<PAGE>
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
WASHINGTON, D.C. 20549
FORM 10-Q
- --------------------------------------------------------------------------------
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended December 31, 1997 or
-----------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _________ to _________
Commission file number 1-10062
-------
InterTAN, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2130875
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
201 Main Street, Suite 1805
Fort Worth, Texas 76102
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 348-9701
-------------------
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 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
At January 31, 1998, 12,196,013 shares of the registrant's common stock, par
value $1.00 per share, were outstanding.
<PAGE>
TABLE OF CONTENTS
PART I
PAGE
1. ITEM 1 - Financial Statements and Supplementary Data
Consolidated Statements of Operations 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Consolidated Statements of Stockholders' Equity 6
2. ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II
1. ITEM 1 - Legal Proceedings 21
2. ITEM 4 - Submission of Matters to a Vote of Security Holders 21
3. ITEM 6 - Exhibits and Reports on Form 8-K 21
OTHER
1. Signatures 24
2
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
INTERTAN, INC.
- --------------------------------------------------------------------------------
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31 DECEMBER 31
---------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales and operating revenues ..... $ 192,559 $ 190,934 $ 314,268 $ 303,221
Other income ......................... 259 115 351 256
--------- --------- --------- ---------
192,818 191,049 314,619 303,477
--------- --------- --------- ---------
Operating costs and expenses:
Cost of products sold ............. 110,586 108,976 178,405 170,533
Selling, general and administrative
expenses ........................ 62,701 64,895 114,061 115,742
Depreciation and amortization ..... 1,873 2,379 3,792 4,596
--------- --------- --------- ---------
175,160 176,250 296,258 290,871
--------- --------- --------- ---------
Operating income ..................... 17,658 14,799 18,361 12,606
Foreign currency transaction gains ... (658) (731) (738) (926)
Interest expense, net ................ 1,893 1,908 3,536 3,505
--------- --------- --------- ---------
Income before income taxes ........... 16,423 13,622 15,563 10,027
Provision for income taxes ........... 5,076 4,145 7,125 5,157
--------- --------- --------- ---------
Net income ........................... $ 11,347 $ 9,477 $ 8,438 $ 4,870
========= ========= ========= =========
Basic net income per
average common share ............ $ 0.94 $ 0.83 $ 0.70 $ 0.43
Diluted net income per
average common share ............ $ 0.55 $ 0.50 $ 0.46 $ 0.33
Average common shares outstanding .... 12,024 11,366 11,995 11,298
Average common shares outstanding
assuming dilution ............... 19,814 20,317 19,780 20,249
</TABLE>
The comments in Management's Discussion and Analysis of Financial Condition and
Results of Operations are an integral part of these statements.
3
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
INTERTAN, INC.
- -------------------------------------------------------------------------------------------------------------------------------
(In thousands, except share data)
DECEMBER 31 JUNE 30 DECEMBER 31
1997 1997 1996
-------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and short-term investments........................ $ 26,025 $ 34,726 $ 53,302
Accounts receivable, less allowance for doubtful
accounts.......................................... 16,742 9,655 14,721
Inventories............................................ 169,512 170,594 185,292
Other current assets................................... 9,126 7,271 7,550
Deferred income taxes.................................. - 634 1,459
-------------------------------------------------------------
Total current assets............................... 221,405 222,880 262,324
Property and equipment, less accumulated
depreciation and amortization......................... 26,777 28,812 40,899
Other assets............................................... 1,172 2,615 2,767
-------------------------------------------------------------
$ 249,354 $ 254,307 $ 305,990
=============================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term bank borrowings............................. $ 966 $ 9,821 $ 2,569
Current maturities of notes payable to Tandy
Corporation....................................... - 6,958 6,958
Accounts payable....................................... 38,785 25,215 44,943
Accounts payable to Tandy Corporation.................. 836 2,589 593
Accrued expenses....................................... 37,255 27,031 40,854
Income taxes payable................................... 18,226 12,734 12,402
-------------------------------------------------------------
Total current liabilities......................... 96,068 84,348 108,319
Long-term notes payable to Tandy Corporation,
less current maturities............................... - 16,420 19,745
9% convertible subordinated debentures..................... 39,723 41,138 41,456
Other liabilities.......................................... 6,152 6,167 6,329
-------------------------------------------------------------
141,943 148,073 175,849
-------------------------------------------------------------
Stockholders' Equity:
Preferred stock, no par value, 1,000,000 shares
authorized, none issued or outstanding............ - - -
Common stock, $1 par value, 40,000,000 shares
authorized, 12,130,270, 11,873,437 and
11,429,187 issued and outstanding................. 12,130 11,873 11,429
Additional paid-in capital............................. 114,429 114,350 112,959
Retained earnings...................................... 10,961 2,523 24,002
Foreign currency translation effects................... (30,109) (22,512) (18,249)
-------------------------------------------------------------
Total stockholders' equity........................ 107,411 106,234 130,141
-------------------------------------------------------------
Commitments and contingent liabilities.....................
$ 249,354 $ 254,307 $ 305,990
=============================================================
</TABLE>
The comments in Management's Discussion and Analysis of Financial Condition and
Results of Operations are an integral part of these statements.
4
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
INTERTAN, INC.
- -------------------------------------------------------------------------------------------------------------------------
(In thousands) SIX MONTHS ENDED
DECEMBER 31
-----------------------------------
1997 1996
-----------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................................... $ 8,438 $ 4,870
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization................................... 3,792 4,596
Deferred income taxes........................................... 594 4,773
Foreign currency transaction gains, unrealized.................. (1,397) (855)
Other........................................................... 1,071 1,336
Cash provided by (used for) current assets and liabilities:
Accounts receivable............................................. (7,680) (4,929)
Inventories..................................................... (6,975) (17,351)
Other current assets............................................ (2,622) 307
Accounts payable................................................ 14,691 18,587
Accounts payable to Tandy Corporation........................... (1,669) (316)
Accrued expenses................................................ 11,671 14,703
Income taxes payable............................................ 6,065 (505)
-----------------------------------
Net cash provided by operating activities....................... 25,979 25,216
-----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment.................................. (3,279) (5,736)
Proceeds from sales of property and equipment........................ 28 54
Other investing activities........................................... 2,091 769
-----------------------------------
Net cash used in investing activities.............................. (1,160) (4,913)
-----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in short-term bank borrowings, net........................... (8,768) 1,407
Proceeds from issuance of common stock to employee plans............. 725 885
Principal repayments on long-term borrowings......................... (24,353) (3,487)
-----------------------------------
Net cash used in financing activities.............................. (32,396) (1,195)
-----------------------------------
Effect of exchange rate changes on cash................................ (1,124) 98
-----------------------------------
Net increase (decrease) in cash and short-term investments............. (8,701) 19,206
Cash and short-term investments, beginning of period................... 34,726 34,096
-----------------------------------
Cash and short-term investments, end of period......................... $ 26,025 $ 53,302
===================================
</TABLE>
The comments in Management's Discussion and Analysis of Financial Condition and
Results of Operations are an integral part of these statements.
5
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
INTERTAN, INC.
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands)
Foreign
Currency Total
Common Stock Additional Retained Translation Stockholders'
Shares Amount Paid-in Capital Earnings Effects Equity
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1997............ 11,873 $ 11,873 $ 114,350 $ 2,523 $ (22,512) $ 106,234
Net foreign currency
translation adjustments.......... - - - - (7,597) (7,597)
Issuance of common stock
to employee plans................ 257 257 977 - - 1,234
Retirement of warrants held by
Tandy Corporation.............. - - (898) - - (898)
Net income.......................... - - - 8,438 - 8,438
---------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 12,130 $ 12,130 $ 114,429 $ 10,961 $ (30,109) $ 107,411
=============================================================================================
</TABLE>
The comments in Management's Discussion and Analysis of Financial Condition and
Results of Operations are an integral part of these statements.
6
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTORY NOTE REGARDING FORWARD-LOOKING INFORMATION
-------------------------------------------------------
With the exception of historical information, the matters discussed herein are
forward-looking statements about the business, financial condition and prospects
of InterTAN, Inc. (the "Company" or "InterTAN"). The actual results of the
Company could differ materially from those indicated by the forward-looking
statements because of various risks and uncertainties including, but not limited
to, international economic conditions, interest and foreign exchange rate
fluctuations, various tax issues, including possible reassessments, changes in
product demand, competitive products and pricing, availability of products,
inventory risks due to shifts in market conditions, dependence on manufacturers'
product development, the regulatory and trade environment, real estate market
fluctuations and other risks indicated in the Company's previous filings with
the Securities and Exchange Commission. These risks and uncertainties are beyond
the ability of the Company to control, and in many cases the Company cannot
predict the risks and uncertainties that could cause its actual results to
differ materially from those indicated by the forward-looking statements.
RESULTS OF OPERATIONS
---------------------
InterTAN is engaged in the sale of consumer electronics products primarily
through company-operated retail stores and dealer outlets in Canada, the United
Kingdom and Australia. The Company's retail operations are conducted through
three wholly-owned subsidiaries: InterTAN Australia Ltd., which operates in
Australia under the trade name "Tandy Electronics"; InterTAN Canada Ltd., which
operates in Canada under the trade name "RadioShack"; and InterTAN U.K. Limited,
which operates in the United Kingdom under the "Tandy" trade name. All of these
trade names are used under exclusive license from Tandy Corporation ("Tandy") of
Fort Worth, Texas. In addition, during fiscal year 1996, the Company entered
into an agreement in Canada with Rogers Cantel Inc. ("Cantel") to operate
telecommunications stores ("Cantel stores") on its behalf. The first of these
stores was opened in August, 1996 and at December 31, 1997, 55 stores were in
operation.
The number of company-operated stores and dealers at December 31, 1997 and 1996,
as well as the number of locations opened and closed during the three-month
periods then ended, is presented in the following table:
7
<PAGE>
<TABLE>
<CAPTION>
SALES OUTLETS
THREE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------------- --------------------------------------
ENDING OPENED CLOSED ENDING OPENED CLOSED
<S> <C> <C> <C> <C> <C> <C>
CANADA
Company-operated 461* 12 1 455* 2 1
Dealers 386 1 8 426 20 4
------------------------------------- --------------------------------------
847 13 9 881 22 5
===================================== ======================================
AUSTRALIA
Company-operated 217 - - 213 3 -
Dealers 142 2 - 210 6 2
------------------------------------- --------------------------------------
359 2 - 423 9 2
===================================== ======================================
UNITED KINGDOM
Company-operated 338 - 1 351 6 1
Dealers 130 3 1 175 3 1
------------------------------------- --------------------------------------
468 3 2 526 9 2
===================================== ======================================
TOTAL
Company-operated 1,016 12 2 1,019 11 2
Dealers 658 6 9 811 29 7
------------------------------------- --------------------------------------
1,674 18 11 1,830 40 9
===================================== ======================================
</TABLE>
*In addition, at December 31, 1997 and December 31, 1996, the Company operated
55 and 46 stores, respectively, on behalf of Cantel. Since these locations are
not company-owned, they are not included in the above table.
As described under "Recently Announced United Kingdom Restructuring Plan", the
Company will close 69 under-performing stores in the United Kingdom. The impact
of the closure of these stores is not reflected in the above table.
OPERATING INCOME
The Company's operating income (loss) for each geographic segment for the three
and six-month periods ended December 31, 1997 and 1996 is presented in the
following table (in thousands):
<TABLE>
<CAPTION>
OPERATING INCOME (LOSS)
-----------------------
UNITED CORPORATE
CANADA AUSTRALIA KINGDOM EXPENSES TOTAL
------ --------- ------- -------- -----
<S> <C> <C> <C> <C> <C>
Three months ended
December 31, 1997 $ 11,331 $ 2,881 $ 4,428 $ (982) $ 17,658
Three months ended
December 31, 1996 $ 10,297 $ 2,778 $ 2,749 $ (1,025) $ 14,799
Six months ended
December 31, 1997 $ 16,286 $ 3,709 $ 574 $ (2,208) $ 18,361
Six months ended
December 31, 1996 $ 13,037 $ 3,367 $ (1,749) $ (2,049) $ 12,606
</TABLE>
8
<PAGE>
The improvement in operating results in all three countries was due to a
combination of higher sales and an improvement in the operating margin. In the
United Kingdom, part of the operating margin improvement resulted from lower
depreciation expense arising from the effects of an impairment charge recorded
pursuant to Financial Accounting Standard No. 121 ("FAS 121") during the fourth
quarter of fiscal year 1997.
The Canadian and Australian dollars were weaker against the U.S. dollar during
both the second quarter and the first six months of fiscal year 1998 than in the
same periods a year ago. Consequently, the local currency operating incomes in
those countries translate into fewer U.S. dollars. At the same time, the United
Kingdom pound sterling was stronger against the U.S. dollar, resulting in the
operating income (loss) in local currency in that country translating into more
U.S. dollars. Had last year's operating results been translated into U.S.
dollars at this year's exchange rates, the consolidated improvement in operating
results for the three and six months ended December 31, 1997 would have been
increased by an additional $922,000 and $1,201,000, respectively.
RECENTLY ANNOUNCED UNITED KINGDOM RESTRUCTURING PLAN
As part of its on-going efforts to improve the financial performance of its
United Kingdom operation, the Company recently carried out a review of the
performance of all of its U.K. stores. Consequently, in January, 1998 a plan to
close 69 consistently under-performing stores was approved. Most of these stores
have already closed. Several stores will remain open as inventory clearance
centers until early in the fourth quarter. As a consequence of this
restructuring plan, the Company will record a charge to operating income in the
third quarter of fiscal year 1998 of $13 to 16 million, at current exchange
rates, representing primarily lease disposal, employee severance and inventory
clearance costs.
NET SALES
Net sales for the quarter ended December 31, 1997 were $192,559,000, an increase
of 0.9% over the sales for the same quarter in the prior year of $190,934,000.
When the impact of fluctuations in the value of the U.S. dollar in relation to
the currencies of the countries in which the Company operates is removed, the
sales gain over the same quarter last year increases to 5.3%. Comparative store
sales, measured at the same exchange rate, increased by 4.1% from the same
quarter in the prior year. Year to date, sales have increased by 3.6% and 6.7%
in U.S. dollars and local currency, respectively. Comparative store sales for
the six months ended December 31, 1997 have increased 4.6% over the same period
a year ago.
The table which follows shows by country the percentage changes in net sales for
the quarter and six months ended December 31, 1997 compared to the corresponding
period in the prior year. Changes are presented in both U.S. dollars and local
currencies to illustrate the effects of exchange rate fluctuations. The change
in comparative store sales, measured at the same exchange rates, is also shown:
9
<PAGE>
<TABLE>
<CAPTION>
NET SALES
---------
PERCENTAGE INCREASE (DECREASE)
------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 DECEMBER 31, 1997
LOCAL COMPARATIVE LOCAL COMPARATIVE
US$ CURRENCY STORE US$ CURRENCY STORE
--------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Canada 2.2 % 6.8 % 4.1 % 7.0 % 10.5 % 6.5 %
Australia (7.8)% 7.1 % 3.7 % (5.4)% 6.2 % 3.2 %
United Kingdom 3.3 % 2.3 % 4.2 % 3.8 % 1.5 % 2.8 %
-----------------------------------------------------------
Consolidated 0.9 % 5.3 % 4.1 % 3.6 % 6.7 % 4.6 %
</TABLE>
Increased cellular revenue was the major factor contributing to Canada's second
quarter local currency sales gain. The introduction of PCS/digital technology
continues to create demand for these products. RadioShack Canada experienced an
increase in the number of units sold of over 28%, with most of this increase
arising in the 55 company-operated Cantel stores. Sales of government-approved
direct to home satellite dishes, which were introduced into Canadian stores for
the first time late in fiscal 1997, made a contribution to revenue growth for
the quarter. The sale of batteries as well as portable CD players and toys were
also important contributors to the Canadian sales performance. Although the
number of computers sold increased over a year ago, this improvement was offset
by the effects of significantly reduced pricing.
Sales growth at Tandy Electronics Australia also continued during the second
quarter. As has been the case in recent quarters, this growth has come from a
number of categories, including telephony. The Company has been emphasizing this
category in all its markets as a second "anchor" to the ever-important parts and
accessories category. This program has been particularly successful in
Australia. Increased sales of fax machines, small screen TV's and portable CD
players also contributed to positive Australian sales performance. Sales of
cellular phones declined, reflecting lower pricing and possible early signs of
market saturation. Cellular phones have now reached 30% market penetration in
Australia - the second highest in the world. Lower pricing also affected
computer sales; however, the effect of this price deflation was partially offset
in the computer category by increases in the sale of printers and accessories.
In the United Kingdom, this was another difficult Christmas for consumer
electronics retailers, particularly in the downtown or so-called "High Street"
market in which InterTAN operates. Of the Company's major competitors in the
U.K., one reported a Christmas season comparative store sales decline, while
another posted a very small gain. Against this background, the Company's United
Kingdom subsidiary achieved positive comparative store sales gains in all three
months of the quarter. A major contributor to the United Kingdom sales
improvement during the Christmas period was a significant increase in the volume
of cellular phone sales. An attractively priced product assortment, combined
with a pre-paid air time package, continues to attract the consumer's interest.
InterTAN U.K. moved these products in record volumes over Christmas, despite
vendor supply shortages in the market place as a whole.
The stores to be closed under the United Kingdom restructuring plan accounted
for approximately 5% of consolidated sales during fiscal year 1997. While
management anticipates that a portion of the sales from these stores will be
transferred to continuing units, there can be
10
<PAGE>
no assurance that this will occur, nor is it practical to estimate the impact
that the closure of these stores will have on future sales.
GROSS MARGIN AND COST OF PRODUCTS SOLD
The gross margin percentage for the quarter was 42.6%, down 30 basis points from
42.9% a year ago. Australia, which showed a margin improvement of 30 basis
points, had the only increase. The increase of cellular in the sales mix in
Canada, in particular in the company-operated Cantel stores, was an important
factor in a Canadian margin decline of 20 basis points. In addition, two new
carriers have entered the cellular market in Canada. Both have adopted very
aggressive pricing strategies in an attempt to build market share quickly. The
traditional carriers, including Cantel, have responded to this pricing pressure,
with the result that margins have suffered. The gross margin percentage declined
in the U.K. by 70 basis points. However, this reduction was more than
attributable to a change in the supplier and the method of distribution of
computers, which resulted in computer sales being reported at full retail value
this year. In the prior year, only a sales commission was earned.
The portion of the restructuring provision to be recorded in the United Kingdom
in the third quarter relating to inventory clearance costs, which is estimated
to be $1.5 to $2.5 million, at current exchange rates, will be charged to cost
of products sold. Except for the initial effects of this charge, the store
closure program in the U.K. is not expected to have a material effect on the
gross margin percentage in future periods.
The effect of a lower gross margin percentage, combined with the effect of
overall weaker currencies, was offset by the positive impact of increased sales.
Overall, gross margin dollars for the quarter were substantially even with the
prior year, showing an increase of $15,000:
<TABLE>
<CAPTION>
<S> <C>
Decrease in margin percentage $ (543,000)
Increase in sales 4,134,000
Foreign exchange rate effects (3,576,000)
-----------
$ 15,000
===========
</TABLE>
Year to date, the gross margin percentage is 60 basis points below the prior
year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative ("SG&A") expenses for the quarter in U.S.
dollars decreased to $62,701,000 from $64,895,000 a year ago, a reduction of
$2,194,000. Year to date, SG&A expenses have decreased from $115,742,000 for the
six months ended December 31, 1996 to $114,061,000, a decrease of $1,681,000 or
1.5%. These reductions are more than attributable to foreign currency rate
effects. When the effects of generally weaker currencies are eliminated, an
increase in SG&A spending, measured at the same exchange rates, of less than 1%
results for both periods. This control in the rate of increase in SG&A spending
is reflective of steps taken by management in prior periods to monitor and
control these costs. Consequently, the SG&A
11
<PAGE>
percentage for the quarter declined by 1.4 percentage points from the prior year
level to 32.6% of sales, with all three countries showing improvement.
The restructuring plan being implemented in the United Kingdom will have a
direct bearing on SG&A expenses in future periods as the costs of operating the
stores identified for closure are removed from the business.
The following table provides a breakdown of SG&A expenses by major category
(percentages shown are as a rate to sales):
<TABLE>
<CAPTION>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
--------------------------------------------
(In thousands, except percents)
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31 DECEMBER 31
1997 1996 1997 1996
------------------------------ -------------------------------
AMOUNT PCT. AMOUNT PCT. AMOUNT PCT. AMOUNT PCT.
------------------------------ -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advertising $ 9,461 4.9 $10,397 5.4 $ 14,994 4.8 $ 16,856 5.6
Rent 11,205 5.8 11,329 5.9 21,883 7.0 21,803 7.2
Payroll 25,885 13.4 26,340 13.8 47,063 15.0 46,959 15.5
Taxes
(other than
income taxes) 5,250 2.7 5,148 2.7 9,552 3.0 9,378 3.1
Telephone &
utilities 1,763 0.9 1,946 1.0 3,562 1.1 3,720 1.2
Other 9,137 4.9 9,735 5.2 17,007 5.4 17,026 5.6
------------------------------ -------------------------------
Total $62,701 32.6 $64,895 34.0 $114,061 36.3 $115,742 38.2
============================== ===============================
</TABLE>
NET INTEREST EXPENSE
Net interest expense was $1,893,000 for the three months ended December 31, 1997
compared with $1,908,000 for the same quarter last year. Net interest expense
for the six months ended December 31, 1997 of $3,536,000 was $31,000 lower than
in the same period last fiscal year. These decreases reflect the effects of a
reduction in a long-term loan (the "Series A Note") owing under a loan agreement
with Tandy (the "Secured Loan Agreement"), partially offset by the effects of
higher short-term borrowings in the United Kingdom. On December 30, 1997, the
Series A Note was repaid in full and any remaining unamortized costs associated
with this debt were expensed. The Series A Note, together with the Company's
then existing revolving credit arrangements, were replaced by a three-year
revolving facility with a new syndicate of three lenders. Management believes
that replacing the Company's fixed term financing with a revolving credit
facility better reflects the seasonal borrowing needs of its retail business.
Additionally, the amortization of costs associated with the Company's new credit
facility will be lower than under prior credit arrangements. Consequently,
management anticipates that net interest expense will be lower in future periods
than has been the Company's recent experience.
12
<PAGE>
PROVISION FOR INCOME TAXES
A net income tax provision of $5,076,000 was recorded during the quarter
compared with a provision of $4,145,000 a year ago. For the six months ended
December 31, 1997, income tax expense of $7,125,000 was recorded compared to
$5,157,000 in the first six months of the prior year. These increases primarily
reflect higher profits in Canada and Australia, offset partially by the
recognition of tax benefits associated with the loss carry forwards and other
deferred tax assets in Australia. No credit is currently available for the tax
losses being generated in the United Kingdom.
NET INCOME PER AVERAGE COMMON SHARE
In February 1997, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 128, "Earnings per Share" ("FAS 128"), which is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods. Effective December 31, 1997, the Company
adopted FAS 128, which established new standards for computing and presenting
earnings per share ("EPS"). The statement requires dual presentation of basic
and diluted EPS on the face of the income statement for entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. Basic EPS excludes the effect of potentially dilutive
securities while diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised, converted,
or resulted in the issuance of common stock that would then share in the
earnings of the entity. In accordance with FAS 128, EPS amounts for the prior
period have been restated.
Basic and diluted net income per average common share were $0.94 and $0.55,
respectively, for the three-month period ended December 31, 1997, as compared to
$0.83 and $0.50 for the same quarter in the prior year. For the six-month period
ended December 31, 1997, basic and diluted net income per average common share
were $0.70 and $0.46, respectively, compared to $0.43 and $0.33, respectively,
for the same period a year ago. A reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation is set out below:
13
<PAGE>
<TABLE>
<CAPTION>
(In thousands, except for per THREE MONTHS ENDED
share data)
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------------------------------- ----------------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
------------ -------------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 11,347 $ 9,477
============ ============
BASIC EPS
Income available to
common stockholders $ 11,347 12,024 $ 0.94 $ 9,477 11,366 $ 0.83
============ ============
EFFECT OF DILUTIVE
SECURITIES
9% convertible debentures* (451) 7,779 782 8,951
Stock options - 11 - -
------------ -------------- ------------ --------------
DILUTED EPS
Income available to common
stockholders including
assumed conversions $ 10,896 19,814 $ 0.55 $ 10,259 20,317 $ 0.50
============ ============== ============ ============ ============== ============
</TABLE>
<TABLE>
<CAPTION>
(In thousands, except for per SIX MONTHS ENDED
share data)
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------------------------------- ----------------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
------------ -------------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 8,438 $ 4,870
============ ============
BASIC EPS
Income available to
common stockholders $ 8,438 11,995 $ 0.70 $ 4,870 11,298 $ 0.43
============ ============
EFFECT OF DILUTIVE
SECURITIES
9% convertible debentures * 731 7,779 1,861 8,951
Stock options - 6 - -
------------ -------------- ------------ --------------
DILUTED EPS
Income available to common
stockholders including
assumed conversions $ 9,169 19,780 $ 0.46 $ 6,731 20,249 $ 0.33
============ ============== ============ ============ ============== ============
</TABLE>
* The income adjustments relating to the 9% convertible debentures include
interest expense, amortization of financing costs and foreign currency
transaction gains and losses.
The adjustments to shares in the computation of diluted EPS for the three
and six-month periods ended December 31, 1997 relate to options to
purchase 244,000 shares held by directors and employees of the Company at
prices ranging from $3.50 to $5.50 per share. In addition, at December
31, 1997, directors and employees of the Company and its subsidiaries
held options to
14
<PAGE>
purchase 731,000 shares, at prices ranging from $6.00 to $8.1875 per share. At
December 31, 1996, 718,000 employee and director options were outstanding at
prices ranging from $5.31 to $8.1875. These options were not included in the
computation of diluted EPS because the options' exercise price was more than the
average price of the Company's common stock during the respective periods.
FINANCIAL CONDITION
-------------------
Most balance sheet accounts are translated from their values in local currency
to U.S. dollars at the respective month end rates. The table below outlines the
percentage change, to December 31, 1997, in exchange rates as measured against
the U.S. dollar:
<TABLE>
<CAPTION>
FOREIGN EXCHANGE RATE FLUCTUATIONS
----------------------------------
% INCREASE % INCREASE
(DECREASE) (DECREASE)
FROM DECEMBER 31, 1996 FROM JUNE 30, 1997
---------------------- ------------------
<S> <C> <C>
Canada (4.2) (3.4)
Australia (18.2) (13.7)
United Kingdom (3.6) (0.8)
</TABLE>
ACCOUNTS RECEIVABLE
Accounts receivable were $16,742,000 at December 31, 1997 compared with
$9,655,000 and $14,721,000 at June 30, 1997 and December 31, 1996, respectively.
Increases in the level of cellular phone sales, partially offset by the effects
of weaker foreign currencies contributed to both of these increases. Seasonal
increases in dealer receivables also contributed to the increase from June 30,
1997.
INVENTORIES
Inventories at December 31, 1997 were $169,512,000 compared to $170,594,000 and
$185,292,000 at June 30 ,1997 and December 31, 1996 respectively. The decrease
from the June 30, 1997 level is more than explained by foreign currency rate
effects. Measured at the same exchange rates, inventories increased by
approximately 4% to December 31, 1997. Most of this increase results from lower
than anticipated sales in the United Kingdom, as well as the fact that the
inventory of computers in that country was unusually low at June 30, 1997.
Weaker foreign currencies also explains approximately 80% of the reduction in
inventories from December 31, 1996. The balance of the reduction is more than
attributable to steps taken by management to more closely control the level of
inventories in the United Kingdom.
PROPERTY AND EQUIPMENT
Property and equipment, less accumulated depreciation and amortization, totaled
$26,777,000 at December 31, 1997, compared with $40,899,000 at December 31,
1996, a reduction of $14,122,000. This decrease relates primarily to an
impairment charge of $10,042,000 recorded
15
<PAGE>
pursuant to FAS 121 in the fourth quarter of fiscal 1997. This charge reduced
the carrying value of the Company's investment in store assets in the United
Kingdom to their estimated fair value. The balance of the reduction relates to
foreign currency effects and depreciation expense, partially offset by planned
additions. Foreign currency effects and depreciation expense, partially offset
by planned additions, primarily on store refits and improvements, also explain
the reduction in property and equipment from the June 30, 1997 level of
$28,812,000.
ACCOUNTS PAYABLE
The level of accounts payable has increased from $25,215,000 at June 30, 1997 to
$38,785,000 at December 31, 1997, primarily as a result of seasonal inventory
purchases. At December 31, 1997, accounts payable were $6,158,000 lower than at
December 31, 1996. This decrease in accounts payable results primarily from the
reduction in the level of inventories and from foreign currency rate effects.
ACCRUED EXPENSES
Accrued expenses have increased from $27,031,000 at June 30, 1997 to $37,255,000
at December 31, 1997. This increase primarily results from seasonal increases in
sales related accruals, including commissions, bonuses and sales taxes. Accrued
expenses were $3,599,000 lower at December 31, 1997 than a year ago. This
reduction results principally from foreign currency rate effects.
INCOME TAXES PAYABLE
Income taxes payable were $18,266,000 at December 31, 1997, up from $12,734,000
at June 30, 1997. This increase is reflective of the fact that available tax
loss carryforwards have now been fully utilized in both Canada and Australia and
the Company will be in a tax paying position in both of those countries for
fiscal 1998. Income taxes payable at December 31, 1996 were $12,402,000.
An audit of the Canadian income tax returns of the Canadian subsidiary for the
1987 to 1989 taxation years was completed during fiscal year 1994, resulting in
additional tax being levied against the Canadian subsidiary. The Company has
appealed these reassessments and, pending the outcome of these matters, the
Company, by Canadian law, was required to pay one-half of the tax in dispute.
The tax levied by Revenue Canada in reassessing those years was offset by
refunds arising from the carry-back of losses incurred in subsequent years.
Depending on the ultimate resolution of these issues, the Company could
potentially have an additional liability in the range of $0 to $11,600,000. The
Company believes it has meritorious arguments in defense of the issues raised by
Revenue Canada and it is in the process of vigorously defending its position. It
is management's determination that no additional provision need be recorded for
these reassessments. In order for the Company to succeed in appealing certain
aspects of these reassessments, it must succeed in defending the possible
reassessments discussed in the paragraph immediately below.
16
<PAGE>
The Company was advised in August 1995 that Revenue Canada intended to extend
the scope of its 1987 to 1989 reassessments to raise certain issues flowing from
the spin-off of the Company from Tandy in fiscal year 1987. Management disagrees
with Revenue Canada's views on these issues and will vigorously defend the
Company's position should Revenue Canada pursue these issues. Management
believes it has meritorious arguments supporting its stance and, accordingly, no
additional provision has been recorded for these possible reassessments.
Depending on the ultimate resolution of these issues, the Company could
potentially have an additional liability in the range of $0 to $20,000,000. As
required by Canadian law, the Company would likely be required to post a deposit
of one-half of the tax in dispute, including interest, in order to appeal any
reassessment.
An audit of the Canadian income tax returns of the Canadian subsidiary for the
1990 to 1993 taxation years was commenced during the 1995 fiscal year. The
Company has been advised that Revenue Canada is challenging certain interest
deductions relating to the Canadian subsidiary's former operations in
continental Europe and is proposing to tax certain foreign exchange gains
related to such operations. Depending on the ultimate resolution of these
issues, the Company could potentially have an additional liability in the range
of $0 to $25,000,000. Assuming Revenue Canada pursues these issues, in order for
the Company to proceed with such appeals, the Company would likely be required
to post a cash deposit or letters of credit equal to one-half of the 1990-1993
tax in dispute, together with interest. Notwithstanding that the Company is
still in discussions with Revenue Canada regarding these issues, Revenue Canada
was required to issue a protective reassessment for one of the years because the
time period during which such reassessment could legally be issued was about to
expire. The amount of the reassessment, including interest, is approximately
$13,800,000. This amount relates to the 1992 taxation year only and is reflected
in the range described immediately above. The Company has appealed this
reassessment and, as indicated above, would normally be required to post a cash
deposit equal to one-half of the reassessment, pending the outcome of such
appeal. However, Revenue Canada has agreed to defer the posting of such deposit
pending the outcome of on-going discussions on this particular issue. Revenue
Canada has further agreed to accept a letter of credit in lieu of a cash deposit
should it be necessary for the Company to actively proceed with its appeal.
Management believes it has meritorious arguments in support of the deductibility
of such interest and in support of its treatment of the foreign exchange gains
and is prepared to vigorously defend its position should the Canadian tax
authorities proceed with such a challenge following the conclusion of
discussions with the Company and its advisors. Accordingly, it is management's
assessment that no provision need be recorded for these possible claims.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Operating activities generated $25,979,000 in cash during the six-month period
ended December 31, 1997 compared to $25,216,000 in the same period of the prior
year, an increase of $763,000. The seasonal increase in inventory levels used
$10,376,000 less cash than was the case in the six-month period ended December
31, 1996, when the effects of increased inventories to support a private label
merchandising strategy were felt in the United Kingdom. The deferred payment of
income tax installments also conserved an additional $6,570,000 in cash. The
benefits of the additional cash generated by these changes were partially offset
by the fact that the build-up of accrued expenses conserved $3,032,000 less in
cash for the period than in the previous year. Similarly, a reduction in the
build-up of accounts payable preserved $3,896,000 less in cash
17
<PAGE>
during the six-month period ended December 31, 1996 than was the case in the
comparable period a year ago. Higher sales of cellular phones resulted in an
increase in the accounts receivable build-up, which resulted in $2,751,000 less
cash being generated than in the six months ended December 31, 1996. Net income,
adjusted to reconcile net income to cash, generated $2,222,000 less cash than in
the first six months of the prior year.
Cash flow from investing activities consumed $1,160,000 in cash during the
six-month period ended December 31, 1997, compared to $4,913,000 a year ago.
This change results from a planned reduction in capital spending as well as the
liquidation of certain other assets.
Financing activities resulted in cash outflows of $32,396,000 and $1,195,000
during the six-month periods ended December 31, 1997 and December 31, 1996,
respectively. This increase results from the repayment of the Series A Note
payable to Tandy as well as a decrease in the level of short-term borrowings
used to finance operations in the United Kingdom.
The Company's principal sources of liquidity during fiscal year 1998 are its
cash and short-term investments, its cash flow from operations and its banking
facilities.
In 1994, InterTAN Canada Ltd., InterTAN, Inc., and InterTAN U.K. Limited entered
into a one-year credit agreement with a syndicate of banks. In December, 1997
this credit agreement was replaced with a three-year revolving facility with a
syndicate of three new lenders (the "Syndicated Loan Agreement") in an amount
not to exceed $75,000,000 in the aggregate. The amount of credit actually
available at any particular time is dependent on a variety of factors including
the level of inventories and accounts receivable of InterTAN Canada and InterTAN
U.K. Limited (the "Borrowers"). The amount of available credit is then reduced
by the amount of trade accounts payable of the Borrowers then outstanding as
well as certain other reserves. The interest rate under the credit facility is
the Canadian prime rate plus 1.0% on loans to InterTAN Canada Ltd. and the
London Inter Bank Offered Rate plus 2.5% for loans to InterTAN U.K. Limited.
Letters of credit are charged at the rate of 1.5% per annum. In addition, a
standby fee is payable on the unused portion of the credit facility. The amount
of this fee is subject to certain thresholds and ranges from 0.375% to 0.50% of
the unused credit line. The Syndicated Loan Agreement is secured by a first
priority lien over all of the assets of the Borrowers and is guaranteed by
InterTAN, Inc. This facility will be used primarily to provide letters of credit
in support of purchase orders, to finance inventory purchases and for general
corporate purposes. At December 31, 1997, the maximum credit available under the
Syndicated Loan Agreement was $40,561,000 of which $4,700,000 was committed in
support of letters of credit. There were no borrowings against the facility at
December 31, 1997. Management estimates that the costs associated with putting
this credit facility into place will approximate $600,000. These costs will be
amortized over the term of the facility, commencing in January, 1998. In
September, 1997, the Company's Merchandise Agreement with Tandy was amended to
permit the Company to support purchase orders with a surety bond or bonds as
well as letters of credit. The Company has entered into an agreement with a
major insurer to provide such a surety bond (the "Bond") in an amount not to
exceed $15,000,000. Use of the Bond will give the Company greater flexibility in
placing orders with Far Eastern suppliers by releasing a portion of the credit
available under the Syndicated Loan Agreement for other purposes.
18
<PAGE>
In fiscal year 1997, the Company's Australian subsidiaries, InterTAN Australia
Ltd. and Technotron Sales Corp. Pty. Ltd., entered into a credit agreement with
an Australian bank (the "Australian Facility"). This agreement established a
credit facility in the amount of A$12,000,000 ($7,800,000 at December 31, 1997
exchange rates). The Australian Facility has no fixed term and may be terminated
at any time upon five days prior written notice by the lender. All or any part
of the facility may be used to provide letters of credit in support of purchase
orders. A maximum amount of A$5,000,000 ($3,250,000 at December 31, 1997
exchange rates) may be used in support of short-term borrowings. At December 31,
1997, there were no borrowings outstanding against the Australian Facility;
A$6,150,000 ($4,000,000 at December 31, 1997 exchange rates) was committed in
support of letters of credit.
In addition to the credit facilities described above, the Company's principal
sources of outside financing have been from the Series A Note payable to Tandy
and from the Company's 9% subordinated convertible debentures (the
"Debentures"). In order to obtain a release of Tandy's security interests so
that security could be given under the Syndicated Loan Agreement, the Series A
Note was repaid in full in December, 1997. In consideration of the early
repayment of this loan, warrants to purchase 1,449,007 shares of the common
stock of the Company held by Tandy were surrendered for cancellation.
The Company's primary uses of liquidity during the remainder of fiscal year 1998
will include the funding of capital expenditures and the servicing of debt. The
Company anticipates that capital additions will approximate $4,600,000 during
the remainder of fiscal year 1998, mainly related to new store openings,
remodeling and upgrading. Management estimates that the effects of the recently
announced restructuring program in the United Kingdom will be cash neutral
during the remainder of fiscal year 1998 and cash positive thereafter, as cash
inflows from inventory reductions and improved operating results are expected to
exceed remaining store closure costs. The Company's debt servicing requirements,
consisting of interest on the Debentures, in the balance of fiscal year 1998 are
estimated to be approximately $2,000,000. As previously described, the Company
believes that it may be required to post additional tax deposits or letters of
credit with Revenue Canada in order to appeal existing, and, possibly,
additional reassessments of tax. See "Income Taxes Payable."
Management believes that the Company's cash and short-term investments on hand
and its cash flow from operations combined with the Syndicated Loan Agreement,
the Australian Facility and the Bond will provide the Company with sufficient
liquidity to meet its planned requirements throughout fiscal year 1998, provided
the amount of any additional tax deposits is not at the upper end of the ranges
described above under "Income Taxes Payable." If this were the case, the Company
would be required to seek additional sources of liquidity. There can be no
assurance that additional funding would be available, if required, on terms
acceptable to the Company.
CONTINGENCIES
-------------
In the fourth quarter of fiscal year 1993, the Company recorded a pre-tax charge
of $77,400,000 in connection with the Company's plan to close its continental
European retail operations. The shutdown process is now substantially complete.
Management believes that the remaining provision is adequate to provide for the
Company's remaining obligations in Europe, including claims brought against the
Company by certain trade creditors, former employees, dealers and franchisees.
19
<PAGE>
Apart from this matter and those described under "Income Taxes Payable", there
are no material pending legal proceedings or claims, other than routine
litigation incidental to the Company's business, to which the Company or any of
its subsidiaries is a party, or to which any of its property is subject.
BASIS OF FINANCIAL STATEMENTS
-----------------------------
The accompanying unaudited financial statements have been prepared in accordance
with Rule 10-01 of Regulation S-X, "Interim Financial Statements", and do not
include all information and footnotes required by generally accepted accounting
principles for complete financial statements. The financial statements have been
prepared in conformity with accounting principles and practices (including
consolidation practices) as reflected in the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1997, and, in the opinion of the
Company, include all adjustments necessary for fair presentation of the
Company's financial position as of December 31, 1997 and 1996 and the results of
its operations for the three and six months ended December 31, 1997 and 1996 and
its cash flows for the six months ended December 31, 1997 and 1996. Such
adjustments are of a normal and recurring nature. Operating results for the
three and six months ended December 31, 1997 are not necessarily indicative of
the results that can be expected for the fiscal year ended June 30, 1998. For
further information, refer to the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1997.
20
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
The various matters discussed under the heading "Contingencies" on
page 19 of this Form 10-Q are incorporated herein by reference.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held on November 11,
1997, the following persons were elected to the Board of Directors:
John H. McDaniel
W. Darcy McKeough
Ron G. Stegall
In such connection, Messrs. McDaniel, McKeough and Stegall received
9,193,636, 9,210,376 and 9,210,510 votes, respectively, "For" election
and 88,349, 71,609 and 71,475 votes, respectively, were withheld. In
total, 12,009,208 shares were authorized to vote.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits Required by Item 601 of Regulation S-K:
Exhibit No. Description
3(a) Restated Certificate of Incorporation
(Filed as Exhibit 3(a) to InterTAN's
Registration Statement on Form 10 and
incorporated herein by reference).
3(a)(i) Certificate of Amendment of Restated
Certificate of Incorporation (Filed as
Exhibit 3(a)(i) to InterTAN's Annual Report
on Form 10-K for fiscal year ended June 30,
1995 and incorporated herein by reference).
3(a)(ii) Certificate of Designation, Preferences and
Rights of Series A Junior Participating
Preferred Stock (Filed as Exhibit 3(a)(i) to
InterTAN's Registration Statement on Form 10
and incorporated herein by reference).
3(b) Bylaws (Filed on Exhibit 3(b) to InterTAN's
Registration Statement on Form 10 and
incorporated herein by reference).
21
<PAGE>
Exhibit No. Description
3(b)(i) Amendments to Bylaws through August 3, 1990
(Filed as Exhibit 3(b)(i) to InterTAN's
Annual Report on Form 10-K for fiscal year
ended June 30, 1990 and incorporated herein
by reference).
3(b)(ii) Amendments to Bylaws through May 15, 1995
(Filed as Exhibit 3(b)(ii) to InterTAN's
Annual Report on Form 10-K for fiscal year
ended June 30, 1995 and incorporated herein
by reference).
3(b)(iii) Amended and Restated Bylaws (filed as
Exhibit 3(b)(iii) to InterTAN's Annual
Report on Form 10-K for fiscal year ended
June 30, 1996 and incorporated herein by
reference).
4(a) Articles Fifth and Tenth of the Restated
Certificate of Incorporation (included in
Exhibit 3(a)).
4(b) Amended and Restated Rights Agreement
between InterTAN Inc. and The First National
Bank of Boston (Filed as Exhibit 4(b) to
InterTAN's report on Form 8-K dated
September 25, 1989 and incorporated herein
by reference).
4(c) Trust Indenture securing the issue of 9%
Convertible Subordinated Debentures due
August 30, 2000 (Filed as Exhibit 4(c) to
InterTAN's Annual Report on Form 10-K for
fiscal year ended June 30, 1993 and
incorporated herein by reference).
*10(a) Employment letter dated November 29, 1997
between InterTAN, Inc. and Brian E. Levy.
*10(b) Form of Omnibus Termination Agreement dated
December 30, 1997 between, among others,
InterTAN, Inc. and Tandy Corporation.
22
<PAGE>
Exhibit No. Description
*10(c) Loan Agreement dated to be effective
December 22, 1997 among InterTAN, Inc., Bank
of America Canada, Bank of America N.T. &
S.A. (London England Branch Office) and
certain other Lenders as identified therein.
*27 Article 5, Financial Data Schedule.
- -----------------------
* Filed herewith
b) Reports on Form 8-K: No reports on Form 8-K were filed during the
quarter ended December 31, 1997.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
InterTAN, Inc.
(Registrant)
Date: February 12, 1998 By: /s/James T. Nichols
---------------------------------------
James T. Nichols
Chief Executive Officer
(Authorized Officer)
By: /s/Douglas C. Saunders
---------------------------------------
Douglas C. Saunders
Vice President and Corporate Controller
(Principal Accounting Officer)
24
<PAGE>
INTERTAN, INC.
FORM 10-Q
INDEX TO EXHIBITS
Exhibit No. Description
3(a) Restated Certificate of Incorporation
(Filed as Exhibit 3(a) to InterTAN's
Registration Statement on Form 10 and
incorporated herein by reference).
3(a)(i) Certificate of Amendment of Restated
Certificate of Incorporation (Filed as
Exhibit 3(a)(i) to InterTAN's Annual Report
on Form 10-K for fiscal year ended June 30,
1995 and incorporated herein by reference).
3(a)(ii) Certificate of Designation, Preferences and
Rights of Series A Junior Participating
Preferred Stock (Filed as Exhibit 3(a)(i) to
InterTAN's Registration Statement on Form 10
and incorporated herein by reference).
3(b) Bylaws (Filed on Exhibit 3(b) to InterTAN's
Registration Statement on Form 10 and
incorporated herein by reference).
3(b)(i) Amendments to Bylaws through August 3, 1990
(Filed as Exhibit 3(b)(i) to InterTAN's
Annual Report on Form 10-K for fiscal year
ended June 30, 1990 and incorporated herein
by reference).
3(b)(ii) Amendments to Bylaws through May 15, 1995
(Filed as Exhibit 3(b)(ii) to InterTAN's
Annual Report on Form 10-K for fiscal year
ended June 30, 1995 and incorporated herein
by reference).
3(b)(iii) Amended and Restated Bylaws (filed as
Exhibit 3(b)(iii) to InterTAN's Annual
Report on Form 10-K for fiscal year ended
June 30, 1996 and incorporated herein by
reference).
<PAGE>
Exhibit No. Description
4(a) Articles Fifth and Tenth of the Restated
Certificate of Incorporation (included in
Exhibit 3(a)).
4(b) Amended and Restated Rights Agreement
between InterTAN Inc. and The First National
Bank of Boston (Filed as Exhibit 4(b) to
InterTAN's report on Form 8-K dated
September 25, 1989 and incorporated herein
by reference).
4(c) Trust Indenture securing the issue of 9%
Convertible Subordinated Debentures due
August 30, 2000 (Filed as Exhibit 4(c) to
InterTAN's Annual Report on Form 10-K for
fiscal year ended June 30, 1993 and
incorporated herein by reference).
*10(a) Employment letter dated November 29, 1997
between InterTAN, Inc. and Brian E. Levy.
*10(b) Form of Omnibus Termination Agreement dated
December 30, 1997 between, among others,
InterTAN, Inc. and Tandy Corporation.
*10(c) Loan Agreement dated to be effective
December 22, 1997 among InterTAN, Inc., Bank
of America Canada, Bank of America N.T. &
S.A. (London England Branch Office) and
certain other Lenders as identified therein.
*27 Article 5, Financial Data Schedule.
- -----------------------
* Filed herewith
<PAGE>
EXHIBIT 10(a)
JAMES T. NICHOLS
President and
Chief Executive Officer
(817) 348-9704
November 29, 1997
Mr. Brian Levy
19243 Cloister Lake Lane
Boca Raton, Florida 33498
Dear Brian:
On behalf of InterTAN, Inc. (the "Company"), I am hereby offering to you the
full-time position of President and Chief Operating Officer of the Company.
Your compensation and benefits will be as described below and will not be
subject to adjustment until July 1, 1998 at the earliest. You agree to devote
your primary working time, skill, attention and best efforts to the business of
the Company as President and Chief Operating Officer at the Company's Fort
Worth, Texas office or in such other similar executive position or office as the
Company's Chief Executive Officer may designate. All annual amounts are subject
to pro rata adjustment to your start date, which is expected to be at the
earliest possible date.
BASE SALARY: During the term hereof, at least $275,000 per year,
payable in 26 equal bi-weekly amounts in accordance with
the Company's normal payroll procedures.
BONUS: Your bonus base will be $125,000. Your bonus base in
FY1998 may be subject to change, either up or down,
depending upon and corresponding to the Company's actual
operating performance as compared to the FY1998 Company
budget. While your FY1998 bonus will be subject to pro
rata adjustment, it will not in any event be less than
$25,000. The bonus payable for fiscal 1999 and beyond
will vary reflecting a predetermined formula approved by
the Board of Directors annually, in advance. You will
also be entitled to such other bonuses, if any, as the
Board of Directors of the Company may determine to pay at
its sole discretion.
<PAGE>
Page 2
Mr. Levy
November 29, 1997
STOCK OPTIONS: As of the start date of your employment with the Company,
you will be granted an option to purchase 60,000 shares
of Company common stock under the InterTAN, Inc. 1996
Stock Option Plan. The exercise price will be the fair
market value of the stock (i.e., NYSE closing price) on
the date of grant. You will be entitled to future grants
of stock options as determined from time to time by the
Board of Directors.
SEVERANCE BENEFITS: Your employment with the Company shall be "at will" and
the Company shall have the right to terminate your
employment at any time.
(a) If your employment with the Company is terminated
for "gross misconduct", then such termination shall
become effective immediately. The Company shall have
only those rights or obligations which may have
accrued prior to such termination. You shall be
entitled to all earned and unpaid salary to the date
of termination as well as all other benefits which
may be due you pursuant to and subject to any of the
Company's health or employee benefit plans in which
you are a participant. "Gross misconduct" for
purposes of this letter shall mean that you have
been convicted of, or have pleaded nolo contendere
---------------
or entered into any other plea arrangement relating
to a felony, whether or not related to the Company's
business, or you were guilty of reckless or willful
misconduct in the performance of your duties
hereunder. The Company's right to terminate your
employment shall be in addition to any other rights
it may have against you.
(b) If your employment with the Company is terminated
for any reason other than your voluntary resignation
from the Company, your "gross misconduct", or your
death or disability, you shall be entitled to
receive severance benefits from the Company in an
amount equal to twelve (12) months of your then
current base salary and the bonus which would be
payable under your then current plan formula, such
aggregate amount to be paid out equally over the
twelve (12) month period following your employment
termination date.
<PAGE>
Page 3
Mr. Levy
November 29, 1997
CHANGE OF CONTROL: The Company's 1996 Stock Option Plan and its Deferred
Compensation Plan contain "change of control" provisions,
each as separately defined in the respective plans. In
the event you are employed by the Company at the time a
defined "change of control" of the Company occurs under
either or both plans, your options and salary
continuation shall be subject to treatment as set forth
in each such plan.
DEFERRED
COMPENSATION PLAN: You will be designated as a "Participant" in the
Company's DCP and your "Plan Benefit Amount" will be set
at $2,000,000 and will be subject to and payable in
accordance with the terms of the DCP.
CAR ALLOWANCE: $9,000 per year, payable in 26 equal bi-weekly amounts as
part of your regular paycheck.
RELOCATION COSTS: The Company will reimburse you for all reasonable moving
expenses related to your family's move to the Dallas/Fort
Worth, Texas area. The Company will also pay or reimburse
you for customary commissions and fees associated with
the sale of your current home. The usual Company house
purchase arrangement is available to you if you wish to
have the Company purchase your current home. If
necessary, the Company will buy your home for the lesser
of the actual purchase price you paid or the lowest of up
to three current appraisals of your home. If you decide
to sell your current home yourself, the Company will pay
your current monthly mortgage payment (principal,
interest, taxes and insurance) for up to six (6) months
from the start date of your employment with the Company
(provided you and your family have moved to the Fort
Worth area) or until the closing of escrow on the sale of
your current home, whichever comes first.
STOCK PURCHASE PLAN: Voluntary contributions up to 10% of Base Salary; Company
will match employee contributions pursuant to existing
SPP formula (initially 40%). Existing SPP terms will
apply if you elect to participate.
401(k) PLAN: You will be entitled to participate in this plan to the
same extent as the other members of the Company's
executive management in accordance with the plan's terms.
<PAGE>
Page 4
Mr. Levy
November 29, 1997
INSURANCE: You will be entitled to participate in the Company's
major medical and dental insurance plans in accordance
with their respective terms. You will be provided life
insurance (3x annual base salary) and long-term
disability insurance. The Company will pay the same
proportion of your total premium for each type of
insurance as provided to other members of executive
management.
VACATION: Three weeks paid vacation per calendar year. No carry
over of unused vacation time.
If the foregoing accurately sets forth our understanding, please acknowledge
below.
Sincerely,
INTERTAN, INC.
/s/JAMES T. NICHOLS
James T. Nichols
President and
Chief Executive Officer
Acknowledged and Accepted
November 29, 1997
--
/s/BRIAN LEVY
- --------------------------
Brian Levy
<PAGE>
EXHIBIT 10(b)
OMNIBUS TERMINATION AGREEMENT
This Agreement is dated as of the 30th day of December, 1997.
AMONG: INTERTAN, INC., a Delaware corporation ("ITI"), INTERTAN AUSTRALIA LTD.,
a New South Wales corporation ("ITA"), TECHNOTRON SALES CORP. PTY.
LIMITED, a New South Wales corporation ("TSC"), INTERTAN CANADA LTD., an
Alberta corporation ("ITC"), and INTERTAN U.K. LIMITED, an England/Wales
corporation ("ITUK")
(collectively, the "InterTAN Group" and, individually, a "member of the
InterTAN Group")
OF THE FIRST PART
AND: TANDY CORPORATION, a Delaware corporation ("Tandy"), TRANS WORLD
ELECTRONICS, INC., a Texas corporation ("Trans World"), and A&A
INTERNATIONAL, INC., a Nevada corporation ("A&A")
(collectively, the "Tandy Group" and, individually, a "member of the
Tandy Group")
OF THE SECOND PART
WHEREAS, the InterTAN Group, or one or more members of the InterTAN Group (and
InterTAN Europe S.A., a Belgian corporation ("ESA"), now dissolved), and the
Tandy Group, or one or more members of the Tandy Group, entered into certain
agreements, including without limitation, the agreements referred to in Schedule
A annexed hereto (collectively, the "Restructuring Agreements"), in connection
with the 1993 restructuring of the debt of the InterTAN Group and the purchase
of certain of such indebtedness by the Tandy Group or one or more members of the
Tandy Group and in connection with certain related transactions; and
WHEREAS, it is proposed that the InterTAN Group repay all outstanding term
indebtedness to the Tandy Group owing under the Secured Loan Agreement referred
to in Schedule A annexed hereto; and
WHEREAS, upon repayment of such indebtedness, the parties hereto have agreed to
terminate each of the Restructuring Agreements referred to in Schedule A annexed
hereto; provided that, for greater certainty, any agreement or instrument
currently in force between the Tandy Group and the InterTAN Group or between any
member or members of the Tandy Group or the InterTAN Group, respectively, not
referred to in Schedule A shall continue in full force and effect after the
Effective Date (as hereinafter defined).
NOW, THEREFORE, THIS AGREEMENT WITNESSETH that, in consideration of the premises
and the mutual covenants hereinafter contained and other good and valuable
<PAGE>
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. This Agreement shall be effective from and after the date hereof (the
"Effective Date") upon the repayment in full of all currently outstanding
principal indebtedness, such amount being U.S.$20,873,826.44, plus all accrued
and unpaid interest thereon, through the Effective Date, of any member of the
InterTAN Group owing to any member of the Tandy Group under the Series A Note
issued pursuant to the Secured Loan Agreement referred to in Schedule A annexed
hereto.
2. On the Effective Date, all agreements and instruments referred to in
Schedule A annexed hereto shall be terminated and neither party shall have any
obligation or liability thereunder in respect of any matter arising after the
Effective Date.
3. Trans World represents and warrants to ITI that it is the registered and
beneficial holder of 1,449,007 certificated warrants to purchase 1,449,007
shares of the common stock of ITI, such warrants being issued pursuant to a
Warrant Agreement dated as of August 5, 1993 between ITI and Trans World (the
"Warrants"). On the Effective Date, Trans World shall surrender the certificate
for all of the Warrants to ITI for cancellation against payment of the amount,
if any, by which the closing price on the New York Stock Exchange of the common
stock of ITI (determined as at the last date that such stock traded prior to the
Effective Date) exceeds US$7.75 per share, multiplied by 1,449,007, representing
the number of Warrants surrendered.
4. The Tandy Group represents and warrants to the InterTAN Group that one
or more members of the Tandy Group holds, as pledgee under the Stock Pledge
Agreement referred to in Schedule A annexed hereto, the stock certificates
referred to in Schedule B annexed hereto. On the Effective Date, the Tandy Group
shall surrender to ITI all stock certificates representing such shares and any
associated stock powers, powers of attorney or similar instruments.
5. All of the parties hereto, at the expense of the InterTAN Group, will do
all things and execute all further agreements, instruments and documents
necessary or desirable to carry
<PAGE>
out the terms and provisions hereof, including without limitation, the
furnishing of discharges in registrable form for, and/or the assignment of, any
or all security interests currently held by any member of the Tandy Group for
the obligations of any member of the InterTAN Group.
6. This Agreement shall be construed in accordance with and governed by the
laws of the State of Texas. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original.
INTERTAN, INC. INTERTAN AUSTRALIA LTD.
By: By:
----------------------------------- -------------------------------------
Title: Title:
-------------------------------- ----------------------------------
TECHNOTRON SALES CORP. PTY. LIMITED INTERTAN CANADA LTD.
By: By:
----------------------------------- -------------------------------------
Title: Title:
-------------------------------- ----------------------------------
INTERTAN U.K. LIMITED TANDY CORPORATION
By: By:
----------------------------------- -------------------------------------
Title: Title:
-------------------------------- ----------------------------------
TRANS WORLD ELECTRONICS, INC. A&A INTERNATIONAL, INC.
By: By:
----------------------------------- -------------------------------------
Title: Title:
-------------------------------- ----------------------------------
<PAGE>
SCHEDULE A
Each of the following agreements, documents or instruments as amended,
supplemented or replaced from time to time, up to and including the Effective
Date, are deemed the "Restructuring Agreements":
1. Terms Agreement dated July 23, 1993 between the InterTAN Group and Tandy
(insofar as it applies to the agreements and documents listed below).
2. Sale and Purchase Agreement dated August 5, 1993 among the Banks, Trans
World, the InterTAN Group, Tandy and the Agent.
3. Loan Agreement dated as of August 3, 1993 between InterTAN Group and
Trans World and all loan and security documentation in connection
therewith.
4. General Security Agreement dated as of August 3, 1993 among the InterTAN
Group, Tandy, Trans World and A&A.
5. Stock Pledge Agreement dated August 3, 1993 among the InterTAN Group and
the Tandy Group.
6. Warrant Agreement dated as of August 5, 1993 between ITI and Trans
World.
7. Registration Rights Agreement dated as of August 5, 1993 between ITI and
Trans World.
8. Secured Loan Agreement dated as of August 25, 1993 between the InterTAN
Group, ESA and Trans World and the other "Loan Documents" (excluding
the "Distribution Agreement" and any lease guaranty obligations
thereunder) and "Security Agreements" (all as defined in such Secured
Loan Agreement) and all other security granted by members of the
InterTAN Group pursuant thereto.
9. Inventory Repurchase Agreement dated as of May 6, 1994 among CIBC, the
Tandy Group and the InterTAN Group (excluding TSC).
<PAGE>
SCHEDULE B
STOCK HELD BY TANDY GROUP
-------------------------
ISSUER HOLDER CERT.# #SHARES CERT. DATE
- -------- ---------- ---------- ------------ ----------------
TSC ITI A2 99,999 8-26-93
TSC L. Neumann A4 1 3-8-94
ITC ITI 21 20,000 12-1-86
ITUK ITI 5 14,000,001 10-18-93
ITUK ITI 1 1 12-13-93
ITUK ITC 4 8,000,000 5-31-88
ESA ITC 1 755,051 ?-93
ESA A. Barwood 2 6 1-28-94
ITA ITI A1 1 8-26-93
ITA M. Williams A5 1 8-26-93
ITA ITI A6 4,999,995 8-26-93
ITA L. Neumann A7 1 3-8-94
ITA J. Williams A8 1 3-8-94
ITA D. Saunders A9 1 3-8-94
<PAGE>
EXHIBIT 10(c)
LOAN AGREEMENT
among
INTERTAN CANADA LTD.
AS CANADIAN BORROWER
and
INTERTAN U.K. LIMITED
AS U.K. BORROWER
and
INTERTAN, INC.
AS GUARANTOR
and
BANK OF AMERICA CANADA
AS AGENT AND AS A CANADIAN LENDER
AND
BANK OF AMERICA N.T.&S.A. (LONDON ENGLAND BRANCH OFFICE)
AS A U.K. LENDER
AND
THE LENDERS (AS HEREINBELOW DEFINED)
dated as of
December 22, 1997
OSLER, HOSKIN & HARCOURT MEIGHEN DEMERS
Borrowers' and Guarantor's Canadian Counsel Agent's and Lenders' Counsel
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS............................................................................................-1-
-----------
1.1 DEFINITIONS...................................................................................-1-
-----------
1.2 ACCOUNTING TERMS.............................................................................-33-
----------------
1.3 INTERPRETATION...............................................................................-33-
--------------
1.4 REFERENCES...................................................................................-34-
----------
1.5 INTEREST CALCULATIONS AND PAYMENTS...........................................................-34-
----------------------------------
1.6 INTEREST ACT (CANADA)........................................................................-35-
---------------------
2. LOANS AND LETTERS OF CREDIT...........................................................................-35-
---------------------------
2.1 TOTAL FACILITY...............................................................................-35-
--------------
2.2 REVOLVING LOANS..............................................................................-36-
---------------
2.3 LETTERS OF CREDIT............................................................................-44-
-----------------
2.4 F/X TRANSACTIONS.............................................................................-52-
----------------
2.5 DELIBERATELY LEFT BLANK......................................................................-53-
-----------------------
2.6 CONVERSION...................................................................................-53-
----------
2.7 ROLLOVER/SELECTION OF INTEREST PERIODS.......................................................-54-
--------------------------------------
2.8 BA EQUIVALENT LOANS..........................................................................-54-
-------------------
2.9 LIBOR LOANS..................................................................................-55-
-----------
3. INTEREST AND OTHER CHARGES............................................................................-55-
--------------------------
3.1 INTEREST.....................................................................................-55-
--------
3.2 DEFAULT RATE.................................................................................-56-
------------
3.3 UNUSED LINE FEE..............................................................................-56-
---------------
3.4 MAXIMUM INTEREST RATE........................................................................-57-
---------------------
3.5 CLOSING FEE..................................................................................-57-
-----------
3.6 COLLATERAL MANAGEMENT FEE....................................................................-57-
-------------------------
3.7 COLLECTION DAY...............................................................................-58-
--------------
4. PAYMENTS AND PREPAYMENTS..............................................................................-58-
------------------------
4.1 LOANS........................................................................................-58-
-----
4.2 PLACE AND FORM OF PAYMENTS; EXTENSION OF TIME................................................-58-
---------------------------------------------
4.3 APPORTIONMENT, APPLICATION AND REVERSAL OF PAYMENTS..........................................-59-
---------------------------------------------------
4.4 INDEMNITY FOR RETURNED PAYMENTS..............................................................-60-
-------------------------------
4.5 FUNDING LOSSES...............................................................................-61-
--------------
4.6 CURRENCY.....................................................................................-61-
--------
4.7 PAYMENTS AS REVOLVING LOANS..................................................................-61-
---------------------------
4.8 EXCESS RESULTING FROM EXCHANGE RATE CHANGE...................................................-62-
------------------------------------------
4.9 TAXES........................................................................................-62-
-----
5. AGENT AND/OR LENDERS BOOKS AND RECORDS; MONTHLY STATEMENTS............................................-63-
</TABLE>
<PAGE>
<TABLE>
<S> <C>
6. COLLATERAL............................................................................................-63-
----------
6.1 GRANT OF SECURITY INTEREST...................................................................-63-
--------------------------
6.2 PERFECTION AND PROTECTION OF SECURITY INTEREST...............................................-65-
----------------------------------------------
6.3 LOCATION OF COLLATERAL.......................................................................-66-
----------------------
6.4 TITLE TO, LIENS ON AND SALE AND USE OF COLLATERAL............................................-67-
-------------------------------------------------
6.5 APPRAISALS...................................................................................-67-
----------
6.6 ACCESS AND EXAMINATION.......................................................................-67-
----------------------
6.7 INSURANCE....................................................................................-68-
---------
6.8 COLLATERAL REPORTING.........................................................................-68-
--------------------
6.9 ACCOUNTS.....................................................................................-70-
--------
6.10 COLLECTION OF ACCOUNTS; PAYMENTS.............................................................-71-
--------------------------------
6.11 INVENTORY....................................................................................-73-
---------
6.12 EQUIPMENT....................................................................................-74-
---------
6.13 ASSIGNED CONTRACTS...........................................................................-75-
------------------
6.14 DOCUMENTS, INSTRUMENTS AND CHATTEL PAPER.....................................................-76-
----------------------------------------
6.15 RIGHT TO CURE................................................................................-76-
-------------
6.16 POWER OF ATTORNEY............................................................................-76-
-----------------
6.17 AGENT'S RIGHTS, DUTIES AND LIABILITIES.......................................................-77-
--------------------------------------
7. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.....................................................-78-
-------------------------------------------------
7.1 BOOKS AND RECORDS............................................................................-78-
-----------------
7.2 FINANCIAL INFORMATION........................................................................-78-
---------------------
7.3 NOTICES TO AGENT.............................................................................-80-
----------------
8. GENERAL WARRANTIES AND REPRESENTATIONS................................................................-82-
--------------------------------------
8.1 AUTHORIZATION, VALIDITY AND ENFORCEABILITY OF THIS AGREEMENT AND THE LOAN DOCUMENTS..........-82-
-----------------------------------------------------------------------------------
8.2 VALIDITY AND PRIORITY OF SECURITY INTEREST...................................................-83-
------------------------------------------
8.3 ORGANIZATION AND QUALIFICATION...............................................................-83-
------------------------------
8.4 CORPORATE NAME; PRIOR TRANSACTIONS...........................................................-83-
----------------------------------
8.5 SUBSIDIARIES AND AFFILIATES..................................................................-83-
---------------------------
8.6 FINANCIAL STATEMENTS AND PROJECTIONS.........................................................-83-
------------------------------------
8.7 CAPITALIZATION...............................................................................-84-
--------------
8.8 SOLVENCY.....................................................................................-84-
--------
8.9 DEBT.........................................................................................-84-
----
8.10 DISTRIBUTIONS................................................................................-84-
-------------
8.11 TITLE TO PROPERTY............................................................................-84-
-----------------
8.12 ADEQUATE ASSETS..............................................................................-84-
---------------
8.13 REAL PROPERTY; LEASES........................................................................-84-
---------------------
8.14 PROPRIETARY RIGHTS COLLATERAL................................................................-85-
-----------------------------
8.15 TRADE NAMES..................................................................................-85-
-----------
8.16 LITIGATION...................................................................................-85-
----------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
8.17 RESTRICTIVE AGREEMENTS.......................................................................-85-
----------------------
8.18 LABOUR DISPUTES..............................................................................-85-
---------------
8.19 ENVIRONMENTAL LAWS...........................................................................-86-
------------------
8.20 NO VIOLATION OF LAW..........................................................................-87-
-------------------
8.21 NO DEFAULT...................................................................................-87-
----------
8.22 PLANS........................................................................................-87-
-----
8.23 TAXES........................................................................................-88-
-----
8.24 EVENT OF DEFAULT.............................................................................-88-
----------------
8.25 AUTHORITY TO INCUR DEBTS.....................................................................-88-
------------------------
8.26 NO MATERIAL ADVERSE CHANGE...................................................................-89-
--------------------------
8.27 DISCLOSURE...................................................................................-89-
----------
8.28 WORKERS' COMPENSATION........................................................................-89-
---------------------
8.29 REAL ESTATE..................................................................................-89-
-----------
8.30 INVESTMENT ACT...............................................................................-90-
--------------
8.31 MARGIN SECURITIES............................................................................-90-
-----------------
9. AFFIRMATIVE AND NEGATIVE COVENANTS....................................................................-91-
----------------------------------
9.1 TAXES AND OTHER OBLIGATIONS..................................................................-91-
---------------------------
9.2 CORPORATE EXISTENCE AND GOOD STANDING........................................................-91-
-------------------------------------
9.3 COMPLIANCE WITH LAW AND AGREEMENTS...........................................................-91-
----------------------------------
9.4 MAINTENANCE OF PROPERTY AND INSURANCE........................................................-92-
-------------------------------------
9.5 ENVIRONMENTAL LAWS...........................................................................-92-
------------------
9.6 PLANS........................................................................................-93-
-----
9.7 MERGERS, CONSOLIDATIONS, ACQUISITIONS OR SALES...............................................-93-
----------------------------------------------
9.8 DISTRIBUTIONS; CAPITAL CHANGES...............................................................-93-
------------------------------
9.9 TRANSACTIONS AFFECTING COLLATERAL OR OBLIGATIONS.............................................-94-
------------------------------------------------
9.10 GUARANTEES...................................................................................-94-
----------
9.11 DEBT.........................................................................................-94-
----
9.12 PREPAYMENT...................................................................................-95-
----------
9.13 TRANSACTIONS WITH AFFILIATES.................................................................-95-
----------------------------
9.14 INVESTMENT BANKING AND FINDER'S FEES.........................................................-95-
------------------------------------
9.15 BUSINESS CONDUCTED...........................................................................-95-
------------------
9.16 LIENS........................................................................................-95-
-----
9.17 SALE AND LEASEBACK TRANSACTIONS..............................................................-95-
-------------------------------
9.18 NEW SUBSIDIARIES.............................................................................-96-
----------------
9.19 RESTRICTED INVESTMENTS.......................................................................-96-
----------------------
9.20 DELIBERATELY LEFT BLANK......................................................................-96-
-----------------------
9.21 DELIBERATELY LEFT BLANK......................................................................-96-
-----------------------
9.22 MINIMUM AVAILABILITY.........................................................................-96-
--------------------
9.23 TANGIBLE NET WORTH...........................................................................-96-
------------------
9.24 YEAR 2000 PROBLEM............................................................................-96-
-----------------
9.25 RE - FILE BARRIE MORTGAGE....................................................................-96-
-------------------------
9.26 DELIBERATELY LEFT BLANK......................................................................-96-
-----------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
9.27 FURTHER ASSURANCES...........................................................................-96-
------------------
10. CLOSING; CONDITIONS TO LENDING........................................................................-96-
------------------------------
10.1 REPRESENTATIONS AND WARRANTIES; COVENANTS; EVENTS............................................-97-
-------------------------------------------------
10.2 CLOSING DATE CONDITIONS......................................................................-97-
-----------------------
10.3 RELEASE OF PROCEEDS; DRAWDOWN DATE...........................................................-99-
----------------------------------
10.4 TERMINATION OF LIENS........................................................................-101-
--------------------
10.5 DELIBERATELY LEFT BLANK.....................................................................-101-
-----------------------
10.6 CLOSING FEE.................................................................................-101-
-----------
10.7 PAYMENT OF FEES AND EXPENSES................................................................-101-
----------------------------
10.8 REQUIRED APPROVALS..........................................................................-101-
------------------
10.9 NO MATERIAL ADVERSE CHANGE..................................................................-101-
--------------------------
10.10 PROCEEDINGS.................................................................................-101-
-----------
10.11 ENVIRONMENTAL MATTERS.......................................................................-102-
---------------------
11. DEFAULT; REMEDIES....................................................................................-102-
-----------------
11.1 EVENTS OF DEFAULT...........................................................................-102-
-----------------
11.2 REMEDIES....................................................................................-105-
--------
12. TERM AND TERMINATION OF REVOLVING LOAN...............................................................-107-
13. GUARANTEES...........................................................................................-108-
----------
13.1 THE GUARANTEES..............................................................................-108-
--------------
13.2 GUARANTEE ABSOLUTE..........................................................................-108-
------------------
13.3 CONSENTS, WAIVERS AND RENEWALS..............................................................-109-
------------------------------
13.4 SUBROGATION.................................................................................-110-
-----------
14. THE AGENT............................................................................................-110-
---------
14.1 AGENT.......................................................................................-110-
-----
14.2 AGENT'S RESPONSIBILITY......................................................................-111-
----------------------
14.3 AGENT'S DUTIES..............................................................................-112-
--------------
14.4 PROTECTION OF AGENT.........................................................................-113-
-------------------
14.5 INDEMNIFICATION OF AGENT....................................................................-115-
------------------------
14.6 TERMINATION OR RESIGNATION OF AGENT.........................................................-115-
-----------------------------------
14.7 RIGHTS OF AGENT, BAUK AND BACAN.............................................................-116-
-------------------------------
14.8 AUTHORIZED WAIVERS, VARIATIONS AND OMISSIONS................................................-116-
--------------------------------------------
14.9 FINANCIAL INFORMATION CONCERNING THE BORROWERS OR THE GUARANTORS............................-117-
----------------------------------------------------------------
14.10 KNOWLEDGE OF FINANCIAL SITUATION OF BORROWERS...............................................-117-
---------------------------------------------
14.11 RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS.....................................-118-
-------------------------------------------------------
14.12 CAPACITY AS AGENT...........................................................................-118-
-----------------
14.13 CERTAIN RIGHTS OF THE AGENT.................................................................-119-
---------------------------
14.14 COLLATERAL MATTERS..........................................................................-119-
------------------
14.15 DESIGNATION OF BAUK AS AGENT................................................................-119-
----------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
14.16 FIELD AUDIT AND EXAMINATION REPORTS; DISCLAIMER BY LENDERS..................................-120-
----------------------------------------------------------
15. ASSIGNMENTS AND TRANSFERS............................................................................-122-
-------------------------
15.1 BENEFIT OF AGREEMENT........................................................................-122-
--------------------
15.2 ASSIGNMENTS AND TRANSFERS BY THE BORROWERS..................................................-122-
------------------------------------------
15.3 ASSIGNMENTS AND TRANSFERS BY A LENDER.......................................................-122-
-------------------------------------
15.4 ASSIGNMENT AND ASSUMPTION AGREEMENT.........................................................-122-
-----------------------------------
15.5 REGISTER AND NOTICE.........................................................................-124-
-------------------
15.6 SUB-PARTICIPATIONS..........................................................................-125-
------------------
15.7 DISCLOSURE..................................................................................-125-
----------
16. MISCELLANEOUS........................................................................................-125-
-------------
16.1 CUMULATIVE REMEDIES; NO PRIOR RECOURSE TO COLLATERAL........................................-125-
----------------------------------------------------
16.2 NO IMPLIED WAIVERS..........................................................................-125-
------------------
16.3 SEVERABILITY................................................................................-126-
------------
16.4 GOVERNING LAW...............................................................................-126-
-------------
16.5 CONSENT TO JURISDICTION AND VENUE; SERVICE OF PROCESS.......................................-126-
-----------------------------------------------------
16.6 WAIVER OF JURY TRIAL, ETC...................................................................-126-
--------------------------
16.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES..................................................-127-
------------------------------------------
16.8 OTHER SECURITY AND GUARANTEES...............................................................-127-
-----------------------------
16.9 FEES AND EXPENSES...........................................................................-127-
-----------------
16.10 WAIVER OF NOTICES...........................................................................-129-
-----------------
16.11 BINDING EFFECT; ASSIGNMENT..................................................................-129-
--------------------------
16.12 MODIFICATION................................................................................-129-
------------
16.13 COUNTERPARTS................................................................................-129-
------------
16.14 RIGHT OF SET-OFF............................................................................-129-
----------------
16.15 DELIBERATELY LEFT BLANK.....................................................................-130-
-----------------------
16.16 PRECEDENCE..................................................................................-130-
----------
16.17 CONFIDENTIALITY.............................................................................-130-
---------------
16.18 ILLEGALITY..................................................................................-130-
----------
16.19 INCREASED COSTS.............................................................................-130-
---------------
16.20 JUDGMENT CURRENCY...........................................................................-132-
-----------------
16.21 NOTICES.....................................................................................-133-
-------
16.22 NATURE OF THE OBLIGATIONS...................................................................-134-
-------------------------
</TABLE>
<PAGE>
-1-
LOAN AGREEMENT, dated as of December 22, 1997, among BANK OF AMERICA
CANADA, a Canadian chartered bank, with offices at 200 Front Street West, Suite
2700, Toronto, Ontario, M5V 3L2, for itself as a Canadian Lender and as agent
for the Lenders, BANK OF AMERICA N.T.&S.A. (LONDON ENGLAND BRANCH OFFICE), as a
U.K. Lender and designated as an agent as provided in Section 14.15, the
Lenders, INTERTAN CANADA LTD. (the " Canadian Borrower"), as a borrower,
INTERTAN U.K. LIMITED (the "U.K. Borrower" and together with the Canadian
Borrower, "the Borrowers"), as a borrower, and INTERTAN, INC. (the "Parent"), as
a guarantor, each having its principal office and chief place of business as set
forth, respectively in EXHIBIT "D";
W I T N E S S E T H
-------------------
WHEREAS the Borrowers have requested that (a) the Agent and Canadian
Lenders provide a revolving credit facility available by way of loans and
letters of credit in an amount not exceeding U.S.$50,000,000 (or the equivalent
amount thereof in Cdn.$) in favour of the Canadian Borrower and (b) that the
Agent and U.K. Lenders provide a revolving credit facility available by way of
loans and letters of credit in an amount not exceeding U.S.$25,000,000 (or the
Equivalent Amount thereof in BPS) in favour of the U.K. Borrower, to provide for
the repayment of the term loan due by the Borrowers to Tandy and to repay its
revolving loans to a CIBC led bank syndicate and for the ongoing working capital
requirements of the Borrowers;
AND WHEREAS the Agent and Lenders have agreed to grant such facilities
upon and subject to the terms hereof;
NOW THEREFORE, in consideration of the mutual conditions and
agreements set forth in this Agreement and for good and valuable consideration,
the receipt of which is hereby acknowledged, the Borrowers, the Parent, the
Agent and the Lenders hereby agree as follows:
1. DEFINITIONS.
-----------
1.1 Definitions. As used herein:
-----------
"(Pounds)" or "BPS" means lawful currency of the United Kingdom.
-----------------
"Account" means a Borrower's right to payment for a sale or lease
-------
and/or delivery of goods or rendition of services.
<PAGE>
-2-
"Account Debtor" means each Person obligated in any way on or in
--------------
connection with an Account.
"Accounts Payable Reserve" means (A) in the case of the Canadian
------------------------
Borrower, all merchandise trade payables and accruals no greater than 30 days
old less the account receivable due from Cantel (but only to the extent of the
----
Cantel payables included in the merchandise trade payables and accruals) and (B)
in the case of the U.K. Borrower, one hundred percent (100%), of the Canadian
Borrower's or U.K. Borrower's, as the case may be, merchandise trade payables as
at the end of the immediately preceding month.
"Action Request" means any request received by either Borrower, the
--------------
Parent or any of its Subsidiaries from any governmental or regulatory body or
agency under any Environmental Law whereby such body or agency requests that it
take action or steps or do acts or things in respect of any property or assets
in its charge, management or control to remediate a matter which is not or is
alleged not to be in material compliance with all Environmental Laws.
"Additional Compensation" has the meaning specified in Section 16.19.
-----------------------
"Affiliate" means: (a) any Person which, directly or indirectly,
---------
controls, is controlled by or is under common control with, the Parent and/or
either Borrower; (b) any Person which beneficially owns or holds, directly or
indirectly, ten percent or more of any class of voting stock or equity interest
(including partnership interests) of the Parent or either Borrower; (c) any
Person, ten percent or more of any class of the voting stock (or if such Person
is not a corporation, ten percent or more of the equity interest, including
partnership interests) of which is beneficially owned or held, directly or
indirectly, by the Parent and/or either Borrower or (d) any Person related
within the meaning of the Income Tax Act of Canada to any such Person and
--------------
includes any "Affiliate" within the meaning specified in the Business
--------
Corporations Act (Canada) on the date hereof. The term control (including the
- ----------------
terms "controlled by" and "under common control with"), means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of the Person in question.
"Agent" means BACAN and its assignees and Persons designated by it and
-----
includes BAUK to the extent provided in Section 14.15.
"Agent Advances" has the meaning specified in Section 2.2(i).
--------------
"Aggregate Commitments" means the sum of the Total Commitments in
---------------------
respect of both of the Revolving Credit Facilities.
"Applicable Margins" means, collectively, the BA Rate Margin, the
------------------
LIBOR Rate Margin, the Base Rate Margin, the U.K. Reference Rate Margin and the
Prime Rate Margin.
<PAGE>
-3-
"Assigned Contracts" means, collectively, all of the Borrowers' or
------------------
Parent's rights and remedies under, and all moneys and claims for money due or
to become due to either Borrower or the Parent under any material contracts and
any and all amendments, supplements, extensions, and renewals thereof including,
without limitation, all rights and claims of either Borrower or the Parent now
or hereafter existing: (i) under any insurance, indemnities, warranties, and
guarantees provided for or arising out of or in connection with any of the
foregoing agreements; (ii) for any damages arising out of or for breach of or
default under or in connection with any of the foregoing agreements; (iii) to
all other amounts from time to time paid or payable under or in connection with
any of the foregoing agreements; or (iv) to exercise or enforce any and all
covenants, remedies, powers and privileges thereunder.
"Assignment" means an assignment agreement whereby the Parent assigns
----------
to the Agent and Canadian Lenders all of its rights and benefits of and under
the U.K. Note and the U.K. Intercorporate Security, in form satisfactory to the
Agent.
"Audit Fee" has the meaning specified in Section 16.9.
---------
"Australian Affiliate" means each of InterTAN Australia Ltd. and
--------------------
Technotron Sales Corp. Pty. Ltd. and any Subsidiary thereof.
"Average Loan Balance" means (a) in the case of the Canadian Borrower,
--------------------
the average of the sum of Canadian Revolving Loans and Letters of Credit
outstanding under the Canadian Revolving Credit Facility during the period of
180 days preceding the date of termination of this Agreement and (b) in the case
of the U.K. Borrower, the average of the sum of U.K. Revolving Loans and Letters
of Credit outstanding under the U.K. Revolving Credit Facility during the period
of 180 days preceding the date of termination of this Agreement.
"BACAN" means Bank of America Canada.
-----
"BAUK" means Bank of America N.T.&S.A. (London England Branch Office).
----
"BA Equivalent Interest Period" means, with respect to each BA
-----------------------------
Equivalent Loan, the period selected by the Canadian Borrower hereunder and
being of one (1), three (3) or six (6) months' duration, or any other duration
of seven (7) days to one hundred and eighty (180) days subject to the
availability of funds to the Lenders, in each case commencing on the Drawdown
Date, Conversion Date or Rollover Date with respect to the Drawdown or Rollover
of or Conversion into such BA Equivalent Loan; provided that in any case the
last day of each BA Equivalent Interest Period shall also be the first day of
the next Interest Period and further provided that the last day of each BA
Equivalent Interest Period shall be a Business Day and if the last day of a BA
Equivalent Interest Period selected by the Canadian Borrower is not a Business
Day, the Canadian Borrower shall be deemed to have selected a BA Equivalent
Interest
<PAGE>
-4-
Period the last day of which is the Business Day next following the last day of
the BA Equivalent Interest Period otherwise selected, unless such next following
Business Day falls in the next calendar month in which event the Canadian
Borrower shall be deemed to have selected a BA Equivalent Interest Period the
last day of which is the Business Day next preceding the last day of the BA
Equivalent Interest Period otherwise selected and further provided that the last
BA Equivalent Interest Period hereunder shall expire on or prior to the Maturity
Date (or, after any renewal of this Agreement as herein provided, the expiry
date of any Renewal Term).
"BA Equivalent Loan" means a Loan in Canadian Dollars made by the
------------------
Canadian Lenders to the Canadian Borrower hereunder pursuant to a Drawdown,
Rollover or Conversion, on which interest is payable under Section 3.1(c).
"BA 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 on
the Business Day which is the first day of such Interest Period by BACAN 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 BA Equivalent Interest Period.
"BA Rate Margin" means two and one-half percent (2.5%).
--------------
"Base Rate" means the rate of interest publicly announced from time to
---------
time by BACAN as its reference rate of interest for loans made in U.S. Dollars
to Canadian customers and designated as its "base" rate. It is a rate set by
BACAN based upon various factors including BACAN's cost and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans. However, BACAN may price loans at, above or below such
announced rate.
"Base Rate Loan" means a Loan in U.S. Dollars made by the Canadian
--------------
Lenders to the Canadian Borrower hereunder pursuant to a Drawdown, Rollover or
Conversion of a Loan under the Canadian Revolving Credit Facility, on which
interest is payable under Section 3.1(b).
"Base Rate Margin" means one percent (1.0%) per annum.
----------------
"BIS Guidelines" means the guidelines relating to capital adequacy
--------------
proclaimed in July 1988 by the Basel Committee on Banking Regulations and
Supervisory Practices of the Bank of International Settlements, as amended to
the date hereof.
"Borrowers" has the meaning specified in the preambles and includes
---------
their successors and permitted assigns.
<PAGE>
-5-
"Business Day" means any day that is not a Saturday, Sunday, or day on
------------
which banks in Toronto, Ontario and Chicago, Illinois and, in the case of the
U.K. Revolving Loans and Letters of Credit issued at the request of the U.K.
Borrower, London, England are required or permitted to close.
"Canadian Availability" means: (a) the lesser at any point in time
---------------------
of: (i) the Maximum Canadian Revolving Credit Line; and (ii) the sum of (A)
eighty-five percent (85%) of the Net Amount of Eligible Canadian Accounts, plus
(B) the Inventory Advance Rate of the Canadian Borrower at such time multiplied
by the value of Eligible Canadian Inventory; less (C) the Accounts Payable
----
Reserve (the amount under this clause (ii) referred to as the "Canadian Formula
Amount"); less (b) without duplication (i) the Tax Reserve; (ii) the Dilution
----
Reserve; (iii) a reserve established for all amounts secured by any Liens,
choate or inchoate, which rank or are capable of ranking in priority to the
Agent's and/or Lenders' Security Interest, including without limitation, any
such amounts due and not paid for vacation pay, amounts due and not paid under
any legislation relating to workers' compensation or to unemployment insurance,
all amounts deducted or withheld and not paid and remitted under the Income Tax
----------
Act of Canada, amounts currently or past due and not paid for realty, municipal
- ---
or similar taxes and all amounts currently or past due and not contributed,
remitted or paid to any Plan or under the Canada Pension Plan, the Pension
-------
Benefits Act or any similar legislation; (iv) a reserve in an amount determined
- ------------
by the Agent from time-to-time in respect of such portion of the Accounts as
represents a sales or excise tax or goods and services tax; (v) a reserve for
all claims, charges and Liens, including in respect of rent, storage and/or
transport costs which have arisen or may arise, in respect of off-site Inventory
or Inventory at leased locations unless a waiver and access agreement
satisfactory to the Agent shall have been received; (vi) a reserve for all
amounts due to contract managers under joint venture or similar arrangements;
and (vii) all other reserves which the Agent in the exercise of its Permitted
Discretion deems necessary or desirable to maintain with respect to the Canadian
Borrower, including, without limitation, in respect of any amounts which the
Agent and/or Lenders may be obligated to pay in the future for the account of
the Canadian Borrower (the foregoing amount calculated by deducting (b) from (a)
being hereinafter referred to as the "Canadian Borrowing Base"), less (c) the
----------------------- ----
sum of: (i) the unpaid balance of Canadian Revolving Loans at that time; (ii)
the Canadian L/C Reserve; and (iii) the Canadian F/X Reserve provided, however,
-------- -------
that each of the reserves under clause (b) shall be established, and the amount
thereof determined, by the Agent in the exercise of its Permitted Discretion.
"Canadian Borrowing Base" has the meaning specified in the definition
-----------------------
of Canadian Availability.
"Canadian Closing Fee" has the meaning specified in Section 3.5(a).
--------------------
"Canadian Collateral" has the meaning specified in Section 6.1(a).
-------------------
<PAGE>
-6-
"Canadian Dollars" or "Cdn. Dollars" or "Cdn. $" means lawful currency
---------------- ------------ ------
of Canada.
"Canadian Formula Amount" has the meaning specified in the definition
-----------------------
of Canadian Availability.
"Canadian F/X Reserve" means a reserve established by the Agent in the
--------------------
exercise of its Permitted Discretion, from time to time, for F/X Transactions
with the Canadian Borrower outstanding. Initially, the reserve will be equal to
ten percent (10%) of the notional principal amount of each F/X Transaction
entered into with the Canadian Borrower (provided that the maturities of all F/X
transactions at any time are evenly spread out over up to twelve months to the
satisfaction of the Canadian Lenders). The Agent reserves the right to change
the reserve based upon such factors as it considers relevant in its discretion,
including, without limitation, the spread of settlement dates and exchange risks
as assessed by the Agent and Canadian Lenders.
"Canadian Guarantee" has the meaning specified in Section 10.1.
------------------
"Canadian L/C Reserve" means a reserve established by the Agent in the
--------------------
exercise of its Permitted Discretion, from time to time, for Letters of Credit
issued on behalf of the Canadian Borrower. Such reserve shall be, initially,
and shall never exceed one hundred percent (100%) of the undrawn amount of such
Letters of Credit.
"Canadian Lenders" means those Lenders who have a Commitment in the
----------------
Canadian Revolving Credit Facility.
"Canadian Revolving Credit Facility" has the meaning specified in
----------------------------------
Section 2.2(a)(i).
"Canadian Revolving Loans" has the meaning specified in Section
------------------------
2.2(b).
"Canadian Unused Line Fee" has the meaning specified in Section
------------------------
3.3(a).
"Capital Lease" means any lease of Property by either Borrower or any
-------------
Guarantor that, in accordance with GAAP, should be reflected as a liability on
the consolidated balance sheet of the Borrower.
"Cash Dominion System" has the meaning specified in Section 6.10.
--------------------
"Cash Proceeds" has the meaning specified in Section 6.10.
-------------
<PAGE>
-7-
"Closing Date" means the date on which the first Loans are made
------------
hereunder.
"Collateral" has the meaning given to such term in Section 6.1(c).
----------
"Collateral Management Fee" has the meaning specified in Section 3.6.
-------------------------
"Collection Account Agreements" has the meaning specified in Section
-----------------------------
6.10.
"Commitment" means on any day during the term hereof in relation to
----------
any Lender, except as otherwise provided herein, the amount of such Lender's
individual commitment in the Canadian Revolving Credit Facility and/or U.K.
Revolving Credit Facility, as the case may be, as set out on the execution pages
hereof subject to modification pursuant to its Assignment and Assumption
Agreement, as such amount has been reduced in accordance with Article 11, as at
the date of determination.
"Conversion" means the conversion of a Loan pursuant to the provisions
----------
of Section 2.6.
"Conversion Date" means the date notified to the Agent by the Canadian
---------------
Borrower or U.K. Borrower, as the case may be, in accordance with Section 2.6 as
being the date on which the Canadian Borrower or U.K. Borrower, as the case may
be, has elected to convert one type of Loan into another type of Loan and which
shall be a Business Day.
"Credit Support" has the meaning specified in Section 2.3.
--------------
"Deadline" has the meaning specified in Section 6.10.
--------
"Debenture" has the meaning specified in Section 10.2.
---------
"Debt" means, without duplication, all liabilities, obligations and
----
indebtedness of either Borrower or the Parent to any Person, of any kind or
nature, now or hereafter owing, arising, due or payable, howsoever evidenced,
created, incurred, acquired or owing, whether primary, secondary, direct,
contingent, fixed or otherwise, and including, without in any way limiting the
generality of the foregoing: (i) either Borrower's or the Parent's liabilities
and obligations to trade creditors; (ii) all Obligations; (iii) all obligations
and liabilities of any Person secured by any Lien on either Borrower's or the
Parent's Property, even though a Borrower or the Parent shall not have assumed
or become liable for the payment thereof; provided, however, that all such
-------- -------
obligations and liabilities which are limited in recourse to such Property shall
be included in Debt only to the extent of the book value of such Property as
would be shown on a balance sheet of a Borrower or the Parent prepared in
accordance with GAAP; (iv) all obligations or liabilities created or arising
under any Capital Lease or conditional sale or other
<PAGE>
-8-
title retention agreement with respect to Property used or acquired by a
Borrower or the Parent even if the rights and remedies of the lessor, seller or
lender thereunder are limited to repossession of such Property; provided,
--------
however, that all such obligations and liabilities which are limited in recourse
- -------
to such Property shall be included in Debt only to the extent of the book value
of such Property as would be shown on a consolidated balance sheet of the Parent
prepared in accordance with GAAP; (v) all accrued pension fund and other
employee benefit plan obligations and liabilities; (vi) all obligations and
liabilities under Guarantees; and (vii) deferred taxes.
"Defaulting Lender" has the meaning specified in Section 2.2(g).
-----------------
"Depository Banks" has the meaning specified in Section 6.10.
----------------
"Dilution Reserve" means, initially, five percent (5%) of the Net
----------------
Amount of Eligible Canadian Accounts or Net Amount of Eligible U.K. Accounts, as
applicable, provided that the Agent may in the exercise of its Permitted
Discretion change such reserve with respect to the Canadian Borrower or U.K.
Borrower, as the case may be, based upon non-cash credits against the Accounts
of such Borrower for the historical period to date, plus pending or probable,
but not yet applied, non-cash credit against the Accounts of such Borrower as
determined by the Agent.
"Distribution" means, in respect of any corporation: (a) the payment
------------
or making of any dividend or other distribution of Property (including any
purchases, retractions, redemptions or other transactions made out of its
treasury) in respect of capital stock of such corporation, other than
distributions in capital stock of the same class; or (b) the redemption or other
acquisition of any capital stock of such corporation.
"Drawdown" means the drawdown of a Loan to be made pursuant to Section
--------
2.
"Drawdown Date" means the date (being a Business Day) on which a
-------------
Drawdown is made.
"EBITDA" means, with respect to any fiscal year of either Borrower,
------
such Borrower's net income (determined on an average cost basis), before non-
cash gains or losses and before all extraordinary gains, plus the sum of (a)
income tax expense deducted by such Borrower in determining net income for such
year, as determined in accordance with GAAP and reported on the Financial
Statements for such year, (b) the depreciation and amortization expense deducted
by such Borrower in determining net income for such year, as determined in
accordance with GAAP and reported on the Financial Statements for such year, and
(c) interest expense of such Borrower deducted by such Borrower in determining
net income for such year, as determined in accordance with GAAP and reported on
the Financial Statements for such year.
<PAGE>
-9-
"Eligible Canadian Accounts" means all Accounts arising in the
--------------------------
ordinary course of the Canadian Borrower's business, but excluding interest,
late charges, penalties, collection costs and other sums due or payable in
respect thereof, upon which the Security Interest constitutes a first-ranking,
duly registered and perfected lien ranking in priority to all other Liens and
that are not ineligible as the basis for Canadian Revolving Loans and/or Letters
of Credit, based on the following criteria and on such other criteria as the
Agent may from time to time establish in the exercise of its Permitted
Discretion. Without intending to limit the Agent's Permitted Discretion to
establish other criteria of eligibility, Eligible Accounts shall not include any
Account:
(a) with respect to which more than ninety (90) days have elapsed since
the date of the original invoice therefor;
(b) with respect to which any of the representations, warranties,
covenants, and agreements contained in Article 6 are not or have
ceased to be complete and materially correct or have been breached;
(c) with respect to which, in whole or in part, a cheque, promissory note,
draft, trade acceptance or other instrument for the payment of money
has been received, presented for payment and returned uncollected for
any reason;
(d) as to which any one or more of the following events has occurred with
respect to the Account Debtor on such Account: death or judicial
declaration of incompetency of an Account Debtor who is an individual;
the filing by or against the Account Debtor of a request, proposal,
notice of intent to file a proposal, proceeding, action or petition
for liquidation, reorganization, arrangement, adjustment of debts,
adjudication as a bankrupt, winding-up, or other relief under the
bankruptcy, insolvency, restructuring, liquidation, winding up,
corporate or similar laws of Canada, any province or territory
thereof, or any foreign jurisdiction, now or hereafter in effect; the
making of any general assignment by the Account Debtor for the benefit
of creditors; the appointment of a receiver, trustee, monitor,
custodian, liquidator, administrator, interim receiver, monitor or
trustee or other official for the Account Debtor or for any of the
assets of the Account Debtor, including, without limitation, the
appointment of or taking possession by a "custodian" as defined in the
Federal Bankruptcy Code of the United States or "trustee" under the
-----------------------
Bankruptcy and Insolvency Act of Canada; the institution by or against
-----------------------------
the Account Debtor of any other type of insolvency, liquidation,
bankruptcy, winding up or reorganization proceeding (under the laws of
Canada, the United States or otherwise, including applicable corporate
statutes, the Bankruptcy and Insolvency Act of Canada and the
-----------------------------
Companies' Creditors
--------------------
<PAGE>
-10-
Arrangement Act of Canada) or of any formal or informal proceeding for
---------------
the dissolution or liquidation of, settlement of claims against or
winding up of affairs of, the Account Debtor; the sale, assignment, or
transfer of all or any material part of the assets of the Account
Debtor; the nonpayment generally by the Account Debtor of its debts as
they become due; or the cessation of the business of the Account
Debtor as a going concern;
(e) if fifty percent (50%) or more of the aggregate dollar amount of
outstanding Accounts owed at such time by the Account Debtor thereon
is classified as ineligible under the other criteria set forth herein;
(f) owed by an Account Debtor if such Account Debtor: (i) does not
maintain its chief executive office in Canada or the United States of
America; or (ii) is not organized under the laws of Canada or any
Province thereof or the United States of America or any State thereof;
or (iii) is the government of any country or sovereign state, or of
any state, province, municipality, or other political subdivision
thereof, or of any department, agency, public corporation, or other
instrumentality thereof, except to the extent that the Agent otherwise
determines in its discretion the Account to be eligible on an account-
by-account basis based on, among other things, compliance with all
applicable laws in order to obtain a valid and enforceable assignment
(in the case of clause (iii)) or the existence of any letter of credit
or acceptance or credit insurance and a credit review of the Account
Debtor satisfactory to the Agent in its discretion, provided, however,
-------- -------
that Accounts due from school boards and municipalities will not in
consequence of this paragraph (f) be ineligible unless the Agent
determines that it does not have a valid and enforceable assignment
thereof;
(g) owed by an Account Debtor which is an employee, an Affiliate or which
is an Intercompany Account;
(h) which is owed by an Account Debtor to which the Canadian Borrower is
indebted in any way, or which is subject to any right of setoff,
counterclaim, offset, discount, allowance, charge-back, rebate payable
or contra claim by the Account Debtor, unless the Account Debtor has
entered into an agreement acceptable to the Agent to waive all such
rights; or if the Account Debtor thereunder has disputed liability or
made any claim with respect to any other Account due from such Account
Debtor; but in each such case only to the extent of such indebtedness,
setoff, charge-back, counterclaim, offset, discount, allowance,
rebate, dispute, or claim;
<PAGE>
-11-
(i) to the extent subject to any credits that offset what would otherwise
be past due amounts, unapplied credits, credit balances in past due,
or debit memoranda;
(j) which represents a re-billed or redated account;
(k) which represents a sale on a bill-and-hold, guaranteed sale, sale and
return, sale on approval, consignment, or other repurchase or return
basis;
(l) which is evidenced by a promissory note or other instrument or by
chattel paper;
(m) if Agent believes in the exercise of its Permitted Discretion that the
prospect of collection of such Account is impaired or that the Account
may not be paid by reason of the Account Debtor's financial inability
to pay;
(n) in respect of which the Canadian Borrower is not the sole payee and
remittance party, with sole lawful and absolute title thereto free and
clear of any Lien (other than a Lien in favour of the Agent and/or
Lenders);
(o) which is payable in a currency other than Canadian Dollars or U.S.
Dollars;
(p) for goods not shipped and delivered and accepted by the Account Debtor
or otherwise not representing a final sale;
(q) if the sale giving rise thereto was not made in compliance in all
material respects with all applicable laws;
(r) if not representing a trade receivable;
(s) if representing a sale of samples; or
(t) which the Agent in the good faith exercise of its Permitted Discretion
determines to be ineligible.
"Eligible Canadian Inventory" means Inventory, valued in Canadian
---------------------------
Dollars, at the lower of cost (on an average cost basis and such cost excluding
intercorporate profit or capitalized overhead cost or mark-up above landed cost
and exchange variance provision and store shrink provision) and fair market
value, that constitutes finished goods of the Canadian Borrower and: (a) in the
Agent's Permitted Discretion, is not obsolete, unsalable or unmerchantable; (b)
that is located at premises owned by the Canadian Borrower or located at
Premises leased by the Canadian Borrower provided that the Agent has
established reserves therefor satisfactory to it in its discretion or received a
consent and waiver from the landlord of
<PAGE>
-12-
such Premises in form and substance satisfactory to the Agent or located at
warehouses provided the Agent has established reserves therefor satisfactory to
it in its discretion or received a waiver letter in form and substance
satisfactory to the Agent; (c) upon which the Security Interest constitutes a
first-ranking, duly registered and perfected Lien ranking in priority to all
other Liens; (d) that is not supplies, samples, repair parts, packaging (other
than consumer packaging intended for retail sale) and shipping materials; (e)
that is not returned as being damaged or defective or damaged or defective
Inventory, or Inventory delivered to the Canadian Borrower on consignment; (f)
that is located in Canada; (g) that is not Slow-moving Inventory in excess of
the lesser of Cdn.$11,900,000 and 9.5% of gross perpetual Inventory; (h) that is
saleable in compliance with all trademarks and licences of all Persons; and (i)
that the Agent otherwise deems eligible as the basis for Canadian Revolving
Loans and/or issuance of Letters of Credit based on such other criteria as the
Agent may from time to time establish in the exercise of its Permitted
Discretion. Notwithstanding clauses (b) and (f) above, Inventory that is being
imported and that is paid for and that would be Eligible Canadian Inventory
except for the terms of such clauses (b) and (f), will be Eligible Canadian
Inventory if the Canadian Borrower or upon request the Agent is named as
consignee on the applicable bill of lading or other similar document of title,
such bill of lading or document has been delivered to the Borrower or upon
request the Agent or its agent and the Inventory is covered by insurance
acceptable to the Agent (including for greater certainty cargo insurance
coverage with satisfactory limits).
"Eligible U.K. Accounts" means all Accounts arising in the ordinary
----------------------
course of the U.K. Borrower's business, but excluding interest, late charges,
penalties, collection costs and other sums due or payable in respect thereof,
upon which the Security Interest constitutes a first-ranking, duly registered
and perfected lien ranking in priority to all other Liens and that are not
ineligible as the basis for U.K. Revolving Loans and/or Letters of Credit, based
on the following criteria and on such other criteria as the Agent may from time
to time establish in the exercise of its Permitted Discretion. Without
intending to limit the Agent's Permitted Discretion to establish other criteria
of eligibility, Eligible U.K. Accounts shall not include any Account:
(a) with respect to which more than ninety (90) days have elapsed since
the date of the original invoice therefor;
(b) with respect to which any of the representations, warranties,
covenants, and agreements contained in Article 6 are not or have
ceased to be complete and materially correct or have been breached;
(c) with respect to which, in whole or in part, a cheque, promissory note,
draft, trade acceptance or other instrument for the payment of money
has been received, presented for payment and returned uncollected for
any reason;
<PAGE>
-13-
(d) as to which any one or more of the following events has occurred with
respect to the Account Debtor on such Account: death or judicial
declaration of incompetency of an Account Debtor who is an individual;
the filing by or against the Account Debtor of a request, proposal,
notice of intent to file a proposal, proceeding, action or petition
for liquidation, reorganization, arrangement, adjustment of debts,
adjudication as a bankrupt, winding-up, or other relief under the
bankruptcy, insolvency, restructuring, liquidation, winding up,
corporate or similar laws of any part of the United Kingdom, or any
foreign jurisdiction, now or hereafter in effect; the making of any
general assignment by the Account Debtor for the benefit of creditors;
the appointment of a receiver, trustee, monitor, custodian,
liquidator, administrator, interim receiver, monitor or trustee or
other official for the Account Debtor or for any of the assets of the
Account Debtor, including, without limitation, the appointment of or
taking possession by a "custodian" "administrator", "receiver" or
"trustee" as defined in the Insolvency Act, 1986 or the Companies Act,
---------------- -------------
1985 (as amended by the Companies Act, 1989) of England and Wales; the
-------------
institution by or against the Account Debtor of any other type of
insolvency, liquidation, bankruptcy, winding up or reorganization
proceeding (under the laws of Canada, the United States or otherwise,
including applicable corporate statutes, the Insolvency Act, 1986 or
---------------
the Companies Act, 1985 (as amended by the Companies Act, 1989 of
------------- -------------
England and Wales) or of any formal or informal proceeding for the
dissolution or liquidation of, settlement of claims against or winding
up of affairs of, the Account Debtor; the sale, assignment, or
transfer of all or any material part of the assets of the Account
Debtor; the nonpayment generally by the Account Debtor of its debts as
they become due; or the cessation of the business of the Account
Debtor as a going concern;
(e) if fifty percent (50%) or more of the aggregate dollar amount of
outstanding Accounts owed at such time by the Account Debtor thereon
is classified as ineligible under the other criteria set forth herein;
(f) owed by an Account Debtor if such Account Debtor: (i) does not
maintain its chief executive office in the United Kingdom; or (ii) is
not organized under the laws of England and Wales; or (iii) is the
government of any country or sovereign state, or of any state,
province, municipality, or other political subdivision thereof, or of
any department, agency, public corporation, or other instrumentality
thereof, except to the extent that the Agent otherwise determines in
its discretion the Account to be eligible on an account-by-account
basis based on, among other things, compliance with all applicable
laws in order to obtain a valid and enforceable assignment (in the
case of clause (iii)) or the existence of any letter of credit or
acceptance or credit insurance and a credit review of the Account
<PAGE>
-14-
Debtor satisfactory to the Agent in its discretion, provided, however,
-------- -------
that Accounts due from school boards and municipalities will not in
consequence of this paragraph (f) be ineligible unless the Agent
determines that it does not have a valid and enforceable assignment
thereof;
(g) owed by an Account Debtor which is an employee, an Affiliate or which
is an Intercompany Account;
(h) which is owed by an Account Debtor to which the U.K. Borrower is
indebted in any way, or which is subject to any right of setoff,
counterclaim, offset, discount, allowance, charge-back, rebate payable
or contra claim by the Account Debtor, unless the Account Debtor has
entered into an agreement acceptable to the Agent to waive all such
rights; or if the Account Debtor thereunder has disputed liability or
made any claim with respect to any other Account due from such Account
Debtor; but in each such case only to the extent of such indebtedness,
setoff, charge-back, counterclaim, offset, discount, allowance,
rebate, dispute, or claim;
(i) to the extent subject to any credits that offset what would otherwise
be past due amounts, unapplied credits, credit balances in past due or
debit memoranda;
(j) which represents a re-billed or redated account;
(k) which represents a sale on a bill-and-hold, guaranteed sale, sale and
return, sale on approval, consignment, or other repurchase or return
basis;
(l) which is evidenced by a promissory note or other instrument or by
chattel paper;
(m) if Agent believes in the exercise of its Permitted Discretion that the
prospect of collection of such Account is impaired or that the Account
may not be paid by reason of the Account Debtor's financial inability
to pay;
(n) in respect of which the U.K. Borrower is not the sole payee and
remittance party, with sole lawful and absolute title thereto free and
clear of any Lien (other than a Lien in favour of the Agent and/or
Lenders);
(o) which is payable in a currency other than BPS or U.S. Dollars;
(p) for goods not shipped and delivered and accepted by the Account Debtor
or otherwise not representing a final sale;
<PAGE>
-15-
(q) if the sale giving rise thereto was not made in compliance in all
material respects with all applicable laws;
(r) if not representing a trade receivable;
(s) if representing a sale of samples; or
(t) which the Agent in the good faith exercise of its Permitted Discretion
determines to be ineligible.
"Eligible U.K. Inventory" means Inventory, valued in BPS, at the lower
-----------------------
of cost (on an average cost basis and such cost excluding intercorporate profit
or capitalized overhead or mark-up above landed cost and exchange variance
provision and store shrink provision) and fair market value, that constitutes
finished goods of the U.K. Borrower and: (a) in the Agent's Permitted
Discretion, is not obsolete, unsalable or unmerchantable; (b) that is located at
premises owned by the U.K. Borrower or located at Premises leased by the U.K.
Borrower provided that the Agent has established reserves therefor satisfactory
to it in its discretion or received a consent and waiver from the landlord of
such Premises in form and substance satisfactory to the Agent or located at
warehouses provided the Agent has established reserves therefor satisfactory to
it in its discretion or received a waiver letter in form and substance
satisfactory to the Agent; (c) upon which the Security Interest constitutes a
first-ranking, duly registered and perfected Lien ranking in priority to all
other Liens; (d) that is not supplies, samples, repair parts, packaging (other
than consumer packaging intended for retail sale) and shipping materials; (e)
that is not returned as being damaged or defective Inventory or damaged or
defective Inventory, or Inventory delivered to the U.K. Borrower on
consignment;(f) that is located in the United Kingdom; (g) that is not Slow-
moving Inventory in excess of the lesser of BPS 5,300,000 and 20% of gross
Inventory; (h) that is saleable in compliance with and trademarks and licences
of all Persons; and (i) that the Agent otherwise deems eligible as the basis for
Revolving Loans and/or issuance of Letters of Credit based on such other
criteria as the Agent may from time to time establish in the exercise of its
Permitted Discretion. Notwithstanding clauses (b) and (f) above, Inventory that
is being imported and that is paid for, and that would be Eligible U.K.
Inventory except for the terms of such clause (b) and (f), will be Eligible U.K.
Inventory if the U.K. Borrower or upon request the Agent is named as consignee
on the applicable bill of lading or other similar document of title, such bill
of lading or document has been delivered to the U.K. Borrower or upon request
the Agent or its agent and the Inventory is covered by insurance acceptable to
the Agent (including for greater certainty cargo insurance coverage with
satisfactory limits).
"Environmental Laws" means all federal, provincial, state and local
------------------
laws, rules, regulations, ordinances, programs, permits, guidances, orders and
consent decrees relating to Materials of Environmental Concern, pollution or
protection of health, safety or the environment
<PAGE>
-16-
(including ambient air, surface water, ground water, land surface or subsurface
strata), including without limitation, laws and regulations relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacturing, processing,
distribution, use, treatment, storage, disposal or transport of Materials of
Environmental Concern, and includes the following legislation (or any successor
legislation) to the extent the same is applicable to either Borrower or the
Parent or its property and assets:
Canada
------
Arctic Waters Pollution Prevention Act, R.S.C. 1985, c.A-12, as
--------------------------------------
am.
Canada Water Act, R.S.C. 1985, c. C-11, as am.
----------------
Canadian Environmental Protection Act, R.S.C. 1985, c. C-15.3, as
-------------------------------------
am.
Fisheries Act, R.S.C. 1985, c. F-14, as am.
-------------
Northern Inland Waters Act, R.S.C. 1985, c. N-25, as am.
--------------------------
Transportation of Dangerous Goods Act, S.C. 1992, c. 34.
-------------------------------------
Ontario
-------
Conservation Authorities Act, R.S.O. 1990, c. C27 as am.
----------------------------
Environmental Protection Act, R.S.O. 1990, c. E. 19 as am.
----------------------------
Gasoline Handling Act, R.S.O. 1990, c. G.4, as am.
---------------------
England and Wales
-----------------
Environment Act, 1995
---------------
Environment Protection Act of 1990
----------------------------------
Planning (Hazardous Substances) Act of 1990
-------------------------------------------
or any other federal, provincial, state or local law, statute,
regulation, ordinance, order, permit or decree relating to the
environment.
"Equipment" means in relation to each Borrower, all of that Borrower's
---------
now owned and hereafter acquired machinery, equipment, furniture, furnishings,
fixtures, and other tangible personal property (except Inventory), including,
without limitation, data processing hardware and software, motor vehicles,
aircraft, dies, tools, jigs, and office equipment, as well as all of such types
of moveable and personal property leased by that Borrower and all of that
Borrower's rights and interests with respect thereto under such leases
(including, without limitation, options to purchase); together with all present
and future additions and accessions thereto, replacements therefor, component
and auxiliary parts and supplies used or to be used in connection therewith, and
all substitutes for any of the foregoing, and all manuals, drawings,
instructions, warranties and rights with respect thereto; wherever any of the
foregoing is located.
"Equivalent Amount" means, on any date, the amount of U.S. $ into
-----------------
which an amount of Cdn. $ or BPS,
<PAGE>
-17-
as the case may be, may be converted or the amount of Cdn. $ or BPS, as the case
may be, into which an amount of U.S. $ may be converted, in either case, at, in
the case of the Canadian Borrower, BACAN's spot buying rate in Toronto as at
approximately 12:00 noon (Local time) on such date and, in the case of the U.K.
Borrower, BAUK's spot buying rate in London as at approximately 12:00 noon
(London time) on such date.
"Event" means any event or condition which, with notice, the passage
-----
of time, the observance of any other formality, or any combination thereof,
would constitute an Event of Default and includes, for the purposes hereof, an
Event of Default.
"Event of Default" has the meaning specified in Section 11.1.
----------------
"Financial Statements" means, according to the context in which it is
--------------------
used, the financial statements of the Parent attached hereto as EXHIBIT G-1, and
the pro forma balance sheets of the Borrowers as at the Closing Date, attached
hereto as EXHIBIT G-3, and any other financial statements required to be given
to the Agent and Lenders pursuant to Section 7.2(a), (b) or (c), or any
combination thereof.
"Fiscal Year" means each of the Parent's and each Borrower's fiscal
-----------
year for financial accounting purposes which, in the case of the Parent and
Borrowers, will end on June 30, 1998.
"French Insolvency Proceeding" means the judicial liquidation
----------------------------
proceedings in the courts of France in respect of a branch of the Canadian
Borrower provided that (a) such declaration or determination has not been
ratified, accepted or confirmed and no steps have been taken to enforce, ratify,
accept or confirm such declaration or determination in any other jurisdiction or
against any Property of the Canadian Borrower in any other jurisdiction, (b) all
admitted claims of creditors in such proceeding have been fully secured by
letters of credit, bank guarantees or cash deposited with the appropriate French
courts or officials, and (c) such proceeding has not resulted in and is not
likely to result in any Material Adverse Effect.
"F/X Agreement" means an indemnity agreement for spot or forward
-------------
foreign exchange transactions, and/or such further agreements in respect of F/X
Transactions as BACAN or BAUK may require, all in form and substance
satisfactory to BACAN.
"F/X Transactions" means spot or forward foreign exchange transactions
----------------
entered into by the Canadian Borrower and BACAN (on behalf of the Canadian
Lenders) or the U.K. Borrower and BAUK (on behalf of the U.K. Lenders) for
amounts not exceeding in the aggregate under each Revolving Credit Facility
$7,500,000 or the Equivalent Amount thereof in Canadian $ or BPS, having
settlement dates not later than the earlier to occur of (x) twelve (12) months
from the entering into of the F/X Transaction or (y) the Maturity Date (or,
after any renewal of this Agreement as herein provided, the expiry date of any
Renewal Term).
<PAGE>
-18-
"GAAP" means at any particular time with respect to the Parent and
----
Borrowers, generally accepted accounting principles as in effect at such time in
the United States of America, or, in the case of the financial statements of the
Canadian Borrower and the U.K. Borrower, Canada and the United Kingdom,
respectively, consistently applied, provided, however, that, if employment of
-------- -------
more than one principle shall be permissible at such time in respect of a
particular accounting matter, "GAAP" shall refer to the principle which is then
----
employed by the Parent and Borrowers with the concurrence of its independent
public or chartered accountants, who are acceptable to the Agent provided
--------
further that, for the purposes of determining compliance with the financial
- ------- ----
covenants herein, "GAAP" means GAAP as at the date hereof.
----
"Guarantee" by any Person means all obligations of such Person which
---------
in any manner directly or indirectly guarantee or assure, or in effect guarantee
or assure, or indemnify and/or save harmless any Person in respect of the
payment or performance of any proceeding, claim, liability, indebtedness,
dividend or other obligation of any other Person (the "guaranteed obligations"),
----------------------
or to assure or in effect assure the holder of the guaranteed obligations
against loss in respect thereof, including, without limitation, any such
obligations incurred through an agreement, contingent or otherwise: (a) to
purchase the guaranteed obligations or any Property constituting security
therefor; (b) to advance or supply funds for the purchase or payment of the
guaranteed obligations or to maintain a working capital or other balance sheet
condition; or (c) to lease Property or to purchase any debt or equity securities
or other Property or services.
"Guaranteed Obligations" has the meaning specified in Section 13.1.
----------------------
"Guarantors" means in respect of the Canadian Revolving Credit
----------
Facility, the Parent, and, in respect of the U.K. Revolving Credit Facility, the
Parent and any other Person who now or hereafter guarantees the payment and
performance of any of the Obligations as herein provided, by executing and
delivering this Agreement as a Guarantor or by executing and delivering to the
Agent a Guarantee, and their successors and assigns, and "Guarantor" means any
---------
one of them.
"Hypothec" has the meaning specified in Section 10.2.
--------
"Instructing Group" means (a) one or more Lenders whose aggregate
-----------------
Commitments are equal to or greater than sixty-six and two-thirds percent (66
2/3%) of the Aggregate Commitments, or (b) if the Aggregate Commitments have
been reduced to zero (0), one or more Lenders to whom is owed at least sixty-six
and two-thirds percent (66 2/3%) of the principal amount of the Loans
outstanding.
"Intercompany Accounts" means all assets and liabilities, however
---------------------
arising, which are due to either Borrower or the Parent
<PAGE>
-19-
from, which are due from either Borrower or the Parent to, or which otherwise
arise from any transaction by either Borrower or the Parent with, any Affiliate.
"Interest Payment Date" means, with respect to each Loan, the earlier
---------------------
of (a) the date of repayment of the principal of such Loan, (b) the Conversion
Date or Rollover Date of such Loan, (c) with respect to BA Equivalent Loans or
LIBOR Loans the last day of each applicable Interest Period, and (d) with
respect to Prime Rate Loans, Base Rate Loans, U.K. Reference Rate Loans, LIBOR
Loans and BA Equivalent Loans, the first day of each succeeding month after the
making of such Loan.
"Interest Period" means a BA Equivalent Interest Period and/or LIBOR
---------------
Interest Period, as the context may require.
"Inventory" means in relation to each Borrower, all of that Borrower's
---------
now owned and hereafter acquired inventory, goods and merchandise, wherever
located, to be furnished under any contract of service or held for sale or
lease, finished goods, returned goods, and materials and supplies of any kind,
nature or description which are or might be used or consumed in that Borrower's
business or used in connection with the manufacture, packing, shipping,
advertising, selling or finishing of such goods, merchandise and such other
personal property, and all documents of title or other documents representing
them.
"Inventory Advance Rate" means (A) in the case of the Canadian
----------------------
Borrower, (i) between January and April, fifty percent (50%), (ii) between May
and August, fifty-five percent (55%) and (iii) between September and December,
sixty percent (60%) and (B) in the case of the U.K. Borrower, (i) between
January and August, fifty percent (50%) and between September and December,
sixty percent (60%).
"Issue Date" means the Business Day upon which BACAN issues a Letter
----------
of Credit at the request of the Canadian Borrower under and in accordance with
Section 2.3 or BAUK issues a Letter of Credit at the request of the U.K.
Borrower under and in accordance with Section 2.3.
"Issuing Lender" means (a) in the case of Letters of Credit issued
--------------
pursuant to the Canadian Revolving Credit Facility, BACAN, and (b) in the case
of Letters of Credit issued pursuant to the U.K. Revolving Credit Facility,
BAUK, or in either case another financial institution designated by the Agent in
its discretion.
"Latest Projections" means: (a) on the Closing Date and thereafter
------------------
until the Agent and Lenders receive new projections pursuant to Section 7.2(e),
the projections of the Parent's consolidated and each Borrower's balance sheets,
statements of operations, and statements of cash flows on an annual basis and on
a month-by-month basis for the period ending June 30,
<PAGE>
-20-
1998, attached hereto as EXHIBIT G-2; and (b) thereafter, the projections most
recently received by the Agent and Lenders pursuant to Section 7.2(e).
"L/C Fee" has the meaning specified in Section 2.3(g).
-------
"Lenders" means BACAN and BAUK and the other financial institutions
-------
which are party hereto by signing and delivering this Agreement as a "Lender" or
who become party hereto by accepting and delivery to and acceptance by the Agent
of an Assignment and Assumption Agreement substantially in the form attached
hereto as EXHIBIT O, and their successors and assigns, and includes the Canadian
Lenders and the U.K. Lenders and "Lender" means any one of them.
------
"Letter of Credit" means a documentary or standby letter of credit or
----------------
letter of guarantee having an expiry date not later than the earlier of (i) the
Maturity Date (or after a renewal of this Agreement as herein provided, the
expiry date of the Renewal Term), and (ii) three hundred and sixty-five (365)
days from the Issue Date thereof.
"LIBOR Interest Period" means, with respect to each LIBOR Loan, the
---------------------
period selected by the Canadian Borrower or U.K. Borrower, as the case may be,
hereunder and being of any duration of seven (7) days to one hundred and eighty
(180) days subject to the availability of funds to the applicable Lenders, in
each case commencing on the Drawdown Date, Conversion Date or Rollover Date with
respect to the Drawdown or Rollover of or Conversion into such LIBOR Loan;
provided that in any case the last day of each LIBOR Interest Period shall also
be the first day of the next Interest Period and further provided that the last
day of each LIBOR Interest Period shall be a Business Day and if the last day of
a LIBOR Interest Period selected by the Canadian Borrower or U.K. Borrower, as
the case may be, is not a Business Day, such Borrower shall be deemed to have
selected a LIBOR Interest Period the last day of which is the Business Day next
following the last day of the LIBOR Interest Period otherwise selected, unless
such next following Business Day falls in the next calendar month in which event
such Borrower shall be deemed to have selected a LIBOR Interest Period the last
day of which is the Business Day next preceding the last day of the LIBOR
Interest Period otherwise selected and further provided that the last LIBOR
Interest Period hereunder shall expire on or prior to the Maturity Date (or,
after any renewal of this Agreement as herein provided, the expiry date of any
Renewal Term).
"LIBOR Loan" means a Loan in United States Dollars made by the
----------
Canadian Lenders to the Canadian Borrower or a Loan in BPS made by the U.K.
Lenders to the U.K. Borrower hereunder pursuant to a Drawdown, Rollover or
Conversion, on which interest is payable under Section 3.1.
<PAGE>
-21-
"LIBOR Rate" means, for the Interest Period of each LIBOR Loan, the
----------
rate of interest per annum (rounded upward to the next 1/16th of 1%) notified to
the Agent by BAUK equal to the rate of interest at which U.S. dollar deposits or
BPS deposits, as the case may be, in the approximate amount of the applicable
LIBOR Loan and for a term similar to the applicable LIBOR Loan would be offered
by BAUK to major banks in the London interbank market at their request at
approximately 11:00 a.m. (London time) two (2) business days prior to the
commencement of the LIBOR Interest Period, as such rate may be adjusted by the
reserve percentage applicable during the LIBOR Interest Period in effect (or if
more than one such percentage shall be applicable, the daily average of such
percentages for those days in such LIBOR Interest Period during which any such
percentage shall be so applicable) under regulations issued from time to time by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement) with respect to
liabilities or assets consisting of or including "Eurocurrency Liabilities" as
such term is defined in Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time, having a term equal to such
LIBOR Interest Period ("Eurocurrency Reserve Requirement"). Such adjustment
shall be effectuated by calculating, and the LIBOR Rate shall be equal to, the
quotient of (i) the offered rate divided by (ii) one minus the Eurocurrency
Reserve Requirement..
"LIBOR Rate Margin" means two and one-half percent (2.5%).
-----------------
"Lien" means: (a) any interest in Property securing an obligation
----
owed to, or a claim by, a Person, whether such interest is based on the common
law, statute, or contract, and including without limitation, a security
interest, charge, claim, or lien arising from a mortgage, deed of trust,
encumbrance, pledge, hypothecation, assignment, deposit arrangement, agreement,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes; and (b) to the extent not included under clause
(a), (i) any rights of repossession or similar rights of unpaid suppliers, (ii)
any reservation, exception, encroachment, easement, right-of-way, covenant,
condition, restrictment, lease or other title exception or encumbrance affecting
Property, and (iii) any other lien, charge, privilege, secured claim, title
retention, garnishment right, deemed trust, encumbrance or other right affecting
Property, choate or inchoate, whether or not crystallized or fixed, whether or
not for amounts due or accruing due, arising by any statute or law of any
jurisdiction, at common law, in equity or by any agreement.
"Loan Documents" means this Agreement, the F/X Agreement, the
--------------
Hypothec, the Debenture, the Mortgages, the Collection Account Agreement, the
Tandy Agreement, the U.K. Security Documents, the Assignment, the U.K. Note and
the U.K. Intercorporate Security, the Canadian Guarantee, the U.K. Guarantee,
each of the documents listed in EXHIBIT M and all other agreements, instruments
and documents heretofore, now or hereafter entered into with or granted to the
Agent and/or Lenders evidencing, securing, guaranteeing or otherwise relating to
<PAGE>
-22-
any Obligations, the Collateral, the Security Interest or any other aspect of
the transactions contemplated by this Agreement.
"Loans" means, collectively, all loans and advances provided for in
-----
Article 2.
"Local Time" means, in the case of requests and notices to or notices
----------
or advances by (a) BACAN, Toronto time and (b) BAUK, London time.
"Material Adverse Effect" means any materially adverse effect on (a)
-----------------------
the prospect of repayment of any of the Obligations, (b) the Agent's, Security
Trustee's or Lender's rights under any of the Loan Documents or (c) the
Property, business, operations, prospects or condition (financial or otherwise)
of the Parent and Borrowers taken on a consolidated basis.
"Material Agreements" means, collectively, the following: Trust
-------------------
Indenture securing the issue of 9% Convertible Subordinated Debentures due
August 30, 2000; Mall Stores Operating and Marketing Agreement made as of April
16, 1996, among, inter alia, the Parent, the Canadian Borrower and Rogers Cantel
Inc.; Amendment No. 1 to Mall Stores Operating and Marketing Agreement executed
as of September 1, 1997; Short Term Agreement Radio Shack and AT&T Canada Store
Program effective September 1, 1997; and Agreement between Uniqueair Ltd.,
Vodafone Ltd. and the U.K. Borrower for the Retail Distribution of Cellular
Communication Equipment and Air time Services in the U.K. dated as of July 10,
1996.
"Materials of Environmental Concern" means any chemicals, pollutants,
----------------------------------
contaminants, wastes, toxic substances, hazardous substances, petroleum or
petroleum products.
"Maturity Date" means December 22, 2000.
-------------
"Maximum Canadian Revolving Credit Line" means U.S.$50,000,000 or the
--------------------------------------
Equivalent Amount thereof in Cdn.$.
"Maximum U.K. Revolving Credit Line" means U.S.$25,000,000 or the
----------------------------------
Equivalent Amount thereof in BPS.
"Mortgages" means: (a) the mortgages referred to in the definition of
---------
U.K. Security Documents, (b) each other mortgage, charge, hypothec, security
agreement and assignments of leases and/or rents between either Borrower and the
Agent and/or Lenders (or the Security Trustee on its or their behalf) and
delivered now or hereafter to the Agent (including the Security Trustee on its
or their behalf), including pursuant to Sections 6.1(b) and/or 10.2; and (c) all
other real property mortgages, leasehold mortgages, assignments of leases,
mortgage deeds, deeds of trust, deeds to secure debt, security agreements,
hypothecations and other instruments and documents of security now or hereafter
entered into which provide the Agent
<PAGE>
-23-
and/or Lenders (or the Security Trustee on its or their behalf) a lien on or
other interest in any portion of the Premises, the Real Estate or any other
Property of either Borrower or which relate to any such lien or interest.
"Net Amount of Eligible Canadian Accounts" means the gross amount of
----------------------------------------
Eligible Canadian Accounts less sales, excise or similar taxes and less returns,
discounts, claims, credits and allowances of any nature at any time issued,
owing, granted, outstanding, available or claimed.
"Net Amount of Eligible U.K. Accounts" means the gross amount of
------------------------------------
Eligible U.K. Accounts less sales, value-added, excise or similar taxes and less
returns, discounts, claims, credits and allowances of any nature at any time
issued, owing, granted, outstanding, available or claimed.
"Notice of Amount" has the meaning specified in Section 16.19.
----------------
"Notice of Borrowing" has the meaning specified in Section 2.2.
-------------------
"Obligations" means all present and future loans, advances,
------------
liabilities, obligations, covenants, duties and Debts owing by either Borrower
to the Agent, Security Trustee and/or any of the Lenders, under this Agreement
or any other Loan Document, whether or not evidenced by any note or other
instrument or document, whether arising from an extension of credit, opening of
a letter of credit, loan, guarantee, indemnification or otherwise, whether
direct or indirect, absolute, matured or contingent, due or to become due, now
existing or hereafter arising, created or incurred, primary or secondary, as
principal or guarantor and including, without limitation, all interest, charges,
expenses, fees, legal fees, filing fees and any other sums chargeable to either
Borrower hereunder, under another Loan Document, or under any other agreement or
instrument with the Agent or the Security Trustee. "Obligations" includes,
-----------
without limitation, the principal of and interest on all Revolving Loans, all
debts, liabilities, and obligations now or hereafter owing from either Borrower
to Agent, the Security Trustee and/or any of the Lenders under or in connection
with the Letters of Credit or any F/X Transaction.
"Participation" of a Lender means the percentage determined by
-------------
dividing such Lender's Commitment by the Total Commitments in respect of the
applicable Revolving Credit Facility, as such percentage may be adjusted
pursuant to this Agreement or, as the context requires, the amount of such
Participation in any issue of Letter of Credit or Revolving Loan under the
applicable Revolving Credit Facility, or in any repayment thereof or, as the
context may require, in any payment of interest or fees or other payment,
provided that a Lender's Participation will be determined without regard to any
notice of termination of the Commitments given under Article 10 hereof.
<PAGE>
-24-
"Payment Accounts" has the meaning specified in Section 6.10.
----------------
"Permitted Discretion" means the Agent's and/or Lenders', as the case
--------------------
may be, good faith judgment based upon any factor or circumstance which it
reasonably believes in good faith (a) will or could reasonably be expected to
adversely affect the value of any Collateral, the enforceability or priority of
the Agent's, Security Trustee's and/or Lenders' Security Interest and Liens
thereon or the amount which the Agent, the Security Trustee and/or Lenders would
be likely to receive (after giving consideration to delays in payment and costs
of enforcement) in the liquidation of such Collateral, (b) could reasonably be
expected to increase the likelihood of a bankruptcy, reorganization, insolvency
or a like proceeding involving either Borrower, the Parent or any Subsidiary or
any of the Collateral, (c) creates or could reasonably be expected to create an
Event or Event of Default or (d) will or may create a Material Adverse Effect.
In exercising such judgment, the Agent and/or Lenders may consider such factors
or circumstances already included in or tested by the definitions of Eligible
Canadian Accounts, Eligible U.K. Accounts, Eligible U.K. Inventory and Eligible
Canadian Inventory as it considers relevant, as well as any of the following:
(i) changes in collection history and dilution with respect to the Account, (ii)
changes in demand for, and pricing of, Inventory, (iii) changes in any
concentration of risk with respect to Accounts or Inventory, (iv) any other
factors or circumstances that will or could reasonably be expected to have a
Material Adverse Effect, (v) audits of books and records, history of charge-
backs or other credit adjustments, (vi) any other factors that change or could
reasonably be expected to change the credit risk of lending to either Borrower
on the security of the Accounts or the Inventory, and (vii) any factor or
circumstance that suggests that any collateral report or financial information
delivered to the Agent, the Security Trustee and/or Lenders by any Person on
behalf of either Borrower, the Parent or any Subsidiary is incomplete,
inaccurate or misleading in any material respect. The burden of establishing
lack of good faith shall be on the party asserting lack of good faith.
"Permitted Liens" means: (a) Liens for taxes not yet payable or Liens
---------------
for taxes being contested in good faith and by proper proceedings diligently
pursued, in either case ranking subordinate to the Liens of the Agent, Security
Trustee and Lenders and provided that a reserve or other appropriate provision,
if any, as shall be required by GAAP shall have been made therefor on the
applicable Financial Statements, that a stay of enforcement of any such Lien is
in effect and that no Event of Default has occurred in consequence thereof; (b)
Liens in favour of the Agent, Security Trustee and/or any of the Lenders; (c)
PMSIs on Equipment expressly permitted to be outstanding in accordance with
Section 9.11 and (d) Liens as described in EXHIBIT A hereto.
"Person" means any individual, sole proprietorship, partnership, joint
------
venture, trust, unincorporated organization, association, corporation, Public
Authority, or any other entity.
<PAGE>
-25-
"Plan" means any pension or other employee benefit plan and which is:
----
(a) a plan maintained by either Borrower, the Parent or any Related Company; (b)
a plan to which either Borrower, the Parent or any Related Company contributes
or is required to contribute; (c) a plan to which either Borrower, the Parent or
any Related Company was required to make contributions at any time during the
five (5) calendar years preceding the date of this Agreement; or (d) any other
plan with respect to which either Borrower, the Parent or any Related Company
has incurred or may incur liability, including contingent liability, either to
such plan or to any person, administration or Public Authority.
"PMSI" means a purchase money security interest as defined in the PPSA
----
and/or a sale and hypothecation agreement pursuant to Article 2954 of the Civil
-----
Code of Quebec.
- --------------
"PPSA" means the Personal Property Security Act of Ontario (or any
---- ------------------------------
successor statute) or similar legislation of any other jurisdiction the laws of
which are required by such legislation to be applied in connection with the
issue, perfection, enforcement, validity or effect of security interests.
"Premises" means the lands, together with all buildings, improvements,
--------
and fixtures thereon and all tenements, hereditament, and appurtenances
belonging or in any way appertaining thereto as described in EXHIBIT D, and
which constitutes all of the immoveable and real Property in which either
Borrower or the Parent has any interests on the Closing Date.
"Prime Rate" means the rate of interest publicly announced from time
----------
to time by BACAN as its reference rate of interest for loans made in Canadian
Dollars to Canadian customers and designated as its "prime" rate. It is a rate
set by BACAN based upon various factors including BACAN's costs and desired
return, general economic conditions and other factors and is used as a reference
point for pricing some loans. However, BACAN may price loans at, above or below
such announced rate.
"Prime Rate Loan" means a Loan in Canadian Dollars made by the
---------------
Canadian Lenders to the Canadian Borrower hereunder pursuant to a Drawdown,
Rollover or Conversion, on which interest is payable under Section 3.1(a).
"Prime Rate Margin" means one percent (1.0%) per annum.
-----------------
"Proceeds" means all products and proceeds (as defined in the PPSA) of
--------
any Collateral, and all proceeds of such proceeds and products, including,
without limitation, all cash and credit balances, all payments under any
indemnity, warranty, or guarantee payable with respect to any Collateral, all
awards for taking by eminent domain, all proceeds of fire or other insurance,
and all money and other Property obtained as a result of any claims against
third parties or any legal action or proceeding with respect to Collateral.
<PAGE>
-26-
"Property" means any interest in any kind of property or asset,
--------
whether real, personal or mixed, moveable or immoveable, tangible or intangible.
"Proprietary Rights Collateral" means all of the Borrowers' now owned
-----------------------------
and hereafter arising or acquired: licenses, franchises, permits, patents,
patent rights, copyrights, works which are the subject matter of copyrights,
trademarks, trade names, trade styles, patent and trademark applications and
licenses and rights thereunder and all other intangibles, including without
limitation those patents, trademarks and copyrights set forth on EXHIBIT B
hereto, and all other rights under any of the foregoing, all extensions,
renewals, reissues, divisions, continuations, and continuations-in-part of any
of the foregoing, and all rights to sue for past, present, and future
infringement of any of the foregoing; inventions, trade secrets, formulae,
processes, compounds, drawings, designs, blueprints, surveys, reports, manuals,
and operating standards; goodwill; customer and other lists in whatever form
maintained; and trade secret rights, copyright rights, rights in works of
authorship, and contract rights relating to computer software programs, in
whatever form created or maintained.
"Public Authority" means the government of any country or sovereign
----------------
state, or of any state, province, municipality, or other political subdivision
thereof, or any department, agency, public corporation, commission, tribunal,
committee, board or other instrumentality of any of the foregoing and includes,
without limitation, any pension board.
"Real Estate" means all of the present and future interests of the
-----------
Borrowers, as owner, lessee, or otherwise, in the Premises, including, without
limitation, any interest arising from an option to purchase or lease the
Premises or any portion thereof and includes the 412,000 square foot facility at
279 Bayview Drive, Barrie, Ontario, L4M 4W5, the 43,000 square foot facility at
Tandy Centre, Leamore Lane, Bloxwich, Walsall, West Midlands, England, WS2 7PS,
the lands known as 28/30 Hall Street, Dudley, West Midlands and the three leased
facilities, aggregating 136,000 square feet near Birmingham, England in which
the U.K. Borrower's distribution and repair facilities are located.
"Receivables Collateral" means all of the Borrowers' now owned and
----------------------
hereafter arising or acquired: Accounts (whether or not earned by performance or
passage of time), including Accounts owed to either Borrower by any of its
Subsidiaries or Affiliates, together with all interest, late charges, penalties,
collection fees, and other sums which shall be due and payable in connection
with any Account; proceeds of any letters of credit naming either Borrower as
beneficiary; accounts contract rights, chattel paper, instruments, documents,
general intangibles (including without limitation choses in action, causes of
action, tax refunds, tax refund claims, and Reversions and other amounts payable
to either Borrower from or in respect of any Plan) and all forms of obligations
owing to either Borrower (including, without limitation, in respect of loans,
advances, and extensions of credit by either Borrower to its Subsidiaries and
Affiliates); guarantees and other security for any of the foregoing; goods
represented by or the
<PAGE>
-27-
sale, lease or delivery of which gave rise to any of the foregoing; merchandise
returned to or repossessed by either Borrower and rights of stoppage in transit,
replevin and reclamation; and other rights or remedies of an unpaid vendor, lien
or secured party.
"Register" has the meaning specified in Section 15.5.
--------
"Related Company" means any corporation "related" to either Borrower
---------------
or the Parent within the meaning of the Income Tax Act of Canada, or any member
--------------
of any controlled group of corporations of which either Borrower or the Parent
is a party, or any trade or business (whether or not incorporated) which
together with either Borrower or the Parent would be treated as a single
employer.
"Renewal Term" has the meaning specified in Section 12.
------------
"Restricted Investment" means any acquisition of Property by either
---------------------
Borrower, the Parent or any of its or their Subsidiaries in exchange for cash or
other Property, whether in the form of an acquisition of stock, securities, debt
security, or other indebtedness or obligation, or the purchase or acquisition of
any other Property, or by loan, advance, capital contribution, or subscription,
except acquisitions of the following: (a) fixed assets to be used in the
business of either Borrower or the Parent; (b) Inventory in the ordinary course
of business; (c) current assets arising from the sale or lease of goods or
rendition of services in the ordinary course of business of either Borrower or
the Parent; (d) direct obligations of Canada, Provinces of Canada, the United
States of America or the United Kingdom or any agency thereof, or obligations
guaranteed by Canada, Provinces of Canada, the United States of America or the
United Kingdom, provided that such obligations mature within one year from the
date of acquisition thereof; (e) certificates of deposit, term deposits, bankers
acceptances and other similar notes maturing within one year from the date of
acquisition, in each case issued by, created by, or with a bank chartered under
the laws of Canada, the United States of America or England and Wales having
capital and surplus aggregating at least $100,000,000; (f) commercial paper
given the highest rating by a national credit rating agency and maturing not
more than three hundred and sixty-five (365) days from the date of creation
thereof; and (g) prime domestic bankers' acceptances ("prime domestic bankers'
acceptances" means a bankers' acceptance (I) with a stated maturity of 270 days
or less from the date of its issuance that will be , in accordance with the
term, liquidated in full at maturity; (II) that is eligible for collateral; and
(III) eligible for borrowing from a Federal Reserve Bank in the United States,
and that is accepted by a bank organized and existing under the laws of the
United States or any state, the short-term obligation of which (or of a bank
holding company of which the bank is the largest subsidiary) are rated at least
A-1, P-1, or the equivalent by at least one nationally recognized credit rating
agency); (h) commercial paper with a stated maturity of ninety (90) days or less
from the date of its issuance, including both non-interest-bearing discount
obligations and interest-bearing obligations payable on demand or on a specified
date not more than ninety (90) days after the
<PAGE>
-28-
date of issuance and which: (I) is rated not less than A-1, P-1, or the
equivalent by at least two nationally recognized credit rating agencies; and
(II) is rated at least A-1, P-1, or the equivalent by at least one nationally
recognized credit rating agency and is fully secured by an irrevocable letter of
credit issued by a bank organized and existing under the laws of the United
States, Canada, or the United Kingdom having capital surplus aggregating at
least $100,000,000; and (i) in the case of the Parent only: (A) fully
collateralized repurchase agreements having a defined termination date not later
than two hundred and seventy (270) days from the date of creation, secured by
obligations of the United States or Canadian governments, or its agencies
("repurchase agreement" means a simultaneous agreement to buy, hold for a
specified time, and then sell back at a future date, obligations of the United
States government or its agencies of which the principal of and interest of are
guaranteed or insured by the United States or its agencies, in market value not
less than the principal amount of the repurchase agreement); (B) money market
mutual funds registered under the (United States) Investment Company Act of
1940, as amended, (the "1940 Act") and have a rating of the highest category
from two national rating agencies in the United States; (C) money market mutual
funds registered under the 1940 Act which invests (i) in U.S. treasury
securities, including bills, notes, bonds, and other direct obligations of the
U.S. treasury or U.S. Government instrumentalities or agencies, or (ii)
commercial paper which is rated of the highest quality by two nationally
recognized rating agencies of the United States; (D) money market mutual funds
or other funds of similar description and purpose in Canada and the United
Kingdom, which invest (I) the majority of the funds assets in securities that
are guaranteed as to the payment of principal and interest by the governments of
either Canada or the United Kingdom, (II) commercial paper which is rated of the
highest quality by two nationally recognized rating agencies in Canada or the
United Kingdom, or (III) corporate bonds considered suitable for preservation of
investment capital which are rated of the highest quality by two nationally
recognized rating agencies in the United States or similar rating in Canada or
the United Kingdom; and (E) forward exchange contracts, not in excess of
$5,000,000 for each contract and not to exceed twelve (12) months forward, for
the purposes of purchasing inventory or funding the Borrowers as permitted in
accordance with Section 9.8, provided that the aggregate amount of all such
contracts permitted to be outstanding shall not exceed $10,000,000.
"Reversions" means any funds which may become due to either Borrower
----------
in connection with the termination of any Plan or other employee benefit plan.
"Revolving Credit Facilities" means, collectively, the Canadian
---------------------------
Revolving Credit Facility and the U.K. Revolving Credit Facility.
"Revolving Loans" means, collectively, the Canadian Revolving Loans
---------------
and the U.K. Revolving Loans.
<PAGE>
-29-
"Rollover" means a rollover of a BA Equivalent Loan or LIBOR Loan
--------
pursuant to the provisions of Section 2.7.
"Rollover Date" means the date on which a Rollover takes place, which
-------------
date shall be a Business Day.
"Security Interest" means collectively the Liens granted to the Agent
-----------------
and/or Lenders (or the Security Trustee on its or their behalf) in the
Collateral pursuant to this Agreement, the other Loan Documents, or any other
agreement or instrument now or hereafter granted and/or entered into.
"Security Trustee" means a Person appointed by the Agent and Lenders
----------------
as a security trustee to be granted and to hold on behalf of the Agent and
Lenders the Liens created by the U.K. Security Documents.
"Settlement" has the meaning specified in Section 2.2(j).
----------
"Settlement Date" has the meaning specified in Section 2.2(j).
---------------
"Settlement Loans" and "Settlement Loan" have the meanings specified
---------------- ---------------
in Section 2.2(h).
"Slow-moving Inventory" means Inventory that has individual stock-
---------------------
keeping units which have a twelve (12) month sales history to the extent that
current inventory levels thereof exceed the prior twelve (12) months' sales.
"Solidary" as used herein and in EXHIBIT "O" shall be read and
--------
interpreted in accordance with the Civil Code of Quebec.
--------------------
"Solvent" shall mean when used with respect to any Person that: (a)
-------
the fair value of all its Property is in excess of the total amount of its debts
(including contingent liabilities other than in relation to Canadian income
tax); and (b) it is able to pay its debts as they generally become due.
"Subordinated Debentures" means the 9% subordinated convertible
-----------------------
debentures maturing August 30, 2000, of which the principal amount of
$43,446,000 was outstanding at June 30, 1997.
"Subsidiary" means any corporation of which more than fifty percent
----------
(50%) of the outstanding securities of any class or classes, the holders of
which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons
<PAGE>
-30-
performing similar functions), is at the time, directly or indirectly through
one or more intermediaries, owned by the Borrower and/or any Guarantor and/or
one or more of its or their Subsidiaries.
"Tandy" means, collectively, Tandy Corporation, Trans World
-----
Electronics, Inc., and A&A International, Inc.
"Tandy Agreement" has the meaning specified in Section 10.3.
---------------
"Tangible Net Worth" means, at any date: (a) book net worth as at the
------------------
Canadian Borrower's date of determination plus (b) the translation adjustment in
----
the equity section of the Canadian Borrower's balance sheet as at such date less
----
(c) (without duplication) all amounts, to the extent not repaid after the
Closing Date, which have been paid, whether by loans, repayments, Distributions
or otherwise, to any Affiliate after the Closing Date.
"Tax Reserve" means a reserve initially in the amount of $15,000,000
-----------
established by the Canadian Lenders against Canadian Availability in respect of
claims and assessments for taxes upon the Canadian Borrower, provided that: (a)
such reserve shall by reduced by an amount equal to the lesser of (A) sixty
percent (60%) of the appraised (such appraisal to be in form and by appraisers
satisfactory to the Agent) fair market value of the Barrie, Ontario lands owned
by the Canadian Borrower (provided that a Phase 1 environmental assessment
addressed to the Agent has been received in respect of such lands and the Agent
is satisfied with regard to all matters revealed thereby) and (B) $2,500,000;
(b) such reserve shall, if the aggregate amount of taxes claimed or assessed as
owing by Revenue Canada is reduced to $25,000,000 other than by any payments or
provisions of security whatsoever (whether in settlement or satisfaction, by
providing security or otherwise), be further reduced by sixty percent (60%) of
any claims or assessments thereafter paid (in settlement or satisfaction) or
otherwise eliminated by their withdrawal by Revenue Canada provided that the
ratio obtained by dividing the net availability based on Inventory (after all
related inventory reserves) by the net amount recoverable in respect of the
Inventory based on a then updated (not less than ninety (90) days old) going out
of business appraisal (conducted by appraisers and on a basis satisfactory to
the Agent) of the Inventory, is not more than eighty percent (80%); and (c) such
reserve shall immediately be increased by the amount of any reduction under
paragraph (a) upon any sale, disposal, seizure, expropriation or condemnation of
any of the Barrie lands.
"Termination Event" means: (a) the withdrawal of either Borrower, the
-----------------
Parent or any Related Company from a Plan during a plan year; or (b) the filing
of a notice of intent to terminate a Plan or the treatment of a Plan amendment
as a termination; or (c) the institution of proceedings by any Public Authority
to terminate or have a trustee appointed to administer a Plan; or (d) any other
event or condition which might constitute grounds for the termination of,
winding up or the appointment of a trustee to administer, any Plan.
<PAGE>
-31-
"Total Commitments" means the aggregate of the Lenders' Commitments
-----------------
from time to time and which shall be, initially, (a) in the case of the Canadian
Revolving Credit Facility, $50,000,000, and (b) in the case of the U.K.
Revolving Credit Facility, $25,000,000, and which shall reduce by any permanent
reductions made in accordance with the terms hereof.
"U.K. Availability" means: (a) the lesser at any point in time of:
-----------------
(i) the Maximum U.K. Revolving Credit Line; and (ii) the sum of (A) eighty-five
percent (85%) of the Net Amount of Eligible U.K. Accounts, plus (B) the
Inventory Advance Rate of the U.K. Borrower at such time multiplied by the value
of Eligible U.K. Inventory; less (C) the Accounts Payable Reserve (the amount
----
under this clause (ii) referred to as the "U.K. Formula Amount"); less (b)
----
without duplication (i) the Dilution Reserve; (ii) a reserve established for all
amounts secured by any Liens, choate or inchoate, which rank or are capable of
ranking in priority to the Agent's and/or Lenders' Security Interest, including
without limitation, any such amounts which are payroll tax amounts, National
Insurance contributions, occupational pension scheme contributions, amounts due
and not paid for vacation pay, amounts due and not paid under any legislation
relating to workers' compensation or to unemployment insurance, all amounts
deducted or withheld and not paid and remitted under the Income Tax Act of
--------------
Canada, all amounts falling within any of the categories of preferential debts
as listed in Schedule 6 to the Insolvency Act 1986 of England and Wales, amounts
-------------------
currently or past due and not paid for realty, municipal or similar taxes and
all amounts currently or past due and not contributed, remitted or paid to any
Plan or under the Canada Pension Plan, the Pension Benefits Act or any similar
--------------------
legislation; (iii) a reserve in an amount determined by the Agent from time-to-
time in respect of such portion of the Accounts as represents a value-added,
sales, goods and services or excise tax;(iv) a reserve for all claims, charges
and Liens, including in respect of rent, storage and/or transport costs which
have arisen or may arise, in respect of off-site Inventory or Inventory at
leased locations unless a waiver and access agreement satisfactory to the Agent
shall have been received; (v) a reserve for all amounts due to contract managers
under joint venture or similar arrangements; and (vi) all other reserves which
the Agent in the exercise of its Permitted Discretion deems necessary or
desirable to maintain with respect to the U.K. Borrower, including, without
limitation, in respect of any amounts which the Agent and/or U.K. Lenders may be
obligated to pay in the future for the account of the U.K. Borrower (the
foregoing amount calculated by deducting (b) from (a) being hereinafter referred
to as the "U.K. Borrowing Base"), less (c) the sum of: (i) the unpaid balance of
------------------- ----
U.K. Revolving Loans at that time; (ii) the U.K. L/C Reserve and (iii) the U.K.
F/X Reserve, provided, however, that each of the reserves under clause (b) shall
-------- -------
be established, and the amount thereof determined, by the Agent in the exercise
of its Permitted Discretion.
"U.K. Borrowing Base" has the meaning specified in the definition of
-------------------
U.K. Availability.
"U.K. Closing Fee" has the meaning specified in Section 3.5(b).
----------------
<PAGE>
-32-
"U.K. Collateral" has the meaning specified in Section 6.1(b).
---------------
"U.K. Formula Amount" has the meaning specified in the definition of
-------------------
U.K. Availability.
"U.K. F/X Reserve" means a reserve established by the Agent in the
----------------
exercise of its Permitted Discretion, from time to time, for F/X Transactions
with the U.K. Borrower outstanding. Initially, the reserve will be equal to ten
percent (10%) of the nominal principal amount of each F/X Transaction entered
into with the U.K. Borrower (provided that the maturity of all F/X Transactions
at any time are evenly spread out over up to twelve months to the satisfaction
of the U.K. Lenders). The Agent reserves the right to change the reserve based
upon such factors as it considers relevant in its discretion, including, without
limitation, the spread of settlement dates and exchange risks as assessed by the
Agent and the U.K. Lenders.
"U.K. Guarantee" has the meaning specified in the definition of U.K.
--------------
Security Documents.
"U.K. Intercorporate Security" means a debenture granted by the U.K.
----------------------------
Borrower to the Parent, in form satisfactory to the Agent.
"U.K. L/C Reserve" means a reserve established by the Agent in the
----------------
exercise of its Permitted Discretion, from time to time, for Letters of Credit
issued on behalf of the U.K. Borrower. Such reserve shall be, initially, and
shall never exceed one hundred percent (100%) of the undrawn amount of such
Letters of Credit.
"U.K. Lenders" means those Lenders who have a Commitment in the U.K.
------------
Revolving Credit Facility.
"U.K. Note" means a note evidencing all loans and advances made to the
---------
U.K. Borrower by the Parent on or after the date hereof, in form satisfactory to
the Agent.
"U.K. Reference Rate" means, for any day, the rate of interest in
-------------------
effect for such day as quoted generally from time to time by BAUK as its "base
rate" for BPS (the "base rate" for BPS being a rate set by BAUK based upon
various factors including BAUK'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 quoted rate). Any change in
the base rate for BPS so quoted by BAUK shall take effect at the opening of
business on the day of such change in such quoted base rate for BPS. Each
Interest Rate based upon the U.K. Reference Rate shall be adjusted
simultaneously with any change in the Base Rate.
<PAGE>
-33-
"U.K. Reference Rate Loans" means a Revolving Loan in BPS made by the
-------------------------
U.K. Lenders to the U.K. Borrower hereunder, on which interest is payable based
upon the U.K. Reference Rate as provided in Section 3.1.
"U.K. Reference Rate Margin" means two and one-half percent (2.5%).
--------------------------
"U.K. Revolving Credit Facility" has the meaning specified in Section
------------------------------
2.2(a)(ii).
"U.K. Revolving Loans" has the meaning specified in Section 2.2(b).
--------------------
"U.K. Security Documents" means legal mortgages in respect of all the
-----------------------
real Property legally or beneficially owned by the U.K. Borrower, a composite
guarantee and debenture, which will include a guarantee by the U.K. Borrower of
all Obligations of the Canadian Borrower (the "U.K. Guarantee"), and a security
trust deed among the Agent, the Borrowers, the Lenders and the Security Trustee,
each in form and substance satisfactory to the Agent.
"U.K. Unused Line Fee" has the meaning specified in Section 3.3(b).
--------------------
"U.S. Dollars" or "U.S. $" means lawful currency of the United States
------------ ------
of America.
"U.S. Security Agreement" has the meaning specified in Section 10.2.
-----------------------
"Violation Notice" means any notice received by either Borrower or the
----------------
Parent from any governmental or regulatory body or agency under any
Environmental Law that the Borrower or the Parent or any of its property and
assets is not in compliance with the requirements of any Environmental Law.
1.2 Accounting Terms. Any accounting term used in this Agreement shall
----------------
have, unless otherwise specifically provided herein, the meaning customarily
given in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
as consistently applied and using the same method for inventory valuation as
used in the preparation of the Financial Statements.
1.3 Interpretation. In this Agreement, (a) the singular includes the
--------------
plural and vice versa, (b) "in writing" or "written" includes printing,
typewriting, or any electronic means of communication capable of being visibly
reproduced at the point of reception, including telex, telecopy and telegraph,
(c) the headings, the table of contents, the Articles and the Sections are
inserted for convenience only and are to be ignored in construing this
Agreement, (d) a document, notice, note, bill of exchange or other instrument
shall be deemed to have been validly signed and executed if it has been signed
by either an original signature or a facsimile
<PAGE>
-34-
signature or stamp, (e) all references to amounts of money shall, unless
otherwise indicated, be references to U.S. Dollars, and (f) all references to
the Agent and/or Lenders acting "reasonably", all references to the Agent's
and/or the Lenders' "reasonable" discretion or determination and all references
to not unreasonably withholding a consent shall, unless otherwise indicated, be
read as references to acting reasonably in the Circumstances or making a
determination which is reasonable in the Circumstances or reasonably in the
Circumstances withholding a consent, where the "Circumstances" include the
recognition of the credit, repayment, security and other risks faced by the
Agent and/or Lenders (or the Security Trustee on their behalf) at the time of
the action or determination, given, inter alia, the subordinate nature of the
Security in relation to certain of the Permitted Liens and the amounts and terms
of repayment of indebtedness or liabilities secured pursuant to Permitted Liens.
1.4 References. Any reference made in this Agreement to:
----------
(a) "Agent" or "Lender" shall so be construed as to include its
successors and permitted assigns;
(b) a time of day is, unless otherwise stated, a reference to Local
time;
(c) Sections, Articles or Schedules is, unless otherwise indicated, a
reference to Sections and Articles of this Agreement and to
Schedules to this Agreement, as the case may be. The provisions
of each Schedule shall constitute provisions of this Agreement as
though repeated at length herein; and
(d) a "fiscal quarter" means, in relation to the Borrower, one of
the four (4) consecutive periods in each fiscal year of the
Borrower each of three (3) months in duration.
1.5 Interest Calculations and Payments. Unless otherwise stated (as in
----------------------------------
the case of Base Rate Loans, U.K. Reference Rate Loans, BA Equivalent Loans and
LIBOR Loans, which shall be calculated at an interest per annum based on a year
of 360 days), wherever in this Agreement reference is made to a rate of interest
"per annum" or a similar expression is used, such interest will be calculated on
the basis of a calendar year of three hundred and sixty-five (365) days or three
hundred and sixty-six (366) days, as the case may be. Calculations of interest
shall be made using the nominal rate method of calculation, and will not be
calculated using the effective rate method of calculation or on any other basis
that gives effect to the principle of deemed reinvestment of interest. All
payments of interest to be made hereunder will be paid both before and after
maturity and before and after default and/or judgment, if any, until payment
thereof, and interest will accrue on overdue interest, if any.
<PAGE>
-35-
1.6 Interest Act (Canada). For the purposes of this Agreement, whenever
---------------------
interest to be paid hereunder is to be calculated on the basis of a year of
three hundred and sixty (360) days, as in the case of all Base Rate Loans, U.K.
Reference Rate Loans and LIBOR Loans, or any other period of time that is less
than a calendar year, the yearly rate of interest to which the rate determined
pursuant to such calculation is equivalent is the rate so determined multiplied
by the actual number of days in the calendar year in which the same is to be
ascertained and divided by either three hundred and sixty (360) or such other
period of time, as the case may be.
2. LOANS AND LETTERS OF CREDIT.
---------------------------
2.1 Total Facility. (a) Canadian. Subject to all of the terms and
-------------- ---------
conditions of this Agreement, the Canadian Lenders severally agree to make
available for Drawdowns by the Canadian Borrower up to a $50,000,000 credit
facility for the Canadian Borrower's use from time to time during the term of
this Agreement. The credit facility shall consist of a revolving line of credit
consisting of Canadian Revolving Loans, Letters of Credit and F/X Transactions
as described in Sections 2.2, 2.3 and 2.4.
(b) U.K. Subject to all of the terms and conditions of this Agreement, the
----
U.K. Lenders severally agree to make available for Drawdowns in BPS by the U.K.
Borrower up to an Equivalent Amount in BPS of $25,000,000 credit facility for
the U.K. Borrower's use from time to time during the term of this Agreement.
The credit facility shall consist of a revolving line of credit consisting of
U.K. Revolving Loans denominated in BPS, Letters of Credit and F/X Transactions
as described in Sections 2.2, 2.3 and 2.4.
(c) Solidary Interests/Civil Code of Quebec. Each of the Borrowers
----------------------------------------
confirms and agrees that:
(i) subject to Section 14.11, the rights of the Agent and each
Canadian Lender or U.K. Lender, as the case may be, from time to
time a party to this Agreement by way of assignment or otherwise
are solidary and as regards the Obligations owing from time to
time to each Lender, each of the Agent and such Lender is
entitled to; (i) demand repayment of the amounts of all Canadian
Revolving Loans or U.K. Revolving Loans outstanding from time to
time in respect of such Obligations; (ii) exact the whole
performance of such Obligations from the Canadian Borrower or
U.K. Borrower, as the case may be; (iii) benefit from the
Security Interest and the Collateral in respect of such
Obligations; (iv) give a full acquittance of such Obligations and
exercise all rights and recourses under the Loan Documents with
respect to those Obligations; (v) the Obligations of the Canadian
Borrower or U.K. Borrower, as the case may be, with respect to
any F/X Transactions under the Canadian Revolving Credit
<PAGE>
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Facility or U.K. Revolving Credit Facility, as the case may be,
or arising from any Canadian Revolving Loans or U.K. Revolving
Loans, as the case may be, advanced by or Letter of Credit issued
or arranged by any of them under the Canadian Revolving Credit
Facility or U.K. Revolving Credit Facility, as the case may be,
will form part of the Obligations, will be secured by the
Security Interest and the Collateral and the Agent and such
Canadian Lender or U.K. Lender, as the case may be, will have a
solidary interest therein; and
(ii) the Obligations to make Revolving Loans and to issue or arrange
for the issuance of Letters of Credit and the obligation with
respect to F/X Transactions is several, and not joint and several
or solidary and, accordingly, each Borrower's recourse against
any Lender with respect thereto, will be limited to the amount of
such Lender's Commitment in the applicable Revolving Credit
Facility.
2.2 Revolving Loans.
---------------
(a)(i) Canadian Amounts. Subject to the terms and conditions of this
----------------
Agreement and relying upon each of the representations and warranties of the
Canadian Borrower and the Parent set forth in each of the Loan Documents, each
of the Canadian Lenders, severally and not jointly, agrees to make Loans and
issue Letters of Credit to the Canadian Borrower, at any time and from time to
time on and after the Closing Date and until the Maturity Date (or, after any
renewal of this Agreement as herein provided, the expiry date of any Renewal
Term), in an aggregate principal amount at any time outstanding not to exceed
the lesser of (x) such Canadian Lender's Participation in the Canadian Borrowing
Base in effect at such time and (y) such Canadian Lender's Commitment,
consisting of Canadian Revolving Loans and participation in Letters of Credit
and F/X Transactions as described in Sections 2.2, 2.3 and 2.4 hereof,
respectively (the "Canadian Revolving Credit Facility"). The Agent (as provided
----------------------------------
in Section 2.2(i)) or the Canadian Lenders may, in their discretion, elect to
exceed the limits of the Canadian Availability on one or more occasions, but if
they do so, neither the Agent nor the Canadian Lenders shall be deemed thereby
to have changed the limits of the Canadian Availability or to be obligated to
exceed the limits of the Canadian Availability on any other occasion. If, at
any time, the unpaid balance of the Canadian Revolving Loans plus the Canadian
L/C Reserve plus the Canadian F/X Reserve exceeds the Canadian Borrowing Base,
then the Canadian Lenders may refuse to make or otherwise restrict Canadian
Revolving Loans and/or Letters of Credit and/or F/X Transactions, on such terms
as the Canadian Lenders determine until such excess has been eliminated and the
Canadian Borrower shall immediately repay to the Canadian Lenders an amount
equal to such excess.
<PAGE>
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(ii) U.K. Amounts. Subject to the terms and conditions of this
------------
Agreement and relying upon each of the representations and warranties of the
U.K. Borrower and the Parent set forth in each of the Loan Documents, each of
the U.K. Lenders, severally and not jointly, agrees to make Loans denominated in
BPS and issue Letters of Credit to the U.K. Borrower, at any time and from time
to time on and after the Closing Date and until the Maturity Date (or, after any
renewal of this Agreement as herein provided, the expiry date of any Renewal
Term), in an aggregate principal amount at any time outstanding not to exceed
the lesser of (x) such U.K. Lender's Participation in the U.K. Borrowing Base in
effect at such time and (y) such U.K. Lender's Commitment, consisting of U.K.
Revolving Loans and participation in Letters of Credit and F/X Transactions as
described in Sections 2.2, 2.3 and 2.4 hereof, respectively (the "U.K. Revolving
--------------
Credit Facility"). The Agent (as provided in Section 2.2(i)) or the U.K. Lenders
- ---------------
may, in their discretion, elect to exceed the limits of the U.K. Availability on
one or more occasions, but if they do so, neither the Agent nor the U.K. Lenders
shall be deemed thereby to have changed the limits of the U.K. Availability or
to be obligated to exceed the limits of the U.K. Availability on any other
occasion. If, at any time, the unpaid balance of the U.K. Revolving Loans plus
the U.K. L/C Reserve plus the U.K. F/X Reserve exceeds the U.K. Borrowing Base,
then the U.K. Lenders may refuse to make or otherwise restrict U.K. Revolving
Loans and/or Letters of Credit and/or F/X Transaction, on such terms as the U.K.
Lenders determine until such excess has been eliminated and the U.K. Borrower
shall immediately repay to the U.K. Lenders an amount equal to such excess. At
no time will the U.K. Borrower be permitted to have outstanding more than
$3,500,000 in U.K. Reference Rate Loans.
(b) Notice of Borrowing. Whenever either Borrower desires to borrow
--------------------
revolving loans under this Section 2.2 (in the case of the Canadian Borrower,
the "Canadian Revolving Loans" and, in the case of the U.K. Borrower, the "U.K.
------------------------ ----
Revolving Loans"), the applicable Borrower shall deliver to the Agent a written
- ---------------
request substantially in the form of EXHIBIT G-5 hereto (a "Notice of
---------
Borrowing") signed by an authorized officer of the applicable Borrower, no later
than (i) 10:00 a.m. (Local time) on the requested Drawdown Date, in the case of
requests for Prime Rate Loans or Base Rate Loans or U.K. Reference Rate Loans,
or (ii) 10:00 a.m. (Local time) three (3) Business Days in advance of the
requested Drawdown Date, in the case of requests for BA Equivalent Loans or
LIBOR Loans. The Notice of Borrowing shall, with respect to any Revolving Loans
requested, specify (i) the requested Drawdown Date (which shall be a Business
Day), (ii) the aggregate amount of the requested Revolving Loans and the
currency thereof, (iii) whether the Revolving Loans requested are to be Prime
Rate Loans, Base Rate Loans, BA Equivalent Loans, U.K. Reference Rate Loans or
LIBOR Loans, (iv) if the requested Revolving Loans are to be BA Equivalent Loans
or LIBOR Loans, the requested Interest Period. In lieu of delivering the above-
described Notice of Borrowing the applicable Borrower may (if agreed with the
Agent) give the Agent telephonic notice of such request by the required time;
provided, however, that (if so agreed) such telephonic notice shall be confirmed
- -------- -------
in writing by delivery to the Agent (A) promptly and on the same day of a
telecopy of a Notice of Borrowing which has been signed by an authorized officer
of such Borrower, and (B) only if requested by
<PAGE>
-38-
the Agent, promptly of a Notice of Borrowing containing the original signature
of an authorized officer of such Borrower, mailed or delivered by such Borrower
to the Agent on the date such notice is given. Unless otherwise agreed with the
Agent, in the event that the terms of any confirmatory Notice of Borrowing
referred to in the proviso contained in the immediately preceding sentence shall
conflict with the telephonic notice with respect to which it was delivered, the
terms of such telephonic notice shall govern.
(c) Reliance upon Authority. On or prior to the Closing Date and
-----------------------
thereafter prior to any change with respect to any of the information contained
in the following clauses (i) and (ii), each Borrower shall deliver to the Agent
a writing setting forth (i) the account(s) to which the Agent is authorized to
transfer the proceeds of the Revolving Loans requested by such Borrower pursuant
to this Section 2.2, and (ii) the names of the officers authorized to request
Revolving Loans on behalf of such Borrower, and shall provide the Agent with a
specimen signature of each such officer. The Agent shall be entitled to rely
conclusively on such officer's authority to request Revolving Loans on behalf of
such Borrower, the proceeds of which are to be transferred to any of the
accounts specified by such Borrower pursuant to the immediately preceding
sentence, until the Agent receives written notice to the contrary. The Agent
shall have no duty to verify the identity of any individual representing himself
as one of the officers authorized by such Borrower to make such requests on its
behalf.
(d) No Liability. The Agent shall not incur any liability to either
-------------
Borrower as a result of acting upon any notice referred to in Sections 2.2(b)
and (c), which notice the Agent believes in good faith to have been given by an
officer duly authorized by such Borrower to request Revolving Loans on its
behalf or for otherwise acting in good faith under this Section 2.2, and the
crediting of Revolving Loans to a Borrower's deposit account, or transmittal to
such Person as a Borrower shall direct, shall conclusively establish the
obligation of the applicable Borrower to repay such Revolving Loans as provided
herein.
(e) Notice Irrevocable. Any Notice of Borrowing (or telephonic notice in
-------------------
lieu thereof) made pursuant to Section 2.2(b) shall be irrevocable and the
applicable Borrower shall be bound to borrow the funds requested therein in
accordance therewith.
(f) Agent's Election. Promptly after receipt of a Notice of Borrowing
-----------------
pursuant to Section 2.2(b), the Agent shall elect, in its discretion, (i) to
have the terms of Section 2.2(g) apply to such requested borrowing, or (ii) to
request BACAN, in the case of Canadian Revolving Loans, or BAUK, in the case of
U.K. Revolving Loans, to make a Settlement Loan pursuant to the terms of Section
2.2(h) in the amount of the requested Borrowing; provided, however, that, if
--------- -------
BACAN or BAUK, as the case may be, declines in its sole discretion to make a
Settlement Loan pursuant to Section 2.2(h), the Agent shall elect to have the
terms of Section 2.2(g) apply to such requested Borrowing.
<PAGE>
-39-
(g) Making of Revolving Loans.
--------------------------
(i) In the event that the Agent shall elect to have the terms of this
Section 2.2(g) apply to a requested borrowing as described in
Section 2.2(f), then promptly after receipt of a Notice of
Borrowing pursuant to Section 2.2(b), the Agent shall notify the
Canadian Lenders or the U.K. Lenders, as the case may be, by
telecopy, telephone or other similar form of transmission, of the
requested Borrowing. Each Canadian Lender or U.K. Lender, as the
case may be, shall make the amount of such Lender's Participation
in the requested Revolving Loan available to the Agent in same
day funds, to such account of the Agent as the Agent may
designate, not later than 2:00 p.m. (if notified by 11:00 a.m.)
(Local time) on the Drawdown Date applicable thereto. After the
Agent's receipt of the proceeds of such Revolving Loans, upon
satisfaction of the applicable conditions precedent set forth
herein, the Agent shall make the proceeds of such Revolving Loans
available to the applicable Borrower on the applicable Drawdown
Date by transferring same day funds equal to the proceeds of such
Revolving Loans received by the Agent to the account of the
applicable Borrower previously designated in writing by the
applicable Borrower, provided, however, that the amount of
-------- -------
Revolving Loans so made on any date shall in no event exceed the
amount of Canadian Availability or U.K. Availability, as the case
may be, on such date.
(ii) On any Drawdown Date in respect of a Revolving Loan, the Agent
shall be entitled to assume that each applicable Lender has made
the amount of such Lender's Revolving Loan available to the Agent
on such Drawdown Date, unless such Lender shall have notified the
Agent to the contrary prior to the deadline therefor contained in
Section 2.2(g)(i). The Agent, in its sole discretion, based upon
such assumption, may make available to the applicable Borrower a
corresponding amount on such Drawdown Date. If such corresponding
amount had not in fact been made available to the Agent by any
Lender, such Lender and the applicable Borrower severally agree
to repay to the Agent forthwith, on demand, such corresponding
amount, together with interest thereon for each day during the
period commencing on the date such amount is made available to
the applicable Borrower and ending on the date such amount is
repaid to the Agent, at the interest rate applicable from time to
time to such Borrowing excluding any breakage fees referred to
under Section 4.5. If such Lender repays to the Agent such
corresponding amount, such amount so repaid shall constitute a
Revolving Loan, and if both such Lender and the applicable
<PAGE>
-40-
Borrower shall have repaid such corresponding amount, the Agent
shall promptly return to the applicable Borrower such
corresponding amount in same day funds. The failure of any Lender
to make any Revolving Loan on any Drawdown Date (any such Lender
being hereinafter referred to as a "Defaulting Lender") shall not
-----------------
relieve any other Lender of its obligation, if any, hereunder to
make its Revolving Loan on such Drawdown Date, but no Lender
shall be responsible for such failure of any such Defaulting
Lender.
(iii) The Agent shall not be obligated to transfer to a Defaulting
Lender any payments made by any Borrower to the Agent for the
benefit of such Defaulting Lender; nor shall a Defaulting Lender
be entitled to the sharing of any payments hereunder. Amounts
payable to a Defaulting Lender shall instead be made to or
retained by the Agent. The Agent may hold and, in its discretion,
relend to the applicable Borrower, the amount of all such
payments received or retained by it for the account of such
Defaulting Lender. For purposes of voting or consenting to
matters with respect to the Loan Documents requiring the consent
of all or any portion of the Lenders, and determining
Participations, such Defaulting Lender shall be deemed not to be
a "Lender" and such Lender's Commitment shall be deemed to be
zero. The terms of this Section 2.2(g)(iii) shall remain
effective with respect to such Defaulting Lender until such time
as the Defaulting Lender shall no longer be in default of any of
its obligations under this Agreement. The terms of this Section
2.2(g)(iii) shall not be construed to increase or otherwise
affect the Commitment of any other Lender, or relieve or excuse
the performance by either Borrower of any of its duties or
obligations hereunder.
(h) Making of Settlement Loans.
---------------------------
(i) In the event the Agent shall elect, with the consent of BACAN, in
the case of the Canadian Revolving Credit Facility, or BAUK, in the case of
the U.K. Revolving Credit Facility, to have the terms of this Section
2.2(h) apply to a requested borrowing as described in Section 2.2(f), BACAN
or BAUK, as the case may be, shall make a Revolving Loan in the amount of
such Borrowing (any such Revolving Loan made solely by BACAN or BAUK, as
the case may be, pursuant to this Section 2.2(h) being referred to as a
"Settlement Loan" and such Revolving Loans being referred to collectively
---------------
as "Settlement Loans") available to the applicable Borrower on the Drawdown
----------------
Date applicable thereto by transferring same day funds to the account of
the applicable Borrower. Each Settlement Loan is a Canadian Revolving Loan
or U.K. Revolving Loan, as the case may be, hereunder and shall be subject
to all the terms and conditions
<PAGE>
-41-
applicable to other Revolving Loans except that all payments thereon shall
be payable to BACAN or BAUK, as the case may be, solely for its own account
(and for the account of the holder of any participation interest with
respect to such Revolving Loan created pursuant to subsection (ii) of
Section 2.2(j)). The Agent shall not request BACAN or BAUK to make any
Settlement Loan if (A) the Agent shall have received written notice from
any Canadian Lender or U.K. Lender, as the case may be, that one or more of
the applicable conditions precedent will not be satisfied on the requested
Drawdown Date for the applicable Revolving Loan, or (B) the requested
Revolving Loan would exceed the amount of Canadian Availability or U.K.
Availability, as the case may be, on the Drawdown Date. BACAN and BAUK
shall not otherwise be required to determine whether the applicable
conditions precedent set forth herein have been satisfied or the requested
Revolving Loan would exceed the amount of Canadian Availability or U.K.
Availability, as the case may be, on the Drawdown Date applicable thereto
prior to making, in its sole discretion, any Settlement Loan.
(i) Agent Advances.
---------------
(i) Subject to the limitations set forth in the provisos contained in
this Section 2.2(i)(i), the Agent is hereby authorized by the
Borrowers and the Lenders, from time to time in the Agent's
discretion, (A) after the occurrence and during the continuance
of an Event or an Event of Default, or (B) at any time that any
of the other applicable conditions precedent to a Revolving Loan
have not been satisfied, to make Canadian Revolving Loans to the
Canadian Borrower on behalf of the Canadian Lenders or (directly
or by BAUK) U.K. Revolving Loans to the U.K. Borrower on behalf
of the U.K. Lenders which the Agent, in its reasonable business
judgment, deems necessary or desirable (x) to preserve or protect
the Collateral, or any portion thereof, (y) to enhance the
likelihood of, or maximize the amount of, repayment of the Loans
and other Obligations, or (z) to pay any other amount chargeable
to such Borrower pursuant to the terms of this Agreement,
including, without limitation, costs, fees and expenses (any of
the advances described in this Section 2.2(i)(i) being
hereinafter referred to as "Agent Advances"); provided, that no
-------------- --------
Agent Advances may be made which have the effect of increasing
any Lender's Commitment or if the Instructing Group instructs the
Agent not to make any Agent Advances.
(ii) The Agent Advances shall be repayable on demand and secured by,
in the case of Agent's Advances under the Canadian Revolving
Credit Facility, the Canadian Collateral, and, in the case of
Agent's Advances under the U.K. Revolving Credit Facility, the
U.K. Collateral, shall constitute
<PAGE>
-42-
Canadian Revolving Loans, if under the Canadian Revolving Credit
Facility, and U.K. Revolving Loans, if under the U.K. Revolving
Credit Facility, and Obligations hereunder, and shall bear
interest at the rate applicable to the Prime Rate Loans or U.K.
Revolving Loans, as the case may be, from time to time. The Agent
shall notify each Canadian Lender or U.K. Lender, as the case may
be, and the applicable Borrower in writing of each such Agent
Advance promptly following the making thereof, which notice shall
include a description of the purpose of such Agent Advance.
(j) Settlement. The Agent and the Lenders hereby agree that, except in the
----------
case of Loans consisting of Settlement Loans or Agent Advances, each Lender's
funded portion of the Loans is intended to be equal at all times to such
Lender's Participation in the outstanding Loans. The Agent and the Lenders agree
(which agreement shall not be for the benefit of or enforceable by the Borrower)
that in order to facilitate the administration of this Agreement and the other
Loan Documents, settlement among them as to the Settlement Loans, Agent Advances
and other Loans shall take place on a periodic basis in accordance with the
following provisions:
(i) The Agent shall request settlement ("Settlement") with the Lenders on
----------
a basis not less frequently than once during each five (5) Business
Day period, or on a more frequent basis if so determined by the Agent,
(A) on behalf of BACAN or BAUK, with respect to each outstanding
Settlement Loan, and (B) for itself, with respect to each Agent
Advance, by notifying the other applicable Lenders by telecopy,
telephone or other similar form of transmission, of such requested
Settlement, no later than 11:00 a.m. (Local time) on the date of such
requested Settlement (the "Settlement Date"). Each Lender (other than
---------------
BACAN and BAUK, in the case of Settlement Loans) shall make the amount
of such Lender's Participation in the outstanding principal amount of
the Settlement Loans and Agent Advances with respect to which
Settlement is requested available to the Agent, for itself or for the
account of BACAN and BAUK, in same day funds, to such account of the
Agent as the Agent may designate, no later than 2:00 p.m. (Local
time), on the Settlement Date applicable thereto, regardless of
whether the applicable conditions precedent for Revolving Loans set
forth herein have then been satisfied. Such amounts made available to
the Agent shall be applied against the amounts of the applicable
Settlement Loan or Agent Advance and, together with the portion of
such Settlement Loan or Agent Advance representing BACAN's or BAUK's
Participation thereof, shall constitute Revolving Loans of such
Lenders. If any such amount is not made available to the Agent by any
Lender on the Settlement Date applicable thereto, the Agent shall be
entitled to recover such amount on demand from such Lender together
with interest thereon at the
<PAGE>
-43-
interest rate then applicable to the Revolving Loans with respect to
which Settlement is to be made.
(ii) Notwithstanding the foregoing, not more than one (1) Business Day
after demand is made by the Agent (whether before or after the
occurrence of an Event or an Event of Default and regardless of
whether the Agent has requested a Settlement with respect to a
Settlement Loan or Agent Advance), each other Canadian Lender or U.K.
Lender, as the case may be, shall irrevocably and unconditionally
purchase and receive from BACAN, BAUK or the Agent, as applicable,
without recourse or warranty, an undivided interest and Participation
in such Settlement Loan or Agent Advance to the extent of such
Lender's Participation therein by paying to the Agent, in same day
funds, an amount equal to such Lender's Participation in such
Settlement Loan or Agent Advance. If such amount is not in fact made
available to the Agent by any Lender, the Agent shall be entitled to
recover such amount on demand from such Lender together with interest
thereon at the interest rate then applicable to the Revolving Loans.
(iii) From and after the date, if any, on which any Lender purchases an
undivided interest and participation in any Settlement Loan or Agent
Advance pursuant to clause (ii) above, the Agent shall promptly
distribute to such Lender at such address as such Lender may request
in writing, such Lender's Participation in all payments of principal
and interest and all proceeds of Collateral received by the Agent in
respect of such Settlement Loan or Agent Advance.
(iv) If any payments are received by the Agent which, in accordance with
the terms of this Agreement would be applied to the reduction of the
Revolving Loans, and no Settlement Loans or Agent Advances are then
outstanding, the Agent may pay over such amounts to BACAN or BAUK, as
the case may be, for application to BACAN's or BAUK's, as the case may
be, Participation in such Revolving Loans. If , as of any Settlement
Date, payments received since the then immediately preceding
Settlement Date have been applied to BACAN's or BAUK's, as the case
may be, Participation in the Revolving Loans other than Settlement
Loans and Agent Advances, as provided for in the immediately preceding
sentence, then BACAN or BAUK, as the case may be, shall pay to the
Agent, for the account of the applicable Canadian Lenders or U.K.
Lenders, as the case may be, to be applied to the outstanding
Revolving Loans of such Lenders, an amount such that each Lender shall
have outstanding, as of such Settlement Date, after giving effect to
such payments, its Participation in such Revolving Loans; provided,
that the Agent may net payments due from BACAN or BAUK, as the case
may be, pursuant to this sentence against payments due to BACAN or
BAUK, as the case may be, pursuant to Section 2.2(j)(i) on the
applicable Settlement Date, and
<PAGE>
-44-
require BACAN, BAUK or the other Lenders, as applicable, to make only
the amount of the payment due after such netting. As of each
Settlement Date, each of (a) BACAN and BAUK with respect to Settlement
Loans, (b) the Agent with respect to Agent Advances, and (c) each
Lender with respect to the Revolving Loans other than Settlement Loans
and Agent Advances, shall be entitled to interest at the applicable
rate or rates payable under this Agreement on the actual daily amount
of funds employed by BACAN, BAUK, the Agent or such Lender since the
immediately preceding Settlement Date.
(k) Notation; Revolving Loan Notes. Each Lender is authorized, at such
------------------------------
Lender's option, to note the date and amount of each payment or prepayment of
principal of such Lender's Revolving Loans in its books and records, including
computer records, such books and records constituting rebuttably presumptive
evidence, absent manifest error, of the accuracy of the information contained
therein. In addition, upon request by any Lender, a Borrower shall execute and
deliver to such Lender a promissory note, in order to evidence such Lender's
Revolving Loans, in a maximum principal amount equal to such Lender's
Participation in the applicable Revolving Credit Facility, in a form
satisfactory to the Agent and such Lender.
(l) Lenders' Failure to Perform. All Loans (other than Settlement Loans
---------------------------
and Agent Advances) shall be made by the Lenders simultaneously and in
accordance with their Participations. It is understood that (i) no Lender shall
be responsible for any failure by any other Lender to perform its obligation to
make any Loans hereunder, nor shall any Commitment of any Lender be increased or
decreased as a result of any failure by any other Lender to perform its
obligation to make any Loans hereunder, (ii) no failure by any Lender to perform
its obligation to make any Loans hereunder shall excuse any other Lender from
its obligation to make any Loans hereunder, and (c) the obligations of each
Lender hereunder shall be several, not joint and several.
2.3 Letters of Credit.
-----------------
(a) Subject to the terms and conditions of this Agreement, the Issuing
Lender shall, upon the Canadian Borrower's or U.K. Borrower's, as the case may
be, written request to the Agent as herein provided (A) cause Letters of Credit
to be issued for the applicable Borrower's account or (B) provide credit support
or enhancement or otherwise confirm payment (any such credit support,
enhancement or payment confirmation being referred to as "Credit Support") to
banks other than Lenders under this Agreement, which banks are acceptable to the
Agent in the exercise of its reasonable business judgment and which banks shall
issue Letters of Credit in accordance with this Section 2.3 from time to time
during the term of this Agreement. The Issuing Lender will not cause to be
opened any Letter of Credit or provide any Credit Support if: (i) the maximum
face amount of the requested Letter of Credit or for which Credit Support is
requested, plus the aggregate undrawn face amount of all outstanding Letters of
Credit under
<PAGE>
-45-
the applicable Revolving Credit Facility, would exceed $25,000,000, in the case
of the Canadian Revolving Credit Facility, and $15,000,000, in the case of the
U.K. Revolving Credit Facility; (ii) the maximum face amount of the requested
Letter of Credit or for which Credit Support is requested, and all commissions,
fees, and charges due from such Borrower in connection with the opening thereof,
would cause the Canadian Availability or U.K. Availability, as the case may be,
to be exceeded at such time; or (iii) the expiration date of the Letter of
Credit would exceed the Maturity Date (or, after any renewal of this Agreement
as herein provided, the expiry date of any Renewal Term) or be greater than
twelve (12) months from the date of issuance. All payments made and expenses
incurred by the Issuing Lender and/or Lenders pursuant to or in connection with
the Letters of Credit will be charged to the applicable Borrower's loan account
as Canadian Revolving Loans or U.K. Revolving Loans, as the case may be.
(b) Other Conditions. In addition to being subject to the satisfaction of
----------------
the applicable conditions precedent herein provided, the obligation of the
Issuing Lender to cause to be issued any Letter of Credit or to provide any
Credit Support is subject to the following conditions precedent having been
satisfied in a manner satisfactory to the Issuing Lender and Agent:
(i) The applicable Borrower shall have delivered to the Issuing
Lender or proposed issuer of the Letter of Credit, at such times
and in such manner as the Issuing Lender may prescribe, an
application in form and substance satisfactory to the Issuing
Lender or proposed issuer of the Letter of Credit for the
issuance of the Letter of Credit and such other documents as may
be reasonably required pursuant to the terms thereof, and the
form and terms of the proposed Letter of Credit shall be
satisfactory to the Issuing Lender and any proposed issuer of
the Letter of Credit and Agent; and
(ii) As of the date of issuance, no order of any court, arbitrator or
Public Authority shall purport by its terms to enjoin or
restrain banks generally from issuing letters of credit of the
type and in the amount of the proposed Letter of Credit, and no
law, rule or regulation applicable to banks generally and no
request or directive (whether or not having the force of law)
from any Public Authority with jurisdiction over banks generally
shall prohibit, or request that the Issuing Lender or proposed
issuer of the Letter of Credit and/or Lenders refrain from, the
issuance of letters of credit generally or the issuance of such
Letters of Credit.
(c) Issuance of Letters of Credit.
-----------------------------
(i) Request for Issuance. A Borrower shall give the Agent (who
--------------------
shall promptly notify the applicable Issuing Lender of such
request) three (3) Business Days' prior written notice of such
Borrower's request for
<PAGE>
-46-
the issuance of a Letter of Credit. Such notice shall be
irrevocable and shall specify the original face amount of the
Letter of Credit requested, the effective date (which date shall
be a Business Day) of issuance of such requested Letter of
Credit, whether such Letter of Credit may be drawn in a single
or in partial draws, the date on which such requested Letter of
Credit is to expire (which date shall be a Business Day), the
purpose for which such Letter of Credit is to be issued, and the
beneficiary of the requested Letter of Credit. Such Borrower
shall attach to such notice the proposed form of the Letter of
Credit that the Issuing Lender is requested to cause to be
issued.
(ii) No Extensions or Amendment. The Issuing Lender shall not be
--------------------------
obligated to cause any Letter of Credit to be extended or
amended or any Credit Support to be extended unless the
requirements of this Section 2.3 are met as though a new Letter
of Credit were being requested and issued.
(iii) Notice by Agent. Promptly after the issuance of any Letter of
---------------
Credit, the Issuing Lender shall give each Canadian Lender or
U.K. Lender, as the case may be, written notice, or telephone
notice confirmed thereafter in writing, of the issuance of such
Letter of Credit.
(d) Payments Pursuant to Letters of Credit.
--------------------------------------
(i) Payment of Letter of Credit Obligations. The Canadian Borrower
---------------------------------------
agrees to reimburse the issuer of a Letter of Credit under the
Canadian Revolving Credit Facility and the U.K. Borrower agrees
to reimburse the issuer of a Letter of Credit under the U.K.
Revolving Credit Facility for any draw under any such Letter of
Credit immediately upon demand, and to pay the issuer the amount
of all other obligations and other amounts payable to such issuer
under or in connection with any such Letter of Credit immediately
when due, irrespective of any claim, setoff, defence or other
right which such Borrower may have at any time against Issuing
Lender and/or any other issuer and/or Lenders or any other
Person.
(ii) Revolving Loans to Satisfy Reimbursement Obligations. In the
----------------------------------------------------
event that the issuer of any Letter of Credit honours a draw
under such Letter of Credit and the applicable Borrower shall not
have repaid such amount to the issuer pursuant to Section
2.3(d)(i), the Issuing Lender shall, upon receiving notice of
such failure, notify the Agent and each Canadian Lender or U.K.
Lender, as the case may be, of such failure, and each Canadian
Lender or U.K. Lender, as the case may be, shall
<PAGE>
-47-
unconditionally pay to the Issuing Lender (or its or any other
issuer's account), as and when provided hereinbelow, an amount
equal to such Lender's Participation in the amount of such
payment in same day funds. If the Issuing Lender so notifies the
Lenders prior to 10:00 a.m. (Local time) on any Business Day,
each Lender shall make available to the Issuing Lender the amount
of such payment, as provided in the immediately preceding
sentence, by 11:00 a.m. (Local time) on such Business Day and
otherwise by 10:00 a.m. (Local time) on the next following
Business Day. Such amounts paid by the Lenders to the Issuing
Lender shall constitute Canadian Revolving Loans or U.K.
Revolving Loans, as the case may be, which shall be deemed to
have been requested by the applicable Borrower pursuant to
Section 2.2.
(e) Participations.
---------------
(i) Purchase of Participations. Immediately upon issuance of any
--------------------------
Letter of Credit in accordance with this Section, each Lender to
the extent of its Participation in the Revolving Credit Facility
pursuant to which such Letter of Credit has been issued shall be
deemed to have irrevocably and unconditionally purchased and
received without recourse or warranty, an undivided interest and
participation in such Letter of Credit or the Credit Support,
equal to such Lender's Participation in the face amount of such
Letter of Credit (including, without limitation, all obligations
of the applicable Borrower with respect thereto, and any security
therefor or guaranty pertaining thereto).
(ii) Sharing of Reimbursement Obligation Payments. Whenever the
--------------------------------------------
Issuing Lender receives a payment on account of reimbursement
obligations in respect of a Letter of Credit as to which the
Issuing Lender has previously received payment from a Lender
pursuant to Section 2.3(d), the Issuing Lender shall promptly pay
to such Lender such Lender's Participation of such payment from
the applicable Borrower. Each such payment shall be made to such
Lender by the Issuing Lender on the Business Day on which the
Issuing Lender receives immediately available funds, if received
prior to 10:00 a.m. (Local time) on such Business Day, and
otherwise on the next succeeding Business Day. If any such
amount is not so made available to such Lender by the Issuing
Lender, such Lender shall be entitled to recover such amount on
demand from the Issuing Lender together with interest thereon at
the interest rate then applicable to Prime Rate Loans or U.K.
Revolving Loans, as the case may be.
<PAGE>
-48-
(iii) Documentation. Upon the request of any Lender, the Issuing Lender
-------------
shall furnish to such Lender copies of any Letter of Credit
executed in connection therewith, any application for any Letter
of Credit or Credit Support and such other documentation as may
reasonably be requested by such Lender.
(iv) Obligations Irrevocable. The obligations of each Lender to make
-----------------------
payments to the Issuing Lender with respect to any Letter of
Credit or Credit Support provided through the Issuing Lender and
the obligations of the applicable Borrower to make payments to
the Agent, for the account of the applicable Lenders, shall be
irrevocable, not subject to any qualification or exception
whatsoever and shall be made in accordance with the terms and
conditions of this Agreement including, without limitation,
notwithstanding the existence of any of the following
circumstances:
(A) any lack of validity or enforceability of this Agreement or
any of the other Loan Documents;
(B) the existence of any claim, set-off, defence or other right
which the applicable Borrower may have at any time against a
beneficiary named in a Letter of Credit or any transferee of
any Letter of Credit (or any Person for whom any such
transferee may be acting), any Lender, the Agent, the
Security Trustee, the Issuing Lender or any other issuer of
a Letter of Credit or any other Person, whether in
connection with this Agreement, any Letter of Credit, the
transactions contemplated herein or any unrelated
transactions (including any underlying transactions between
either Borrower or any other Person and the beneficiary
named in any Letter of Credit);
(C) any draft, certificate or any other document presented under
the Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect, provided,
--------
however, that nothing herein will release any Lender from
-------
the direct consequences of its own gross negligence or
wilful misconduct;
(D) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the
Loan Documents; or
(E) the occurrence of any Event or Event of Default.
<PAGE>
-49-
(f) Recovery or Avoidance of Payments. In the event any payment by or on
---------------------------------
behalf of either Borrower received by the Issuing Lender with respect to a
Letter of Credit or any Credit Support provided for any Letter of Credit (or any
guaranty by such Borrower or reimbursement obligation of such Borrower relating
thereto) and distributed to the Lenders on account of their respective
Participations therein, is thereafter set aside, avoided or recovered from the
Issuing Lender in connection with any receivership, liquidation or bankruptcy
proceeding, the Lenders shall, upon demand by the Issuing Lender, pay to the
Issuing Lender their respective Participation in such amount set aside, avoided
or recovered, together with interest at the rate required to be paid by the
Issuing Lender upon the amount required to be repaid by it.
(g) Compensation for Letters of Credit.
----------------------------------
(i) Letter of Credit Fee. Each Borrower agrees to pay to the Agent
--------------------
(for the account of the Lenders) with respect to each Letter of
Credit issued or Credit Support at its request, a commission (the
"L/C Fee") of one and one half percent (1 1/2%) per annum, on the
-------
outstanding principal amount of such Letter of Credit, provided,
--------
however, that if any Event of Default occurs, then, from and
-------
after the date of such Event of Default occurs until it is cured,
or the Letter of Credit cancelled, as the case may be, the L/C
Fee shall be the fee otherwise applicable plus two percent (2%)
per annum. The L/C Fee will be payable monthly, in arrears, on
the first day of each month commencing in the month following the
Issue Date of the Letter of Credit.
(ii) Issuer Fees and Charges. In addition to the L/C Fee referred to
-----------------------
above, each Borrower shall, in connection with any Letter of
Credit issued at its request, pay to the issuer of any Letter of
Credit (for its own account), such fees and other charges as are
charged for letters of credit issued by it, including, without
limitation, its standard fees for issuing, administering,
amending, renewing, paying and cancelling letters of credit and
all other fees associated with issuing or servicing letters of
credit, as and when assessed.
(h) Indemnification; Exoneration; Power of Attorney
-----------------------------------------------
(i) Indemnification. In addition to amounts payable as elsewhere
---------------
provided in this Section 2.3, each Borrower hereby agrees to
protect, indemnify, pay and save the Agent, its applicable
Issuing Lender and each of its applicable Lenders harmless from
and against any and all claims,
<PAGE>
-50-
demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys' fees) which its
applicable Issuing Lender and/or any of its applicable Lenders
may incur or be subject to as a consequence, direct or indirect,
of the issuance of any Letter of Credit or the provision of any
Credit Support in connection therewith, provided, however, that
-------- -------
nothing herein will protect and indemnify and save the applicable
Issuing Lender and each of the applicable Lenders harmless from
the direct consequences of their own gross negligence or wilful
misconduct and, subject to the terms of any other Loan Documents
(including any guarantees), the Canadian Borrower shall have no
liability hereunder with respect to any Letter of Credit issued
or Credit Support provided under the U.K. Revolving Credit
Facility and the U.K. Borrower shall have no liability with
respect to any Letter of Credit issued or Credit Support provided
under the Canadian Revolving Credit Facility. The agreement shall
survive payments of all Obligations and the termination of this
Agreement.
(ii) Assumption of Risk by the Borrowers. As among the Borrowers, the
-----------------------------------
Issuing Lender, the Lenders and the Agent, the Borrowers assume
all risks of the acts and omissions of, or misuse of any of the
Letters of Credit by, the respective beneficiaries of such
Letters of Credit. In furtherance and not in limitation of the
foregoing, neither the Issuing Lender, nor the Agent, nor any of
the Lenders shall be responsible (except as otherwise imposed by
any agreement between the Agent and/or Lenders and a Borrower in
relation to the specific Letter of Credit and except for the
direct consequence of the Issuing Lender's or any Lender's gross
negligence or wilful misconduct) for: (A) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any
document submitted by any Person in connection with the
application for and issuance of and presentation of drafts with
respect to any of the Letters of Credit, even if it should prove
to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or
assign any Letter of Credit or the rights or benefits thereunder
or proceeds thereof, in whole or in part, which duly prove to be
invalid or ineffective for any reason; (C) the failure of the
beneficiary of any Letter of Credit to comply duly with
conditions required in order to draw upon such Letter of Credit;
(D) errors, omissions, interruptions, or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (E) errors in
interpretation of technical terms; (F) any loss or delay in the
transmission or otherwise of any document required
<PAGE>
-51-
in order to make a drawing under any Letter of Credit or of
the proceeds thereof; (G) the misapplication by the
beneficiary of any Letter of Credit of the proceeds of any
drawing under such Letter of Credit; or (H) any consequences
arising from causes beyond the control of the Agent, the
Issuing Lender and/or Lenders, including, without
limitation, any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto
Public Authority. None of the foregoing shall affect, impair
or prevent the vesting of any rights or powers of the Agent,
Issuing Lender and/or Lenders under this Section 2.3.
(iii) Exoneration. In furtherance and extension, and not in
-----------
limitation, of the specific provisions set forth above, any
action taken or omitted by the Agent, Issuing Lender and/or
Lenders under or in connection with any of the Letters of
Credit or any related certificates, if taken or omitted in
the absence of gross negligence or wilful misconduct, shall
not put the Agent, Issuing Lender and/or Lenders under any
resulting liability to either Borrower or relieve the
Borrowers of any of its obligations hereunder to any such
Person.
(iv) Power of Attorney. In connection with all Inventory financed
-----------------
by Letters of Credit or paid for and in transit, each
Borrower hereby appoints the Agent, or the Agent's designee,
as its attorney, with full power and authority: (A) to sign
and/or endorse such Borrower's name upon any warehouse or
other receipts; (B) to sign such Borrower's name on bills of
lading and other negotiable and non-negotiable documents;
(C) to clear Inventory through customs in the Agent's or
such Borrower's name, and to sign and deliver to customs
officials powers of attorney in such Borrower's name for
such purpose; (D) to complete in such Borrower's or the
Agent's name, any order, sale, or transaction, obtain the
necessary documents in connection therewith, and collect the
proceeds thereof; and (E) to do such other acts and things
as are necessary in order to enable the Agent to obtain
possession of the Inventory or to obtain payment of the
Obligations. Neither the Agent and/or Lenders nor its
designee, as such Borrower's attorney, will be liable for
any acts or omissions, nor for any error of judgement or
mistake of fact or law except for the direct consequence of
the Agent's or any Lender's gross negligence or wilful
misconduct. This power, being coupled with an interest, is
irrevocable until all Obligations have been paid and
satisfied.
(v) Account Party. Each Borrower hereby authorizes and directs
-------------
the Issuing Lender to name the applicable Borrower as the
"Account Party" therein
<PAGE>
-52-
and, upon Agent's request, to deliver to the Agent all
instruments, documents and other writings and property
received by the Issuing Lender pursuant to the Letter of
Credit, and to accept and rely upon the Agent's instructions
and agreements with respect to all matters arising in
connection with the Letter of Credit or the application
therefor.
(vi) Control of Inventory. In connection with all Inventory
--------------------
financed by Letters of Credit or paid for and in transit,
the applicable Borrower will, at the Agent's request,
instruct all suppliers, carriers, forwarders, warehouses or
others receiving or holding cash, checks, Inventory,
documents or instruments in which the Agent, the Security
Trustee and/or Lenders hold a Security Interest to deliver
them to the Agent or, in the case of the U.K. Borrower, the
Security Trustee and/or subject to the Agent's or, in the
case of the U.K. Borrower, the Security Trustee's order, and
if they shall come into such Borrower's possession, to
deliver them, upon request, to the Agent in their original
form. Such Borrower shall also designate the Agent or such
Person as the Agent may designate as the consignee on all
bills of lading and other negotiable and non-negotiable
documents.
(i) Supporting Letter of Credit: Cash Collateral. If, notwithstanding the
--------------------------------------------
provisions of this Section 2.3, and without limitation to any of the Agent's,
Issuing Lender's and/or Lenders' rights under Section 11.2, any Letter of
Credit is outstanding upon the termination of this Agreement, then upon such
termination the applicable Borrower at whose request the Letter of Credit was
issued shall deposit with the Agent, at the Agent's discretion, with respect to
each Letter of Credit then outstanding, either (A) a standby letter of credit (a
"Supporting Letter of Credit") in form and substance satisfactory to the Agent,
---------------------------
issued by an issuer satisfactory to the Agent in an amount equal to the greatest
amount for which such Letter of Credit may be drawn (plus fees, commissions and
expenses which may be or become payable thereunder), under which Supporting
Letter of Credit the Agent is entitled to draw amounts necessary to reimburse
the Agent, the Security Trustee, Issuing Lender and/or Lenders for payments
made by the Agent, Issuing Lender and/or Lenders under such Letter of Credit or
under any Credit Support provided through the Agent, Issuing Lender and/or
Lenders with respect thereto, or (B) cash in amounts necessary to reimburse the
Agent, Issuing Lender and/or Lenders for payments made by the Agent, Issuing
Lender and/or Lenders under such Letter of Credit or under any Credit Support
provided through the Agent, Issuing Lender and/or Lenders (plus fees,
commissions and expenses which may be or become payable thereunder). Such
Supporting Letter of Credit or deposit of cash shall be held by the Agent, as
security for, and to provide for the payment of, the aggregate undrawn amount of
such Letters of Credit remaining outstanding.
2.4 F/X Transactions. (a) Subject to the limits of the Canadian
----------------
Availability and the other terms and conditions of this Agreement, and payment
of BACAN's fees for such
<PAGE>
-53-
transactions, BACAN shall subject to the Canadian Borrower's execution and
delivery of such documents as BACAN may require (including, as applicable, any
F/X Agreements) upon the Canadian Borrower's request from time to time, enter
into F/X Transactions with the Canadian Borrower for amounts of currency not
exceeding in the aggregate (A) $7,500,000 or the Equivalent Amount thereof in
Cdn.$ or (B) a $750,000 settlement and revaluation limit (as determined by the
Agent), with settlement to occur not later than (i) one year from the date of
entering into the transaction or (ii) the Maturity Date (or, after any renewal
of this Agreement, the expiry date of any Renewal Term. The Canadian Borrower
shall be required to pay to BACAN sufficient cash to settle each F/X Transaction
on or before the settlement date of each F/X Transaction; all amounts which may
be due and payable by the Canadian Borrower to BACAN (and not settled as
aforesaid) under or in connection with any F/X Transaction or the F/X Agreement
shall be deemed to constitute Prime Rate Loans and the provisions of Sections
2.3(d), with respect to each Lender's obligation to fund its Participation in
such Loan and 2.3(e), with respect to each Lender's individual interest and
participation in such F/X Transactions and the sharing of all reimbursement
payments, shall apply thereto, mutatis mutandus.
(b) Subject to the limits of the U.K. Availability and the other terms and
conditions of this Agreement, and payment of BAUK's fees for such transactions,
BAUK shall subject to the Canadian Borrower's execution and delivery of such
documents as BAUK may require (including, as applicable, any F/X Agreements)
upon the U.K. Borrower's request from time to time, enter into F/X Transactions
with the U.K. Borrower for amounts of currency not exceeding in the aggregate
(A) $7,500,000 or the Equivalent Amount thereof in BPS or (B) a $750,000
settlement and revaluation limit (as determined by the Agent), with settlement
to occur not later than (i) one year from the date of entering into the
transaction or (ii) the Maturity Date (or, after any renewal of this Agreement,
the expiry date of any Renewal Term. The U.K. Borrower shall be required to pay
to BAUK sufficient cash to settle each F/X Transaction on or before the
settlement date of each F/X Transaction; all amounts which may be due and
payable by the U.K. Borrower to BAUK (and not settled as aforesaid) under or in
connection with any F/X Transaction or the F/X Agreement shall be deemed to
constitute LIBOR Loans and the provisions of Sections 2.3(d), with respect to
each Lender's obligation to fund its Participation in such Loan and 2.3(e), with
respect to each Lender's individual interest and participation in such F/X
Transactions and the sharing of all reimbursement payments, shall apply thereto,
mutatis mutandus.
2.5 Deliberately Left Blank.
-----------------------
2.6 Conversion. Subject to the provisions of this Agreement, the Canadian
----------
Borrower may convert:
(a) all or any part of a Prime Rate Loan into a BA Equivalent Loan at
any time;
<PAGE>
-54-
(b) a BA Equivalent Loan into a Prime Rate Loan on the last day of
the Interest Period applicable to such Loan;
(c) all or any part of a Base Rate Loan into a LIBOR Loan at any
time; and
(d) a LIBOR Loan into a Base Rate Loan on the last day of the
Interest Period applicable to such Loan,
and the U.K. Borrower may convert:
(e) all or any part of a U.K. Reference Rate Loan into a LIBOR Loan
at any time; and
(f) a LIBOR Loan into a U.K. Reference Rate Loan on the last day of
the Interest Period applicable to such Loan,
in each case by giving to the Agent an irrevocable conversion notice no later
than 10:00 a.m. (Local time) three (3) Business Days prior to the Conversion
Date. No BA Equivalent Loan or LIBOR Loan may be converted into another type of
Loan except upon the last day of the Interest Period applicable to such Loan.
2.7 Rollover/Selection of Interest Periods. At or before 10:00 a.m.
--------------------------------------
(Local time) three (3) Business Days prior to the expiration of each BA
Equivalent Interest Period or LIBOR Interest Period of each BA Equivalent Loan
or LIBOR Loan, as the case may be, the Canadian Borrower shall, unless it has
delivered a conversion notice pursuant to Section 2.6, deliver a written notice
of its intention to rollover the BA Equivalent Loan or LIBOR Loan, as the case
may be, to the Agent selecting the next Interest Period applicable to the Loan
which new Interest Period shall commence on and include the last day of such
prior Interest Period. If the Canadian Borrower fails to deliver a rollover
notice to the Agent, a BA Equivalent Loan shall be deemed to have been converted
into a Prime Rate Loan and a LIBOR Loan shall be deemed to have been converted
into a Base Rate Loan. The Canadian Borrower may convert the Prime Rate Loan
into a BA Equivalent Loan and the Base Rate Loan into a LIBOR Loan at any time
thereafter in accordance with Section 2.6. If the U.K. Borrower fails to
deliver a rollover notice to the Agent, a LIBOR Loan shall be deemed to have
been converted into a U.K. Reference Rate Loan (subject to U.K. Borrower's right
to convert such Loan into a LIBOR Loan at any time thereafter in accordance with
Section 2.6).
2.8 BA Equivalent Loans. BA Equivalent Loans may be drawn down by the
-------------------
Canadian Borrower at any time and from time to time in a minimum principal
amount and in increments of Cdn.$1,000,000 by irrevocable written notice of its
intention to make a Drawdown given to the Agent not later than 10:00 a.m. (Local
time) three (3) Business Days prior to the
<PAGE>
-55-
Drawdown Date. Notwithstanding anything to the contrary herein, at no time shall
the Canadian Borrower request or be permitted to have outstanding, more than
five (5) BA Equivalent Loans.
2.9 LIBOR Loans. LIBOR Loans may be drawn down by the Canadian Borrower
-----------
or U.K. Borrower at any time and from time to time in a minimum principal amount
and increments of $1,000,000 and for terms of 30, 60, 90 or 180 days, by
irrevocable written notice of its intentions to make a Drawdown given to the
Agent by not later than 10:00 a.m. (Local time) three (3) Business Days prior to
the Drawdown Date. Notwithstanding anything to the contrary herein, at no time
shall the Canadian Borrower or U.K. Borrower, as the case may be, request or be
permitted to have outstanding more than 5 LIBOR Loans.
3. INTEREST AND OTHER CHARGES.
--------------------------
3.1 Interest. The Canadian Borrower shall pay the Agent (for the account
--------
of the Canadian Lenders) interest on the unpaid principal balance of the Loans
at a fluctuating per annum rate equal to:
(a) in the case of Prime Rate Loans, the Prime Rate in effect from time to
time plus the Prime Rate Margin per annum;
----
(b) in the case of Base Rate Loans, the Base Rate in effect from time to
time plus the Base Rate Margin per annum (based on a year of 360
----
days);
(c) in the case of BA Equivalent Loans, the BA Rate plus the BA Rate
----
Margin per annum (based on a year of 360 days); and
(d) in the case of LIBOR Loans under the Canadian Revolving Credit
Facility, the LIBOR Rate plus the LIBOR Rate Margin per annum (based
----
on a year of 360 days).
The U.K. Borrower shall pay to the Agent (for the account of the U.K. Lenders)
interest on the unpaid balance of LIBOR Loans under the U.K. Revolving Credit
Facility at a per annum rate equal to the LIBOR Rate plus the LIBOR Rate Margin
----
and interest on the unpaid balance of U.K. Reference Rate Loans at a per annum
rate equal to the U.K. Reference Rate plus the U.K. Reference Rate Margin. Each
----
change in the Prime Rate or Base Rate shall be reflected in the foregoing
interest rates as of the effective date of such change. Such interest will be
payable in arrears to the Agent (for the benefit of the applicable Lenders) on
each Interest Payment Date for such Loan, for the period from and including the
Drawdown Date or the preceding Conversion Date, Rollover Date or Interest
Payment Date of such Loan, as the case may be, for such Loan to but excluding
such Interest Payment Date and shall be calculated on the principal amount of
the Loan outstanding during such period and on the actual number of days
elapsed.
<PAGE>
-56-
The Applicable Margins may be adjusted downwards as follows:
1. if based on the Parent and Borrowers' audited financial
statements for the fiscal year ending June 30, 1998, the Canadian
Borrower's EBITDA is not less than U.S.$23,000,000 and the U.K.
Borrower's EBITDA is not less than negative U.S.$8,500,000 then
the Applicable Margins shall be reduced by 0.25%, effective for
all LIBOR Loans and BA Equivalent Loans advanced after the date
which is the first Business Day of the month following the month
during which such financial statements were delivered and for all
other Loans outstanding on such first Business Day; and
2. if based on the Parent and Borrowers' audited financial
statements for the fiscal year ending June 30, 1999, the Canadian
Borrower's EBITDA is not less than U.S.$25,000,000 and the U.K.
Borrower's EBITDA is not less than negative U.S.$5,000,000 then
the Applicable Margins shall be reduced by 0.25%, effective for
all LIBOR Loans and BA Equivalent Loans advanced after the date
which is the first Business Day of the month following the month
during which of such financial statements were delivered and for
all other Loans outstanding on such first Business Day,
provided that the maximum aggregate reduction to the Applicable Margins in
effect on the Closing Date shall be one-half of one percent (.50%). The
entitlement of the Borrowers to the Applicable Margin reductions described above
shall only be available if, at the date of determination, no Event or Event of
Default has occurred and is continuing. If at any time an Event or Event of
Default occurs, the Applicable Margins will immediately and without any notice
or observance of any other formality revert back to the Applicable Margins in
effect on the Closing Date (subject to any applicable default rates of interest
provided for herein); provided this shall not impair the Borrowers' ability to
earn further reductions as set out above.
3.2 Default Rate. If any Event of Default occurs, then, from the date
------------
such Event of Default occurs until it is cured, or until all of its Obligations
are paid and performed in full, as the case may be, each Borrower will pay
interest on the unpaid principal balances of its Loans at a per annum rate two
percent (2%) greater than the rates of interest otherwise specified herein and
applicable thereto.
3.3 Unused Line Fee. (a) For every month during the term of this
---------------
Agreement, the Canadian Borrower shall pay the Agent (for the benefit of the
Canadian Lenders) a fee (the "Canadian Unused Line Fee") in an amount equal to
-------- ---------------
the sum of (A) three eighths of one percent (0.375%) per annum multiplied by the
amount of the Tax Reserve plus (B) one half of one percent (0.50%) per annum,
----
multiplied by the amount by which (x) the Maximum Canadian
- -------------
<PAGE>
-57-
Revolving Credit Line exceeds (y) the sum of (i) the average closing daily
unpaid balance of the Canadian Revolving Loans during such month, (ii) the
Canadian L/C Reserve, (iii) the F/X Reserve, and (iv) the Tax Reserve. Such a
fee shall be payable to the Agent (for the account of the Canadian Lenders) on
the first day of each month with respect to the prior month.
(b) For every month during the term of this Agreement, the U.K. Borrower
shall pay the Agent (for the benefit of the U.K. Lenders) a fee (the "U.K.
----
Unused Line Fee") in an amount equal to the sum of (A) three eighths of one
- ---------------
percent (0.375%) per annum multiplied by U.S.$2,500,000 plus (B) one half of one
----
percent (0.50%) per annum, multiplied by the amount by which (x) the Maximum
-------------
U.K. Revolving Credit Line exceeds (y) the sum of (i) the average closing daily
unpaid balance of the U.K. Revolving Loans during such month, (ii) the U.K. L/C
Reserve, (iii) the F/X Reserve, and (iv) U.S.$2,500,000. Such a fee shall be
payable to the Agent (for the account of the U.K. Lenders) on the first day of
each month with respect to the prior month..
3.4 Maximum Interest Rate. In no event shall the interest rate and other
---------------------
charges hereunder exceed the highest rate permissible under any law which a
court of competent jurisdiction shall, in a final determination, deem applicable
hereto. In the event that a court determines that the Agent and/or Lenders have
received interest and other charges hereunder in excess of the highest rate
applicable hereto, such excess shall be deemed received on account of, and shall
automatically be applied to reduce, the Obligations, other than interest, in the
inverse order of maturity, and the provisions hereof shall be deemed amended to
provide for the highest permissible rate. If there are no Obligations
outstanding, the applicable Lenders shall refund to the applicable Borrower such
excess.
3.5 Closing Fee. (a) The Canadian Borrower will pay the Agent (for the
-----------
account of the Canadian Lenders) on the Closing Date a closing fee in the amount
of $187,500 (the "Canadian Closing Fee"). The Agent, the Canadian Lenders and
--------------------
the Canadian Borrower agree that the Canadian Closing Fee shall be financed by
the Canadian Lenders as a Canadian Revolving Loan.
(b) The U.K. Borrower will pay the Agent (for the account of the U.K.
Lenders) on the Closing Date a closing fee in the amount of $93,750 (the
"Closing Fee"). The Agent, the U.K. Lenders and the U.K. Borrower agree that
- ------------
the Closing Fee shall be financed by the U.K. Lenders as a U.K. Revolving Loan.
3.6 Collateral Management Fee. The Canadian Borrower shall pay the Agent
-------------------------
(for its sole account) a quarterly fee (the "Collateral Management Fee"), on the
Closing Date (pro rata to the end of 1997 and for the first quarter of 1998) and
on the first day of each calendar quarter commencing April 1, 1998 and
thereafter prior to the termination of this Agreement, in the
<PAGE>
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amount of $10,000 for each quarter or (except in regard to the partial quarter
in 1997) portion thereof.
3.7 Collection Day. Each of the Borrowers agrees that, if at any time
--------------
Canadian Revolving Loans or U.K. Revolving Loans, as the case may be, are
outstanding and, in the case of the Canadian Revolving Credit Facility, the
Agent is in accordance with the second paragraph of Section 6.10 entitled to
exercise exclusive control over the funds in the Canadian Borrower's accounts
pursuant to Section 6.10, the Agent (for its own benefit) shall be entitled to a
fee, payable monthly in arrears, equivalent to one (1) day's interest, in the
case of the U.K. Borrower, at the U.K. Reference Rate plus the U.K. Reference
Rate Margin, and in the case of the Canadian Borrower, at the Prime Rate plus
the Prime Rate Margin, on the collections for each applicable Borrower for the
previous month. The foregoing fee of the U.K. Borrower will be waived for
subsequent months if the U.K. Borrower earns a positive net profit after tax for
any fiscal year effective upon receipt of audited financials confirming such
positive profit, provided that the fee shall be reinstated for subsequent months
immediately if the U.K. Borrower incurs a negative net profit after tax in any
subsequent fiscal quarter.
4. PAYMENTS AND PREPAYMENTS.
------------------------
4.1 Loans. (a) The Canadian Borrower shall repay the outstanding
-----
principal balance of the Canadian Revolving Loans, plus all accrued but unpaid
interest thereon, upon the termination of this Agreement for any reason. In
addition, and without limiting the generality of the foregoing, the Canadian
Borrower shall pay to the Agent (for the account of the Canadian Lenders) on
demand, the amount by which the unpaid principal balance of the Canadian
Revolving Loans plus the Canadian L/C Reserve plus the Canadian F/X Reserve at
----
any time exceeds the Canadian Borrowing Base at such time.
(b) The U.K. Borrower shall repay the outstanding principal balance of the
U.K. Revolving Loans, plus all accrued but unpaid interest thereon, upon the
termination of this Agreement for any reason. In addition, and without limiting
the generality of the foregoing, the U.K. Borrower shall pay to the Agent (for
the account of the U.K. Lenders) on demand, the amount by which the unpaid
principal balance of the U.K. Revolving Loans plus the U.K. L/C Reserve plus
----
the U.K. F/X Reserve at any time exceeds the U.K. Borrowing Base at such time.
4.2 Place and Form of Payments; Extension of Time. All payments of
---------------------------------------------
principal, interest, premium and other sums due to the Agent and/or Lenders
shall be made at the Agent's address set forth in or specified pursuant to
Section 16.21. Except for Proceeds received directly by the Agent, all such
payments shall be made in immediately available funds. If any payment of
principal, interest, premium or other sum to be made hereunder becomes due and
payable on a day other than a Business Day, the due date of such payment shall
be extended to the next
<PAGE>
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succeeding Business Day and interest thereon shall be payable at the applicable
interest rate during such extension.
4.3 Apportionment, Application and Reversal of Payments. (a) Aggregate
---------------------------------------------------
principal and interest payments from the Canadian Borrower shall be apportioned
ratably among the Canadian Lenders (according to the unpaid principal balance of
the Loans to which such payments relate held by each Canadian Lender but subject
to Section 2.2(j) hereof with regard to Settlement of Settlement Loans, Agent
Advances and all other Canadian Revolving Loans), and payments of the fees
shall, as applicable, be apportioned ratably among the Canadian Lenders in
accordance with their Participations in the Canadian Revolving Credit Facility
Agreement. All payments shall be remitted to the Agent and all such payments
not relating to principal or interest of specific Loans, or not constituting
payment of specific fees, and all proceeds of Accounts of the Canadian Borrower
other Canadian Collateral received by the Agent, shall be applied, ratably,
subject to the provisions of this Agreement, first, to pay any fees (including,
-----
without limitation, the Collateral Management Fee and any audit fees), expenses,
reimbursements or indemnities then due to the Agent from the Canadian Borrower;
second, to pay any fees, expense reimbursements or indemnities then due to the
- ------
Canadian Lenders from the Canadian Borrower; third, to pay interest due in
-----
respect of the Settlement Loans and Agent Advances under the Canadian Revolving
Credit Facility; fourth, to pay or prepay principal of the Settlement Loans and
------
Agent Advances under the Canadian Revolving Credit Facility; fifth, to pay
-----
interest due in respect of all Canadian Revolving Loans (other than the
Settlement Loans and Agent Advances), and unpaid reimbursement obligations in
respect of Letters of Credit and F/X Transactions under the Canadian Revolving
Credit Facility; sixth, to pay or prepay principal of the Canadian Revolving
-----
Loans (other than the Settlement Loans and Agent Advances) and to pay, prepay or
provide cash collateral in respect of outstanding Letters of Credit under the
Canadian Revolving Credit Facility, or any unpaid reimbursement obligations in
respect thereof, as applicable; and seventh, to the payment of any other
-------
Obligation due to the Agent or any Canadian Lender by the Canadian Borrower.
Notwithstanding anything to the contrary contained in this Agreement, unless so
directed by the Canadian Borrower, or unless an Event of Default is outstanding,
neither the Agent nor any Canadian Lender shall apply any payment it receives to
any BA Equivalent Loan or LIBOR Loan except (a) on the expiration date of the
Interest Period applicable to any such Loan, or (b) in the event, and only to
the extent, that there are no outstanding Prime Rate Loans or Base Rate Loans.
The Agent shall promptly distribute to each Canadian Lender, pursuant to the
applicable wire transfer instructions provided in writing to the Agent, or
pursuant to such other instructions such funds as it may be entitled to receive.
The Agent and the Canadian Lenders shall have the continuing and exclusive right
to apply and reverse and reapply any and all such proceeds and payments to any
portion of the Obligations under or in connection with the Canadian Revolving
Credit Facility.
(b) Aggregate principal and interest payments by the U.K. Borrower shall
be apportioned ratably among the U.K. Lenders (according to the unpaid principal
balance of the Loans to which
<PAGE>
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such payments relate held by each U.K. Lender but subject to Section 2.2(j)
hereof with regard to Settlement of Settlement Loans, Agent Advances and all
other U.K. Revolving Loans), and payments of the fees shall, as applicable, be
apportioned ratably among the U.K. Lenders in accordance with their
Participations in the U.K. Revolving Credit Facility. All payments shall be
remitted to the Agent and all such payments not relating to principal or
interest of specific Loans, or not constituting payment of specific fees, and
all proceeds of Accounts of the U.K. Borrower or other U.K. Collateral received
by the Agent, shall be applied, ratably, subject to the provisions of this
Agreement, first, to pay any fees (including, without limitation, audit
-----
fees), expenses, reimbursements or indemnities then due to the Agent or the
Security Trustee from the U.K. Borrower; second, to pay any fees, expense
------
reimbursements or indemnities then due to the U.K. Lenders from the U.K.
Borrower; third, to pay interest due in respect of the Settlement Loans and
-----
Agent Advances under the U.K. Revolving Credit Facility; fourth, to pay or
------
prepay principal of the Settlement Loans and Agent Advances under the U.K.
Revolving Credit Facility; fifth, to pay interest due in respect of all U.K.
-----
Revolving Loans (other than the Settlement Loans and Agent Advances), and unpaid
reimbursement obligations in respect of Letters of Credit and F/X Transactions
under the U.K. Revolving Credit Facility; sixth, to pay or prepay principal of
-----
the U.K. Revolving Loans (other than the Settlement Loans and Agent Advances)
and to pay, prepay or provide cash collateral in respect of outstanding Letters
of Credit under the U.K. Revolving Credit Facility, or any unpaid reimbursement
obligations in respect thereof, as applicable; and seventh, to the payment of
-------
any other Obligation due to the Agent or any U.K. Lender by the U.K. Borrower.
Notwithstanding anything to the contrary contained in this Agreement, unless so
directed by the U.K. Borrower, or unless an Event of Default is outstanding,
neither the Agent nor any U.K. Lender shall apply any payment it receives to any
LIBOR Loan except (a) on the expiration date of the Interest Period applicable
to any such Loan, or (b) in the event, and only to the extent, that there are no
outstanding U.K. Reference Rate Loans. The Agent shall promptly distribute to
each U.K. Lender, pursuant to the applicable wire transfer instructions provided
in writing to the Agent, or pursuant to such other instructions such funds as it
may be entitled to receive. The Agent and the U.K. Lenders shall have the
continuing and exclusive right to apply and reverse and reapply any and all such
proceeds and payments to any portion of the Obligations under or in connection
with the U.K. Revolving Credit Facility
4.4 Indemnity for Returned Payments. If after receipt of any payment of
-------------------------------
or Proceeds applied to the payment of all or any part of the Obligations, the
Agent and/or any Lender is for any reason compelled to surrender such payment or
Proceeds to any Person, because such payment or Proceeds is invalidated,
declared fraudulent, set aside, determined to be void or voidable as a
preference, impermissible setoff, a diversion of trust funds or for any other
reason, then: the Obligations or part thereof intended to be satisfied shall be
revived and continue and this Agreement shall continue in full force as if such
payment or Proceeds had not been received by the Agent and/or Lenders; and the
applicable Borrower shall be liable to pay to the Agent (for the account of the
applicable Lenders) and hereby does indemnify the Agent and applicable Lenders
and hold the Agent and applicable Lenders harmless for, the amount of such
payment
<PAGE>
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or Proceeds surrendered. The provisions of this Section 4.4 shall be and remain
effective notwithstanding any contrary action which may have been taken by the
Agent and/or Lenders in reliance upon such payment or Proceeds, and any such
contrary action so taken shall be without prejudice to the Agent and/or Lenders
rights under this Agreement and shall be deemed to have been conditioned upon
such payment or Proceeds having become final and irrevocable. The provisions of
this Section 4.4 shall survive the termination of this Agreement.
4.5 Funding Losses. Without limitation to Section 16.9, the Canadian
--------------
Borrower shall reimburse each Canadian Lender and hold each Canadian Lender
harmless, and the U.K. Borrower shall reimburse each U.K. Lender and hold each
U.K. Lender harmless from, any loss or expense which such Lender may sustain or
incur as a consequence of:
(i) the failure of such Borrower to make on a timely basis any
payment of principal of any LIBOR Loan or BA Equivalent Loan;
(ii) the failure of such Borrower to borrow, continue or convert a
LIBOR Loan or BA Equivalent Loan after the Borrower has given (or is deemed
to have given) a Notice of Borrowing or a notice of conversion or
continuation; and
(iii) the prepayment or other payment (including after acceleration
thereof) of any LIBOR Loan or BA Equivalent Loan on a day that is not the
last day of the relevant Interest Period,
including any such loss or expense arising from the liquidation or re-employment
of funds obtained by it to maintain its LIBOR Loans or BA Equivalent Loans or
from fees payable to terminate the deposits from which such funds were obtained.
4.6 Currency. All Obligations shall be payable to the Agent in the
--------
currency in which they are denominated.
4.7 Payments as Revolving Loans. All payments of principal, interest,
---------------------------
reimbursement obligations in connection with Letters of Credit or F/X
Transactions, fees, premiums and other sums payable hereunder, including all
reimbursement for expenses pursuant to Section 16.9, may, at the option of the
Agent, in its sole discretion, subject only to the terms of this Section 4.7, be
paid from the proceeds of, or charged to the applicable Borrower's account as,
Revolving Loans made hereunder under the Canadian Revolving Credit Facility or
U.K. Revolving Credit Facility, as the case may be, whether made following a
request by the applicable Borrower pursuant to Section 2.2 or a deemed request
as provided in this Section 4.7. Each Borrower hereby irrevocably authorizes
the applicable Lenders to make Revolving Loans (including Settlement Loans by
BACAN or BAUK, as the case may be, or Agent Advances by the Agent), upon notice
from the Agent as described in the next succeeding sentence, for the purpose of
<PAGE>
-62-
paying principal, interest, reimbursement obligations in connection with Letters
of Credit and/or F/X Transactions, fees, premiums and other sums payable
hereunder, including reimbursing expenses pursuant to Section 16.9, and agrees
that all such Revolving Loans so made shall be deemed to have been requested by
it pursuant to Section 2.2, as of the date of the aforementioned notice. The
Agent shall request Revolving Loans on behalf of the applicable Borrower as
described in the immediately preceding sentence by notifying the applicable
Lenders (or BACAN or BAUK, as the case may be, in the case of a Settlement Loan)
and the applicable Borrower by telecopy, telephone or other similar form of
transmission, of the amount and Drawdown Date of the requested Borrowing and
that such Borrowing is being requested on the applicable Borrower's behalf
pursuant to this Section 4.7. On the requested Drawdown Date, as applicable,
the applicable Lenders will make the requested Revolving Loans in accordance
with the procedures and subject to the conditions specified in Section 2.2.
4.8 Excess Resulting from Exchange Rate Change. If at any time
-------------------------------------------
following one or more fluctuations in the exchange rate of any currency against
the U.S. Dollar, the Obligations of the Canadian Borrower or the U.K. Borrower,
as the case may be, in U.S. Dollars exceeds the limit of the U.K. Borrowing Base
or Canadian Borrowing Base, as the case may be, or any other limitations
hereunder, the Canadian Borrower or U.K. Borrower, as the case may be, shall
immediately (i) make the necessary payments or repayments to reduce its
Obligations to an amount equal to or less than the amount denominated in U.S.
Dollars permitted to be outstanding or (ii) maintain or cause to be maintained
with the Agent or the Security Trustee deposits in an amount equal to or greater
than the amount by which its Obligations exceed the amount denominated in U.S.
Dollars permitted to be outstanding, such deposits to be maintained in such form
and upon such terms as are acceptable to the Agent. Without in any way limiting
the foregoing provisions, the Agent shall, weekly or more frequently in the
Agent's sole discretion, make the necessary exchange rate calculations to
determine whether any such excess exists on such date.
4.9 Taxes. If either Borrower or the Parent shall be required by law to
-----
deduct or withhold any taxes from or in respect of any sum payable hereunder to
any Lender or the Agent then:
(a) the applicable Borrower or Parent, as the case may be, shall make
such deductions and withholdings;
(b) the applicable Borrower or Parent, 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
(c) within 30 days after the date of any payment by either Borrower
or the Parent of taxes the applicable Borrower or Parent, as the
case may be, shall furnish the Lender on whose behalf the
deduction or withholding was
<PAGE>
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made the original or a certified copy of a receipt evidencing
payment thereof, or other evidence of payment satisfactory to
such Lender.
Each Lender represents to the Agent and other Lenders that no withholdings or
deductions are required in respect of any payments to it, save in the case of
interest (or fees in the nature of interest) payable to BankBoston Retail
Finance Inc.
5. AGENT AND/OR LENDERS BOOKS AND RECORDS; MONTHLY STATEMENTS. The Borrowers
----------------------------------------------------------
agree that the Register and each of the Agent's and Lenders' books and records
showing the Obligations and the transactions pursuant to this Agreement and the
other Loan Documents shall be admissible in any action or proceeding arising
therefrom, and shall constitute prima facie proof thereof, irrespective of
whether any Obligation is also evidenced by a promissory note or other
instrument. In the event of any discrepancy between the Agent's books and any
Lender's books, the Agent's books shall constitute prima facie proof in regard
to the discrepancy. The Agent will provide to the Borrowers (with a copy to the
Parent) a monthly statement of Loans, payments and other transactions pursuant
to this Agreement. Such statement shall be deemed correct, accurate and binding
on the Borrowers and as an account stated (except for reversals and
reapplications of payments made as provided in Section 4.4 and corrections of
errors discovered by the Agent and/or Lenders), unless the Canadian Borrower, in
the case of the Canadian Revolving Credit Facility, or U.K. Borrower, in the
case of the U.K. Revolving Credit Facility notifies the Agent in writing to the
contrary within thirty (30) days after such statement is given to a Borrower.
In the event a timely written notice of objections is given by a Borrower, only
the items to which exception is expressly made will be considered to be disputed
by the Borrower.
6. COLLATERAL.
----------
6.1 Grant of Security Interest. (a) Without limitation to any other
--------------------------
provision hereof or the Loan Documents, as security for all Obligations of the
Canadian Borrower, the Canadian Borrower shall, prior to or on the Closing Date,
grant to the Agent (for itself and the other Canadian Lenders) and on the date
of making each subsequent Loan or issuing any Letter of Credit or entering into
any F/X Transaction on behalf of the Canadian Borrower,
the Agent (for itself and the other Canadian Lenders) shall hold, a continuing
first-ranking (subject only to Permitted Liens) and perfected and duly
registered security interest in, lien on, hypothec of and assignment of all
Property of the Canadian Borrower, now owned or hereafter acquired, tangible or
intangible, real or personal, moveable or immoveable including without
limitation: (i) all Receivables Collateral, Inventory, Equipment, Proprietary
Rights Collateral and Proceeds of the Canadian Borrower, wherever located and
whether now existing or hereafter arising or acquired; (ii) all moneys,
securities and other property and the Proceeds thereof, now or hereafter held or
received by, or in transit to, the Agent or any of its affiliates from or for
the Canadian Borrower,
<PAGE>
-64-
whether for safekeeping, pledge, custody, transmission, collection or otherwise,
including, without limitation, all of the Canadian Borrower's deposit accounts,
credits, and balances with the Agent and/or any of the Canadian Lenders or any
of its or their affiliates and all claims of the Canadian Borrower against the
Agent and/or any of the Canadian Lenders or any of its or their affiliates at
any time existing; (iii) all books, records and other Property relating to or
referring to any of the foregoing, including, without limitation, all books,
records, ledger cards, data processing records, computer software and other
property and general intangibles at any time evidencing or relating to the
Receivables Collateral, Inventory, Equipment, Proprietary Rights Collateral,
Proceeds, and other property referred to above; (iv) all shares in the capital
stock of any Subsidiary of the Canadian Borrower now owned or hereafter acquired
by the Canadian Borrower and (v) all real property and leasehold interests of
the Canadian Borrower (all of the foregoing, together with any other Property of
the Canadian Borrower in which the Agent and/or any of the Canadian Lenders may
at any time be granted a Lien, including as provided in paragraph (c) below,
being herein collectively referred to as the "Canadian Collateral"). The Agent
-------------------
and the Lenders shall have all of the rights of a secured party with respect to
the Canadian Collateral under the PPSA, Civil Code of Quebec and the other laws
----------
of Ontario and Quebec and of any other applicable jurisdiction.
(b) Without limitation to any other provision hereof or the Loan
Documents, as security for all Obligations of the U.K. Borrower, the U.K.
Borrower shall, prior to or on the Closing Date, grant to the Agent or Security
Trustee (for the Agent and the other U.K. Lenders) and on the date of making
each subsequent Loan or issuing any Letter of Credit or entering into any F/X
Transaction on behalf of the U.K. Borrower, the Agent or Security Trustee (for
the Agent and the other U.K. Lenders) shall hold, a continuing first-ranking
(subject only to Permitted Liens) and perfected and duly registered security
interest in, lien on, hypothec of and assignment of all Property of the U.K.
Borrower, now owned or hereafter acquired, tangible or intangible, real or
personal, moveable or immoveable including without limitation: (i) all
Receivables Collateral, Inventory, Equipment, Proprietary Rights Collateral and
Proceeds of the U.K. Borrower, wherever located and whether now existing or
hereafter arising or acquired; (ii) all moneys, securities and other property
and the Proceeds thereof, now or hereafter held or received by, or in transit
to, the Agent or Security Trustee or any of its affiliates from or for the U.K.
Borrower, whether for safekeeping, pledge, custody, transmission, collection or
otherwise, including, without limitation, all of the U.K. Borrower's deposit
accounts, credits, and balances with the Agent, Security Trustee and/or any of
the U.K. Lenders or any of its or their affiliates and all claims of the U.K.
Borrower against the Agent or Security Trustee and/or any of the U.K. Lenders or
any of its or their affiliates at any time existing; (iii) all books, records
and other Property relating to or referring to any of the foregoing, including,
without limitation, all books, records, ledger cards, data processing records,
computer software and other property and general intangibles at any time
evidencing or relating to the Receivables Collateral, Inventory, Equipment,
Proprietary Rights Collateral, Proceeds, and other property referred to above;
(iv) all shares in the capital stock of any Subsidiary of the U.K. Borrower now
owned or hereafter
<PAGE>
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acquired by the U.K. Borrower and (v) all real property and leasehold interests
of the U.K. Borrower (all of the foregoing, together with any other Property of
the U.K. Borrower in which the Agent, the Security Trustee and/or any of the
U.K. Lenders may at any time be granted a Lien, including as provided in
paragraph (c) below, being herein collectively referred to as the "U.K.
----
Collateral"). The Security Trustee (as security trustee on behalf of the Lenders
- ----------
in accordance with their specific interests as set out in the U.K. Documents)
shall have all of the rights of a secured party with respect to the U.K.
Collateral under applicable law.
(c) As security for all Obligations, and all obligations and liabilities of
the Parent, including pursuant to its guarantees as provided herein, on or prior
to the Closing Date, and at the date of making each subsequent Loan or issuing
any Letter of Credit or entering into any F/X Transaction on behalf of either
Borrower, the Agent (for itself and the Lenders) shall hold a continuing first
ranking (subject to Permitted Liens) and perfected security interest in, lien
on, hypothec of and assignment of all property of the Parent, now owned or
hereafter acquired, tangible or intangible, real or personal, moveable or
immoveable, except any capital stock of any Subsidiaries (the foregoing,
together with the Canadian Collateral and the U.K. Collateral, collectively, the
"Collateral").
(d) Subject to the terms of the other Loan Documents and any Liens created
thereby and any guarantees provided for therein, all Obligations under or in
connection with the Canadian Revolving Credit Facility shall constitute a single
loan secured by the Collateral other than the U.K. Collateral and all
Obligations under or in connection with the U.K. Revolving Credit Facility shall
constitute a single loan secured by the Collateral other than the Canadian
Collateral. The Agent may, in its sole discretion (subject only to its
obligations, if any, to the Lenders as herein provided), exchange, waive or
release any of the Collateral and, upon the occurrence of an Event of Default,
(i) apply Collateral and direct the order or manner of sale thereof as the Agent
may determine, and (ii) settle, compromise, collect or otherwise liquidate any
Collateral in any manner, subject to compulsory provisions of law, all without
affecting the Obligations or the Agent's, Security Trustee's and/or Lenders'
right to take any other action with respect to any other Collateral.
6.2 Perfection and Protection of Security Interest. Each Borrower and the
----------------------------------------------
Parent shall, at its own expense, perform, do, execute and deliver all steps,
acts, things and documents as may be requested by the Agent at any time to
register, file, signify, publish, perfect, maintain, protect and enforce the
Security Interest including, without limitation: (a) executing, registering and
recording of the Loan Documents and executing and filing financing or
continuation statements or applications for registration, and amendments
thereof, in form and substance satisfactory to the Agent; (b) if requested,
delivering to the Agent the original certificates of title for motor vehicles
with the Security Interest properly endorsed thereon if available; (c)
delivering to the Agent the originals of all instruments, documents, chattel
paper and all other Collateral of which the Agent determines it should have
physical possession in order to perfect
<PAGE>
-66-
and protect the Security Interest therein, duly endorsed or assigned to the
Agent without restriction; (d) delivering to the Agent warehouse receipts
covering any portion of the Collateral located in warehouses and for which
warehouse receipts are issued; (e) after an Event of Default, transferring
Inventory to warehouses designated by the Agent; (f) placing notations on the
Borrowers' and Parent's books of account to disclose the Security Interest; (g)
executing and delivering to the Agent a hypothecation or security agreement
relating to the Reversions in form and substance satisfactory to the Agent; (h)
delivering to the Agent all letters of credit on which a Borrower is named
beneficiary; and (i) taking such other steps as are deemed necessary by the
Agent to maintain the Security Interest and the priority thereof. To the extent
permitted by applicable law, the Agent may file, without the Borrowers' or any
Parent's signature, one or more financing statements disclosing the Security
Interest. Each of the Borrowers and the Parent agrees that a carbon,
photographic, photostatic or other reproduction of any Loan Document or of a
financing statement is sufficient as a financing statement. If any Collateral is
at any time in the possession or control of any warehouseman, bailee or any of
either Borrower's agents or processors, then such Borrower shall notify the
Agent thereof and shall notify such Person of the Security Interest in such
Collateral and, upon the Agent's request, instruct such Person to hold all such
Collateral for the Agent's account subject to the Agent's instructions. From
time to time, each Borrower and the Parent shall, upon the Agent's request,
execute and deliver confirmatory written instruments pledging or hypothecating
to the Agent the Collateral, but either Borrower's or the Parent's failure to do
so shall not affect or limit the Security Interest or the Agent's and/or
Lenders' other rights in and to the Collateral. So long as this Agreement is in
effect and until all Obligations have been fully satisfied, the Security
Interest shall continue in full force and effect in all Collateral (whether or
not deemed eligible for the purpose of calculating the Canadian Availability or
U.K. Availability or as the basis for any advance, loan, extension of credit, or
other financial accommodation). For the purposes of this Section 6.2, "Agent"
includes, in the case of the U.K. Borrower and the U.K. Revolving Credit
Facility, a Security Trustee.
6.3 Location of Collateral. Each Borrower (as to itself only) represents
----------------------
and warrants to the Agent and each of the Lenders that as at the Closing Date:
EXHIBIT D hereto is a correct and complete list of each Borrower's and the
Parent's chief executive office, the location of its books and records, the
locations of the Collateral and, in the case of any Collateral not located at
premises owned by a Borrower, the purpose for which the Collateral is at such
location and the locations of all of its other places of business; and EXHIBIT
D correctly identifies any of such facilities and locations that are not
beneficially owned by and registered in the name of a Borrower or the Parent and
sets forth the names of the owners and lessors or sub-lessors of, and, to the
best of such Borrower's knowledge, the holders of any mortgages on, such
facilities and locations. Each Borrower (as to itself only) and the Parent
covenants and agrees that it will not (a) (save for additional retail outlets
and provided that the Borrowers provide to the Agent an updated list of all such
locations not less frequently than once each fiscal quarter) maintain any
Collateral at any location other than those listed on EXHIBIT D, and it will not
otherwise change or add to any of such locations, or (b) change the location of
its head office and chief place of
<PAGE>
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business unless it gives the Agent at least thirty (30) days' prior written
notice thereof and executes, delivers, registers, signifies and publishes any
and all financing statements and other documents that the Agent or, in the case
of the U.K. Borrower, the Security Trustee reasonably requests in connection
therewith.
6.4 Title to, Liens on and Sale and Use of Collateral. Each Borrower (as
-------------------------------------------------
to itself only) and the Parent represents and warrants to the Agent and each of
the Lenders and agrees with the Agent and each of the Lenders that: (a) all
Property, including the Collateral, is and will continue to be owned by the
Borrowers and the Parent, free and clear of all Liens whatsoever, except for the
Security Interest and other Permitted Liens; (b) the Security Interest will not
be subject to any prior Lien except for Permitted Liens, if any; (c) the
Borrowers and the Parent will use, store, and maintain its Property (including
the Collateral) with all reasonable care and will use its Property (including
the Collateral) for lawful purposes only; and (d) none of the Borrowers or the
Parent will, without the Agent's prior written approval, sell or dispose of or
permit the sale or disposition of any of its Property (including the
Collateral), except for sales of Inventory in the ordinary course of business
and dispositions of Property as expressly permitted under Sections 6.12 and 9.7.
The inclusion of Proceeds in the Collateral shall not be deemed the Agent's
and/or Lenders' consent to any sale or other disposition of its Property
(including the Collateral) except as expressly permitted herein.
6.5 Appraisals. Twice each year and more frequently at the Agent's
----------
request whenever an Event of Default exists, each of the Borrowers (as to itself
only) and the Parent shall, at its expense and upon the Agent's request, provide
the Agent with appraisals or updates thereof of any or all of the Collateral
from an appraiser, and prepared on a basis, satisfactory to the Agent.
6.6 Access and Examination. Each Borrower (as to itself only) and the
----------------------
Parent shall provide to the Agent and each of the Lenders access and the right
at all reasonable times and upon not less than one (1) Business Day's notice
(and at any time without the need for any prior notice when an Event of Default
exists) to examine, audit, make extracts from and inspect the Borrowers' and
Parent's, records, files, and books of account and the Borrowers' and Parent's
Property and to discuss the Borrowers' and Parent's affairs with the Borrowers'
and Parent's officers and management. The Lenders are permitted, at their own
cost, to participate in the Agent's audits and appraisals. Each Borrower (as to
itself only) and the Parent will deliver to the Agent any instrument necessary
for the Agent to obtain records from any service bureau maintaining records for
the applicable Borrower or Parent. The Agent may, at any time when an Event of
Default exists, and at the Borrowers' expense, make copies of all of the
Borrowers' and Parent's books and records, or require the Borrowers and/or the
Parent to deliver such copies to the Agent. The Agent may, without expense to
the Agent, use such of the Borrowers' and the Parent's personnel, supplies and
premises as may be reasonably necessary for maintaining or enforcing the
Security Interest.
<PAGE>
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6.7 Insurance. Each Borrower (but as to itself only) and Parent shall
---------
insure all its and their Property (including the Collateral) against loss or
damage by fire with extended coverage, flood, theft, burglary, pilferage, loss
in transit, and such other hazards as the Agent shall specify, in amounts, under
policies and by insurers acceptable to the Agent. Each Borrower (but as to
itself only) and Parent shall cause the Agent and, in the case of the U.K.
Borrower, the Security Trustee (for the Agent and the other Lenders) to be named
in each such policy as secured party or mortgagee and loss payee or additional
insured, in a manner acceptable to the Agent and, in the case of the U.K.
Borrower, the Security Trustee. Each policy of insurance shall contain a clause
or endorsement requiring the insurer to give not less than thirty (30) days
prior written notice to the Agent and, in the case of the U.K. Borrower, the
Security Trustee in the event of cancellation of the policy for any reason
whatsoever and a clause or endorsement stating that the interest of the Agent
and, in the case of the U.K. Borrower, the Security Trustee shall not be
impaired or invalidated by any act or neglect of either Borrower or the Parent
or the owner of any premises where Collateral is located nor by the occupation
of such premises for purposes more hazardous than are permitted by such policy.
Each Borrower (as to itself) covenants and agrees to deliver certificates of
insurance for all of its policies of insurance, containing payee endorsements in
compliance with the terms hereof and otherwise satisfactory to the Agent in its
discretion, within 30 days after the Closing Date. All premiums for such
insurance shall be paid by the applicable Borrower or Parent when due and
certificates of insurance and, if requested, photocopies of the policies shall
be delivered to the Agent and, in the case of the U.K. Borrower, the Security
Trustee. If either Borrower or the Parent fails to procure such insurance or to
pay the premiums therefor, when due, the Agent may (but shall not be required
to) do so and charge the costs thereof to the applicable Borrower's loan account
as a Revolving Loan (and the provisions of Section 2.2 shall apply). Each
Borrower (but as to itself only) and the Parent shall promptly notify the Agent
of any event resulting in loss, damage, or destruction to any of its or their
Property having an aggregate value in excess of $250,000, whether or not covered
by insurance. All insurance proceeds of Collateral shall be deposited in the
Borrowers' accounts in reduction of the Obligations (in the case of the U.K.
Borrower, the Obligations under or in connection with the U.K. Revolving Credit
Facility only and in the case of the Canadian Borrower, the Obligations under or
in connection with the Canadian Revolving Credit Facility), in accordance with
Section 4.3, or at the Agent's option (upon approval of the Instructing Group)
may permit or may, in any case, require the applicable Borrower and/or any
Parent to use such money, or any part thereof, to replace, repair, restore or
rebuild the Collateral in a diligent and expeditious manner with materials and
workmanship of substantially the same quality as existed before the loss, damage
or destruction.
6.8 Collateral Reporting. Each Borrower (but as to itself only) will
--------------------
provide the Agent with the following documents at the following times in form
satisfactory to the Agent:
(a) weekly, reports on the following:
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(i) sales, supported by a sales summary and the total page of the
sales journal;
(ii) cash and collections, supported by a cash receipts journal;
and
(iii) credit memos, supported by a credit memo register or the total
page of the sales journal, as appropriate;
(iv) a borrowing base report in form satisfactory to the Agent;
(b) monthly (by the fifteenth (15th) calendar day following the end of
each fiscal month), the following:
(i) aging of accounts receivable by customer, reconciled to the
general ledger and listing ineligibles;
(ii) cash reconciliation report of collections deposited to the
cash applied to receivables;
(iii) perpetual inventory reports at cost, by category and location,
and reconciled to the general ledger, and listing ineligibles;
(iv) slow moving inventory reports;
(v) accounts payable agings by vendor with supporting schedules;
and
(vi) GST, PST and other sales, excise and value-added tax summary
reports (including copies of all GST filings and remittances
in respect thereof).
(c) promptly upon written request of the Agent, the following:
(i) copies of invoices and credit memos and delivery evidences;
(ii) copies of customer and dealer lists;
(iii) copies of purchase orders, invoices and delivery documents for
Inventory and Equipment acquired by the applicable Borrower;
and
(iv) such other reports or more frequent reporting as Agent shall
request from time to time; and
<PAGE>
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(d) certificates of a senior officer of the applicable Borrower or the
Parent certifying the accuracy and completeness of the foregoing.
If any of either Borrower's records or reports of Collateral are prepared by an
accounting service or other agent, such Borrower hereby authorizes such Person
to deliver such records, reports and related documents to the Agent. The Agent
shall, promptly upon any request by a Lender, provide copies of any of the
foregoing reports to such Lender. The Agent reserves the right to require more
frequent reporting.
6.9 Accounts. (a) Each Borrower (but as to itself only) hereby
--------
represents and warrants to the Agent and each of the Lenders and agrees with the
Agent and each of the Lenders that: (i) each existing Account represents, and
each future Account will represent, a bona fide sale or lease and delivery of
goods by such Borrower or rendition of services by such Borrower in the ordinary
course of such Borrower's business; (ii) each existing Account is, and each
future Account will be, for a liquidated amount payable by the Account Debtor
thereon on the terms set forth in the invoice therefor or in the schedule
thereof delivered to the Agent, without offset, deduction, defence, rebate,
contra claim, set-off or counterclaim save as have been deducted for the
purposes of calculating Eligible Accounts; (iii) no payment will be received
with respect to any Account, and no credit, discount, or extension, or agreement
therefor in excess of $50,000 will be granted on any Account, except as reported
to the Agent in accordance with this Agreement; (iv) each copy of an invoice
delivered to the Agent by such Borrower will be a genuine copy of the original
invoice sent to the Account Debtor named therein; and (v) all goods described in
each invoice will have been delivered to the Account Debtor and all services of
such Borrower described in each invoice will have been performed.
(b) Neither Borrower shall re-date any invoice or sale or make sales on
extended dating beyond that customary in such Borrower's business or extend or
modify any Account unless permitted by the Agent. If either Borrower obtains
current actual knowledge of any matter affecting any material Account in any
materially adverse manner, including information regarding the Account Debtor's
creditworthiness, such Borrower will promptly so advise the Agent.
(c) Neither Borrower shall accept any note or other instrument (except a
cheque for the payment of money) with respect to any Account without the Agent's
written consent. If either Borrower accepts any note or other instrument,
except a cheque payable immediately, such note or instrument shall be considered
as evidence of the Account and not payment thereof, and such Borrower will
promptly upon request deliver such note or instrument to the Agent or BAUK
appropriately endorsed. Regardless of the form of presentment, demand, notice
of dishonour, protest and notice of protest with respect thereto, such Borrower
will remain liable thereon until such note or instrument is paid in full.
<PAGE>
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(d) Each Borrower (as to itself only) shall notify the Agent promptly of
all disputes and claims in an amount in excess of $100,000 with Account Debtors
and settle or adjust them at no expense to the Agent and/or Lenders, but no
discount, credit or allowance shall be granted to any Account Debtor without the
Agent's consent, except for discounts, credits and allowances made or given in
the ordinary course of such Borrower's business when no Event of Default exists
hereunder. Each Borrower (as to itself only) shall notify the Agent of each
credit memoranda in excess of $25,000 as soon as issued and will provide to the
Agent copies of such credit memoranda upon request by the Agent and a list of
all credit memoranda on a weekly basis (with copies upon request by the Agent).
The Agent may, at all times when an Event of Default exists hereunder, settle or
adjust disputes and claims directly with customers or Account Debtors for
amounts and upon terms which the Agent considers advisable and, in all cases,
the Agent will credit such Borrower's loan account with only the amounts
received by the Agent in payment of any Accounts.
(e) If an Account Debtor returns any Inventory to either Borrower when no
Event of Default exists, then such Borrower shall promptly determine the reason
for such return and shall issue a credit memorandum to the Account Debtor in the
appropriate amount. Each Borrower (as to itself only) shall immediately report
to the Agent any return involving an amount in excess of $100,000. In the event
any Account Debtor returns Inventory to either Borrower when an Event of Default
exists, such Borrower shall: (i) hold the returned Inventory in trust for the
Agent or, in the case of the U.K. Borrower, the Security Trustee; (ii) segregate
all returned Inventory from all of its other Property; (iii) dispose of the
returned Inventory solely according to the Agent's or, in the case of the U.K.
Borrower, the Security Trustee written instructions; and (iv) not issue any
credits or allowances with respect thereto without the Agent's prior written
consent. All returned Inventory shall remain subject to the Security Interest.
6.10 Collection of Accounts; Payments. (a) (i) Each Borrower, jointly and
--------------------------------
severally, agrees to establish, within 30 days after the Closing Date (or such
later date as may from time to time be consented to by the Agent, the
"Deadline"), a system (the "Cash Dominion System") of depository accounts
-------- --------------------
(together with accounts opened from time to time pursuant to clause (ii) hereof
"Payment Accounts") into which each such Borrower shall promptly deposit or
----------------
cause to be deposited all cash proceeds, store receipts, collections of Accounts
and other moneys whatsoever (collectively, "Cash Proceeds") received by it or
-------------
any other Person on its behalf. Each Borrower represents that on or prior to
the Closing Date it has provided to the Agent a true and complete list of all
depository accounts maintained by it with any banks or financial institutions as
of the Closing Date into which Cash Proceeds are deposited. Each Borrower
further agrees (I) to execute and deliver to the Agent with respect to each such
Payment Account maintained by it on or prior to the Deadline, a blocked account
agreement or lockbox agreement in form satisfactory to the Agent (collectively,
the "Collection Account Agreements"), and (II) to use reasonable efforts, with
-----------------------------
the co-operation of the Agent, to cause the banks ("Depository Banks") with
----------------
which the Payment Accounts are maintained to execute and deliver to the Agent
<PAGE>
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on or prior to the Deadline, a Collection Account Agreement. In the event that,
notwithstanding the efforts of the Borrowers pursuant to the preceding sentence,
a Depository Bank does not execute a Collection Account Agreement with respect
to the relevant Payment Account on or prior to the Deadline, such Borrower shall
cease to deposit Cash Proceeds in such Payment Account unless and until such
Depository Bank executes a Collection Account Agreement. Each Borrower further
agrees that all amounts received by it from any Person (whether as a dividend,
loan or otherwise) shall be deposited directly into Payment Accounts.
(ii) Each Borrower agrees that it shall not open a bank or similar
account after the Closing Date into which Cash Proceeds are
deposited unless the relevant Depository Bank and such Borrower
shall have executed and delivered a Collection Account
Agreement, with respect to such Payment Account .
(iii) Notwithstanding the establishment of the Cash Dominion System,
until the Agent or, as appropriate, Security Trustee, notifies
either Borrower to the contrary, each Borrower shall make
collection of its Accounts and other Collateral for the benefit
of the Agent or, as appropriate Security Trustee, and whether
or not an Event of Default has occurred, any Cash Proceeds
(including, without limitation, in payment of any Account or in
payment for any Inventory or otherwise) that are not received
and deposited directly into a Payment Account, when collected
by any Borrower, shall be promptly deposited by such Borrower
in a Payment Account, in precisely the form received, except
for its endorsement when required, and until so turned over,
shall be deemed to be held in trust by such Borrower for and as
the Agent's or, as appropriate, Security Trustee's property,
and shall be held separately from such Borrower's other funds.
(iv) Notwithstanding anything to the contrary herein, the terms of
the Collection Account Agreements shall provide (I) in the case
of the U.K. Borrower, that the Agent or Security Trustee has
exclusive control over the Payment Accounts of the U.K.
Borrower and all funds are to be wire transferred to the Agent
or Security Trustee daily and (II) in the case of the Canadian
Borrower, (A) upon the occurrence and during the continuance of
any Event or Event of Default, the Agent has exclusive control
over the Payment Accounts of the Canadian Borrower and all
funds are to be wire transferred to the Agent daily and, (B)
until the occurrence and during the continuance of any Event or
Event of Default, the Borrower's authority with respect to
funds in such Payment Accounts is limited to transferring such
funds to the Agent.
(v) The Agent or the Agent's designee or, in the case of the U.K.
Borrower, the Security Trustee may, at any time after the
occurrence of any Event of Default,
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publish notice of the Security Interest of the Agent or, in the
case of the U.K. Borrower, the Security Trustee and/or Lenders,
signify Accounts or otherwise notify obligors that the Accounts
have been hypothecated or assigned to the Agent and/or Lenders
or, in the case of the U.K. Borrower, the Security Trustee and
of the Security Interest therein, and may collect them directly
and charge the reasonable collection costs and expenses to the
applicable Borrower's loan account as a Canadian Revolving Loan
or U.K. Revolving Loan, as the case may be. At the Agent's or,
in the case of the U.K. Borrower, the Security Trustee's
request, each Borrower shall execute and deliver to the Agent
or, in the case of the U.K. Borrower, the Security Trustee such
documents as the Agent or, in the case of the U.K. Borrower,
the Security Trustee shall require to grant the Agent or, in
the case of the U.K. Borrower, the Security Trustee access to
any post office box in which collections of Accounts are
received.
(vi) Without limiting the generality of the foregoing, if sales of
Inventory are made for cash, each Borrower shall immediately
deliver to the Agent or, in the case of the U.K. Borrower, the
Security Trustee or the Payment Account (for the Agent and
Lenders) the identical cheques, cash, or other forms of payment
which such Borrower receives.
(b) All Payments received by the Agent or, in the case of the U.K.
Borrower, the Security Trustee on account of Accounts or as Proceeds of other
Collateral will be the Agent's or, in the case of the U.K. Borrower, the
Security Trustee's (for the Agent and the other applicable Lenders) sole
property and will be credited promptly to the applicable Borrower's loan account
(conditional upon final collection) upon receipt.
6.11 Inventory. Except for any Inventory which has been duly reported to
---------
the Agent as obsolete or otherwise ineligible, each Borrower (as to itself only)
represents and warrants to the Agent and each of the Lenders and agrees with the
Agent and each of the Lenders that all of the Inventory is and will be held for
sale or lease, or to be furnished in connection with the rendition of services,
in the ordinary course of such Borrower's business, and is and will be fit for
such purposes. Each Borrower (as to itself only) will keep the Inventory in good
and marketable condition, at its own expense. Each Borrower (as to itself only)
will maintain a perpetual inventory reporting system at all times. Each
Borrower (as to itself only) will conduct physical cycle counts of the Inventory
in January, May and September of each year and shall supply the Agent and each
of the Lenders with a report setting forth in reasonable detail all variances
and reporting the value of such Inventory (valued at the lower of cost, on
average cost basis, or market value). Following the occurrence of any Event of
Default, each Borrower (as to itself only) shall conduct and report on such
additional physical Inventory counts as the Agent may request. Except for sales
of an immaterial portion of its Inventory on such basis which have been
expressly disclosed to the Agent in writing and is identified as such in the
reports delivered
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pursuant to Section 6.8, neither Borrower will sell any of its Inventory on a
bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment,
or other repurchase or return basis.
Except as has been expressly disclosed to the Agent prior to Closing Date or is
hereafter disclosed in writing to the Agent and is identified as such in the
reports delivered pursuant to Section 6.8, neither Borrower has any Inventory
acquired on, or will in the future acquire any Inventory on, approval or on a
conditional sale, title retention, consignment or similar basis.
6.12 Equipment. Each Borrower (as to itself only) represents and warrants
---------
to the Agent and each of the Lenders and agrees with the Agent and each of the
Lenders that all of the Equipment is and will be used or held for use in such
Borrower's business, is and will be fit for such purposes and will at all times
be subject to a first-ranking, subject to Permitted Liens, duly registered and
perfected Lien in favour of the Agent or, in the case of the U.K. Borrower, the
Security Trustee. Each Borrower (as to itself only) shall keep and maintain the
Equipment in good operating condition and repair (ordinary wear and tear
excepted) and shall make all necessary replacements thereof.
Each Borrower (as to itself only) shall promptly inform the Agent of
any material additions to or deletions from the Equipment. Neither Borrower
shall permit any Equipment to become a fixture to real property or an accession
to other personal property, unless the Agent (for itself and the other
applicable Lenders) or Security Trustee, as the case may be, has a valid
perfected, registered and first priority Lien in such real or personal property.
Neither Borrower will, without the Agent's prior written consent, alter or
remove any identifying symbol or number on the Equipment. Neither Borrower
shall sell, lease as a lessor, or otherwise dispose of any of the Equipment;
provided, however, that Borrower may dispose of Equipment and real Property not
required in such Borrower's business having a net book value no greater than
$100,000 individually, and $500,000 in the aggregate in any Fiscal Year, without
the Agent's consent, subject to the conditions set forth below. In the event
any of the Equipment or real Property is sold, transferred or otherwise disposed
of with the Agent's prior written consent or as otherwise permitted hereby and:
(a) such sale, transfer or disposition is effected without replacement of such
Equipment or real Property, or such Equipment or real Property is replaced by
Equipment or real Property leased by a Borrower, or by Equipment or real
Property purchased by a Borrower subject to a lien or other right constituting a
Permitted Lien, then such Borrower shall deliver all of the cash proceeds of any
such sale, transfer or disposition to the Agent or, in the case of the U.K.
Borrower, the Security Trustee pursuant to Section 6.10; or (b) such sale,
transfer or disposition is made in connection with the purchase by a Borrower of
replacement Equipment or real Property (other than subject to a Permitted Lien),
then such Borrower shall use the proceeds of such sale, transfer or disposition
to finance the purchase by such Borrower of replacement Equipment or other
Property and shall deliver to the Agent
<PAGE>
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written evidence of the use of the proceeds for such purpose. All replacement
Equipment or other Property purchased by a Borrower shall be free and clear of
all liens, claims and encumbrances, except for the Security Interest and other
Permitted Liens.
6.13 Assigned Contracts. Each Borrower (as to itself only) shall fully
------------------
perform all of its obligations under each of the Assigned Contracts, and shall
enforce all of its rights and remedies thereunder as it deems appropriate in its
business judgment. Neither Borrower shall, without the Agent's prior written
consent, modify, amend, supplement, compromise, satisfy, release, or discharge
any of the Assigned Contracts except in the ordinary course of business and
provided same will not give rise to any Material Adverse Effect, any collateral
securing the same, any Person liable directly or indirectly with respect
thereto, or any agreement relating to any of the Assigned Contracts or the
collateral therefor. Each Borrower (as to itself only), shall notify the Agent
in writing, promptly after it becomes aware thereof, of any event or fact which
could give rise to a claim by it for indemnification under any of the Assigned
Contracts, and shall diligently pursue such right and report to the Agent on all
further developments with respect thereto. Each Borrower shall remit directly
to the Agent, for application to the Obligations as provided in Section 4.3, all
amounts received by such Borrower as indemnification or otherwise pursuant to
the Assigned Contracts. If an Event of Default exists, then the Agent or, in the
case of the U.K. Borrower, the Security Trustee may directly enforce such right
in its own or such Borrower's name and may enter into such settlements or other
agreements with respect thereto as the Agent determines. All amounts thereby
recovered by the Agent or, in the case of the U.K. Borrower, the Security
Trustee, after deducting the Agent's or, in the case of the U.K. Borrower, the
Security Trustee's reasonable costs and expenses in connection therewith, shall
be applied to the Obligations as provided in Section 4.3. In any suit,
proceeding or action brought by the Agent or, in the case of the U.K. Borrower,
the Security Trustee and/or Lenders under any Assigned Contract for any sum
owing thereunder or to enforce any provision thereof, each Borrower (as to
itself only) shall indemnify and hold the Agent, the Security Trustee and the
Lenders harmless from and against all expense, loss or damage suffered by reason
of any defence, setoff, counterclaim, recoupment, or reduction of liability
whatsoever of the obligor thereunder arising out of a breach by such Borrower of
any obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing from such Borrower to or in favour of such obligor
or its successors. All such obligations of each Borrower, shall be and remain
enforceable only against such Borrower, and shall not be enforceable against the
Agent, the Security Trustee or any of the Lenders. Notwithstanding any
provision hereof to the contrary, each Borrower shall at all times remain liable
to observe and perform all of its duties and obligations under the Assigned
Contracts, and the Agent's, Security Trustee's and/or Lenders' exercise of any
of its rights with respect to the Collateral shall not release either Borrower
from any of such duties and obligations. Neither the Agent nor the Security
Trustee nor any of the Lenders shall be obligated to perform or fulfil any of
either Borrower's duties or obligations under the Assigned Contracts or to make
any payment thereunder, or to make any inquiry as to the nature or sufficiency
of any payment or Property
<PAGE>
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received by it thereunder or the sufficiency of performance by any party
thereunder, or to present or file any claim, or to take any action to collect or
enforce any performance, any payment of any amounts, or any delivery of any
Property.
6.14 Documents, Instruments and Chattel Paper. Each Borrower (as to itself
----------------------------------------
only) represents and warrants to the Agent and each of the Lenders and agrees
with the Agent and each of the Lenders that: (a) all documents, instruments,
and chattel paper describing, evidencing, or constituting Collateral, and (to
the best of such Borrower's current actual knowledge in the case of the
signatures of third parties) all signatures and endorsements thereon, are and
will be complete, valid, and genuine; and (b) all goods evidenced by such
documents, instruments, and chattel paper are and will be owned by such
Borrower, free and clear of all Liens other than Permitted Liens. Each Borrower
(as to itself only) warrants the quantities, sound condition, grades and
qualities of the goods described in such documents, instruments and chattel
paper.
6.15 Right to Cure. The Agent may, in its sole discretion and at any time
-------------
upon two (2) Business Days' prior notice to the applicable Borrower, for such
Borrower's account and expense (in which case the provisions of Section 2.2
shall apply thereto), pay any amount or do any act required of either Borrower
hereunder or requested by the Agent or, in the case of the U.K. Borrower, the
Security Trustee and/or Lenders to preserve, protect, maintain or enforce the
Obligations, the Collateral or the Security Interest, and which such Borrower
fails to pay or do, including, without limitation, payment of any judgment
against such Borrower, any insurance premium, any warehouse charge, any
finishing or processing charge, any landlord's claim, and any other Lien upon or
with respect to the Collateral. All payments that the Agent, the Security
Trustee and/or Lenders make under this Section and all reasonable out-of-pocket
costs and expenses that the Agent, the Security Trustee and/or Lenders pay or
incur in connection with any action taken by it hereunder shall be charged to
the applicable Borrower's loan account as a Revolving Loan (in which case the
provisions of Section 2.2 shall apply thereto). Any payment made or other
action taken by the Agent, the Security Trustee and/or Lenders under this
Section shall be without prejudice to any right to assert an Event of Default
hereunder and to proceed thereafter as herein provided.
6.16 Power of Attorney. Immediately in the case of paragraphs (b) and (d)
-----------------
and otherwise upon the occurrence of an Event of Default, each Borrower (as to
itself only) hereby appoints the Agent and the Agent's designees (including the
Security Trustee), without further action on the part of such Borrower, or the
Agent and/or Lenders, as such Borrower's attorney, with full power of
substitution, with power: (a) to endorse such Borrower's name on any cheques,
notes, acceptances, money orders, or other forms of payment or security that
come into the Agent's, the Security Trustee's and/or any Lenders' possession;
(b) to sign such Borrower's name on any invoice, bill of lading, or other
document of title relating to any Collateral, on drafts against customers, on
assignments of Accounts, on notices of assignment, financing statements and
other public records, and on notices to Account Debtors; (c) to notify the post
office
<PAGE>
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authorities to change the address for delivery of such Borrower's mail to an
address designated by the Agent or Security Trustee and to receive, open and
dispose of all mail addressed to such Borrower; (d) to send in such Borrower's
name requests for verification of Accounts to Account Debtors; and (e) to do all
things necessary to carry out this Agreement. Each Borrower (as to itself only)
ratifies and approves all acts of such attorney taken in good faith in
accordance with the foregoing power. Neither the Agent nor the Security Trustee
nor the attorney will be liable for any acts or omissions or for any error of
judgment or mistake of fact or law provided, however, that nothing herein shall
relieve the Agent, the Security Trustee or attorney from the consequences of its
own gross negligence or wilful misconduct. This power, being coupled with an
interest, is irrevocable until this Agreement has been terminated and the
Obligations have been fully satisfied.
6.17 Agent's Rights, Duties and Liabilities. Prior to the enforcement of
--------------------------------------
the Agent's, the Security Trustee's and/or Lenders' security and thereafter
subject only to mandatory duties on the Agent, the Security Trustee and/or
Lenders at law which are not capable of being waived, each Borrower (as to
itself only) assumes all responsibility and liability arising from or relating
to the use, sale, or other disposition of the Collateral. Prior to the
enforcement of the Agent's, the Security Trustee's and/or Lenders' security, and
thereafter subject only to mandatory duties on the Agent, the Security Trustee
and/or Lenders at law which are not capable of being waived, neither the Agent
nor the Security Trustee nor any Lender nor any of its or their officers,
directors, employees and agents shall be liable or responsible in any way for
the safekeeping of any of the Collateral, or for any act or failure to act with
respect to the Collateral, or for any loss or damage thereto, or for any
diminution in the value thereof, or for any act of default or any warehouseman,
carrier, forwarding agency or other person whomsoever, all of which shall be at
the applicable Borrower's sole risk provided, however, that nothing herein shall
-------- -------
relieve the Agent, the Security Trustee and/or any of the Lenders from liability
for the direct consequences of its gross negligence or wilful misconduct. The
Obligations shall not be affected by any failure of the Agent, the Security
Trustee and/or Lenders to take any steps to perfect the Security Interest or to
collect or realize upon the Collateral, nor shall loss of or damage to the
Collateral release either Borrower from any of the Obligations. After the
occurrence of an Event of Default the Agent or, in the case of the U.K.
Borrower, the Security Trustee may (but shall not be required to), without
notice to or consent from either Borrower, sue upon or otherwise collect, extend
the time for payment of, modify or amend the terms of, compromise or settle for
cash, credit, or otherwise upon any terms, grant other indulgences, extensions,
renewals, compositions, or releases, and take or omit to take any other action
with respect to the Collateral, any security therefor, any agreement relating
thereto, any insurance applicable thereto, or any Person liable directly or
indirectly in connection with any of the foregoing, without discharging or
otherwise affecting the liability of either Borrower for the Obligations or
under this Agreement or any other agreement now or hereafter existing between
the Agent, the Security Trustee and/or any of the Lenders and either Borrower.
<PAGE>
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7. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.
-------------------------------------------------
7.1 Books and Records. Each Borrower (as to itself only) and the Parent
-----------------
shall maintain at all times, correct and complete books, records and accounts in
which complete, correct and timely entries are made of its transactions in
accordance with GAAP consistent with those applied in the preparation of the
Financial Statements. Each Borrower and the Parent shall, by means of
appropriate entries, reflect in such accounts and in all Financial Statements
adequate liabilities and reserves for all taxes and adequate provision for
depreciation and amortization of Property and bad debts, all in accordance with
GAAP. Each Borrower and the Parent shall maintain at all times books and
records pertaining to the Collateral in such detail, form and scope as the Agent
shall reasonably require, including, without limitation, records of: (a) all
payments received and all credits and extensions granted with respect to the
Accounts; (b) the return as being damaged or defective, rejection, repossession,
stoppage in transit, loss, damage, or destruction of any Inventory; and (c) all
other dealings affecting the Collateral.
7.2 Financial Information. Each Borrower and the Parent shall promptly
---------------------
furnish to the Agent or its agents all such financial information as the Agent
shall reasonably request, and notify its auditors and accountants that the Agent
is authorized to obtain such information directly from them. Without limiting
the foregoing, each Borrower and the Parent will furnish to the Agent and to
each of the Lenders, in such detail as the Agent shall request, the following:
(a) As soon as available, but in any event not later than one hundred and
five (105) days after the close of each Fiscal Year, audited consolidated and
attached unaudited consolidating balance sheets and statements of operations,
cash flows, and consolidated stockholders' equity for the Parent and its
consolidated Subsidiaries and the accompanying notes thereto, setting forth in
each case in comparative form figures for the previous fiscal year, all in
reasonable detail, fairly presenting the financial position and the results of
operations of the Parent and its consolidated Subsidiaries as at the date
thereof and for the fiscal year then ended, and prepared in accordance with
GAAP. Such consolidated statements shall be examined in accordance with
generally accepted auditing standards by and accompanied by a report thereon,
unqualified as to scope, of independent public accountants selected by the
Parent and satisfactory to the Agent.
(b) As soon as available, but in any event not later than sixty (60) days
after the close of each fiscal quarter except for the fourth fiscal quarter,
consolidated and consolidating unaudited balance sheets of the Parent and its
consolidated Subsidiaries at the end of such quarter, and consolidated and
consolidating unaudited statements of operations, cash flows and consolidated
stockholders' equity for the Parent and its consolidated Subsidiaries for such
quarter and for the period from the beginning of the fiscal year to the end of
such quarter and, regarding the statements of operations for such quarter,
together with the accompanying analysis, all in reasonable detail, fairly
presenting the financial position and results of operation of the
<PAGE>
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Parent and its consolidated Subsidiaries as at the date thereof, and for such
quarter, prepared in accordance with GAAP consistent with the audited Financial
Statements required pursuant to Section 7.2(a). Such statements shall be
certified to be correct by the principal financial officer or principal
accounting officer of the Parent, subject to normal year-end adjustments.
(c) As soon as available, but in any event not later than thirty (30) days
after the end of each month, consolidated and consolidating unaudited balance
sheets of the Parent, and its consolidated Subsidiaries as at the end of such
month, and unaudited statements of operations for the Parent and its
consolidated Subsidiaries for such month and for the period from the beginning
of the fiscal year to the end of such month, all in reasonable detail, fairly
presenting the financial position and results of operation of the Parent and its
consolidated Subsidiaries as at the date thereof and for such periods, and
prepared in accordance with GAAP consistent with the audited Financial
Statements required pursuant to Section 7.2(a). Such statements shall be
certified to be correct by the principal financial officer or principal
accounting officer of the Parent subject to normal year-end and quarterly
adjustments.
(d) With each of the annual audited and quarterly and monthly unaudited
Financial Statements of the Parent and its consolidated Subsidiaries delivered
pursuant to Sections 7.2(a), 7.2(b) and 7.2(c), a certificate substantially in
the form of EXHIBIT G-4 of the principal financial or principal accounting
officer of the Parent (i) in the case of the annual audited and the quarterly
financial statements as at ends of fiscal quarters setting forth in reasonable
detail the calculations required to establish that each of the Borrowers was in
compliance with its covenants set forth in Sections 9.20 to 9.25 during the
period covered in such Financial Statements and as at the end thereof, and (ii)
stating that, except as explained in reasonable detail in such certificate, (A)
all of the representations and warranties of the Borrowers and the Parent
contained in this Agreement and the other Loan Documents are correct and
complete as at the date of such certificate as if made at such time, (B) each of
the Borrowers and the Parent is, at the date of such certificate, in compliance
with all of its covenants and agreements in this Agreement and the other Loan
Documents, and (C) no Event or Event of Default then exists or existed during
the period covered by such Financial Statements. If such certificate discloses
that a representation or warranty is not correct or complete, or that a covenant
has not been complied with, or that an Event or Event of Default existed or
exists, such certificate shall set forth what action the Borrowers and the
Parent have taken or proposes to take with respect thereto.
(e) No sooner than ninety (90) days and no less than fifteen (15) days
prior to the beginning of each Fiscal Year, consolidated and consolidating
projected balance sheets, statements of operations and statements of cash flows
for the Parent and its consolidated Subsidiaries, on an annual basis, and, as at
the end of, and for each month of such Fiscal Year. The financial projections
of the Borrowers for Fiscal Year ending in 1998 are attached hereto as EXHIBIT
G-2.
<PAGE>
-80-
(f) Promptly after filing with the pension commission or administrator or
other Public Authority, a copy of each annual report, or other filing or notice
filed with respect to each Plan of either Borrower, the Parent or any Related
Company.
(g) Copies of all returns, proxy statements, financial statements and
material reports and documents filed with any securities commission, stock
exchange or similar Public Authority or which the Parent makes available to its
stockholders.
(h) Promptly after the receipt thereof, and contemporaneously with any
filings by the Canadian Borrower, notice of any requirements to pay,
assessments, requirements to provide security or other material notices or
documents which reflect any additional claims directly related to, or adverse
changes in, Revenue Canada's positions from those disclosed to the Agent prior
to the Closing Date made to or received from Revenue Canada.
(i) Such additional information as the Agent may from time to time
reasonably request regarding the financial and business affairs of either
Borrower, the Parent or any of its or their Subsidiaries.
7.3 Notices to Agent. Each Borrower (as to itself only) and the Parent
----------------
shall notify the Agent and each of the Lenders in writing, and provide to the
Agent and each of the Lenders copies of any pertinent notices, correspondence or
writings received or issued in respect thereof, and all particulars thereof
reasonably requested by the Agent, of the following matters at the following
times:
(a) Promptly after becoming aware thereof, any Event or Event of Default.
(b) Promptly after becoming aware thereof: the assertion by the holder of
any capital stock or equity of such Borrower or the Parent or of any Debt that a
default exists with respect thereto or that a Borrower or the Parent is not in
compliance with the terms thereof; or the threat or commencement by such holder
of any enforcement action because of such asserted default or non-compliance.
(c) Promptly after becoming aware thereof, any pending or threatened
action, suit, proceeding, or counterclaim by any Person, or any pending or
threatened investigation by a Public Authority which may give rise to a Material
Adverse Effect.
(d) Promptly after becoming aware thereof, any other event or circumstance
which may have or may have had a Material Adverse Effect.
<PAGE>
-81-
(e) Promptly after becoming aware thereof, any pending or threatened
strike, work stoppage, material unfair labour practice claim, or other material
labour dispute affecting either Borrower, the Parent or any of its or their
Subsidiaries.
(f) Promptly after becoming aware thereof, any violation or alleged
violation of any law, statute, regulation, or ordinance of a Public Authority
applicable to either Borrower, the Parent or any of its or their Subsidiaries,
or its or their respective Properties which may give rise to a Material Adverse
Effect.
(g) Promptly after becoming aware thereof any violation or alleged
violation by either Borrower, the Parent or any of its or their Subsidiaries of
Environmental Laws which may have a Material Adverse Effect; or, promptly upon
its receipt thereof, any Action Request, Violation Notice, and any other notice
that either Borrower, the Parent or any of its or their Subsidiaries receives
from a Public Authority asserting that a Borrower, the Parent or any of its or
their Subsidiaries is or may not be in compliance with Environmental Laws or
that its compliance is being investigated, in any case which may have a Material
Adverse Effect; or, promptly upon becoming aware of same, any violation of any
Environmental Law that either Borrower, the Parent or any of its or their
Subsidiaries reports in writing or is required to report under any Environmental
Law in writing (or for which any written report supplemental to any oral report
is made) to any federal, provincial or local environmental agency or other
Public Authority to the extent same may have a Material Adverse Effect.
(h) Any change in either Borrower's or the Parent's name, Fiscal Year,
jurisdiction of incorporation or establishment, jurisdictions of operation, head
office, chief place of business or location from which Accounts are invoiced or
paid or form of organization, at least thirty (30) days prior thereto.
(i) Any Termination Event with respect to a Plan, within ten (10) days
after becoming aware thereof, accompanied by any materials required to be filed
with any Public Authority with respect thereto; promptly after either Borrower's
or the Parent's receipt thereof, any notice received by either Borrower or the
Parent concerning the imposition of any withdrawal liability with respect to a
Plan; the establishment of any Plan not existing at the Closing Date, or the
commencement of contributions by either Borrower or the Parent to any Plan to
which either Borrower or the Parent was not contributing at the Closing Date,
within forty-five (45) days after such event occurs; or promptly after becoming
aware thereof, any other event or condition regarding a Plan or either
Borrower's, the Parent's or a Related Company's compliance with all applicable
laws relating to the establishment or administration of any Plan which may give
rise to a Material Adverse Effect.
(j) Promptly after becoming aware thereof, of any events of loss or
insurance claims filed with any of its insurers in excess of $250,000 (with
particulars thereof).
<PAGE>
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Each notice given under this Section shall describe the subject matter thereof
in reasonable detail, and shall set forth the action that a Borrower or the
Parent has taken or propose to take with respect thereto.
8. GENERAL WARRANTIES AND REPRESENTATIONS.
--------------------------------------
Each Borrower (as to itself only) and the Parent continuously warrants and
represents to and covenants with the Agent and each of the Lenders, at all times
during the term of this Agreement, and until all Obligations have been
satisfied, that, except as hereafter disclosed to and either (A) in the case of
Sections 8.5, 8.7 (to the extent the charge arises from a transaction permitted
under Article 9), 8.13, 8.14, 8.18, 8.19, 8.22, 8.27, 8.29(a) and, provided no
Event of Default has occurred in consequence thereof, (f), not giving rise to or
capable of giving rise to a Material Adverse Effect or (B) in the case of all
other Sections, accepted by the Agent in writing:
8.1 Authorization, Validity and Enforceability of this Agreement and the
--------------------------------------------------------------------
Loan Documents. Each Borrower and the Parent has the power and authority to
- --------------
execute, deliver, and perform this Agreement and the other Loan Documents to
which it is party, to incur the Obligations, and to grant the Security Interest.
Each Borrower and the Parent has taken all necessary corporate action to
authorize its execution, delivery, and performance of this Agreement and the
other Loan Documents to which it is party. No consent, approval, or
authorization of, or declaration or filing with, any Public Authority, and no
consent of any other Person, is required in connection with either Borrower's or
the Parent's execution, delivery, and performance of this Agreement and the
other Loan Documents to which it is party, except for those already duly
obtained. Each of this Agreement and the other Loan Documents has been duly
executed and delivered by each Borrower and the Parent to the extent a party
thereto, and constitutes the legal, valid and binding obligation of each
Borrower, and the Parent enforceable against it in accordance with its terms
(subject to applicable bankruptcy, insolvency, and similar laws affecting
creditors' rights, and the discretion of courts as to the granting of equitable
remedies such as specific performance and injunction) without defence, setoff or
counterclaim. Each Borrower's and the Parent's execution, delivery, and
performance of this Agreement and the other Loan Documents to which it is party
do not, and will not conflict with, or constitute a violation or breach of, or
constitute a default under, or result in the creation or imposition of any Lien
upon the Property of either Borrower, the Parent or any of its or their
Subsidiaries (except as contemplated by this Agreement and the other Loan
Documents) by reason of the terms of (a) any contract, hypothec, mortgage, lien,
lease, agreement, indenture, or instrument to which either Borrower, the Parent
or any of its or their Subsidiaries is a party or which is binding upon it, (b)
any judgment, law, statute, rule or governmental regulation applicable to either
Borrower, the Parent or any of its or their Subsidiaries, or (c) the certificate
or articles of incorporation, amendment, continuation or amalgamation, or by-
laws of either Borrower, the Parent or any of
<PAGE>
-83-
its or their Subsidiaries or any shareholders agreement affecting it or its
Property (or declaration having a like effect).
8.2 Validity and Priority of Security Interest. The provisions of this
------------------------------------------
Agreement and the other Loan Documents create legal and valid Liens on all the
Collateral in the Agent's or Security Trustee's favour, and when all proper
filings, recordings, registrations and other actions necessary to perfect and
maintain such Liens have been made or taken, such Liens will constitute
perfected, duly registered, and continuing Liens on all the Collateral, having
priority over all other Liens on the Collateral (except Permitted Liens), and
all claims of other creditors, securing all the Obligations, and enforceable
against each Borrower, the Parent and all third parties.
8.3 Organization and Qualification. Each of the Borrowers and the Parent
------------------------------
is duly incorporated or amalgamated, as the case may be, and organized, and
validly existing and in good standing under the laws of (a) Alberta in the case
of the Canadian Borrower, (b) England and Wales in the case of the U.K. Borrower
and (c) Delaware, in the case of the Parent. Each Borrower and the Parent is
qualified to do business, and is in good standing in each jurisdiction in which
qualification is necessary in order for it to own or lease its Property and
conduct its business, and has all requisite power and authority to conduct its
business and to own its Property.
8.4 Corporate Name; Prior Transactions. Neither Borrower nor the Parent
----------------------------------
has during the five years preceding the Closing Date in Canada, the United
States or the United Kingdom, been known by or used any other corporate or
business name, or been a party to any amalgamation, merger or consolidation, or
acquired all or substantially all of the assets of any Person or acquired any of
its or their Property out of the ordinary course of business, except as set
forth on EXHIBIT E.
8.5 Subsidiaries and Affiliates. EXHIBIT F is a correct and complete list
---------------------------
of the name and relationship to each Borrower of each and all of each Borrower's
Subsidiaries and other Affiliates. Each Subsidiary is (a) duly incorporated and
organized, and validly existing in good standing under the laws of its
jurisdiction of incorporation set forth on EXHIBIT F, and (b) qualified to do
business, and in good standing in the jurisdictions set forth opposite its name
on EXHIBIT F, which are the only jurisdictions in which such qualification is
necessary in order for it to own or lease its Property and conduct its business.
8.6 Financial Statements and Projections. (a) Each Borrower and the
------------------------------------
Parent has delivered to the Agent (audited, in the case of the Parent only) its
consolidated balance sheets and related statements of operations, cash flows and
stockholders' equity for each Borrower and the Parent as of June 30, 1997 and
for the fiscal year then ended. Such financial statements are attached hereto
as EXHIBIT G-1. All such financial statements have been prepared in accordance
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with GAAP and present accurately and fairly each Borrower's, and the Parent's
consolidated, financial position as at the dates thereof, and its results of
operations for the periods then ended.
(b) The Latest Projections represent each Borrower's and the Parent's best
estimate of each Borrower's and the Parent's consolidated future financial
performance for the periods set forth therein. The Latest Projections have been
prepared on the basis of the assumptions set forth therein, which each Borrower
and the Parent believes are fair and reasonable in light of current and
reasonably foreseeable business conditions as at the date of presentation.
8.7 Capitalization. Each Borrower's and the Parent's authorized and
--------------
issued capital stock, and (except for the portion of its Shares which is
publicly held) the registered and beneficial owners thereof are described in
EXHIBIT N.
8.8 Solvency. Each Borrower and the Parent is Solvent prior to and after
--------
giving effect to the making and incurring of each Revolving Loan and each Letter
of Credit and F/X Transaction.
8.9 Debt. Neither Borrower nor the Parent has any Debt except (a) the
----
Obligations, (b) Debt set forth in the most recent Financial Statements
delivered to the Agent, or the notes thereto, (c) trade payables and other
contractual obligations arising in the ordinary course of business as carried on
by each Borrower since the date of such Financial Statements, (d) alleged Debt
to creditors in France not in excess of FRF17,000,000, and (e) Debt created in
accordance with Sections 9.8 and 9.11.
8.10 Distributions. No Distribution has been declared, paid, or made upon
-------------
or in respect of any Shares or other securities of or equity interests in either
Borrower or the Parent except as expressly permitted hereby.
8.11 Title to Property. Except for Permitted Liens, and except for
-----------------
Property which a Borrower or a Guarantor leases, each Borrower and the Parent
has good and marketable title in fee simple to the Premises, and good,
indefeasible, and merchantable title to all of its other Property including,
without limitation, the assets reflected on the most recent Financial Statements
delivered to the Agent, except as disposed of since the date thereof in the
ordinary course of business and as expressly permitted hereby, free of all Liens
except Permitted Liens.
8.12 Adequate Assets. Each Borrower and the Parent individually and in the
---------------
aggregate possess adequate assets for the conduct of its and their business.
8.13 Real Property; Leases. EXHIBIT D hereto is a correct and complete
---------------------
list, of all real property owned by each Borrower or the Parent, all leases and
subleases of real or personal property by either Borrower or the Parent, as
lessee or sublessee, and all leases and subleases of
<PAGE>
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real or personal property by either Borrower or the Parent, as lessor or
sublessor. Each of such leases and subleases is valid and enforceable in
accordance with its terms, and is in full force and effect, and no default by
any party to any such lease or sublease exists.
8.14 Proprietary Rights Collateral. EXHIBIT B hereto is a correct and
-----------------------------
complete list of all of the Proprietary Rights Collateral. None of the
Proprietary Rights Collateral is subject to any licensing agreement or similar
arrangement except as set forth on or referred to in EXHIBIT B. Except as set
forth in EXHIBIT B, neither Borrower nor the Parent has any licenses or similar
agreements of or in respect of any intellectual property which might reasonably
be considered to be material to its business or financial condition. To the
best of each Borrower's and the Parent's, current actual knowledge, none of the
Proprietary Rights Collateral infringes on or conflicts with any other Person's
Property, and no other Person's Property infringes on or conflicts with the
Proprietary Rights Collateral. The Proprietary Rights Collateral described on
EXHIBIT B constitutes all of the Property of such type necessary to the current
and anticipated future conduct of each Borrower's and the Parent's business.
8.15 Trade Names. All trade names or styles under which either Borrower or
-----------
the Parent sells Inventory or create Accounts or to which instruments in payment
of Accounts may be made payable, are listed on EXHIBIT E hereto.
8.16 Litigation. Except as set forth on EXHIBIT J, there is no pending or,
----------
to the best of either Borrower's or the Parent's current actual knowledge,
threatened action, suit, proceeding, or counterclaim by any Person, or
investigation by any Public Authority, or any basis for any of the foregoing,
which may give rise to any Material Adverse Effect.
8.17 Restrictive Agreements. Neither Borrower nor the Parent is a party to
----------------------
any contract or agreement, or subject to any charter or other corporate
restriction, which affects its ability to execute, deliver, and perform the Loan
Documents to which it is party, and repay the Obligations or which materially
and adversely affects or, insofar as such Borrower or the Parent can reasonably
foresee, could materially and adversely affect, such Borrower's or the Parent's
Property or could give rise to any Material Adverse Effect.
8.18 Labour Disputes. (a) There is no collective bargaining agreement or
---------------
other labour contract covering employees of either Borrower or any of its
Subsidiaries other than the Australian Affiliate other than collective
agreements covering approximately 130 employees in Canada at the Canadian
Borrower's warehouse and distribution centre and its stores in Manitoba; (b)
except as noted above, to the best of each Borrower's (as to itself only) and
the Parent's current actual knowledge, no union or other labour organization is
seeking to organize, or to be recognized as, a collective bargaining unit of
employees of either Borrower, the Parent, or any of its or their Subsidiaries
other than the Australian Affiliate or for any similar purpose; and (c) there is
no pending or, to the best of each Borrower's (as to itself only) and the
Parent's current
<PAGE>
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actual knowledge, threatened strike, work stoppage, material unfair labour
practice claims, or other material labour dispute against or affecting either
Borrower, the Parent or any of its or their Subsidiaries other than the
Australian Affiliate or their respective employees.
8.19 Environmental Laws. Each Borrower and the Parent and each of its
------------------
Subsidiaries other than the Australian Affiliate have complied in all material
respects with all Environmental Laws applicable to transfer, construction on,
and operation of its and their Property and business and neither Borrower nor
the Parent nor any of its Subsidiaries other than the Australian Affiliate has
any material contingent liability with respect to non-compliance with
Environmental Laws or the generation, handling, use, storage or disposal of
hazardous or toxic wastes or substances and neither Borrower nor the Parent nor
any of its Subsidiaries other than the Australian Affiliate has received any
Action Request, Violation Notice, summons, complaint, order or other notice that
it is not in compliance with, or that any Public Authority is investigating its
compliance with, Environmental Laws in respect of any matter that remains
outstanding. Without limiting the generality of the foregoing:
(a) Neither Borrower has any current actual knowledge that its, or its
Subsidiaries other than the Australian Affiliate operations or any
property or assets of or occupied by it or its Subsidiaries other
than the Australian Affiliate or in its or any Subsidiaries' other
than the Australian Affiliate charge, management or control are not in
compliance in all material respects with all applicable Environmental
Laws, or that all of its and its Subsidiaries' other than the
Australian Affiliate Properties and Premises are not free:
(i) from contamination by, or threat of, a release, discharge or
emission of any hazardous substance, gas or liquid or any other
substance, gas or liquid which is prohibited, controlled or
regulated under any Environmental Law, and
(ii) of underground storage tanks containing any Material of
Environmental Concern, land fills, land disposals, and dumps;
(b) None of the Borrowers or any of its Subsidiaries other than the
Australian Affiliate has filed any notice under any federal,
provincial or local law, including any Environmental Law, indicating
past or present treatment, storage or disposal of a Material of
Environmental Concern or reporting an actual or threatened spill or
release of a Material of Environmental Concern into the environment;
(c) None of the Borrowers or any of its Subsidiaries other than the
Australian Affiliate has any contingent liability of which it or they
have current actual
<PAGE>
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knowledge in connection with any release of any Material of
Environmental Concern;
(d) None of the Borrowers or any of its Subsidiaries other than the
Australian Affiliate generates, transports, treats or disposes of any
Material of Environmental Concern except in compliance in all material
respects with applicable laws; and
(e) Neither Borrower has disposed of any Material of Environmental Concern
by placing it in or on the ground of any of either Borrower's or any
of its Subsidiaries' other than the Australian Affiliate Property or
the Premises.
8.20 No Violation of Law. None of the Borrowers, the Parent or any of its
-------------------
Subsidiaries other than the Australian Affiliate is in violation of any law,
statute, regulation, ordinance, judgment, order or decree applicable to it which
violation could give rise to a Material Adverse Effect.
8.21 No Default. None of the Borrowers, the Parent or any of its
----------
Subsidiaries other than the Australian Affiliate is in default with respect to
any Debt (including the Subordinated Debentures and all obligations under the
Material Agreements), Lien, note, indenture, loan agreement, mortgage, lease,
deed, security instrument or agreement or other agreement to which it is a party
or bound, which default could give rise to a Material Adverse Effect.
8.22 Plans. (a) None of the Borrowers, the Parent, any of its Subsidiaries
-----
other than the Australian Affiliate or any Related Company other than the
Australian Affiliate has any Plan other than those listed on EXHIBIT L hereto,
and all monthly and other payments in respect of such Plans which are registered
pension plans (on account of contributions, special contributions or unfunded
liability or solvency deficiencies) or otherwise are accurately set for in
EXHIBIT L; (b) no Plan has been terminated or partially terminated or is
insolvent or in reorganization, nor have any proceedings been instituted to
terminate, in whole or in part, or reorganize any Plan; (c) none of the
Borrowers, the Parent, any of its Subsidiaries other than the Australian
Affiliate or any Related Company other than the Australian Affiliate has ceased
to participate (in whole or in part) as a participating employer in any Plan
which is a registered pension plan or has withdrawn from any Plan in a complete
or partial withdrawal, nor has a condition occurred which if continued would
result in a complete or partial withdrawal; (d) none of the Borrowers, the
Parent, any of its Subsidiaries other than the Australian Affiliate or any
Related Company other than the Australian Affiliate has any unfunded liability
on windup or withdrawal liability, including contingent withdrawal or windup
liability, to any Plan or any solvency deficiency in respect of any Plan; (e)
none of the Borrowers, the Parent, any of its Subsidiaries other than the
Australian Affiliate or any Related Company other than the Australian Affiliate
has any unfunded liability on windup or any liability in respect of any Plan
other than for required insurance premiums or contributions or remittances which
have been paid, contributed and
<PAGE>
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remitted when due; (f) each of the Borrowers, the Parent and each of its
Subsidiaries other than the Australian Affiliate have made all contributions to
their Plans required by law or the terms thereof to be made by it when due, and
it and they are not in arrears in the payment of any contribution, payment,
remittance or assessment or in default in filing any reports, returns,
statements, and similar documents in respect of the Plans required to be made or
paid by them pursuant to any Plan, any law, act, regulation, directive or order
or any employment, union, pension, deferred profit sharing, benefit, bonus or
other similar agreement or arrangement; (g) none of the Borrowers, the Parent or
any of its Subsidiaries other than the Australian Affiliate are liable or, to
the best of their knowledge, alleged to be liable, to any employee or former
employee, director or former director, officer or former officer resulting from
any violation or alleged violation of any Plan, any fiduciary duty, any law or
agreement in relation to any Plan or have any unfunded pension or like
obligations or solvency deficiency (including any past service or experience
deficiency funding liabilities), other than accrued obligations not yet due, for
which they have made full provision in their books and records; (h) all vacation
pay, bonuses, salaries and wages, to the extent accruing due, are properly
reflected in each Borrower's, the Parent's and/or its Subsidiaries' other than
the Australian Affiliate books and records; (i) without limiting the foregoing,
all of the Borrowers', the Parent's and each of its Subsidiaries' other than the
Australian Affiliate Plans are duly registered where required by, and are in
compliance and good standing in all material respects under, all applicable
laws, acts, statutes, regulations, orders, directives and agreements, including,
without limitation, the Income Tax Act of Canada, the Supplemental Pensions Act
-------------- -------------------------
of Quebec and the Pension Benefits Act of Ontario, any successor legislation
--------------------
thereto, and other applicable laws of any jurisdiction, and (j) there are no
outstanding or pending or threatened investigations, claims, suits or
proceedings in respect of any Plans (including to assert rights or claims to
benefits or that could give rise to any material liability).
8.23 Taxes. Each Borrower, the Parent and its Subsidiaries other than the
-----
Australian Affiliate have filed all tax returns and other reports which they
were required by law to file on or prior to the date hereof, and have paid all
taxes, assessments, fees, and other governmental charges, and penalties and
interest, if any, against them or their Property, income, or franchise, that are
due and payable save for assessments which are being contested by appropriate
proceedings and, to the extent reserves for which are required under GAAP, such
reserves have been established in its financial statements in accordance with
GAAP. Each income tax return was accurate in all material respects.
8.24 Event of Default. No Event of Default has occurred and is continuing.
----------------
8.25 Authority to Incur Debts. None of the Borrowers or the Parent are or
------------------------
will be in consequence of the execution, delivery or performance of any of the
Loan Documents or the consummation of the transactions therein provided, in
breach of any regulation under any national, federal or provincial law, act,
statute or regulation limiting their ability to incur
<PAGE>
-89-
indebtedness for money borrowed or to secure payment of same or to provide
financial assistance, directly or indirectly, by means of a loan, guarantee or
otherwise.
8.26 No Material Adverse Change. Each of the Material Agreements is in
--------------------------
full force and effect, unamended (except as described in the definition thereof)
and no breaches, defaults or alleged breaches or defaults have occurred
thereunder. No material adverse change has occurred in either Borrower's or the
Parent's Property, business, operations, or condition (financial or otherwise)
since June 30, 1997. On the basis of a review and assessment undertaken by each
of the Borrowers and the Parent of its computer applications, each of the
Borrowers and the Parent reasonably believes that the "Year 2000 problem" (that
is, the risk that principal computer applications used in connection with its
business may be unable to recognize and perform properly date sensitive
functions involving certain dates prior to and any date after December 31, 1999)
will not result in a Material Adverse Effect.
8.27 Disclosure. Neither this Agreement nor any document or statement
----------
prepared and furnished the Agent and/or Lenders by the Parent hereunder or in
connection herewith contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements contained
herein or therein not misleading.
8.28 Workers' Compensation. None of the Borrowers, the Parent or any of its
---------------------
Subsidiaries other than the Australian Affiliate has any unpaid workers'
compensation or like obligations except as are being incurred, and paid on a
current basis in the ordinary course of business, and there are no proceedings,
claims, actions, orders or investigations of any Public Authority relating to
worker's compensation outstanding, pending or, to their knowledge, threatened
relating to them or any of their employees or former employees which could
reasonably be expected to have a Material Adverse Effect.
8.29 Real Estate. (a) No part of the Real Estate has been condemned, taken
-----------
or expropriated by any federal, provincial, municipal or any other competent
authority and no alteration, repair, improvement or other work has been ordered
or directed to be done or performed to or in respect of such property by any
provincial, state, municipal or any other competent authority; (b) there are no
Liens, easements, encroachments, rights of way, work orders, licences,
concession agreements, leases or tenancies affecting the Real Estate save and
except for Permitted Liens; (c) there is nothing owing in respect of the Real
Estate including any of its leasehold property (to the extent either Borrower is
or may be liable for same) to any municipality or to any corporation or
commission owning or operating a public utility for water, gas, electrical power
or energy, steam or hot water or for the use thereof or for the fittings,
machines, apparatus, meters or other things leased in respect thereof or for any
work or service performed for any such corporation or commission in connection
with such public utilities, except current charges and Permitted Liens; (d)
neither Borrower retains any interest, beneficially or otherwise in any land
abutting the Real Estate either by way of fee or equity of
<PAGE>
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redemption in, or a power or right to grant or exercise a power of appointment
with respect to, any such land abutting the Real Estate; (e) the buildings on
the Real Estate are located entirely within the limits of such Real Estate and
all present uses in respect of the Real Estate may lawfully be continued and all
permitted uses are satisfactory for each Borrower's current and intended
purposes; (f) there are no unsatisfied judgments against either Borrower and
there are no writs of execution which, in either case, would effect the Real
Estate, including any of their interests in any leasehold property; (g) all
immoveable and real property taxes including local improvement rates, have been
paid prior to being in default to date in respect of the Real Estate; (h) all
accounts for work and service performed and materials placed or furnished upon
or in respect of the Real Estate including any of its leasehold property,
including any claims by any municipal, provincial or other competent authority,
have been fully paid and no one is entitled to claim a lien under the
Construction Lien Act of Ontario (or any similar law or legislation of any
jurisdiction) against such Real Estate or any part thereof; (i) the Security
Interest is not being granted with the intention of securing the financing of
any alteration, addition or repair to, or any construction, erection, demolition
or installation on or in respect of the Real Estate or any structure thereon,
nor is it being taken to repay any mortgage the proceeds of which were so used;
and (j) no Inventory is located at any leased Premises except as indicated in
EXHIBIT D and at locations permitted under Section 6.3.
8.30 Investment Act. None of the Borrowers or the Parent is an
--------------
"investment company" or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended (15 U.S.C. S 80(a)(l), et seq.). The
-- ---
making of the Revolving Loans and other financial accommodations hereunder by
the Agent and/or Lenders, the application of the proceeds and repayment thereof
by the Borrowers and other transactions contemplated by this Agreement and the
Loan Documents do not violate any provisions of such Act or any rule, regulation
or order issued by the Securities and Exchange Commission thereunder.
8.31 Margin Securities. None of the Borrowers or the Parent owns any
-----------------
"margin security," as that term is defined in Regulations G and U of the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board"), and
---------------------
the proceeds of the Revolving Loans and the other financial accommodations made
pursuant to this Agreement will be used only for the purposes contemplated
hereunder. None of the Revolving Loans and the other financial accommodations
hereunder will be used, directly or indirectly, for the purpose of purchasing or
carrying any margin security, for the purpose of reducing or retiring any Debt
or other Person's indebtedness which was originally incurred to purchase or
carry any margin security, or for any other purpose which might cause any such
loan or other financial accommodation to be considered a "purpose credit" within
the meaning of Regulation G, U or X of the Federal Reserve Board. None of the
Borrowers or the Parent will take or permit any agent acting on its behalf to
take any action which might cause any transaction, obligation or right created
by this
<PAGE>
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Agreement, or any document or instrument delivered pursuant hereto, to
violate any regulation of the Federal Reserve Board.
9. AFFIRMATIVE AND NEGATIVE COVENANTS. Each Borrower (as to itself only) and
----------------------------------
the Parent covenants that, except as otherwise consented to by the Agent, so
long as any of the Obligations remain outstanding or this Agreement is in effect
(it being agreed by the Parent that, where any act or thing is to be done by
either Borrower or any of its other Subsidiaries, the Parent shall cause the
Borrowers or other Subsidiaries to do the act or thing and where any act or
thing is not to be done or permitted by either Borrower or other Subsidiary, the
Parent shall cause the Borrowers or other Subsidiaries not to do or permit the
act or thing).
9.1 Taxes and Other Obligations. Each Borrower and the Parent shall, and
---------------------------
shall cause each of its Subsidiaries to: (a) file when due all tax returns and
other reports which it is required to file, pay or provide for the payment, on
or prior to the time when due or delinquent, of all taxes, fees, assessments,
and other governmental charges against it or upon its Property, income and
franchises, make all required withholding and other tax deposits, and establish
adequate reserves for the payment of all such items, and shall provide to the
Agent, upon request, satisfactory evidence of its timely compliance with the
foregoing; and (b) pay when due all Obligations and, subject to any restrictions
thereof as herein provided, any other Debt or indebtedness owed by it, and
perform and discharge in a timely manner all its covenants and obligations
hereunder and under the Loan Documents and, subject to any restrictions thereon
as herein provided, all other obligations undertaken by it; provided, however
-------- -------
that the Parent and its Subsidiaries need not pay any tax, fee, assessment,
governmental charge, or Debt, or perform or discharge any other obligation, that
it has disclosed (with all particulars required by the Agent) in writing to the
Agent and that is contesting in good faith by appropriate proceedings diligently
pursued provided that to the extent so required under GAAP it has established
reserves in financial statements in accordance with GAAP.
9.2 Corporate Existence and Good Standing. Each Borrower and the Parent
-------------------------------------
shall, and shall cause each of its Subsidiaries to, maintain its corporate
existence and its qualification and good standing in all jurisdictions necessary
to conduct its business and own its Property, shall obtain and maintain, and
shall cause each of its Subsidiaries to obtain and maintain, all licenses,
permits, franchises and governmental authorizations necessary to conduct its
business and own its Property, and shall properly maintain, and shall cause each
of its Subsidiaries to maintain, all of its books, records and accounts in
accordance with GAAP.
9.3 Compliance with Law and Agreements. Each Borrower and the Parent
----------------------------------
shall, and shall cause each of its Subsidiaries to, comply with the terms and
provisions of each judgment, law, statute, rule, and governmental regulation
applicable to it, and each Material Agreement, and, each other hypothec,
mortgage, lien, lease, indenture, order, instrument, agreement or document to
which it is or they are a party or by which it is or they are bound, except, in
each
<PAGE>
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case, to the extent that non-compliance is not reasonably likely to give rise to
a Material Adverse Effect.
9.4 Maintenance of Property and Insurance. Each Borrower and the Parent
-------------------------------------
shall, and shall cause each of its Subsidiaries to: (a) maintain all of its
Property necessary and useful in its and their businesses in the ordinary course
in good operating condition and repair, ordinary wear and tear excepted; and (b)
in addition to the insurance required by Section 6.7, maintain with financially
sound and reputable insurers such other insurance with respect to its Property
and business against casualties and contingencies of such types and in such
amounts as is customary for Persons of established reputation engaged in the
same or a similar business and similarly situated, naming the Agent or, in the
case of the U.K. Borrower, the Security Trustee, at its request, as additional
insured under each such policy.
9.5 Environmental Laws. Each Borrower and the Parent shall conduct, and
------------------
shall cause each of its Subsidiaries other than the Australian Affiliate to
conduct, its business in compliance in all material respects with all
Environmental Laws applicable to it, including, without limitation, those
relating to the Borrower's, the Parent's or such Subsidiary's other than the
Australian Affiliate generation, handling, use, storage and disposal of
Materials of Environmental Concern. Each Borrower and the Parent shall take,
and shall cause its Subsidiaries other than the Australian Affiliate to take,
prompt and appropriate action to respond to any non-compliance or alleged non-
compliance with Environmental Laws, and shall regularly report to the Agent on
such response. Without limiting the generality of the foregoing, whenever
either Borrower or the Parent gives notice to the Agent pursuant to Section
7.3(g) and the Agent so requests, such Borrower and the Parent shall, at the
applicable Borrower's expense: (a) cause an independent environmental engineer
acceptable to the Agent to conduct such tests of the site where the non-
compliance or alleged non-compliance with Environmental Laws has occurred, and
prepare and deliver to the Agent a report setting forth the results of such
tests, a proposed plan for responding to any environmental problems described
therein, and an estimate of the costs thereof; and (b) provide to the Agent a
supplemental report of such engineer whenever the scope of the environmental
problems, or such Borrower's, and any other Person's response thereto or the
estimated costs thereof, shall change. Such reports shall also be addressed to
the Agent and shall, as requested by the Agent, set out the results of such
engineers' review of, inter alia: (i) the internal policies and procedures of
such Borrower, the Parent or any Subsidiary other than the Australian Affiliate,
as the case may be, relating to environmental regulatory compliance to ensure
that all appropriate steps are being taken by or on behalf of such Borrower, the
Parent or any Subsidiary other than the Australian Affiliate, as the case may
be, to comply with all applicable requirements of Environmental Laws; (ii)
progress of compliance satisfaction, capital expenditures required to effect
remedial steps and compliance deficiencies; (iii) all other environmental audit
reports which such Borrower, the Parent or any Subsidiary other than the
Australian Affiliate, as the case may be, or any predecessor has commissioned in
the normal conduct of its business; and (iv) all environmental reports which
have been commissioned by
<PAGE>
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or made available to a Borrower, the Parent or any Subsidiary other than the
Australian Affiliate, as the case may be, in connection with new acquisitions,
and the engineers' report and recommendations on results of tests performed or
samples taken by it during the course of its review, irregularities or steps
which may be taken to ensure continued compliance, as well as such other matters
as a Borrower, the Parent and/or the Agent may reasonably request from time to
time.
9.6 Plans. Each Borrower and the Parent shall cause each of its and its
-----
Subsidiaries other than the Australian Affiliate' Plans to be duly qualified and
administered in all respects in compliance with all applicable laws (including
regulations, orders and directives), and the terms of the Plans and any
agreements relating thereto. Each Borrower and the Parent shall ensure that it
and its and their Subsidiaries other than the Australian Affiliate (a) have no
unfunded, solvency, or deficiency on windup liability in respect of any Plan
including any Plan to be established and administered by it or them, (b) all
amounts required to be paid by it or them are paid when due, and (c) no
liability upon it or them or Lien on any of its or their Property arises or
exists in respect of any Plan.
9.7 Mergers, Consolidations, Acquisitions or Sales. None of the
----------------------------------------------
Borrowers, the Parent or any of its or their Subsidiaries other than the
Australian Affiliate shall, in one or a series of transactions, carry on
business with or through any other Person, enter into any partnership, joint
venture, co-venture or other combination, enter into any transaction of
amalgamation, merger, reorganization, or consolidation, or, subject to Sections
6.4 and 6.12 hereof, transfer, sell, assign, lease or otherwise dispose of all
or any part of its Property, or, wind up, liquidate or dissolve, or cease to
carry on business or agree to do any of the foregoing.
9.8 Distributions; Capital Changes. Provided no Event of Default has
------------------------------
occurred and is continuing, (A) each Borrower may make payments, loans, loan
repayments and Distributions to the Parent (I) to pay current interest in
respect of the Subordinated Debentures, (II) to pay current administrative
expenses (including income and other taxes) of the Parent or management fees in
accordance with practices as at the date hereof and (III) to provide moneys to
the other Borrower and (B) the Parent may make (I) loans, loan repayments and
Distributions to either Borrower with the proceeds of a payment, loan, loan
repayment or Distribution permitted under clause (A) above, (II) loans and
Distributions to the Australian Affiliate by the Parent in an amount not
exceeding in the aggregate, the aggregate amount of all Distributions made to
the Parent following the Closing Date by the Australian Affiliate and (III) odd
lot stock acquisitions in an aggregate amount not exceeding $150,000 in any
fiscal year and to meet the requirements of existing employee stock option or
purchase plans, none of the Borrowers or the Parent or any of its Subsidiaries
other than the Australian Affiliate. Except as provided in clauses (A) or (B),
no Borrower nor the Parent shall (a) directly or indirectly, declare, make or
pay, or incur any liability to make or pay, any Distribution or, subject to
Section 9.13 hereof, any other payment to any Affiliate of either Borrower or
the Parent, in cash or property, on account of repayments of,
<PAGE>
-94-
indebtedness, lease or rental payments, payments for management or other
services or otherwise, or (b) subject to the creation and/or issuance of equity
securities by either of the Borrowers to the Parent or the other Borrower as
expressly permitted in clause (A) above in connection with a Distribution
(provided that 100% of the stock of the Borrowers carrying a right to vote
continues to be legally and beneficially owned by the Parent) or any issuance of
any equity securities by the Parent (the proceeds of which are dealt with in
accordance with clause (B) above), make any change in its capital structure
(excluding transfers of shares in the capital of the Parent between holders of
publicly traded shares but including by the issuance of shares, purchase, put,
call, retraction, redemption, restructuring or otherwise or by changing any
terms or conditions of any class of shares in its capital or by creating any
further classes of shares).
9.9 Transactions Affecting Collateral or Obligations. None of the
------------------------------------------------
Borrowers or the Parent or any of its or their Subsidiaries shall enter into any
transaction or otherwise cause, permit or suffer to occur or exist any event or
condition which has resulted in or could forseably result in a Material Adverse
Effect. Without limiting the generality of the foregoing, none of the Borrowers
or the Parent will, without the consent of the Agent not to be unreasonably
withheld or delayed, permit to occur any material change in the terms of,
default under or termination of, in any case which has resulted in or could
forseably give rise to a Material Adverse Effect, the Material Agreements or any
of its standard Authorized Dealer Agreement (U.K. or Canadian versions), Export
Purchase and Application Agreement, Authorized Sales Centre Agreement (Radio
Shack), Joint Venture Agreement (Radio Shack) or Contract Management Agreement.
9.10 Guarantees. None of the Borrowers or any of its Subsidiaries other
----------
than the Australian Affiliate shall make, issue, or become liable on any
Guarantee, except (a) Guarantees in favour of the Agent, the Security Trustee
and/or Lenders; and (b) endorsements of instruments for deposit in the ordinary
course of business.
9.11 Debt. None of the Borrowers or the Parent or any of its or their
----
Subsidiaries other than the Australian Affiliate shall incur or maintain any
Debt other than: (a) the Obligations; (b) trade payables and contractual
obligations to suppliers and customers and other Persons incurred in the
ordinary course of business as carried on the date hereof by each of the
Borrowers and the Parent; (c) other Debt existing on the Closing Date and
included in the Financial Statements attached as EXHIBIT G-1 or refinancings by
the Parent of the subordinated debt existing at the Closing Date at interest
rates not in excess of eleven percent (11%) provided that the principal amount
thereof is not increased and the terms of subordination are satisfactory to the
Agent in its discretion; (d) Debt secured by PMSIs in, or constituting operating
leases of, Equipment acquired by a Borrower (provided the principal amount of
such Debt does not exceed the purchase price of such Equipment or $5,000,000 in
the aggregate in any Fiscal Year); (e) Debt in connection with loans and
Distributions permitted under Section 9.8; and (f) contingent Debt
<PAGE>
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of the Canadian Borrower under guarantees or indemnities in respect of existing
leases of premises by the U.K. Borrower.
9.12 Prepayment. None of the Borrowers or the Parent or any of its or
----------
their Subsidiaries other than the Australian Affiliate shall voluntarily prepay
any Debt except repayments of loans as permitted under Section 9.8 and except
the Obligations in accordance with the terms hereof.
9.13 Transactions with Affiliates. Except to the extent permitted under
----------------------------
Section 9.8, none of the Borrowers or the Parent or any of its Subsidiaries
shall: sell, transfer, distribute, or pay any money or Property to any
Affiliate, or lend or advance money or Property to any Affiliate or related
(within the meaning of the Income Tax Act of Canada) Person, or invest in (by
--------------
capital contribution or otherwise) or purchase or repurchase any equity or
indebtedness, or any Property, of any Affiliate or related (within the meaning
of the Income Tax Act of Canada) Person, or become liable on any Guarantee of
--------------
the indebtedness, dividends, or other obligations of any Affiliate or related
(within the meaning of the Income Tax Act of Canada) Person.
--------------
9.14 Investment Banking and Finder's Fees. None of the Borrowers or the
------------------------------------
Parent or any of its or their Subsidiaries other than the Australian Affiliate
shall pay or agree to pay any investment banking or similar or related fee,
underwriter's fee, finder's fee, or broker's fee to any Person in connection
with this Agreement. Each Borrower and the Parent shall defend and indemnify
the Agent and each of the Lenders against and hold it and them harmless from all
claims of any Person for any such fees, and all costs and expenses (including,
without limitation, legal fees) incurred by the Agent and/or any of the Lenders
in connection therewith.
9.15 Business Conducted. None of the Borrowers or the Parent or any of its
------------------
and their Subsidiaries other than the Australian Affiliate shall engage,
directly or indirectly, in any line of business other than the businesses in
which such Borrower, the Parent and its and their Subsidiaries other than the
Australian Affiliate are engaged in on the Closing Date and businesses
reasonably related or ancillary thereto.
9.16 Liens. None of the Borrowers or the Parent or any of its or their
-----
Subsidiaries other than the Australian Affiliate shall create, incur, assume, or
permit to exist any Lien on any Property now owned or hereafter acquired by any
of them, except Permitted Liens.
9.17 Sale and Leaseback Transactions. None of the Borrowers or the Parent
-------------------------------
or any of its or their Subsidiaries other than the Australian Affiliate shall,
directly or indirectly, enter into any arrangement with any Person providing for
such Borrower, the Parent or any Subsidiary other than the Australian Affiliate,
to lease or rent Property that such Borrower, the Parent or any Subsidiary other
than the Australian Affiliate has or will sell or otherwise transfer to such
Person.
<PAGE>
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9.18 New Subsidiaries. None of the Borrowers or the Parent or any of its
----------------
or their Subsidiaries other than the Australian Subsidiary shall, directly or
indirectly, organize or acquire any Subsidiary other than those listed on
EXHIBIT F.
9.19 Restricted Investments. None of the Borrowers or the Parent or any of
----------------------
its Subsidiaries other than the Australian Affiliate shall make any Restricted
Investment except to the extent permitted under Section 9.8.
9.20 Deliberately Left Blank.
------------------------
9.21 Deliberately Left Blank.
-----------------------
9.22 Minimum Availability. The U.K. Borrower shall not at any time permit
--------------------
the U.K. Availability to be less than ten percent (10%) of the U.K. Borrowing
Base.
9.23 Tangible Net Worth. The Canadian Borrower will maintain a Tangible
------------------
Net Worth of not less than U.S.$96,000,000 at all times.
9.24 Year 2000 Problem. The Borrowers and the Parent will, on a timely
-----------------
basis, take all commercially reasonable steps to address the "Year 2000 problem"
referred to in Section 8.26 such that there does not occur any Material Adverse
Effect as a consequence thereof.
9.25 Re - File Barrie Mortgage. The Canadian Borrower shall, within thirty
-------------------------
(30) days of the Closing Date, execute or re-execute and record the Mortgage of
the Barrie lands, in favour of the Agent as agent or as attorney, and otherwise
in form satisfactory to the Agent.
9.26 Deliberately Left Blank.
-----------------------
9.27 Further Assurances. Each of the Borrowers and the Parent shall
------------------
execute and deliver, or cause to be executed and delivered, to the Agent and, in
the case of the U.K. Borrower, the Security Trustee, such documents and
agreements, and such additional instruments of security, and shall take or cause
to be taken, or do or cause to be done, such actions and things, as the Agent
and, in the case of the U.K. Borrower, the Security Trustee may, from time to
time, request to carry out the terms and conditions of this Agreement and the
other Loan Documents, and in order to better register, perfect and protect the
priority over all other Liens of the Security Interest.
10. CLOSING; CONDITIONS TO LENDING. The Agent and Lenders will not be
------------------------------
obligated to make or continue any Loans or obtain or issue any Letters of Credit
or to enter into any F/X Transaction, and neither Borrower shall request any
Drawdown, Rollover or Conversion of any Loan or issuance of any Letter of Credit
unless the following conditions (which will, until the Closing Date, constitute
conditions precedent and, thereafter, and whether or not any loans
<PAGE>
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have been made without compliance with any of the conditions unless the same
have been expressly permanently waived, continuing conditions) have been
satisfied as determined by the Agent and Lenders:
10.1 Representations and Warranties; Covenants; Events. Each Borrower's
-------------------------------------------------
and the Parent's representations and warranties contained in this Agreement and
the other Loan Documents shall be correct and complete; each Borrower and the
Parent shall have performed and complied with all covenants, agreements, and
conditions contained herein and in the other Loan Documents which are required
to have been performed or complied with; and there shall exist no Event or Event
of Default.
10.2 Closing Date Conditions. The Agent shall have received (3 copies of
-----------------------
each) on or prior to the Closing Date, and shall continue to hold, in form and
substance satisfactory to the Agent and Lenders and Agent's counsel:
(a) this Agreement duly executed by each Borrower and the Parent;
(b) certified copies of the articles or certificates of incorporation,
amalgamation and amendment, if applicable, of each Borrower and
the Parent, its borrowing by-laws and resolutions of its board of
directors and, in the case of the Borrowers, shareholders
authorizing its execution, delivery and performance of this
Agreement and the Loan Documents to be signed by it;
(c) evidence reasonably satisfactory to the Agent and Lenders and the
Agent's counsel that each of the representations and warranties
herein is true and accurate in all material respects, each
Borrower and the Parent is in compliance in all material respects
with all of its covenants and obligations herein, no Event has
occurred, and there has not occurred any material adverse change
in either of the Borrowers or the Parent since June 30, 1997;
(d) a General Hypothec of Moveables of the Canadian Borrower on terms
satisfactory to the Agent (the "Hypothec");
(e) a $100,000,000 fixed and floating charge demand debenture of the
Canadian Borrower, together with a pledge agreement in respect
thereof, each satisfactory to the Agent (the "Debenture");
(f) Charges/Mortgages of Land in respect of each parcel of Real
Estate owned by the Canadian Borrower, satisfactory to the Agent;
<PAGE>
-98-
(g) the Collection Account Agreement;
(h) except as otherwise permitted by the Agent, mortgagee, bailee and
consignee waivers and consents with respect to each location not
owned by a Borrower where Inventory may be located, in form and
substance acceptable to the Agent and Agent's counsel;
(i) the U.K. Security Documents of the U.K. Borrower, satisfactory to
the Agent;
(j) U.S. Security Agreement of Parent, satisfactory to the Agent;
(k) the Assignment;
(l) a Guarantee by the Canadian Borrower of all of the U.K.
Borrower's obligations, and, if requested, and agreed by the
Canadian Borrower on, prior to or after the Closing Date, a
Guarantee by the Canadian Borrower of all of the Parent's
obligations, each satisfactory to the Lender (collectively, the
"Canadian Guarantee");
(m) each of the other Loan Documents, including the documents listed
in EXHIBIT M, in form and substance satisfactory to the Agent;
(n) the favourable opinion of each Borrower's counsel (and local
counsel as required by the Agent and Lenders), addressed to the
Agent and each of the Lenders and Agent's counsel, such opinions
to speak to the status and formation of each Borrower and its
qualification to carry on business in each jurisdiction where it
does so, the due authorization, execution, delivery and
enforceability in accordance with their terms of all Loan
Documents, and the validity and enforceability of the Mortgages as
first charges of the Real Estate and otherwise in form and scope
satisfactory to the Agent, the Lenders and Agent's counsel; and
(o) the Agent's customary agreements and all documents, instruments,
financial statements, consents, evidences of corporate authority,
certificates, insurance certificates, opinions of legal counsel
and such other writings to confirm and effectuate the lending
transactions and the matters referred to herein as may be required
by the Agent and its counsel, all duly executed and/or delivered
by each Borrower and the Parent.
<PAGE>
-99-
10.3 Release of Proceeds; Drawdown Date. On the Closing Date, and prior to
----------------------------------
the release of any proceeds of any Loans or issuance of any Letters of Credit or
entering into of any F/X Transaction, the following shall have been completed to
the satisfaction of the Agent and Lenders in its discretion:
(a) all necessary legislative, regulatory, governmental, and other
third party approvals, notices, consents and permits including as
necessary to grant and perform the Loan Documents and carry on
each Borrower's and the Parent's business shall have been given
and obtained by each Borrower and the Parent, such approvals,
notices, consents and permits not to contain any terms or
conditions which the Agent and Lenders reasonably consider to be
materially adverse to either Borrower or the Parent and evidence
thereof shall have been furnished to the Agent and Lenders;
(b) each Borrower shall have delivered evidence reasonably
satisfactory to the Agent and Lenders that, immediately after the
Closing Date and making of the initial Loans and issuance of any
Letter of Credit and after ensuring that all of the Borrowers' and
the Parent Debts are current, the U.K. Borrower will have U.K.
Availability of not less than ten percent (10%) of the U.K.
Borrowing Base, and each Borrower shall have sufficient
availability to enable it to meet all debt amortization
requirements and to observe and perform all terms hereof and of
the other Loan Documents;
(c) all registrations and filings in respect of the Loan Documents
shall have been made in England, Wales, Quebec and Ontario and
otherwise as Agent's counsel shall determine to be necessary or
appropriate (at the expense of the applicable Borrower), it being
understood and agreed that the Agent or the Security Trustee shall
be entitled to make (at the expense of the applicable Borrower)
all such further registrations and filings in respect of the Loan
Documents, after the Closing Date, and until all Obligations of
the Borrowers and the Parent have been paid and performed in full,
as the Agent or the Security Trustee shall consider necessary or
appropriate in its discretion;
(d) the Agent shall have reviewed and shall be satisfied with the
insurance policies maintained by each Borrower and the Parent, and
all terms thereof (including risks and amounts of coverage) and
the insurers, it being understood and agreed that the Agent or, in
the case of the U.K. Borrower, the Security Trustee (for the Agent
and the other Lenders) shall be named as loss payee as its
interest may appear (pursuant to endorsements
<PAGE>
-100-
satisfactory to the Agent in its discretion) on each of the
policies of the Borrowers and the Parent;
(e) the Agent shall be satisfied with the results of all immoveable
and real and moveable and personal property and other searches and
enquiries conducted in respect of the Borrowers and the Parent and
their property and assets as the Agent's counsel may require
including, without limitation, under the Uniform Commercial Code,
the PPSA, the Register of Personal and Moveable Real Rights of
Quebec, the public register maintained by the Registrar of
Companies pursuant to, inter alia, the Companies Act of 1985 (as
amended by the Companies Act of 1989) of England and Wales, and
such discharges (in the case of any registrations in favour of
Tandy and estoppel letters (to confirm the amounts secured by any
existing encumbrances and the collateral covered thereby) shall be
received by the Agent as may be required by the Agent in its
discretion;
(f) the Agent and Lenders shall be satisfied that there are no
judgments outstanding, and no legal or administrative proceedings
(including in any court arbitrator or any Public Authority but
excluding proceedings or discussions with Revenue Canada which
have been disclosed to the Lender) pending or threatened except as
expressly permitted hereunder which could have a Material Adverse
Effect or which could otherwise, in the Agent's and/or Lenders'
judgment, adversely affect the transactions contemplated hereby;
(g) the Parent and Borrowers shall have delivered budgets for its
Capital Expenditures and cash flow and other projections,
satisfactory to the Agent and Lenders, prepared on an annualized
basis and on a month-by-month basis for the period ending June 30,
1998, on terms and in form satisfactory to the Agent and Lenders;
(h) the Agent and Lenders shall have received a waiver agreement (the
"Tandy Agreement") from Tandy, in form satisfactory to the Agent
---------------
and Lenders, whereby Tandy waives and agrees not to assert any
rights (under the Bankruptcy and Insolvency Act of Canada, the
---------------------------------------
Civil Code of Quebec and the applicable laws of any other
--------------------
jurisdictions, any rights as an unpaid supplier and Tandy grants
to the Agent, the Security Trustee and Lenders a licence, on
terms satisfactory to the Agent, the Security Trustee and
Lenders, to use trademarks and other intellectual property to
liquidate Collateral;
<PAGE>
-101-
(i) the Borrowers and Parent shall have satisfied Agent that the
Borrowers and Parent have taken and are taking all commercially
reasonable steps to ascertain the extent of, quantify and
successfully address the business and financial risks facing the
Borrowers and Parent as a result of what is commonly referred to
as the "Year 2000 problem" (i.e., the inability of certain
principal computer applications used in the Borrowers' businesses
to recognize correctly and perform properly date-sensitive
functions involving certain dates prior to and any date after
December 31, 1999).
10.4 Termination of Liens. The Agent shall have received duly executed
--------------------
financing change statements, discharges and other instruments, or evidence
thereof, in form and substance satisfactory to the Agent, as shall be necessary
to terminate and satisfy all Liens on the Property of the Borrowers and the
Parent except Permitted Liens.
10.5 Deliberately Left Blank.
-----------------------
10.6 Closing Fee. The Canadian Borrower shall have paid in full the
-----------
Canadian Closing Fee and any other fees as agreed upon between the Canadian
Borrower and the Agent and/or Canadian Lenders. The U.K. Borrower shall have
paid in full the U.K. Closing Fee and any other fees as agreed upon between the
U.K. Borrower and the Agent and/or the U.K. Lenders.
10.7 Payment of Fees and Expenses. The Canadian Borrower shall have paid
----------------------------
all reasonable fees and expenses of the Agent's outside counsel, Meighen Demers
all special local counsel retained and all other fees and expenses of the Agent
or Security Trustee incurred in connection with any of the Loan Documents and
the transactions contemplated thereby.
10.8 Required Approvals. The Agent and Lenders shall have received
------------------
certified copies of all consents or approvals of any Public Authority or other
Person which the Agent and/or Lenders determine is required in connection with
the transactions contemplated by this Agreement.
10.9 No Material Adverse Change. There shall have occurred no material
--------------------------
adverse change in either Borrower's or the Parent's Property, business,
operations, prospects or financial condition since June 30, 1997.
10.10 Proceedings. All proceedings to be taken in connection with the
-----------
transactions contemplated by this Agreement and all Loan Documents and other
documents, instruments, guarantees and other assignments incident hereto or
contemplated in connection herewith (whether or not forms thereof are annexed
hereto as Exhibits), shall be satisfactory in form and substance to the Agent
and Lenders and its counsel.
<PAGE>
-102-
10.11 Environmental Matters. The Agent shall have received and confirmed
---------------------
its satisfaction with duly completed Environmental Questionnaire and Disclosure
Statements for each parcel of Real Property owned by the Borrowers.
11. DEFAULT; REMEDIES.
-----------------
11.1 Events of Default. It shall constitute an event of default ("Event of
----------------- --------
Default") if any one or more of the following shall occur for any reason:
- -------
(a) any failure to pay the principal of or interest or premium on any
of the Obligations (including, for greater certainty, any amount
due in respect of any F/X Transaction, including upon any early or
premature termination, cancellation or unwinding thereof) when
due, whether upon demand or otherwise;
(b) any representation or warranty made by either Borrower or the
Parent in this Agreement, any of the other Loan Documents, any
Financial Statement, or any certificate furnished by either
Borrower, the Parent or any of its and their Subsidiaries at any
time to the Agent, the Security Trustee and/or Lenders shall prove
to be untrue in any material respect as of the date on which made;
(c) default shall occur in the observance or performance of any of the
covenants and agreements contained in Sections 6.1 to 6.15, 7.2(a)
to (e), 7.3, 9.4, 9.7, 9.8, 9.10, 9.11, 9.12 and 9.16 to 9.23 of
this Agreement or any of the other Loan Documents shall terminate
(other than in accordance with its terms or the terms hereof or
with the written consent of the Agent and/or Lenders) or become
void or unenforceable without the written consent of the Agent
and/or Lenders;
(d) default shall occur in the observance or performance of any of the
covenants and agreements contained in this Agreement, the Loan
Documents, or any other agreement entered into at any time to
which either Borrower, the Parent, any other Guarantor and/or any
of its and their Subsidiaries, and the Agent and/or the Security
Trustee and/or any of the Lenders are party other than those
referred to in paragraph (c) above, which is not remedied within
thirty (30) days of written notice to do so;
(e) any default shall occur in the payment of any principal, interest
or premium with respect to any other Debt in an outstanding
principal
<PAGE>
-103-
amount in excess of $500,000 or under any agreement or instrument
under or pursuant to which any such Debt or indebtedness may have
been issued, created, assumed, or guaranteed by either Borrower,
the Parent or any other Guarantor and such default shall continue
for more than the period of grace, if any, therein specified, or
if any Debt or indebtedness shall be declared due and payable
prior to the stated maturity thereof or if either Borrower, the
Parent or any other Guarantor otherwise defaults in the
performance of any material term or condition contained in any
document relating to a Permitted Lien;
(f) either Borrower, the Parent or any other Guarantor or any of its
and their Subsidiaries shall: (i) file a voluntary petition in
bankruptcy or file a voluntary petition or an answer or file any
proposal or notice of intent to file a proposal, or file any
application or otherwise commence any action or proceeding
seeking reorganization, arrangement, consolidation or
readjustment of its debts or securities, or which seeks to stay
or has the effect of staying, any creditors, or for any other
under the Bankruptcy and Insolvency Act of Canada, or the
-----------------------------
Companies' Creditors Arrangement Act of Canada, The Insolvency
------------------------------------ --------------
Act 1986 of England and Wales, the Companies Act of 1985 (as
-------- ---------------------
amended by the Companies Act of 1989) of England and Wales, the
---------------------
U.S. Federal Bankruptcy Code (so called), or under any other
----------------------------
bankruptcy, insolvency, liquidation, winding up, corporate or
similar statute or law, provincial or federal, now or hereafter
existing, or consent to, approve of or acquiesce in, any such
petition, proposal, action or proceeding; (ii) apply for or
acquiesce in the appointment of a receiver, assignee, monitor,
liquidator, sequestrator, custodian or trustee (whether or not on
an interim or permanent basis) or similar officer for it or for
all or any part of its Property; (iii) make an assignment for the
benefit of creditors; or (iv) be unable generally to pay its
debts as they become due;
(g) an involuntary petition or proposal shall be filed or an action
or proceeding otherwise commenced seeking reorganization,
arrangement, consolidation or readjustment of either Borrower's,
the Parent's or any other Guarantor's or any of its and their
Subsidiaries' debts or securities or for any other relief under
the Bankruptcy and Insolvency Act of Canada, the Companies'
----------------------------- ----------
Creditors Arrangement Act of Canada, The Insolvency Act 1986 of
------------------------- -----------------------
England and Wales, the Companies Act of 1985 (as amended by the
---------------------
Companies Act of 1989) of England and Wales, the U.S. Federal
--------------------- ------------
Bankruptcy Code (so called), or under any other bankruptcy,
---------------
insolvency, liquidation, winding up, corporate or similar statute
or law, provincial,
<PAGE>
-104-
state or federal, now or hereafter existing unless (A) such
proceeding is discharged within a period of sixty (60) days, (B)
until discharged is being actively and diligently contested in
good faith, and any relief or remedies upon or against either
Borrower's, the Parent's or any other Guarantor's Property have
been stayed, (C) has not given rise to any Material Adverse
Effect, and (D) has not otherwise resulted in any adjudication or
declaration of bankruptcy or any of the events referred to in
paragraph (g);
(h) a receiver, assignee, liquidator, administrator, sequestrator,
custodian, trustee, monitor or similar official for either
Borrower, the Parent, any other Guarantor or any of its and their
Subsidiaries, other than in France and pursuant to the French
Insolvency Proceeding, or for all or any part of the Collateral or
all or any material part of the other Property shall be appointed
involuntarily; or an execution, writ of seizure and sale,
sequestration or extent or any other process of any court, shall
be issued or levied against any material part of the Property of
either Borrower, the Parent or any other Guarantor or shall
otherwise be enforceable against either Borrower, the Parent or
any other Guarantor or a distress or analogous process is levied
upon any material part of the Property of either Borrower, the
Parent or any other Guarantor;
(i) either Borrower, the Parent or any other Guarantor shall file a
certificate of dissolution or like process under applicable law or
shall be liquidated, dissolved or wound-up or shall commence or,
if (A) other than the French Insolvency Proceeding, such
proceeding has not been discharged within sixty (60) days or (B)
such proceeding is not being actively and diligently contested in
good faith or (C) any relief or remedies upon either Borrower's,
the Parent's or any other Guarantor's Property have not been
stayed or (D) such proceeding has given rise to any Material
Adverse Effect or (E) other than an adjudication or declaration
pursuant to the French Insolvency Proceeding which has no effect
outside of France, such proceeding has resulted in any
adjudication or declaration, have commenced against it any action
or proceeding for dissolution, winding-up, administration or
liquidation, or shall take any corporate action in furtherance
thereof or if either Borrower, the Parent or any other Guarantor
abandons all or any material part of its Property or ceases or
threatens to cease to carry on business;
(j) all or any material part of the Property of either Borrower, the
Parent or any other Guarantor shall be nationalized, expropriated
or condemned, seized or otherwise appropriated, or custody or
control of such Property
<PAGE>
-105-
or if either Borrower, the Parent or any other Guarantor shall be
assumed by any Public Authority or any court of competent
jurisdiction at the instance of any Public Authority, except where
contested in good faith by proper proceedings diligently pursued
where a stay of enforcement is in effect, which has resulted in or
may result in a Material Adverse Effect;
(k) any Guarantee of the Obligations shall be terminated, revoked or
declared void or invalid;
(l) one or more final judgments for the payment of money or final
assessments (which are no longer appealable) of Revenue Canada
aggregating in excess of $1,000,000 (whether or not covered by
insurance) shall be rendered against either Borrower, the Parent
or any other Guarantor and such judgment or assessment is not paid
and discharged within thirty (30) days (provided until discharged,
all relief or remedies have been stayed and further provided such
judgment or assessment has not given rise to a Material Adverse
Effect);
(m) any loss, theft, damage or destruction of any item or items of
Collateral occurs which has given or may give rise to a Material
Adverse Effect; or
(n) either Borrower, the Parent or any other Guarantor violates
any Environmental Law which results in an Action Request,
Violation Notice or other notice or control order, cancellation
of any license or certificate or approval that results in any
material disruption of either Borrowers', the Parent's or any
other Guarantor's business or that could reasonably be expected
to have a Material Adverse Effect.
11.2 Remedies. (a) Upon making any demand for payment of any Obligations
--------
payable upon demand or if an Event of Default exists, the Agent may in its
discretion and, if so directed by the Instructing Group, shall, without notice
to or demand on either Borrower, any Guarantor or any other Person, do one or
more of the following at any time or times and in any order: (i) reduce the
Canadian Availability or the U.K. Availability or one or more of the elements
thereof; (ii) restrict the amount of or refuse to make Revolving Loans, and
restrict or refuse to arrange for Letters of Credit or F/X Transactions; (iii)
terminate this Agreement; (iv) declare any or all Obligations to be immediately
due and payable (provided however that upon the occurrence of any Event of
Default described in Sections 11.1(e), 11.1(f), 11.1(g), 11.1(h) or 11.1(i), all
Obligations shall automatically become immediately due and payable) in which
case the Borrowers shall immediately (A) pay to the Agent the amount so declared
to be due and payable by it (the "Amount"), and (B) without relieving the
------
Borrowers from their obligations to immediately obtain the termination and
cancellation of all Letters of Credit, deposit with the
<PAGE>
-106-
Agent or, in the case of the U.K. Borrower, the Security Trustee, as security
for the due payment on their respective expiry dates of the Letters of Credit
issued and outstanding for such Borrower's account, a sum of money equal to the
principal amount of all such Letters of Credit for such Borrower's account, and
all fees and expenses payable by such Borrower to the date of expiration of such
Letters of Credit for such Borrower's account (the "Deposit"), and the Agent or,
-------
in the case of the U.K. Borrower, the Security Trustee shall, upon the earlier
to occur of the termination or cancellation thereof prior to maturity or the
respective expiry dates of such Letters of Credit apply (or deliver to the
Issuing Lender for application) the Deposit (or such portion thereof as shall be
necessary) to pay the principal amount of such Letters of Credit; and (v) pursue
its other rights and remedies hereunder and under the Loan Documents and
applicable law.
(b) Upon making any demand for payment of any Obligations payable upon
demand or upon the occurrence of an Event of Default: (i) the Loan Documents
shall become immediately enforceable and the Agent or, in the case of the U.K.
Borrower, the Security Trustee and/or Lenders shall have all rights and remedies
of a secured party under the PPSA, the Civil Code of Quebec and all applicable
laws of any jurisdiction where the Collateral may be located as well as all
rights provided for in the Loan Documents and may, in its absolute discretion,
take any and all steps in order to enforce and realize upon the Loan Documents,
in whole or in part, provided that none of the Borrowers' or any Guarantor's
obligations and liabilities under this Agreement are in any way affected or
diminished, in the event of any such enforcement of or realization upon any
Security Interest; and (ii) the Agent and/or Lenders shall be entitled to cause
Environmental Audits to be conducted in respect of the Borrowers and the
Guarantors and its or their Property and/or any Property in its or their
possession, charge, management or control, the cost and expense of same to be
paid by the Borrower.
(c) If a demand for payment of any of the Obligations payable upon demand
is made or an Event of Default occurs, to the maximum extent legally permitted
but subject to compulsory provisions of law, each Borrower and each Guarantor
hereby waives all rights to notice and hearing prior to the exercise by the
Agent or, in the case of the U.K. Borrower, the Security Trustee and/or Lenders
of the Agent's, Security Trustee's and/or Lenders' rights to repossess the
Collateral without judicial process or to replevy, attach or levy upon the
Collateral without notice or hearing.
(d) Upon demand or upon the termination of this Agreement following the
occurrence of any Event of Default, each Borrower shall pay the Agent,
immediately upon termination, an early termination penalty equal to the early
termination fee that would have been payable by it under Article 12 if this
Agreement had been terminated on that date pursuant to such Borrower's election.
<PAGE>
-107-
(e) Each Borrower and each of the Guarantors expressly agrees that the
rights and remedies of the Agent and/or Lenders under this Agreement and/or the
Loan Documents are cumulative and in addition to, and not in substitution for,
any rights or remedies provided by law; any single or partial exercise by the
Agent, the Security Trustee and/or Lenders of any right or remedy for a default
or breach of any term, covenant, condition or agreement in this Agreement does
not affect its rights and does not waive, alter, affect, or prejudice any other
right or remedy to which the Agent, the Security Trustee and/or Lenders may be
lawfully entitled for the same default or breach. Any waiver by the Agent, the
Security Trustee and/or Lenders of the strict observance of, performance of or
compliance with any term, covenant, condition or agreement of this Agreement or
the Loan Documents, and any indulgence by the Agent, the Security Trustee and/or
Lenders is not a waiver of that or any subsequent default.
(f) In addition to any rights now or hereafter granted under applicable
law, and not by way of limitation of any such rights, the Agent, the Security
Trustee and/or Lenders are authorized at any time or from time to time, without
notice to the Borrowers, any Guarantor or to any other Person, any such notice
being expressly waived by the Borrowers and each Guarantor, to set-off and to
appropriate and to remit to the Agent any and all deposits, matured or
unmatured, general or special, and any other indebtedness at any time held by
the Agent, the Security Trustee and/or Lenders, as the case may be, to or for
the credit of or the account of such Borrower or Guarantor against and on
account of the obligations and liabilities of such Borrowers or Guarantor due
and payable to the Agent, the Security Trustee and/or the applicable Lenders as
the case may be, under or in connection with this Agreement, including without
limitation, all claims of any nature or description arising out of or connected
with this Agreement.
12. TERM AND TERMINATION OF REVOLVING LOAN. Subject to any earlier demand for
--------------------------------------
payment of the Revolving Credit Facilities upon the occurrence of an Event of
Default, the initial term of this Agreement shall be the period from the Closing
Date to end on the Maturity Date (the "Term"). Provided that the Borrowers
----
provide a written request for renewal not less that ninety (90) days prior to
the Maturity Date and the Lenders, in their sole discretion, agree to such
renewal, this Agreement may be renewed for successive one (1) year periods after
the Maturity Date (each such renewal period referred to as a "Renewal Term").
------------
The Borrowers may terminate the Revolving Credit Facilities at any time during
the Term or any Renewal Term if: (a) they give the Agent ninety (90) days prior
written notice of termination by registered or certified mail; (b) each Borrower
pays and performs all of its Obligations on or prior to the effective date of
termination; and (c) each Borrower pays to the Agent (for distribution in
accordance with their respective Participations) on or before the effective date
of termination (A) if the effective date of such termination is on or prior to
the first anniversary of the Closing Date, it pays the Agent (for the account of
the Lenders in accordance with their respective Participations), on or prior to
the effective date of termination, an early termination fee equal to one percent
(1%) of its Average Loan Balance, (B) if the effective date of such
<PAGE>
-108-
termination is after the first anniversary of the Closing Date and prior to the
second anniversary of the Closing Date, an early termination fee equal to one
half of one percent (0.50%) of its Average Loan Balance and (C) if the effective
date of such termination is after the second anniversary of the Closing Date and
prior to the Maturity Date or the expiry date of any Renewal Term, an early
termination fee equal to one quarter of one percent (0.25%) of its Average Loan
Balance. The Agent may terminate this Agreement upon an Event of Default
whereupon the foregoing fee shall be payable as if the Borrowers had given a
notice of termination effective as of the date of termination by the Agent. Upon
the effective date of termination of this Agreement for any reason whatsoever,
all Obligations (including, without limitation, all exposure of the Agent and/or
Lenders under or in connection with Letters of Credit outstanding) shall become
immediately due and payable without the need for any demand or observance of any
other formality by the Agent and/or Lenders. Notwithstanding the termination of
this Agreement, until all Obligations are paid and performed in full, the Agent,
the Security Trustee and/or Lenders shall retain all its rights and remedies
hereunder and under the Loan Documents (including, without limitation, in all
then existing and after-arising Collateral). Partial termination of the
Revolving Credit Facilities is not permitted. Neither the Canadian Revolving
Credit Facility nor the U.K. Revolving Credit Facility may be terminated unless
the other is contemporaneously terminated. The foregoing termination fees
payable to BACAN and BAUK in respect of BACAN's and BAUK's Commitments at the
time shall be waived in the event that the Revolving Credit Facilities are
refinanced by Bank of America NT&SA or any of its affiliates after the first
anniversary of the Closing Date.
13. GUARANTEES
----------
13.1 The Guarantees. The Parent, as primary obligor and not as a surety
--------------
merely, hereby unconditionally and irrevocably, jointly and severally,
guarantees to the Agent and each of the Lenders the punctual payment when due in
accordance with the terms hereof of all obligations, of whatever kind and
description, of each Borrower to the Agent, the Security Trustee and each of the
Lenders now or hereafter existing, whether direct or indirect, absolute or
contingent, matured or unmatured, secured or unsecured pursuant to or arising
out of or under this Agreement , including, without limitation, all Obligations
(all such obligations are referred to herein as the "Guaranteed Obligations").
----------------------
13.2 Guarantee Absolute. The Parent guarantees that the Guaranteed
------------------
Obligations will be paid strictly in accordance with their terms regardless of
any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Agent, the Security Trustee
and/or Lenders with respect thereto. The liability of the Parent hereunder shall
be joint and several and absolute and unconditional irrespective of:
(a) Any lack of validity or enforceability of the Obligations or the
Guaranteed Obligations or any agreement or instrument relating thereto;
<PAGE>
-109-
(b) Any change in the time, manner or place of the payment of, or in any
other term of, all or any of the Obligations or the Guaranteed Obligations, or
any amendment or modification of or any consent to departure from this Agreement
or any other Loan Document;
(c) Any exchange, release or nonperfection of any Collateral or any release
or amendment to, waiver of, or consent to departure from, or any Guarantee for,
all or any part of the Obligations or the Guaranteed Obligations;
(d) Any whole or partial termination of this Guarantee as to any other
Guarantor; or
(e) Any other circumstance which might otherwise constitute a defence
available to, or a discharge of, either Borrower in respect of the Obligations
or the Guaranteed Obligations or a Guarantor in respect of this Guarantee or the
Guaranteed Obligations.
This Guarantee shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Obligations or the Guaranteed
Obligations are rescinded or must otherwise be returned by the Agent, the
Security Trustee and/or Lenders under applicable law, all as though such payment
had not been made.
13.3 Consents, Waivers and Renewals. The Parent hereby waives promptness,
------------------------------
diligence, notice of the acceptance hereof, notice of intent to accelerate and
notice of acceleration and any other notice with respect to any of the
Obligations or the Guaranteed Obligations and this Agreement and any requirement
that the Agent, the Security Trustee and/or Lenders protect, secure, perfect or
insure any Security Interest or Lien or any Property subject thereto or exhaust
any right or take any action against either Borrower, any Guarantor or any other
Person or any Collateral before proceeding hereunder. The Parent agrees that the
Agent, the Security Trustee and/or Lenders may at any time and from time to
time, either before or after the maturity thereof, without notice to or further
consent of the Parent extend the time of payment of, exchange or surrender any
Collateral for, or renew any of the Obligations or the Guaranteed Obligations,
and may also make any agreements with either Borrower, any Guarantor or with any
other party to or Person liable on any of the Obligations, or interested
therein, for the extension, renewal, payment, compromise, discharge, or release
thereof, in whole or in part, or for any modification of the terms thereof or of
any agreement between the Agent, the Security Trustee and/or any Lenders and the
Borrowers or any such other party or Person, without in any way impairing or
affecting this Guarantee. The Parent agrees to make payment to the Agent of any
of the Obligations and the Guaranteed Obligations whether or not the Agent, the
Security Trustee and/or any Lenders shall have resorted to any collateral
security, or shall have proceeded against any other obligor principally or
secondarily obligated with respect to any of the Obligations or the Guaranteed
Obligations. The Agent, the Security Trustee and/or Lenders shall be free to
deal with the Borrowers and each of the Guarantors as it sees fit.
<PAGE>
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13.4 Subrogation. The Parent shall not exercise any rights which it may
-----------
acquire by way of subrogation under this Agreement, by any payment made
hereunder or otherwise, until all the Obligations and the Guaranteed Obligations
shall have been paid in full. If any amount shall be paid to the Parent on
account of such subrogation rights in violation of the foregoing restriction,
such amount shall be held in trust for the benefit of the Agent (for itself and
the other Lenders) and shall forthwith be paid to the Agent (for itself and the
other Lenders) to be credited and applied to the Obligations, whether matured or
unmatured, in accordance with the terms of this Agreement.
13.5 Allocation. As between the Agent and Lenders only, all amounts
----------
received or collateral from the Parent from the foregoing guarantee, shall be
applied firstly, two-thirds (2/3) to the Obligations under or in respect of the
-------
Canadian Revolving Credit Facility and one-third (1/3) to the Obligations under
or in respect of the U.K. Revolving Credit Facility and thereafter to any other
----------
Obligations outstanding.
14. THE AGENT.
---------
14.1 Agent. Each Lender hereby irrevocably appoints BACAN as Agent
-----
(including any successor agent as herein provided and including any person to
whom the Agent may delegate (but only with the consent of the Instructing Group
if not to an affiliate of the Agent or a recognized appraiser) duties or
responsibilities as permitted by Section 14.2(h) or as contemplated in Section
14.15, the "Agent") to act as its agent in connection with this Agreement, the
other Loan Documents and the matters contemplated hereunder and thereunder, and
authorizes irrevocably the Agent to exercise such rights, powers and discretions
as are delegated to the Agent pursuant to this Agreement and the other Loan
Documents together with all such rights, powers and discretions as are
incidental hereto or thereto. The Agent shall have only those duties and
responsibilities which are expressly specified in this Agreement and the other
Loan Documents, and it may perform such duties by or through its agents or
employees. This Agreement shall not place the Agent under any fiduciary duties
in respect of any Lender or any other Person, 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
Agent. Without limiting the generality of the foregoing sentence, the use of
the term "agent" in this Agreement with reference to the 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. The Agent
and any other Person to whom an Agent may delegate duties or responsibilities as
permitted under Section 14.2 (h) and Section 14.5 shall enjoy the same benefits,
rights and protections as those provided to the Agent under this Article mutatis
mutandis. Each Lender hereby irrevocably appoints and constitutes the Agent its
true and lawful attorney, with full power of
<PAGE>
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substitution, for the purposes of carrying out any of the terms hereof,
collecting or enforcing any of the Obligations and exercising any of the rights
and remedies of the Lenders hereunder and under the other Loan Documents,
including, without limitation, for the purposes of signing any documents
necessary to perfect, register, maintain, release or discharge the Security
Interest or any of the Loan Documents and instituting any actions or
proceedings. The Agent shall not be liable for any acts or omissions or errors
of judgment or mistakes of fact or law in its exercise of the foregoing power,
except resulting from its gross negligence or wilful default.
14.2 Agent's Responsibility. The Agent may:
----------------------
(a) assume that:
(i) any representation made by either Borrower or any Guarantor
in or in connection with any of the Loan Documents, any
notice or other document, instrument or certificate is true;
(ii) no Event has occurred; and
(iii) none of the Borrowers or any Guarantor is in breach of or in
default under its obligations under any of the Loan
Documents;
(b) unless the Agent has actual knowledge or actual notice to the
contrary, assume that each parties' address is that identified
with its signature below until it has received from such party a
notice designating some other office of such party as its address
and act upon any such notice until the same is superseded by a
further such notice;
(c) engage and pay for the advice or services of any lawyers,
accountants or other experts whose advice or services may to it
seem necessary, expedient or desirable and rely upon any advice
so obtained;
(d) unless the Agent has actual knowledge or actual notice to the
contrary, rely as to matters of fact which might reasonably be
expected to be within the knowledge of a Borrower or any
Guarantor upon a statement signed by or on behalf of a Borrower
or such Guarantor;
(e) rely upon any writing, resolution, notice, consent, certificate,
affidavit, letter, fax, telex, telephone message, statement,
conversation, communication or document believed by it to be
genuine and correct and believed to have been signed, sent or made
by a proper Person;
<PAGE>
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(f) refrain from exercising any right, power or discretion vested in
it under the Loan Documents or otherwise refrain from taking any
action unless and until it first receives the advice or
concurrence of the Instructing Group and, if requested, it is
specifically indemnified to its satisfaction by all Lenders
against any and all liability or expense which may be incurred by
it by reason of taking or continuing to take such action. The
Agent 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
Instructing Group and such request and any action taken or failure
to act pursuant thereto shall be binding upon all the Lenders;
(g) refrain from exercising any right, power or discretion vested in
it which would or might in its opinion be contrary to any law of
any jurisdiction or any directive or otherwise render it liable to
any Person, and may do anything which is in its opinion necessary
to comply with any such law or directive;
(h) (without any further consent of the Borrowers, the Parent, any
Lender or any other Person if to an affiliate of the Agent or
recognized appraiser and without limitation to Section 14.15) to
such other Person, such duties and responsibilities as it shall
determine to be appropriate in respect of dealings with or
relating to the Borrowers, the Guarantors or any other Person and
such delegated Person shall be entitled to all of the benefits and
powers of the Agent relating to such delegated functions and the
Agent shall not be responsible for the negligence or misconduct of
any agent or attorney-in-fact that it selects with reasonable
care;
(i) retain for its own benefit, and without liability to account for,
any fee or other sum receivable by it for its own account; and
(j) provide any advisory or other ancillary banking services to any
party (including any Affiliate thereof) to this Agreement provided
same do not conflict with the Agent's express duties hereunder.
14.3 Agent's Duties. The Agent shall:
--------------
(a) promptly upon receipt thereof, inform each Lender of the contents
of (and, if requested, provide a copy to such Lender of) any
notice, document, request or other information received by it in
its capacity as Agent hereunder from either Borrower, any
Guarantor, or any Lender;
<PAGE>
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(b) promptly notify each Lender of the occurrence of any Event or
Event of Default, provided, however, that the Agent shall not be
-------- -------
deemed to have knowledge or notice of the occurrence of any Event
or Event of Default, except with respect to defaults in the
payment of principal, interest and fees required to be paid to
the Agent for the account of the Lenders, unless the Agent shall
have received written notice from a Lender or a Borrower
referring to this Agreement, describing such Event or Event of
Default and stating that such notice is a "notice of default";
(c) each time either Borrower requests the prior written consent of
the Instructing Group of the Lenders, use its best efforts to
obtain and communicate to such Borrower the response of the
Instructing Group of the Lenders in a reasonable and timely manner
having due regard to the nature and circumstances of the request;
(d) subject to the foregoing provisions of this Article, take such
actions with respect to any Event or Event of Default as may be
requested by the Instructing Group, provided, however, that
-------- -------
unless and until the Agent has received any such request, the
Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Event or
Event of Default as it shall deem advisable or in the best
interest of the Lenders; and
(e) if so instructed by the Instructing Group, and subject to being
indemnified to its satisfaction by all Lenders, do and perform the
things contemplated in Articles 6 and 11 in respect of the
Revolving Credit Facilities, or refrain from exercising any right,
power or discretion vested in it under the Loan Documents or any
document incidental thereto.
14.4 Protection of Agent. Notwithstanding anything to the contrary
-------------------
expressed or implied herein, the Agent shall not:
(a) be bound to enquire as to:
(i) whether any representation made by either Borrower, any
Guarantor or any other Person in or in connection with the
Loan Documents or any document incidental thereto is true;
(ii) the occurrence or otherwise of any Event;
<PAGE>
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(iii) the performance by either Borrower, any Guarantor or any
other Person of its obligations under any of the Loan
Documents or any document incidental thereto (including any
obligations in respect of insurance);
(iv) any breach of or default by either Borrower, any Guarantor
or any other Person under the Loan Documents or any document
incidental thereto; or
(v) the use or application by either Borrower or any Guarantor
of any of the proceeds of the Revolving Credit Facility;
(b) be bound to account to any Lender for any sum or the profit
element of any sum received by it for its own account as herein
provided;
(c) be bound to disclose to any Person any information relating to
either Borrower or any Guarantor if such disclosure would or might
in its opinion constitute a breach of any law or regulation or be
otherwise actionable at the suit of any Person;
(d) be under any obligation to inspect any Collateral or any other
Property, books or records of either Borrower, any Guarantor or
any of its or their Subsidiaries or Affiliates;
(e) accept any responsibility for the accuracy and/or completeness of
any information supplied in connection herewith or for the
legality, validity, effectiveness, genuineness, sufficiency,
adequacy or enforceability of the Loan Documents, any Loan, any
Letter of Credit or any document incidental hereto or thereto and
the Agent shall be under no liability to any Lender as a result of
taking or omitting to take any action in relation to the Loan
Documents, any Loan or any document incidental hereto or thereto
save in the case of gross negligence or wilful misconduct, and
each of the Lenders agrees that it will not assert or seek to
assert against any director, officer, employee, affiliate or agent
of the Agent any claim it might have against any of them in
respect of the matters referred to in this Section 14.4; or
(f) have any obligation whatsoever to any of the Lenders to assure
that the Collateral exists or is owned by the Borrowers or any
Guarantor or is cared for, protected or insured or has been
encumbered, or that the Agent's Liens have been properly or
sufficiently or lawfully created, perfected,
<PAGE>
-115-
protected or enforced or are entitled to any particular priority,
or to exercise at all or in any particular manner or under any
duty of care, disclosure or fidelity, or to continue exercising,
any of the rights, authorities and powers granted or available to
the Agent pursuant to this Agreement or pursuant to any of the
Loan Documents, it being understood and agreed that in respect of
the Collateral, or any act, omission or event related thereto, the
Agent may act in any manner it may deem appropriate, in its sole
discretion, given the Agent's own interest in the Collateral in
its capacity as one of the Lenders and that the Agent shall have
no duty or liability whatsoever to any Lender as to any of the
foregoing.
14.5 Indemnification of Agent. Each Lender shall, on demand by the Agent,
------------------------
indemnify the Agent pro rata in accordance with each such Lender's Participation
at the time of such demand against any and all costs, claims, reasonable
expenses (including legal fees and disbursements) and liabilities which such
Agent may incur (and which have not been reimbursed by the applicable Borrower),
except to the extent determined by a court of competent jurisdiction in a final,
non-appealable judgment to have resulted solely from the gross negligence or
wilful misconduct of the Agent, in acting in its capacity as an Agent under the
Loan Documents, any Loans or any document incidental hereto or thereto. Without
limitation of the foregoing, each Lender shall reimburse the Agent upon demand
for its ratable share of any costs or out-of-pocket expenses (including legal
fees) incurred by the Agent 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 Agent is not reimbursed for such expenses by or on behalf of the
applicable Borrower. The undertaking in this Section shall survive the payment
of all Obligations hereunder and the resignation or replacement of the Agent.
For greater certainty, the term "Agent" includes each Agent to whom any rights,
powers or functions of Agent may be delegated.
14.6 Termination or Resignation of Agent. The Agent may resign as Agent,
-----------------------------------
upon 30 days' notice to the Lenders. If the Agent resigns under this Agreement,
the Instructing Group shall appoint from among the Lenders a successor agent for
the Lenders which successor agent shall be approved by the Borrowers. If no
successor agent is appointed prior to the effective date of the resignation of
the Agent, the Agent may appoint, after consulting with Lenders and the
Borrowers, a successor agent from among the Lenders. 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 14 and Sections 14.5 and 16.9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was an
<PAGE>
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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 Lenders shall perform all of the duties of the Agent
hereunder until such time, if any, as the Instructing Group appoint a successor
agent as provided for above.
14.7 Rights of Agent, BAUK and BACAN. With respect to its Commitment and
-------------------------------
its Participation, and to all Loans, the Agent shall have the same rights and
powers under this Agreement and any Loans as any other Lender, and it may
exercise such rights and powers as though it were not performing the duties and
functions delegated to it as an Agent hereunder, and the term "Lenders" or any
other similar term shall, unless the context otherwise requires, include the
Agent in its capacity as a Lender and BACAN and BAUK as Issuing Lenders. BACAN,
BAUK and its or their Affiliates may make, provided same does not conflict with
any express duties hereunder, 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 Borrowers and their Subsidiaries and Affiliates as though BACAN and
BAUK were not the Agent and/or Issuing Lender hereunder and without notice to or
consent of the Lenders. The Lenders acknowledge that, pursuant to such
activities, BACAN, BAUK or its or their Affiliates may receive information
regarding the Borrowers or their Affiliates (including information that may be
subject to confidentiality obligations in favour of the Borrowers or such
Subsidiary) and acknowledge that the Agent, BAUK and BACAN shall be under no
obligation to provide such information to them.
14.8 Authorized Waivers, Variations and Omissions.
--------------------------------------------
(a) Subject to paragraphs (b) and (c), if so authorized in writing by
the Instructing Group the Agent may grant waivers, consents, vary the terms of
or amend this Agreement and do or omit to do all such acts and things in
connection herewith or therewith; and
(b) the Agent shall, in the exercise of its Permitted Discretion and
without further authorization of any Lender, be permitted to (i) reduce the
lending percentages specified in the definitions of "Canadian Availability" or
"U.K. Availability", (ii) to reincrease the lending percentages to the
percentages specified in the definitions of "Canadian Availability" or "U.K.
Availability" following any previous decrease, (iii) determine the applicability
of any ineligibility criteria in determining Canadian Availability or U.K.
Availability and the Canadian Borrowing Base or U.K. Borrowing Base and
establish, reduce, increase or calculate reserves as it considers appropriate,
(iv) release, or instruct the Security Trustee to release, Collateral provided
that (A) full and final payment and satisfaction of the Obligations has
occurred, or (B) such Collateral is being sold or disposed of and the applicable
Borrower has certified that such sale or disposition is permitted hereunder, or
(C) such Collateral is Leased Property under a lease which has expired or been
terminated in a transaction permitted hereunder, or (D) such Collateral
<PAGE>
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is not otherwise referred to in clauses (A) to (C) and such Collateral, together
with all other Collateral released otherwise than pursuant to clause (A) to (C)
hereof, does not have a book value in excess of $5,000,000 in the aggregate in
any Fiscal Year, and (v) make or cause to be made Revolving Loans in excess of
Canadian Availability or U.K. Availability, as the case may be, provided that
(i) the aggregate amount of such excess shall not exceed $5,000,000 and (ii) any
such Loans shall not cause any Lender's Commitment to be increased; and
(c) except with the prior written agreement of all the Lenders,
nothing in this Article shall authorize (i) any changes in any rates of interest
or fees, (ii) any extension of the date for, or alteration in the amount,
currency or mode of calculation or computation of any payment of principal or
interest or other amount applicable to the Revolving Credit Facilities, (iii)
any increase in the Commitment of a Lender, (iv) any extension of the Maturity
Date, (v) any release of the Collateral (except as permitted in Section
14.8(b)), (vi) any change in the terms of Section 11, (vii) any change in the
definition of "Instructing Group", (viii) the release of either Borrower or any
Guarantor until all Obligations have been fully and finally paid and satisfied,
(ix) any amendments or waivers to Sections 9.22 or 9.23, (x) any change in the
definition of the "Tax Reserve", or (xi) any amendments to this Section 14.8.
Notwithstanding the foregoing, no such agreement shall amend, modify or
otherwise affect the rights or duties of the Agent under the Loan Documents
without the prior written consent of the Agent.
14.9 Financial Information Concerning the Borrowers or the Guarantors.
----------------------------------------------------------------
Subject to Section 14.3(a), the Agent shall have no duty or responsibility
either initially or on a continuing basis to provide any Lender with any credit
or other information with respect to the financial condition and affairs of the
Borrowers or any Guarantor.
14.10 Knowledge of Financial Situation of Borrowers. Without limiting the
---------------------------------------------
generality of Section 14.9, each Lender acknowledges that none of the Agent or
its Affiliates or any director, officer, employee, representative or agent
thereof (an "Agent-Related Person") has made any representation or warranty to
--------------------
it, and that no act by the Agent hereinafter taken, including any review of the
affairs of the Borrowers, the Parent and its Subsidiaries shall be deemed to
constitute any representation or warranty by any Agent-Related Person to any
Lender. Without limiting the generality of Section 14.9, each Lender represents
to the Agent 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 conditions and credit
worthiness of the Borrowers, the Parent and its Subsidiaries, 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
Borrowers hereunder. Each Lender also represents that it will, independently and
without reliance 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
<PAGE>
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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 credit worthiness of the Borrowers,
the Parent and Guarantors. Except for notices, reports and other documents
expressly herein required to be furnished to the Lenders by the Agent, the Agent
shall not have any duty or responsibility to provide any Lender with any credit
or information concerning the business, prospects, operations, property,
financial and other condition and credit worthiness of the Borrowers, the Parent
or any Guarantor which may come into the possession of any of the Agent-Related
Persons.
14.11 Restrictions on Actions by Lenders; Sharing of Payments. (a) Each
-------------------------------------------------------
of the Lenders agrees that it shall not, without the express consent of the
Agent, and that it shall, to the extent that it is lawfully entitled to do so,
upon the request of the Agent, set-off against the Obligations, any amounts
owing by such Lender to a Borrower or any Guarantor or any accounts of a
Borrower or any Guarantor now or hereafter maintained with such Lender. Each of
the Lenders further agrees that it shall not, unless specifically requested to
do so by the Agent, take or cause to be taken any action, including, without
limitation, the commencement of any legal or equitable proceedings, against a
Borrower or any Guarantor or otherwise to foreclose any Lien on, or otherwise
enforce any security interest in, any of the Collateral, the purpose of which
is, or could be, to give such Lender any preference or priority against the
other Lenders with respect to the Collateral.
(b) If at any time or times any Lender shall receive (i) by payment,
foreclosure, set-off or otherwise, any proceeds of Collateral or any payments
with respect to the Obligations of a Borrower to such Lender arising under, or
relating to, this Agreement or the other Loan Documents, except for any such
proceeds or payments received by such Lender from the Agent pursuant to the
terms of this Agreement or the Security Trustee pursuant to the terms of the
U.K. Security Documents, or (ii) payments from the Agent or, as the case may be,
the Security Trustee in excess of such Lender's ratable portion of all such
distributions by the Agent or, as the case may be, the Security Trustee, such
Lender shall promptly turn the same over to the Agent or, as the case may be,
the Security Trustee, in kind, and with such endorsements as may be required to
negotiate the same to the Agent or, as the case may be, the Security Trustee, or
in same day funds, as applicable, for the account of the Agent or, as the case
may be, the Security Trustee, and the Lenders and for application to the
Obligations in accordance with the applicable provisions of this Agreement.
14.12 Capacity as Agent. In performing its functions and duties under this
-----------------
Agreement, the Agent shall act solely as the agent of the Lenders and shall not
assume, and shall not be deemed to have assumed, any obligation as agent or
trustee for the Borrowers or any other Person. The Agent shall be under no
liability or responsibility of any kind to the Borrowers, any Guarantor, any
Lender or to any other Person arising out of or in relation to any failure or
delay in performance or breach by any Lender or Lenders or Agent, as the case
may be, by the
<PAGE>
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Borrowers, any Guarantor or any other Person pursuant to or in any way in
connection with this Agreement For greater certainty, the term "Agent" includes
each Agent to whom any rights, powers or functions of Agent may be delegated.
14.13 Certain Rights of the Agent. Without limitation to any other
---------------------------
provision hereof, the Agent may request instructions from the Instructing Group
at any time. If the Agent requests instructions from the Instructing Group with
respect to any action or inaction, the Agent shall be entitled to await
instructions from the Instructing Group before such action or inaction and shall
be entitled to request and obtain an indemnity of all Lenders satisfactory to
the Agent against all costs, liability and expenses which Agent may suffer or
incur in connection with such matters.
14.14 Collateral Matters. Each Lender authorizes the Agent to enter into
------------------
the Loan Documents to which it is a party, for the benefit of the Lenders. Each
Lender hereby appoints each other Lender as agent for the purpose of perfecting
the Lenders' security interest in assets which can be perfected only by
possession. Should any Lender (other than the Agent or the Security Trustee)
obtain possession of any such Collateral, such Lender shall notify the Agent
thereof, and, promptly upon the Agent's request therefor shall deliver such
Collateral to the Agent or, in the case of the U.K. Borrower, the Security
Trustee or in accordance with the Agent's or, in the case of the U.K. Borrower,
the Security Trustee instructions. Each Lender authorizes and directs the Agent
and the Security Trustee to enter into this Agreement and the other Loan
Documents relating to the Collateral, for the benefit of the Agent, the Security
Trustee and the Lenders. Each Lender agrees that any action taken by the Agent
or the Security Trustee or Instructing Group in accordance with the terms of
this Agreement or the other Loan Documents relating to the Collateral, and the
exercise by the Agent or the Security Trustee or the Instructing Group of their
respective powers set forth therein or herein, together with such other powers
that are reasonably incidental thereto, shall be deemed authorized by and
binding upon all of the Lenders. Notwithstanding the provisions of this Article,
without notice to or consent from any Lender, the Agent or the Security Trustee
may take any action it considers, in its sole discretion, necessary or advisable
to perfect and maintain the perfection of the Security Interest.
14.15 Designation of BAUK as Agent. Until further notice given by BACAN
----------------------------
to the U.K. Borrower, the Agent hereby designates and appoints BAUK as the
"Agent" for the purposes of, and delegates to BAUK all responsibilities, duties,
benefits and powers relating to:
(i) Section 2, in relation to the U.K. Borrower and the U.K.
Revolving Credit Facility and, without limitation, for all
purposes of Section 2, in relation to the U.K. Borrower and the
U.K. Revolving Credit Facility (including, without limitation
receipt of Notices of Borrowing from the U.K. Borrower, making
the elections and making or causing to be made
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Settlement Loans or Agent Advances under the U.K. Revolving
Credit Facility, receiving requests for the issuance of
Letters of Credit under the U.K. Revolving Credit Facility and
receiving Notices of Conversion and/or Rollovers) "Agent"
shall mean BAUK;
(ii) Section 3, in relation to the U.K. Borrower and the U.K.
Revolving Credit Facility, and without limitation, for all
purposes of Section 3, in relation to the U.K. Borrower and
the U.K. Revolving Credit Facility (including receiving
interest payments and all fees), "Agent" shall mean BAUK;
(iii) Section 4, in relation to the U.K. Borrower and the U.K.
Revolving Credit Facility, and without limitation, for all
purposes of Section 4, in relation to the U.K. Borrower and
the U.K. Revolving Credit Facility (including, without
limitation, the receipt and apportionment of payments and
charging the U.K. Borrower's accounts for expenses as U.K.
Revolving Loans), "Agent" shall mean BAUK;
(iv) Sections 6.6 and 6.7, in relation to the U.K. Borrower and the
U.K. Revolving Credit Facility, and without limitation, for
the purposes of such sections in relation to the U.K. Borrower
and the U.K. Revolving Credit Facility, "Agent" shall mean
BAUK; and
(v) Section 6.10, in relation to the U.K. Borrower and the U.K.
Revolving Credit Facility, and for the purposes of such
section, "Agent" shall mean BAUK.
In order to give effect to the foregoing, each of the Borrowers, the Parent and
the Lenders agree that BAUK shall, until further notice given by BACAN or
replacement of BACAN as Agent as provided in Section 14.6, be deemed to be an
"Agent" hereunder and shall have all of the rights, responsibilities and
protections provided for in this Agreement, including without limitation,
Sections 2.2, 2.3(h), 4.4 and Article 14 (except that the provisions of Sections
11.2 and 14.8 shall be exercised by all Agents acting together), and BACAN shall
be released and relieved of any obligations corresponding to the functions and
duties so delegated to BAUK.
14.16 Field Audit and Examination Reports; Disclaimer by Lenders. By
----------------------------------------------------------
signing this Agreement, each Lender:
<PAGE>
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(a) is deemed to have requested that the Agent furnish such Lender,
promptly after it becomes available, a copy of each field audit or examination
report (each a "Report" and collectively, "Reports") prepared by the Agent;
------ -------
(b) expressly agrees and acknowledges that none of BACAN, BAUK or
the Agent (i) makes any representation or warranty as to the accuracy of any
Report, or (ii) shall be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that the Agent or other party performing
any audit or examination will inspect only specific information regarding the
Borrowers and will rely significantly upon the Borrowers' and Parent's books and
records, as well as on representations of the Borrowers' and Parent's personnel;
(d) agrees to keep all Reports confidential and strictly for its
internal use, and not to distribute except to its participants, or use any
Report in any other manner; and
(e) without limiting the generality of any other indemnification
provision contained in this Agreement, agrees: (i) to hold the Agent and any
such other Lender preparing a Report harmless from any action which that
indemnifying Lender may take or conclusion which that indemnifying Lender may
reach or draw from any Report (other than a Report, the preparation of which was
grossly negligent or in bad faith) in connection with any loans or other credit
accommodations which the indemnifying Lender has made or may make to either
Borrower, or that indemnifying Lender's participation in, or that indemnifying
Lender's purchase of, a loan or loans of either Borrower; and (ii) to pay and
protect, and indemnify, defend and hold the Agent and any such other Lender
preparing a Report harmless from and against, the claims, actions, proceedings,
damages, costs, expenses and other amounts (including, without limitation
attorney's reasonable fees and costs) incurred by the Agent and any such other
Lender preparing a Report (other than a Report, the preparation of which was
grossly negligent or in bad faith) as the direct or indirect result of any third
parties who might obtain all or part of any such Report through that
indemnifying Lender it being understood that no Lender, other than a Lender
which initiates an action against the Agent or another Lender which has prepared
a Report, or which has supplied a Report to a third party which has initiated
such an action shall have any indemnification obligation pursuant to this
Section, and it being further understood that in no circumstance shall such
indemnification be available if a Lender prevails in such action. Each of the
Borrowers and the Parent consents for all purposes hereof, including Section
16.17 to the distribution of the Reports and all information obtained in
connection therewith.
<PAGE>
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15. ASSIGNMENTS AND TRANSFERS
-------------------------
15.1 Benefit of Agreement. This Agreement shall be binding upon and enure
--------------------
to the benefit of each party hereto and its successors and permitted assigns.
15.2 Assignments and Transfers by the Borrowers. Except as expressly
------------------------------------------
permitted hereunder, neither Borrower nor any Guarantor shall be entitled to
assign or transfer all or any of its rights, benefits and obligations hereunder.
15.3 Assignments and Transfers by a Lender. (a) Any Lender may, at its
-------------------------------------
own cost, without requiring any consent, assign or transfer to another Lender or
an affiliate of a Lender, and otherwise with the consent of the Agent and, if
such assignee of any Obligations under or in connection with the Canadian
Revolving Credit Facility is a non-resident of Canada, the Canadian Borrower
and, if such assignee of any Obligations under or in connection with the U.K.
Revolving Credit Facility is not a resident of the United Kingdom, the U.K.
Borrower (which shall not in any case be unreasonably withheld or delayed) to
any other Person who carries on a business of making loans or providing
financing all or a rateable portion of all of its rights, benefits and
obligations hereunder, provided that no assignee or transferee shall be entitled
to receive pursuant to the Loan Documents more than the amounts which would
otherwise have been payable by a Borrower to such Lender, had such assignment or
transfer not have been made, in respect of the rights, benefits and obligations
so assigned or transferred. No assignment (other than an assignment of all of
the assigning Lender's rights, benefits and obligations hereunder) shall be for
aggregate (amongst that Lender and its affiliates) Commitment amounts less than
$25,000,000. Any Lender requesting a Borrower's consent to a transfer or
assignment shall provide the Agent and such Borrower with all reasonable
information regarding the proposed transferee or assignee as such Borrower or
Agent requests. No Borrower shall be required to pay any amounts to an assignee
in excess of amounts that it would have been required to pay had no such
assignment been made.
(b) Where obligations of a Lender are so assigned or transferred, the
assignee or transferee shall confirm in writing to the applicable Borrower
obligated in respect of the Obligations so assigned or transferred, prior to
such assignment or transfer taking effect, that it shall be bound towards such
Borrower by the terms hereof relating to such obligations. On the assignment and
transfer being made and such written confirmation being delivered to such
Borrower, the Lender making an assignment or transfer shall be relieved of its
obligations to the extent of such assignment or transfer thereof.
15.4 Assignment and Assumption Agreement. If any Lender wishes to assign
-----------------------------------
or transfer all or any of its rights, benefits and obligations hereunder in
accordance with Section 15.3, then such assignment or transfer shall be effected
by the delivery by such Lender to the Agent for its accepting and recording in
the Register (referred to below) of an Assignment and Assumption Agreement
substantially in the form of EXHIBIT "O" (together with any and all addendums
thereto) or such other form as may be agreed upon by the Agent, the Lender and
the
<PAGE>
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assignee or transferee (the "Assignment and Assumption Agreement") and a fee of
$2,500.00 (payable to the Agent). In the event of an assignment or transfer as
aforesaid (and subject in the terms of the U.K. Security Documents, to the due
execution of any amendment, variation, accession memoranda or any other
supplemental agreement or deed as may be required by the Security Trustee as
referred to later in this Section), the following will apply, namely:
(a) the rights and benefits so assigned or transferred shall consist
of a solidary interest of such Lender in all of its rights and
benefits hereunder and under the Security Interest, the Collateral
and the other Loan Documents, the whole to the extent of the
interest so assigned or transferred;
(b) the assignee/transferee party shall assume, to the exoneration of
such Lender, the obligations of such Lender hereunder and under
the other Loan Documents, to the extent of the interest so
assigned or transferred;
(c) such Lender shall be released from its obligations to the Borrower
and each Guarantor hereunder and under the other Loan Documents,
to the extent of the interest so assigned or transferred;
(d) such assignment or transfer will not result in novation of the
Commitment, the Obligations or any other obligations under this
Agreement, such novation being hereby expressly disclaimed;
(e) the obligation of the assignee/transferee party to make Revolving
Loans and to issue or arrange for the issuance of Letters of
Credit and the obligation with respect to F/X Transactions will be
the same obligation as that of such Lender before the assignment
or transfer and not a new obligation, notwithstanding any release
of such Lender from such obligation;
(f) the assignee/transferee party shall be a party hereto and, to the
extent provided in the Assignment and Assumption Agreement, have
the rights and obligations of a Lender hereunder with the
Commitment as set forth therein, and the obligations of the
Borrower arising from any Revolving Loan advanced by or Letter of
Credit issued or arranged by the assignee/transferee party will
form part of the Obligations, will be secured by the Security
Interest and the Collateral and the assignee/transferee party,
such Lender and the Agent will have a solidary interest therein in
the same manner as if the assignee/transferee party had
specifically been named as a Lender thereunder;
<PAGE>
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(g) subject to Section 14.11, the rights of such Lender, the Agent and
the assignee/transferee party shall be solidary such that each of
them shall be entitled to:
(i) demand repayment of Revolving Loans outstanding from time to
time in accordance with the Loan Agreement;
(ii) exact the whole performance of the Obligations from the
Borrower;
(iii) benefit from the Security Interest;
(iv) give a full acquittance of the Obligations; and
(v) exercise all rights and recourses under the Loan Documents;
the whole to the extent of the interest so assigned or
transferred;
(h) obligation to make Revolving Loans and to issue or arrange for the
issuance of Letters of Credit and the obligation with respect to
F/X Transactions as between such Lender and the
assignee/transferee party shall be several, and not joint and
several or solidary and, accordingly, the Borrower's recourse
against such Lender and the assignee/transferee party with respect
thereto, will be limited to the amount of the respective
Commitment of each Lender and the assignee/transferee party.
The Borrowers and the Parent shall intervene in any Assignment and
Assumption Agreement including Addendum 1 thereto so as to, inter alia, consent
to and unconditionally acquiesce in the subject assignment or transfer. The
Borrowers, the Parent and the assignee shall also execute such further
documents, confirmations and documents, including, without limitation in the
case of the Borrowers and Parent, security documents and/or amendments to
security documents and in the case of the assignee, amendments to and
interventions in the security trust deed included in the U.K. Security Documents
(including the execution of any accession memorandum or other supplemental
agreement or deed), as may be requested by the Agent in connection with the
assignment or transfer.
15.5 Register and Notice. The Agent shall maintain a register of the names
-------------------
and addresses of the Lenders, their Commitments and the principal amounts of
their Loans (the "Register"). The Agent shall also maintain a copy of each
--------
Assignment and Assumption Agreement delivered to and accepted by it and to
modify the Register to give effect to each Assignment and Assumption Agreement.
Upon its receipt of each Assignment and Assumption Agreement, the Agent will
give prompt notice thereof to the applicable Borrower. The Agent shall be
entitled to rely upon the Register exclusively for purposes of identifying the
Lenders
<PAGE>
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hereunder. The Agent shall notify promptly the other applicable Lenders of any
Assignment and Assumption Agreement accepted by it and shall promptly upon any
request deliver a copy of such Assignment and Assumption Agreement and a copy of
the Register to any Lender or the Parent.
15.6 Sub-Participations. (i) Any Lender may, at its own cost, grant one or
------------------
more sub-participations in its rights, benefits and/or obligations hereunder to
third parties, without the consent of the Borrowers or any Guarantor or any
other Person, upon such terms and conditions as such Lender shall determine,
provided that, notwithstanding any such sub-participation, such Lender shall
remain, in so far as the other parties hereto are concerned, entitled to its
rights and benefits hereunder and bound by its obligations hereunder and the
Borrowers and Guarantors shall not be obliged to recognize any such third party
as having the rights against any of them which it would have if it had been a
party hereto; and (ii) no sub-participant (unless and only to the extent such
sub-participant is itself a Lender) shall be entitled to require such Lender to
take or refrain from taking any action hereunder or under any other Loan
Document, except that such Lender may agree with such sub-participant that such
Lender will not, without such sub-participant's consent, agree to any amendment
or waiver of this Agreement described in Section 14.8(c).
15.7 Disclosure. Each Lender is hereby authorized by each Borrower and the
----------
Guarantors to disclose to any proposed assignee, transferee or sub-participant
information in the Lenders' possession (in any capacity) relating to such
Borrower or the Guarantors provided that such proposed assignee, transferee or
sub-participant shall have executed and delivered to the Lenders a written
undertaking to keep confidential any such information which is not publicly
available.
16. MISCELLANEOUS.
-------------
16.1 Cumulative Remedies; No Prior Recourse to Collateral. The enumeration
----------------------------------------------------
herein or in the Loan Documents of the Agent's, the Security Trustee's and/or
Lenders' rights and remedies is not intended to be exclusive, and such rights
and remedies are in addition to and not by way of limitation of any other rights
or remedies that the Agent and/or the Security Trustee and/or Lenders may have
under the PPSA, or other applicable law or the Loan Documents. The Agent and/or
the Security Trustee and/or Lenders shall have the right, in its and their sole
discretion, but subject to Section 14.11, to determine which rights and remedies
are to be exercised and in which order. The exercise of one right or remedy
shall not preclude the exercise of any others, all of which shall be cumulative.
The Agent and/or the Security Trustee and/or Lenders may, without limitation,
but subject to Section 14.11, proceed directly against either or both Borrowers
or any Guarantor to collect the Obligations or Guaranteed Obligations without
any prior recourse to the Collateral.
16.2 No Implied Waivers. No act, failure or delay by the Agent and/or the
------------------
Security Trustee and/or Lenders shall constitute a waiver of any of its rights
and remedies. No single or
<PAGE>
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partial waiver by the Agent and/or the Security Trustee and/or Lenders of any
provision of this Agreement or any other Loan Document, or of breach or default
hereunder or thereunder or of any right or remedy which the Agent and/or the
Security Trustee and/or Lenders may have, shall operate as a waiver of any other
provision, breach, default, right or remedy or of the same provision, breach,
default, right or remedy on a future occasion. No waiver by the Agent and/or the
Security Trustee and/or Lenders shall affect its rights to require strict
performance of this Agreement.
16.3 Severability. If any provision of this Agreement shall be prohibited
------------
or invalid under the applicable law of any jurisdiction, such prohibition or
invalidity shall not invalidate the remainder of this Agreement in such
jurisdiction or this Agreement as whole in any other jurisdiction provided
--------
however that, if the Agent and/or Lenders determine as a result of any such
- -------
prohibition or invalidity that the Agent and/or the Security Trustee and/or
Lenders have lost any material benefit of or right under this Agreement, then an
Event of Default shall be deemed to have occurred whereupon the Agent and/or the
Security Trustee and/or Lenders may exercise any of its right or remedies as
provided in Section 11.2 hereof.
16.4 Governing Law. This Agreement shall be deemed to have been made in
-------------
the Province of Ontario, and shall be governed by and interpreted in accordance
with the laws of such province.
16.5 Consent to Jurisdiction and Venue; Service of Process. If applicable,
-----------------------------------------------------
each Borrower and each of the Guarantors agrees that, in addition to any other
courts that may have jurisdiction under applicable laws or rules, any action or
proceeding to enforce or arising out of this Agreement or any of the other Loan
Documents may be commenced in the courts of the Province of Ontario, and each
Borrower and each of the Guarantors consents and submits in advance to such
jurisdiction and agrees that venue will be proper in such courts on any such
matter. The choice of forum set forth in this Section shall not be deemed to
preclude the enforcement of any judgment obtained in such forum or the taking of
any action under this Agreement to enforce the same, in any appropriate
jurisdiction.
16.6 Waiver of Jury Trial, Etc. EACH BORROWER AND EACH GUARANTOR HEREBY
--------------------------
WAIVES TRIAL BY JURY, IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, THE
OBLIGATIONS OR THE COLLATERAL, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT
HERETO OR THERETO, OR ANY OTHER CLAIM OR DISPUTE HOWSOEVER ARISING, BETWEEN SUCH
BORROWER AND/OR ANY GUARANTOR AND THE AGENT, SECURITY TRUSTEE AND/OR ANY OF THE
LENDERS. EACH BORROWER AND EACH GUARANTOR HEREBY WAIVES NOTICE OF INTENT TO
ACCELERATE AND ACCELERATION. EACH BORROWER AND EACH GUARANTOR CONFIRMS THAT THE
FOREGOING WAIVERS ARE INFORMED AND FREELY MADE.
<PAGE>
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16.7 Survival of Representations and Warranties. All of the Borrowers' and
------------------------------------------
each Guarantor's representations and warranties contained in this Agreement
shall survive the execution, delivery and acceptance thereof by the parties,
notwithstanding any investigation by the Agent and/or Lenders or its agents.
16.8 Other Security and Guarantees. The Agent and/or Lenders may, without
-----------------------------
notice or demand, and without affecting either Borrower's or any Guarantor's
obligations hereunder, from time to time: (a) take from any Person and hold
collateral (other than the Collateral) for the payment of all or any part of the
Obligations (provided in the case of a Lender that same is delivered to the
Agent to be held for the benefit of all Lenders as herein provided), and
exchange, enforce or release such collateral or any part thereof; and (b) accept
and hold any endorsement or guarantee of payment of all or any part of the
Obligations (provided in the case of a Lender that same is delivered to the
Agent to be held for the benefit of all Lenders as herein provided), and release
or substitute any such endorser or guarantor, or any Person who has given any
Lien in any other collateral as security for the payment of all or any part of
the Obligations, or any other Person in any way obligated to pay all or any part
of the Obligations.
16.9 Fees and Expenses. The Borrowers (severally and, except to the extent
-----------------
relating solely to a failure by the other Borrower to perform its obligation
hereunder in which case the payment shall be payable solely by such other
Borrower, jointly) shall pay to the Agent (for itself and the other Lenders) on
demand all costs and expenses that the Agent or Security Trustee pays or incurs
in connection with the negotiation, preparation, consummation, administration,
enforcement, and termination of this Agreement and the other Loan Documents,
including, without limitation: (a) reasonable lawyer's and paralegal's fees and
disbursements of counsel to the Agent or Security Trustee, on a solicitor and
his own client basis, (including, without limitation, a reasonable estimate of
the allowable cost of in-house counsel and staff); (b) costs and expenses
including reasonable lawyer's and paralegals' fees and disbursements, on a
solicitor and his own client basis (including, without limitation, a reasonable
estimate of the allowable cost of in-house counsel and staff) for any amendment,
supplement, waiver, consent, or subsequent closing in connection with this
Agreement or the Loan Documents and the transactions contemplated hereby and
thereby; (c) costs and expenses of PPSA, Lien, real Property and title searches
and enquiries; (d) taxes, fees and other charges for recording the Loan
Documents, filing financing statements and continuations, and other actions to
perfect, protect, register, signify, publish and continue the Security Interest;
(e) sums paid or incurred to pay any amount or take any action required of
either Borrower or any Guarantor under the Loan Documents that such Borrower or
such Guarantor fails to pay or take; (f) costs of appraisals, inspections, and
verifications of the Collateral, including, without limitation, travel, lodging,
and meals together with an allocated charge (such allocated charge, the "Audit
-----
Fee") of U.S. $575 per day for each auditor employed by Agent for inspections of
- ---
the Collateral and the Borrowers' or any Guarantor's operations by the Agent's
and/or Lenders' agents; (g) costs and expenses of forwarding loan proceeds,
collecting cheques and other items of payment, and establishing and maintaining
Payment Accounts; (h) all amounts that a Borrower is required to pay under the
F/X Agreement; (i) costs and expenses of preserving and protecting the
Collateral; (j) any claims or
<PAGE>
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liabilities whatsoever which may be incurred by the Agent and/or Security
Trustee and/or any of the Lenders, including reasonable lawyer's and paralegals
fees, on a solicitor and his own client basis (including, without limitation,
the allowable cost of in-house counsel and staff), and any costs of conducting
Environmental Audits pursuant to its rights under Section 11.2 or relating to
any material violation or alleged material violation of any Environmental Laws
in respect of which a Borrower has not conducted an audit or has not complied
with its obligations hereunder; (k) costs and expenses (including reasonable
lawyer's and paralegals' fees and disbursements (including, without limitation,
the allowable cost of in-house counsel and staff) paid or incurred to obtain
payment of the Obligations, enforce the Security Interest, sell or otherwise
realize upon the Collateral, and otherwise enforce the provisions of the Loan
Documents, or to defend any claims made or threatened against the Agent and/or
Security Trustee and/or any of the Lenders arising in respect of the
transactions contemplated hereby (including without limitation, preparations for
and consultations concerning any such matters); and (l) all syndication fees and
costs, inclusive of reasonable legal fees and expenses, on a solicitor and his
own client basis, and audit and appraisal fees and expenses (but excluding the
$2,500 fee pursuant to Section 15.4), to be paid by the Borrowers hereunder. The
foregoing shall not be construed to limit any other provisions of the Loan
Documents regarding costs and expenses to be paid by the Borrowers or any
Guarantor. In addition to any liability of the Borrowers or any Guarantor to the
Agent and/or Security Trustee and/or any of the Lenders under any other
provision hereof, the Borrowers (severally and, except to the extent relating
solely to a failure by the other Borrower to perform its obligation hereunder
which shall be payable solely by such other Borrower, jointly) shall indemnify
the Agent , the Security Trustee and each of the Lenders and hold the Agent and
each of the Lenders harmless against any reasonable costs or expenses incurred
by the Agent and/or Security Trustee and/or any of the Lenders as a result (i)
of any failure by either Borrower or any Guarantor to fulfil any of its
obligations hereunder in the manner provided herein including, without
limitation, any cost or expense incurred by reason of the liquidation or re-
employment in whole or in part of deposits or other funds required by the Agent
and/or Security Trustee and/or any of the Lenders to fund or maintain any Loan
as a result of either Borrower's or any Guarantor's failure to complete a
Drawdown or to make any repayment or other payment on the date required
hereunder or specified by it in any notice given hereunder, or (ii) either
Borrower's or any Guarantor's failure to pay any other amount including, without
limitation, any interest or fee, due hereunder on its due date, or (iii) the
repayment of a BA Equivalent Loan or LIBOR Loan otherwise than on the last day
of its Interest Period (including, without limitation, breakage, costs of
redeploying assets and losses of anticipated profits). The foregoing indemnities
and agreements to pay shall survive until all Obligations have been fully and
finally paid. The certificate of an officer or manager of the Agent, the
Security Trustee and/or any of the Lenders setting forth the amount of any such
losses, damages, charges, claims, expenses and liabilities, including relating
to any Lender's reallocation or redeployment of funds in consequence of any
repayment of a BA Equivalent Loan or LIBOR Loan other than on the last day of
its Interest Period (with reasonable particulars thereof), shall constitute
prima facie evidence of any such amount, and the Agent shall be entitled to
debit, from the applicable Borrower's accounts, the amount stipulated in the
certificate. All of the foregoing costs and expenses shall be charged to the
applicable Borrower's
<PAGE>
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loan account as Revolving Loans. The Canadian Borrower agrees to pay to
BankBoston, N.A. and/or BankBoston Retail Finance Inc. up to $5,000 in the
aggregate of its or their legal expenses incurred in connection with the
execution and delivery of this Agreement.
16.10 Waiver of Notices. Unless otherwise expressly provided herein, each
-----------------
Borrower and each Guarantor waives, to the maximum extent permitted by law, but
subject to compulsory provision of law, presentment, protest and notice of
demand or dishonour and protest as to any instrument, as well as any and all
other notices to which it might otherwise be entitled. No notice to or demand on
the Borrowers or any Guarantor which the Agent and/or Security Trustee and/or
Lenders may elect to give shall entitle the Borrowers or any Guarantor to any or
further notice or demand in the same, similar or other circumstances.
16.11 Binding Effect; Assignment. The provisions of this Agreement shall
--------------------------
be binding upon and inure to the benefit of the respective representatives,
successors and assigns of the parties hereto; provided, however, that no
interest herein may be assigned by the Borrowers or any Guarantor without the
prior written consent of the Lenders. The Lenders shall have the right to assign
or participate all or any portion of the Obligations or the Revolving Credit
Facilities or any interest therein as hereinabove provided.
16.12 Modification. This Agreement is intended by the Borrowers, the
------------
Guarantor and the Agent and the Lenders to be the final, complete, and exclusive
expression of the agreement between them. This Agreement supersedes any and all
prior oral or written agreements relating to the subject matter hereof. No
modification, rescission, waiver, release, or amendment of any provision of this
Agreement shall be made, except by a written agreement signed by the Borrowers
or any Guarantor and a duly authorized officer of the Agent and Lenders.
16.13 Counterparts. This Agreement may be executed in any number of
------------
counterparts, and by the Agent, the Lenders, the Borrowers and Guarantors in
separate counterparts, each of which shall be an original, but all of which
shall together constitute one and the same agreement.
16.14 Right of Set-Off. Whenever an Event of Default exists, but subject
----------------
to Section 14.11 the Agent and/or Security Trustee and/or any of the Lenders is
hereby authorized at any time, and from time to time, to the fullest extent
permitted by law, to set off and apply to such Borrower's Obligations any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by the Agent and/or Security
Trustee and/or any of the Lenders or any affiliate of the Agent and/or Security
Trustee and/or any of the Lenders to or for the credit or the account of such
Borrower or any Guarantor against any and all of its Obligations, whether or not
then due and payable. The Agent and/or Security Trustee and/or any such Lender,
as applicable, agrees promptly to notify the Agent and Borrower or any
Guarantor, as applicable, after any such set-off and application made by the
Agent and/or Security Trustee and/or any of the Lenders, provided that the
failure to give such notice shall not affect the validity of such set-off and
application.
<PAGE>
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16.15 Deliberately Left Blank.
------------------------
16.16 Precedence. In the event that any provisions of the Loan Documents
----------
(other than this Agreement) (the "Conflicted Agreements") contradict or are
---------------------
otherwise incapable of being construed in conjunction with the provisions of
this Agreement, the provisions of this Agreement shall take precedence over
those contained in the Conflicted Agreements and, in particular, if any act of
either Borrower or any Guarantor is expressly permitted under this Agreement but
is prohibited under the Conflicted Agreements, any such act shall be permitted
under this Agreement and shall be deemed to be permitted under the Conflicted
Agreements.
16.17 Confidentiality. Except as otherwise provided herein, the Agent,
---------------
the Security Trustee and the Lenders agree to take customary and reasonable
precautions to maintain the confidentiality of all information in connection
with this Agreement or other information respecting the Borrowers or any
Guarantor and/or its accounts and business with the Agent, the Security Trustee
and/or Lenders, provided to the Agent, the Security Trustee and/or Lenders by
the Borrowers or any Guarantor or otherwise known to the Agent, the Security
Trustee and/or Lenders ("Customer Information"). The Borrowers and each
--------------------
Guarantor acknowledge and agree that the Agent, the Security Trustee and Lenders
may to the extent necessary for the administration and enforcement of this
Agreement disclose from time to time Customer Information to other offices and
branches of the Agent, the Security Trustee and/or any of the Lenders and to the
Agent's, the Security Trustee's and/or any Lender's subsidiaries and affiliates,
in Canada or anywhere outside Canada. The Borrowers and each Guarantor further
consent to the disclosure of Customer Information by the Agent, the Security
Trustee and/or any of the Lenders, or any such subsidiary or affiliate of the
Agent, the Security Trustee and/or any of the Lenders (i) at the request of any
governmental, regulatory or other similar agency or authority having
jurisdiction over the Agent, the Security Trustee and/or any of the Lenders or
such subsidiary or affiliate, (ii) pursuant to subpoena or other court process
or to the extent required in connection with any litigation between the Agent,
the Security Trustee and/or any of the Lenders, and either Borrower and/or any
Guarantor; (iii) when otherwise required to do so in accordance with applicable
law.
16.18 Illegality. If the introduction of or any change in, applicable
----------
law, regulation, treaty or official directive, or regulatory requirement
(whether or not having the force of law) or in the interpretation or application
thereof by any court or by any governmental authority charged with the
administration thereof, makes it unlawful, or prohibited for the Agent, BACAN or
BAUK and/or any of the other Lenders (in its sole opinion) to make, to fund or
to maintain any Loans or Letters of Credit, the Agent and/or any such Lender
may, by written notice to the Borrowers, terminate its Commitment (or in the
discretion of the Instructing Group, the Total Commitments) and the affected
Borrower shall prepay such Loans or Letters of Credit affected thereby.
16.19 Increased Costs. In the event of
---------------
<PAGE>
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(a) any applicable law, regulation, treaty or official directive
(whether or not having the force of law) coming into force after
the date hereof, or (ii) any change in any existing applicable
law, regulation, treaty or official directive (whether or not
having the force of law), or in the interpretation or
application thereof by any court or by any governmental or other
authority or entity charged with the administration thereof
which now or hereafter (each such event being hereinafter
referred to as a "change in law"):
(b) subjects the Agent and/or any of the Lenders to any tax or
changes the basis of taxation, or increases any existing tax, on
payments of principal, interest or other amounts payable by
either Borrower to the Agent and/or any Lender under this
Agreement (except for taxes on the net income or capital of any
Lender), or
(c) imposes, modifies or deems applicable any reserve, special
deposit or similar requirements against assets held by, or
deposits in or for the account of or loans by or any other
acquisition of funds by an office of any of the Lenders, or
(d) either (i) requires any of the Lenders to take into account a
greater percentage of the Loans outstanding than was the case
immediately prior to such change of law in the determination by
any of the Lenders of the amount of capital required or expected
to be maintained by it and, as a result, the amount of such
capital is increased, or (ii) will have the effect of increasing
the amount of capital required or expected to be maintained by
any of the Lenders based on the existence of such Lender's
participation in the advance or its obligations hereunder, or
(e) changes the basis of taxation (other than as aforesaid) of any
of the Lenders in respect of payments or principal or interest
payable by any of the Lenders in respect of deposits from third
parties acquired to effect or maintain the Loans or any part
thereof,
and the result of any of the foregoing is to increase the cost to any of the
Lenders or reduce the income receivable by it or, reduce the effective return
realizable by any of the Lenders, in respect of the Loans to an extent which
such Lender deems to be material, then such Lender shall give notice thereof to
the Agent and the Borrowers (herein called a "Notice of Amount") stating the
----------------
amount of Additional Compensation (as hereinafter defined) incurred by such
Lender. The affected Borrower shall pay to the Agent (for such Lender), within
ten (10) days of the date of receipt of any Notice of Amount, that amount (in
this Section referred to as "Additional Compensation") which shall compensate
-----------------------
such Lender for such additional cost or reduction in income or effective return
from the earlier of (i) the last Interest Payment Date in the case of a
<PAGE>
-132-
retroactive change of law, and (ii) the date which is two days prior to the day
on which such Lender gave its initial Notice of Amount in the case of a change
of law which is not retroactive. The affected Lender shall provide to the Agent
and the affected Borrower a photocopy of the relevant law, regulation, treaty or
official directive and a certificate of a duly authorized officer of such Lender
setting forth the Additional Compensation and the basis of calculation therefor,
which shall be prima facie evidence of the Additional Compensation absent
manifest error, provided that such Lender shall not be required to disclose any
information required to be kept confidential by the relevant authority. The
affected Lender shall endeavour in good faith to limit the incidence of any such
Additional Compensation, including seeking recovery for itself and for the
account of the affected Borrower by appealing any assessment at the request and
expense of the affected Borrower. In the event such Lender subsequently recovers
all or part of the Additional Compensation paid to the Agent (for distribution
to the affected Lender), it shall repay an equal amount to such Borrower. The
Lenders shall be entitled to be paid such Additional Compensation from time to
time to the extent that the provisions of this Section are then applicable
notwithstanding that any of the Lenders has previously been paid any Additional
Compensation. The provisions of this Section shall not be applicable to a Loan
to the extent that such additional cost or reduction in income or effective
return has been taken into consideration in establishing the Prime Rate or Base
Rate. In addition, the affected Borrower shall not be required to pay any
Additional Compensation pursuant to this Section in respect of such changes
which are now known or ought reasonably to have been known to the affected
Lender. In particular, without limitation of the foregoing, the affected
Borrower shall not be required to pay any Additional Compensation in respect of
(i) the BIS Guidelines in their current form or arising from the implementation
thereof, or (ii) bulletins, guidelines, orders or directives relating to the BIS
Guidelines heretofore released by the Office of the Superintendent of Financial
Institutions.
16.20 Judgment Currency. If for the purpose of obtaining judgment in
-----------------
any court it is necessary to convert an amount due hereunder in the currency in
which it is due (the "Original Currency") into another currency (the "Second
----------------- ------
Currency"), the rate of exchange applied shall be that at which, in accordance
- --------
with normal banking procedures, the Agent could purchase in the Toronto foreign
exchange market, the Original Currency with the Second Currency on the date two
(2) Business Days preceding that on which judgment is given. Each Borrower and
each Guarantor agrees that its obligation in respect of any Original Currency
due from it hereunder shall, notwithstanding any judgment or payment in such
other currency, be discharged only to the extent that, on the Business Day
following the date the Agent receives payment of any sum so adjudged to be due
hereunder in the Second Currency, the Agent may, in accordance with normal
banking procedures, purchase, in the Toronto foreign exchange market, the
Original Currency with the amount of the Second Currency so paid; and if the
amount of the Original Currency so purchased or could have been so purchased is
less than the amount originally due in the Original Currency, each Borrower and
each Guarantor agrees as a separate obligation and notwithstanding any such
payment or judgment to indemnify the Agent against such loss. The term "rate of
exchange" in this Section 16.20 means the spot rate at which the Agent, in
accordance with normal practices, is able on the relevant date to purchase the
Original Currency
<PAGE>
-133-
with the Second Currency, and includes any premium and costs of exchange payable
in connection with such purchase.
16.21 Notices. Except as otherwise provided herein, all notices,
-------
demands and requests that any party is required or elects to give to the other
shall be in writing, shall be delivered personally against receipt, or sent by
recognized overnight courier service, or mailed by registered or certified mail,
return receipt requested, postage prepaid or by facsimile (provided a copy
thereof is forthwith delivered by mail in the manner herein specified), and
shall be addressed to the party to be notified as follows:
If to the Agent or BACAN: Bank of America Canada
200 Front Street West
Suite 2700
Toronto, Ontario M5V 3L2
Attention: Robert Kizell, Vice-President
---------- -----------------------------
Fax No.: (416) 349-4295
except in regard to financial reports
with copies to: Bank of America N.T.&S.A., Legal Department
10124 Old Grove Road
San Diego, California 92131
Attention: Thomas A. Montgomery,
----------
Assistant General Counsel
-------------------------
Fax No.: (619) 549-7518
and to: BankAmerica Business Credit, Inc.
231 South LaSalle Street, 16th Floor
Chicago, Illinois 60697
Attention: Portfolio Manager
---------- -----------------
Fax No.: (312) 974-8760
If to the Borrowers
or to any Guarantor: InterTAN, Inc.
201 Main Street, Suite 1805
Fort Worth, Texas 76102
Attention: David S. Goldberg
---------- -----------------
Vice President, Secretary and
-----------------------------
General Counsel
---------------
Fax No.: (817) 332-3071
<PAGE>
-134-
If to any other Lender: At its address set forth on the signature pages
hereof or in any Assignment and Assumption
Agreement.
or to such other address or fax number as each party may designate for itself by
like notice. Any such notice, demand, or request shall be deemed given when
received, if personally delivered or sent by overnight courier, or five (5)
Business Days after deposited in the mail, postage paid, if sent by registered
or certified mail or upon confirmation of receipt by fax.
16.22 Nature of the Obligations. Notwithstanding anything to the
-------------------------
contrary herein but subject to any terms of the Loan Documents (including the
Canadian Guarantee or U.K. Guarantee), (a) each representation, warranty,
covenant and agreement herein of the U.K. Borrower or the Canadian Borrower, as
the case may be, shall be read and construed only as a representation or
warranty in respect of itself and a covenant and agreement relating to its own
conduct or circumstances and only in favour of, in the case of the U.K.
Borrower, the Agent, the Security Trustee and the U.K. Lenders and, in the case
of the Canadian Borrowers, the Agent and Canadian Lenders, (b) all proceeds of
any U.K. Collateral shall be applied solely to the Obligations under or in
connection with the U.K. Revolving Credit Facility and (c) all proceeds of any
Canadian Collateral shall be applied solely to the Obligations under or in
connection with the Canadian Revolving Credit Facility, in each case until all
such Obligations have been paid and satisfied, and thereafter may be applied to
any other Obligations, including pursuant to the Canadian Guarantee or U.K.
Guarantee.
IN WITNESS WHEREOF, the parties have entered into this Agreement
effective as of the date first above written.
CANADIAN BORROWER: INTERTAN CANADA LTD.
By: /s/ DAVID S. GOLDBERG
--------------------------
Name: David S. Goldberg
Title: V.P. & Secretary
U.K. BORROWER: INTERTAN U.K. LIMITED
By: /s/ DAVID S. GOLDBERG
--------------------------
Name: David S. Goldberg
Title: Attorney
GUARANTOR: INTERTAN, INC.
By: /s/ DAVID S. GOLDBERG
--------------------------
Name: David S. Goldberg
Title: V.P., Secretary
and General Counsel
<PAGE>
-135-
AGENT: BANK OF AMERICA CANADA
By: /s/ ROBERT KIZELL
--------------------------
Name: Robert Kizell
Title: Vice President
c/o BankAmerica Business Credit, Inc.
231 South LaSalle Street, 16/th/ Floor
Chicago, Illinois U.S.A. 60697
Attention: Portfolio Manager
Fax: (312) 974-8760
LENDER(S): BANK OF AMERICA CANADA Commitment in
Canadian Revolving
Credit Facility
By: /s/ ROBERT KIZELL U.S.$16,666,666.67
--------------------------
Name: Robert Kizell
Title: Vice President
200 Front Street West, Suite 2700
Toronto, Ontario M5V 3L2
Attention: Robert Kizell
Fax No.: (416) 349-4295
CONGRESS FINANCIAL
CORPORATION Commitment in
Canadian Revolving
Credit Facility
By: /s/ WAYNE EHGOETZ U.S.$16,666,666.66
---------------------------
Name: Wayne Ehgoetz
Title: Senior Vice President & Managing Director
141 Adelaide Street West, Suite 1508
Toronto, Ontario M5H 3L9
Attention: Wayne R. Ehgoetz
Fax No.: (416) 364-6068
<PAGE>
-136-
BANKBOSTON RETAIL
FINANCE INC. Commitment in
Canadian Revolving
Credit Facility
By: /s/ FRANCIS O'CONNOR U.S.$16,666,666.66
---------------------------
Name: Francis O'Connor
Title: Vice President
40 Broad Street
Boston, Massachusetts 02109
Attention: Francis O'Connor
Fax No.: (617) 434-4339
BANK OF AMERICA N.T.&S.A. Commitment in
(LONDON ENGLAND U.K. Revolving
BRANCH OFFICE) Credit Facility
By: /s/ PAUL HANOCK U.S.$8,333,333.34
---------------------------
Name: Paul Hancock
Title: Senior Vice President
1 Alie Street, 5/th/ Floor
London, England E1 8DE
Attention: Tim Jacobs
Fax No.:
BANKBOSTON, N.A. Commitment in
U.K. Revolving
Credit Facility
By: /s/ THOMAS R. SOMMERFIELD U.S.$8,333,333.33
---------------------------
Name: Thomas R. Sommerfield
Title: Division Executive
BankBoston House
39 Victoria Street
London, England SW1 H0ED
cc. Boston Office:
40 Broad Street, 10/th/ Floor
Boston, Massachusetts 02109
Attention: Francis O'Connor
Fax No.: (617) 434-4339
<PAGE>
-137-
BURDALE ACCEPTANCES
LIMITED Commitment in
U.K. Revolving
Credit Facility
By: /s/ ILLEGIBLE U.S.$8,333,333.33
---------------------------
Name:
Title: Director
53 Queen Anne Street
London, England W1
Attention: Dennis Levine
Fax No.: 011-44-171-935-5445
`
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