<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM
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TO
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COMMISSION FILE NUMBER: 1-10372
DOMINION BRIDGE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 23-2577796
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
500 NOTRE DAME ST., 3RD FLOOR H8S 2B2
LACHINE, QUEBEC, CANADA
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (514) 634-3550
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered under Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.001 PER SHARE
PREFERRED STOCK PURCHASE RIGHTS
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.
(1) Yes [X] No [__] (2) Yes [X] No [__]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [__]
The aggregate market value of the voting stock held by non-affiliates
of the registrant, as of January 7, 1998, was approximately $47,689,795 based
upon the closing price of the Common Stock on such date as reported on the
NASDAQ National Market System of $1.96875. The information provided shall in no
way be construed as an admission that any person whose holdings are excluded
from the figure is an affiliate or that any person whose holdings are included
is not an affiliate, and any such admission is hereby disclaimed. The
information provided is included solely for record keeping purposes of the
Securities and Exchange Commission.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS
Check whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
Yes [X] No [__]
APPLICABLE ONLY TO CORPORATE REGISTRANTS
The number of shares outstanding of the registrant's sole class of
common stock as of January 7, 1998 was 31,447,648 shares.
All dollar amounts included in this Report are shown in U.S. dollars,
unless otherwise indicated.
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE> 2
TABLE OF CONTENTS
Page
PART I.........................................................................2
ITEM 1. DESCRIPTION OF BUSINESS..........................................2
ITEM 2. DESCRIPTION OF PROPERTIES.......................................16
ITEM 3. LEGAL PROCEEDINGS...............................................17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............20
PART II.......................................................................21
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS........21
ITEM 6. SELECTED FINANCIAL DATA.........................................23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.......................................23
ITEM 8. FINANCIAL STATEMENTS............................................30
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE........................................30
PART III......................................................................31
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT......31
ITEM 11. EXECUTIVE COMPENSATION..........................................36
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..39
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................43
PART IV.......................................................................44
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K................................44
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PRIVATE SECURITIES LITIGATION
REFORM ACT SAFE HARBOR STATEMENT
When used in this Annual Report on Form 10-K and in other public
statements by the Company and Company officers, the words "expect," "estimate,"
"project," "intend," and similar expressions are intended to identify
forward-looking statements regarding events and financial trends which may
affect the Company's future operating results and financial condition. Such
statements are subject to risks and uncertainties that could cause the Company's
actual results and financial condition to differ materially. Such factors
include, among others: (i) the impact that a recent consent solicitation and the
possible sale of the Company may have on the Company's ongoing operations; (ii)
the risk of claims for product and construction liability or other liability
associated with the Company's construction operations; (iii) the Company's
ability to secure performance bonding on the projects it undertakes; (iv) the
intense competition and the bidding process in which the Company competes; (v)
the Company's ability to obtain financing on satisfactory terms and the degree
to which the Company is leveraged; (vi) the Company's ability to obtain loan
guarantees and other governmental support for projects to be undertaken by the
Company; (vii) the sensitivity of the Company's business to general economic
conditions, including conditions internationally where the Company's
subsidiaries operate; (viii) the timing of completion of projects; (ix) the
performance of suppliers and subcontractors; (x) the Company's ability to avoid
penalties for delays in completion of projects and cost overruns; (xi) factors
associated with international ventures such as the relative strength of the
dollar when compared to the currencies in the countries in which the Company
operates; (xii) the Company's ability to remain in compliance with the numerous
environmental, health and safety requirements to which it is subject; (xiii)
changes in accounting principles, policies or guidelines; and (xiv) other
economic, competitive, governmental and technological factors affecting the
Company's operations, markets, products, services and prices. Additional factors
are described in this Annual Report on Form 10-K and in the Company's other
public reports filed with the Securities and Exchange Commission. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date made. The Company undertakes no obligation to publicly
release the result of any revision of these forward-looking statements to
reflect events or circumstances after the date they are made or to reflect the
occurrence of unanticipated events.
<PAGE> 4
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL DEVELOPMENT OF BUSINESS
Dominion Bridge Corporation (the "Company") was incorporated on
February 16, 1989 in Delaware as Cedar Group, Inc. and subsequently changed its
name to Dominion Bridge Corporation in 1996 to more readily identify the Company
with its principal North American operating subsidiary. The Company primarily
operates as a diversified international engineering and construction company in
North America, Australia and Southeast Asia, and has additional operations in
shipbuilding and repair and industrial specialty fasteners.
Since 1994, the Company has established its operations by way of four
principal and several other acquisitions. The principal acquisitions concluded
by the Company were:
(i) in 1994, the acquisition from United Dominion Industries
Limited ("UDI") of Dominion Bridge Inc. ("DBI"), a 116 year-old Canadian general
contractor engaged in infrastructure projects in Canada and North America;
(ii) in 1995, the acquisition of Steen Contractors Limited and
related subsidiaries ("Steen"), an 80 year-old engineering and construction
company which focuses on mechanical, heating, ventilation and air conditioning
and, recently, in the construction of oil and gas pipelines;
(iii) in 1996, the acquisition of a controlling interest in
McConnell Dowell Corporation Limited ("MDC"), a general contractor engaged in a
broad range of infrastructure projects in the Asia-Pacific region, the Middle
East and Eastern Europe; and
(iv) also in 1996, the acquisition of Davie Industries Inc.
("Davie," formerly known as "The MIL Group Inc."), which is engaged primarily in
commercial and military ship design, construction and repair, the construction
and repair of offshore drilling rigs and the manufacturing of industrial
products.
The Company's initial acquisitions were in the industrial and aerospace
specialty fasteners market and included the 1994 acquisition of a controlling
interest in Unimetric Corporation ("Unimetric") from Ateliers de la Haute
Garonne ("AHG"), and several small acquisitions prior to the Unimetric
acquisition by a predecessor company, Edinov Corporation ("Edinov"). In 1994,
the Company sold its shares of Edinov, which owned several Canadian fastener
companies, and DBI's steel service center division.
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International Engineering and Construction
The international engineering and construction activities of the
Company are conducted in North America by DBI and Steen and in Australia,
South East Asia, the Pacific Islands, the Middle East and Eastern Europe by
MDC. The following is a summary of the transactions that have been concluded
by the Company to establish its engineering and construction operations.
Dominion Bridge Inc. On April 8, 1994, the Company completed the
acquisition of 85% of DBI from UDI, which had operated it as an unincorporated
division. The acquisition, effective March 9, 1994 for accounting purposes, had
UDI transfer all of the assets, liabilities and business of its Dominion Bridge
division into a newly-created subsidiary of UDI (which is now DBI), which the
Company purchased for a net payment of Cdn $5,000,000 in cash. UDI was also
issued Cdn $18.3 million of DBI's Class A Preferred Shares in connection with
the transfer of assets. Concurrently, the Company contributed Cdn $2 million to
DBI in exchange for its Class B Preferred Shares. The Class A Preferred Shares
were convertible into the Company's common stock at a rate of Cdn $6.00 and paid
a quarterly dividend at a rate of 7.5% annually. The Class A Preferred Shares
were subject to certain put and call rights.
On October 21, 1994, the Company reached agreement with UDI whereby the
Company acquired from UDI the remaining 15% of the common shares of DBI and all
of the Class A Preferred Shares in exchange for future cash payments totaling
Cdn $18 million and transfer to UDI of certain assets having a book value of
Cdn $1.4 million. The Company received a waiver of that year's fourth quarter
Class A Preferred Share dividend payment. As of September 30, 1995, the Company
paid Cdn. $8.3 million, transferred the assets and received all of the common
shares of DBI held by UDI and Cdn. $8.8 million face value of the Class A
Preferred Shares. The agreement between the Company and UDI was further modified
on December 18, 1995, when the Company agreed to acquire the remaining Class A
Preferred Shares of UDI for aggregate consideration of Cdn $11.5 million,
consisting of cash of Cdn $5.0 million and the issuance of up to 1,250,334
shares of the Company's Common Stock to be sold by UDI from time to time to
permit UDI to realize up to Cdn $6.5 million. These financial obligations to UDI
were completed in 1996 and resulted in the Company issuing 1,050,334 shares of
Common Stock and paying UDI $967,000 in lieu of issuing the additional 200,000
shares of Common Stock.
At the time that the Class A Preferred Shares were purchased by the
Company, UDI released all of the registered security interests it held on the
assets of DBI, including any claims for bonding, letters of credit or other
guarantees. It further forgave any claims to Cdn $1.8 million of interest and
other claims against DBI, as well as all dividends accruing on the Class A
Preferred Shares.
During fiscal 1995, in order to pay its obligations to UDI, the Company
sold to third party investors certain of the reacquired Class A Preferred
Shares, which were concurrently converted into shares of common stock of the
Company at a rate of Cdn $6.00. Of the 643,200 of Class A Preferred Shares
converted to common stock, 450,000 of Class A Preferred Shares were acquired by
Groupe Fidutech International Inc. from its purchase of $2.7 million of the
Class A Preferred Shares. Groupe Fidutech International, Inc. is a company owned
by Messrs. Marengere and Amyot, who are the Company's Chief Executive Officer
and a Director, respectively. SEE "ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS."
Steen Contractors Limited. On July 31, 1995, but effective March 31,
1995, the Company purchased 75% of the outstanding common shares of Steen
Contractors Limited for a cash price of Cdn $6.3 million ($4.5 million). The
acquisition, accounted for under the purchase method of accounting, was
effective April 1, 1995 for accounting purposes, the date on which the Company
assumed operational control. The remaining 25% of common shares were purchased
for Cdn $2.1 million ($1.6 million) on March 31, 1996, with the consideration
being fully paid on May 3, 1996. The total cost of the Company's acquisition of
Steen was approximately U.S. $6.1 million. Funds for the initial acquisition of
the 75% of the common shares were provided to the Company by a U.S. $5.0 million
bridge loan from BT Commercial Corporation ("BTCC"), an affiliate of Banker's
Trust Company. The loan was repaid in full in October 1995 with funds
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partially raised from the private placement sale of convertible preferred stock
by the Company's subsidiary, Cedar Group (TCI) Inc. LLC ("TCI"). SEE "ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."
McConnell Dowell Corporation Limited. In January 1996, the Company,
through a subsidiary, acquired 19.9% of the ordinary shares of MDC from Morrison
Knudsen Corporation for A$1.25 (U.S. $0.98) per share. On January 18, 1996, a
tender offer was made for all ordinary shares of MDC at a net price to the
seller of A$1.25 (U.S. $0.98). This was later increased to A$1.60 (U.S. $1.25).
Under this tender offer, an additional 11,178,115 ordinary shares, or 26.89%,
were tendered and purchased by the Company's subsidiary. Prior to the expiration
of this tender offer, on March 29, 1996 the Company's subsidiary purchased
12,640,000 ordinary shares, or 30.4%, in a block purchase on the Australian
Stock Exchange, which provided 50.3% ownership of MDC. For purposes of
accounting, MDC was consolidated as of March 29, 1996. After the close of the
tender offer, the Company owned 32,187,000 ordinary shares, or 77.4% of the
outstanding ordinary shares of MDC. The total cost to acquire these ordinary
shares, including all related fees and expenses, was US $40.2 million.
In June 1997, the Company sold 6,000,000 ordinary shares of MDC to
institutional investors for US $10.6 million, reducing its ownership to
approximately 63%. In November, through open market purchases, the Company
reacquired approximately 305,000 ordinary shares of MDC for approximately
$600,000. As of the date of this Report, the Company owns approximately 64% of
the outstanding shares of MDC. The ordinary shares of MDC continue to trade on
the Australian Stock Exchange and the New Zealand Stock Exchange.
The Company financed the $40.2 million acquisition cost of MDC by the
issuance of US $24.2 million of a 6% convertible preferred shares of TCI by
way of an offshore private placement, and a U.S. $30.0 million credit facility
from BTCC. SEE "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - LIQUIDITY AND CAPITAL RESOURCES."
Ship Construction, Repair, Design and Industrial Production
The ship construction repair and design activities of the Company are
conducted by Davie. The following is a summary of the Company's acquisition of
Davie.
Davie Industries Inc. On April 24, 1996, but effective March 31, 1996,
the Company, through a subsidiary, purchased from Societe Generale de
Financement ("SGF") 100% of the common stock of Davie Industries in a
privatization transaction. SGF is the industrial finance arm of the Government
of Quebec. Under terms of the transaction, the Company purchased for Cdn $1.00
(one dollar) all of the common stock of Davie and SGF assumed all the current
and contingent liabilities on the date of acquisition, including Davie's
accumulated working capital deficit. On May 15, 1996, SGF invested an additional
Cdn $25.0 million (US $ 18.5 million) to fund capital expenditures and provide
Davie with working capital over the next two years in accordance with the
business plan adopted by the Company and SGF. SGF has also agreed to invest up
to another Cdn $25.0 million in Davie at a rate of Cdn $1.00 for each Cdn $3.00
invested by the Company for expenditures under Davie's development plan. The
Company has agreed to invest over a three year period from the effective date of
acquisition Cdn $45 million to modernize Davie's facilities under the Davie
development plan, subject to financial market conditions and the conditions in
the potential industry sectors identified in the business plan. There is no
prescribed financial penalty or impact on the ownership of Davie if the Company
were to fail to make the agreed upon investment.
The transaction was accounted for as a purchase for accounting
purposes. Under applicable accounting principles, the Company was further
required to value the assets of Davie acquired at the price paid for the
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acquisition. Approximately US $24.2 million of net fixed assets were written
down to Cdn $1.00 (one dollar) and the remainder of the difference between the
new assets acquired and the purchase price was accounted for by negative
goodwill, which will be amortized against earnings over a three year period.
Specialty Fasteners
Unimetric Corporation. The Company acquired 70% of the shares of
Unimetric on April 26, 1994, and acquired the balance in December 1997. The
purchase price for the initial 70% was $1.0 million, consisting of a cash
payment of $900,000, issuance of 88,968 shares of the Company's common stock and
a $200,000 cash purchase of Unimetric 4% non-cumulative, non-voting preferred
shares. Approximately $900,000 of indebtedness due to AHG by Unimetric was
converted into 4% non-cumulative, non-voting preferred shares. The Company
subsequently purchased the preferred shares of Unimetric from AHG by issuing
338,033 shares of its common stock. Finally, in December 1997 the Company agreed
to purchase the balance of AHG's interest in Unimetric, including shareholder
loans, for a purchase price of $400,000 to be paid in installments.
Although the Company has no formal plan to do so, the Company is
exploring the divestiture of the specialty fastener business. The acquisition of
AHG's remaining ownership interest is expected to facilitate such a divestiture.
Divestitures
Divestiture of the Company's Canadian commodity fastener business
carried out by its predecessor company, Edinov, was completed in December 1994.
The Company at that time sold the shares that it held in Edinov for
cash of Cdn $1.0 million and received Cdn $5.1 million of preferred shares from
the purchaser, 3091473 Canada, Inc. The preferred shares carry a stated dividend
equal to the bank prime rate and are redeemable annually at varying amounts
commencing in 1995 through 2009. In August 1997, the acquirer failed to make the
required partial redemption and pay the accompanying dividend. The Company is
evaluating its rights as a result of this default.
In December 1994, the Company sold its Amherst, Nova Scotia steel
service center division for gross proceeds of Cdn $900,000.
In March 1997, the Company sold its Winnipeg rebar division for
approximately Cdn $700,000.
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BREAKDOWN OF SALES, OPERATING PROFITS AND IDENTIFIABLE ASSETS BY BUSINESS
SEGMENT AND GEOGRAPHY
The following table presents the breakdown of sales and operating
profit by business segment for the last three fiscal years.
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED 9/30/97 9/30/96 9/30/95
($ THOUSANDS)
[As Restated]
<S> <C> <C> <C>
SALES BY BUSINESS SEGMENT
Engineering & Construction (1) $513,409 $ 336,599 $ 150,996
Shipbuilding and Repair (2) 50,073 21,729 --
Fasteners 4,096 4,296 4,754
Total Revenues 567,578 $ 362,624 $155,750
OPERATING INCOME (LOSS)
Engineering & Construction (1) (2,433) $ 2,611 $3,246
Shipbuilding and Repair (2) 2,333 (131) --
Specialty Fasteners (921) (1,467) (1,316)
Segment Operating Income (Loss) (1,021) 1,013 1,930
Corporate Expenses (11,915) (5,030) (1,020)
Interest (5,215) (2,104) (406)
Provision for Impairment in
Value of an Investment (3,847) -- --
Other Income (Loss) (4,166) 1,134 1,236
Gain on Disposal of Subsidiary Shares 1,342 -- --
Income from Operations of Joint Ventures 1,180 2,189 2,165
Income Tax Provision (4,833) (574) (1,693)
Minority Interest - Common Stock (2,627) (1,667) (122)
Minority Interest - Cash Dividends -- (645) (70)
on Preferred Shares
Minority Interest - Deemed Dividends on -- (4,260) --
Preferred Shares
TOTAL ASSETS (3)
Engineering and Construction $219,694 $224,912 $79,400
Shipbuilding and Maintenance 16,960 28,655 --
Fasteners 3,519 4,275 5,503
Total Assets 240,173 257,842 84,903
</TABLE>
(1) Includes revenues and operating income of Steen from April 1995 and of
MDC from April 1996.
(2) Includes revenues and operating income from Davie from April 1996.
Prior thereto, the Company was not involved in this business segment.
(3) Excludes corporate assets of $2,591, $7,405 and $11,496 in fiscal years
1997, 1996 and 1995, respectively.
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<TABLE>
<CAPTION>
GEOGRAPHIC SEGMENTS NORTH AUSTRALIA AND
FISCAL 1997 AMERICA SOUTHEAST ASIA
<S> <C> <C>
Assets $107,436 $132,737
Sales 271,955 295,623
Segment Operating Income (Loss) (11,907) 10,886
</TABLE>
NARRATIVE DESCRIPTION OF BUSINESS
Description of Engineering and Construction Business
The Company is an engineering and construction company with operational
headquarters in Montreal, Canada and Melbourne, Australia. It has facilities
throughout Canada and, through MDC, in Australia, New Zealand, Singapore,
Thailand, Hong Kong and Indonesia. In fiscal 1997, approximately 90% of the
Company's total revenues were derived from engineering and construction.
Geographically, approximately 42% of these revenues were derived from North and
South America and 58% were derived from Asia-Pacific.
The Company's principal business is infrastructure construction and
engineering projects. Traditionally, its principal operations include civil,
mechanical and electrical engineering and construction. Specifically, the
Company's infrastructure construction and engineering capabilities include
tunnels, bridges, pipelines, power plants, plants and factories, commercial
buildings, engineering and design, mechanical contracting, oil and gas offshore
platforms, mills and mining infrastructure, and steel fabrication. The Company
serves the broad commercial and industrial markets of energy, pulp and paper,
mining, port facilities, large cranes, material handling systems, petrochemical,
food processing, sports and entertainment facilities, as well as general
commercial and industrial facility construction.
The Company believes that it has prospects for future growth due to the
need for building and replacing existing infrastructure in most parts of the
world. In addition, the Company is continuing to implement its strategy towards
obtaining recurring revenue projects. In this regard, DBI, Steen and MDC have
been able to obtain turnaround projects and similar work from major oil
companies which management believes will provide approximately $75 million of
revenue during each of the next three (3) fiscal years.
North America. The Company's North American engineering and
construction operations are conducted by DBI and Steen. DBI's operations are
particularly suited to large scale engineering projects. The range of services
provided by DBI include: fabrication, installation, project management, as well
as, subcontracting, procurement, quality assurance and scheduling.
DBI provides extensive services to the energy sector and, specifically,
to the oil and gas industry. These services consist primarily of (i) mechanical
installation of plant and equipment; (ii) design, fabrication and erection of
ABI storage tanks and ASME pressure vessels; (iii) spooling and heavy walled
pipe fabrication and installation; and (iv) refinery annual "turn around."
Additionally, DBI is a major industrial contractor for the pulp and
paper and mining industries. It executes civil, structural, mechanical, pipe
fabrication and installation, pressure part (oilers) installation and
modernization. DBI is also involved in comprehensive scheduling and project
management for these industries.
DBI's projects include the fabrication of box girder guide ways for
monorails, cranes for the shipping industry and super structure steel for
bridges; the supply and erection of structural steel for all types of
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construction projects; and the engineering, manufacturing and installation of
piping for the pulp and paper and chemical industries.
The pipeline division of Steen was formed in January 1997 and has
completed Cdn $85 million of contracts for TransCanada Pipelines. With the
growing demand for gas and oil gathering and distribution systems, Steen expects
this division to continue to grow and to complement the compressor station
activities of DBI.
Australia and Southeast Asia. The Company's Australian and Southeast
Asian engineering and construction operations are conducted by MDC. MDC is
organized into the following principal divisions: pipeline, civil, mechanical,
building and electrical. The operations of each division are described below.
The pipeline division engineers, designs and constructs all aspects of
pipeline transportation systems including gas, liquid, fuels, slurries, water
and by-products throughout Australia, South East Asia, the Pacific Islands and
the Middle East. This division also provides project management, design,
engineering, estimating, procurement administration, quality assurance, quality
control, supervision and safety services to its pipeline customers.
The civil division is MDC's largest division and is involved in the
procurement of design and construct contracts wherein MDC designs, builds and
then turns over a completed operational facility to the client. The civil
division has been involved in the construction of wharves and jetties, submarine
pipelines, soft ground and hard rock tunnels, heavy industrial civil works,
roads, bridges and supply and facilities, marine structures and piling.
The mechanical division carries out a wide range of projects throughout
Australia and South East Asia. These include oil storage terminals, refineries,
processing plants, power generation and transmission lines. This division is
involved in managing sophisticated control system installations, high-tech
manufacturing facilities, state of the art fertilizer plants, major plant
shut-downs and rebuilds and geothermal and petrochemical facilities.
The building division is involved in the design and construction of
industrial and process buildings primarily in Australia and Southeast Asia,
including projects undertaken on a turnkey basis. MDC believes there is an
increasing demand for such turnkey contracts and that it is has the engineering
expertise to compete for these projects.
Finally, the electrical division is one of New Zealand's largest
suppliers of construction and maintenance services to the electrical and power
system industry. The electrical division has recently expanded operations into
Australia and Indonesia. This division is involved in power station,
sub-station, transmission line and distribution line maintenance and
construction; industrial and commercial maintenance and installation; and
engineering and project management.
Backlog. As of September 30, 1997, the Company had confirmed contracts
in the engineering and construction segment of approximately $269 million,
approximately $243 million of which the Company intends to complete during
fiscal 1998. In addition to the backlog, the Company has been able to obtain
turnaround projects and similar work from major oil companies which management
believes will provide approximately $75 million in revenue in each of the next
three (3) fiscal years. Although, the dollar amounts of the backlog and the
recurring revenue are not necessarily directly proportional to the future
earnings of the Company, the backlog represents business which is considered to
be firm. In light of this statement, there can be no assurance that
cancellations or scope adjustments will not occur.
Suppliers. The principal raw material in most of the Company's
infrastructure projects is steel. Steel utilized by the Company is supplied by
Canadian mills and is also imported from Europe and Japan. The Company is not
dependent on any single supplier for its raw materials. Although the price of
steel fluctuates, substantially all of the Company's steel requirements are
purchased for specific projects and the
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cost of steel is usually reflected in the price of the project. As a policy, the
Company does not maintain significant raw material inventory not allocated to
specific projects.
Steen's operations as a prime mechanical contractor dictate that a
number of raw materials be employed in its operations. Steen uses a number of
suppliers in its operations and is not dependent on any single supplier for its
raw materials. Steen's pipeline division contracts strictly for the laying of
pipe and does not supply any raw materials to the projects.
Employees. As of the date of this Report, DBI, Steen and MDC employed,
in the aggregate, approximately 4,550 persons, of which approximately 20% are
members of a labor union. DBI (Lachine), with its approximately 350 employees,
had a collective bargaining agreement which expired in October 1997. As of the
date of this Report, DBI (Lachine) is in negotiations with the union with
respect to a new contract. In October 1997, the Company entered into a new
collective bargaining agreement for the Amherst, Nova Scotia plant. DBI's
Manitoba operations, with its approximately 130 employees, has a collective
bargaining agreement in place until May 31, 2000. Of the 230 Steen employees,
approximately 140 are hourly staff employees which are covered by a general
construction agreement, by each of their respective trades, to which Steen is a
signatory. The general construction agreements cover all aspects generally found
in collective bargaining agreements. MDC has experienced one work stoppage
during the past five years. Neither DBI nor Steen have suffered any work
stoppages during the past five years. The Company believes their labor relations
to be amicable.
Governmental Regulations. Many aspects of the Company's operations are
subject to government regulations in the countries in which the Company
operates, including those relating to currency conversion and repatriation,
taxation of its earnings and the earnings of its personnel and its use of local
employees and suppliers. The Company's operations are also subject to the risk
of changes in national, state, provincial and local laws and policies which may
impose restrictions on the Company, including trade restrictions, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. Other types of government regulations which could, if
enacted or implemented, materially and adversely affect the Company's operations
could include expropriation or nationalization decrees, confiscatory tax
systems, primary or secondary boycotts directed at specific countries or
companies, embargoes and port restrictions or other trade barriers, mandatory
sourcing rules and high labor rate and field price regulation. The Company
cannot determine to what extent future operations and earnings of the Company
may be affected by new legislation, new regulations or changes in, or new
interpretations of, existing regulations.
The Company's operations and properties are affected by numerous
national, state, provincial and local environmental protection laws and
regulations including those governing discharges into air and water and the
handling and disposal of solid and hazardous waste. The Company expects
compliance with these increasingly stringent and complex laws and regulations to
become increasingly difficult and costly. In addition, the Company may be
subject to claims alleging personal injury or property damage as a result of
alleged exposure to hazardous substances.
The Company is not aware of any non-compliance with environmental laws
that could have a material adverse effect on the Company's business or
operations. However, while the Company has an environmental compliance program
in place, it cannot guarantee that any non-compliance, if it exists, would not
have a material adverse effect on the Company. In addition, there can be no
assurance that environmental laws, regulations or their interpretation will not
change in the future in a manner that could not materially and adversely effect
the Company. Certain environmental laws provide for liability for investigation
and remediation of spills and other releases of hazardous substances. Such laws
may apply to conditions at properties presently or formerly owned or operated by
an entity or its predecessors, as well as the conditions at properties at which
waste or other contamination attributable to an entity or its predecessors come
to be located. The Company's facilities have been operated for many years and
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substances which are or might be considered hazardous were used and disposed of
at some locations which will, or may, require the Company to make expenditures
for remediation. However, the Company does not anticipate incurring material
capital expenditures for environmental controls or for investigation or
remediation of environmental conditions during the current or succeeding fiscal
year. Nevertheless, the Company can give no assurance that it, or entities for
which it may be responsible, will not incur liability in connection with the
investigation and remediation of facilities it currently owns or operates (or
formerly owned or operated) or other locations in a manner that could materially
and adversely affect the Company.
The Company's business sometimes involves working with volatile and
hazardous substances which expose it to risk of liability for personal injury or
property damage caused by any release, spill or other accident involving such
substances that occur as a result of the conduct of its business. The Company
has been, and may continue to be, unable to obtain adequate environmental damage
or pollution insurance at a reasonable cost. Although the Company maintains
general liability insurance, this insurance is subject to coverage limitations,
deductibles and exclusions and may exclude coverage for losses or liabilities
relating to pollution damage. Therefore, there can be no assurance that the
liabilities that may be incurred by the Company will be covered by its insurance
policies, or if covered, that the dollar amount of such liabilities will not
exceed the Company's policy limits. A partially uninsured claim, if successful
and of sufficient magnitude, could have a material adverse effect on the
Company's business, financial condition and results of operations.
It is possible that environmental liabilities in addition to those
described above may arise in the future. Although the Company's facilities in
Canada and certain other jurisdictions operate under stringent environmental
laws, certain of its other operations, including those in the Middle East and
Southeast Asia, have not been so regulated. As a result, the Company could incur
significant future liabilities should the laws of the jurisdictions in which the
Company operates change to impose additional environmental remediation
obligations. The precise costs associated with these or other future
environmental laws are difficult to predict at this time.
Health and safety records of contractors continue to be an important
decision criteria of project promoters and owners in the awarding of contracts.
Construction and heavy equipment involve a high degree of operational risk.
Natural disasters, adverse weather conditions or operator error can cause
personal injury or loss of life, severe damage to and destruction of property
and equipment and suspension of operations. Litigation arising from such an
occurrence may result in the Company being named as a defendant in lawsuits
asserting substantial claims. The primary responsibility for safety is that of
the various project managers. The Company also employs Safety and Quality
Assurance Managers. Although the Company has been subject to claims in the
ordinary course of its business, the Company believes its health and safety
record has been acceptable.
Marketing. DBI, Steen and MDC obtain most of their projects by
competitive bid. DBI, Steen and MDC employ a full-time marketing work force and
also engage agents and consultants to enhance their in-house marketing
capabilities.
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Contract Risks. The Company generally uses one of three types of
contracting approaches, depending on the type of work, the degree of work scope,
definition and the degree of risk in the project. These methods may be used for
competitive situations or negotiated contracts. The material features of each
contract approach appear below.
(i) Fixed or Lump Sum Pricing. The Company's expertise in
performing its design and construction services enable it to typically contract
over 50% of its work on a fixed price or lump sum basis, using price adjustment
clauses and where appropriate, cost escalation and contingency clauses in its
contracts.
(ii) Cost Reimbursable Pricing. In instances where the degree
of definition of the work scope, schedule requirements or the evaluation of risk
does not allow for the use of fixed or lump sum pricing, the Company may choose
to contract only on a cost reimbursable basis. Contracts of this nature may have
cost incentive provisions.
(iii) Target Fixed or Lump Sum Pricing. This approach is often
used in connection with partnering arrangements. The Company and the customer
establish a target, based on the parties' estimate of the total installed cost
of a project. Cost savings and overruns are then shared by the Company and the
customer, thereby encouraging total alignment of both parties with respect to
cost-effective completion of the project.
Facilities. DBI owns and operates manufacturing facilities in four
Canadian Provinces. In each of these facilities, DBI is equipped to receive and
ship material via road and rail. At the Lachine (Montreal) facility, the Company
can also ship by water through its access to international waterways via the St.
Lawrence Seaway.
The largest of the four manufacturing facilities is the 400,000 square
foot facility located on 40 acres of land in a heavy industrial park in Lachine,
near downtown Montreal, Quebec, which recently became ISO 9001 qualified. The
second largest facility is a 29 acre site, also in a heavy industrial park, in
Winnipeg, Manitoba. The main building on this site is a 150,000 square foot
fabrication shop which houses most of DBI's bridge building activity. DBI owns a
23 acre site in Regina, Saskatchewan, which includes a 35,000 square foot heavy
manufacturing facility which has general heavy manufacturing capability. DBI
also owns a 77,000 square foot facility in Amherst, Nova Scotia, where it
operates its fabrication division. Finally, DBI owns an office in downtown
Amherst, which consists of 16,000 square feet of office space and 16,000 square
feet of land.
In Nisku, Alberta, a suburb of Edmonton, DBI leases and operates a
30,000 square foot manufacturing facility. The major activity in this particular
facility is pipe spooling work for the oil and gas sector. In addition, DBI
operates construction offices from leased premises in the following locations:
Richmond, British Columbia; Calgary, Alberta; Nisku, Alberta; Regina,
Saskatchewan; Oakville, Ontario; and Sudbury, Ontario.
Steen operates from leased premises in six locations in the Provinces
of Ontario, Quebec and the Maritimes. With the exception of Toronto, from each
of these locations, Steen carries out all of the mechanical work with its own
facilities and work force, subcontracting only for specialty services, such as
controls, insulation and electrical wiring. In Toronto, the sheet metal work is
subcontracted to independent sheet metal contractors. The other locations
operate sheet metal fabricating facilities equipped with CAD/CAM and automated
duct fabrication machines. All locations prefabricate piping systems and Steen's
facility in Toronto maintains a large pipe fabrication system.
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MDC operates from premises in Australia, New Zealand, Thailand,
Singapore, Hong Kong, Dubai and Indonesia. MDC also operates in seventeen other
countries on a project or joint venture basis. The locations in Australia, New
Zealand, Singapore, Thailand and Dubai include significant plant repair and
storage yard facilities which allow MDC to service its regional construction
equipment requirements and to undertake its various construction projects.
Competition. The markets in which DBI, Steen and MDC operate are highly
competitive. Competition is primarily centered on price, reputation for quality,
timeliness experience, reliability and the financial strength of the contractor.
Due to the number of different markets in which the Company competes throughout
North America and the world, any meaningful estimate of the number of
competitors is impossible. Many of the Company's competitors are substantially
larger, with greater financial, marketing and other resources than those of the
Company. In some instances, due to the constraints of their respective bonding
capacities, DBI, Steen and MDC may be limited in their ability to compete for
very large projects. As has been its past practice, the Company will continue to
use its best efforts to bid for projects it cannot handle individually as part
of a consortium.
During 1997, the Company was subject to a consent solicitation
sponsored by dissident shareholders which created negative publicity regarding
the Company and its management. The consent solicitation to replace management
may have had a material adverse affect on the Company's ability to compete in
the markets in which it operates. See "ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS."
The Company's ability to compete effectively was also adversely
impacted by the Company's financial resources. The Company has responded to
these issues by securing a revolving credit facility from BNY Financial
Corporation - Canada ("BNY"). The Company is also exploring alternatives to
provide it with access to greater working capital either in the form of an
equity investment in the Company from a strategic partner or the possible sale
of the Company or one of its operating units. The Company is engaged in
preliminary negotiations with potential investors and acquirers, although there
have been no agreements reached and there can be no assurance that the Company
will be successful in reaching any agreement or that such an agreement will
provide the Company with the resources to compete effectively.
Description of Shipbuilding Segment
The shipbuilding segment accounted for approximately 9% of the
Company's consolidated revenues in fiscal 1997 and is conducted through Davie.
Davie, founded in 1825, is Canada's oldest and largest shipbuilding and ship
repair facility and is located in Levis, across the St. Lawrence River from
Quebec City, Quebec. A subsidiary of Davie, MIL Systems, an engineering division
located in Ottawa, Canada, is classified ISO 9001 and specializes in advanced
ship design software, naval systems and computer aided logistics.
Shipbuilding Operations. Davie's primary operation involves the
construction of a wide range of marine structures, including merchant and naval
vessels, ferries, tankers, bulk-carriers, destroyers and frigates. Davie's
accomplishments include building the largest ships ever produced in Canada
(80,000 dwt tankers), building the MV Caribou in 1986 which, at the time, was
the largest ferry of its class in the world, constructing three patrol frigates
and modernizing four destroyers of the Canadian Navy.
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Davie is also actively involved in ship repair and conversions. Davie
operates two large dry-docks, a floating dock and extension wharfage. The
dry-docks are primarily utilized for ship repair; however, they are also
available for newbuild business. These facilities, together with Davie's
strategic position on the St. Lawrence River, have enabled Davie to successfully
perform and complete a wide spectrum of ship repair work from routine surveys to
major overhauls including structural rebuilds and total conversions.
Other Industrial Operations. On the basis of its experience in ship
construction and repair, Davie has been awarded manufacturing contracts from
other industrial sectors. For example, Davie has manufactured equipment for
nuclear power plants, scroll cases and rotary kilns and has served industries as
diverse as petro chemicals, pulp and paper, hydro-electricity and steel mills.
Davie has also manufactured 71 sonar dome structures for the U.S. Navy cruiser
and destroyer programs, and has been awarded a contract for the construction of
three sonar dome structures with a purchaser's option for an additional nine.
Offshore Oil Platforms. Between 1979 and 1983, Davie diversified its
activities and profitably produced thirteen jack-up drilling platforms of large
size, for foreign customers in the offshore industry. A substantial portion of
Davie's future operations involve construction, retrofit and repair services for
offshore drilling rigs. Davie provides a full-range of design, engineering,
construction, conversion, retrofit and repair services for off-shore drilling
rigs, including construction of new-build off-shore drilling rigs. Davie's
shipyard located on the St. Lawrence River in Quebec has the capacity to provide
conversion, retrofit and repair services on off-shore drilling rigs
simultaneously with the timely and efficient construction of new off-shore
drilling rigs.
Davie's primary platform customers are involved in drilling operations in
the South Atlantic and other offshore areas of the world. These drilling
contractors generally own and operate or charter offshore drilling rigs and
provide drilling services to oil and gas companies. The following is a brief
description of the primary types of offshore drilling rigs and production units:
(i) Semisubmersibles. Semisubmersible rigs consist of an upper working and
living deck resting on vertical columns connected to lower hull members. Such
rigs operate in a semi-submerged position, remaining afloat in a position which
places the water-line approximately halfway between the top of the lower hulls
and bottom of the deck. The rig is dynamically positioned and remains stable for
drilling in the semi-submerged floating position.
(ii) Jackups. Jackup rigs are mobile, self-elevating drilling platforms
equipped with legs which are lowered to the ocean floor until a foundation is
established to support the drilling platform. The rig hull includes the drilling
rig, jacking system, crew quarters, loading and unloading facilities, storage
areas for bulk and liquid materials, heliport and other related equipment.
Jackups are used extensively for drilling in water depths from 20 feet to 400
feet. Jackup rigs are generally characterized by their design as either slot
jackups or cantilevered jackups. Many slot-designed rigs have been converted to
cantilever configurations which may be utilized for drilling exploratory wells
as well as drilling over existing fixed structures.
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Retrofits consist generally of improvements to the technical
capabilities, tolerances and systems of drilling and production equipment.
Retrofits performed on semisubmersible rigs include buoyancy and stability
enhancements and the addition or improvement of self-propulsion systems,
positioning thrusters and self-contained mooring systems. Jackup retrofits
include strengthening and extending the rig legs.
Current Business Plan. Historically, a large percentage of Davie's
business involved the construction and repair of commercial ships. During more
recent decades, Davie has been involved primarily in the procurement and
performance of military contracts from the Canadian government. After
recognizing a slowdown in Canadian military shipbuilding Davie has now refocused
its business on the commercial production of merchant ships principally for the
export market. This decision was based on Davie management's assessment that
there would be a significant increase in the demand for the next generation of
technologically and environmentally advanced merchant ships which would be
maintained through the year 2005. This increase in demand is materializing and
Davie management believes that it is primarily due to (i) an increase in
seaborne trade; (ii) additional replacement opportunities linked to the aging of
the world merchant vessel fleets; and (iii) a stricter regulatory environment
which is leading to an increase in the scrapping rate of older ships. Management
of Davie has concluded that the price level for new ships is determined mainly
by supply and demand as opposed to cost and, as such, the expected increase in
new building demand would lead to price increases over the level that prevailed
in the late 1980s and early 1990s.
Davie's current business plan also involves continued emphasis on the
expanding offshore drilling platform and rig business. The level of worldwide
offshore drilling activity has increased substantially over the last two years
resulting in an increase in worldwide drilling rig utilization to approximately
99% in May 1997. In deep water areas where larger and more technically advanced
drilling rigs are needed, increased drilling activity has also increased demand
for retrofitting offshore drilling rigs to enhance their technical capabilities.
In addition, increased drilling activity in and around more mature fields in
shallower waters has contributed to the increase in demand for construction and
retrofit for jackups and other offshore drilling rigs. Davie believes these
positive trends will continue due to, among other things, the increasing
percentage of worldwide oil supply being produced from less accessible offshore
areas, technology advancements that have increased drilling success rates and
the increased focus on deep water exploration and production projects.
Facilities. In terms of area, Davie owns and operates the largest
shipyard in Canada. The shipyard is located on the St. Lawrence River in Quebec
with access to international waterways. The shipyard is owned by Davie outright
and contains two main construction berths. Each berth is served by two gantry
cranes with lifting capacities of 39 and 45 tons and by four mobile cranes, the
largest of which has a maximum individual capacity of 200 tons. The berths are
uncovered and measure 352 meters by 37 meters and 183 meters by 37 meters,
respectively. The combined berth is capable of being extended to 300 meters by
150 meters. The shipyard also contains a floating dry-dock which measures 178
meters by 32 meters. Davie leases two dry-docks and approximately 14 acres of
land adjacent to the shipyard from the Canadian government. The shipyard also
houses approximately 220,000 square feet of office space. The shipyard and dry
docks constitute Davie's principal place of business.
Competition. Commercial shipbuilding is a highly competitive market
with world wide competition. In order to compete successfully in this market,
Davie recognized that it would have to increase productivity by adopting a
continuous flow process for the production of ships. In order to implement this
continuous flow process, Davie continues to develop more simplified designs,
improve its facilities and production processes, increase worker flexibility and
more efficiently procure its raw materials. In this regard, Davie has completed
an agreement with a European commercial shipbuilder wherein Davie is given
access to designs and the benefit of marketing, technical, production and
planning support of product tankers containership. This has led to direct
contact with potential customers which has allowed Davie to utilize its in-house
capabilities to further refine
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existing designs. Davie has also identified containerships with capacities of
between 1,500 and 3,000 dwt as a potential market.
Labor. To effectively compete in world markets, Davie must maintain
reasonable labor costs. Davie currently employs approximately 600 persons of
which approximately 500 are unionized. The unionized workers consist of four
certified bargaining units, the largest of which consists of shipyard employees.
On March 15, 1995, Davie signed a six (6) year collective agreement with this
unit which provided for a 15% reduction in total labor costs, a profit sharing
program, the ability to contract out certain work, a more efficient deployment
of personnel by cutting trades from 27 to 13 and a more efficient utilization of
overtime. Given that labor represents 40% of the cost of building a commercial
ship, Davie management believes that its labor costs provide Davie with a
substantial competitive advantage in the international markets as its labor
costs are below those of its major competitors in the United States and Western
Europe. Davie management believes that its labor relations are amicable.
Government Regulation. The shipbuilding industry is subject to
essentially the same types of government regulation as faced by the construction
and engineering industry, including substantial environmental regulation. In the
fall of 1993, the shipyard was the subject of a Phase I environmental study
conducted by consultants, Roche Ltee. Pursuant to certain recommendations
contained in the Phase I report, Davie has implemented certain clean up
procedures and is engaged in the routine clean up of its facilities. The Company
has been indemnified for such liability by SGF with respect to its Levis
facility. In connection with the Company's purchase of Davie, SGF agreed to
indemnify the Company for all such liabilities arising prior to the time of
sale.
Backlog. As of the date of this report, the Company had confirmed
contracts in the shipbuilding and repair segment for approximately $12 million,
approximately $7 million of which is to be completed during fiscal 1998. This
backlog does not include signed contracts for the significant upgrade of the
production platform, Spirit of Columbus, or the new building of two deep-water
drilling platforms, Amethyst II and Amethyst III. These contracts contemplate
scope of work for Davie of approximately $200 million, but are subject to
financing and other conditions which are beyond the control of the Company.
Nonetheless, the Spirit of Columbus is in Quebec City and preparatory work is
underway. Although the dollar amount of the backlog is not necessarily
indicative of the future earnings of the Company related to the performance of
such work,the backlog represents business which is considered to be firm. In
light of this statement, there can be no assurance that cancellations or scope
adjustments will not occur.
Description of Fasteners Business.
Historically, the Company has owned three subsidiaries in the specialty
fastener business including Unimetric. Unimetric is engaged in the manufacturing
of specialty fasteners for the industrial and aerospace markets, and has been
working to broaden its product line to include nuts for the automotive industry.
The other two subsidiaries had been engaged in the importation and distribution
of standard industrial fasteners, a highly competitive market. In the fourth
quarter of Fiscal 1996, management of the Company decided to close the commodity
fastener business in order to focus resources on its core business and avoid
continued losses. The fastener segment represented less than 1% of the Company's
consolidated revenues during fiscal 1997. Although Unimetric was profitable
during fiscal 1997, in order to focus attention on core businesses, management
has begun to pursue a sale of Unimetric during fiscal 1998 if such a sale can be
completed on terms acceptable to the Company.
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Agreement With The New World Power Corporation.
Effective as of October 31, 1996, the Company entered into a joint
venture agreement with The New World Power Corporation ("New World Power") to
develop specified projects of New World Power. These projects included the
further development of wind and hydro electric power plants in North, Central
and South America and China. Pursuant to the joint venture agreement and other
financing provided by the Company, the Company invested approximately $1 million
in exchange for common shares of New World Power and a 50% interest in the
financed projects. The Company was also given the option to convert its equity
in such projects into common stock of New World Power which, if all such equity
were earned and converted, would have given the Company ownership of
approximately 41% of the common stock of New World Power. As of September 30,
1997, the Company owned 15% of the common stock of New World Power.
The only project financed was a wind farm in Big Springs, Texas. This
project was sold in late 1997 to York Research for $1.5 million, $750,000 of
which is to be paid to the Company in three installments. The first installment
of $152,000 was paid at closing in November 1997. The balance is to be paid upon
completion of an archeological impact study in 1998.
The Company and New World Power have agreed not to pursue the remaining
projects in the joint venture.
In addition to the joint venture agreement, the Company is providing
management assistance to New World Power. Pursuant to a Management Services
Agreement, the Company is providing Vitold Jordan, a Vice President of the
Company, as interim chief executive officer of New World Power.
Dominion Kuhns Brothers & Company, Inc.
In 1996, the Company formed a project finance subsidiary with John D.
Kuhns known as Dominion Kuhns Brothers and Company, Inc. ("DK"). The mission of
DK was to act as financial advisor to the Company on general corporate finance
matters, act as a liaison with the Company's investment bankers and provide
project financing for various projects. Due to the inability of DK to achieve
its desired objectives and its two principals commencing a consent solicitation
of the Company's stockholders to remove management, DK was closed down and the
Company wrote off its investment in DK which had a carrying value of
approximately $500,000. SEE "ITEM 3. LEGAL PROCEEDINGS."
ITEM 2. DESCRIPTION OF PROPERTIES.
DBI owns four principal manufacturing facilities in Lachine, Quebec;
Winnipeg, Manitoba; Regina, Saskatchewan and Amherst, Nova Scotia; and leases a
manufacturing facility in Nisku, Alberta. In addition, DBI operates construction
offices from leased premises in Richmond, British Columbia; Calgary, Alberta;
and Oakville and Sudbury, Ontario.
Steen operates from leased premises in six locations from the Provinces
of Ontario, Quebec and Canada's maritime provinces.
MDC leases approximately fourteen different properties in New Zealand
and seven properties in Australia, as well as individual properties in
Indonesia, Singapore, Thailand, Dubai, Saudi Arabia, Hong Kong, and American
Samoa. MDC also owns a plant storage and plant maintenance facility in
Laverton, Victoria, Australia to house and maintain its equipment fleet. These
properties represent the primary office and production space utilized by MDC.
Davie owns a shipyard in Quebec, Canada and leases two adjacent dry
docks from the Canadian government. The shipyard contains 220,000 square feet of
office space. Davie conducts all of its industrial
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and manufacturing operations from these sites. Davie rents office space in
Ottawa, Canada, for its military research and engineering division MIL
Systems.
Unimetric operates from leased premises in East Providence, Rhode
Island.
The Company believes its facilities are adequate for its current use
and has no planned capital improvement plan for the facilities. It is the
opinion of management that the properties are adequately covered by insurance.
SEE "ITEM 1. DESCRIPTION OF BUSINESS - FACILITIES."
ITEM 3. LEGAL PROCEEDINGS.
From time to time, disagreements with individual employees and
disagreements as to the interpretation, effect or nature of individual
agreements arise in the ordinary course of business and may result in legal
proceedings being commenced against the Company.
Other than as set forth below, the Company is not currently involved in
any litigation or proceeding which is material, either individually or in the
aggregate, and, to the Company's knowledge, no other legal proceeding of a
material nature involving the Company is currently contemplated by any
individuals, entities or governmental authorities.
1. By complaint dated July 18, 1995, Paul Kandola, a former employee of
DBI ("Kandola"), commenced an action in Quebec Superior Court against UDI,
seeking Cdn. $352,933 in severance payments under his employment agreement. On
September 11, 1995, UDI filed an action in warranty against DBI seeking
indemnification for any payments which may be required in this matter.
By complaint dated August 4, 1995, Kandola filed an action in Quebec
Superior Court against DBI for constructive dismissal seeking damages in the
amount of Cdn. $490,901.92.
The Company has answered these complaints denying liability and intends
to vigorously defend the actions.
2. By letter dated July 24, 1996, UDI, the former owner of DBI, has
indicated that it intends to seek indemnification from the Company and from DBI,
with regard to legal proceedings instituted against UDI by Loblaws Inc. in the
Supreme Court of Newfoundland. The proceedings are based on the collapse of the
roof of a building owned by Loblaws Inc. and seek Cdn. $1.2 million in damages.
DBI has informed UDI that neither itself nor the Company are liable
towards UDI in this matter. The Company has not yet been served with court
papers as of the date of this Report.
3. IPCO International has commenced legal action in Thailand seeking
damages against the Thai company Si Chang Thong (as first defendant) and MDC's
Thailand subsidiary (as second defendant) in connection with alleged
infringements of intellectual property rights of IPCO International relating to
the construction of the Si Chang Thong Island Deep Sea Terminal and Tank Farm in
Thailand. This action was recently settled by MDC.
4. On or about November 18, 1996 (but not served on the Company until
December 9, 1996), James B. Smith commenced a purported class action securities
lawsuit in the United States District Court for the Eastern District of
Pennsylvania against the Company and Messrs. Marengere and Matossian,
individually. The complaint seeks unspecified damages for the persons who traded
in the Company's common stock during the period commencing on April 20, 1995 and
ending on May 18, 1996.
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The action alleges that during the class period the Company issued
misleading press releases and reports to the Securities and Exchange Commission
in that the Company failed to disclose allegations made by a former disgruntled
employee regarding DBI's accounting practices, bonding capability and contracts
in connection with his action against the Company for constructive dismissal.
On December 12, 1996, the Company filed an answer denying the
allegations and strongly affirming that the allegations, both by Smith and the
former employee, are entirely without merit. The Plaintiffs have filed a motion
to certify their proposed class which is pending before the court and no
discovery has been conducted.
5. By complaint dated January 31, 1997 and filed with the courts of
Newfoundland, International Offshore Services Group Inc. and Ocean Management
and Trading Company Ltd., both former consultants to the Company, are claiming
Cdn $973,000 for purported unpaid retainer fees, success fees and finders fees.
In August 1997, the Company settled this matter for Cdn $50,000.
6. By complaint dated February 24, 1997, the Company commenced an
action in Quebec Superior Court against Steinar Knai, a former executive of the
Company, DBI and Steen, following his termination for cause, for
misappropriation of corporate property. On March 14, 1997, Knai answered the
complaint and made a cross demand against the Company in the amount of Cdn $1.5
million for defamation. The Company intends to vigorously pursue its claim and
defend itself against Knai's cross demand. In December 1997, Knai filed another
claim against the Company seeking Cdn $1.5 million.
7. On August 28, 1997, Regie des Installations Olympiques ("RIO")
commenced an action against DBI in the Superior Court for the District of
Montreal relating to the cancellation of a contract for the installation of a
new roof for the Montreal Olympic Stadium. In September 1994, DBI was awarded a
contract for the installation of the new roof and received an advance payment of
Cdn $3 million. After a change in the government of Quebec and the completion of
certain studies, the contract was canceled by RIO which now seeks to recoup the
Cdn $3 million previously advanced to DBI. DBI asserts that it incurred expenses
in excess of Cdn $7 million in connection with this contract. DBI and RIO are
currently discussing a settlement of this action.
8. On March 31, 1997, Privatinvest Bank AG ("Privatinvest"), an
investor in the private placement of the TCI Preferred Shares, filed a Statement
of Claim in the Superior Court for the District of Montreal against the
Company's subsidiary, TCI, seeking recission of its investment in the preferred
shares of TCI based on the Company's alleged failure to deliver the correct
number of shares of common stock of the Company upon conversion of the TCI
preferred shares. Alternatively, Privatinvest seeks $445,849 plus interest
reflecting the value of shares not received in time as alleged by Privatinvest.
The Company believes it honored the terms of the TCI preferred shares and
intends to vigorously defend this action. Following the first motion filed by
TCI, Privatinvest was ordered to and deposited a sum of money in order to
guarantee the payment of court costs in the event that the complaint is
dismissed. TCI has filed a second motion alleging that the New York State Courts
and/or the United States Federal District Courts have jurisdiction over this
matter. This motion is currently pending before the court.
9. On May 23, 1997, the so called "Committee to Revitalize Dominion
Bridge Corporation" (the "Kuhns Group" or the "Committee") commenced a lawsuit
against the Company in Federal District Court in Wilmington, Delaware seeking a
declaration that it should be permitted to solicit written consents from the
Company's stockholders without violating federal securities laws and that the
Company's Second Amended and Restated By-laws, particularly those provisions
relating to the stockholder's right to take action by written consent and
requiring advance notice of stockholders in order to submit a nominee to serve
on the
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<PAGE> 21
Company's Board of Directors, are invalid. The Committee alleges that the
description of these provisions appearing in certain public filings, including
the Company's 1997 Proxy Statement, render the election of directors at the
Company's 1997 Annual Meeting void. Concurrent with the filing of this lawsuit,
the Committee commenced a consent solicitation of the Company's stockholders.
With the exception of its claim that stockholders have the right to act by
written consent, the Company believes that all claims asserted by the Kuhns
Group are entirely without merit and the Company is vigorously defending this
matter. In that regard, on June 4, 1997 the Company filed its answer
affirmatively denying the factual allegations and legal theories of the
Committee along with a ten (10) count counterclaim. The counterclaim seeks
declaratory and injunctive relief against the Committee for its illegal and
improper consent solicitation in contravention of Delaware law and its violation
of federal securities laws by disseminating materially false and misleading
information to stockholders. The Company is also seeking damages for the
Committee's unjustified and tortious interference with the Company's contractual
and prospective relations with its customers and suppliers and its conspiracy to
harm the Company's business and prospects. Motions are pending before the court
with respect to the continuation of discovery on both the Committee's claim and
the Company's counterclaim.
A group of investors negotiated a proposed settlement with the Kuhns
Group which would have required the Company to pay the Kuhns Group's
solicitation expenses, up to $400,000, in exchange for the mutual release of
litigation. The Company's Board of Directors rejected the settlement proposal.
10. On June 2, 1997, the Company filed a complaint against Kuhns Group
member John M. Dutton in the United States District Court for the District of
Delaware seeking a preliminary and permanent injunction against Mr. Dutton, and
all other persons acting in concert with him, to prevent Mr. Dutton from
continuing to disseminate material non-public information about the Company in
furtherance of his conspiracy to illegally obtain control of the Company. During
his eight month tenure with the Company, Mr. Dutton maintained a position of
trust and was privy to proprietary and confidential non-public information about
the Company, its financial prospects, prospective projects and strategic
business plans. Upon his resignation from the Company on May 12, 1997, Mr.
Dutton took his laptop computer, which contained numerous confidential files,
and illegally retained other confidential documents including financial
statements and stockholder lists. The Company believes that he has disseminated
this confidential non-public information in his efforts to illegally gain
control of the Company and jeopardize the Company's current and potential
contractual relationships. The Company is seeking injunctive and monetary relief
based on Mr. Dutton's breaches of his fiduciary and common law duties to the
Company and his misappropriation and misuse of confidential information.
Although discovery has not been completed, Mr. Dutton has filed a motion for
summary judgment with respect to all of the Company's claims. This motion has
been opposed by the Company and is pending before the court. Motions with
respect to the continuation of discovery are also pending before the court.
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<PAGE> 22
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On May 23, 1997, the Committee commenced a consent solicitation of the
Company's stockholders seeking to (i) amend the Company's Bylaws to provide for,
among other things, the direct election of the Company's officers by the
stockholders; and (ii) remove Messrs. Marengere, Matossian and Despres as
executive officers of the Company and replace them with Messrs. Kuhns, Mariash
and Dutton. An initial consent was filed with the Company on May 23, 1997 which
was subsequently revoked and refiled on June 23, 1997 thereby establishing June
23, 1997 as the record date for the solicitation. The Company solicited
revocations of consent in opposition to the Committee's solicitation asserting,
among other things, that the Committee's solicitation sought action which would
be illegal under applicable Delaware law. SEE "ITEM 3. LEGAL PROCEEDINGS."
Under applicable Delaware law, the Committee was required to deliver to
the Company written consents sufficient to approve its proposal by August 19,
1997. Although it is certain that the Committee did not obtain the requisite
number of consents, since no consents were delivered to the Company, the Company
has no reliable information regarding the exact number of valid consents, if
any, received by the Committee in support of its proposal.
On August 20, 1997, a Committee member filed another written consent
with the Company establishing a new record date for a second solicitation by the
Committee. Although the Committee filed a preliminary consent solicitation
statement with the Securities and Exchange Commission seeking stockholder
consents for an identical proposal, no definitive statement was filed and no
consents were solicited from the Company's stockholders. During this time, the
Company filed a preliminary revocation statement with the Commission opposing
the Committee's solicitation. The second consent solicitation expired on October
19, 1997.
The Company has no information regarding the continuing activities, if
any, of the Committee.
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<PAGE> 23
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Recent Sales of Unregistered Securities.
On August 20, 1997, the Company issued 2,380,000 shares of Common Stock
upon the exercise of certain outstanding options to certain executive officers,
directors and a limited number of other current and former employees of the
Company. Of these shares, 580,000 were sold pursuant to the limited offering
exemption set forth in Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act") for total consideration of approximately $1.2 million.
SEE "ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
In September 1997, the Company issued 15,000 shares of Common Stock to
an employee pursuant to the exemption for issuances outside of the United States
provided in Regulation S under the Securities Act.
Market Price Information
The Company's Common Stock is traded on the over-the-counter market and
is included for quotation on the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ").
Since November 4, 1993, the Company's Common Stock has also traded on the
Vancouver Stock Exchange.
The following table sets forth certain information with respect to the
high and low sales prices of the Company's Common Stock during fiscal 1996
(October 1, 1995 to September 30, 1996) and fiscal 1997 (October 1, 1996 to
September 30, 1997).
<TABLE>
<CAPTION>
FISCAL 1996 HIGH LOW
<S> <C> <C>
First Quarter $7.4375 $5.4375
Second Quarter 6.9375 4.5000
Third Quarter 5.6875 2.3750
Fourth Quarter 3.2500 1.5625
FISCAL 1997 HIGH LOW
First Quarter $2.750 $1.625
Second Quarter 2.562 1.406
Third Quarter 1.781 1.000
Fourth Quarter 2.500 1.093
</TABLE>
Holders
As of December 9, 1997, the approximate number of holders of record of
the Company's Common Stock was 300. Based upon the requests for consent
revocation materials during July, 1997, the Company believes the number of
beneficial owners of its Common Stock exceeds 6,000.
Dividends
The Company has not paid any cash dividends to date and does not
anticipate or contemplate paying cash dividends in the foreseeable future. It is
the present intention of management to utilize all available
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<PAGE> 24
funds for working capital. The Company's agreement with its principal lender
prohibits the payment of dividends without the lender's prior written consent.
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<PAGE> 25
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30 1997 1996 1995 1994 1993
- ----------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 567,578 $ 362,624 $ 155,750 $ 67,959 $ 7,003
Income (loss) from (22,320) (9,944) 2,020 416 (240)
continuing operations
Income (loss) from
continuing operations per
common share: (0.77) (0.55) 0.14 0.05 (0.07)
Primary (1) (1) 0.11 0.05 (0.07)
Fully Diluted
TOTAL ASSETS 242,764 265,247 96,399 72,178 9,774
Long-term obligations and 14,932 5,767 1,760 518 454
redeemable preferred stock
Cash dividend declared per 0 0 0 0 0
common share
</TABLE>
(1) Fully diluted earnings per share for this period is not calculated because
inclusion of common share equivalents would be antidilutive.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
BACKGROUND
Initially, the Company operated as Edinov Corporation in the industrial
fasteners market. Since the effective date of the Plan of Reorganization with
the shareholders of Cedar Group, Inc. on September 30, 1993, the Company's
growth has been as a result of four principal acquisitions, three of which were
in the infrastructure construction and engineering segment and one of which was
in the shipbuilding and ship repair segment. In fiscal 1994, the Company
acquired DBI, in fiscal 1995 it acquired Steen, and in fiscal 1996 it acquired
MDC and Davie. Each of these acquisitions was accounted for in the Results of
Operations from the effective dates of its acquisition, which were March 9,
1994, April 1, 1995, March 29, 1996 and March 31, 1996, respectively. The
Company also acquired Unimetric, effective January 1, 1994.
The Company has substantially reduced its industrial fastener operations.
During fiscal 1994, the Company divested its Canadian commodity fastener
distribution businesses that had been carried on by Edinov and its subsidiaries.
The divestiture was completed on December 22, 1994 (effective July 1, 1994) and
the Company sold all of the shares that it held in Edinov, which owned all of
the shares of George Hegedus Enterprises Ltd., Atto-Renaud Industries Inc. and
Specialty Fasteners Ltd. During the fourth quarter of fiscal 1996, the Company
completed the reduction of its commodity fastener distribution business which
entailed the purchase, importing, warehousing, reselling and distribution of
commodity fasteners from sales offices and warehouses in Houston, Chicago and
Philadelphia. As the inventories were liquidated and the warehouses and offices
closed, the Company assumed certain write-offs and closing costs associated with
its commodity fastener division. As of the date of this Report, the only
operations of this segment are those of Unimetric, which include the custom
fabrication of industrial fasteners and specialty steel fasteners for the
aerospace and automotive industries.
In fiscal 1997, the infrastructure construction and engineering business
accounted for approximately 90% of all of the revenues of the Company, as
compared to 93% and 97% in fiscal 1996 and fiscal 1995,
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<PAGE> 26
respectively. The shipbuilding and repair segment accounted for approximately 9%
of the Company's fiscal 1997 revenues, as compared to 6% in fiscal 1996. The
shipbuilding and repair segment was a new segment in 1996.
The industrial fasteners segment of the Company's business, which accounted
for approximately 1%, 1% and 3% of sales in fiscal 1997, 1996 and 1995,
respectively, had been unprofitable and adversely impacted the Company's
operating income by $1.5 million in 1996 and $1.3 million in 1995. This
negatively impacted the Company's earnings per share by $0.06 in fiscal 1996 and
$0.09 in the prior year. The Company undertook certain steps to return this
segment to profitability. These steps included key management changes and
marketing and production improvements. Unimetric achieved an operating profit in
fiscal 1997. However, due to closing costs incurred in the abandoned commodity
fastener business, the segment incurred an operating loss during fiscal 1997 of
$0.9 million.
During fiscal 1996, the Company acquired Davie, its initial entrance into the
shipbuilding and repair business. For one dollar, the Company purchased 100% of
the shares of Davie from Societe Generale de Financement ("SGF"), the industrial
finance arm of the Government of Quebec, in a privatization transaction. The
acquisition involved competition between several companies for the
privatization, and the Company was selected based on the business plan it
submitted to commercially expand Davie. SGF assumed all the current and
contingent liabilities on the date of acquisition including Davie's accumulated
working capital deficiencies. On May 15, 1996, SGF invested an additional Cdn
$25 million (US $ 18.5 million) to fund capital expenditures and provide for
working capital over the next two years in accordance with the business plan
adopted by the Company and SGF. SGF has also agreed to invest in Davie up to
another Cdn $25 million by matching each Cdn $3.00 invested by the Company with
Cdn $1.00 of its own money under Davie's development plan.
The acquisition was accounted for by the purchase method. As the acquisition
was made for a nominal amount (Cdn $1.00), negative goodwill amounting to $24.2
million at acquisition was applied to reduce the value of fixed assets to $ Nil
and the balance of $15.6 million is being amortized over a 3 year period. The
Company has adopted a multi-prong plan to build the revenue and earnings base of
Davie, which was instituted after the acquisition. Since its March 31, 1996
acquisition, Davie had reported operating loss of $0.2 million for the period
from April 1, 1996 to September 30, 1996 and operating income of $2.3 million
for fiscal 1997, including amortization of negative goodwill.
RESULTS OF OPERATIONS
The following table provides selected expense and income items from the
Company's Consolidated Statements of Operations stated as a percentage of
revenues for the three most recent fiscal years. It will be referred to in the
discussions that follow the table.
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Sales 100.0% 100.0% 100.0%
Cost of Sales 91.4% 90.4% 89.5%
Gross Profit 8.6% 9.6% 10.5%
Selling, General & 10.8% 10.7% 9.9%
Administrative
(Loss) Income from Operations (2.0)% (0.5%) 2.0%
(Loss) Income before Income Taxes
and Minority Interests (2.7)% (0.8%) 2.5%
Net (loss) income (3.9)% (2.7%) 1.3%
</TABLE>
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<PAGE> 27
Exchange rates used in this discussion for the translation of financial
results for fiscal 1997, 1996 and 1995 from Canadian to U.S. dollars were Cdn
$1.00 equals US $.7241, US $.7326 and US $.7270, respectively. For 1997 and
1996, the Australian dollar was converted to U.S. dollars at the exchange rate
of A $1.00 equals US $.76393 and US $.7898, respectively.
Fiscal 1997 Compared to Fiscal 1996
Sales. Sales for fiscal 1997 increased 57% to $568 million over fiscal
1996. The principal factors behind the growth in sales were the inclusion of MDC
and Davie for a full twelve month period in fiscal 1997, as opposed to only six
months in fiscal 1996, and significant growth in the pipeline division of Steen.
However, internal sales increased 7.1% during fiscal 1997, fueled by continuing
strong performance by MDC, which experienced internal sales growth of 9%, and
Steen which experienced internal sales growth of 65% due primarily to its
pipeline division. These increases were partially offset by decreased sales
in the fabrication division of DBI.
Notwithstanding the financial turmoil in Southeast Asia in which
MDC operates, the Company expects continued strong sales growth from MDC. While
some government projects in the Asia Pacific region have been put on hold, MDC's
principal customers are multi-national corporations who appear to be continuing
with their construction plans.
During fiscal 1997, the Company's North American operations were adversely
affected by a number of factors, including adverse publicity generated as a
result of a consent solicitation to remove management and, for most of fiscal
1997, a lack of a working capital line of credit. In October 1997, the Company
obtained a $40 million asset-based revolving line of credit from a syndicate led
by BNY Financial Corporation-Canada ("BNY"), and is in discussions with several
potential investors and/or acquirers which would likely need to provide
additional working capital for the Company's North American operations. See
"LIQUIDITY AND CAPITAL RESOURCES," below.
During fiscal 1997, the Company also successfully negotiated contracts for
Davie for the upgrading of the oil production platform Spirit of Columbus and
the new building of two deep water semi-submersible drilling platforms, Amethyst
II and Amethyst III. Based on their current specifications, these contracts
would involve approximately $430 million of procurement and construction
business for Davie and DBI to be completed over approximately two years.
Furthermore, the Company recently learned that the proposed operator of Amethyst
II and Amethyst III is considering upgrading the specifications for these
platforms to permit them to operate in even deeper water. These contracts are
subject to a number of contingencies and there can be no assurance that the
contracts will proceed as currently planned.
Cost of Sales. Cost of sales as a percentage of sales, increased slightly to
91.4% in fiscal 1997 from 90.4% in fiscal 1996. The increase in cost of sales is
attributable, in part, to the inability of the Company's North American
operations to take advantage of supplier discounts or to obtain favorable
prices. In addition, due to their cash needs, DBI and Steen discounted holdbacks
receivable on certain construction contracts to accelerate payment. Finally,
certain adjustments were made to and reserves taken against work-in-process for
construction contracts which did not achieve the expected level of
profitability.
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<PAGE> 28
Selling, General and Administrative Expenses. Selling, general and
administrative expenses ("SG&A") remained relatively constant as a percentage of
sales in fiscal 1997 at 10.8%, in spite of the Company incurring approximately
$912,000 in expenses associated with the consent solicitation and $2.1 million
in write-offs of assets charged to SG&A, excluding a $3.8 million provision for
impairment in value of an investment. The write-offs recorded in fiscal 1997
relate to certain investments made by the Company in the current and prior
fiscal years for which no future economic benefit could be achieved. The
write-offs were recorded as a result of changes in economic circumstances
relating to these assets.
Income from Joint Ventures. Income from joint ventures declined to $1.1
million in fiscal 1997 from $2.2 million in fiscal 1996 due to the substantial
completion by a joint venture of which Steen is a partner, of the construction
of an offshore drilling platform.
Interest Expense. Interest expense increased 148% in fiscal 1997 to $5.2
million from $2.1 million in fiscal 1996. The increased interest expense is
largely attributable to the Company's loan from BT Credit Corporation ("BTCC")
being outstanding for twelve months in fiscal 1997 as opposed to six months in
fiscal 1996, offset partially by a lower average outstanding balance. Included
in interest expense in fiscal 1997, is the amortization of financing fees
incurred with respect to the BTCC loan in the amount of $1.7 million.
Gain on Sale of Shares of MDC. In March 1997, the Company sold a portion of
its interest in MDC for net proceeds of $10.4 million, resulting in a gain of
$270,000, net of income taxes of $1.1 million.
Income Taxes. Income taxes expense increased over 660% in fiscal 1997 over
fiscal 1996 to $4.4 million, in spite of the Company's substantial consolidated
net loss. The principal cause of the increase in income tax was the
profitability of MDC, which is not consolidated with the North American
operations for the purpose of income taxes in the jurisdictions in which MDC
operates. Also contributing to the increase in income taxes were taxes paid on
the disposition of a portion of the Company's interest in MDC. No recognition
has been given to losses carried forward in the U.S. and Canada.
Minority Interest. Minority interest decreased 60% in fiscal 1997 to $2.6
million This decrease reflected the effect in fiscal 1996 of the deemed
dividends on the shares of the Company's subsidiary, Cedar Group (TCI) LLC,
Inc. ("TCI").
Net Income (Loss). The Company's net loss increased 125% to $22.3 million in
fiscal 1997 compared with $9.9 million in fiscal 1996. The principal factors
affecting the current year net loss were:
(1) Reduced margins in construction contracts due to the inability of
certain operations of the Company to obtain favorable trade conditions
from suppliers;
(2) Decline in the value of the Australian and Canadian dollar vs. the U.S.
dollar which result in reduced earnings, especially from MDC;
(3) Write-off of certain investments and provision for impairment in value
of the Company's investment in preferred shares acquired upon the sale
of its commodity fastener business;
(4) Adjustments to and reserves taken against work-in-process for certain
construction contracts which did not achieve the expected level of
profitability;
(5) Increase in interest costs; and
(6) Increase in income taxes.
Fiscal 1996 Compared to Fiscal 1995
Sales. Sales for fiscal 1996 increased 133% to $362.6 million as compared to
$155.8 million in fiscal 1995. The $206.8 million total increase in sales growth
in fiscal 1996 over fiscal 1995 is principally attributable to the acquisitions
of MDC and Davie on March 29, 1996. Of this sales increase of $206.8 million,
$135.5 million (or 65.5% of the fiscal 1996 increase) is from the acquisition of
MDC on March 29, 1996 and $21.7 million (or 10.5%) is from the acquisition of
Davie on March 31, 1996. The remaining increase of $49.6 million (or 24% of the
fiscal 1996 sales increase) is from ongoing operations.
The Company's internal growth, excluding MDC and Davie in fiscal 1996 was
16%. The 16% internal growth is derived by comparing the Company's remaining
operations for fiscal 1996 with their twelve months of operations in fiscal
1995. Pro forma 1995 sales of $177.5 million (versus $155.8 million reported)
are used to include the results of Steen for a twelve month period instead of
for six months from the date of its acquisition on April 1, 1995. Therefore, on
a comparable basis, the internal sales increase for fiscal 1996 was $27.9
million or 16%. Management attributes this increase to improved efficiencies in
marketing and sales at both DBI and Steen.
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<PAGE> 29
Cost of Sales. Gross profit margins declined by 0.9% in fiscal 1996 as
compared to fiscal 1995. The Company's fiscal 1996 gross profit margin decline
to 9.6% was principally attributable to its DBI operations that were affected by
a change in its mix of business. In fiscal 1996, Steen improved its gross profit
margins over the prior year but, due to the nature of its engineering business,
Steen's gross profit margin is typically lower than the corporate average. The
inclusion of MDC and Davie for the Company's second six months of operations in
fiscal 1996, was positive with both having gross profit margins higher than the
corporate average in fiscal 1996. In addition, fiscal 1995 sales mix included a
substantial level of high margin fabrication.
Selling, General and Administrative. SG&A costs increased from $15.4 million
in fiscal 1995 to $38.7 million in fiscal 1996 or from 9.9% of sales to 10.7% of
sales. Of the $23.3 million increase in total selling, general and
administrative expenses in fiscal 1996, $9.1 million and $5.4 million,
respectively, were from the inclusion of MDC and Davie. The remaining $8.8
million increase was from the inclusion of Steen for twelve months in fiscal
1996 as compared to six months in fiscal 1995 and the increases in the costs of
corporate overhead. Significantly, included in this latter category were
substantial marketing costs expended in fiscal 1996 by DBI to expand sales in
its Canadian markets. These expenditures have begun to provide returns, with the
December 1996 announcement of an initial Canadian pipeline contract for $12.6
million.
During fiscal 1996, the Company incurred certain adjustments as part of its
operating costs which reduced significantly its net income and earnings per
share. These adjustments include:
(a) The expensing in the period of $0.7 million of marketing costs associated
with various foreign joint ventures;
(b) The expensing of financing costs of $1.0 million associated with the
Company's purchase of MDC; and
(c) One-time tax costs of $1.4 million (see tax discussion below).
Income from Joint Ventures. Income from the operations of joint ventures
primarily represents the Company's interests through Steen in the joint venture
that is providing project construction management service and procurement
services to an offshore drilling platform. Although there was minimal difference
recorded by the Company between fiscal 1996 and fiscal 1995 in its share of the
joint venture's earnings, fiscal 1995 represents, from the date of acquiring
Steen, only a six months interest in the earnings. The decrease in the Company's
earnings from the joint venture for fiscal 1996 as compared to fiscal 1995's pro
forma full year income reflects that the project should be completed by the end
of calendar 1997, the Company's first quarter of fiscal 1998. The termination of
the joint venture at the conclusion of the contract is not expected to result in
any expenses to the Company. Although there can be no assurance of success,
management continues to address additional offshore drilling projects being
planned to replace the stream of income.
The North American segment operating income declined significantly from
fiscal 1995 to fiscal 1996 as a result of the accrual in fiscal 1996 of
estimated losses on certain contracts; by contrast several large, profitable
contracts were completed which positively affected operating income in 1995. The
significant decline in operating income in 1996 reflects the fact that the
contracts closed during fiscal 1996 were less profitable than those closed
during fiscal 1995. In accordance with the Company's accounting policies,
foreseeable losses on contracts are recorded in the period in which such losses
are first determinable. During fiscal 1996, the Company recognized
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<PAGE> 30
losses on certain contracts while no such losses were incurred in 1995.
Furthermore, during fiscal 1995, the Company completed contracts at
significantly higher margins than usual.
Interest Expense. The increase in the Company's net interest expense of $1.7
million over fiscal 1995 to $2.1 million in fiscal 1996 is due to the interest
cost and amortization of financing fees of the $30 million credit facility from
BTCC, which was used to partially finance the acquisition of 77.4% of MDC.
Income Taxes. The Company did not recognize any significant benefit from the
tax losses incurred in fiscal 1996. This was due to the incurrence of taxable
income and losses in different international tax jurisdictions. This precluded
obtaining the tax benefits of the Company's losses to offset the tax burden of
its profitable subsidiaries. Additionally, at September 30, 1996, the Company
reevaluated certain tax provisions in light of a) its expected disposition of
the US commodity fastener distribution business, b) the nature of the structure
of its 1996 acquisition financing and c) further information regarding various
tax matters. As a result of these re-evaluations, approximately $1.4 million has
been included in the 1996 income tax provision. In fiscal 1995, the Company had
an effective tax rate of 43.4% which was attributable to the losses in its
United States fastener divisions being unable to offset Canadian income tax on
its Canadian earnings.
Minority Interest. The increase in preferred dividends paid in fiscal 1996
was from the issuance of the Company's 6% cumulative preferred stock through its
Cedar Group (TCI) Inc. LLC subsidiary ("TCI"), which were converted into Company
common stock according to a specified formula. The conversion entitled the TCI
preferred shareholders to convert their shares into common stock of the Company
at a discount to market. This beneficial conversion feature has been accounted
for as additional paid-in-capital, to reflect the paid-in-capital account at the
fair value of the shares issued and a deemed dividend to the TCI preferred
shareholders. During fiscal 1996, the Company issued $24.2 million of the TCI
preferred stock, and at year end, only $8.5 million remained to be converted to
common stock by the holders. The remaining preferred were converted into the
Company's common stock during the first quarter of fiscal 1997. The minority
interests attributable to common stock of $1.7 million, and the increase of $1.5
million over fiscal 1995, is attributable to the 22.6% of MDC not owned by the
Company. A small portion was attributable to the 25% of Steen owned by minority
shareholders before their interest was purchased effective March 15, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity since the Company's
reorganization have been proceeds from seller financing provided in connection
with the Company's acquisitions and the private placement of equity securities,
bank financing and cash from operations. In addition, in connection with the
Company's acquisition of Davie, the Company received $18.5 million in cash from
SGF, to fund Davie's operating deficit and to modernize Davie's operating
facilities.
During fiscal 1996, TCI, a subsidiary of the Company, issued $24.2 million
of preferred shares by way of an offshore private placement and the Company
obtained a $30 million credit facility from BTCC. The proceeds from these
transactions, net of issuance costs of approximately $4.0 million, were used to
fund the $40.2 million acquisition of MDC, approximately $4.7 million to
partially retire the outstanding minority interest preferred shares in DBI, and
$5.0 million to repay the BTCC Steen acquisition bridge loan. The balance of
approximately $0.3 million was added to working capital. The TCI preferred
shares paid cash dividends at the rate of 6% per annum. The TCI Preferred Shares
became convertible into the Company's common stock, beginning May 31, 1996, at a
conversion price equal to 12% less than the market price of the common stock
during the five trading
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<PAGE> 31
days prior to conversion if converted prior to June 30, 1996, or 15% less than
the market price of the common stock during the five trading days prior to
conversion, if converted thereafter. There was no minimum conversion price. All
TCI preferred shares outstanding on the maturity date of October 31, 1998 were
to automatically convert into shares of common stock of the Company at a price
equal to the weighted average price of the Company's shares traded on NASDAQ
during the 20 previous trading days. As of the end of fiscal 1996, $7.3 million
of the preferred shares remained outstanding and $16.9 million had converted
into 7,994,606 shares of the Company's common stock. During the first three
months of fiscal 1997, the remaining outstanding balance of the TCI preferred
shares were converted into 3,971,126 shares of the Company's common stock.
As of the fiscal year-end, the Company had a $30 million credit facility from
BTCC, of which $15 million was outstanding as of September 30, 1997. This
facility provided funding for the Company's acquisition of MDC. Subsequent to
year-end, the Company entered into a $40 million credit facility (the "BNY
Facility") with a syndicate led by BNY Financial Corporation - Canada ("BNY").
The BNY Facility was used to pay off BTCC and to provide working capital for the
Company's North American operation. The amount available to the Company under
the BNY Facility is based upon a percentage of the value of certain eligible
assets of the Company, including the MDC shares owned by the Company and the
accounts receivable, inventory and property, plant and equipment of the North
American operations. The BNY Facility matures in three years and bears interest
at a floating rate based upon BNY's prime rate. The BNY Facility agreements
provide for an acceleration of the maturity date in the event of an "Event of
Default" (as such term is defined in the BNY Facility agreements). An Event of
Default includes failure to pay when due any installment of interest on or
principal of the Facility and any failure to observe the covenants provided in
the BNY Facility agreements, including certain financial covenants.
The BNY Facility contains various financial and other covenants including
maintaining a minimum shareholders equity of $52 million as of September 30
and December 31, 1997. This covenant was not met on these dates and constituted
a technical default under the BNY Facility. The Company has negotiated waivers
for these defaults. The Company is currently negotiating a waiver of or a
revision to the shareholders equity and other covenants contained in the BNY
Facility for the remainder of fiscal 1998. There can be no assurance that such
negotiations will result in a waiver or revision of such covenants. The
Company's failure to successfully negotiate such waiver or revisions would
adversely affect the Company's ability to obtain necessary working capital and
would have a material adverse effect on the continuing operations of the
Company.
During the second quarter of fiscal 1997, the Company sold 6 million ordinary
shares of MDC for net proceeds of $10.4 million, of which $10 million was paid
to BTCC to reduce the principal balance of the BTCC facility.
MDC has a revolving credit facility of $28 million which management believes
is adequate for its current level of operations. The Company's other
subsidiaries in North America rely upon cash on hand, trade payables and
customer advances for working capital. Due to restrictions under the BNY
Facility, these subsidiaries are precluded from drawing on their normal
operating lines of credit.
During fiscal 1997, the Company's operations generated cash in the amount of
$3.9 million, while operations used cash of $4.7 million in fiscal 1996. The
net cash provided by operations in fiscal 1997 results principally from net
changes in working capital items, an increase in depreciation and amortization
(net of amortization of negative goodwill) of $1.9 million and non-cash items
such as deferred income taxes and non-current asset write-offs.
Since November 1997, Davie has been engaged in the upgrade of the Spirit of
Columbus. The Company has yet to obtain financing for this project and has been
incurring costs on behalf of Davie of approximately $1 million per week. As of
the date of this Report, Davie has not received any progress payments for the
work performed. In order to reserve limited working capital, the Company has
determined to cut back on the scope of work authorized until such time as
progress payments are received and financing is in place.
The Company has instituted several significant business initiatives to
improve the operating cash flow. The Company has initiated plant and
administrative staff reductions in its DBI operations to achieve operating cost
savings and benefits from rationalization of operations with those of Steen and
these savings are currently being felt principally through increased margins and
reductions in SG&A. The Company has initiated its business plan at Davie to
focus on running the operation profitably. Davie reduced its operating loss to
$100,000 during fiscal 1997 before amortization of $5.3 million in negative
goodwill.
-29-
<PAGE> 32
The Company's operations are not significantly dependent upon computer
programs which are subject to the so-called "Year 2000" problem and, therefore,
the Company does not anticipate any material impact on its financial condition
or results of operation as a result therefrom.
The Company is subject to a risk of claims for construction and product
liability. If a liability claim exceeding the Company's insurance coverage or
its own available resources was to be successfully asserted against the Company,
it could have a material adverse effect on the Company's financial condition.
The Company has general liability insurance of approximately $5 million per
occurrence, with a maximum of $5 million of claims payable during any policy
year. There is no assurance that such coverage will be sufficient to fully
insure against claims brought against the Company and its subsidiaries, or that
the Company will be able to maintain such insurance at affordable rates or
obtain additional insurance covering the projects it undertakes.
In connection with the acquisition of Davie, the Company agreed to make Cdn
$45 million in capital additions pursuant to a three year revitalization plan.
This investment is on a best efforts basis and is subject to financial market
conditions and the general conditions in the chosen industrial markets
contemplated in the revitalization plan. SEE ITEM 1. "DESCRIPTION OF BUSINESS."
Effect of Inflation
The Company's operating costs are subject to general economic and
inflationary pressures. While operating costs have increased during the past
years, the Company does not believe that its operations have been significantly
affected by inflation.
Foreign currency
The Company operates principally in Canada, Australia and Southeast Asia and
is, therefore, exposed to currency fluctuations. Because the currencies in these
countries have significantly decreased in value relative to the United States
dollar, a charge of $4.2 million has been made to the cumulative translation
adjustment component of shareholders' equity principally as a result of a
re-valuation of the Company's assets in these countries. The Company does not
currently hedge its exposures to foreign currency fluctuations.
ITEM 8. FINANCIAL STATEMENTS.
The information required by this Item is found immediately following the
signature page to this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
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<PAGE> 33
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The following is a brief description of the business experience of each of
the directors and executive officers of the Company.
NAME AGE POSITION
- ---- --- --------
Michel L. Marengere 50 Chairman, Chief Executive Officer and
Director of the Company; Chairman of
the Board of Directors of MDC
Nicolas Matossian 56 President, Chief Operating Officer and
Director of the Company; Director of MDC
Olivier Despres 42 Vice President, General Counsel and
Corporate Secretary of the Company
Robert Chartier 53 Vice President, Corporate Controller
and Interim Chief Financial Officer of
the Company
J. Arthur Gelinas 57 Vice President of the Company and
President of Davie Industries Inc.
Rene Amyot 71 Director of the Company and MDC
Reynald Lemieux 70 Director of the Company and MDC
Louis Berlinguet 71 Director
Ladislas O. Rice 71 Director
Andrew Choa 73 Director
Charles-Albert Poissant, FCA 72 Director
Allen S. Gerrard 62 Director
Derek Tennant 55 Director
-31-
<PAGE> 34
EXECUTIVE OFFICERS
Olivier Despres was appointed Vice President, General Counsel and Corporate
Secretary of the Company in September 1996. During the five years prior to such
time, Me Despres practiced in the areas of commercial and corporate law,
computer and high technology law, civil law, and related litigation in his own
firm. A member of the Canadian Bar Association and of the Quebec Bar, Me
Despres graduated in political science (1976) and in law (1979) from Ottawa
University, and obtained an M. Sc. in political science (1983) from the
University of Montreal.
Robert Chartier was appointed Vice President and Corporate Controller of
the Company in October 1994, and Interim Chief Financial Officer in September
1996. Mr. Chartier graduated in accounting from Ecole des Hautes Etudes
Commerciales de Montreal. He holds a C.A. and prior to joining the Company,
practiced as a Chartered Accountant in his own firm since 1971.
J. Arthur Gelinas was appointed Vice President of the Company effective
October 1993 and President of Davie Industries Inc. effective upon its
acquisition by the Company in March 1996. Prior to his appointment, Mr.
Gelinas was the founding President of Administratique Inc., a management
consulting company involved in providing financial and administrative
services. Mr. Gelinas graduated from Laval University with a Masters in
Commercial Sciences and is a Chartered Administrator.
-32-
<PAGE> 35
DIRECTORS
The Company's Board of Directors is divided into three classes with one class
elected at each Annual Meeting of Stockholders.
- --------------------------------------------------------------------------------
Director Whose Term Year in Which Service as
Expires at the 1998 Principal Occupation a Director Began
Annual Meeting
- --------------------------------------------------------------------------------
Derek Tennant Consultant 1997
Allen S. Gerrard Attorney (self-employed) 1997
Ladislas O. Rice Consultant; Independent 1997
Director
- --------------------------------------------------------------------------------
Derek Tennant was appointed a Director of the Company on October 9, 1997. Mr.
Tennant currently serves as a consultant to Deere Park Equities, LLC ("Deere
Park"), a principal stockholder of the Company, and serves on the Board as a
nominee of Deere Park. During the past five years, Mr. Tennant has served as
President of Active Living of Elliot Lake, Inc., a retirement housing company
and also as Site Selection Manager of Q. Canada, Inc., a developer of
entertainment centers. In 1994, Mr. Tennant filed a petition for personal
bankruptcy under federal bankruptcy laws due to losses incurred on real estate
investments. Mr. Tennant was discharged from bankruptcy in February 1995.
Allen S. Gerrard was appointed a Director of the Company on November 13,
1997. Mr. Gerrard obtained a Bachelor of Arts Degree from the University of
Illinois and a Law Degree from the University of Michigan. Mr. Gerrard is a
self-employed attorney in Chicago, Illinois specializing in general civil
litigation. Since 1975 he has been a Director of the Western Golf Association,
which manages the affairs of the Evans Scholarship Foundation. He is the father
of Douglas A. Gerrard, who is a Manager of Deere Park, a principal stockholder
of the Company. Mr. Gerrard serves on the Board as a nominee of Deere Park.
Ladislas O. Rice was appointed a Director of the Company on March 14, 1997.
He is currently a business consultant and outside director for a number of
companies. For the past 5 years he has served as an independent director for
Huntingdon Life Sciences PLC, Scudder New Europe Investment Co., Inc., Sovereign
High Yield Investment Co. NV and Venizaula High Yield Investment Co. NV. For the
past 3 years he has served as an independent director for Stanley Gibbons
Holdings PLC.
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<PAGE> 36
- --------------------------------------------------------------------------------
Directors Whose Terms Year in Which Service as
Expire at the 1999 Annual Principal Occupation a Director Began
Meeting
- --------------------------------------------------------------------------------
Reynald Lemieux President, Placement 1995
R.N.S. Inc.
Rene Amyot Attorney (self-employed) 1993
Charles-Albert Poissant Chairman of the Board of 1997
Donohue Inc.
Andrew Choa Senior Advisor, Russell 1997
Reynolds Associates
- --------------------------------------------------------------------------------
Reynald Lemieux was elected a Director of the Company in February 1995. He
graduated in commerce from Laval University and has been involved in real estate
as an owner and developer for the past forty years. He is the President and
majority shareholder of Placement R.N.S. Inc., a private company specializing in
real estate and other investments. Mr. Lemieux also serves as a director of MDC.
Rene Amyot, Q. C. was elected a Director of the Company in January 1994. Me
Amyot graduated in law from Laval University in Quebec City and received an MBA
from Harvard University. Me Amyot is a Queen's Counsel and retired in February
1996 as counsel to the Quebec City law firm of Jolin, Fournier, Morisset. Me
Amyot is a director of Rothman's Inc., a tobacco company. Me Amyot also serves
as a director of MDC.
Charles-Albert Poissant, FCA was appointed a Director of the Company on
October 9, 1997. He is the Chairman of the Board of Directors of Donohue Inc., a
pulp and paper company located in Montreal, Canada. For the past 10 years he has
served as Vice-Chairman for Quebecor, Inc., a publicly held media and printing
company.
Andrew Choa was appointed a Director of the Company on March 14, 1997. Since
1987, Mr. Choa has served as Senior Advisor to Russell Reynolds Associates, an
executive recruitment and consulting firm, where he conducts CEO level searches
and provides consulting services to a variety of public and private companies.
He previously served as the Managing Director for Russell. Prior to that, Mr.
Choa served as a Vice-President of Citibank Citicorp where he was the Division
Head of Asia Pacific.
-34-
<PAGE> 37
- --------------------------------------------------------------------------------
Directors Whose Terms Principal Occupation Year in Which
Expire at the 2000 Annual Service as a
Meeting Director Began
- --------------------------------------------------------------------------------
Michel L. Marengere Chairman and Chief Executive 1993
Officer of the Company
Louis Berlinguet Consultant 1995
Nicolas Matossian President and Chief Operating 1997
Officer of the Company
- --------------------------------------------------------------------------------
Michel L. Marengere was elected Chairman of the Board of Directors and Chief
Executive Officer of the Company effective as of October 1993. During the prior
five years, Mr. Marengere was President and Chief Executive Officer of Edinov, a
former subsidiary of the Company. Mr. Marengere also serves as Chairman of the
Board of Directors of MDC.
Louis Berlinguet was elected a Director of the Company in August 1995.
He obtained a B.Sc. (Honours) from the University of Montreal in 1947 and a
Ph.D. in Chemistry from Laval University in 1950. Dr. Berlinguet is a
scientific consultant, president of the Order of Quebec, (1994-) and
president of the Quebec Advisory Committee on the Information Highway
(1995-). From 1990 to January 1997, Dr. Berlinguet was President of the
"Conseil de la science et de la technologie du Quebec."
Nicolas Matossian was appointed President and Chief Operating Officer of the
Company in April 1994 and has been a director of the Company since March 14,
1997. Dr. Matossian graduated from Harvard University with an MBA and acquired
his Ph.D. in economics from McGill University. Prior to joining the Company, Dr.
Matossian was the founding partner of ERA, an economic and management consulting
firm involved in major projects for the public and private sectors and was the
managing director of the Manitoba Development Corporation. Mr. Matossian also
serves as a director of MDC.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the knowledge of the Company, based solely on a review of Forms 3, 4 and
5, and any amendments thereto, furnished to the Company, each of the Company's
directors, executive officers and 10% beneficial owners has complied with the
requirements of Section 16(a) of the Exchange Act, except that Messrs. Choa,
Rice and Gerrard each failed to timely file a Form 3 upon their appointment to
the Company's Board of Directors and Mr. Matossian failed to timely file a Form
4 with respect to his purchase of 25,000 shares of Common Stock in March, 1997.
-35-
<PAGE> 38
ITEM 11. EXECUTIVE COMPENSATION.
The following table discloses, for the fiscal years ended September 30, 1997
("Fiscal 1997"), September 30, 1996 ("Fiscal 1996") and September 30, 1995
("Fiscal 1995"), individual compensation information relating to the Chief
Executive Officer and the four highest compensated executive officers of the
Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation Awards
------------------- -----------------------------
Awards Payouts
------ -------
Securities
Restricted Underlying All Other
Salary Bonus Other Annual Stock Options/SAR LTIP/Payouts Compensation
Name and Position Year ($) ($) Compensation Award(s)($) (#) ($) ($)
- ----------------- ---- --- --- ------------ ---------- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michel L. Marengere 1997 360,000 180,000 0 0 0 0 0
Chairman of the 1996 360,000 180,000(1) 0 0 825,000(2) 0 0
Board of 1995 360,000 180,000(1) 0 0 (2) 0 0
Directors, Chief
Executive Officer
and Director
Nicolas Matossian 1997 240,000 96,000 0 0 0 0 0
President and 1996 240,000 96,000(3) 0 0 400,000(4) 0 0
Chief Operating 1995 240,000 96,000(3) 0 0 (4) 0 0
Officer
Robert Chartier 1997 125,000 0 0 0 0 0 0
Vice President, 1996 125,000 0 0 0 110,000(5) 0 0
Corporate 1995 117,000 0 0 0 (5) 0 0
Controller and
Interim Chief
Financial Officer
J. Arthur Gelinas 1997 150,000 0 0 0 0 0 0
Vice President 1996 113,000 0 0 0 200,000 0 0
of the Company 1995 90,000 0 0 0 0 0 0
and President of
Davie Industries
Inc
Olivier Despres(6) 1997 148,000 0 0 0 0 0 0
Vice President 1996 10,500 0 0 0 175,000 0 0
General Counsel
and Corporate
Secretary
</TABLE>
(1)The Compensation Committee (now known as the Corporate Governance Committee)
granted Mr. Marengere a bonus equal to one-half of his base compensation
during Fiscal 1995 and Fiscal 1996. These bonuses were authorized and paid in
January 1997.
(2)Consists of 175,000 options granted during Fiscal 1994, 500,000 options
granted during Fiscal 1995 and 150,000 shares of Common Stock which were to
be received upon the exercise of 75,000 unit options (exercisable for one
share of Common Stock and one Common Stock purchase warrant) granted during
Fiscal 1995 under Mr. Marengere's service agreement, all of which were
repriced on September 12, 1996. All of these options were exercised in August
1997.
(3)The Compensation Committee (now known as the Corporate Governance Committee)
granted Mr. Matossian a bonus equal to 40% of his base compensation during
Fiscal 1995 and Fiscal 1996. These bonuses were authorized and paid in
January 1997.
(4)Consists of 300,000 options granted during Fiscal 1995 and 100,000 shares of
Common Stock be received upon the exercise of 50,000 unit options
(exercisable for one share of Common Stock and one Common Stock purchase
warrant) granted during Fiscal 1995 under Mr. Matossian's service agreement,
all of which were repriced on September 12, 1996. All of these options were
exercised in August 1997.
-36-
<PAGE> 39
(5)Consists of options granted during Fiscal 1995 which were repriced on
September 12, 1996. All of these options were exercised in August 1997.
(6)Me Despres joined the Company in September 1996.
AGGREGATED OPTION EXERCISES IN 1997 FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES TABLE
<TABLE>
<CAPTION>
Number of
Unexercised
Shares Options/SARs
Acquired Value at FY-end (#)
on Realized Exercisable/
Name Exercise(#) ($)(1) Unexercisable
---- ----------- ------ -------------
<S> <C> <C> <C>
Michel L. Marengere 825,000 0 0/0
Nicolas Matossian 400,000 0 0/0
Robert Chartier 110,000 0 0/0
J. Arthur Gelinas 200,000 0 0/0
Olivier Despres 175,000 0 0/0
</TABLE>
(1) All options were exercised on August 20, 1997. The closing price for the
Company's Common Stock on that date was $1.844 which was lower than the
exercise price of the options.
The Company has no retirement, pension or profit-sharing plans covering its
officers and directors and does not contemplate implementing any such plans at
this time. Although the Company has no formal bonus arrangements, other than as
provided in the service agreements for Messrs. Marengere and Matossian, bonuses
will be granted at the discretion of the Board of Directors or by the Corporate
Governance Committee. SEE "CORPORATE GOVERNANCE COMMITTEE REPORT ON EXECUTIVE
COMPENSATION."
DIRECTORS' COMPENSATION
During Fiscal 1997, Directors of the Company who are not employees of the
Company ("Outside Directors") were paid an annual stipend of $12,000 plus a fee
of $1,000 for each Audit Committee or Board meeting attended and $500 for each
other Committee meeting attended. The aggregate amount of fees paid to all
outside directors during Fiscal 1997 was $190,000. On November 25, 1996, Outside
Directors Rene Amyot, Reynald Lemieux and Louis Berlinquet were granted
three-year options to purchase 25,000 shares of Common Stock at a price of $2.00
per share. In addition, Outside Directors Ladislas O. Rice and Andrew Choa were
granted three (3) year options to purchase 25,000 shares of Common Stock at a
price of $2.00 per share upon their appointment to the Company's Board of
Directors on March 14, 1997.
CHANGE IN CONTROL ARRANGEMENTS
SERVICE AGREEMENTS
Effective February 1, 1995, the Company entered into three year service
agreements with Michel L. Marengere as Chairman and Chief Executive Officer,
Nicolas Matossian as President and Chief Operating
-37-
<PAGE> 40
Officer and Robert Chartier as Vice President and Corporate Controller.
Effective April 1, 1996 and September 1, 1996, the Company entered into a three
year service agreement with Mr. Gelinas and a three-year employment agreement
with Me Despres. Mr. Marengere's employment agreement was extended for a
three-year period beginning February 1997.
The service agreements with Messrs. Marengere, Matossian, Chartier, Gelinas
and Despres (individually an "executive") contain "change in control" language
which provides the executive with certain benefits, including payment to the
executive in the amount of three times his base compensation, if the executive
is terminated for "good reason," as that term is defined in the service
agreements, following a change in control of the Company. The service agreements
provide that a "change in control" shall mean a change in control of a nature
that would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A, as in effect on the date thereof, promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); provided,
however, that, without limitation, such a change in control shall be deemed to
have occurred if (A) any "Person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), except for Michel L. Marengere, or a company
controlled by him, is or becomes the beneficial owner, directly or indirectly,
of securities of the Company representing 10% or more of the combined voting
power of the Company's then outstanding securities; (B) there occurs a contested
proxy solicitation of the Company's stockholders that results in the contesting
party obtaining the ability to vote securities representing 20% or more of the
combined voting power of the Company's then outstanding securities; (C) there
occurs a sale, exchange, transfer or other disposition of substantially all of
the assets of the Company to another entity, except to an entity controlled
directly or indirectly by the Company, or a merger, consolidation or other
reorganization of the Company in which the Company is not the surviving entity,
or a plan of liquidation or dissolution of the Company other than pursuant to
bankruptcy or insolvency laws is adopted; or (D) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors cease for any reason to constitute at least a majority
thereof unless the election, or the nomination for election by the Company's
stockholders, of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period. Notwithstanding the foregoing, a "change in control" shall not be deemed
to have occurred for purposes of the service agreements (i) in the event of a
sale, exchange, transfer or other disposition of substantially all of the assets
of the Company, or a merger, consolidation or other reorganization involving the
Company and the executive, alone or with other officers of the Company, or any
entity in which an executive (alone or with other officers) has, directly or
indirectly, at least a 25% equity or ownership interest or (ii) in a transaction
otherwise commonly referred to as a "management leveraged buy-out."
If a "change in control" had occurred during Fiscal 1997, Messrs. Marengere,
Matossian, Chartier, Gelinas and Despres would have been entitled to receive
$1,080,000, $720,000, $375,000, $450,000 and $450,000 respectively, based on
their base compensations pursuant to their respective service agreements. In
addition, since their service agreements are for three year terms ending
February 27, 2000, January 31, 1998, July 31, 1998, March 31, 1999 or August
31, 1999 they would also be entitled to receive their base compensation during
the terms of their respective service agreements.
-38-
<PAGE> 41
CORPORATE GOVERNANCE COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Corporate Governance Committee of the Board of Directors (the
"Committee") is responsible for developing and making recommendations to the
Board with respect to the Company's executive compensation policies. The
Committee consists of Rene Amyot (Chairman), Charles-Albert Poissant, Louis
Berlinguet and Reynald Lemieux (temporary), each of whom is an outside director.
No member of the Corporate Governance Committee has a relationship that would
constitute an interlocking relationship with executive officers or directors of
another entity.
SENIOR AND OTHER EXECUTIVE OFFICER COMPENSATION PROGRAM
For the purpose of this report, senior executives refers to Messrs. Marengere
and Matossian. The Company's senior and other executive compensation program is
based on the following four objectives: (i) to link the interests of management
with those of stockholders by encouraging stock ownership in the Company; (ii)
to attract and retain superior executives by providing them with the opportunity
to earn total compensation packages that are competitive with the industry;
(iii) to reward individual results by recognizing performance through cash
compensation and incentives as well as long-term stock based incentives; and
(iv) to manage compensation based on the level of skill, knowledge, effort and
responsibility needed to perform the job successfully.
The components of the Company's compensation program for its senior and
executive officers include (i) cash compensation and bonuses provided pursuant
to service agreements or employment agreements; and (ii) performance-based cash
bonuses. In past years, the Company has provided incentive compensation in the
form of stock options.
Cash Compensation. Cash compensation levels for the Company's senior and
other executive officers are determined, in part, through comparisons with
companies in the engineering and construction industry and other companies with
which the Company competes for personnel and general geographic market
conditions. Additionally, the Committee evaluates individual experience and
performance and the overall performance of the Company. The Committee reviews
each executive's cash compensation on an annual basis and may increase each
executive's cash compensation based on (i) the individual's increased
contribution to the Company over the preceding year; (ii) the individual's
increased responsibilities over the preceding year; or (iii) any increase in
median competitive pay levels.
Annual Cash Bonuses. The Committee recommends the payment of bonuses from
time-to-time to the Company's employees and executive officers to provide these
persons with an incentive to be productive over the course of each fiscal year.
The service agreements for Messrs. Marengere and Matossian provide for minimum
cash bonuses equal to 50% and 40% of their respective base compensation. Subject
to the Committee's recommendation, other bonuses may be awarded only if the
Company achieves or exceeds certain corporate performance objectives relating to
net income, revenues and strategic acquisitions. Except as provided in the
service agreements, there is no mechanical formula or official policy regarding
the issuance of bonuses to the Company's other executive officers and key
employees.
Stock Option Plans. Historically, the Company has utilized stock options to
provide an incentive to these officers and employees by allowing them to
directly participate in any increase in the long-term value of the Company and
to reward, motivate and retain the services of executive officers. The Company's
1995 Stock Option Plan provided for the grant of 1,500,000 Incentive Stock
Options and Non-Qualified Stock Options. All of these options were granted to
the executive officers and other key employees in prior fiscal years. Since all
outstanding options were repriced to $2.00 per share at the end of fiscal 1996,
the Committee did not consider presenting a new option plan for full board and
stockholder approval.
Exercise of Options. During fiscal 1997, the Company's executive officers, Me
Amyot and certain other key employees of the Company exercised a total of
2,300,000 options at $2.00 providing the Company with approximately $4.8 million
in working capital. At the time of exercise, the Company's Common stock was
trading below $2.00 per share and the Company needed cash while it awaited
closing of the BNY Facility. These exercise thus provided the Company with much
needed working capital and demonstrated the executive officers commitment to
increase the long term value of the Company. See "ITEM 1 CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS."
CEO COMPENSATION
Mr. Marengere's base compensation will be adjusted from time-to-time in
accordance with the criteria for the determination of executive officer
compensation as described above in the section captioned "Cash Compensation."
Mr. Marengere was principally responsible for the acquisitions which have
resulted in the Company's substantial growth over the time period since the
Company was reorganized in 1993. Furthermore, the Company's executive staff has
remained relatively small in spite of the Company's growth, resulting in
substantially increased responsibilities for Mr. Marengere. In setting the
compensation for Mr. Marengere for Fiscal 1998, the Committee will seek to
retain this key executive officer while continuing to tie a significant
percentage of his compensation to Company financial performance.
By the Corporate Governance Committee
Rene Amyot, Chairman
Charles-Albert Poissant
Louis Berlinguet
Reynald Lemieux
38.1
<PAGE> 42
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of January 7, 1998, certain
information concerning the stock ownership of all persons known by the
Company to own beneficially more than 5% of the Company's outstanding Common
Stock based upon filings with the Securities and Exchange Commission,
including a Schedule 13D filed by Deere Park and certain executive officers
and directors of the Company, as well as the beneficial ownership of such
Common Stock, as of such date, of all executive officers and directors,
individually and as a group. SEE "ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS."
<TABLE>
<CAPTION>
Shares Owed Beneficially Percentage of
Name and Address of Beneficial Owner and of Record Outstanding Shares(1)
- ------------------------------------ ------------- ---------------------
<S> <C> <C>
Michel L. Marengere 7,188,260 (2) 22.9%
500 Rue Notre Dame
Lachine, Quebec
Canada H8S 2B2
Nicolas Matossian 7,188,260(3) 22.9%
500 Rue Notre Dame
Lachine, Quebec
Canada H8S 2B2
Rene Amyot 61,000(4) *
523 Cote Ste. Anne
Ste. Anne de Beaupre
Sante-Foy, Quebec
Canada G0A 3C0
</TABLE>
-39-
<PAGE> 43
<TABLE>
<CAPTION>
Shares Owed Beneficially Percentage of
Name and Address of Beneficial Owner and of Record Outstanding Shares(1)
- ------------------------------------ ------------- ---------------------
<S> <C> <C>
Reynald Lemieux 26,000(5) *
1340 Duquet
Sillery, Quebec
Canada G1S 1A9
Louis Berlinquet 25,000(6) *
500 Rue Notre Dame
Lachine, Quebec
Canada H8S 2B2
Andrew Choa 25,000(6) *
3801-4 Edinburgh Tower
The Landmark
16 Queens Road
Hong Kong
Ladislas O. Rice 25,000(6) *
19 Redington Road
London, England NW3 7QX
Derek Tennant ___ ___
154 University Avenue
2nd Floor
Toronto, Ontario
Canada M5H 3Y9
Charles-Albert Poissant, ___ ___
FCA
500 Sherbrooke West
Suite 800
Montreal, Quebec
Canada H3A 3C6
Allen S. Gerrard ___(7) ___
33 North Dearborn Street
Suite 1850
Chicago, IL 60603
Robert Chartier 20,000(8) *
500 Rue Notre Dame
Lachine, Quebec
Canada H8S 2B2
J. Arthur Gelinas 20,000(9) *
500 Rue Notre Dame
Lachine, Quebec
Canada H8S 2B2
Olivier Despres ___(10) ____
500 Rue Notre Dame
Lachine, Quebec
Canada H8S 2B2
Douglas A. Gerrard 7,188,260(11) 22.9%
c/o Deere Park Capital
Management L.L.C.
650 Dundee Road, Suite 640
Northbrook, IL 60062
Leonard Feldman 7,188,260(12) 22.9%
c/o Deere Park Capital
Management L.L.C.
650 Dundee Road, Suite 640
Northbrook, IL 60062
Dominion Park Equities, L.L.C. 7,188,260(13) 22.9%
c/o Deere Park Equities, L.L.C.
</TABLE>
-40-
<PAGE> 44
<TABLE>
<CAPTION>
Shares Owed Beneficially Percentage of
Name and Address of Beneficial Owner and of Record Outstanding Shares(1)
- ------------------------------------ ------------- ---------------------
<S> <C> <C>
650 Dundee Road, Suite 640
Northbrook, IL 60062
Deere Park Equities, L.L.C. 7,188,260(14) 22.9%
650 Dundee Road, Suite 640
Northbrook, IL 60062
Wellgate International Ltd. 7,188,260(15) 22.9%
c/o Dominion Bridge
Corporation
500 Notre Dame
Lachine, Quebec
Canada H8S 2B2
All Directors and 7,350,260 23.4%
Executive Officers
as a group (13 persons)
</TABLE>
- -------------------------------------------
* Less than 1%.
(1) Except as otherwise indicated, percentages are presented after rounding to
the nearest tenth and include the total number of shares outstanding and
the number of shares which each person has the right to acquire, within 60
days through the exercise of options, pursuant to Item 403 of Regulation
S-K and Rule 13d-3(d)(1), promulgated under the Securities and Exchange
Act of 1934, as amended (the "Exchange Act"). Percentages for the total of
all persons and the total of all officers and directors include all
outstanding shares and all shares which such persons have the right to
acquire within 60 days.
(2) As a manager of Dominion Park Equities, L.L.C. ("Dominion Park") which
is the record owner of 4,490,100 shares of Common Stock and holds a
proxy with respect to an additional 2,698,160 shares, Mr. Marengere has
shared voting power with respect to all of these shares, shared
investment power with respect to 4,490,100 of these shares and is
deemed to beneficially own all such shares. Also includes 1,359,792
shares held of record by Fidutech Technologies, Inc. as to which Mr.
Marengere has shared investment power. Mr. Marengere is the sole
stockholder of Gestion Edinov Inc. and Services M.L. Marengere, Inc.
which own, in the aggregate, 75% of Fidutech. Also includes 500,000
shares held of record by Wellgate International Ltd. ("Wellgate") over
which Mr. Marengere has shared investment power. Mr. Marengere is an
executive officer, director and shareholder of Wellgate.
(3) As a manager of Dominion Park which is the record owner of 4,490,100
shares of Common stock and holds a proxy with respect to an additional
2,698,160 shares, Mr. Matossian has shared voting power with respect to
all of these shares, shared investment power with respect to 4,490,100 of
these shares and is deemed to beneficially own all such shares. Also
includes 50,000 shares over which Mr. Matossian has sole investment power,
4,000 of which held of record by Greyhorse Resources (Canada) Ltd. Mr.
Matossian is the sole director, officer and shareholder of Greyhorse. Also
includes 500,000 shares held of record by Wellgate over which Mr.
Matossian has shared investment power. Mr. Matossian is an executive
officer, director and shareholder of Wellgate.
(4) Includes 25,000 shares of Common Stock that may be issued pursuant to
stock options exerciseable at $2.00 per share. Although not deemed to be
beneficially owned for the purposes of applicable SEC rules and
regulations, Me Amyot has an economic interest in an additional 100,000
shares of Common Stock which are deemed to be beneficially owned by
Dominion Park and others.
(5) Includes 25,000 shares of Common Stock which may be issued pursuant to
stock options exercisable at $2.00 per share.
-41-
<PAGE> 45
(6) Consists of shares of Common Stock which may be issued pursuant to stock
options exercisable at $2.00.
(7) Mr. Gerrard is identified in the Schedule 13D filed by Deere Park and
others as a member of a 13D Group which beneficially owns 7,188,260 shares
of Common Stock. See note 13 below.
(8) Represents shares of Common Stock held of record by Mr. Chartier over
which he has sole investment power. These shares are subject to a proxy
which vests Dominion Park with sole voting power. Although not deemed to
be beneficially owned for the purposes of applicable SEC rules and
regulations, Mr. Chartier has an economic interest in an additional
110,000 shares of Common Stock which are deemed to be beneficially owned
by Dominion Park and others.
(9) Represents shares of Common Stock held of record by Mr. Gelinas over which
he has sole investment power. These shares are subject to a proxy which
vests Dominion Park with sole voting power. Although not deemed to be
beneficially owned for the purposes of applicable SEC rules and
regulations, Mr. Gelinas has an economic interest in an additional 200,000
shares of Common Stock which are deemed to be beneficially owned by
Dominion Park and others.
(10) Although not deemed to be beneficially owned for the purposes of
applicable SEC rules and regulations, Me Despres has an economic interest
in 175,000 shares of Common Stock which are deemed to be beneficially
owned by Dominion Park and others.
(11) As a manager of Dominion Park, which is the record owner of 4,490,100
shares of Common Stock and holds a proxy with respect to an additional
2,698,160 shares, Mr. Gerrard has shared voting power with respect to all
of these shares, shared investment power with respect to 4,490,100 of
these shares and is deemed to beneficially own all such shares. Mr.
Gerrard is the sole director and shareholder of Deere Park Capital
Management, Inc. which is the record owner of 630,700 shares which are
subject to a proxy vesting Dominion Park with sole voting power and over
which Mr. Gerrard has sole investment power.
(12) As a manager of Dominion Park, which is the record owner of 4,490,100
shares of Common Stock and holds a proxy with respect to an additional
2,698,160 shares, Mr. Feldman has shared voting power with respect to all
of these shares, shared investment power with respect to 4,490,100 of
these shares and is deemed to beneficially own all such shares
(13) Dominion Park is the record owner of 4,490,000 shares of Common Stock and
holds a proxy with respect to an additional 2,698,160 shares. Dominion
Park is deemed to beneficially own all of these shares.
(14) Consists of shares of Common Stock beneficially owned by Dominion Park.
Deere Park is a member of Dominion Park and may also be deemed to
beneficially own such shares.
(15) Includes shares of Common Stock beneficially owned by Dominion Park.
Wellgate is a member of Dominion Park and may also be deemed to
beneficially own such shares. Also includes 500,000 shares held of record
by Wellgate over which Wellgate has sole investment power. These shares
are subject to a proxy which vests Dominion Park with sole voting power.
-42-
<PAGE> 46
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
As of September 30, 1997, a subscription receivable in the aggregate amount
of $1,824,000 was owed to the Company by Mr. Marengere or his affiliates
including Me Amyot.
During Fiscal 1997, the Company paid approximately $80,000 in fees to Rene
Amyot, a director, for consulting and legal services provided to the Company.
In connection with the settlement of a stockholder derivative action
brought against the Company and Messrs. Marengere and Amyot, a company
affiliated with Mr. Marengere guaranteed up to $1,155,000 of the value of the
preferred stock issued to the Company in connection with the sale of Edinov.
On August 19, 1997, (i) Deere Park; (ii) the Company's Executive Officers
identified herein, outside director Rene Amyot and certain current and former
employees of the Company (collectively, the "Management Members"); and (iii)
certain principals of Deere Park, including principal stockholders Douglas A.
Gerrard and Leonard Feldman, and outside director Allen S. Gerrard,
(collectively, the "Group"), filed a Schedule 13D (the "13D") with the
Commission which was subsequently amended on September 16, 1997. The 13D
describes a series of transactions pursuant to which Deere Park purchased
2,110,000 shares of Company Common Stock and made a loan of approximately $4.8
million to the Management Members which was utilized to exercise 2,380,000
options. Thereafter, Deere Park contributed its 2,110,000 shares and the
Management Members contributed their 2,380,000 shares to Dominion Park, LLC
("Dominion Park"), a newly formed limited liability company jointly owned by
Deere Park and Messrs. Marengere and Matossian. The Management Members also
delivered a proxy to Dominion Park vesting it with sole voting power with
respect to an additional 2,067,460 shares owned of record by the Management
Members. The transaction documents provide for any gain on the 2,380,000 option
shares to be distributed 30% to Deere Park and 70% to the Management Members.
Although the Company was not a party to these transactions, the proceeds of
the approximate $4.8 million loan from Deere Park were paid to the Company by
the Management Members to exercise outstanding options. The transactions were
also subject to prior approval by the Company's Board of Directors in order to
exempt the Group from the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law. In addition, the Board determined that the
transactions did not trigger the exercise of rights issued under the Company's
Shareholder Rights Plan and agreed to the appointment of Derek Tennant and Allen
S. Gerrard to the Company's Board as nominees of Deere Park.
The 13D states that certain members of the Group are in the process of
formulating a proposal with a third party regarding a business combination with
the Company and that the Group or its members may also explore the possibility
of entering into a business combination with other third parties in the future.
Deere Park is an investor in American Eco Corporation, which has indicated an
interest in pursuing a business combination with the Company.
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K.
A. Financial Statements filed as part of this Report:
Auditors' Report of Deloitte & Touche, Independent Auditors, on
Company's Consolidated Financial Statements for the fiscal years ending
September 30, 1997 and 1996
Auditors' Report of Ernst & Young, Independent Auditors, on the
Company's Consolidated Financial Statements for the fiscal year ending
September 30, 1995
Consolidated Balance Sheets of the Company as at September 30, 1997 and
1996
-43-
<PAGE> 47
Consolidated Statements of Operations of the Company for the fiscal years
ended September 30, 1997, 1996 and 1995
Consolidated Statements of Cash Flows of the Company for the fiscal years
ended September 30, 1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity of the Company for the
fiscal years ended September 30, 1997, 1996 and 1995
Notes to Consolidated Financial Statements of the Company
B. The following Exhibits are filed as part of this Report:
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1 (a) Amended and Restated Certificate of Incorporation of the
Company (Incorporated by reference to Exhibit 3 (i) of the
Company's Report on Form 10-Q for the period ended June 30,
1996)
3.2(b) Certificate of Designation for the Company's Series One
Preferred Stock (Incorporated by reference to the Company's
Registration Statement on Form 8-A for its Preferred Stock
Purchase Rights, filed December 11, 1996 (the "Form 8-A"))
3.2 Second Amended and Restated By-Laws (Incorporated by reference
to Exhibit 3.2 of the Company's Annual Report on Form 10-K for
the year ended September 30, 1996 ("1996 10-K"))
3.3 Certificate of Correction to the Company's Restated
Certificate of Incorporation filed July 25, 1989.
(Incorporated by reference for the Company's Amended Current
Report on Form 8-A/A dated June 2, 1997)
3.4 Certificate of Correction to the Company's Certificate of
Amendment filed January 31, 1992. (Incorporated by reference
for the Company's Amended Current Report on Form 8-A/A dated
June 2, 1997)
3.5 Certificate of Correction to the Company's Restated Certificate
of Incorporation filed September 5, 1996 (Incorporated by
reference to the Company's Amended Current Report on Form 8-A/A
dated June 2, 1997)
4.1 Shareholder Rights Plan dated as of November 26, 1996 between
the Company and Continental Stock Transfer & Trust Company
(Incorporated by reference to the Form 8-A)
4.2 Amendment No. 1 to Shareholders Rights Plan dated November
26, 1997 between the Company and Continental Stock Transfer &
Trust Company (Incorporated by reference to the Company's
Current Report on Form 8-K dated November 26, 1997)
-44-
<PAGE> 48
10.1 Subscription Agreement dated July 25, 1993 between Edinov and
Fidutech relating to the purchase of Fidutech of 777,778 Units
(Incorporated by reference to Exhibit 10.1 to the Annual Report
on Form 10-KSB for the transition period from January 31, 1993
to September 30, 1993)
10.2 Subscription Agreement dated September 15, 1993 between Edinov
and Fidutech relating to the purchase of Fidutech of 266,667
Units (Incorporated by reference to Exhibit 10.2 to the Annual
Report on Form 10-KSB for the transition period from January
31, 1993 to September 30, 1993)
10.3 Master Agreement Between United Dominion Industries Limited,
Cedar Group, Inc., Edinov Corporation and Dominion Bridge
Inc. dated March 9, 1994 (incorporated by reference to the
Company's Form 8-K, dated April 8, 1994)
10.4 Rollover Agreement Between United Dominion Industries Limited
and 3010864 Canada Inc., effective December 31, 1993
(incorporated by reference to the Company's Form 8-K, dated
April 8, 1994)
10.5 Share Purchase Agreement Between United Dominion Industries
Limited and the Company dated March 10, 1994 (incorporated by
reference to the Company's Form 8-K, dated April 8, 1994)
10.6 Services Agreement between the Company and Michel Marengere
(incorporated by reference to Exhibit 10.13 to the Company's
Report on Form 10-KSB for the fiscal year ended September 30,
1995 (the "1995 10-KSB")
10.7 Services Agreement between the Company and Nicholas Matossian
(incorporated by reference to Exhibit 10.14 of the 1995
10-KSB)
10.8 The Company's 1995 Stock Option Plan (incorporated by
reference to Exhibit 10.15 of the 1995 10-KSB)
10.9 Credit Agreement dated September 12, 1997 among BNY, Groupe
Cedar Canada Inc., the Company, DBI, Steen, Davie, Becker, Les
Entrepreneurs Becker Inc. and MIL.
10.10 Letter of Credit Financing Supplement dated as of September 12,
1997 among BNY, Groupe Cedar Canada Inc., the Company, DBI,
Steen, Davie, Becker, Les Entrepreneurs Becker Inc. and MIL.
10.11 Guarantee dated September 12, 1997 of the Company.
10.12 Hypothecation of Securities dated September 12, 1997 between
BNY and the Company.
10.13 Hypothec on Movable Property dated September 12, 1997 between
BNY and the Company.
11 Statement of Computation of Earnings Per Share
21 Subsidiaries (incorporated by reference to Exhibit 21 of the
1996 10-K)
23.1 Consent of Deloitte & Touche
23.2 Consent of Ernest & Young
27 Financial Data Schedule
C. Reports on Form 8-K
Report on Form 8-K dated November 26, 1997, Item 5 regarding Amendment
No. 1 to the Company's Shareholder Rights Plan.
D. Financial Statement Schedule
Schedule II -- Valuation and Qualifying Accounts (included at F-38)
-45-
<PAGE> 49
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of
1934, the Registrant has duly caused this Annual Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: January 16, 1998 DOMINION BRIDGE CORPORATION
By:/s/ MICHEL L. MARENGERE
-----------------------
Chief Executive Officer
By:/s/ ROBERT CHARTIER
-----------------------
Interim Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Form 10-K has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ MICHEL L. MARENGERE Chairman of the Board of
- ----------------------- Directors, Chief Executive
Michel L. Marengere Officer and Director January 16, 1998
/s/ NICOLAS MATOSSIAN President and Chief
- --------------------- Operating Officer, Director January 16, 1998
Nicolas Matossian
/s/ ROBERT CHARTIER Vice President, Interim CFO January 16, 1998
- -------------------
Robert Chartier
/s/ RENE AMYOT Director January 16, 1998
- --------------
Rene Amyot
/s/ REYNALD LEMIEUX Director January 16, 1998
- -------------------
Reynald Lemieux
/s/ LOUIS BERLINGUET Director January 16, 1998
- --------------------
Louis Berlinguet
/s/ LADISLAS O. RICE Director January 16, 1998
- --------------------
Ladislas O. Rice
-46-
<PAGE> 50
Consolidated financial statements of
DOMINION BRIDGE CORPORATION
September 30, 1997
<PAGE> 51
DOMINION BRIDGE CORPORATION
TABLE OF CONTENTS
<TABLE>
<S> <C>
Independent auditors' report.......................................... F-1
Consolidated statements of operations................................. F-3
Consolidated balance sheets........................................... F-4
Consolidated statements of cash flows................................. F-5-6
Notes to the consolidated financial statements........................ F-7-34
Consolidated statements of stockholders' equity....................... F-35-37
Valuation and Qualifying Accounts..................................... F-38
</TABLE>
<PAGE> 52
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Dominion Bridge Corporation
We have audited the accompanying consolidated balance sheets of Dominion Bridge
Corporation as at September 30, 1997 and 1996, and the related consolidated
statements of operations and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Dominion Bridge
Corporation as at September 30, 1997 and 1996, and the consolidated results of
its operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.
The financial statements as at and for the year ended September 30, 1995 were
reported on by another firm of chartered accountants, which expressed an
unqualified opinion under date of December 20, 1995.
As discussed in Note 19, the accompanying 1996 consolidated financial statements
have been restated.
Montreal, Canada
December 16, 1997
(except as to Note 21 which is as of January 16, 1998)
F-1
<PAGE> 53
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
CEDAR GROUP, INC. (NOW KNOWN AS DOMINION BRIDGE CORPORATION)
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Cedar Group, Inc., for the year ended
September 30, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects the consolidated results of the operations and the cash
flows of Cedar Group, Inc., for the year ended September 30, 1995 in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young
Montreal, Canada
December 20, 1995
F-2
<PAGE> 54
DOMINION BRIDGE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
=============================================================================
<TABLE>
<CAPTION>
1997 1996 1995
(restated,
see Note 19)
---------- ---------- ----------
$ $ $
<S> <C> <C> <C>
SALES 567,578 362,624 155,750
- ---------------------------------------------------------------------------------------------------------------
Cost of sales 518,955 327,921 139,407
Selling, general and administrative expenses 61,559 38,720 15,433
- ---------------------------------------------------------------------------------------------------------------
580,514 366,641 154,840
Income from operations of joint ventures (Note 8) 1,180 2,189 2,165
- ---------------------------------------------------------------------------------------------------------------
(Loss) income from operations (11,756) (1,828) 3,075
Interest expense (5,215) (2,104) (406)
Gain on disposal of subsidiary shares 1,342 -- --
Provision for impairment in value of an investment
(Note 3 vi) (3,847) -- --
Other income 4,166 1,134 1,236
- ---------------------------------------------------------------------------------------------------------------
(Loss) income before income taxes and minority interest (15,310) (2,798) 3,905
- ---------------------------------------------------------------------------------------------------------------
Income taxes (recovery) (Note 11)
Current 8,507 1,283 (300)
Deferred (4,124) (709) 1,993
- ---------------------------------------------------------------------------------------------------------------
4,383 574 1,693
- ---------------------------------------------------------------------------------------------------------------
(Loss) income before minority interest (19,693) (3,372) 2,212
Minority interest - dividends on preferred shares -- (645) (70)
Minority interest - deemed dividends on conversion
of subsidiary preferred shares
(Note 19) -- (4,260) --
Minority interest - common stock (2,627) (1,667) (122)
- ---------------------------------------------------------------------------------------------------------------
NET (LOSS) INCOME (22,320) (9,944) 2,020
===============================================================================================================
Net (loss) income per common share and common
share equivalents $ $ $
Primary (0.77) (0.55) 0.14
Fully diluted -- -- 0.11
- ---------------------------------------------------------------------------------------------------------------
Weighted average number of common shares
and common share equivalents outstanding
Primary 28,834,000 18,174,000 14,929,000
Fully diluted 29,384,000 23,565,000 17,688,000
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-3
<PAGE> 55
DOMINION BRIDGE CORPORATION
CONSOLIDATED BALANCE SHEETS
AS AT SEPTEMBER 30
(IN THOUSANDS OF U.S. DOLLARS)
===============================================================================
<TABLE>
<CAPTION>
1997 1996
(restated,
see Note 19)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ $
ASSETS
Current assets
Cash (Note 4) 9,021 26,231
Accounts receivable, net (Note 5) 107,956 126,911
Inventories (Note 6) 47,621 43,762
Prepaid expenses and other current assets 5,862 5,417
- ----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 170,460 202,321
Property, plant and equipment, net (Note 7) 51,827 38,289
Assets of business transferred under contractual
arrangements (preferred shares) (Note 3 vi) -- 3,847
Goodwill 9,306 11,958
Pension assets (Note 12) 2,652 1,187
Investments in unincorporated joint ventures (Note 8) 996 2,398
Other assets 7,523 5,247
- ---------------------------------------------------------------------------------------------------------------
242,764 265,247
===============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank indebtedness (Note 9) 7,165 5,624
Term loan (Notes 9 and 20) 15,000 30,000
Accounts payable and accrued expenses 132,010 119,839
Customer advances on construction contracts 8,447 16,166
Deferred income taxes 805 --
Current portion of obligations under capital leases 3,778 2,979
- ---------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 167,205 174,608
Deferred income taxes 492 5,147
Accrued post-retirement benefits other than pensions (Note 12) 1,791 514
Obligations under capital leases (Note 10) 9,363 2,274
Minority interest (Note 3) 19,243 18,783
Negative goodwill (Note 3 ii) 7,812 12,945
Other long-term liabilities 1,459 2,976
- ---------------------------------------------------------------------------------------------------------------
207,365 217,247
- ---------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTE 15)
STOCKHOLDERS' EQUITY (NOTE 13)
Preferred stock, $0.001 par value; 25,000,000 shares
authorized, none issued
Common stock, $0.001 par value; 50,000,000 shares
authorized; issued and outstanding: 31,447,648 in 1997
and 24,722,188 shares in 1996 34 25
Additional paid-in capital 74,529 60,624
Deficit (32,511) (10,191)
Cumulative translation adjustment (4,829) (634)
- ---------------------------------------------------------------------------------------------------------------
37,223 49,824
Subscription receivable (1,824) (1,824)
- ---------------------------------------------------------------------------------------------------------------
Total stockholders' equity 35,399 48,000
- ---------------------------------------------------------------------------------------------------------------
242,764 265,247
===============================================================================================================
</TABLE>
See accompanying notes
F-4
<PAGE> 56
DOMINION BRIDGE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30
(IN THOUSANDS OF U.S. DOLLARS)
===============================================================================
<TABLE>
<CAPTION>
1997 1996 1995
(restated,
see Note 19)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ $ $
CASH FLOW FROM OPERATING ACTIVITIES
Net (loss) income (22,320) (9,944) 2,020
Adjustments to reconcile net income to the
cash used in operating activities
Deemed dividends on conversion of subsidiary
preferred shares (Note 19) -- 4,260 --
Minority interest 2,627 1,667 122
Depreciation and amortization 11,478 6,902 3,217
Common stock issued for services 649 85 170
Amortization of negative goodwill (5,257) (2,626) --
Deferred pension costs (1,465) (709) 1,993
Deferred income taxes (4,124) 432 434
Non-current asset write-offs 4,259 -- --
Gain on sale of property, plant and equipment -- (1,105) (689)
Gain on sale of subsidiary shares (1,342) -- --
Income from operations of unincorporated
joint ventures (1,180) (2,189) (2,165)
Investments in unincorporated joint ventures 2,582 860 1,189
Decrease (increase) in accounts receivable 14,295 (25,963) (10,797)
Decrease (increase) in prepaid expenses and
other assets (455) 6,516 806
Decrease (increase) in inventories (6,048) 18,012 (3,148)
(Decrease) increase in accounts payable and
accrued expenses 17,083 (595) 5,660
Decrease in customer advances (7,719) (272) (3,263)
Accrued post retirement benefits 1,277 (8) --
Other - net (401) (22) 178
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 3,939 (4,699) (4,273)
- ---------------------------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Decrease in investments -- -- 2,696
Decrease (increase) in term deposits -- 1,688 (1,688)
Cash consideration paid for acquired businesses -- (40,214) (4,476)
Cash of acquired businesses -- 35,081 544
Purchase of minority interest of subsidiaries -- (6,186) (8,298)
(Advance to) repayment by divested businesses -- (207) 739
Repayment by (advance to) a shareholder -- 1,198 (417)
Repayment of advance by an officer -- -- 565
Cash payment for purchase of equipment (16,742) (7,132) (10)
Proceeds from sale of property and equipment 1,325 2,905 2,152
(Increase) decrease in other assets (2,276) 312 --
Proceeds on disposal of subsidiary shares (Note 3i) 10,378 -- --
- ---------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (7,315) (12,555) (8,193)
- ---------------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock -- 2,619 3,493
Proceeds from exercise of warrants 299 359 757
Proceeds from exercise of options 4,458 -- --
Issue of preferred shares of subsidiary to
minority interest -- 24,142 --
Issue costs of subsidiary preferred shares -- (1,497) --
Share issue costs (137) -- --
Bank indebtedness 1,541 (10,909) 1,688
Other long-term liabilities (1,517) 250 488
Repayment of capital lease obligations (2,717) (745) --
Term loan (15,000) 25,000 5,000
Decrease in subscription receivable -- 61 --
- ---------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (13,073) 39,280 11,426
- ---------------------------------------------------------------------------------------------------------------
Effect of foreign exchange rate fluctuations on cash (761) (560) 227
===============================================================================================================
Net change in cash (17,210) 21,466 (813)
Cash, beginning of year 26,231 4,765 5,578
===============================================================================================================
CASH, END OF YEAR (NOTE 4) 9,021 26,231 4,765
===============================================================================================================
</TABLE>
F-5
<PAGE> 57
DOMINION BRIDGE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED SEPTEMBER 30
(IN THOUSANDS OF U.S. DOLLARS)
==============================================================================
<TABLE>
<CAPTION>
1997 1996 1995
(restated,
see Note 19)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ $ $
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR:
Interest 3,311 1,457 406
Taxes 2,829 705 310
- -----------------------------------------------------------------------------------------
NON-CASH INVESTING AND FINANCING ACTIVITIES
Issue of capital lease obligations 10,605 5,077 --
Purchase of equipment under capital leases (10,605) (5,077) --
Issuance of common stock on conversion of
minority interest preferred shares 8,641 22,723 --
Purchase of preferred stock minority interest
of subsidiaries (8,641) (22,723) --
Issuance of common stock in repayment of debt -- -- --
Settlement on acquisition of minority interest -- (627) 1,034
- -----------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-6
<PAGE> 58
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
==============================================================================
1. NATURE OF OPERATIONS
Dominion Bridge Corporation (formerly Cedar Group Inc.), a Delaware
corporation with executive offices in Montreal, Canada, specializes in
international engineering, infrastructure development and project
management and ship building and repair. In July 1996, Cedar Group, Inc.
amended its certificate of incorporation to change its name to Dominion
Bridge Corporation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared by management in
accordance with accounting principles generally accepted in the United
States, the most significant of which are outlined below. These principles
require the use of estimates to measure the financial effects of past
transactions or events and the present status of assets and liabilities.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
F-7
<PAGE> 59
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
Principles of consolidation
The financial statements include the accounts of the Company and its
subsidiaries. All significant intercompany accounts and transactions have
been eliminated upon consolidation.
During 1996, the Company (1) acquired the remaining minority interests in
Dominion Bridge Inc. and Steen Contractors Limited, (2) acquired
approximately 77.4% of the outstanding shares of McConnell Dowell
Corporation Limited and (3) acquired 100% of the outstanding share capital
of Industries Davie Inc. (formerly Groupe MIL Inc.).
During 1997, the Company disposed of a portion of its interest in McConnell
Dowell Corporation Limited reducing its interest to 63% at September 30,
1997.
Each of the above acquisitions were accounted for under the purchase method
of accounting. Under the purchase method of accounting, the assets of the
acquired entity are reflected on the balance sheet at their fair market
value on the date of purchase, with the balance of the purchase price
attributed to goodwill. In the case of Industries Davie Inc., since the
purchase price was nominal, the difference between the fair market value of
the assets and the purchase price was first applied to non-current assets
and the remaining portion was treated as negative goodwill. Goodwill is
amortized on a straight-line basis over periods not exceeding forty years.
Negative goodwill is amortized on a straight-line basis over a period of
three years.
Cash
Cash includes short-term deposits with terms less than 90 days. Short-term
deposits with terms longer than 90 days are stated at cost which
approximates fair market value.
Construction contracts
Income on construction contracts is recognized on the
percentage-of-completion basis. This method allows for the recording of
income as the contract progresses based on estimates of the gross margin,
the cost to complete and the percentage of completion. Anticipated losses
are recorded as they become determinable.
Management establishes these estimates by periodically assessing the status
of each contract using actual costs incurred compared to budgeted costs,
and hours worked compared to plan.
In the ordinary course of its construction business, the Company, together
with its client, may conduct a review following the completion of the
project for the purpose of establishing a final contract amount. Income is
recorded only when the Company's entitlement to additional amounts under
such contracts is established.
F-8
<PAGE> 60
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
Inventories
Inventories consist principally of work in process related to construction
contracts which are stated at accumulated costs less amounts charged to
income based on the percentage-of-completion of individual contracts. Work
in process inventories, accounted for under the percentage-of-completion
basis, are adjusted to reflect the lower of cost or net realizable value by
accruing for any losses anticipated under such construction contracts as
soon as such losses are identified. Raw materials consist principally of
raw steel and supplies not held for resale and are stated at the lower of
cost (first in, first out) or replacement cost (net realizable value). The
policy of carrying these raw material inventories at the lower of cost and
replacement cost reflects obsolescence or decline in market value of these
inputs to the Company's end products. Finished goods comprise steel and
steel hardware products held for resale and are stated at the lower of cost
(first in, first out) or market (net realizable value).
Investments in unincorporated joint ventures
The Company's investments in unincorporated joint ventures are accounted
for by the equity method whereby the investment is initially recorded at
cost and the carrying value is adjusted thereafter to include the Company's
pro rata share of earnings less drawings received.
Property, plant and equipment
Property, plant and equipment, including assets that were acquired under
capital leases, are stated at cost. Maintenance and repairs are expensed as
incurred. When assets are sold or otherwise disposed of, the cost and
related accumulated depreciation are removed from their respective accounts
and the resulting gain or loss is reflected in current operations.
Depreciation is computed on the straight-line method over the estimated
useful lives of the assets, generally five to twenty years for machinery
and equipment and forty years for buildings.
Pension costs
The Company maintains defined benefit pension plans which cover certain of
its Canadian employees. Pension plan obligations are valued using the
projected benefit actuarial method and best estimate assumptions. Pension
plan assets are valued at market-related values. The Company also
participates in defined contribution plans for its Australian and certain
of its Canadian employees.
Post-retirement benefits other than pensions
The Company accrues for benefits such as health care, life insurance
coverage and long service leave to which retired employees are entitled.
The obligation is adjusted on an annual basis to reflect the expected cost
of providing post-retirement benefits during the years an employee renders
service.
Translation of foreign currencies and foreign exchange contracts
All assets and liabilities of the Company's subsidiaries operating outside
the United States are translated into U.S. dollars using current exchange
rates and income statement items are translated using weighted average
exchange rates for the year. The resulting translation adjustment is
included as a component of stockholders' equity. Other foreign currency
transaction gains and losses are included in determining net income.
Impairment in value of long-lived assets
The Company evaluates the carrying value of its long-lived assets on an
ongoing basis. In order to determine whether an impairment exists,
management considers the undiscounted cash flows estimated to be generated
by those assets as well as other indicators. Any impairment in the carrying
value of assets is charged against earnings in the period an impairment is
determined. During 1997, the Company recorded a provision of $3,847 for
impairment in value of certain assets (Note 3 vi).
F-9
<PAGE> 61
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
Income taxes
The Company accounts for income taxes under the asset and liability method.
Deferred taxes reflect the tax consequences in future years of differences
between the tax bases of assets and liabilities and their financial
reporting amounts.
Net income (loss) per share
Primary net income (loss) per common share is computed by dividing the
income or loss applicable to common shares by the weighted average number
of shares of common stock outstanding and common stock equivalents
including the dilutive effect of options and warrants from the date of
grant.
Net income (loss) per common share on a fully diluted basis assumes that
all convertible instruments were converted into common stock at the earlier
of the beginning of each year or the date of issuance.
Net loss per common share for the years ended September 30, 1997 and 1996
is not presented on a fully-diluted basis as the existence of potentially
dilutive warrants has an antidilutive effect on loss per common share.
The loss per common share is computed by dividing net loss, plus the
dividends on preferred stock, by the weighted average number of common
shares outstanding and common stock equivalents, if dilutive. Preferred
stock dividends include: (i) dividends stated in the respective certificate
of designations; and (ii) dividends deemed to have been issued by virtue of
a conversion price that is computed at the date of conversion using a
discount to the market price of the Company's common stock. For the years
ended September 30, 1997, 1996 and 1995, net income (loss) applicable to
common stockholders is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------
<S> <C> <C> <C>
$ $ $
(Loss) income before minority interest (19,693) (3,372) 2,212
Minority interest - cash dividends on
subsidiary preferred shares -- (645) (70)
Minority interest - deemed dividends
on conversion of subsidiary preferred
shares -- (4,260) --
Minority interest - common stock (2,627) (1,667) (122)
- ------------------------------------------------------------------------------------
NET (LOSS) INCOME APPLICABLE TO COMMON
STOCKHOLDERS (22,320) (9,944) 2,020
====================================================================================
</TABLE>
Recent pronouncements
In February 1997, the Financial Accounting Standards Board (FASB) issued
SFAS 128, "Earnings per share" which is effective for fiscal years ending
after December 15, 1997. SFAS 128 specifies the computation, presentation
and disclosure for earnings per share for entities with publicly held
common stock or potential common stock. The Company will adopt SFAS 128 in
the preparation of its financial statements for fiscal year ending
September 30, 1998. The adoption of SFAS 128 should not have a significant
impact on reported loss per share of the Company.
In June 1997, the FASB issued SFAS 131 - "Disclosures about Segments of an
Enterprise and related information". SFAS 131 is effective for fiscal years
ending after December 15, 1997. SFAS 131 requires public enterprises to
report certain information about operating segments, products and services,
geographic areas in which they operate and their major customers. The
adoption of SFAS 131 should not have an impact on the financial statements
of the Company.
F-10
<PAGE> 62
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================
3. ACQUISITIONS AND DIVESTITURES
(i) Acquisition of McConnell Dowell Corporation Limited
Between March 9, 1996 and April 9, 1996, Cedar Group Australia Pty
Ltd. (CGA), an Australian indirect wholly-owned subsidiary of the
Company, purchased, through the facilities of the Australian Stock
Exchange, 23,913,000 ordinary shares of McConnell Dowell Corporation
Limited (MDC), representing approximately 57.5% of the issued ordinary
shares of MDC. Prior to these acquisitions, CGA had acquired 8,274,000
ordinary shares of MDC representing approximately 19.9% of the issued
ordinary shares of MDC. At September 30, 1996, CGA owned 32,187,000
ordinary shares of MDC representing a 77.4% ownership interest. MDC is
an Australian based general contractor engaged in a broad range of
infrastructure projects in the Asia-Pacific region, the Middle East and
Eastern Europe.
The purchase price for the acquisition, including acquisition costs,
amounted to $40,214.
The Company has accounted for the acquisition of MDC using the
purchase method as of March 29, 1996, the date at which the Company
achieved voting control of MDC. Accordingly, the assets and liabilities
of MDC at September 30, 1996 and 1997 are consolidated into the
accounts of the Company.
Prior to March 29, 1996, the Company accounted for its investment in
MDC using the equity method. Goodwill is being amortized over a period
of forty years.
The total cost of the acquisition was allocated to the net assets
acquired on the basis of their fair value as follows:
<TABLE>
<S> <C>
$
Current assets 108,691
Fixed and other assets 14,390
Goodwill 11,875
- -----------------------------------------------------------------------------------
Total assets 134,956
- -----------------------------------------------------------------------------------
Current liabilities 81,708
Other liabilities 4,709
- -----------------------------------------------------------------------------------
Total liabilities 86,417
- -----------------------------------------------------------------------------------
Net assets 48,539
Common shares held by minority shareholders at book value 8,325
- -----------------------------------------------------------------------------------
NET CONSIDERATION paid 40,214
===================================================================================
</TABLE>
The acquisition was financed partially by a term loan and by the
issuance of preferred shares by a subsidiary of the Company.
In March 1997, the Company sold a portion of its interest in MDC for a
cash consideration of $10,378, resulting in a gain of $270, net of
income taxes of $1,072. At September 30, 1997, the Company owned 63.0%
of the outstanding common shares of MDC.
F-11
<PAGE> 63
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================
3. ACQUISITIONS AND DIVESTITURES (CONT'D)
(ii) Acquisition of Industries Davie Inc.
On April 24, 1996, but effective March 31, 1996, the Company's
wholly-owned subsidiary, Cedar Group Canada Inc. acquired from Societe
Generale de Financement du Quebec (SGF), 100% of the equity of
Industries Davie Inc. (IDI) for the purchase price of CDN$1.00. IDI is
a Canadian company engaged primarily in commercial and military ship
design, construction and repair and in the manufacturing of industrial
products.
The Company has accounted for the acquisition of IDI using the purchase
method effective March 31, 1996. Accordingly, the assets and
liabilities of IDI at September 30, 1996 and 1997 are consolidated in
the accounts of the Company.
The total cost of the acquisition was allocated to the net assets
acquired on the basis of their fair value as follows:
<TABLE>
<S> <C>
$
Current assets 44,127
Fixed assets -
Other assets 2,089
---------------------------------------------------------------------
Total assets 46,216
---------------------------------------------------------------------
Current liabilities 30,645
Negative goodwill 15,571
---------------------------------------------------------------------
Total liabilities 46,216
---------------------------------------------------------------------
Net assets -
---------------------------------------------------------------------
NET CONSIDERATION PAID -
=====================================================================
</TABLE>
Negative goodwill amounting to $24,225 has been applied to reduce the
value of long-term non-monetary assets to $Nil and the balance of
$7,812 (net of accumulated amortization of $7,759) is being disclosed
as negative goodwill on the balance sheet and is being amortized over a
three-year period from the date of acquisition.
(iii) Acquisition of Steen Contractors Limited
Effective April 1, 1995, the Company acquired 75% of the common stock
of Steen Contractors Limited (Steen), a Canadian company engaged in
construction services provided in Canada, for a cash consideration of
$4,476.
Effective March 31, 1996, the remaining 25% of Steen's common shares
were purchased for a cash consideration of CDN$2,135 (US$1,571),
resulting in goodwill of $230 which was amortized during fiscal year
1996.
F-12
<PAGE> 64
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================
3. ACQUISITIONS AND DIVESTITURES (CONT'D)
(iii) Acquisition of Steen Contractors Limited (cont'd)
The acquisitions have been accounted for under the purchase method of
accounting and have been given effect from April 1, 1995 for the first
purchase of 75% and from March 31, 1996 for the second purchase of 25%.
The total cost of the initial 75% interest in Steen was allocated to
the net assets acquired on the basis of their fair value as follows:
<TABLE>
<S> <C>
$
Current assets 18,505
Fixed assets 255
Other assets 1,235
---------------------------------------------------------------------
Total assets 19,995
---------------------------------------------------------------------
Current liabilities 12,056
Other liabilities 1,726
---------------------------------------------------------------------
Total liabilities 13,782
---------------------------------------------------------------------
Net assets 6,213
Common shares held by minority shareholders at book value 1,737
---------------------------------------------------------------------
NET CONSIDERATION PAID 4,476
=====================================================================
</TABLE>
The acquisition was financed by a $5,000 term loan from Bankers Trust.
(iv) Acquisition of Dominion Bridge Inc.
Effective March 9, 1994, the Company acquired from United Dominion
Industries Limited (UDIL) 85% of the common stock of Dominion Bridge
Inc. (DB), a Canadian company engaged in construction and engineering
services provided in Canada for a cash consideration of $3,750 and the
issue by DB of Class A preferred shares in the amount of CDN$18,338.
The acquisition has been accounted for by the purchase method and
earnings have been included in the results of operations from the date
of acquisition.
F-13
<PAGE> 65
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================
3. ACQUISITIONS AND DIVESTITURES (CONT'D)
(iv) Acquisition of Dominion Bridge Inc. (cont'd)
The total cost of the acquisition was allocated to the net assets
acquired on the basis of their fair value as follows:
<TABLE>
<S> <C>
$
Current assets 23,381
Fixed assets 25,632
Other assets 3,525
----------------------------------------------------------------------------------
Total assets 52,538
----------------------------------------------------------------------------------
Current liabilities 23,765
Other liabilities 10,604
----------------------------------------------------------------------------------
Total liabilities 34,369
----------------------------------------------------------------------------------
Net assets 18,169
Common and preferred shares held by minority shareholders at book value 14,419
----------------------------------------------------------------------------------
NET CONSIDERATION PAID 3,750
==================================================================================
</TABLE>
The CDN$18,338 Class A Preferred Shares of DB, bearing a cumulative
dividend of 7.5%, originally issued to UDIL were convertible into the
Company's common stock at a rate of CDN$6.00 per share. On October 21,
1994, the Company agreed to acquire the minority holdings of common and
Class A preferred shares of DB held by UDIL. The agreement provided
that these interests would be acquired for cash payments of CDN$18,000,
the transfer of assets having a book value of CDN$1,368 and the waiver
of the preferred dividend requirement for the Company's 1994 fourth
quarter. As of September 30, 1995, the Company paid CDN$8,300,
transferred the assets and received all of the common shares of DB held
by UDIL and received preferred shares having a face value of CDN$8,786.
On December 18, 1995, the Company accepted UDIL's offer to acquire all
remaining preferred shares of DB and the waiver of all claims and
dividends for an aggregate consideration of CDN$11,500 (US$8,200)
consisting of a cash payment of CDN$5,000 (US$3,648) and the balance to
be paid through the issuance of up to 1,250,334 shares of the Company.
The book value of the minority interest related to the preferred shares
was $8,200 at September 30, 1995.
During the year ended September 30, 1996, the Company issued 1,000,000
common shares, valued at $2,855, and paid cash of $967 in lieu of
issuing 200,000 common shares to UDIL to settle its obligation arising
from the acquisition of the remaining preferred shares of DB. At
September 30, 1996, an obligation to issue a final 50,334 shares
remained and the Company settled this obligation through the issuance,
in 1997, of 50,334 common shares valued at $104. The deficiency of the
final consideration paid from the book value of the obligation has been
credited as a capital transaction in the statement of stockholders'
equity at September 30, 1996 and a decrease in minority interest in the
amount of $627.
F-14
<PAGE> 66
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================
3. ACQUISITIONS AND DIVESTITURES (CONT'D)
(v) Pro-forma results
Set forth below is the Company's unaudited pro-forma combined condensed
statement of operations for the year ended September 30, 1996 as though
each of the acquisitions made during 1996 had been made on October 1,
1995.
<TABLE>
<CAPTION>
(in thousands of dollars
except per share data)
<S> <C>
Sales $ 527,555
Net loss $ 9,260)
Per common share
Primary $ (0.51)
Fully diluted $ --
Average number of common shares and common
share equivalents outstanding
Primary 18,174,000
Fully diluted 27,699,000
</TABLE>
The unaudited pro-forma combined summary of operations has been
prepared utilizing the historical financial statements of the Company
and the acquired businesses. The unaudited pro-forma combined summary
of operations does not purport to be indicative of the results which
actually would have been obtained if the acquisitions had been made at
the beginning of the Company's 1996 fiscal year.
The unaudited pro-forma combined summary of operations includes the
effects of the purchase price allocation adjustments. The purchase
price allocation adjustments include the adjustment of the net assets
acquired to the price paid for them, including the estimated costs
associated with the integration of the businesses.
(vi) Edinov Corporation
Effective July 1, 1994, the Company decided to divest the Canadian
commodity fastener distribution businesses, formerly conducted by
Edinov Corporation. The transaction was completed on December 22, 1994
by the receipt of CDN$1,000 cash and CDN$5,135 (US$3,847) preferred
shares of the acquirer. No gain or loss was recognized on the
transaction. The preferred shares bear a cumulative dividend equal to
the bank prime rate at the beginning of every fiscal year where a
dividend is declared and are collateralized by a pledge of Edinov's
assets. These preferred shares are redeemable at varying amounts
annually through 2009, commencing at CDN$250 in 1996 and CDN$350
thereafter. No shares have been retired in 1997 (CDN$250 in 1996). The
Company's ability to realize the value of the preferred shares is
dependent on future operations of the divested businesses. During 1997,
the Company recorded a $3,847 provision for impairment in value of this
asset.
F-15
<PAGE> 67
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================
3. ACQUISITIONS AND DIVESTITURES (CONT'D)
(vii) Fasteners distribution business
In late fiscal 1996, the Company abandoned its industrial fastener
importation and distribution business. The operations of this business
were not significant to the Company and were not disclosed as
discontinued operations as the Company continued to have operations in
the fastener business.
4. CASH
Included in cash is an amount of $268 ($17,078 in 1996) as indicated in the
IDI accounts. Pursuant to the purchase agreement with SGF (see Note 3
(ii)), this cash amount is restricted in its use to the benefit of IDI.
5. ACCOUNTS RECEIVABLE
Accounts receivable are comprised of the following:
<TABLE>
<CAPTION>
1997 1996
------------------------
<S> <C> <C>
$ $
Trade and other receivables 84,100 99,389
Holdbacks receivable 16,774 13,714
Unbilled receivables 7,316 15,312
Allowance for doubtful accounts (234) (1,504)
-------------------------------------------------------------------------
107,956 126,911
=========================================================================
</TABLE>
Holdbacks receivable represent retainage provisions due from customers as
is the normal course of business in long-term construction contracts.
6. INVENTORIES
<TABLE>
<CAPTION>
1997 1996
------------------------
<S> <C> <C>
$ $
Raw materials 9,040 2,958
Construction contracts, work in process 38,459 38,625
Finished goods 122 2,179
------------------------------------------------------------------------
47,621 43,762
========================================================================
</TABLE>
F-16
<PAGE> 68
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================
7. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ $ $
1997
Land 6,843 - 6,843
Building 5,077 900 4,177
Machinery and equipment 50,867 22,358 28,509
Machinery and equipment under capital leases 16,462 4,164 12,298
--------------------------------------------------------------------------------------------
79,249 27,422 51,827
============================================================================================
1996
Land 6,813 - 6,813
Building 4,114 604 3,510
Machinery and equipment 35,458 12,779 22,679
Machinery and equipment under capital leases 5,857 570 5,287
--------------------------------------------------------------------------------------------
52,242 13,953 38,289
============================================================================================
</TABLE>
8. INVESTMENTS IN UNINCORPORATED JOINT VENTURES
Subsidiaries of the Company have interests in unincorporated joint ventures
which are accounted for by the equity method. Unincorporated joint ventures
are engaged in construction and engineering in Canada and Asia-Pacific.
The Company's share of assets and liabilities as at September 30, and the
revenue, expenses and net earnings of the joint ventures for the years
ended September 30, are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------
<S> <C> <C> <C>
$ $ $
Assets 2,510 5,716 1,608
Liabilities 862 3,205 2,358
Revenue 12,510 15,040 8,319
Expenses 11,330 12,851 6,154
--------------------------------------------------------------------------
Net income 1,180 2,189 2,165
==========================================================================
</TABLE>
F-17
<PAGE> 69
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================
9. FINANCING ARRANGEMENTS
On April 29, 1996, the Company entered into an agreement with BT Commercial
Corporation, an affiliate of Bankers Trust Company ("BTCC") for a term loan
in the amount of $30,000. This loan bears interest at LIBOR and is
collateralized by most assets of the consolidated group. The weighted
average interest rate on the term loan was 11.37% for the year ended
September 30, 1997 (8.25% in 1996). The original maturity date for the loan
was April 30, 1997 and has since been extended to September 30, 1997. (See
Note 20 - Subsequent event.)
A subsidiary of the Company has entered into operating credit facilities
totalling $4,120 bearing interest at variable rates. At September 30, 1997,
$407 was outstanding under these facilities. Certain facilities have
restrictions on their usage and are limited for use on specific projects.
10. OBLIGATIONS UNDER CAPITAL LEASES
A subsidiary of the Company has obligations under capital leases which are
due as follows:
<TABLE>
<S> <C>
$
1998 4,473
1999 3,577
2000 3,374
2001 2,948
2002 614
------------------------------------------
14,986
LESS: IMPUTED INTEREST (1,845)
------------------------------------------
13,141
LESS: AMOUNTS DUE WITHIN ONE YEAR 3,778
------------------------------------------
9,363
==========================================
</TABLE>
F-18
<PAGE> 70
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================
11. INCOME TAXES
The provision for income taxes comprises the following elements:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------------------------
$ $ $
CURRENT
<S> <C> <C> <C>
United States -- 217 --
Canada 1,661 463 (300)
Asia-Pacific 6,846 603 --
---------------------------------------------------------------------------------------
8,507 1,283 (300)
---------------------------------------------------------------------------------------
DEFERRED
United States (415) 1,382 (139)
Canada (2,517) (2,400) 2,132
Asia-Pacific (1,192) 309 --
---------------------------------------------------------------------------------------
(4,124) (709) 1,993
---------------------------------------------------------------------------------------
4,383 574 1,693
=======================================================================================
</TABLE>
The related income (loss) before income taxes is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------------------------
$ $ $
<S> <C> <C> <C>
United States (11,617) (364) (1,246)
Canada (18,331) (8,981) 5,151
Asia-Pacific 14,638 6,547 --
---------------------------------------------------------------------------------------
(15,310) (2,798) 3,905
=======================================================================================
</TABLE>
Deferred tax liabilities and assets comprise the following elements at
September 30:
<TABLE>
<CAPTION>
1997 1996
---------------------------------
$ $
<S> <C> <C>
Deferred tax liabilities
Book over tax value of property and equipment 1,128 3,959
Income from operations of joint ventures 703 955
Completed contracts basis 840 536
Holdbacks 506 --
Other 2,165 492
---------------------------------------------------------------------------------------------------------
5,342 5,942
---------------------------------------------------------------------------------------------------------
Deferred tax assets
Post-employment benefits other than pensions 1,309 193
Rationalization reserves 1,392 197
Net operating losses carried forward 31,888 20,808
Valuation allowance for operating losses carried forward (31,483) (20,403)
Other 939 --
---------------------------------------------------------------------------------------------------------
4,045 795
---------------------------------------------------------------------------------------------------------
NET DEFERRED TAX LIABILITIES 1,297 5,147
=========================================================================================================
</TABLE>
F-19
<PAGE> 71
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================
11. INCOME TAXES (CONT'D)
The difference between the Company's effective income tax rate and the
statutory rate on income from operations is reconciled below:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------------------------
$ $ $
<S> <C> <C> <C>
Income tax expense (recovery) at U.S.
statutory rate (5,359) (979) 1,367
State tax (recovery), net of federal tax benefits (919) (167) 234
Foreign income taxes at less than statutory rate (235) (1,433) (155)
Operating losses without tax benefit 12,229 1,746 162
Other (1,333) 1,407 85
-----------------------------------------------------------------------------------------------------------
4,383 574 1,693
===========================================================================================================
</TABLE>
The Company conducts its construction projects in a wide variety of tax
jurisdictions including Canada and many South East Asia and Pacific Rim
countries. These tax jurisdictions have tax rates that are less than
those of the statutory rates in the United States of America. The
Company had positive net income in these jurisdictions and has reflected
a net tax provision on these profits, but less of a provision than would
have resulted had those foreign incomes been subject to the U.S.
statutory rate. As a result, the expected net tax recovery from the
overall combined foreign and domestic losses would be greater than had
the profitable divisions resided in the USA. This gives rise to the
additional expected recovery. This increased expectation of an overall
recovery is then diminished by the non-recognition of tax benefits on,
principally domestic, losses.
At September 30, 1997, the Company had unused net operating losses
carried forward for income tax purposes which expire as follows:
<TABLE>
<CAPTION>
UNITED STATES CANADA
FEDERAL FEDERAL
$ $
(CDN)
<S> <C> <C> <C> <C>
1998 7,826
2005 160 1999 1,746
2006 1,298 2000 5,426
2007 3,541 2001 20,449
2008 1,491 2002 53,639
2011 1,657 2003 14,450
2012 6,256 2004 21,562
----------------------------------------------------------------------------------------
14,403 125,098
========================================================================================
</TABLE>
The benefit of these losses has been partly recognized in the Company's
books. For financial reporting purposes, a valuation allowance of
$31,888 ($20,403 in 1996) has been recognized to offset the deferred tax
assets relating to the net operating losses carried forward.
F-20
<PAGE> 72
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================
12. BENEFIT PLANS
PENSION PLANS
The Company maintains defined benefit pension plans covering employees
at most Canadian operations. The benefits are based on an average of the
employee's earnings in the years preceding retirement and on credited
service. Certain supplemental unfunded plan arrangements also provide
retirement benefits to specified groups of participants.
The Company's funding policy for these plans is to contribute amounts
sufficient to meet the minimum funding requirements of the regulatory
authorities, plus any additional amounts which the Company may determine
to be appropriate.
The net pension expense for Company-sponsored pension plans consists of
the following components:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------------------------
$ $ $
<S> <C> <C> <C>
Service cost - benefits earned during the year 1,222 1,199 894
Interest cost on projected benefit obligations 4,073 3,023 1,173
Return on plan assets (4,407) (3,255) (1,280)
Net amortization (59) 96 8
------------------------------------------------------------------------------------------------------------
NET PENSION EXPENSE 829 1,063 795
============================================================================================================
</TABLE>
The reconciliation of the funded status of pension plans is as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------------------------
<S> <C> <C>
$ $
Plan assets at fair value 59,813 50,065
Actuarial present value of projected benefit
obligations 53,179 46,585
--------------------------------------------------------------------------------------------------------------
Plan assets in excess of projected benefit
obligations 6,634 3,480
Unrecognized prior service cost for plan
amendments 298 769
Unrecognized net experience gains (4,280) (3,062)
--------------------------------------------------------------------------------------------------------------
NET PENSION ASSETS RECOGNIZED IN THE
CONSOLIDATED BALANCE SHEET 2,652 1,187
==============================================================================================================
</TABLE>
F-21
<PAGE> 73
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================
12. BENEFIT PLANS (CONT'D)
The weighted average of assumptions used in the determination of the
projected benefit obligation is:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------------------------------------
<S> <C> <C> <C>
% % %
Discount rate 8.0 8.0 8.0
Rate of increases in compensation level 5.0 6.0 6.0
Expected long-term rate of return on assets 8.0 8.0 8.0
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The assets of the Company-sponsored plans are invested primarily in
Canadian equities and bonds.
POST-RETIREMENT BENEFITS OTHER THAN PENSIONS
The Company currently provides post-retirement health care and life
insurance benefits to certain Canadian retirees. In general, employees
who retire after attaining age 60 with five years of service are
eligible for continued health care and life insurance coverage.
Dependent health care and life insurance coverage are also available.
Most retirees contribute towards the cost of health care coverage, with
the contributions generally varying based on service. The Company
accrues the expected cost of providing post-retirement benefits during
the years an employee renders service.
Net periodic post-retirement benefit cost includes the following
components:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------------------
<S> <C> <C> <C>
$ $ $
Service cost - benefits earned during the year 143 1 1
Interest cost on accumulated post-retirement
benefit obligation 41 41 40
-------------------------------------------------------------------------------------------------------------
NET PERIODIC POST-RETIREMENT BENEFIT COST 184 42 41
=============================================================================================================
</TABLE>
At present, there is no prefunding of the post-retirement benefits
recognized under FASB Statement No. 106. The following table presents
the status of the plans reconciled with amounts recognized in the
consolidated balance sheets for the Company's post-retirement benefits:
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------
<S> <C> <C>
$ $
Accumulated post-retirement benefit obligation 2,692 514
Unrecognized obligation (901) -
-----------------------------------------------------------------------------------------------------------------
POST-RETIREMENT BENEFIT LIABILITY RECOGNIZED
IN THE CONSOLIDATED BALANCE SHEETS 1,791 514
=================================================================================================================
</TABLE>
F-22
<PAGE> 74
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================
12. BENEFIT PLANS (CONT'D)
For measurement purposes, the assumed weighted average annual rate of
increase for capital cost of health care benefits is 11.5% for 1997 and
assumed to decrease 0.5% per year to 7% in the year 2006 and remain
constant thereafter. The weighted average discount rate used in
determining the accumulated post-retirement benefit obligation was 8% at
September 30, 1997. The rate of increase in compensation levels assumed
was 6%.
OTHER
Certain subsidiaries of the Company contribute to defined contribution
plans for eligible employees. The contributions for 1997, 1996 and 1995
were $1,788, $942 and $4,186, respectively.
A subsidiary of the Company recognizes the future liability for wages
and salaries, annual leave and sick leave. The liability is measured as
the present value of expected future payments to be made in respect of
services provided by employees up to the reporting date. Consideration
is given to expected future wage and salary levels, experience of
employee departures and periods of service. Expected future payments are
discounted using interest rates on Australian government guaranteed
securities with terms that match, as closely as possible, the estimated
future cash flows. The current portion of the liability in the amount of
$3,837 ($2,625 in 1996) has been presented as part of "Accounts payable
and accrued expenses" and the long-term portion in the amount of $882
($1,030 in 1996) has been presented as part of "Other long-term
liabilities".
13. STOCKHOLDERS' EQUITY
Each of the conversion prices disclosed below, in each of the fiscal
years, represents the fair market value of the Company's common stock as
of the date the underlying transaction.
1997
During 1997, the Company issued 3,971,126 shares of its common stock
upon the conversion of $7,300 of Cedar Group (TCI) LLC Inc. ("TCI")
preferred shares in accordance with the terms of the Preferred Share
Agreement. All the shares relating to this Preferred Share Agreement
have been fully converted into the Company's common shares. As a result,
the minority interest balance of $1,237 relating to the embedded
dividend implicit in the TCI preferred shares has been reversed and
credited to the "Additional paid-in capital".
During 1997, the Company issued 50,334 shares of its common stock to
UDIL as part of the settlement to acquire the remaining UDIL held
preferred shares of DB for a total consideration of $104 (Note 3 (iv)).
During 1997, the Company issued 324,000 shares of its common stock
valued at $650 for services rendered by employees and a former officer
of the Company.
During 1997, the Company issued 150,000 shares of its common stock for a
consideration of $300 upon exercise of warrants.
During 1997, the Company issued 2,230,000 shares of its common stock for
a consideration of $4,460 pursuant to the exercise of stock options.
F-23
<PAGE> 75
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================
13. STOCKHOLDERS' EQUITY (CONT'D)
1996
During 1996, the Company issued 7,994,606 shares of its common stock
upon the conversion of $16,845 of TCI preferred shares in accordance
with the terms of the Preferred Share Agreement.
During fiscal 1996, the Company recorded a deemed dividend totalling
$4,260 relating to the embedded dividend implicit in the TCI preferred
shares from March 1996, through to June 30, 1996, the first date the
preferred shares were entitled to convert to common stock at a 15%
discount from the market price of the common stock. The embedded
dividend is charged to earnings as "Minority interest - deemed dividends
on conversion of subsidiary preferred shares" and a corresponding amount
is included as part of the minority interest on the balance sheet. As
the TCI preferred shares are converted to common stock of the Company,
the related amount is credited to "Additional paid-in capital". As of
September 30, 1996, there remained $1,237 included as part of "Minority
interest" which was reclassified to "Additional paid-in capital" upon
conversion of the TCI preferred shares into common stock of the Company
in 1997.
During 1996, the Company issued 1,000,000 shares of its common stock to
UDIL as part of the settlement to acquire the remaining UDIL held
preferred shares of DB for a total consideration of $2,855 (Note 3 iv).
During 1996, the Company issued 30,000 shares of its common stock valued
at $85 for services rendered by a consultant and a former officer of the
Company.
During 1996, the Company issued 107,394 shares of its common stock for a
consideration of $359 upon exercise of warrants.
During 1996, the Company issued 600,000 shares of its common stock to
the public for total proceeds of $2,619.
1995
In December 1994, the Company sold CDN$2,700 of Class A Preferred Shares
of Dominion Bridge Inc. to Groupe Fidutech International, Inc. (GFI).
Subsequently, pursuant to the terms of the Class A Preferred Shares, GFI
converted the CDN$2,700 of Class A Preferred Shares into 450,000 shares
of common stock of the Company. GFI is owned by certain officers and
directors of the Company. During the year, the Company issued an
additional 193,200 shares of its common stock at a price of $4.43 per
share upon conversion of Class A Preferred Shares of Dominion Bridge
Inc., in accordance with the terms of the Preferred Shares Agreement.
These conversion transactions of Dominion Bridge Inc. Class A Preferred
Shares provided total proceeds of $2,849.
In December 1994, the Company issued 409,207 shares of its common stock
at a price of $2.81 per share upon conversion of preferred shares of
Unimetric Corporation in accordance with the terms of the preferred
shares for a total consideration of $1,150.
F-24
<PAGE> 76
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================
13. STOCKHOLDERS' EQUITY (CONT'D)
1995 (CONT'D)
During 1995, the Company issued 262,363 shares of its common stock to
Fidutech Technologies Inc., a company owned by an officer of the Company
and 22,500 shares to an individual at a price of $2.60 upon exercise of
warrants granted in connection with the September 30, 1993 private
placement for aggregate proceeds of $741.
During 1995, the Company issued 45,000 shares of its common stock to
various parties for services rendered aggregating $170. The amount has
been included in selling, general and administrative expenses for the
year ended September 30, 1995.
During 1995, the Company issued 90,000 shares of its common stock for
services rendered by underwriters and directors in May 1993.
On February 2, 1995, the Company issued 10,000 shares of its common
stock at a price of $1.68 per share upon exercise of warrants issued on
September 30, 1993.
INCENTIVE PLANS
At September 30, 1997, the Company has stock-based compensation plans
available to executive officers, non-executive officers and certain key
employees of the Company.
The Company has a stock option plan available to grant options to
executive officers, non-executive officers and certain key employees of
the Company. The stock plan was adopted in 1995 and provides for the
issuance of 2,180,000 options to purchase 2,180,000 shares of the
Company at a price ranging from $0.59 to $4.124 per share. The options
are exercisable over a three-year period. Pursuant to a resolution of
the Board of Directors dated September 12, 1996, the exercise price of
certain share options has been changed to $2.00 per share (market value
of the shares at the time) and the expiry date was changed to September
30, 1998. During the year ended September 30, 1997, all options issued
under the stock option plan have been exercised.
Pursuant to certain employment agreements, the Company has a plan
available to grant units to its key executive officers. The unit allows
the holder to obtain one share in the common stock of the Company for
$2.00 and one warrant. The warrant can then be converted into one common
share, of the Company for $2.00. The total number of units outstanding
is 150,000 and can be converted into 300,000 shares of common stock of
the Company. These units expire on September 30, 1998. During the year
ended September 30, 1997, all units issued under this plan have been
exercised.
The Company has granted warrants to key executive officers of the
Company and non-employees of the Company at prices ranging from $2.00 to
$4.00. The total number of warrants outstanding is 550,000 (including
those available as part of the units described above) which can be
converted into 550,000 shares of common stock of the Company. These
warrants expire from September 30, 1998 to December 31, 1999.
F-25
<PAGE> 77
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================
13. STOCKHOLDERS' EQUITY (CONT'D)
<TABLE>
<CAPTION>
OPTION, WARRANT
AND UNIT PRICE
SHARES PER SHARE AGGREGATE
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ $
OUTSTANDING AT SEPTEMBER 30, 1995 1,835,000 2.68 to 4.125 7,136
Adjustment for 1995 warrants outstanding 600,500 2.00 to 4.00 1,601
Granted 675,000 2.00 1,350
Exercised (107,394) 3.25 to 4.125 (359)
Cancelled (123,106) 2.00 (246)
Adjustment to share option price -- -- (3,322)
-----------------------------------------------------------------------------------------------------------
OUTSTANDING AT SEPTEMBER 30, 1996 2,880,000 2.00 to 4.00 6,160
-----------------------------------------------------------------------------------------------------------
Granted 50,000 2.00 100
Exercised (2,380,000) 2.00 (4,760)
-----------------------------------------------------------------------------------------------------------
OUTSTANDING AT SEPTEMBER 30, 1997 550,000 2.00 to 4.00 1,500
-----------------------------------------------------------------------------------------------------------
</TABLE>
The exercise price of the various options granted was determined based
on the average trading price of the common stock for the five trading
days immediately preceding the date of the grant.
Fair value of stock options
The fair value of each option grant is estimated at the date of grant
using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants in 1997, 1996 and 1995 respectively;
dividend yield of 0% for all years, expected volatility of 76.7%, 68.2%
and 73.4%, risk free interest rates of 5.8%, 6.3% and 6.6% and expected
lives of three years for the options.
The Company applied APB 25 and related Interpretations in accounting for
its stock based compensation plans. No compensation expense was charged
against income in 1997, 1996 and 1995. Had compensation cost for the
Company's stock-based compensation plans been determined based on the
fair value at the grant dates for awards under those plans consistent
with the method of FASB Statement 123, the Company's pro-forma net loss
and loss per share would have been as indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
$ $ $
<S> <C> <C> <C>
Net income (loss)
As reported (22,320) (9,944) 2,020
Pro-forma (22,391) (10,549) (3,792)
Primary earnings (loss) per share
As reported (0.77) (0.55) 0.14
Pro-forma (0.77) (0.58) (0.25)
Fully-diluted earnings per share
As reported -- -- 0.11
Pro-forma -- --
Weighted-average fair value of
options granted 0.94 0.55 2.31
</TABLE>
F-26
<PAGE> 78
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================
14. RELATED PARTY TRANSACTIONS
In 1995, the Company advanced $994 to a shareholder, Groupe Fidutech
International Inc. Of this amount, $577 was repaid during the year ended
September 30, 1995 and the balance of $417 was repaid in December 1995.
15. COMMITMENTS AND CONTINGENCIES
The Company leases office and warehouse space under non-cancellable
operating leases. Future minimum lease payments under all
non-cancellable leases for the five years subsequent to September 30,
1997 consist of the following:
<TABLE>
<CAPTION>
$
<S> <C> <C>
1998 3,557
1999 2,592
2000 1,680
2001 1,368
2002 484
</TABLE>
Total rent expense for all operating leases amounted to $2,710, $1,580
and $976 for the years ended September 30, 1997, 1996 and 1995,
respectively.
In December 1996, the Company was notified that a class action
shareholder complaint had been filed against the Company and certain of
its executive officers. The complaint alleges that the defendants misled
the investing public as to the quality and status of a number of
contracts obtained by the Company as well as failed to disclose various
inaccurate and misleading accounting practices. Management intends to
vigorously defend this claim and believes the claim is without merit. As
the outcome of this claim is indeterminable, no provision has been
recorded in the consolidated financial statements.
In May 1997, the "Committee to Revitalize Dominion Bridge Corporation"
(the "Committee") commenced a lawsuit against the Company seeking a
declaration that it should be permitted to solicit written consents from
the Company's stockholders. The claim seeks injunctive relief but no
material monetary damages. The Company subsequently filed a counterclaim
seeking declaratory and injunctive relief against the Committee for its
consent solicitation and monetary damages. Motions are pending before
the courts with respect to the continuation of discovery on both the
Committee's claim and the Company's counterclaim. As no monetary
material damage has been claimed by the Committee, no provision has been
recorded in the accounts.
During 1995, the Company submitted a claim against a customer in the
amount of CDN$10,700 in view of recovering substantial cost increases
pertaining to the design, manufacture and delivery of major
infrastructure assets. In 1997, the counterparty submitted a claim
against the Company in the amount of CDN$50,000. Management and legal
counsel believe that this claim is without merit. Arbitration of the
Company's claim and the customer's counterclaim is expected to begin in
early 1998 and a decision is expected in April 1998. As it is impossible
to determine the outcome of these claims, no provisions have been made
in the accounts and no gain has been recognized.
F-27
<PAGE> 79
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================
15. COMMITMENTS AND CONTINGENCIES (CONT'D)
A number of claims and lawsuits seeking unspecified damages and other
relief are pending against the Company. It is impossible at this time
for the Company to predict with any certainty the outcome of such
litigation. However, management is of the opinion, based upon
information presently available, that it is unlikely that any liability,
to the extent not provided for through insurance or otherwise, would be
material in relation to the Company's consolidated financial position.
The Company has guaranteed $5,000 of a subsidiary debt. At September 30,
1997, the subsidiary had sufficient assets to meet such obligations.
A subsidiary of the Company has guaranteed 49% of the debt of an equity
investee. The debt of the equity investee is Aus$4,893. Accordingly,
Aus$2,398 is guaranteed by the Company's subsidiary. At September 30,
1997, the equity investee has sufficient assets to meet such
obligations.
Certain subsidiaries of the Company are contingently liable for letters
of credit, commitments and performance guarantees arising in the
ordinary course of business.
In connection with the acquisition of IDI, the Company agreed to make
CDN$45 million in capital additions pursuant to a three-year
revitalization plan. This investment is on a best efforts basis and is
subject to financial market conditions and the general conditions in the
chosen industrial markets contemplated in the revitalization plan.
The Company and its subsidiaries are engaged in manufacturing activities
subject to numerous environmental laws, regulations and guidelines
adopted by various governmental authorities in the jurisdictions in
which the Company operates. The Company's policy is to accrue for
environmental costs in the accounting period in which a loss is known or
considered probable and the amount can be estimated.
16. FINANCIAL INSTRUMENTS
Concentration of credit risk
Concentrations of credit risk with respect to trade, holdbacks and other
receivables are limited due to the large number of customers comprising
the Company's customer base and their dispersion across many different
industries and geographic locations. The Company does not require
collateral from its customers. At September 30, 1997 and 1996, the
Company had no significant concentrations of credit risk.
Interest rate risk
As at September 30, 1997, the Company was not exposed to interest rate
risk as most of its debt was at fixed interest rates. (See Note 20 -
Subsequent event).
Fair value of financial instruments
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and bank indebtedness
The carrying amounts reported in the balance sheet for cash and bank
indebtedness approximate their fair value.
F-28
<PAGE> 80
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================
16. FINANCIAL INSTRUMENTS (CONT'D)
Accounts receivable and accounts payable
The carrying amounts reported in the balance sheets for accounts
receivable and accounts payable approximate their fair value.
Term loan
The carrying amount reported in the balance sheets approximates its fair
value.
Customer advances on construction contracts
The carrying amount reported in the balance sheet approximates its fair
value.
Other long-term liabilities
The other long-term liabilities presented in the balance sheet are
comprised of amounts accrued by a subsidiary for long service leave,
annual leave and sick leave, and other amounts due after September 30,
1997. The carrying amounts reported in the balance sheet approximate
their fair value.
The carrying amounts and fair values of the Company's financial
instruments at September 30, 1997 are as follows:
<TABLE>
<CAPTION>
1997 1996
--------------------------------- --------------------------------
CARRYING FAIR Carrying Fair
AMOUNTS VALUE amounts value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ $ $ $
Cash 9,021 9,021 26,231 26,231
Accounts receivable 107,956 107,956 126,911 126,911
Assets of business transferred
under contractual arrangements -- -- 3,847 3,847
Bank indebtedness 7,165 7,165 5,624 5,624
Term loan 15,000 15,000 30,000 30,000
Accounts payable and accrued expenses 132,010 132,010 119,839 119,839
Customer advances on construction
contracts 8,447 8,447 16,166 16,166
Other long-term liabilities 1,459 1,459 2,076 2,076
Obligations under capital leases 13,141 13,141 5,953 5,953
</TABLE>
17. COMPARATIVE FIGURES
Certain comparatives figures have been reclassified in order to conform
with the presentation adopted in the current year.
F-29
<PAGE> 81
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================
18. BUSINESS SEGMENTS
The Company operates in the following industry segments:
Construction products and services - Design, engineering and
construction of large industrial and commercial structures and
construction services.
Fasteners - Design and manufacturing of speciality fasteners.
Ship building, repair, design and engineering.
<TABLE>
<CAPTION>
CONSTRUCTION
PRODUCTS SHIP BUILDING
AND SERVICES FASTENERS AND REPAIR TOTAL
$ $ $ $
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
Assets(1) 219,694 3,519 16,960 240,173
===================================================================================================================
Sales 513,409 4,096 50,073 567,578
===================================================================================================================
Segment operating income
(loss) (2,433) (921) 2,333 (1,021)
Gain on disposal of
subsidiary shares 1,342
Corporate expenses (11,915)
Interest expense, net (5,215)
Provision for impairment of
an investment (Note 3 vi) (3,847)
Other income 4,166
Income from operations
of joint ventures 1,180
Income taxes (4,383)
Minority interest - common stock (2,627)
-------------------------------------------------------------------------------------------------------------------
Net loss (22,320)
===================================================================================================================
Capital expenditures 23,505 - 3,842 27,347
===================================================================================================================
Depreciation and amortization 10,561 328 91 10,980
===================================================================================================================
</TABLE>
(1) Assets exclude $2,591, $7,405 and $11,496 of corporate amounts in 1997, 1996
and 1995, respectively.
F-30
<PAGE> 82
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================
18. BUSINESS SEGMENTS (CONT'D)
<TABLE>
<CAPTION>
CONSTRUCTION
PRODUCTS SHIP BUILDING
AND SERVICES FASTENERS AND REPAIR TOTAL
$ $ $ $
(restated,
see Note 19)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Assets(1) 224,912 4,275 28,655 257,842
============================================================================================================
Sales 336,599 4,296 21,729 362,624
============================================================================================================
Segment operating income (loss) 2,611 (1,467) (131) 1,013
Corporate expenses (5,030)
Interest expense, net (2,104)
Other income 1,134
Income from operations
of joint ventures 2,189
Income taxes (574)
Minority interest
- common stock (1,667)
Minority interest
- dividends on preferred shares (645)
- deemed dividends on
conversion of subsidiary
preferred shares (4,260)
------------------------------------------------------------------------------------------------------------
Net loss (9,944)
============================================================================================================
Capital expenditures 11,781 -- 428 12,209
============================================================================================================
Depreciation and amortization 6,476 327 22 6,825
============================================================================================================
</TABLE>
- -----------------
(1) Assets exclude $2,591, $7,405 and $11,496 of corporate amounts in 1997, 1996
and 1995, respectively.
F-31
<PAGE> 83
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================
18. BUSINESS SEGMENTS (CONT'D)
<TABLE>
<CAPTION>
CONSTRUCTION
PRODUCTS SHIP BUILDING
AND SERVICES FASTENERS AND REPAIR TOTAL
$ $ $ $
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Assets(1) 79,400 5,503 -- 84,903
==============================================================================================================
Sales 150,996 4,754 -- 155,750
==============================================================================================================
Segment operating income
(loss) 3,246 (1,316) -- 1,930
Corporate expenses (1,020)
Interest expense, net (406)
Other income 1,236
Income from operations
of joint venture 2,165
Income taxes (1,693)
Minority interest - common stock (122)
Minority interest - dividends on
preferred shares (70)
--------------------------------------------------------------------------------------------------------------
Net income 2,020
==============================================================================================================
Capital expenditures 244 8 -- 252
==============================================================================================================
Depreciation and amortization 2,687 378 -- 3,065
==============================================================================================================
</TABLE>
- ---------------
(1) Assets exclude $2,591, $7,405 and $11,496 of corporate amounts in 1997, 1996
and 1995, respectively.
F-32
<PAGE> 84
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================
18. BUSINESS SEGMENTS (CONT'D)
GEOGRAPHIC SEGMENTS
<TABLE>
<CAPTION>
AUSTRALIA
UNITED AND
STATES CANADA S.E. ASIA TOTAL
$ $ $ $
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997
Assets(1) 3,519 103,917 132,737 240,173
==============================================================================================================
Sales 4,096 267,859 295,623 567,578
==============================================================================================================
Segment operating income (loss) (2,009) (9,898) 10,886 (1,021)
==============================================================================================================
1996
Assets(1) 4,275 119,064 134,503 257,842
==============================================================================================================
Sales 4,296 222,805 135,523 362,624
==============================================================================================================
Segment operating income (loss) (1,467) (4,189) 6,669 1,013
==============================================================================================================
1995
Assets(1) 5,503 79,400 -- 84,903
==============================================================================================================
Sales 4,754 150,996 -- 155,750
==============================================================================================================
Segment operating income (loss) (1,316) 3,246 -- 1,930
==============================================================================================================
</TABLE>
- ----------
(1) Assets exclude $2,591, $7,405, and $11,496 of corporate amounts in 1997,
1996 and 1995, respectively.
F-33
<PAGE> 85
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================
19. RESTATEMENT
Subsequent to the issuance of fiscal 1996 financial statements,
management determined that its accounting treatment for the issuance of
the TCI convertible preferred shares did not reflect the dividend
imbedded in the preferred shares' conversion feature in accordance with
the view of the Securities and Exchange Commission. Accordingly, the
Company's fiscal 1996 financial statements have been restated to reflect
this imbedded dividend. A summary of the effects of this restatement is
as follows:
<TABLE>
<CAPTION>
As previously As
reported restated
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ $
For the year ended September 30, 1996
- Net loss 5,684 9,944
- Primary loss per share 0.31 0.55
As at September 30, 1996
- Minority interest 17,546 18,783
- Additional paid-in capital 57,601 60,624
</TABLE>
20. SUBSEQUENT EVENT
Financing arrangements
On September 26, 1997, with effect on October 8, 1997, the Company
entered into an agreement with a syndicate of bankers which provides the
Company with a $40 million revolving credit facility, of which $37.4
million was outstanding at December 16, 1997. The agreement is
for an original term of three years and shall be automatically renewed
for successive terms of one year unless terminated, under specific
conditions by the Company or its lenders. The facility bears interest at
prime plus 3% and is secured by substantially all assets of the
Company's North American operations and the shares of MDC owned by the
Company. The agreement provides for various covenants including but not
restricted to the maintenance of certain financial ratios, such as
minimum shareholders' equity, minimum working capital and total
liabilities to EBITDA, limitation on incurrence of indebtedness, payment
of dividends, capital expenditures and the sale of assets. The new
facility will be used to retire existing debt and for general corporate
purposes.
Although the loan was disbursed in October 1997, minimum shareholders'
equity covenant which was effective as at September 30, 1997 was not met
at September 30, 1997. The Company has negotiated waivers for this
covenant at September 30, 1997 and December 31, 1997. The Company is
currently negotiating a waiver of or a revision to the covenants on its
loan for the remainder of fiscal 1998.
21. SUBSEQUENT EVENT -- JANUARY 16, 1998
On January 16, 1998, the Company received two offers from potential
investors. One offer calls for the purchase of treasury shares for a
minimum of $16 million while the second offer involves a working
capital loan combined with the purchase of all outstanding common
stock of the Company. These offers are subject to approval by the Board
of Directors of the Company and by the shareholders of the Company,
as appropriate. A meeting of the Board of Directors will be held no
later than January 23, 1998 to review these and any other offers which
may be received, and to make recommendations to the shareholders. The
proposals are also subject to certain conditions and regulatory
approvals.
F-34
<PAGE> 86
DOMINION BRIDGE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
[DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS]
YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL CUMULATIVE
COMMON PAID-IN TRANSLATION SUBSCRIPTION
SHARES STOCK AMOUNT CAPITAL DEFICIT ADJUSTMENT RECEIVABLE
$ $ $ $ $
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1996
(as restated) 24,722,188 25 60,624 (10,191) (634) (1,824)
Issuance of common stock upon
conversion of Dominion Bridge,
Inc. Class A preferred shares 50,334 1 103 -- -- --
Issuance of common stock upon
exercise of options 2,230,000 2 4,458 -- -- --
Issuance of common stock upon
exercise of warrants 150,000 1 299 -- -- --
Issuance of common stock upon
conversion of TCI preferred
shares 3,971,126 4 7,296 -- -- --
Deemed dividend upon conversion
of TCI preferred shares -- -- 1,237 -- -- --
Issuance of common stock for
services rendered 324,000 1 649 -- -- --
Share issue costs -- -- (137) -- -- --
Translation adjustments, net of income
taxes of nil -- -- -- -- (4,195) --
Net loss for the year -- -- -- (22,320) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1997 31,447,648 34 74,529 (32,511) (4,829) (1,824)
==================================================================================================================================
</TABLE>
See accompanying notes
F-35
<PAGE> 87
DOMINION BRIDGE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
[DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS]
(CONT'D)
YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995 (AS RESTATED, NOTE 19)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL CUMULATIVE
COMMON PAID-IN TRANSLATION SUBSCRIPTION
SHARES STOCK AMOUNT CAPITAL DEFICIT ADJUSTMENT RECEIVABLE
$ $ $ $ $
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1995 14,990,188 15 36,345 (874) 142 (1,885)
Issuance of common stock upon
conversion of Dominion Bridge, Inc.
Class A preferred shares 1,000,000 1 2,854 -- -- --
Issuance of common stock upon
conversion of TCI
preferred shares 7,994,606 8 16,837 -- -- --
Issuance of common stock upon
exercise of warrants 107,394 -- 359 -- -- --
Issuance of common stock
for services rendered 30,000 -- 85 -- -- --
Deemed dividend on TCI
preferred shares -- -- 3,023 -- -- --
Issuance of common stock for cash
consideration 600,000 1 2,618 -- -- --
Share issue costs -- -- (1,497) -- -- --
Translation adjustments, net of income
taxes of nil -- -- -- -- (776) --
Settlement on acquisition of minority
interest (Note 3 iv) -- -- -- 627 -- --
Receipt of cash during the year -- -- -- -- -- 61
Net loss for the year -- -- -- (9,944) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1996 24,722,188 25 60,624 (10,191) (634) (1,824)
================================================================================================================================
</TABLE>
See accompanying notes
F-36
<PAGE> 88
DOMINION BRIDGE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
[DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS]
(CONT'D)
YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL CUMULATIVE
COMMON PAID-IN TRANSLATION SUBSCRIPTION
SHARES STOCK AMOUNT CAPITAL DEFICIT ADJUSTMENT RECEIVABLE
$ $ $ $ $
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1994 13,507,918 13 31,927 (1,860) (342) (1,885)
Issuance of common stock upon
conversion of Dominion Bridge, Inc.
Class A preferred shares 643,200 1 2,848 -- -- --
Issuance of common stock upon
conversion of Unimetric Corporation
preferred shares 409,207 1 1,149 -- -- --
Issuance of common stock upon
exercise of warrants 284,863 -- 741 -- -- --
Issuance of common stock
for services rendered 45,000 -- 170 -- -- --
Issuance of common stock
issue expenses 90,000 -- -- -- -- --
Issuance of common stock upon
exercise of warrants 10,000 -- 16 -- -- --
Share issue costs -- -- (506) -- -- --
Settlement on acquisition of minority
interest (Note 3 iv) -- -- -- (1,034) -- --
Translation adjustments, net of income
taxes of nil -- -- -- -- 484 --
Net loss for the year -- -- -- 2,020 -- --
- --------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1995 14,990,188 15 36,345 (874) 142 (1,885)
================================================================================================================================
</TABLE>
See accompanying notes
F-37
<PAGE> 89
DOMINION BRIDGE CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Years Ended September 30, 1997, 1996 and 1995
(In Thousands)
<TABLE>
<CAPTION>
Additions
Balance ------------------------
at Charged to Charged Balance
beginning costs and to other Deduc- at end
Description of year expenses accounts tions of year
--------- ---------- -------- ----- -------
<S> <C> <C> <C> <C> <C>
Year ended September 30, 1997
Allowance for doubtful accounts
(deducted from accounts
receivable) 1,504 234 1,504 (1) 234
===== ===== ===== =====
Allowance for obsolescence
(deducted from inventory) nil nil nil (2) nil
===== ===== ===== =====
Year ended September 30, 1996
Allowance for doubtful accounts
(deducted from accounts
receivable) 1,138 1,504 1,138 (1) 1,504
===== ===== ===== =====
Allowance for obsolescence
(deducted from inventory) nil nil nil (2) nil
===== ===== ===== =====
Year ended September 30, 1995
Allowance for doubtful accounts
(deducted from accounts
receivable) 477 1,138 477 (1) 1,138
===== ===== ===== =====
Allowance for obsolescence
(deducted from inventory) nil nil nil (2) nil
===== ===== ===== =====
</TABLE>
(1) Accounts deemed to be uncollectible.
(2) Amounts impaired.
F-38
<PAGE> 90
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10.9 Credit Agreement dated September 12, 1997 among BNY, Groupe
Cedar Canada Inc., the Company, DBI, Steen, Davie, Becker, Les
Entrepreneurs Becker Inc., Cedar Group Australia Party Limited
and MIL.
10.10 Letter of Credit Financing Supplement dated September 12, 1997
among BNY, Groupe Cedar Canada Inc., the Company, DBI, Steen,
Davie, Cedar Groupe Australia PTY Limited, Becker, Les
Entrepreneurs Becker Inc. and MIL.
10.11 Guarantee dated September 12, 1997 of the Company.
10.12 Hypothecation of Securities dated September 12, 1997 between
BNY and the Company.
10.13 Hypothec on Movable Property dated September 12, 1997 between
BNY and the Company.
11 Statement of Computation of Earnings Per Share.
23.1 Consent of Deloitte & Touche.
23.2 Consent of Ernst & Young.
27 Financial Data Schedule.
<PAGE> 1
EXHIBIT 10.9
CREDIT AGREEMENT
AMONG
BNY FINANCIAL CORPORATION - CANADA,
AS A LENDER,
THE OTHER LENDERS FROM TIME TO TIME PARTIES HERETO
LENDERS,
BNY FINANCIAL CORPORATION - CANADA,
AS AGENT,
GROUPE CEDAR CANADA INC./CEDAR GROUP CANADA INC.,
BORROWER,
DOMINION BRIDGE CORPORATION
PARENT,
- AND -
DOMINION BRIDGE, INC.,
STEEN CONTRACTORS LIMITED,
INDUSTRIES DAVIE INC./DAVIE INDUSTRIES INC.,
CEDAR GROUP AUSTRALIA PTY LIMITED
LES ENTREPRENEURS BECKER INC./BECKER CONTRACTORS INC.
BECKER CONTRACTORS LIMITED
MIL INTERMODAL INC.
SUBSIDIARY GUARANTORS
DATED OCTOBER 2, 1997
<PAGE> 2
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.................................................1
1.1 Defined Terms...............................................1
1.2 Other Definitional Provisions..............................21
SECTION 2. [RESERVED.]................................................22
SECTION 3. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS...........22
3.1 Revolving Credit Commitments...............................22
3.2 [RESERVED].................................................23
3.3 Procedure for Revolving Credit Borrowing...................23
3.4 [RESERVED].................................................23
3.5 [RESERVED] ................................................23
3.6 Letters of Credit .........................................23
SECTION 4. GENERAL PROVISIONS APPLICABLE TO REVOLVING CREDIT
LOANS......................................................25
4.1 Interest Rates and Payment Dates...........................25
4.2 [RESERVED].................................................26
4.3 [RESERVED].................................................26
4.4 [RESERVED].................................................26
4.5 Mandatory Prepayments......................................26
4.6 Computation of Interest and Fees; Interest Act (Canada)....27
4.7 [RESERVED.]................................................28
4.8 Pro Rata Treatment and Payments............................28
4.9 Various Fees...............................................29
4.10 Early Termination Fee......................................30
4.11 Requirements of Law........................................30
4.12 Taxes......................................................32
4.13 Indemnity..................................................33
4.14 Lending Offices............................................33
4.15 Bank Charges...............................................33
SECTION 5. REPRESENTATIONS AND WARRANTIES.............................33
5.1 Financial Condition........................................33
5.2 No Change..................................................34
<PAGE> 3
5.3 Existence; Compliance with Law.............................34
5.4 Power; Authorization; Enforceable Obligations..............35
5.5 No Legal Bar...............................................35
5.6 No Material Litigation.....................................35
5.7 No Default.................................................35
5.8 Ownership of Property; Liens...............................35
5.9 Intellectual Property......................................36
5.10 No Burdensome Restrictions.................................36
5.11 Taxes......................................................36
5.12 Federal Regulations........................................36
5.13 Plans......................................................36
5.14 Investment Company Act; Other Regulations..................38
5.15 Subsidiaries...............................................38
5.16 Security Documents.........................................38
5.17 Accuracy and Completeness of Information...................39
5.18 Labour Relations...........................................39
5.19 Insurance..................................................39
5.20 Solvency...................................................40
5.21 Purpose of Revolving Credit Loans..........................40
5.22 Environmental Matters......................................40
5.23 Regulation H...............................................42
5.24 Real Property..............................................42
5.25 MIL Davie Inc. ............................................43
5.26 Workers' Compensation .....................................43
5.27 Bonding Company ...........................................44
5.28 Parent's Business Operations ..............................44
SECTION 6. CONDITIONS PRECEDENT.......................................44
6.1 Conditions to Initial Revolving Credit Loans...............44
6.2 Conditions to Each Revolving Credit Loan...................49
SECTION 7. AFFIRMATIVE COVENANTS......................................50
7.1 Financial Statements.......................................50
7.2 Certificates; Other Information............................51
-ii-
<PAGE> 4
<TABLE>
<S> <C>
7.3 Payment of Obligations......................................................52
7.4 Conduct of Business and Maintenance of Existence............................52
7.5 Maintenance of Property and Insurance.......................................52
7.6 Inspection of Property; Books and Records; Discussions......................53
7.7 Notices.....................................................................53
7.8 Environmental Laws..........................................................54
7.9 Changes to Revolving Credit Advance Rates, Standards of Eligibility and
Reserves....................................................................55
7.10 Periodic Audit of Accounts Receivable and Inventory.........................55
7.11 Additional Collateral.......................................................56
7.12 Administration of Plans.....................................................56
SECTION 8. NEGATIVE COVENANTS..........................................................57
8.1 Financial Condition Covenants...............................................57
8.2 Limitation on Indebtedness..................................................58
8.3 Limitation on Liens.........................................................59
8.4 Limitation on Guarantee Obligations.........................................60
8.5 Limitation on Fundamental Changes...........................................60
8.6 Limitation on Sale of Assets................................................61
8.7 [RESERVED] .................................................................61
8.8 Limitation on Dividends.....................................................61
8.9 Limitation on Capital Expenditures..........................................61
8.10 Limitation on Investments, Revolving Credit Loans and Advances..............62
8.11 Limitation on Optional Payments and Modifications of Debt Instruments.......62
8.12 Limitation on Transactions with Affiliates..................................63
8.13 Limitation on Sales and Leasebacks..........................................63
8.14 Limitation on Changes in Fiscal Year, etc...................................63
8.15 Limitation on Negative Pledge Clauses.......................................63
8.16 Limitation on Lines of Business.............................................63
8.17 Governing Documents.........................................................63
8.18 Limitation on Subsidiary Formation..........................................63
8.19 Limitation on Securities Issuances by any Credit Party......................64
8.20 Non-Guarantor Subsidiaries .................................................64
</TABLE>
-iii-
<PAGE> 5
SECTION 9. EVENTS OF DEFAULT..........................................64
SECTION 10. THE AGENT..................................................67
10.1 Appointment................................................67
10.2 Delegation of Duties.......................................67
10.3 Exculpatory Provisions.....................................67
10.4 Reliance by Agent..........................................68
10.5 Notice of Default..........................................68
10.6 Non-Reliance on Agent and Other Lenders....................68
10.7 Indemnification............................................69
10.8 Agent in Its Individual Capacity...........................69
10.9 Successor Agent............................................69
SECTION 11. MISCELLANEOUS..............................................70
11.1 Amendments and Waivers.....................................70
11.2 Notices....................................................70
11.3 No Waiver; Cumulative Remedies.............................71
11.4 Survival of Representations and Warranties.................71
11.5 Payment of Expenses and Taxes..............................71
11.6 Successors and Assigns; Participations and Assignments.....72
11.7 Adjustments; Set-off.......................................75
11.8 Counterparts...............................................76
11.9 Severability...............................................76
11.10 Integration................................................76
11.11 Governing Law..............................................76
11.12 Submission To Jurisdiction; Waivers........................76
11.13 Acknowledgments............................................77
11.14 Waivers of Jury Trial......................................77
11.15 Confidentiality............................................77
11.16 Formal Date................................................77
11.17 Currency Conversion .......................................77
11.18 Language ..................................................78
-iv-
<PAGE> 6
SCHEDULES
Schedule I Lenders, Commitments, and Lending Offices
Schedule II Real Property Locations
Schedule 5.6 Material Litigation
Schedule 5.11 Taxes
Schedule 5.13(b) Plans
Schedule 5.15 Subsidiaries
Schedule 5.16 Filing Jurisdictions
Schedule 5.18 Labour Matters
Schedule 5.19 Insurance
Schedule 5.22 Environmental Matters
Schedule 5.24(g) Real Property Taxes
Schedule 5.24(j) Inventory
Schedule 9(k) Board of Directors
Schedule 8.2(d) Outstanding Indebtedness
Schedule 8.3(f) Existing Liens
Schedule 8.4(a) Existing Guarantees
EXHIBITS
Exhibit A Form of Borrowing Certificate
Exhibit B Form of Assignment and Acceptance
Exhibit C Form of Borrowing Base Certificate
-v-
<PAGE> 7
CREDIT AGREEMENT, dated September , 1997 as same may be
amended, modified, supplemented, restated or replaced ("Agreement"), among BNY
Financial Corporation - Canada, an Ontario Corporation, as a Lender under this
Agreement, and any other Lenders from time to time parties to this Agreement
(collectively, the "Lenders"), BNY Financial Corporation - Canada, as agent for
the Lenders, Groupe Cedar Canada Inc./Cedar Group Canada Inc., a Canadian
corporation (the "Borrower"), Dominion Bridge Corporation, a Delaware
corporation (the "Parent"), Dominion Bridge, Inc., a Canadian corporation
("DBI"), Steen Contractors Limited, an Ontario corporation ("Steen"), Industries
Davie Inc./Davie Industries Inc., a Canadian corporation ("Davie"), Cedar Group
Australia Pty Limited, an Australian corporation ("CGA"), Les Entrepreneurs
Becker Inc./Becker Contractors Inc., a Quebec corporation ("Becker"), Becker
Contractors Limited, a Newfoundland corporation ("Becker NFLD"), MIL Intermodal
Inc., a Canadian corporation ("MIL").
RECITALS
The Borrower has requested that the Lenders make available to
the Borrower revolving credit loans and issue or arrange for the issuance of
letters of credit in an aggregate principal amount at any one time outstanding
not to exceed $40,000,000.00, the proceeds of which would be used to repay
certain indebtedness of the Borrower to BT Commercial Corporation, to finance
the working capital requirements of the Borrower and DBI, Steen and Davie in the
ordinary course of business and to pay fees and expenses incurred in connection
herewith. The Lenders are willing to make such credit available to the Borrower,
but only on the terms, and subject to the conditions, set forth in this
Agreement.
AGREEMENT
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. The following definitions shall apply
to this Agreement:
"Accounts": as to any Person, all of the accounts, contract
rights, instruments, documents, chattel paper, general intangibles
relating to accounts, drafts and acceptances, and all other forms of
obligations owing to such Person, arising out of or in connection with
the sale or lease of Inventory or the rendition of services, and all
guarantees and other security therefor, whether secured or unsecured,
now existing or hereafter created, and whether or not specifically
pledged or hypothecated to the Agent hereunder or pursuant to any of
the other Loan Documents.
"Affiliate": as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person, but excluding any Person other than
the Parent which is in control of or is controlled by any director or
-1-
<PAGE> 8
officer of the Parent and which is not a Loan Party. For purposes of
this definition, "control" of a Person (including, with its correlative
meanings, "controlled by" and "under common control with") means the
power, directly or indirectly, either to (a) vote 10% or more of the
securities having ordinary voting power for the election of directors
of such Person or (b) direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.
Affiliate shall not include Unimetric Corporation.
"Agent": BNY-Canada, as the arranger of the Revolving Credit
Commitments and as the agent for the Lenders under this Agreement and
the other Loan Documents, or any successor agent appointed to act as
Agent under this Agreement.
"Agreement": as defined in the title paragraph hereof.
"Alternate Base Rate": for any day, a rate per annum equal to
the higher of: (a) the Prime Rate in effect on such day; or (b) the
Federal Funds Effective Rate in effect on such day plus 0.5%.
"Amortized Appraised Value of the Real Property": with respect
to the Real Property, as of any date of determination, an amount equal
to the excess, if any, of the Appraised Value of the Real Property over
the product of $100,000.00 and the number of full calendar months that
have elapsed from and after November 1, 1997. For the purposes of this
definition, each calendar month shall be deemed to elapse on the last
calendar day of such month.
"Amortized Forced Liquidation Value of the Equipment": with
respect to the Eligible Equipment, as of any date of determination, an
amount equal to the excess, if any, of the Forced Liquidation Value of
the Eligible Equipment over the product of $150,000.00 and the number
of full calendar months that have elapsed from and after November 1,
1997. For the purposes of this definition, each calendar month shall be
deemed to elapse on the last calendar day of such month.
"Applicable Lending Office": for each Lender, the lending
office of such Lender designated on Schedule I hereto (or any other
lending office from time to time notified to the Agent by such Lender )
as the office at which its Revolving Credit Loans are to be made and
maintained. No Lender shall designate any office outside of Canada or
the United States of America.
"Applicable Margin": for any Revolving Credit Loan, 3.00% per
annum.
"Appraised Value": with respect to any Real Property, the fair
market value thereof as determined by an Appraiser assuming sale within
a reasonable period of time.
"Appraiser": With respect to any Inventory, Equipment or Real
Property, any recognized appraiser thereof, which shall in all cases be
selected by or acceptable to the Agent but shall not be a Person which
is an Affiliate of the Agent.
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"Assignee": as defined in Section 11.6(c).
"Assignment and Acceptance": as defined in Section 11.6(c).
"Australian Security Documents": the collective reference to:
(a) the Deed of Charge between CGA and the Agent creating
a fixed and floating charge on all assets of CGA;
(b) the Equitable Share Mortgages; and
(c) the Tri-partite Agreement.
"Available RC Commitment": as to any Lender at any time, an
amount equal to the excess, if any, of (a) the amount of such Lender's
Revolving Credit Commitment which is available for borrowing at such
time over (b) the aggregate of (i) the unpaid principal amount of all
Revolving Credit Loans made by such Lender then outstanding; and (ii)
such Lender's pro rata portion of the face amount of Letters of Credit
then outstanding.
"Becker": as defined in the title paragraph of this Agreement.
"Becker Agreement": the Revolving Demand Credit Agreement
bearing formal date of September 12, 1997 entered into between Becker
and Steen providing for Steen to make advances from time to time to
Becker which are secured under the Becker Intercorporate Movable
Hypothec.
"Becker Intercorporate Indebtedness": The aggregate
indebtedness, from time to time, of Becker to Steen pursuant to the
Becker Agreement.
"Becker Intercorporate Moveable Hypothec": The Hypothec on
Moveable Property (General) granted by Becker in favour of Steen and
securing the indebtedness of Becker to Steen as evidenced by the Becker
Note, as same may be amended, supplemented, restated, replaced or
otherwise modified from time to time.
"Becker NFLD": as defined in the title paragraph of this
Agreement.
"Becker Note": the Promissory Note made by Becker in favour of
Steen.
"BNY": The Bank of New York, a New York banking corporation.
"BNY-Canada": BNY Financial Corporation - Canada, an Ontario
corporation.
"Bond": a performance, bid, warranty or material labour bond
or like instrument issued by a Bonding Company to secure the
obligations of a Loan Party.
"Bonding Company": American Home Assurance Company or such
other
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<PAGE> 10
bonding company which has issued a performance, bid, warranty or
material and labour bond or like instrument to secure obligations of a
Loan Party.
"Borrower": as defined in the title paragraph of this
Agreement.
"Borrower Debenture": the Fixed and Floating Charge Demand
Debenture issued by the Borrower in favour of the Agent, creating a
mortgage, pledge and charge on the property of the Borrower, as the
same may be amended, supplemented, restated, replaced or otherwise
modified from time to time.
"Borrower Equitable Share Mortgage": the Equitable Share
Mortgage between the Borrower and the Agent creating a mortgage on the
MDC Stock owned or held by CGA and/or to which the Borrower has an
equitable title.
"Borrower Hypothecs": the collective reference to the Borrower
Moveable Hypothec and the Borrower Hypothecation of Securities
Agreements.
"Borrower Hypothecation of Securities Agreements": the
collective reference to (a) the Hypothecation of Securities granted by
the Borrower in favour of the Agent and the Lenders, creating a
hypothec on, and security interest in, the Capital Stock owned by the
Borrower including, without limitation, the Capital Stock of CGA,
Davie, DBI and Steen owned by the Borrower, as the same may be amended,
supplemented, restated, replaced or otherwise modified from time to
time; and (b) the Hypothecation of Securities granted by the Borrower
in favour of the Agent and the Lenders, creating a hypothec on, and
security interest in, the MDC Stock beneficially owned by the Borrower
through CGA or otherwise, as the same may be amended, supplemented,
restated, replaced or otherwise modified from time to time.
"Borrower Moveable Hypothec": the Hypothec on Moveable
Property (General) granted by the Borrower in favour of the Agent and
the Lenders, creating a hypothec on, and a security interest in, a
universality of all present and future moveable property owned by the
Borrower, as the same may be amended, supplemented, restated, replaced
or otherwise modified from time to time.
"Borrower Pledge of Debenture": the Pledge Agreement entered
into by the Borrower in favour of the Agent pursuant to which the
Borrower pledges and hypothecates the Borrower Debenture to the Agent,
as the same may be amended, supplemented, restated, replaced or
otherwise modified from time to time.
"Borrower Security Documents": the collective reference to the
Borrower Debenture, the Borrower Pledge of Debenture, the Borrower
Hypothecs and the Borrower Equitable Share Mortgage.
"Borrowing Base": at any time, the sum of (a) 80% (or such
other percentage as the Agent shall determine in accordance with
Section 7.9) of the then Eligible Accounts, (b) the lesser of (i)
$5,000,000.00 and (ii) 40% (or such other percentage as the Agent shall
determine in accordance with Section 7.9) of the amount of the then
Eligible
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Inventory, (c) with respect to Equipment of a Credit Party, (i) 70% (or
such other percentage as the Agent shall determine in accordance with
Section 7.9) of the Amortized Forced Liquidation Value of Eligible
Equipment which is free and clear of all Liens including, Permitted
Liens other than those referred to in paragraphs (a), (b), (f), (h) or
(k) of Section 8.3; (ii) for 60 days following the Closing Date, 1/2 of
the percentage referred to in paragraph (c)(i) above of the Amortized
Forced Liquidation Value of Eligible Equipment ("Landlord Lien
Equipment") which is located at an improved Real Property site (which
site is the subject of a lease) and is free and clear of all Liens
including Permitted Liens [other than those referred to in paragraphs
(a), (b), (f), (h) or (k) of Section 8.3 and other than the Lien of the
landlord of such site]; (iii) at all times subsequent to the period
referred to in paragraph (c)(iii), 0% of the Amortized Forced
Liquidation Value of the Landlord Lien Equipment until such time as the
Agent shall have received the Landlord Agreement from the subject
landlord, satisfactory to the Agent in its sole judgment; (d) 40% (or
such other percentage as the Agent shall determine in accordance with
Section 7.9) of the Amortized Appraised Value of the Real Property, and
(e) 25% (or such other percentage as the Agent shall determine in
accordance with Section 7.9) of the MDC Stock Value, less (i) in each
such case such reserves as the Agent shall apply, without duplication,
pursuant to Section 7.9; and (ii) the face amount of outstanding
Letters of Credit (which shall not in any event exceed the Letter of
Credit Limit). The Borrowing Base in effect at any time shall be the
Borrowing Base as shown on the Borrowing Base Certificate most recently
delivered by the Borrower pursuant to this Agreement; provided,
however, that if the Borrower shall fail to deliver a Borrowing Base
Certificate when required pursuant to Section 7.2(c), the Borrowing
Base in effect shall be zero until such Borrowing Base Certificate is
delivered.
"Borrowing Base Certificate": a certificate, substantially in
the form of Exhibit C, with appropriate insertions, showing the
Borrowing Base as of the date set forth therein, and executed on behalf
of the Borrower by a duly authorized officer thereof.
"Borrowing Date": any Business Day specified in a notice
pursuant to Section 3.3 as a date on which the Borrower requests the
Lenders to make Revolving Credit Loans hereunder.
"BTCC Indebtedness": all Obligations of the Borrower and its
Affiliates under the BTCC Indebtedness Documents.
"BTCC Indebtedness Documents": the Credit Facility Agreement,
dated as of March 27, 1996, as amended and restated as of April 29,
1996, between the Borrower, certain Subsidiaries of the Borrower, the
Financial Institutions party thereto and BT Commercial Corporation, as
agent, as the same may have been amended, modified, supplemented,
restated or replaced to the date of the Closing Date.
"Business": as defined in Section 5.22.
"Business Day": a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or
required by law to close.
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"Capital Stock": any and all shares, interests, participations
or other equivalents (however designated) of capital stock of a
corporation, any and all similar ownership interests in a Person (other
than a corporation) and any and all warrants or options to purchase any
of the foregoing.
"Cash Equivalents": (a) securities with maturities of 90 days
or less from the date of acquisition issued or fully guaranteed or
insured by the United States Government, the Canadian Government or any
Provincial Government or any agency thereof, or any Canadian Chartered
Bank referred to in Schedule 1 to the Bank Act (Canada), (b)
certificates of deposit and eurodollar time deposits with maturities of
90 days or less from the date of acquisition and overnight bank
deposits of any Lender or of any commercial bank having capital and
surplus in excess of $500,000,000, (c) repurchase obligations of any
Lender or of any commercial bank satisfying the requirements of clause
(b) of this definition, having a term of not more than 7 days with
respect to securities issued or fully guaranteed or insured by the
United States Government, (d) commercial paper of a domestic issuer
rated at least A-1 or the equivalent thereof by Standard and Poor's
Ratings Group ("S&P") or P-1 or the equivalent thereof by Moody's
Investors Service, Inc. ("Moody's") and in either case maturing within
90 days after the day of acquisition, (e) securities with maturities of
90 days or less from the date of acquisition issued or fully guaranteed
by any state, commonwealth or territory of the United States, by any
political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities
of which state, commonwealth, territory, political subdivision, taxing
authority or foreign government (as the case may be) are rated at least
A by S&P or A by Moody's, (f) securities with maturities of 90 days or
less from the date of acquisition backed by standby letters of credit
issued by any Lender or any commercial bank satisfying the requirements
of clause (b) of this definition or (g) shares of money market mutual
or similar funds which invest exclusively in assets satisfying the
requirements of clauses (a) through (f) of this definition.
"CGA": as defined in the title paragraph of this Agreement.
"Closing Date": the date on which the conditions precedent set
forth in Section 6.1 shall be satisfied.
"Code": the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral": all property and interests in property of the
Loan Parties, now owned or hereinafter acquired, upon which a Lien is
purported to be created by any Security Document including, without
limitation, all Accounts, Inventory, Equipment, Real Property, general
intangibles (including, but not limited to, licences, trademarks, trade
names, patents, copyrights, contract rights, instruments, documents,
chattel paper, corporate and other business records, designs,
manufacturing procedures, goodwill, customer lists, computer programs,
claims under guarantees, security interests, hypothecs and other
security held to secure payment of any accounts, all rights of
indemnification and all other intangible property of every kind and
nature) and all securities and shares in the capital stock of any
Person (including, but not limited to, the MDC Stock).
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"Consolidated Current Assets": of any Person as of the date of
determination, all cash, cash equivalents, accounts and inventory of
such Person and its consolidated Subsidiaries, and all other items
which would, in conformity with GAAP, be included under current assets
on a balance sheet of such Person and its consolidated Subsidiaries, as
at such date; provided, however, that such amounts shall not include
(a) any amounts for any Indebtedness owing by an Affiliate to such
Person or its consolidated Subsidiaries, unless such Indebtedness arose
in connection with the sale of goods or rendition of services in the
ordinary course of business and would otherwise constitute current
assets in conformity with GAAP, (b) any shares of stock issued by an
Affiliate of such Person, or (c) the cash surrender value of any life
insurance policy.
"Consolidated Current Liabilities": of any Person as of the
date of determination, all amounts which would, in conformity with
GAAP, be included under current liabilities on a balance sheet of such
Person and its consolidated Subsidiaries, as at such date, but in any
event including, without limitation, the amounts of (a) all
Indebtedness of such Person or any such Subsidiary payable on demand,
or at the option of the Person to whom such Indebtedness is owed, not
more than twelve (12) months after such date, (b) any payments in
respect of any Indebtedness of such Person or any such Subsidiary
(whether instalment, serial maturity, sinking fund payment or
otherwise) required to be made not more than twelve (12) months after
such date and (c) all reserves in respect of liabilities or
Indebtedness payable on demand or, at the option of the Person to whom
such Indebtedness is owed, not more than twelve (12) months after such
date, the validity of which is contested at such date, and (d) all
accruals for federal or other taxes measured by income payable within a
twelve (12) month period, but excluding the amounts owing under this
Agreement in respect of the Revolving Credit Loans.
"Consolidated EBITDA": for any period with respect to any
Person, the sum for such period of (a) Consolidated Net Income of such
Person, and (b) the sum of, without duplication, provisions for income
taxes, distributions permitted by Section 8.8, Consolidated Interest
Expense, and depreciation and amortization expense and other non-cash
expenses, in each case as used in determining such Consolidated Net
Income.
"Consolidated Interest Expense": for any period with respect
to any Person, the amount which, in conformity with GAAP, would be set
forth opposite the caption "interest expense" or any like caption
(including without limitation, imputed interest included in payments
under Financing Leases) on a consolidated income statement of such
Person and its consolidated Subsidiaries (if any) for such period
excluding the amortization of any original issue discount.
"Consolidated Net Income": for any period with respect to any
Person, the consolidated net income (or deficit) of such Person and its
consolidated Subsidiaries (if any) for such period (taken as a
cumulative whole), determined in accordance with GAAP.
"Consolidated Net Worth": of any Person as of the date of
determination, all amounts which would be included under shareholders'
or partners' equity (or other
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<PAGE> 14
equivalent category) on a consolidated balance sheet of such Person and
its consolidated Subsidiaries (if any) determined on a consolidated
basis in accordance with GAAP as at such date.
"Consolidated Total Liabilities": of any Person, as of the
date of determination, all liabilities of such Person and its
consolidated Subsidiaries, if any, determined in conformity with GAAP,
including Current Liabilities and funded Indebtedness.
"Consolidated Working Capital": of any Person, as of the date
of determination, the excess, if any, of Consolidated Current Assets
over Consolidated Current Liabilities.
"Contractual Obligation": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or any
of its property is bound.
"Credit Exposure": as to any Lender at any time, its Revolving
Credit Commitment (or, if the Revolving Credit Commitments shall have
expired or been terminated, the aggregate unpaid principal amount of
its Revolving Credit Loans).
"Credit Exposure Percentage": as to any Lender at any time,
the fraction (expressed as a percentage), the numerator of which is the
Credit Exposure of such Lender at such time and the denominator of
which is the aggregate Credit Exposures of all of the Lenders at such
time.
"Credit Parties": the Borrower and each of the Subsidiary
Guarantors.
"Customer": the account debtor with respect to any Account
and/or the prospective purchaser of goods, services or both or with
respect to any contract or other arrangement with a Credit Party
pursuant to which the Credit Party is to deliver any property or
perform any services in the ordinary course of business.
"Davie": as defined in the title paragraph of this Agreement.
"Davie Hypothecation of Securities Agreement": the
Hypothecation of Securities granted by Davie in favour of the Agent and
the Lenders, creating a hypothec on, and security interest in, the
Capital Stock owned by Davie including, without limitation, the Capital
Stock of MIL owned by Davie, as the same may be amended, supplemented,
restated, replaced or otherwise modified from time to time.
"DBI": as defined in the title paragraph of this Agreement.
"Default": any of the events specified in Section 9, whether
or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Dispute": any cause asserted for non-payment of Accounts
including, without limitation, any alleged defense, counterclaim,
offset, compensation, dispute or other claim
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(real or merely asserted) whether arising from or relating to the sale
of goods or rendering of services or arising from or relating to any
other transaction or occurrence.
"Dollars" and "$": dollars in lawful currency of the United
States of America.
"Eligible Accounts": all Accounts of each of the Credit
Parties, arising in the ordinary course of its business, evidencing the
sale of goods and services by it but excluding "Retention" and
holdbacks (billed and unbilled) and which the Agent, in its sole
discretion, shall deem to be an Eligible Account based upon such
considerations as the Agent may from time to time deem appropriate.
Without in any way limiting the generality of the foregoing, (i) in
general, unless otherwise determined by the Agent as aforesaid, an
Account shall not constitute an Eligible Account unless it is subject
to a perfected first priority Lien in favour of the Agent, is free and
clear of all Liens including Permitted Liens other than those referred
to in paragraphs (a), (f), (h) and (k) of Section 8.3 and is evidenced
by an invoice, contract or other document reasonably satisfactory to
the Agent, and (ii) no Account of a Customer shall be an Eligible
Account if:
(a) such Account arises out of a sale made by a Credit Party
to an Affiliate of the Credit Party or to a Person controlled by an
Affiliate of the Credit Party, and if such Customer is the Credit
Party's creditor or supplier, only the net amount, if any, owing to the
Credit Party may be an Eligible Account;
(b) more than 90 days have elapsed from the invoice date of
such Account;
(c) 50% or more of the aggregate account balance of Accounts
due from such Customer is more than 90 days past invoice date;
(d) any covenant, representation or warranty contained in this
Agreement or in any other Credit Document with respect to such Account
has been breached in a material respect;
(e) the Agent is not and continues not to be satisfied with
the credit standing of such Customer, or the Agent is insecure or
otherwise believes, in its sole and absolute discretion, that
collection of such Account is doubtful or that such Account may not be
paid by reason of such Customer's financial inability to pay;
(f) other than as provided in paragraph (a) above, such
Customer has asserted any Dispute against any Credit Party, such
Account or any other Account due from such Customer to any Credit
Party, or such Account is or could be expected to become subject to any
Dispute, or is contingent in any respect or for any reason, but only to
the extent of the amount in dispute;
(g) such Customer resides outside the United States, the U.S.
Virgin Islands, or Canada, unless the sale is covered by a letter of
credit or credit insurance in form and substance acceptable to the
Agent in its sole and absolute discretion; provided, however, that the
Agent may approve Accounts denominated in Canadian Dollars of Customers
residing outside of the foregoing jurisdictions as Eligible Accounts in
its sole judgment on
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a case-by-case basis;
(h) such Account is on a sale-and-return, conditional sale,
installment sale, sale on approval, consignment or any other repurchase
or return basis or is evidenced by chattel paper;
(i) such Customer is (A) the United States of America, any
state or any department, agency or instrumentality of any of them,
unless the Credit Party assigns its right to payment of such Account to
the Agent pursuant to the Federal Assignment of Claims Act of 1940, as
amended, or has otherwise complied with all other applicable statutes
or ordinances or (B) Canada, any province or territory or any
department, agency or instrumentality of any of them, unless the Credit
Party has complied with all applicable Requirements of Law in order to
duly and validly assign and hypothecate such Account to the Agent or
the Agent in its sole discretion otherwise deems such Account to be an
Eligible Account;
(j) any of the following events occur or conditions exist with
respect to the goods giving rise to such Account: (i) if such goods
have not been shipped to, delivered to or accepted by such Customer, or
if possession and/or control of such goods is held, maintained or
retained by the Credit Party or any Affiliate thereof (or any agent or
custodian of the Credit Party or any Affiliate thereof) for the account
of or subject to further and/or future direction from such Customer, or
(ii) if such Account otherwise does not represent a final sale, or
(iii) such goods have been repossessed, unless, in the case of each of
(i), (ii) or (iii), such goods are subject to a bill and hold letter in
form and substance satisfactory to the Agent;
(k) the amount of all Accounts of such Customer exceeds any
credit limit determined by the Agent, in its sole discretion, to the
extent that the amount of such Account exceeds such limit;
(l) such Customer has commenced or has had commenced against
it a case, proposal, notice of intention to file a proposal,
proceeding, action, petition or request for liquidation,
reorganization, arrangement, adjustment of debts, adjudication as a
bankrupt, winding up or other relief (each, a "Case") under any
federal, provincial, state or other bankruptcy, insolvency,
restructuring, liquidation, winding up, corporate or similar laws, as
now constituted or hereafter amended, or made an assignment for the
benefit of creditors, or if a decree or order for relief has been
entered by a court having jurisdiction in the premises in respect of
such Customer in an involuntary Case under any such law, as now
constituted or hereafter amended, or if any other petition or other
application for relief under any such law has been filed against such
Customer, or if such Customer has failed, suspended business, ceased to
be solvent, called a meeting of its creditors (in order to discuss
financial insolvency or lack of liquidity), or consented to or suffered
a receiver, trustee, liquidator, administrator, monitor or custodian or
similar official to be appointed for it or for all or a significant
portion of its assets or affairs;
(m) to the extent that the Credit Party or the Parent has made
any agreement with such Customer for any deduction therefrom, except
for discounts or allowances
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<PAGE> 17
made in the ordinary course of business for prompt payment, all of
which discounts or allowances shall be reflected in the calculation of
the face value of each respective invoice related thereto;
(n) to the extent that the invoice relating to such Account
includes amounts which are unearned or are not due and payable within
30 days or contains any amount that is subject to the provision of
additional goods or the performance of additional services or the
approval of the Customer or any other Person, such amounts shall be
excluded in the calculation of the face value of such invoice; or
(o) such Account is not payable to the Credit Party.
(p) such Account relates to a project in respect of which a
Bond has been issued by a Bonding Company unless the Agent has received
from the Bonding Company a waiver or a subordination agreement in
respect of the Account and the rights of the Bonding Company relating
thereto, the whole satisfactory to the Agent in its sole discretion.
"Eligible Assignee": any of (i) a commercial bank or finance
company organized under the laws of the United States, or any State
thereof or the District of Columbia or Canada or any Province thereof,
and having total assets in excess of $1,000,000,000.00; (ii) a savings
and loan association or savings bank organized under the laws of the
United States, or any State thereof or the District of Columbia, and
having a net worth of at least $100,000,000.00, calculated in
accordance with generally accepted accounting principles; (iii) a
commercial bank organized under the laws of any other country which is
a member of the Organization for Economic Cooperation and Development
(the "OECD"), or a political subdivision of any such country, and
having total assets in excess of $1,000,000,000.00, provided that such
bank is acting through a branch or agency located in the country in
which it is organized or another country which is also a member of the
OECD; (iv) the central bank of any country which is a member of the
OECD; (v) any other bank, insurance company, commercial finance company
or other financial institution or prime rate mutual fund approved by
the Agent, such approval not to be unreasonably withheld; and (vi) as
regards a Lender chosen by another Lender, if, but only if, an Event of
Default has occurred and is continuing, any other bank, insurance
company commercial finance company or other financial institution or
other Person approved by the Agent, such approval not to be
unreasonably withheld it being understood that this subclause (vi) will
not apply with respect to a Lender chosen by the Borrower.
"Eligible Equipment": all Equipment of a Credit Party (i) that
is located at an improved Real Property site (which site is the subject
of a first priority Lien in favour of the Agent or is the subject of a
lease) or is located at a construction site for utilization by the
Credit Party in connection with a construction project, (ii) that is in
good and saleable condition, (iii) that is not, in the Agent's sole
opinion, obsolete, damaged or unmerchantable and (iv) that the Agent
shall, in its sole discretion deem Eligible Equipment, based upon such
considerations as the Agent may from time to time in its sole and
absolute discretion deem appropriate, including without limitation,
compliance in all
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material respects with Environmental Laws and other Requirements of
Law, the waiver by landlords of any leased property on which such
Equipment is located of any landlord liens or hypothecs thereon or the
undertaking by such landlords to provide to the Agent notice of any
default of a Credit Party under the terms of the applicable lease and a
10 day period for the Agent to cure such default (such waiver or
undertaking being hereinafter referred to as the "Landlord Agreement").
Unless otherwise determined by the Agent as aforesaid, Equipment shall
not constitute Eligible Equipment unless it is subject to a perfected
first priority Lien in favour of the Agent and is free and clear of all
Liens, including Permitted Liens other than those referred to in
paragraphs (a), (b), (f), (h) or (k) of Section 8.3.
"Eligible Inventory": all Inventory of each Credit Party which
is located in the United States of America or Canada, which is in good
and saleable condition and which is not, in the Agent's sole opinion,
obsolete, damaged, slow moving or unmerchantable and which the Agent,
in its sole and absolute discretion, shall deem Eligible Inventory
based upon such considerations as the Agent may from time to time in
its sole and absolute discretion deem appropriate, including, without
limitation, any Loan Party's compliance in all material respects with
Environmental Laws and other Requirements of Law and the waiver by
landlords of any leased property on which Inventory is located of any
landlord's Liens or hypothecs thereon. In general, unless otherwise
determined by the Agent as aforesaid, Inventory shall not constitute
Eligible Inventory unless it is subject to a perfected first priority
Lien in favour of the Agent and is free and clear of all Liens
including Permitted Liens other than those referred to in paragraphs
(a), (b), (f), (h) or (k) of Section 8.3.
"Environmental Laws": any and all Federal, national,
provincial, regional, state, local or municipal laws, rules, orders,
regulations, by-laws, statutes, ordinances, codes, decrees,
requirements of any Governmental Authority (including without
limitation Canada, the United States and Australia) or other
Requirements of Law (including common and/or civil law) from time to
time in effect regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the
environment, as now or may at any time hereafter be in effect,
including without limitation those relating to emissions, discharges,
spills, releases or threatened releases of pollutants, contaminants,
chemicals or other Materials of Environmental Concern, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, removal, elimination, disposal, transport, or handling of
pollutants, contaminants, chemicals or other Materials of Environmental
Concern.
"Equipment": with respect to any Person, all of the equipment,
machinery and goods (excluding Inventory) of such Person, wherever
located whether now owned or hereafter acquired, including without
limitation, all apparatus, motor vehicles, fittings, furniture,
furnishings, fixtures, parts, accessories and all replacements and
substitutions therefor or accessions thereto, that may properly be
classified as a capital asset in accordance with GAAP, consistently
applied.
"Equitable Share Mortgages": the collective reference to:
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(a) the Equitable Share Mortgage between CGA and the Agent
creating a mortgage on the MDC Stock owned by CGA; and
(b) the Borrower Equitable Share Mortgage.
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Event of Default": any of the events specified in Section 9;
provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Existing Indebtedness": the BTCC Indebtedness.
"Existing Indebtedness Documents": the BTCC Indebtedness
Documents.
"Federal Funds Effective Rate": for any day, the weighted
average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds
brokers, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for
the day of such transactions received by the Agent from three federal
funds brokers of recognized standing selected by it.
"Financing Lease": any lease of property, real or personal,
immoveable or moveable, the obligations of the lessee in respect of
which are required in accordance with GAAP to be capitalized on a
balance sheet of the lessee.
"Forced Liquidation Value": as to Eligible Equipment, as
determined by an Appraiser, the value of such Eligible Equipment, based
on the assumption that it is sold under an immediate "auction" sale.
"GAAP": generally accepted accounting principles in the United
States of America in effect from time to time.
"Governing Documents": as to any Person, its articles and
certificate of incorporation and by-laws, its partnership agreement,
its certificate of formation and operating agreement, and/or the other
organizational or governing documents of such Person.
"Governmental Authority": any nation or government, any state,
province or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the
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guaranteeing person has issued a reimbursement, counterindemnity or
similar obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other obligations
(the "primary obligations") of any other third Person (the "primary
obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of the guaranteeing person, whether
or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or payment of any such
primary obligation or (2) to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities
or services primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in
respect thereof; provided, however, that the term Guarantee Obligation
shall not include endorsements of instruments for deposit or collection
in the ordinary course of business. The terms "Guarantee" and
"Guaranteed" used as a verb shall have a correlative meaning. The
amount of any Guarantee Obligation of any guaranteeing person shall be
deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Guarantee Obligation is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person
may be liable are not stated or determinable, in which case the amount
of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as
determined by the Borrower in good faith.
"Guarantees": the collective reference to the Parent Guarantee
and the Subsidiary Guarantees.
"Guarantor": any Person executing and delivering a Guarantee
pursuant to this Agreement.
"Hypothecated Securities": the collective reference to the
Capital Stock hypothecated under each of the Hypothecation of
Securities Agreements and under any other Security Documents hereafter
executed as well as the MDC Stock charged pursuant to the Equitable
Share Mortgages.
"Hypothecation of Securities Agreements": the collective
reference to the Parent Hypothecation of Securities Agreements, the
Borrower Hypothecation of Securities Agreements and the Subsidiary
Hypothecation of Securities Agreements.
"Hypothecs": the collective reference to the Borrower
Hypothecs, the Subsidiary Hypothecs and the Parent Security Documents.
"Indebtedness": of any Person at any date, without
duplication, (a) all indebtedness of such Person for borrowed money
(whether by loan or the issuance and sale of debt securities) or for
the deferred purchase price of property or services (other than current
trade liabilities incurred in the ordinary course of business and
payable in
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accordance with customary practices), (b) any other indebtedness of
such Person which is evidenced by a note, bond, debenture or similar
instrument, (c) all obligations of such Person under Financing Leases,
(d) all obligations of such Person in respect of letters of credit,
acceptances or similar instruments issued or created for the account of
such Person and (e) all liabilities secured by any Lien on any property
owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof.
"Insolvent": pertaining to a condition of insolvency.
"Interest Payment Date": as to any Revolving Credit Loan, the
last day of each month.
"Inventory": with respect to any Person, all now owned or
hereafter acquired inventory, wherever located, including any such
inventory which is in transit, as would be reflected on the financial
statements of such Person in accordance with GAAP, and all documents of
title or other documents representing such property.
"L/C Obligations": means with respect to any Lender, its pro
rata share of the risk, based upon such Lender's Revolving Credit
Commitment Percentage relating to any Letter of Credit and including
its undertaking to advance a Revolving Credit Loan to fund any draw
thereunder.
"Lenders": the lenders from time to time parties to this
Agreement and named in Schedule I and their respective successors and
assigns permitted hereunder, each of which is referred to herein as a
Lender.
"Letter of Credit Agreement": the Letter of Credit Financing
Supplement entered into between the Borrower and the Agent concurrently
herewith, pertaining to the establishment or opening of Letters of
Credit.
"Letters of Credit": as defined in Section 3.6(a).
"Letter of Credit Fee": as defined in Section 3.6(i).
"Letter of Credit Limit": as defined in Section 3.6(b).
"Lien": (a) any mortgage, pledge, hypothec (legal or
conventional), assignment, deposit arrangement, encumbrance, lien
(statutory or other), deemed trust or actual trust, privilege, right,
prior claim, charge, right of retention or other security interest or
any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever, whether choate or
inchoate, whether or not crystallized or fixed, whether for amounts due
or accruing due (including, without limitation, any conditional
sale, installment sale or other title retention agreement and any
Financing Lease having substantially the same economic effect as any of
the foregoing), any seizure or attachment (unless such seizure or
attachment is released and discharged within 10 days thereof or is
contested in good faith and the Agent has been furnished with complete
security in form, substance and amount acceptable to it against all
loss and damages which it might suffer
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by reason thereof), and the filing of any financing statement or
application for registration under the Uniform Commercial Code or
comparable law of any jurisdiction in respect of any of the foregoing,
and (b) to the extent not included in the foregoing, any reservation,
exception, encroachment, easement, right of way, servitude, covenant,
condition, restriction, title exception or other encumbrance affecting
property.
"Loan Documents": this Agreement, the Letter of Credit
Agreement, the Guarantees and the Security Documents.
"Loan Parties": the Borrower, the Parent and each Subsidiary
Guarantor which is a party to a Loan Document.
"Material Adverse Effect": a material adverse effect, as
determined in the sole and absolute discretion of the Agent, on (a) the
business, operations, property, condition (financial or otherwise) or
prospects of the Loan Parties taken as a whole or (b) the validity or
enforceability of this or any of the other Loan Documents or the rights
or remedies of the Agent or the Lenders hereunder or thereunder.
"Material Environmental Amount": an amount payable (after
taking into account any insurance, reimbursement or cost - sharing
arrangement pursuant to which the Borrower and/or its Guarantor
Subsidiaries have received payment or have provided evidence
satisfactory to the Agent, in its sole discretion, that such amount
will be paid) by the Borrower and/or its Subsidiaries in excess of
$1,000,000.00 for remedial costs, compliance costs, compensatory
damages, punitive damages, fines, penalties or any combination thereof.
"Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes,
defined or regulated in or under any Environmental Law, including,
without limitation, flammables, explosives, radioactive materials,
asbestos, polychlorinated biphenyls (PCBs), urea-formaldehyde
insulation, chemicals known to cause cancer or reproductive toxicity,
pollutants and contaminants.
"MDC": McConnell Dowell Corporation Limited.
"MDC Stock": the Capital Stock of MDC.
"MDC Stock Value": as of any date of determination, the value
of the MDC Stock based upon the closing price on the immediately
preceding trading date.
"MIL": as defined in the title paragraph of this Agreement.
"Mortgage": a security document entered into by a Loan Party
in favour of the Agent creating a Lien on real or immoveable property
owned by such Loan Party.
"Net Proceeds": (i) the aggregate cash consideration received
by a Loan Party in connection with any transaction referred to in
Section 4.5(c) less (ii) the expenses
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(including out-of-pocket expenses) incurred by such Loan Party in
connection with such transaction (including, in the case of any
issuance of debt or equity securities, underwriters' commissions and
fees) and the amount of any federal, state and provincial taxes
incurred in connection with such transaction, in each case as certified
by a Responsible Officer to the Agent at the time of such transaction.
"Non-Excluded Taxes": as defined in Section 4.12.
"Non-Guarantor Subsidiary": a Subsidiary which is not a
Guarantor Subsidiary.
"Obligations": the unpaid principal amount of, and interest
(including, without limitation, interest accruing after the maturity of
the Revolving Credit Loans and interest accruing after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or
not a claim for post-filing or post-petition interest is allowed in
such proceeding) on the Revolving Credit Loans, and all other
obligations and liabilities of the Loan Parties to the Agent and the
Lenders, whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise
under, or out of or in connection with this Agreement, any outstanding
Letter of Credit, the Guarantees, the Security Documents and any other
Loan Documents and any other document made, delivered or given in
connection therewith or herewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all fees and disbursements of counsel
to the Agent or to the Lenders that are required to be paid by a Loan
Party pursuant to the terms of the Loan Documents) or otherwise.
"Parent": as defined in the title paragraph of this Agreement.
"Parent Guarantee": the Guarantee by the Parent in favour of
the Agent, guaranteeing the Obligations, as the same may be amended,
supplemented, restated, replaced or otherwise modified from time to
time.
"Parent Hypothecation of Securities Agreement": the
Hypothecation of Securities granted by the Parent in favour of the
Agent and the Lenders, creating a hypothec on, and security interest
in, the Capital Stock owned by the Parent including, without
limitation, the Capital Stock of the Borrower owned by the Parent, as
the same may be amended, supplemented, restated, replaced or otherwise
modified from time to time.
"Parent Moveable Hypothec": the Hypothec on Moveable Property
(General) granted by the Parent in favour of the Agent and the Lenders,
creating a hypothec on, and security interest in, a universality of all
present and future moveable property owned by the Parent, as same may
be amended, supplemented, restated, replaced or otherwise modified from
time to time.
"Parent Security Documents": the collective reference to the
Parent Moveable Hypothec and the Parent Hypothecation of Securities
Agreement.
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"Participant": as defined in Section 11.6(b).
"Permitted Liens": as defined in Section 8.3.
"Person": an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or
other entity of whatever nature.
"Plan": any pension or other employee benefit plan and which
is: (a) a plan maintained by a Loan Party or any Related Company; (b) a
plan to which a Loan Party or any Related Company contributes or is
required to contribute; (c) a plan to which a Loan Party 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 a Loan Party or any Related Company
has incurred or may incur liability, including contingent liability,
either to such plan or to any person, administrator or Public
Authority.
"Prime Rate": for the purpose of this Agreement means the rate
of interest publicly announced from time to time by BNY at its
principal office in New York as its prime rate or prime lending rate.
This rate of interest is determined from time to time by BNY as a means
of pricing some loans to its customers and is neither tied to any
external rate of interest or index nor does it necessarily reflect the
lowest rate of interest actually charged by BNY to any particular class
or category of customers of BNY. BNY may make commercial loans or other
loans at a rate of interest at, above or below the Prime Rate.
"Properties": as defined in Section 5.22.
"Public Authority": 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 Property": The real or immoveable properties owned by
any of the Loan Parties and located at the locations listed in Schedule
II as well as such other real or immoveable properties which may at any
time be purchased or otherwise acquired by any of the Loans Parties.
"Register": as defined in Section 11.6(d).
"Regulation U": Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"Related Company": any corporation "related" to a Loan Party
within the meaning of the Income Tax Act of Canada, any member of any
controlled group of corporations of which any of the Loan Parties is a
part, or any trade or business (whether
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or not incorporated) which together with a Loan Party would be treated
as a single employer.
"Required Lenders": at any time, Lenders the Credit Exposure
Percentages of which aggregate at least 66-2/3%.
"Requirement of Law": as to any Person, the certificate and
articles of incorporation and by-laws or other organizational or
Governing Documents of such Person, and any law, treaty, order, rule,
regulation, judgment or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person or any
of its property is subject.
"Responsible Officer": the chief executive officer or the
president of the relevant Loan Party or, with respect to financial
matters, the chief financial officer of the relevant Loan Party.
"Revolving Credit Commitment": as to any Lender, the
obligation of such Lender to make Revolving Credit Loans to the
Borrower and its L/C Obligations in an aggregate amount at any one time
outstanding not to exceed the amount set forth opposite such Lender's
name on Schedule I under the caption "Revolving Credit Loan" or in an
Assignment and Acceptance, as such amount may be reduced from time to
time in accordance with the provisions of this Agreement.
"Revolving Credit Commitment Percentage": as to any Lender at
any time, the percentage which such Lender's Revolving Credit
Commitment then constitutes of the aggregate Revolving Credit
Commitments (or, at any time after the Revolving Credit Commitments
shall have expired or terminated, the percentage which the aggregate
principal amount of such Lender's Revolving Credit Loans and L/C
Obligations constitutes of the aggregate principal amount of the
Revolving Credit Loans and L/C Obligations then outstanding).
"Revolving Credit Commitment Period": the period from and
including the date hereof to but not including the Termination Date.
"Revolving Credit Loans": as defined in Section 3.1.
"Security Documents": the collective reference to the Parent
Security Documents, the Borrower Security Documents and the Subsidiary
Security Documents and all other security documents hereafter delivered
to the Agent granting a Lien on any asset or assets of any Person to
secure any of the Obligations or to secure any guarantee of any such
Obligations.
"Steen": as defined in the title paragraph of this Agreement.
"Steen Hypothecation of Securities Agreement": the
Hypothecation of Securities granted by Steen in favour of the Agent and
the Lenders, creating a hypothec on, and a
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security interest in, the Capital Stock owned by Steen including,
without limitation, the Capital Stock of Becker and Becker NFLD owned
by Steen, as the same may be amended, supplemented, restated, replaced
or otherwise modified from time to time.
"Subsidiary": as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the
time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by
such Person. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of the Borrower.
"Subsidiary Debentures": each Fixed and Floating Charge Demand
Debenture issued by a Guarantor Subsidiary in favour of the Agent,
creating a mortgage, pledge and charge on the property of the Guarantor
Subsidiary, as the same may be amended, supplemented, restated,
replaced or otherwise modified from time to time.
"Subsidiary Guarantees": the collective reference to each
Guarantee by a Guarantor Subsidiary in favour of the Agent and the
Lenders, guaranteeing the Obligations, as the same may be amended,
supplemented, restated, replaced or otherwise modified from time to
time.
"Subsidiary Guarantors": the collective reference to DBI,
Steen, Davie, CGA, Becker, Becker NFLD, MIL, and any other Subsidiary
which may at any time execute and deliver a Subsidiary Guarantee.
"Subsidiary Hypothecs": the collective reference to the
Subsidiary Immoveable Hypothecs, the Subsidiary Moveable Hypothecs and
the Subsidiary Hypothecation of Securities Agreements;
"Subsidiary Hypothecation of Securities Agreements": the
collective reference to the Davie Hypothecation of Securities Agreement
and the Steen Hypothecation of Securities Agreement.
"Subsidiary Immoveable Hypothecs": the collective reference to
each Hypothec on Immoveable(s), Leases, Rents and Insurance granted by
a Guarantor Subsidiary in favour of the Agent and the Lenders, creating
a hypothec on, and security interest in, the charged property described
therein, as the same may be amended, supplemented, restated, replaced
or modified from time to time;
"Subsidiary Moveable Hypothecs": the collective reference to
each Hypothec on Moveable Property (General) granted by a Guarantor
Subsidiary in favour of the Agent and the Lenders, creating a hypothec
on, and security interest in, a universality of all present and future
moveable property owned by a Guarantor Subsidiary, as the same may be
amended, supplemented, restated, replaced or modified from time to
time.
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"Subsidiary Pledges of Debenture": each Pledge Agreement
entered into by a Guarantor Subsidiary in favour of the Agent pursuant
to which the Guarantor Subsidiary pledges and hypothecates the
Subsidiary Debenture to the Agent, as the same may be amended,
supplemented, restated, replaced or otherwise modified from time to
time.
"Subsidiary Security Documents": the collective reference to
the Subsidiary Debentures, the Subsidiary Pledges of Debenture, the
Subsidiary Hypothecs, the Australian Security Documents and the Becker
Intercorporate Moveable Hypothec.
"Termination Date": the date on which this Agreement
terminates pursuant to Section 3.7.
"Termination Event": with respect to any Plan, (a) the
withdrawal of a Loan Party or any Related Company from a Plan during a
plan year; or (b) the treatment of a Plan amendment as a termination;
or (c) the institution of proceeding by any Public Authority to
terminate or to have a trustee appointed to administer a Plan; or (d)
any other event or condition which might constitute grounds for
termination of, winding up, in whole or in part, or the appointment of
a trustee to administer any Plan.
"Transferee": as defined in Section 11.6(f).
"Tri-partite Agreement": the Deed Relating to Chess Securities
entered into between the Agent, CGA and MDC pertaining to the
regulation of the conversion by MDC of the MDC Stock to uncertificated
form.
1.2 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms defined in
this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto.
(b) As used herein and in any certificate or other document
made or delivered pursuant hereto, accounting terms relating to the
Loan Parties and the Non-Guarantor Subsidiaries not defined in Section
1.1 and accounting terms partly defined in Section 1.1, to the extent
not defined, shall have the respective meanings given to them under
GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
SECTION 2. [RESERVED.]
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SECTION 3. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS
3.1 Revolving Credit Commitments. Subject to the terms and
conditions hereof, each Lender agrees to make revolving credit loans ("Revolving
Credit Loans") to the Borrower and/or to issue or arrange for issuance of
letters of credit ("Letters of Credit") from time to time during the Revolving
Credit Commitment Period in an aggregate principal amount of Revolving Credit
Loans and of L/C Obligations at any one time outstanding not to exceed the
lesser of (i) the amount of such Lender's Revolving Credit Commitment then in
effect and (ii) such Lender's Revolving Credit Commitment Percentage of the
Borrowing Base then in effect; provided, that the Revolving Credit Commitments
shall terminate at 3:00 p.m., Montreal time, 30 days following the date hereof,
if no Revolving Credit Loans have been made at or before that time. During the
Revolving Credit Commitment Period, the Borrower may use the Revolving Credit
Commitments by borrowing, repaying the Revolving Credit Loans in whole or in
part, and reborrowing and requesting the issuance of Letters of Credit, all in
accordance with the terms and conditions hereof.
3.1.1 The Borrower confirms and agrees that (i) the rights of
the Agent and each Lender presently existing and any other Lender from time to
time a party to this Agreement by way of assignment or otherwise are solidary
and each of them is entitled to demand repayment of the principal amount of all
Revolving Credit Loans outstanding from time to time and to exact the whole
performance of the Obligations from the Borrower, to benefit from the security
created pursuant to the Security Documents, to give a full acquittance for the
Obligations and to exercise all rights and recourses under the Loan Documents,
and the obligations of the Borrower arising from any Revolving Credit Loan
advanced by or Letter of Credit issued or arranged by any of them will form part
of the Obligations, will be secured by the Security Documents and the Agent and
all other Lenders will have a solidary interest therein; and (ii) the obligation
to make Revolving Credit Loans and to issue or arrange for the issuance of
Letters of Credit is several, and not joint and several or solidary and,
accordingly, the Borrower's recourse against any Lender with respect thereto,
will be limited to the amount of such Lender's Revolving Credit Commitment. The
foregoing shall not affect, as amongst the Lenders, the right of each Lender to
receive its pro rata share of the principal of and interest on the Revolving
Credit Loans and any fees and other amounts to which a Lender is entitled
hereunder in accordance with its Revolving Credit Commitment Percentage or on
such other basis as may be provided in this Agreement or the obligation of a
Lender to make the amount of its pro rata share of each borrowing available and
to bear its pro rata share of the risk with respect to each Letter of Credit,
the whole in accordance with the provisions of this Agreement.
3.1.2 On the Closing Date and until otherwise advised in
writing by the Agent to the Borrower, the Revolving Credit Commitments will be
limited to $25,000,000.00. The Borrower acknowledges that the Agent will have no
obligation to make Revolving Credit Loans or Letters of Credit available in
excess of such amount. The Agent will notify the Borrower of an increase in the
Revolving Credit Commitment if and when arrangements are made for other Lenders
to make such increased Revolving Credit Commitments available. The Agent will
diligently attempt to arrange for such other Lenders, however, the Borrower
acknowledges that the Agent has not given any representation or undertaking to
the Borrower, any of the other Loan
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Parties or any other Person as to its ability to arrange for the participation
of other Lenders and the Agent will have no liability of any nature whatsoever
in the event that such participations do not occur. The Agent confirms that
until the Revolving Credit Commitments have been increased to $40,000,000.00, it
will not sell or assign any of its rights or interests under this Agreement
unless as a result the Revolving Credit Commitments are increased by the amount
of the participating interest of the Participant or Assignee, as the case may
be. In the event that by October 15, 1997, the Agent has not arranged for other
Lenders to make Revolving Credit Commitments available for the additional
$15,000,000.00, the Borrower may attempt to arrange for other Lenders to provide
the additional financing. Any person whose involvement is so arranged by the
Borrower will be subject to the prior approval of the Agent, which will not be
unreasonably withheld if such person is an Eligible Assignee.
3.2 [RESERVED]
3.3 Procedure for Revolving Credit Borrowing. The
Borrower may borrow under the Revolving Credit Commitments during the Revolving
Credit Commitment Period on any Business Day in an aggregate principal amount
not exceeding the lesser of (A) the aggregate Available RC Commitments then in
effect and (B) the Borrowing Base then in effect, provided that the Borrower
shall give the Agent irrevocable notice (which notice must be received by the
Agent prior to 10:00 a.m., Montreal time, on the requested Borrowing Date,
specifying the amount to be borrowed and the requested Borrowing Date. Each
borrowing under the Revolving Credit Commitments shall be in an amount equal to
$100,000 or a whole multiple thereof, or, if the then Available RC Commitments
are less than $100,000, such lesser amount. Upon receipt of any such notice from
the Borrower, the Agent shall promptly notify each Lender thereof. Each Lender
will make the amount of its pro rata share of each borrowing (including, without
limitation, a borrowing to fund a draw under a Letter of Credit) available to
the Agent for the account of the Borrower at the office of the Agent specified
in Section 11.2 prior to 1:00 p.m., Montreal time, on the Borrowing Date
requested by the Borrower in funds immediately available to the Agent. Such
borrowing will then be made available to the Borrower by the Agent crediting the
account of the Borrower on the books of such office with the aggregate of the
amounts made available to the Agent by the Lenders and in like funds as received
by the Agent.
3.4 [RESERVED.]
3.5 [RESERVED.]
3.6 "Letters of Credit": The following will apply with
respect to Letters of Credit:
(a) Subject to the terms and conditions hereof, at the request
of the Borrower, the Agent shall arrange for issuance of letters of
credit ("Letters of Credit") for the Borrower. In connection with any
such request, the Borrower shall deliver to the Agent prior to 10:00
a.m., Montreal time, 2 Business Days prior to the date on which the
Letter of Credit is to be issued, a letter of credit application
completed to the satisfaction of the Agent and such other certificates,
documents and information as the Agent may reasonably request.
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(b) The Borrower will not be entitled to the issuance of any
Letter of Credit to the extent that the face amount thereof would then
cause the sum of the outstanding Revolving Credit Loans plus
outstanding Letters of Credit to exceed the amount referred to in the
first sentence of Section 3.1 or if the aggregate amount of outstanding
Letters of Credit would then be in excess of $2,000,000.00 ("Letter of
Credit Limit"). All disbursements or payments relating to the Letters
of Credit shall be deemed to be Revolving Credit Loans and shall bear
interest at the rates provided in this Agreement.
(c) No Letter of Credit shall have an expiry date later than
the last day of the initial three (3) year term or, if this Agreement
is renewed, the last day of any subsequent renewal term.
(d) Each letter of credit application and each Letter of
Credit shall be subject to the Uniform Customs and Practice for
Documentary Credits (1993 revision), International Chamber of Commerce
Publication no. 500 and any amendments or revisions thereof.
(e) Standby Letters of Credit issued to guarantee the
obligations of the Borrower or any other Credit Party will not be
subject to automatic extensions or renewals.
(f) In connection with the issuance of any Letter of Credit,
the Borrower shall indemnify, save and hold the Agent and the Lenders
harmless from any loss, cost, expense or liability, including without
limitation the issuing or accepting bank's standard issuance fees and
payments made by the Agent or any Lender, and expenses and reasonable
attorneys' fees incurred by the Agent or any Lender arising out of or
in connection with any Letter of Credit. The Borrower shall be bound by
any issuing or accepting bank's regulations and good faith
interpretations of any Letter of Credit although this interpretation
may be different from the Borrower's interpretation and none of the
Agent, the Lenders nor any its or their correspondents shall be liable
for any error, negligence, whether of omission or commission, in
following the Borrower's instructions or those contained in any Letter
of Credit or any modification, amendment or supplement thereto or in
creating or paying any Letter of Credit, except for the Agent's, the
Lenders' or correspondents' wilful misconduct or gross negligence.
(g) The Borrower shall authorize and direct and does hereby
authorize and direct any bank which issues a Letter of Credit to name
the Borrower as the Account Party therein and to deliver to the Agent
all instruments, documents and other writings and property received by
the Bank pursuant to the Letter of Credit or in connection with any
acceptance 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, the application therefor and any acceptance.
(h) The Borrower hereby appoints the Agent, or its designee as
its attorney, with full power of authority (i) to sign and/or endorse
the Borrower's name upon any warehouse receipts or any other receipts,
letter of credit applications and acceptances; (ii) to sign the
Borrower's name on bills of lading; (iii) to clear inventory through
customs in
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the name of the Borrower or the Agent or its designee, to sign and
deliver to customs officials, powers of attorney in the name of the
Borrower for such purpose; and (iv) to complete in the Borrower's name
or in the name of the Agent or its designee any order, sale or
transaction, obtain the necessary documents in connection therewith and
collect the proceeds thereof. None of the Agent, the Lenders nor its or
their attorneys will be liable for any acts or omissions, nor for any
error of judgment or mistakes of fact or law, except resulting from its
or their wilful misconduct or gross negligence. This power is
irrevocable as long as any Letter of Credit remains outstanding.
(i) The Borrower will pay a fee ("Letter of Credit Fee") with
respect to each Letter of Credit issued at the rate of .25% for each 30
days or portion thereof based on the face amount of each Letter of
Credit, calculated from issuance until cancellation, expiry or payment.
In addition, the Borrower will pay any bank and other charges incurred
in respect each Letter of Credit.
(j) Letters of Credit shall be subject to the terms and
conditions set forth in the Letter of Credit Agreement.
3.7 "Termination of Agreement": Subject to the rights of
termination provided herein, this Agreement shall be for an initial term of
three (3) years ending on the third anniversary of the Closing Date and, unless
terminated, shall be renewed, automatically, for successive terms of one (1)
year. This Agreement may be terminated as follows and the date on which the
Agreement terminates is herein referred to as the "Termination Date":
(a) Each of the Agent and the Borrower may terminate this
Agreement at the end of the initial term or any subsequent renewal term
by giving the other 60 days' prior written notice, in which case the
fee provided for in Section 4.10 will not be payable.
(b) The Borrower may terminate this Agreement at any other
time upon 60 days' prior written notice provided that the Borrower
repays all of the Obligations, the early termination fee as provided
for in Section 4.10, as well as the collateral monitoring fee provided
for in Section 4.9 for the balance of the initial three (3) year term
or any one (1) year renewal term, as the case may be.
(c) The Agent may terminate this Agreement at any time without
notice upon the occurrence of an Event of Default, in which case the
fee provided for in Section 4.10 will be payable.
SECTION 4. GENERAL PROVISIONS APPLICABLE TO REVOLVING CREDIT LOANS
4.1 Interest Rates and Payment Dates.
(a) Each Revolving Credit Loan shall bear interest at a rate
per annum equal to the Alternate Base Rate plus the Applicable Margin.
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(b) If all or a portion of (i) any principal of any Revolving
Credit Loan, (ii) any interest payable thereon, (iii) any commitment
fee or (iv) any other amount payable hereunder shall not be paid when
due (whether at the stated maturity, by acceleration or otherwise), the
principal of the Revolving Credit Loans and any such overdue interest,
commitment fee or other amount shall bear interest at a rate per annum
which is (x) in the case of principal, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this Section
plus .50% per annum or (y) in the case of any such overdue interest,
commitment fee or other amount, the rate described in paragraph (a) of
this Section plus .50% per annum, in each case from the date of such
non-payment until such overdue principal, interest, commitment fee or
other amount is paid in full (as well after as before judgment).
(c) Interest shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant to paragraph (b)
of this Section shall be payable from time to time on demand.
(d) If on any five Business Days (whether or not consecutive)
occurring in any calendar month the amount of Revolving Credit Loans
outstanding on each such Business Day exceeds the lesser of the
Borrowing Base and the Revolving Credit Commitments as in effect for
each such Business Day, then the average daily balance of all Revolver
Advances outstanding on each day during such month shall bear interest
at the rate determined pursuant to clause (a) of this Section 4.1 plus
a per annum rate of 0.50%. The foregoing will apply whether the excess
results from the permission granted by the Agent pursuant to Section
4.5(d) or for any other reason.
4.2 [RESERVED.]
4.3 [RESERVED.]
4.4 [RESERVED.]
4.5 Mandatory Repayments.
(a) Subject to Section 4.13, if on any date on which a
Borrowing Base Certificate is delivered pursuant to Section 7.2(c), the
aggregate outstanding principal amount of the Revolving Credit Loans
exceeds the Borrowing Base, the Borrower shall repay the Revolving
Credit Loans in an amount equal to the amount of such excess no later
than the Business Day immediately following the date of delivery of
such Borrowing Base Certificate. For purposes of this Section 4.5(a),
in the event that the assets of Becker included in the calculation of
the Borrowing Base exceed the Becker Intercorporate Indebtedness, the
Borrowing Base will be reduced by an amount equivalent to such excess.
(b) Subject to Section 4.13, if on any date the aggregate
outstanding principal amount of the Revolving Credit Loans exceeds the
Revolving Credit Commitments, the Borrower shall immediately repay the
Revolving Credit Loans in an amount equal the amount of such excess.
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(c) Unless the Required Lenders otherwise agree, the Borrower
shall prepay the Revolving Credit Loans and reduce the Revolving Credit
Commitments in an amount equal to (i) provided that there has not
occurred a Default or an Event of Default, 50% and, otherwise, 100% of
the Net Proceeds of any sale or issuance of debt securities, and 50% of
the Net Proceeds of any sale or issuance of any equity securities, in
either case by any Loan Party, whether in a public offering, a private
placement or otherwise, (ii) 100% of the Net Proceeds of any sale,
lease, assignment, exchange or other disposition for cash of any asset
or group of assets not made in the ordinary course of business by any
Loan Party, (iii) 100% of the Net Proceeds of any insurance proceeds
paid as a result of any destruction, casualty or taking of any property
of any Loan Party; in any such case no later than 3 Business Days
following receipt by such Loan Party of such proceeds, together with
accrued interest to such date on the amount prepaid; provided, however,
that (i) no such prepayment shall be required pursuant to subclause
(ii) or (iii) of this Section 4.5(c) unless the aggregate amount of
such Net Proceeds received and the reduction of the Revolving Credit
Commitments pursuant to Section 4.5(c)(ii) is at least $100,000 and
(ii) no such prepayment shall be required pursuant to subclause (iii)
of this Section 4.5(c) if the Agent consents to the Loan Party in
question utilizing the insurance proceeds to replace or repair the
property in question, which consent will not be unreasonably withheld
provided that there has not occurred a Default or Event of Default,
that the proceeds are sufficient to complete the repair or replacement
of the property in question and that the event or circumstance giving
rise to the insurance proceeds has not resulted in a Material Adverse
Effect which will continue to exist after the repair or replacement.
Nothing in this Section 4.5(c) shall be construed to derogate any
restriction or limitation contained in any Loan Document imposed on any
transaction of the types described in this Section 4.5(c), including
without limitation the restrictions set forth in Sections 8.2, 8.5 and
8.6 hereof.
(d) Notwithstanding the provisions of paragraphs (a) and (b)
of this Section and subject to Section 4.1(c), the Lenders may, in
their sole and absolute discretion and without waiver of any right
hereunder, permit the amount of the Revolving Credit Loans to exceed
the Borrowing Base for such time and upon such terms and conditions as
they may determine.
(e) The Borrower shall repay the Revolving Credit Loans and
all other Obligations on the Termination Date.
4.6 Computation of Interest and Fees; Interest Act (Canada).
(a) Commitment fees shall be calculated on the basis of a
360-day year for the actual days elapsed.
(b) Unless otherwise stated, wherever in this Agreement,
reference is made to a rate of interest "per annum" or a similar
expression is used, such interest shall be calculated on the basis of a
360-day year for the actual number of days elapsed in the period, and,
in any such case, using the nominal rate method of calculation (and not
the effective rate method of calculation or any other method that
contemplates deemed
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<PAGE> 34
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. Any change in the
interest rate on a Revolving Credit Loan resulting from a change in the
Alternate Base Rate shall become effective as of the opening of
business on the day on which such change becomes effective. The Agent
shall as soon as practicable notify the Borrower and the Lenders of the
effective date and the amount of each such change in interest rate.
(c) Each determination of an interest rate by the Agent
pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrower and the Lenders in the absence of manifest
error.
(d) For the purposes of this Agreement, whenever interest,
fees or other amounts referred to hereunder are to be calculated on the
basis of a year of 360 days 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 determined and divided by 360.
4.7 [RESERVED.]
4.8 Pro Rata Treatment and Payments.
(a) Each borrowing by the Borrower from the Lenders hereunder,
the sharing of the risk with respect to each outstanding Letter of
Credit, each payment by the Borrower on account of any commitment fee
hereunder and any reduction of the Revolving Credit Commitments of the
Lenders shall be shared or made pro rata according to the respective
Revolving Credit Commitment Percentages of the Lenders. Each payment
(including each prepayment) by the Borrower on account of principal of
and interest on the Revolving Credit Loans shall be made pro rata
according to the respective outstanding principal amounts of the
Revolving Credit Loans then held by the Lenders. All payments
(including prepayments) to be made by the Borrower hereunder, whether
on account of principal, interest, fees or otherwise, shall be made
without abatement, compensation, set-off or counterclaim and shall be
made prior to 12:00 noon, Montreal time, on the due date thereof to the
Agent, for the account of the Lenders, at the Agent's Applicable
Lending Office, in Dollars and in immediately available funds. The
Agent shall distribute such payments to the Lenders promptly upon
receipt in like funds as received. If any payment hereunder becomes due
and payable on a day other than a Business Day, such payment shall be
extended to the next succeeding Business Day, and, with respect to
payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.
(b) Each Loan Party recognizes that the amounts evidenced by
checks, notes, drafts or any other items of payment relating to and/or
proceeds of Accounts may not be collectible by the Agent on the date
received. The Agent shall only conditionally credit the Borrower's
account on the Agents books at such time as the Agent receives such
payment. In making computations under this Agreement, the settlement
date for each
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payment received, and the date on which the corresponding Account shall
be deemed paid for purposes of calculating the Revolver Borrowing Base,
shall be 3 calendar days after the date on which the payment is
actually collected by the Agent. The Agent shall not, however, be
required to credit the Borrower's account for the amount of any item of
payment which is unsatisfactory to the Agent in its reasonable
discretion and the Agent may charge the Borrower's account for the
amount of any item of payment which is returned to the Agent unpaid.
(c) Until the earlier to occur of a Default or an Event of
Default, any Ledger Debt (as defined immediately below) owed to any
Lender by a Loan Party in the ordinary course of such Loan Party's
business, as an account debtor, may be paid solely to such Lender, with
such deduction(s) as are proper and valid in the ordinary course of
business with respect to the related sales. For so long as a Default or
Event of Default shall have occurred and be continuing, all such
payment(s) shall be made without any deduction whatsoever, including
but not limited to any deduction for setoff or counterclaim. For
purposes of this subparagraph, the term "Ledger Debt" shall mean and
include all indebtedness and obligations due or to become due to a
Lender from a Loan Party by reason of or in connection with the sale of
goods and/or the rendering of services from any client of such Lender
to a Loan Party, as an account debtor, as to which the resulting
account receivable is sold or assigned to such Lender at any time and
from time to time by such client(s).
(d) Unless the Agent shall have been notified in writing by
any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its Revolving Credit Commitment Percentage
of such borrowing available to the Agent, the Agent may assume that
such Lender is making such amount available to the Agent, and the Agent
may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the Agent
by the required time on the Borrowing Date therefor, such Lender shall
pay to the Agent, on demand, such amount with interest thereon at a
rate equal to the daily average Federal Funds Effective Rate for the
period until such Lender makes such amount immediately available to the
Agent. A certificate of the Agent submitted to any Lender with respect
to any amounts owing under this Section shall be conclusive and binding
in the absence of manifest error. If such Lender's Revolving Credit
Commitment Percentage of such borrowing is not made available to the
Agent by such Lender within 3 Business Days of such Borrowing Date, the
Agent shall also be entitled to recover such amount with interest
thereon at the Alternate Base Rate, on demand, from the Borrower.
4.9 Various Fees.
(a) Arranging Fee. The Borrower has agreed to pay to the
Agent, for its own account and not for the account of any Lender, an
Arranging Fee of $250,000.00 (based on Revolving Credit Commitment of
$25,000,000.00), which fee has been paid to the Agent in consideration
of the execution and delivery of this Agreement by the Agent. In the
event that the Revolving Credit Commitments are increased as a result
of a Lender whose involvement is arranged by the Agent, forthwith upon
such increase taking effect, the Borrower shall pay to the Agent an
additional Arranging Fee equivalent to $10,000.00
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<PAGE> 36
for each $1,000,000.00 of additional Revolving Credit Commitment
(which, based on Revolving Credit Commitments of $40,000,000.00 will be
for a maximum of $400,000.00). The Agent is hereby authorized to
withhold the amount of such fee from the proceeds of disbursement of
further Revolving Credit Loans.
(b) Collateral Monitoring Fee. The Borrower agrees to pay to
the Agent, for its own account and not for the account of any Lender, a
collateral monitoring fee of $10,000.00 per month on the 15th day of
each month for each month commencing with the month in which the
Closing Date occurs and ending with and including the month in which
the Termination Date occurs. The collateral monitoring fee for the
month in which the Closing Date occurs will be pro-rated in the event
that the Closing Date occurs on a day other than the first day of the
month.
(c) Commitment Fee. The Borrower agrees to pay to the Agent
for the account of each Lender a commitment fee for the period from and
including the first day of the Revolving Credit Commitment Period to
the Termination Date, computed at the rate of 1/2 of 1% per annum on
the average daily amount of the Available RC Commitment of such Lender
during the period for which payment is made, payable quarterly in
arrears on the last day of each March, June, September and December and
on the Termination Date commencing on the first of such dates to occur
after the date hereof.
4.10 Early Termination Fee. If the Borrower shall terminate
this Agreement during any annual period following the Closing Date set forth
below, the Borrower shall concurrently pay to the Agent for the account of each
Lender an early termination fee in the amount equal to the percentage of the
Revolving Credit Commitment set forth opposite the period in which such
termination occurs below:
<TABLE>
<CAPTION>
If Termination Date Occurs in Borrower Shall Pay __% of the
Year Following Closing Date Revolving Credit Commitment
--------------------------- on Termination Date
-------------------
<S> <C>
Year 1 4.00%
Year 2 2.00%
Year 3 and thereafter 1.00%
</TABLE>
4.11 Requirements of Law.
(a) If the adoption of or any change in any Requirement of Law
or in the interpretation or application thereof or compliance by any
Lender with any request or directive (whether or not having the force
of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement or any of the other Loan
Documents or change the basis of taxation of payments to such
Lender in respect thereof (except for Non-Excluded Taxes
covered by Section 4.12 and changes in the rate of tax on the
overall net
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income of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement
against assets held by, deposits or other liabilities in or
for the account of, advances, loans or other extensions of
credit by, or any other acquisition of funds by, any office of
such Lender; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such
Lender, by an amount which such Lender deems to be material, of making
Revolving Credit Loans or to reduce any amount receivable hereunder in
respect thereof, then, in any such case, the Borrower shall promptly
pay such Lender such additional amount or amounts as will compensate
such Lender for such increased cost or reduced amount receivable.
(b) If any Lender shall have determined that the adoption of
or any change in any Requirement of Law regarding capital adequacy or
in the interpretation or application thereof or compliance by such
Lender or any corporation controlling such Lender with any request or
directive regarding capital adequacy (whether or not having the force
of law) from any Governmental Authority made subsequent to the date
hereof shall have the effect of reducing the rate of return on such
Lender's or such corporation's capital as a consequence of its
obligations hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, the
Borrower shall promptly pay to such Lender such additional amount or
amounts as will compensate such Lender for such reduction.
(c) If any Lender becomes entitled to claim any additional
amounts pursuant to this Section, it shall promptly notify the Borrower
(with a copy to the Agent) of the event by reason of which it has
become so entitled. A certificate as to any additional amounts payable
pursuant to this Section submitted by such Lender to the Borrower (with
a copy to the Agent) shall be conclusive and binding upon the Loan
Parties in the absence of manifest error. The agreements in this
Section shall survive the termination of this Agreement and the payment
of the Revolving Credit Loans and all other amounts payable hereunder.
(d) Solely for the purposes of this Section 4.11, references
to "Lender" shall, in the case of the Agent when acting as a Lender
hereunder, include any bank controlling the Agent.
(e) The agreements in this Section 4.11 shall survive the
payment of the Revolving Credit Loans and all other amounts payable
hereunder.
4.12 Taxes.
(a) All payments made by the Borrower under this Agreement
shall be made
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free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes
(imposed in lieu of net income taxes) imposed on the Agent or any
Lender as a result of a present or former connection between the Agent
or such Lender and the jurisdiction of the Governmental Authority
imposing such tax or any political subdivision or taxing authority
thereof or therein (other than any such connection arising solely from
the Agent or such Lender having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement.
If any such non-excluded taxes, levies, imposts, duties, charges, fees
deductions or withholdings ("Non-Excluded Taxes") are required to be
withheld from any amounts payable to the Agent or any Lender hereunder,
the amounts so payable to the Agent or such Lender shall be increased
to the extent necessary to yield to the Agent or such Lender (after
payment of all Non-Excluded Taxes) interest or any such other amounts
payable hereunder at the rates or in the amounts specified in this
Agreement. Whenever any Non-Excluded Taxes are payable by the Borrower,
as promptly as possible thereafter the Borrower shall send to the Agent
for its own account or for the account of such Lender, as the case may
be, a certified copy of an original official receipt received by the
Borrower showing payment thereof. If the Borrower fails to pay any
Non-Excluded Taxes when due to the appropriate taxing authority or
fails to remit to the Agent the required receipts or other required
documentary evidence, the Borrower shall indemnify the Agent and the
Lenders for any incremental taxes, interest or penalties that may
become payable by the Agent or any Lender as a result of any such
failure. In the event that the Agent or any Lender, in its sole
opinion, receives or is granted a credit against or relief, deduction
or omission for, or repayment of, any tax paid or payable by the Agent
or any Lender in respect of or calculated with reference to the
deduction or withholding giving rise to an additional payment under
this Section, then the Agent or the Lender, as the case may be, to the
extent that it can do so without prejudice to the retention of the
amount of such credit, relief, deduction, omission or repayment, shall
pay or cause to be paid to the Borrower such amount that the Agent or
the Lender, as the case may be, shall have reasonably concluded to be
attributable to the relevant deduction or withholding. Any such payment
shall be conclusive evidence of the amount due to the Borrower
hereunder and shall be accepted by the Borrower in full and final
settlement of any rights of reimbursement hereunder in respect of such
deduction or withholding. Nothing herein contained shall interfere with
the Agent's and the Lenders' rights to arrange their respective tax
affairs in whatever manner they may think fit. In particular, the Agent
and the Lenders shall not be under any obligation to claim credit,
relief, remission or repayment from or against their corporate profits
or similar tax liability in respect of the amount of such deduction or
withholding in priority to any other claims, reliefs, credits, or
deductions available to the Agent and the Lenders.
(b) The agreements in this Section shall survive the
termination of this Agreement and the payment of the Revolving Credit Loans and
all other amounts payable hereunder.
4.13 Indemnity. The Borrower agrees to indemnify each Lender
and to hold each Lender harmless from any loss or reasonable expense which such
Lender may sustain or
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<PAGE> 39
incur as a consequence of default by the Borrower in making any prepayment after
the Borrower has given a notice thereof in accordance with the provisions of
this Agreement. This covenant shall survive the termination of this Agreement
and the payment of the Revolving Credit Loans and all other amounts payable
hereunder.
4.14 Lending Offices. Revolving Credit Loans made by any
Lender shall be made and maintained at such Lender's Applicable Lending Office.
4.15 Bank Charges. The Borrower shall additionally pay to the
Agent all reasonable and customary bank charges paid or incurred by the Agent
for the Borrower's account, including, without limitation, charges for wire
transfers.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this
Agreement and to make the Revolving Credit Loans, the Borrower hereby represents
and warrants to the Agent and each Lender that:
5.1 Financial Condition.
(a) The consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at September 30, 1996 and the related
consolidated statements of income and of cash flows for the fiscal year
ended on such date, reported on by Deloitte & Touche, copies of which
have heretofore been furnished to each Lender, are complete and correct
and present fairly the consolidated financial condition of the Borrower
and its consolidated Subsidiaries as at such date, and the consolidated
results of their operations and their consolidated cash flows for the
fiscal year then ended. The unaudited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at June 30, 1997 and the
related unaudited consolidated statements of income and of cash flows
for the nine-month period ended on such date, certified by a
Responsible Officer, copies of which have heretofore been furnished to
each Lender, are complete and correct and present fairly the
consolidated financial condition of the Borrower and its consolidated
Subsidiaries as at such date, and the consolidated results of their
operations and their consolidated cash flows for the nine-month period
then ended (subject to normal year-end audit adjustments). All such
financial statements, including the related schedules and notes
thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by
such accountants or Responsible Officer, as the case may be, and as
disclosed therein). Neither the Borrower nor any of its consolidated
Subsidiaries had, at the date of the most recent balance sheet referred
to above, any material Guarantee Obligation, contingent liability or
liability for taxes, or any long-term lease or unusual forward or
long-term commitment, including, without limitation, any interest rate
or foreign currency swap or exchange transaction or other financial
derivative, which is not reflected in the foregoing statements or in
the notes thereto. During the period from September 30, 1996 to and
including the date hereof there has been no sale, transfer or other
disposition by the Borrower or any of its consolidated Subsidiaries of
any material part of its business or property and no purchase
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<PAGE> 40
or other acquisition of any business or property (including any Capital
Stock of any other Person) material in relation to the consolidated
financial condition of the Borrower and its consolidated Subsidiaries
at June 30, 1997.
(b) The pro forma consolidated balance sheet of the Borrower
and its consolidated Subsidiaries as at June 30, 1997, certified by a
Responsible Officer of the Borrower (the "Pro Forma Balance Sheet"), a
copy of which has been provided to the Agent and each Lender, is the
unaudited consolidated balance sheet of the Borrower and its
consolidated Subsidiaries adjusted to give effect (as if such events
had occurred on such date) to (i) the making of the Revolving Credit
Loans to be made on the Closing Date, (ii) the application of the
proceeds of the foregoing in accordance with the terms of the Loan
Documents and (iii) the payment of all fees and expenses related to the
foregoing transactions, as estimated in good faith using assumptions
deemed reasonable by the Borrower as of the date of the Pro Forma
Balance Sheet. The Pro Forma Balance Sheet, together with the notes
thereto, presents fairly, on a pro forma basis, the consolidated
financial position of the Borrower and its Subsidiaries as at June 30,
1997, assuming that the events specified in the preceding sentence had
actually occurred on such date.
(c) The operating forecast and cash flow projections of the
Borrower and its consolidated Subsidiaries, copies of which have
heretofore been furnished to the Agent, have been prepared in good
faith using assumptions deemed reasonable by the Borrower under the
direction of a Responsible Officer of the Borrower, and in accordance
with GAAP, except that such forecast and projections do not include
footnotes and other disclosures which may be required pursuant to GAAP.
The Borrower has no reason to believe that as of the date of delivery
thereof such operating forecast and cash flow projections are
materially incorrect or misleading in any material respect, or omit to
state any material fact which would render them misleading in any
material respect.
5.2 No Change. (a) Since June 30, 1997 there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect, and (b) during the period from June 30, 1997 to and
including the date hereof, no dividends or other distributions have been
declared, paid or made upon the Capital Stock of the Borrower nor has any of the
Capital Stock of the Borrower been redeemed, retired, purchased or otherwise
acquired for value by the Borrower or any of its Subsidiaries.
5.3 Existence; Compliance with Law. Each Loan Party (a) is
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its organization, (b) has the corporate power and authority, and
the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified as a foreign or extra-provincial corporation and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
and (d) is in compliance with all Requirements of Law except to the extent that
the failure to comply therewith could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
5.4 Power; Authorization; Enforceable Obligations. Each Loan
Party has the
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corporate power and authority, and the legal right, to make, deliver and perform
its obligations under the Loan Documents to which it is a party and, in the case
of the Borrower, to borrow hereunder and has taken all necessary corporate
action to authorize the borrowings on the terms and conditions of this Agreement
and to authorize the execution, delivery and performance of the Loan Documents
to which it is a party. No consent or authorization of, filing with, notice to
or other act by or in respect of, any Governmental Authority or any other Person
is required in connection with the borrowings hereunder or with the execution,
delivery, performance, validity or enforceability of the Loan Documents. This
Agreement has been, and each other Loan Document will be, duly executed and
delivered on behalf of each Loan Party which is intended to become a party
thereto. This Agreement constitutes, and each other Loan Document when executed
and delivered will constitute, a legal, valid and binding obligation of each
Loan Party which is a party to it enforceable against such Loan Party in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
5.5 No Legal Bar. The execution, delivery and performance of
the Loan Documents, the borrowings hereunder and the use of the proceeds thereof
will not violate any Requirement of Law or Contractual Obligation of any Loan
Party and will not result in, or require, the creation or imposition of any Lien
on any of its or their respective properties or revenues pursuant to any such
Requirement of Law or Contractual Obligation (other than Liens created by the
Security Documents in favour of the Agent).
5.6 No Material Litigation. Except as disclosed in Schedule
5.6. No litigation, investigation or proceeding of or before any court,
tribunal, administrative board, arbitrator, Governmental Authority or other
authority is pending or, to the knowledge of the Borrower, threatened by or
against any Loan Party or against any of its or their respective properties or
revenues and there are no unexecuted judgments pending against any Loan Party,
the whole (a) with respect to any of the Loan Documents or any of the
transactions contemplated hereby or thereby, or (b) which could, in the
aggregate, have a Material Adverse Effect.
5.7 No Default. No Loan Party nor any Non-Guarantor Subsidiary
is in default under or with respect to any of its Contractual Obligations in any
respect which could have a Material Adverse Effect. No Default or Event of
Default has occurred and is continuing.
5.8 Ownership of Property; Liens. Each Loan Party has good
record and marketable title (in fee simple where applicable) to, or a valid
leasehold interest in, all its real and immoveable property, and good title to,
or a valid leasehold interest in, all its other property, and none of such
property is subject to any Liens except for Permitted Liens.
5.9 Intellectual Property. Each Loan Party owns, or is
licensed to use, all trademarks, tradenames, copyrights, technology, know-how
and processes necessary for the conduct of its business as currently conducted
except for those the failure to own or license which could not reasonably be
expected to have a Material Adverse Effect (the "Intellectual Property"). No
claim has been asserted and is pending by any Person challenging or questioning
the use of any such Intellectual Property or the validity or effectiveness of
any such Intellectual Property,
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nor does any Loan Party know of any valid basis for any such claim. The use of
such Intellectual Property by each Loan Party does not infringe on the rights of
any Person, except for such claims and infringements that, in the aggregate, do
not have a Material Adverse Effect.
5.10 No Burdensome Restrictions. No Requirement of Law or
Contractual Obligation of any Loan Party could reasonably be expected to have a
Material Adverse Effect.
5.11 Taxes. Except as disclosed on Schedule 5.11, each Loan
Party has filed or caused to be filed all tax returns which, to the knowledge of
the Borrower, are required to be filed and has paid all taxes shown to be due
and payable on said returns or on any assessments made against it or any of its
property and all other taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority (other than any the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided on the
books of the Loan Party; no tax Lien has been filed, and, to the knowledge of
the Borrower, no claim is being asserted, with respect to any such tax, fee or
other charge.
5.12 Federal Regulations. No part of the proceeds of any
Revolving Credit Loans will be used for "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation G or Regulation U of the Board of Governors of the Federal Reserve
System as now and from time to time hereafter in effect, or for any purpose
which violates, or which would be inconsistent with, the provisions of the
regulations of such Board of Governors. If requested by any Lender or the Agent,
the Borrower will furnish to the Agent and each Lender a statement to the
foregoing effect in conformity with the requirements of FR Form G-1 or FR Form
U-1 referred to in said Regulation G or Regulation U, as the case may be.
5.13 Plans.
(a) None of the Loan Parties is or is required to be a member
of, or a party to, any employee benefit, pension or similar plan that
is subject to ERISA.
(b) Except as set forth Schedule 5.13(b), none of the Loan
Parties has any Plan and said schedule contains a true, complete and
correct list of 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.
(c) Except as set forth in Schedule 5.13(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.
(d) Except as set forth in Schedule 5.13(b), none of the Loan
Parties 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.
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(e) Except as set forth in Schedule 5.13(b), none of the Loan
Parties has any unfunded liability on wind-up or withdrawal liability,
including contingent withdrawal or wind-up liability, to any Plan or
any solvency deficiency in respect of any Plan.
(f) Except as set forth in Schedule 5.13(b), none of the Loan
Parties has any unfunded liability on wind-up or any liability in
respect of any Plan other than for required insurance premiums or
contributions or remittances which have been paid, contributed and
remitted when due and no Lien, except inchoate Liens for contribution
amounts accruing but not yet due, exists for or in respect of any Plan.
(g) Each of the Loan Parties has made all contributions to
its Plans required by law or the terms thereof to be made by it or them
when due and none of the Loan Parties is 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 it or 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.
(h) None of the Loan Parties (i) is liable or, to the best of
the knowledge of the Borrower, 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, and (ii)
has 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 it
has made full provision in its books and records.
(i) All vacation pay, bonuses, salaries and wages, to the
extent accruing due, are properly reflected in the Loan Parties books
and records.
(j) Without limiting the foregoing, all of the Plans of the
Loan Parties 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, and the Pension Benefits Act of Ontario, any successor
legislation thereto, and other applicable laws of any jurisdiction.
(k) There are no outstanding or pending or, to the best of
the knowledge of the Loan Parties, 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).
5.14 Investment Company Act; Other Regulations. The Borrower
is not an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
The Borrower is not subject to regulation under any Federal or State statute or
regulation (other than Regulation X of the Board of Governors of the Federal
Reserve System) which limits its ability to incur Indebtedness.
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5.15 Subsidiaries. Schedule 5.15 sets forth the name of each
direct or indirect Subsidiary of the Borrower and the Parent, its form of
organization, its jurisdiction of organization, the total number of issued and
outstanding shares or other interests of Capital Stock thereof, the classes and
number of issued and outstanding shares or other interests of Capital Stock of
each such class, the name of each holder of Capital Stock thereof and the number
of shares or other interests of such Capital Stock held by each such holder and
the percentage of all outstanding shares or other interests of such class of
Capital Stock held by such holders.
5.16 Security Documents.
(a) The provisions of each Security Document are effective to
create in favour of the Agent for the ratable benefit of the Lenders a
legal, valid and enforceable security interest in all right, title and
interest of the Loan Party thereto in the "Collateral" described
therein.
(b) (i) when financing statements, registrable copies of the
Security Documents, or when applications for registration in
the appropriate Land Register, in the case of hypothecs
affecting immoveable property, or in the Register of Personal
and Moveable Real Rights, in the case of hypothecs affecting
moveable property, have been filed in the offices in the
jurisdictions listed in Schedule 5.16, the Security Documents
shall each constitute a fully perfected or duly registered and
recorded, as the case may be, first Lien and hypothec on and
security interest in, all right, title and interest of the
Loan Party thereto in the Collateral described therein, which
can be perfected by such filing;
(ii) when certificates representing the Hypothecated
Securities are delivered to the Agent, together with stock
powers or powers of attorney endorsed in blank by a duly
authorized officer of the grantors of the security, and in the
case of any Subsidiaries of the Borrower that are organized
and existing under the laws of Australia, Canada or any
province thereof, certified extracts of resolutions of the
directors of the corporation issuing any such Hypothecated
Securities duly authorizing the hypothecation or mortgage
thereof and any transfer upon any realization upon the
security, the Hypothecation of Securities Agreements and the
Equitable Share Mortgages shall each constitute a fully
perfected first Lien on all right, title and interest of the
Loan Party thereto in the Collateral described therein.
5.17 Accuracy and Completeness of Information.
(a) All factual information, reports and other papers and
data with respect to the Loan Parties (other than projections)
furnished, and all factual statements and representations made, to the
Agent or the Lenders by a Loan Party, or on behalf of a Loan Party,
were, at the time the same were so furnished or made, when taken
together with all such other factual information, reports and other
papers and data previously so furnished and all such other factual
statements and representations previously so made, complete and correct
in all material respects, to the extent necessary to give the Agent and
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the Lenders true and accurate knowledge of the subject matter thereof
in all material respects, and did not, as of the date so furnished or
made, contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements contained
therein not misleading in light of the circumstances in which the same
were made.
(b) All projections with respect to the Loan Parties
furnished by or on behalf of a Loan Party to the Agent or the Lenders
were prepared and presented in good faith by or on behalf of such Loan
Party. No fact is known to a Loan Party which materially and adversely
affects or in the future is reasonably likely (so far as such Loan
Party can reasonably foresee) to have a Material Adverse Effect which
has not been set forth in the financial statements referred to in
Section 5.1 or in such information, reports, papers and data or
otherwise disclosed in writing to the Agent or the Lenders prior to the
Closing Date.
5.18 Labour Relations. No Loan Party is engaged in any unfair
labour practice which could reasonably be expected to have a Material Adverse
Effect. Except as disclosed in Section 5.18, there is (a) no unfair labour
practice compliant pending or, to the best knowledge of each Loan Party,
threatened against a Loan Party before any court of law including, without
limitation, any administrative boards which could reasonably be expected to have
a Material Adverse Effect and no grievance or arbitration proceeding arising out
of or under a collective bargaining agreement is so pending or threatened; (b)
no strike, labour dispute, slowdown or stoppage pending or, to the best
knowledge of each Loan Party, threatened against a Loan Party; (c) no union
representation question existing with respect to the employees of a Loan Party
and no union organizing activities are taking place with respect to any
thereof.]; (d) no outstanding claims of any kind or nature nor any outstanding
assessment against any Loan Party arising out of The Act Respecting Industrial
Accidents and Occupational Diseases (Workmen's Compensation); (e) no known
infractions by any Loan Party under The Act Respecting Occupational Health and
Safety; and (f) no outstanding civil, criminal and/or penal claims pending or
threatened against any Loan Party including, but not limited to, liability,
severance or unpaid wage claims.
5.19 Insurance. Each Loan Party has, with respect to its
properties and business, insurance covering the risks, in the amounts, with the
deductible or other retention amounts, and with the carriers, listed on Schedule
5.19, which insurance meets the requirements of Section 7.5 hereof and any
applicable provisions of the Hypothecs as of the date hereof and the Closing
Date.
5.20 Solvency. On the Closing Date, after giving effect to the
repayment of the Existing Indebtedness and to the incurrence of all indebtedness
and obligations being incurred on or prior to such date in connection herewith
and therewith, (i) the amount of the "present fair saleable value" of the assets
of the Loan Parties, taken as a whole, will, as of such date, exceed the amount
of all "liabilities of the Borrower and of Loan Parties, taken as a whole,
contingent or otherwise", as of such date, as such quoted terms are determined
in accordance with applicable federal, provincial and state laws governing
determinations of the insolvency of debtors, (ii) the present fair saleable
value of the assets of the Loan Parties, taken as a whole, will, as of such
date, be greater than the amount that will be required to pay the liabilities of
the Loan Parties, taken as a whole, on their respective debts as such debts
become absolute and matured, (iii)
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neither the Borrower nor the other Loan Parties, taken as a whole, will, as of
such date, have an unreasonably small amount of capital with which to conduct
their respective businesses, and (iv) each of the Loan Parties, as a whole, will
be able to pay their respective debts as they mature. For purposes of this
Section 5.20, "debt" means "liability on a claim", "claim" means any (x) right
to payment, whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured, and (y) right to an equitable remedy for
breach of performance if such breach gives rise to a right to payment, whether
or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured or unmatured, disputed, undisputed, secured or unsecured.
5.21 Purpose of Revolving Credit Loans. The proceeds of the
Revolving Credit Loans shall be used by the Borrower to repay the Existing
Indebtedness, to finance the working capital requirements of the Credit Parties
in the ordinary course of business and to pay fees and expenses incurred in
connection herewith.
5.22 Environmental Matters. Except as set forth on Schedule
5.22:
(a) The facilities and properties owned, leased or operated
by or under the care and control of the Loan Parties (the "Properties")
do not and will not contain, and have not previously contained, any
Materials of Environmental Concern in amounts or concentrations which
(i) constitute, will constitute or have constituted a violation of, or
(ii) could give rise to liability under, any Environmental Law except
in either case insofar as such violation or liability, or any
aggregation thereof, is not reasonably likely to result in the payment
of a Material Environmental Amount.
(b) The Properties and all operations at the Properties are,
and have at all times been, in compliance in all material respects with
all applicable Environmental Laws, and there is no contamination at,
under or about the Properties or violation of any Environmental Law
with respect to the Properties or the business operated by the Loan
Parties (the "Business") which could materially interfere with the
continued operation of the Properties or materially impair the fair
saleable value thereof and the Properties are in compliance with
industry standards and all generally accepted norms and guidelines
applicable thereto.
(c) There are proper measures and procedures in place at each
of the Properties in connection with the protection of the environment,
the day-to-day operations and the health and safety of the employees of
the Loan Parties and others involved in the operations of each Loan
Party's Business.
(d) No Loan Party has received any notice of violation,
alleged violation, non-compliance, liability or potential liability
regarding environmental matters or compliance with Environmental Laws
with regard to any of the Properties or the Business, nor does any Loan
Party have knowledge or reason to believe that any such notice will be
received or is being threatened except insofar as such notice or
threatened notice, or any aggregation thereof, does not involve a
matter or matters that is or are reasonably likely to result in the
payment of a Material Environmental Amount.
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(e) The Borrower is not aware of any pending or proposed
changes to any law or regulation including, without limitation, any
Environmental Law, in any jurisdiction in which it operates which would
render its current activities illegal or in non-compliance.
(f) Materials of Environmental Concern have not been nor will
be transported or disposed of from the Properties in violation of, or
in a manner or to a location which could give rise to liability under,
any Environmental Law, nor have any Materials of Environmental Concern
been, nor will any such Materials of Environmental Concern will be,
generated, treated, stored or disposed of at, on or under any of the
Properties nor sold, shipped or transferred from the Properties to a
third party in violation of, or in a manner that could give rise to
liability under, any applicable Environmental Law except insofar as any
such violation or liability referred to in this paragraph, or any
aggregation thereof, is not reasonably likely to result in the payment
of a Material Environmental Amount.
(g) No judicial proceeding or governmental or administrative
action is pending or, to the knowledge of the Loan Parties threatened,
under any Environmental Law to which any Loan Party is or will be named
as a party with respect to the Properties or the Business, nor are
there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law or
relating to environmental matters with respect to the Properties or the
Business.
(h) There has been no release or threat of release of
Materials of Environmental Concern at or from the Properties, or
arising from or related to the operations of the Loan Parties in
connection with the Properties or otherwise in connection with the
Business, in violation of or in amounts or in a manner that could give
rise to liability under Environmental Laws except insofar as any such
violation or liability referred to in this paragraph, or any
aggregation thereof, is not reasonably likely to result in the payment
of a Material Environmental Amount.
(i) Each Loan Party has obtained and shall continue to obtain
as and when required under all Environmental Laws, all permits,
licenses, depollution attestations and other authorizations or
declarations which are required for and material to the conduct of its
respective business and shall at all times be and remain in full
compliance with all terms and conditions of such permits, licenses,
depollution attestations, authorizations and declarations.
(j) Each of the representations and warranties set forth in
Sections 5.22(a) through (i) is true and correct with respect to each
of the facilities and properties owned, leased or operated by the
Non-Guarantor Subsidiaries, except to the extent that the facts and
circumstances giving rise to any such failure to be so true and correct
is not reasonably likely to result in the payment of a Material
Environmental Amount.
5.23 Regulation H. No Mortgage or leasehold mortgage encumbers
improved real property which is located in an area that has been identified by
the Secretary of Housing and Urban Development as an area having special flood
hazards and in which flood insurance has
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been made available under the National Flood Insurance Act of 1968, as amended.
5.24 Real Property.
(a) No part of the Real Property has been condemned, taken or
expropriated by any provincial, state, 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 which has not been done or performed.
(b) Except for Permitted Liens, there are no Liens,
easements, encroachments, rights-of-way, servitudes, work orders,
licenses, concession agreements, leases or tenancies affecting the Real
Property.
(c) There are no overdue amounts owing in respect of the Real
Property including any leasehold property (to the extent the Loan
Parties are 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.
(d) None of the Loan Parties retains any interest,
beneficially or otherwise, in any land abutting the Real Property
either by way of fee or equity of redemption in, or a power or right to
grant or exercise a power of appointment with respect to, any such land
abutting the Real Property.
(e) The buildings on the Real Property are located entirely
within the limits of such Real Property, as the case may be, and all
present uses in respect of the Real Property may lawfully be continued
and all permitted uses are satisfactory for the Loan Parties current
and intended purposes.
(f) There are no unsatisfied judgments against any Loan Party
and there are no writs of execution which would affect the Real
Property, including on any of their interests in any leasehold
property.
(g) Except as set forth on Schedule 5.24(g) and Schedule
5.11, all real property taxes, rates, assessments, levies, surtaxes,
and other impositions, including local improvement rates, have been
paid to date in respect of the Real Property.
(h) All accounts for work and service performed and materials
placed or furnished upon or in respect of the Real Property, 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 a hypothec or prior claim under Quebec law (or any similar
law or legislation of any other jurisdiction) against such Real
Property or any part thereof.
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(i) The Lender's security interests and Liens are not being
granted with the intention of securing the financing of any alteration,
addition, improvement or repair to, or any construction, erection,
demolition or installation on or in respect of the Real Property or any
structure thereon, nor is it being taken to repay any hypothec or
mortgage the proceeds of which were so used.
(j) No Inventory is located at any location not owned by and
in the name of any Loan Party except as indicated in Schedule 5.24(j).
(k) All arrears of rent in respect of leased property of any
Loan Party have been paid and satisfied and no default has occurred and
is being invoked under any lease to which a Loan Party is party.
5.25 MIL Davie Inc. ("MIL Davie")
(a) Pursuant to a Resolution of the Directors of MIL Davie
duly passed on May 27, 1996, it was resolved that MIL Davie file an
application with the Inspecteur general des institutions financieres to
surrender its charter.
(b) Pursuant to a Convention de distribution ("Distribution
Agreement") dated May 28, 1996 between MIL Davie and Le Groupe MIL Inc.
(now known as Davie), MIL Davie transferred to Davie all of its assets,
moveable and immoveable, corporeal and incorporeal with the exception
of those contracts specifically excluded in the Distribution Agreement
("Excluded Contracts").
(c) MIL Davie has transferred to Davie the benefit of the
Excluded Contracts.
(d) MIL Davie does not own and will not acquire any assets
and does not and will not carry on any business operations.
5.26 Workers' Compensation. None of the Loan Parties 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 relating to worker's
compensation outstanding, pending or, to their knowledge, threatened relating to
them or any of their employees or former employees.
5.27 Bonding Company. None of the Loan Parties has entered
into any arrangements with any Person, other than American Home Assurance
Company, Compagnie d'Assurance Wellington and London Guarantee Insurance
Company, to obtain any performance, bid, material and labour or warranty bonds
or like instruments except such arrangements as have been terminated and there
are no agreements, indemnities, undertakings or security in favour of any such
Person, other than American Home Assurance Company, which have not been released
and terminated.
5.28 Parent's Business Operations. The Parent is a holding
company only and does not conduct or otherwise engage in any active business
operations. The parent will not acquire any business assets or establish an
office or other facility in any jurisdiction other than
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those jurisdictions in which it is located on the date of this Agreement,
without obtaining the prior written consent of the Agent.
SECTION 6. CONDITIONS PRECEDENT
6.1 Conditions to Initial Revolving Credit Loans. The
agreement of each Lender to make the initial Revolving Credit Loan requested to
be made by it is subject to the satisfaction, immediately prior to or
concurrently with the making of such Revolving Credit Loan, of the following
conditions precedent:
(a) Loan Documents. The Agent shall have received:
(i) this Agreement, executed and delivered by a duly
authorized officer of each of the Loan Parties, with a
counterpart for each Lender,
(ii) the Letter of Credit Agreement, executed and delivered
by a duly authorized officer of the Borrower, with a
counterpart for each Lender,
(iii) each of the Guarantees, each executed and delivered by a
duly authorized officer of the party thereto, with a
counterpart or a conformed copy for each Lender,
(iv) each of the Security Documents, each executed and
delivered by a duly authorized officer of the party thereto,
with a counterpart or a conformed copy for each Lender.
(b) Concurrent Transactions. All amounts owing to the BTCC
under the BTCC Credit Documents shall have been, or shall be
concurrently with the making of the initial Revolving Credit Loans,
repaid in full, and any Liens created pursuant to the BTCC Credit
Documents shall have been or shall be, concurrently with the making of
the initial Revolving Credit Loans, released, and the BTCC Credit
Documents shall terminate and be of no further force and effect upon
such repayment; in each case pursuant to such payout letters, Lien
releases, main-levees or discharges, termination statements, mortgage
satisfactions and other documents as the Agent may require, each of
which shall be in form and substance satisfactory to the Agent.
(c) Borrowing Certificate. The Agent shall have received,
with a counterpart for each Lender, a certificate of the Borrower,
dated the Closing Date, substantially in the form of Exhibit A, with
appropriate insertions and attachments, satisfactory in form and
substance to the Agent, executed by the President or any Vice President
and the Secretary or any Assistant Secretary of the Borrower.
(d) Borrowing Base Certificate. The Agent shall have
received, with a counterpart for each Lender, a Borrowing Base
Certificate showing the Borrowing Base as of September 25, 1997, with
appropriate insertions and dated the Closing Date, satisfactory in form
and substance to the Agent, executed by the President or any Vice
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President of the Borrower.
(e) Corporate Proceedings of the Borrower. The Agent shall
have received, with a counterpart for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Agent, of the
Board of Directors of the Borrower authorizing (i) the execution,
delivery and performance of this Agreement and the other Loan Documents
to which it is a party, (ii) the borrowings contemplated hereunder and
(iii) the granting by it of the Liens created pursuant to the Borrower
Security Documents, and (iv) the hypothecation in favour of the Agent
of the Hypothecated Securities issued by the Borrower and any transfer
of such Hypothecated Securities upon any realization upon the Parent
Hypothecation of Securities Agreement, certified by the Secretary or an
Assistant Secretary of the Borrower as of the Closing Date, which
certificate shall be in form and substance satisfactory to the Agent
and shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded.
(f) Borrower Incumbency Certificate. The Agent shall have
received, with a counterpart for each Lender, a certificate of the
Borrower, dated the Closing Date, as to the incumbency and signature of
the officers of the Borrower executing any Loan Document satisfactory
in form and substance to the Agent, executed by the President or any
Vice President and the Secretary or any Assistant Secretary of the
Borrower.
(g) Corporate Proceedings of the Parent. The Agent shall have
received, with a counterpart for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Agent, of the
Board of Directors of the Parent authorizing (i) the execution,
delivery and performance of the Loan Documents to which the Parent is a
party and (ii) the granting by it of the Liens created pursuant to the
Parent Security Documents, certified by the Secretary or an Assistant
Secretary of the Parent as of the Closing Date, which certificate shall
be in form and substance satisfactory to the Agent and shall state that
the resolutions thereby certified have not been amended, modified,
revoked or rescinded.
(h) Parent Incumbency Certificate. The Agent shall have
received, with a counterpart for each Lender, a certificate of the
Parent, dated the Closing Date, as to the incumbency and signature of
the officers of the Parent executing any Loan Document satisfactory in
form and substance to the Agent, executed by the President or any Vice
President and the Secretary or any Assistant Secretary of the Parent.
(i) Corporate Proceedings of Subsidiary Guarantors. The Agent
shall have received, with a counterpart for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Agent, of the
Board of Directors of each Subsidiary Guarantor which is a party to a
Loan Document authorizing (i) the execution, delivery and performance
of the Loan Documents to which it is a party, (ii) the granting by it
of the Liens created pursuant to the Subsidiary Security Documents to
which it is a party, and (iii) in the case of any Subsidiary Guarantor
which is an issuer of any Hypothecated Securities, the hypothecation or
the creation of a mortgage in favour of the Agent in respect of the
Hypothecated Securities issued by the Subsidiary Guarantor and any
transfer of such Hypothecated Securities upon any realization upon the
security, certified
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by the Secretary or an Assistant Secretary of each such Subsidiary
Guarantor as of the Closing Date, which certificate shall be in form
and substance satisfactory to the Agent and shall state that the
resolutions thereby certified have not been amended, modified, revoked
or rescinded.
(j) Subsidiary Incumbency Certificates. The Agent shall have
received, with a counterpart for each Lender, a certificate of each
Subsidiary Guarantor, dated the Closing Date, as to the incumbency and
signature of the officers of each such Subsidiary Guarantor
satisfactory in form and substance to the Agent, executed by the
President or any Vice President and the Secretary or any Assistant
Secretary of each such Subsidiary Guarantor.
(k) Corporate Documents. The Agent shall have received, with
a counterpart for each Lender, true and complete copies of the
certificate and articles of incorporation and by-laws of each Loan
Party, certified as of the Closing Date as complete and correct copies
thereof by the Secretary or an Assistant Secretary of the such Loan
Party.
(l) Good Standing Certificates. The Agent shall have
received, with a copy for each Lender, certificates dated as of a
recent date from the Secretary of State or other appropriate authority
(federal, provincial or other), evidencing the good standing of each
Loan Party (i) in the jurisdiction of its organization and (ii) in each
other jurisdiction where its ownership, lease or operation of property
or the conduct of its business requires it to qualify as a foreign
Person except, as to this subclause (ii), where the failure to so
qualify would not have a Material Adverse Effect.
(m) Consents, Licenses and Approvals. The Agent shall have
received, with a counterpart for each Lender, a certificate of a
Responsible Officer of each of the Loan Parties (i) attaching copies of
any consents, authorizations and filings referred to in Section 5.4,
and which are required in connection with any Loan Document and (ii)
stating that such consents, licenses and filings are in full force and
effect, and each such consent, authorization and filing shall be in
form and substance satisfactory to the Agent.
(n) Fees. The Agent shall have received the fees, if any, to
be received on the Closing Date referred to in Section 4.9.
(o) Legal Opinions. The Agent shall have received, with a
counterpart for each Lender, the following executed legal opinions all
acceptable to the Agent:
*[(i) the executed legal opinion of Pouliot Mercure, counsel
to the Borrower, Davie, DBI, Steen, Becker, Becker NFLD and
MIL;
(ii) the executed legal opinion of Buchanan Ingersoll
Professional Corporation, counsel to the Parent;
(iii) the executed legal opinions of Douglas Symes &
Brissenden; Mackimmie Matthews; McDougall, Ready; Pitblado &
Hoskins; Cassels Brock & Blackwell; Chase Sheehan; Curtis,
Dawe; Farmer & MacLeod; and Boyne Clarke, local
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counsel to the Loan Parties, in British Columbia, Alberta,
Saskatchewan, Manitoba, Ontario, New Brunswick, Newfoundland,
Prince-Edward Island and Nova Scotia, respectively;
(iv) the executed legal opinion of Freehill Hollingdale &
Page, counsel to CGA; and
(v) the executed title opinions referred to in
paragraph (s) of this Section 6.1.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Agent may reasonably
require.
(p) Hypothecated Securities and Stock Powers; . The Agent
shall have received:
(i) the certificates representing the Hypothecated
Securities, together with an undated stock power or power of
attorney for each such certificate executed in blank by a duly
authorized officer of the grantor of the applicable security;
and
*[(ii) [RESERVED.]
*[(iii) [RESERVED.]
(ii) an acknowledgment of and consent to the Equitable
Share Mortgages (if required by the Agent's legal counsel) and
Hypothecation of Securities Agreements, executed by a duly
authorized officer of the issuer of the Hypothecated
Securities, in substantially the form (if any) appended to the
Equitable Share Mortgages and the form appended to the
Hypothecation of Securities Agreements.
(q) Actions to Perfect Liens. The Agent shall have
received evidence in form and substance satisfactory to it that all
filings, recordings, registrations and other actions, including,
without limitation, the filing of duly executed financing statements or
applications for registration necessary or desirable, in the opinion of
the Agent, to perfect, record and render effective against all Persons,
the Liens created by the Security Documents shall have been completed.
(r) Surveys. The Agent shall have received, maps, plats or
certificates of location of an as-built survey of the sites of the
property covered by each Mortgage certified to the Agent in a manner
satisfactory to it, dated a date satisfactory to the Agent by an
independent professional licensed land surveyor satisfactory to the
Agent and, without limiting the generality of the foregoing, there
shall be surveyed and shown on such maps, plats, certificates of
location or surveys the following: (i) the locations on such sites of
all the buildings, structures and other improvements and the
established building setback lines; (ii) the lines of streets abutting
the sites and width thereof; (iii) all access and other easements or
servitudes appurtenant to the sites or necessary or desirable to use
the sites; (iv) all roadways, paths, driveways, easements, servitudes,
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encroachments and overhanging projections and similar encumbrances
affecting the site, whether recorded, apparent from a physical
inspection of the sites or otherwise known to the surveyor; (v) any
encroachments on any adjoining property by the building structures and
improvements on the sites; and (vi) if the site is described as being
on a filed map, a legend relating the survey to said map.
(s) Title Opinions. The Agent shall have received in respect
of each Real Property covered by a Mortgage the favourable legal
opinion of qualified legal counsel (or a notary in the Province of
Quebec) as to the effectiveness and priority as a first-ranking, valid
and effective mortgage or hypothec, as the case may be, of each
Mortgage and otherwise in form and substance satisfactory to the Agent.
(t) Flood Insurance. If requested by the Agent, the Agent
shall have received (i) a policy of flood insurance which (A) covers
any parcel of improved Real Property which is encumbered by any
Mortgage (B) is written in an amount not less than the outstanding
principal amount of the indebtedness secured by such Mortgage which is
reasonably allocable to such real property or the maximum limit of
coverage made available with respect to the particular type of property
under the National Flood Insurance Act of 1968, as amended, whichever
is less, and (C) has a term ending not later than the maturity of the
indebtedness secured by such Mortgage and (ii) confirmation that the
Loan Party in question has received the notice required pursuant to
Section 208(e)(3) of Regulation H of the Board of Governors of the
Federal Reserve System.
(u) Copies of Documents. The Agent shall have received a copy
of all recorded documents referred to, or listed as exceptions to title
in, the title opinions referred to in Section 6.1[(s)] and a copy,
certified by such parties as the Agent may deem appropriate, of all
other documents affecting the property covered by each Mortgage.
(v) Lien Searches and Discharges. The Agent shall have
received the results of a recent search by a Person satisfactory to the
Agent, of the Uniform Commercial Code, the Personal Property Security
Act of all applicable jurisdictions, the Register of Personal and
Moveable Real Rights and such other registration systems as the Agent
or its counsel may require, judgment and tax lien filings which may
have been filed with respect to personal and movable property of the
Loan Parties, and the results of such searches shall be satisfactory to
the Agent in its sole judgment. The Agent shall have received
registrable discharges or termination statements in respect of all
recorded Liens (other than Permitted Liens) and/or such estoppel
letters, subordinations, inter-creditor agreements and waivers as the
Agent may require (to confirm amounts secured or collateral affected
thereby), in all cases satisfactory to the Agent in its sole judgment.
(w) Audit. The Agent shall have received copies of an audit,
in form and substance and prepared by a Person satisfactory to the
Agent, of the accounts receivable and inventory of the Loan Parties.
(x) Insurance. The Agent shall have received evidence in form
and substance satisfactory to it that all of the requirements of
Section 7.5 hereof as well as all other insurance requirements
contained in the Security Documents shall have been fulfilled to
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the entire satisfaction of the Agent.
(y) Appraisals. The Agent shall have received from one or
more Appraisers, in form and substance acceptable to the Agent, such
appraisals as it may require with respect to Real Estate, Equipment and
Inventory.
(z) Lockbox Agreements. The Loan Parties, each financial
institution at which the Loan Parties maintain any accounts and the
Agent shall have entered into lockbox and blocked account agreements in
form and substance satisfactory to the Agent, in its sole discretion.
Unless otherwise agreed in writing by the Agent, all Accounts shall be
invoiced and payable to lockboxes established pursuant to such lockbox
agreements and applied to the Revolving Credit Loans in accordance with
Section 4.8. In the event that the Agent agrees that any Accounts are
not required to be payable to lockboxes, the Loan Parties shall collect
such Accounts and receive such collections in trust for the Agent and
the Lenders and shall forthwith pay all such collections into accounts
subject to the blocked account agreements as aforesaid.
(aa) Tri-partite Agreement. The Agent shall have received a
duly executed copy of the Tri-partite Agreement.
(bb) Indemnity Agreement. The Agent shall have received an
Indemnity executed by Michel Marengere in favour of the Agent and the Lenders,
pertaining to any loss, damage or other liability that the Agent and/or the
Lenders may suffer with respect to any breach or violation of the Tri-partite
Agreement, in form and substance satisfactory to the Agent.
6.2 Conditions to Each Revolving Credit Loan. The agreement
of each Lender to make any Revolving Credit Loan requested to be made by it on
any date (including, without limitation, its initial Revolving Credit Loan) is
subject to the satisfaction of the following conditions precedent:
(a) Compliance. The Loan Parties will have satisfied all of
the conditions precedent set forth in Section 6.1 and will be in
compliance with all other terms and conditions of this Agreement.
(b) Representations and Warranties. Each of the
representations and warranties made by the Loan Parties in or pursuant
to the Loan Documents shall be true and correct in all material
respects on and as of such date as if made on and as of such date.
(c) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the
Revolving Credit Loans requested to be made on such date.
(d) Borrowing Base. In the case of any Revolving Credit Loans
requested to be made, the Agent shall have timely received a Borrowing
Base Certificate for the most recent period for which such Borrowing
Base Certificate is required to be delivered, in accordance with
Section 7.2(c).
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(e) Additional Matters. All corporate and other proceedings,
and all documents, instruments and other legal matters in connection
with the transactions contemplated by this Agreement, and the other
Loan Documents shall be satisfactory in form and substance to the
Agent, and the Agent shall have received such other documents and legal
opinions in respect of any aspect or consequence of the transactions
contemplated hereby or thereby as it shall reasonably request.
Each borrowing by the Borrower hereunder shall constitute a representation and
warranty by the Borrower as of the date thereof that the conditions contained in
this Section 6.2 have been satisfied. In the event that the Agent waives any
condition precedent set forth in Section 6.1 or 6.2 with respect to the making
of any Revolving Credit Loan, this will not preclude the Agent from insisting on
satisfaction of such condition precedent in connection with the making of any
other Revolving Credit Loan.
SECTION 7. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as any of the
Revolving Credit Commitments remain in effect or any amount is owing to any
Lender or the Agent hereunder or under any other Loan Document, the Borrower and
(except in the case of financial information and reports) each of the other Loan
Parties shall:
7.1 Financial Statements. Furnish to each Lender:
(a) as soon as available, but in any event within 90 days
after the end of each fiscal year of the Borrower, a copy of the
consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such year and the related consolidated
statements of income and retained earnings and of cash flows for such
year, setting forth in each case in comparative form the figures for
the previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope
of the audit, by Deloitte & Touche or other independent certified
public accountants of nationally recognized standing; and
(b) as soon as available, but in any event not later than 45
days after the end of each of the first three quarterly periods of each
fiscal year of the Borrower, the unaudited consolidated balance sheet
of the Borrower and its consolidated Subsidiaries as at the end of such
quarter and the related unaudited consolidated statements of income and
retained earnings and of cash flows of the Borrower and its
consolidated Subsidiaries for such quarter and the portion of the
fiscal year through the end of such quarter, setting forth in each case
in comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments);
(c) as soon as available, but in any event not later than 30
days after the end of each calendar month, the unaudited consolidated
[and consolidating] balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such month and the related
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unaudited consolidated and consolidating statements of income and
retained earnings and of cash flows of the Borrower and its
consolidated Subsidiaries for such month and the portion of the fiscal
year through the end of such month, setting forth in each case in
comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments);
all such financial statements shall be complete and correct in
all material respects and shall be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected
therein and with prior periods (except as approved by such accountants or
officer, as the case may be, and disclosed therein).
7.2 Certificates; Other Information. Furnish to each Lender:
(a) Concurrently with the delivery of the financial statements
referred to in Section 7.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default, except as specified in
such certificate.
(b) Concurrently with the delivery of the financial statements
referred to in Sections 7.1(a), (b) and (c), a certificate of a
Responsible Officer (i) stating that, to the best of such Officer's
knowledge, each Loan Party during such period has observed or performed
all of its covenants and other agreements, and satisfied every
condition, contained in this Agreement and the other Loan Documents to
be observed, performed or satisfied by it, and that such Officer has
obtained no knowledge of any Default or Event of Default except as
specified in such certificate and (ii) showing in detail the
calculations supporting such Officer's certification of the Borrower's
compliance with the requirements of Section 8.1(a) through 8.1(c).
(c) Within 15 days following the end of each calendar month, a
Borrowing Base Certificate showing the Borrowing Base as of the last
day of such month, certified as complete and correct by a Responsible
Officer.
(d) Not later than 30 days prior to the end of each fiscal
year of the Borrower commencing with the fiscal year terminating
September 30, 1998, a copy of the projections by the Borrower (or if
requested by the Agent compiled and reviewed by Deloitte & Touche or
other independent certified public accountants of nationally recognized
standing) of the operating budget and cash flow budget of the Borrower
and its Subsidiaries for the succeeding fiscal year, such projections
to be accompanied by a certificate of a Responsible Officer to the
effect that such projections have been prepared on the basis of sound
financial planning practice and that such Officer has no reason to
believe they are incorrect or misleading in any material respect.
(e) Within 5 days after the same are sent, copies of all
financial statements and reports which the Parent sends to its
stockholders, and within 5 days after the same are filed, copies of all
financial statements and reports which the Borrower or the Parent may
make to, or file with, the Securities and Exchange Commission or any
successor or
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analogous Governmental Authority.
(f) During the month of September in each calendar year, a
report of a reputable insurance broker with respect to the insurance
maintained by each of the Loan Parties in accordance with Section 7.5
of this Agreement and all other insurance requirements contained in the
Security Documents, and such supplemental reports as the Agent may from
time to time request.
(g) Forthwith upon request, such additional financial and
other information as any Lender may from time to time reasonably
request.
(h) Forthwith, upon Michel Merangere ceasing to hold the
office of Chairman of the Board and/or Chief Executive Officer of the
Parent, notification thereof.
7.3 Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all its obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of the Borrower or its Subsidiaries, as the case may be.
7.4 Conduct of Business and Maintenance of Existence. Continue
to engage in business of the same general type as now conducted by it and
preserve, renew and keep in full force and effect its corporate existence and
take all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business except as otherwise
permitted pursuant to Section 8.5; comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith could
not, in the aggregate, be reasonably expected to have a Material Adverse Effect.
7.5 Maintenance of Property and Insurance. Keep all property
useful and necessary in its business in good working order and condition;
maintain, with financially sound and reputable companies, insurance policies (i)
insuring such property against loss by fire, flood, explosion, theft and such
other casualties as may be reasonably satisfactory to the Agent in amounts
comparable to amounts of insurance coverage obtained by similar businesses of
similar size acting prudently and (ii) insuring the Borrower, the Agent and each
Lender against liability for personal injury and property damage relating to
such property, such policies to be in such form and amounts and having such
coverage as shall be comparable to forms, amounts and coverage, respectively,
obtained by similar businesses of similar size acting prudently, with losses
payable directly to the Agent, or in the case of liability insurance, showing
the Agent and each Lender as an additional insured party. All such insurance
shall (x) provide that no cancellation, material reduction in amount or material
change in coverage thereof shall be effective until at least 30 days after
receipt by the Agent of written notice thereof, (y) name the Agent for itself
and the Lenders as an insured party and loss payee and (z) be reasonably
satisfactory in all other respects to the Agent.
7.6 Inspection of Property; Books and Records; Discussions.
Keep proper books of records and account in which full, true and correct entries
in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its
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business and activities; and permit representatives of any Lender to visit and
inspect any of its properties and examine and make abstracts from any of its
books and records at any reasonable time and as often as may reasonably be
desired and to discuss the business, operations, properties and financial and
other condition of the Loan Parties with officers and employees of the Loan
Parties and with its independent certified public accountants.
7.7 Notices. Promptly give notice to the Agent and each
Lender:
(a) of the occurrence of any Default or Event of Default;
(b) of any (i) default or event of default under any
Contractual Obligation of any of the Loan Parties or (ii) litigation,
investigation or proceeding which may exist at any time between any of
the Loan Parties and any Governmental Authority, which in either case,
if not cured or if adversely determined, as the case may be, could have
a Material Adverse Effect;
(c) of any litigation or proceeding affecting any of the Loan
Parties in which the amount involved is $1,000,000.00 or more and not
covered by insurance or in which injunctive or similar relief is
sought;
(d) of any litigation or proceeding (including injunctive
proceeding) affecting the Non-Guarantor Subsidiaries and not covered by
insurance which could have a Material Adverse Effect;
(e) of the acquisition by any Loan Party of any property or
interest in property (including, without limitation, real or immoveable
property), that is not subject to a perfected Lien in favour of the
Agent pursuant to the Security Documents;
(f) of the occurrence of any transaction or occurrence
referred to in Section 4.5(c), and the receipt of any Net Proceeds or
any insurance proceeds as a result thereof (whether or not such Net
Proceeds or proceeds are then required to be applied to the repayment
of Revolving Credit Loans as specified in Section 4.5(c));
(g) of the occurrence of any Termination Event with respect to
a Plan, accompanied by any materials required to be filed with any
Public Authority with respect thereto; any notice received by a Loan
Party 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 a Loan Party to
any Plan to which such Loan Party was not contributing at the Closing
Date; or any other event or condition regarding a Plan or a Loan
Party's or a Related Company's compliance with all applicable laws
relating to the establishment or administration of any Plan which has
or may result in any Lien on any of its Property or which may otherwise
materially and adversely affect an Loan Party's Property, business,
operations, or condition or prospects (financial or otherwise); and
(h) if any of its Accounts arise out of contracts between a
Loan Party and the United States, Canada, any state or province, or any
department, agency or
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instrumentality of any of them;
(i) any development or event which will have a Material
Adverse Effect; and
(j) the occurrence of any breach of any Environmental Laws or
any alleged breach in respect of which a written communication has been
received or a judicial proceeding or governmental or administrative
action has been commenced.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower and the other Loan Parties and
Non-Guarantor Subsidiaries which are affected propose to take with respect
thereto and by any documents relating thereto including, without limitation,
copies of all orders, notices, proceedings, permits, applications, complaints
and other communications and reports.
7.8 Environmental Laws.
(a) Comply with, and ensure compliance by all tenants,
subtenants and other occupants, if any, with, all applicable
Environmental Laws and obtain and comply with and maintain, and ensure
that all tenants, subtenants and other occupants obtain and comply with
and maintain, any and all licenses, approvals, notifications,
registrations or permits required by applicable Environmental Laws.
Without limiting the generality of the foregoing, each Loan Party shall
continue to obtain as and when required under all Environmental Laws,
all permits, licenses, depollution attestations and other
authorizations or declarations which are required for and material to
the conduct of its respective business and shall at all times be and
remain in full compliance with all terms and conditions of such
permits, licenses depollution attestations, authorizations and
declarations.
(b) Conduct and complete all investigations, studies, sampling
and testing, and all remedial, removal and other actions required under
Environmental Laws or reasonably required by the Agent and promptly
comply with all lawful orders and directives of all Governmental
Authorities regarding Environmental Laws, except to the extent that the
same are being contested in good faith by appropriate proceedings and
the pendency of such proceedings could not be reasonably expected to
have a Material Adverse Effect.
7.9 Changes to Revolving Credit Advance Rates, Standards of
Eligibility and Reserves. The Agent shall, in its sole and absolute discretion,
be entitled to reduce the advance rates set forth in the definition of the term
"Borrowing Base", increase the standards of eligibility applicable to Accounts,
Inventory, Equipment and Real Property, and establish or increase any reserves
(without duplication of exclusions to the Borrowing Base) under this Agreement
without prior notice to the Borrower. Without in any way limiting the foregoing,
the Agent may apply such reserves as it may consider necessary or proper in its
sole and absolute discretion, including, among other things, reserves for (a)
Inventory not readily saleable, not liquid, not adequately supported by listings
provided to the Agent, returned, not at specific locations and easily verifiable
by counts, not subject to adequate reporting controls, (b) the rights of unpaid
suppliers, and; (c) the rights of landlords, processors, warehousemen and
bailees to the extent
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that the Agent has not received waivers and access agreements satisfactory to it
in its sole discretion, and (d) all amounts secured by any Liens, choate or
inchoate, which rank or are capable of ranking in priority to the Agent's Lien,
including without limitation 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 or the Taxation Act (Quebec),
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
(Ontario) or any similar legislation and (e) Real Property, to the extent that
the Agent is not, in its sole and absolute discretion, entirely satisfied with
(i) all environmental matters relating to the Real Property including, without
limitation, compliance with Environmental Laws, the truth and accuracy of all
representations and warranties set forth in Section 5.22 hereof and the ability
of the Agent to receive the benefit of the indemnity provided by La Societe
Generale de Financement upon the acquisition of the Property located at 22
George D. Davie, Levis, Quebec, G6V 8V5; and (ii) all matters relating to title
to the Real Property.
7.10 Periodic Audit of Accounts Receivable and Inventory. The
Agent shall be entitled to perform a periodic due diligence inspection, test and
review of the accounts receivable and inventory of the Loan Parties on a
mutually convenient Business Day twice during each calendar year and shall in
each case be satisfied in all material respects with the results thereof;
provided however, if the Agent in its reasonable judgment is not satisfied that
the results of any due diligence inspection, test, and review performed pursuant
to this Section 7.10 establish that the Borrower's most recent determination of
the Borrowing Base was made in compliance with the applicable provisions of this
Agreement, the Agent shall be entitled to perform additional due diligence
inspections, tests and reviews of such inventory and accounts receivable on
mutually convenient Business Days during the succeeding twelve-month period
until the Agent shall be so satisfied; and provided further, that upon the
occurrence and during the continuation of an Event of Default, the Agent shall
be entitled to perform such additional due diligence inspections, tests and
review of such accounts receivable as any Lender shall deem necessary or
advisable. The Borrower shall pay or reimburse the Agent all its costs, fees and
expenses relating to any due diligence examinations, investigations or audits by
the Agent (including, but not limited to, a per diem charge for the Agent's
internal audit staff at its then standard rate and amounts charged to the Agent
by other parties retained by it).
7.11 (a) Additional Collateral. (i) In the event that any Loan
Party acquires any property or interest in property (including, without
limitation, real or immoveable property) other than property ("Excluded
Property") in respect of which it is entitled to grant a Permitted Lien ranking
in priority to the Lien of the Agent, that is not subject to a perfected Lien in
favour of the Agent pursuant to the Security Documents, such Loan Party shall
take such action (including, without limitation, the preparation and filing of
mortgages, hypothecs or deeds of trust in form and substance satisfactory to the
Agent) as the Agent shall request in order to create and/or perfect a first
ranking Lien in favour of the Agent on such property; (ii) In the event that any
Loan Party acquires any Excluded Property that is not subject to a perfected
Lien in favour of the Agent pursuant to the Security Documents, the Loan Party
shall take such of the action described in subclause (i) above as the Agent
shall request in order to create and/or perfect a second ranking Lien in favour
of the Agent on such property.
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(b) Additional Guarantors. In the event that a Loan Party is
permitted to acquire or form any additional Subsidiary, such Subsidiary
shall execute a guarantee, a debenture and pledge of debenture, an
immoveable and moveable hypothec, a mortgage in respect of each parcel
of real property owned by it, a security agreement, and the Loan Party
and/or any Subsidiary which is a holder of any Capital Stock of such
Subsidiary shall execute such pledge agreements, hypothecs or
supplements to the Subsidiary Pledge Agreements or Hypothecation of
Securities Agreements and such other security as may be required by the
Agent, each in form and substance satisfactory to the Agent, and shall
take such other action as shall be necessary or advisable (including,
without limitation, the execution of financing statements on form
UCC-1) in order to perfect the Liens granted by such Subsidiary in
favour of the Agent for the benefit of the Lenders and to effect and
perfect the pledge of all of the Capital Stock of such Subsidiary in
favour of the Agent for the benefit of the Lenders. Such Subsidiary
shall thereupon become a Subsidiary Guarantor for all purposes under
the Loan Documents, including, without limitation, Section 7.11(a) of
this Agreement. The Agent shall be entitled to receive legal opinions
of one or more counsel to the Loan Parties and such Subsidiary
addressing such matters as the Agent or its counsel may reasonably
request, including, without limitation, the enforceability of the
guaranty and other security documents to which such Subsidiary becomes
a party and the pledge of the Capital Stock of such Subsidiary, and the
creation, validity and perfection of the Liens so granted by such
Subsidiary and the Loan Parties and/or other Subsidiaries to the Agent
for the benefit of the Lenders.
7.12 Administration of Plans. The Parent shall and shall cause
each of its, and its Subsidiaries' Plans to be duly qualified and administered
in all material respects in compliance with all applicable laws (including
regulations, orders and directives) and the terms of the Plans and any
agreements relating thereto. Each Loan Party shall ensure that:
(a) It, and its Subsidiaries 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 in
connection with each such Plan are paid when due; and
(c) No liability upon it or Lien on any of its property arises
or exists in respect of any Plan.
SECTION 8. NEGATIVE COVENANTS
The Loan Parties hereby agree that, so long as any of the
Revolving Credit Commitments remain in effect or any amount is owing to any
Lender or the Agent hereunder or under any other Loan Document, neither the
Borrower nor the other Loan Parties, as hereinafter specified, shall, directly
or indirectly:
8.1 Financial Condition Covenants.
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(a) Maintenance of Net Worth. Permit Consolidated Net Worth of
the Parent at any date set forth below to be less than the amount set
forth opposite such date below:
<TABLE>
<CAPTION>
At Amount
-- ------
<S> <C>
September 30, 1997 $52,000,000
December 31, 1997 $52,000,000
March 31, 1998 $53,500,000
June 30, 1998 $55,000,000
September 30, 1998 $57,000,000
December 31, 1998 $59,000,000
March 31, 1999 $61,000,000
June 30, 1999 $63,500,000
September 30, 1999 $66,000,000
December 31, 1999 $68,500,000
March 31, 2000 $71,500,000
June 30, 2000 $74,500,000
September 30, 2000 $77,500,000
and thereafter
</TABLE>
(b) Maintenance of Working Capital. Permit Consolidated
Working Capital of the Parent at any time to be less than
$25,000,000.00.
(c) Total Liabilities to EBITDA. Permit the ratio of
Consolidated Total Liabilities of the Parent to Consolidated EBITDA at
any time during any period set forth below to be greater than the
amount set forth opposite such period below.
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
October 1, 1997
to December 31, 1997 50 to 1
October 1, 1997
to March 31, 1998 30 to 1
</TABLE>
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<TABLE>
<S> <C>
October 1, 1997
to June 30, 1998 15 to 1
October 1, 1997
to September 30, 1998 10 to 1
December 31, 1997 to
to December 31, 1998 8 to 1
March 31, 1998 to
March 31, 1999 7 to 1
June 30, 1998 to
June 30, 1999 6 to 1
September 30, 1998 to
September 30, 1999 and
thereafter on a trailing 4
quarter basis measured at the
end of each fiscal quarter 5 to 1
</TABLE>
8.2 Limitation on Indebtedness. Create, incur, assume or
suffer to exist any Indebtedness, except:
(a) Indebtedness of the Borrower under this Agreement.
(b) Indebtedness of the Borrower to any Subsidiary Guarantor
and of any Subsidiary Guarantor to the Borrower or any other Subsidiary
Guarantor.
(c) Indebtedness of the Credit Parties incurred to finance the
acquisition of fixed or capital assets (whether pursuant to a loan, a
Financing Lease or otherwise) in an aggregate principal amount not
exceeding $2,000,000.00 at any time outstanding.
(d) Indebtedness outstanding on the date hereof and listed on
Schedule 8.2(d).
(e) Additional Indebtedness not exceeding $1,000,000.00 in
aggregate principal amount at any one time outstanding.
8.3 Limitation on Liens. Create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired, except for (referred to herein as "Permitted Liens"):
(a) Liens for taxes not yet due or which are being contested
in good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the books of the Loan
Party, in conformity with GAAP.
(b) Carriers', warehousemen's, mechanics', materialmen's,
repairmen's or
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other like Liens arising in the ordinary course of business which are
not overdue for a period of more than 60 days or which are being
contested in good faith by appropriate proceedings.
(c) Pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation.
(d) Deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business.
(e) Easements, rights-of-way, servitudes, restrictions and
other similar encumbrances incurred in the ordinary course of business
which, in the aggregate, are not substantial in amount and which do not
in any case materially detract from the value of the property subject
thereto or materially interfere with the ordinary conduct of the
business of the Loan Party.
(f) Liens in existence on the date hereof listed on Schedule
8.3(f), securing Indebtedness permitted by Section 8.2(d), provided
that (i) no such Lien is spread to cover any additional property after
the date hereof and that the amount of Indebtedness secured thereby is
not increased; and (ii) the Agent shall have received such
inter-creditor and/or subordination agreements in respect of such Liens
as the Agent may, in its sole judgment, require.
(g) Liens securing Indebtedness of the Credit Parties
permitted by Section 8.2(c) incurred to finance the acquisition of
fixed or capital assets, provided that (i) such Liens shall be created
substantially simultaneously with the acquisition of such fixed or
capital assets, (ii) such Liens do not at any time encumber any
property other than the property financed by such Indebtedness, (iii)
the amount of Indebtedness secured thereby is not increased and (iv)
the principal amount of Indebtedness secured by any such Lien shall at
no time exceed 95% of the original purchase price of such property of
such property at the time it was acquired.
(h) Inchoate Liens for contribution amounts accruing due but
not overdue in respect of any Plan and for deductions at source being
paid by a Loan Party pursuant to and in compliance with arrangements
between such Loan Party and the relevant taxing authority.
(i) Liens in favour of a Bonding Company provided that (i)
each Lien is restricted to the claim of the Loan Party against its
customer relating to the specific project in respect of which a
particular bond or guarantee was issued; and (ii) the Agent shall have
received from the Bonding Company such inter-creditor and/or
subordination agreements as the Agent may, in its sole judgment,
require.
(j) Liens (not otherwise permitted hereunder) which secure
obligations not exceeding (as to the Loan Parties) $2,000,000.00 in an
aggregate amount at any time outstanding.
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(k) Liens created pursuant to the Security Documents.
8.4 Limitation on Guarantee Obligations. Create, incur, assume
or suffer to exist any Guarantee Obligation except:
(a) Guarantee Obligations in existence on the date hereof and
listed on Schedule 8.4(a);
(b) Guarantee Obligations incurred after the date hereof in an
aggregate amount not to exceed $1,000,000.00 at any one time
outstanding;
(c) guarantees made in the ordinary course of its business by
the Borrower of Indebtedness permitted by Sections 8.2(c) and 8.2(e);
(d) [RESERVED]
(e) the Guarantees;
(f) guarantees made by a Credit Party in respect of the
Indebtedness of another Credit Party permitted pursuant to Section 8.2.
8.5 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, or make any material change in its present method of conducting
business, without the prior written consent of the Agent, which consent will not
be unreasonably withheld with respect to any sale, lease, transfer, or disposal
of any or all assets (upon voluntary liquidation or otherwise) by any
wholly-owned Subsidiary to the Borrower or any Guarantor Subsidiary provided
that the acquirer enters into such documents as the Agent in its sole discretion
may deem necessary to maintain the enforceability and priority of the Lien in
favour of the Lenders in respect of the Collateral.
8.6 Limitation on Sale of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, or, in the case of any Subsidiary, issue or
sell any shares of such Subsidiary's Capital Stock to any Person other than the
corporation which owns 100% of its issued and outstanding stock on the date
hereof, except:
(a) the sale or other disposition of obsolete or worn out
property in the ordinary course of business; provided that the Net
Proceeds of each such transaction are applied to the prepayment of the
Revolving Credit Loans as provided in Section 4.5(c);
(b) the sale or other disposition of any property in the
ordinary course of business, provided that (other than inventory) the
aggregate book value of all assets so sold or disposed of in any period
of twelve consecutive months shall not exceed 2% of
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consolidated total assets of the Loan Parties as at the beginning of such
twelve-month period;
(c) the sale of inventory in the ordinary course of business;
(d) the sale or discount without recourse of accounts
receivable arising in the ordinary course of business in connection
with the compromise or collection thereof; and
(e) as permitted by Section 8.5;
8.7 [RESERVED.]
8.8 Limitation on Dividends. Declare or pay any dividend
(other than dividends payable solely in common stock of the Borrower) on, or
make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any shares of any class of Capital Stock of any Loan Party or
any warrants or options to purchase such Capital Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of a Loan Party
(such declarations, payments, setting apart, purchases, redemptions,
defeasances, retirements, acquisitions and distributions being herein called
"Restricted Payments"), except that Restricted Payments shall be permitted by
any Non-Guarantor Subsidiary and by any Loan Party to any other Loan Party.
8.9 Limitation on Capital Expenditures. Make or commit to make
(by way of the acquisition of securities of a Person or otherwise) any
expenditure in respect of the purchase or other acquisition of fixed or capital
assets (excluding any such asset acquired in connection with normal replacement
and maintenance programs properly charged to current operations and any asset
acquired by a Loan Party for which payment was made or funded by a Person which
is not a Loan Party and which did not obtain a Lien on such asset) except for
expenditures in the ordinary course of business not exceeding, in the aggregate
$5,000,000.00 for the Loan Parties during any fiscal year provided, that up to
100% of any such amount if not so expended in the fiscal year for which it is
permitted above, may be carried over for expenditure in the next following
fiscal year.
8.10 Limitation on Investments, Revolving Credit Loans and
Advances. Make any advance, loan, extension of credit or capital contribution
to, or purchase any stock, bonds, notes, debentures or other securities of or
any assets constituting a business unit of, or make any other investment in, any
Person, except:
(a) extensions of trade credit in the ordinary course of
business;
(b) investments in Cash Equivalents;
(c) Investments in Non-Guarantor Subsidiaries reflected in the
financial statements dated June 30, 1997;
(d) *[RESERVED.]
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(e) loans and advances to employees of the Loan Parties for travel,
entertainment and relocation expenses in the ordinary course of business
in an aggregate amount for the Loan Parties not to exceed $500,000.00 at
any one time outstanding;
(f) investments by a Loan Party in any of the other Loan Parties;
(g) loans by the Loan Parties to their employees in connection with
management incentive plans in an aggregate amount not to exceed
$500,000.00;]
8.11 Limitation on Optional Payments and Modifications of Debt
Instruments.
(a) make any optional payment or prepayment on or redemption or
purchase of any Indebtedness other than:
(i) any payment or prepayment in respect of the Revolving Credit
Loans; and
(ii) any payment or prepayment of Indebtedness in respect of
property subject to a Lien provided:
(A) at the time of the payment or prepayment, and immediately
thereafter, there does not occur and will not exist a Default or an
Event of Default;
(B) after the making of the payment or prepayment, the
aggregate outstanding principal amount of the Revolving Credit Loans
will not exceed the Borrowing Base; and
(C) such payment or prepayment will result in the discharge of
the Lien;
(b) amend, modify or change, or consent or agree to any amendment,
modification or change to any of the terms of any Indebtedness referred to
in paragraph (a) above (other than any such amendment, modification or
change which would extend the maturity or reduce the amount of any payment
of principal thereof or which would reduce the rate or extend the date for
payment of interest thereon).
8.12 Limitation on Transactions with Affiliates. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement, or (b) in the
ordinary course of the Loan Party's business, and (c) upon fair and reasonable
terms no less favourable to the Loan Party, than it would obtain in a comparable
arm's length transaction with a Person which is not an Affiliate.
8.13 Limitation on Sales and Leasebacks. Enter into any arrangement
with any Person providing for the leasing by the Loan Party of real or personal,
moveable or immoveable property which has been or is to be sold or transferred
by the Loan Party to such Person or to
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any other Person to whom funds have been or are to be advanced by such Person on
the security of such property or rental obligations of the Loan Party.
8.14 Limitation on Changes in Fiscal Year, etc. Permit the fiscal
year of the Loan Party to end on a day other than September 30 or, unless it has
given the Agent not less than 30 days prior written notice thereof, change the
location of any of its property from the jurisdiction in which it is presently
located or change its chief place of business or its registered office.
8.15 Limitation on Negative Pledge Clauses. Enter into with any
Person any agreement, other than this Agreement, and any industrial revenue
bonds, purchase money mortgages or Financing Leases permitted by this Agreement
(in which cases, any prohibition or limitation shall only be effective against
the assets financed thereby), which prohibits or limits the ability of the Loan
Party to create, incur, assume or suffer to exist any Lien upon any of its
property, assets or revenues, whether now owned or hereafter acquired.
8.16 Limitation on Lines of Business. Enter into any business,
either directly or indirectly, except for those businesses in which the Loan
Party is engaged on the date of this Agreement.
8.17 Governing Documents. Amend its certificate or articles of
incorporation (except to increase the number of authorized shares of common
stock), partnership agreement or other Governing Documents, without the prior
written consent of the Agent which shall not be unreasonably withheld or
delayed.
8.18 Limitation on Subsidiary Formation. Create any additional
Subsidiaries unless, immediately upon the formation of such Subsidiary, all
requirements of Section 7.11 shall have been satisfied.
8.19 Limitation on Securities Issuances by any Credit Party. (a)
issue any shares of Capital Stock that are not "certificated securities" (as
defined in Section 8-102 of the Uniform Commercial Code as in effect in the
State of New York on the date hereof) or otherwise represented by share
certificates and are not pledged or hypothecated to the Agent pursuant to a
pledge agreement or hypothecation of securities agreement, or (b) issue any
shares of preferred stock other than the issuance of preferred shares by Davie
to Societe Generale de Financement du Quebec ("SGF") in accordance with
agreements between the Borrower and SGF. For clarification, the limitation
provided in this Section 8.19 shall not apply to the Parent.
8.20 Non-Guarantor Subsidiaries. The Borrower shall not permit any
of the Non-Guarantor Subsidiaries to effect or otherwise engage in any of the
acts described in Sections 8.3 to 8.19 inclusive if the result thereof has or
could reasonably be expected to have a Material Adverse Effect.
SECTION 9. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
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(a) The Borrower shall fail to pay any principal of any Revolving Credit
Loan when due in accordance with the terms thereof or hereof; or the Borrower
shall fail to pay any interest on any Revolving Credit Loan or any other amount
payable hereunder or under the other Loan Documents, within 5 days after any
such interest or other amount becomes due in accordance with the terms thereof
or hereof; or
(b) Any representation or warranty made or deemed made by a Loan Party
herein or in any other Loan Document or which is contained in any certificate,
document or financial or other statement furnished by it at any time under or in
connection with this Agreement or any such other Loan Document shall prove to
have been incorrect in any material respect on or as of the date made or deemed
made; or
(c) A Loan Party shall default in the observance or performance of any
agreement contained in Section 8;
(d) A Loan Party shall default in the observance or performance of any
other agreement contained in this Agreement or any other Loan Document (other
than as provided in paragraphs (a) through (c) of this Section), and such
default shall continue unremedied for a period of 30 days; or
(e) A Loan Party shall (i) default in any payment of principal of or
interest of any Indebtedness (other than the Revolving Credit Loans) or in the
payment of any Guarantee Obligation, beyond the period of grace (not to exceed
30 days), if any, provided in the instrument or agreement under which such
Indebtedness or Guarantee Obligation was created , if the aggregate amount of
the Indebtedness and/or Guarantee Obligations in respect of which such default
or defaults shall have occurred is at least $500,000.00; or (ii) default in the
observance or performance of any other agreement or condition relating to any
such Indebtedness or Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or
agent on behalf of such holder or holders or beneficiary or beneficiaries) to
cause, with the giving of notice if required, such Indebtedness to become due
prior to its stated maturity or such Guarantee Obligation to become payable; or
(f) (i) A Loan Party shall commence any case, proposal, proceeding or
other action (A) under any existing or future law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, monitor, administrator, conservator, sequestrator
or other similar official for it or for all or any substantial part of its
assets, or a Loan Party shall make a general assignment for the benefit of its
creditors or file a proposal or notice of intention to file a proposal; or (ii)
there shall be
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commenced against a Loan Party any case, proposal, proceeding or
other action of a nature referred to in clause (i) above which (A) results in
the entry of an order for relief or any such adjudication or appointment or (B)
provided same has not had the effect of staying any rights of the Agent or
Lenders and has not given rise to any Material Adverse Effect, remains
undismissed, undischarged or unbonded for in the case of personal or movable
property in or subject to the jurisdiction of a proceeding in Quebec, a period
of 10 days, and in all other cases, a period of 60 days; or (iii) there shall be
commenced against any Loan Party any case, proceeding or other action
(including, without limitation, a hypothecary action) seeking the exercise of a
hypothecary right or the issuance of a warrant of attachment, execution,
seizure, distraint or similar process against all or any substantial part of its
assets which results in the entry of an order for any such relief which provided
same has not had the effect of staying any rights of the Agent or Lenders and
has not given rise to any Material Adverse Effect, shall not have been vacated,
discharged, or stayed or bonded pending appeal within 10 days, in the case of
personal or movable property in or subject to the jurisdiction of a proceeding
in Quebec, and in all other cases, within 60 days from the entry thereof; (iv) a
Loan Party shall take any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the acts set forth in clause (i),
(ii), or (iii) above; (v) a Loan Party shall generally not, or shall be unable
to, or shall admit in writing its inability to, pay its debts as they become
due, or (vi) if any creditor holding a Lien on any assets of a Loan Party
enforces or gives notice of its intention to enforce such Lien; or
(g) (i) Any Loan Party shall engage in any transaction or activity
prohibited under relevant legislation or documents relating to any Plan, (ii)
any accumulated funding deficiency, solvency deficiency, unfunded liability or
wind-up or withdrawal liability shall exist with respect to any Plan or any Lien
in favour of any Governmental Authority or any Plan trustee or administrator or
a Plan shall arise on the assets of any Loan Party (iii) a Termination Event
shall occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate, any
Plan, which Termination Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Agent, likely to result in the
termination of such Plan (iv) any Plan shall terminate (v) any Loan Party shall,
or in the reasonable opinion of the Agent is likely to, incur any liability in
connection with a withdrawal from, or the insolvency or reorganization of, a
Plan or (vi) any other event or condition shall occur or exist with respect to a
Plan; and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any, could
reasonably be expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against a Loan Party
involving in the aggregate a liability (not paid or fully covered by insurance)
of $2,5000,000 or more, and all such judgments or decrees shall not have been
vacated, discharged, stayed or bonded pending appeal within 60 days from the
entry thereof (or such lesser period of time, which, according to the laws of
any applicable jurisdiction, would permit the creditor of the judgment to obtain
execution thereof in respect of the assets of a Loan Party) provided however
that if such judgments or decrees have given rise to any Lien on any Collateral,
the provisions of paragraph (f) above shall apply if the creditor holding such
Lien enforces or gives notice of its intention to enforce such
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Lien; or
(i) (i) Any of the Security Documents shall cease, for any reason, to be
in full force and effect, or a Loan Party which is a party to any of the
Security Documents shall so assert, or (ii) the Lien created by any of the
Security Documents shall cease to be enforceable and of the same effect and
priority purported to be created thereby; or
(j) Any Guarantee shall cease, for any reason, to be in full force and
effect or any Guarantor shall so assert; or
(k) (i) any Person or "group" (within the meaning of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended) (A) shall acquire,
directly or indirectly, beneficial ownership of 20% (the "Requisite Percentage")
or more of any outstanding class of Capital Stock having ordinary voting power
in the election of directors of the Parent or the Borrower (other than any
person who may be deemed to have acquired beneficial ownership of the Requisite
Percentage by virtue of his becoming a member of the group which reported
beneficial ownership of shares on August 7, 1997, or (B) shall obtain the power
(whether or not exercised), directly or indirectly, to elect a majority of the
Parent's or Borrower's directors, or (ii) the Board of Directors of the Parent
shall not consist of a majority of the persons listed in Schedule III.
(l) Any of the foregoing events occurs in respect of a Non-Guarantor
Subsidiary or its assets which has, or could reasonably be expected to have, a
Material Adverse Effect; or
(m) Any of the MDC Stock forming part of the Hypothecated Securities is
decertificated without the prior written consent of the Agent;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section with respect to the
Borrower, automatically (by the mere lapse of time) the Revolving Credit
Commitments shall immediately terminate and the Revolving Credit Loans hereunder
(with accrued interest thereon) and all other amounts owing under this Agreement
shall immediately become due and payable, and (B) if such event is any other
Event of Default, either or both of the following actions may be taken: (i) with
the consent of the Required Lenders, the Agent may, or upon the request of the
Required Lenders, the Agent shall, by notice to the Borrower declare the
Revolving Credit Commitments to be terminated forthwith, whereupon the Revolving
Credit Commitments shall immediately terminate; and (ii) with the consent of the
Required Lenders, the Agent may, or upon the request of the Required Lenders,
the Agent shall, by notice to the Borrower, declare the Revolving Credit Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement to be due and payable forthwith, whereupon the same shall immediately
become due and payable. Except as expressly provided above in this Section,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived.
SECTION 10. THE AGENT
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10.1 Appointment. Each Lender hereby irrevocably designates and
appoints the Agent as the agent of such Lender under this Agreement and the
other Loan Documents, and each such Lender irrevocably authorizes the Agent, in
such capacity, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, 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.
10.2 Delegation of Duties. The Agent may execute any of its duties
under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys in-fact selected by it with
reasonable care. The Agent may subdelegate such of its functions hereunder as it
deems appropriate for such compensation as is agreed upon from time to time,
and, in such event, the delegatee will be entitled to all of the benefits and
powers of the Agent hereunder with respect to the functions so delegated.
Without prejudice to the rights of the Agent hereunder and notwithstanding
Section 3.1.1, no Lender shall take any steps to exact payment of the
Obligations or to enforce rights and remedies under any of the Loan Documents
without the prior consent of the Required Lenders.
10.3 Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or any other Loan Document
(except for its or such Person's own gross negligence or wilful misconduct) or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by a Loan Party or any officer
thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement or any
other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
for any failure of a Loan Party to perform its obligations hereunder or
thereunder. The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Loan Parties.
10.4 Reliance by Agent. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to any Loan Party), independent accountants and
other experts selected by the Agent. The Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice
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or concurrence of the Required Lenders as it deems appropriate or it shall first
be indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Agreement and the other Loan Documents
in accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all future holders of the Revolving Credit Loans.
10.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall give notice thereof to the Lenders. The
Agent shall take such action with respect to such Default or Event of Default as
shall be reasonably directed by the Required Lenders; provided that unless and
until the Agent shall have received such directions, the Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.
10.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Loan Parties shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon the Agent or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Loan Parties and made its own decision to make its Revolving Credit Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of a Loan Party. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the Agent
hereunder or under the other Loan Documents, the Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Loan Parties which may come
into the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates.
10.7 Indemnification. The Lenders agree to indemnify the Agent in
its capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to their
respective Credit Exposure Percentages in effect on the date on which
indemnification is sought, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at
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any time following the payment of the Revolving Credit Loans) be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of, the Revolving Credit Commitment, this Agreement, any of the other Loan
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Agent under or in connection with any of the foregoing; provided that no
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the Agent's gross negligence or
wilful misconduct. The agreements in this Section shall survive the payment of
the Revolving Credit Loans and all other amounts payable hereunder.
10.8 Agent in Its Individual Capacity. The Agent and its Affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with the Borrower and the other Loan Parties as though the Agent were
not the Agent hereunder and under the other Loan Documents. With respect to the
Revolving Credit Loans made by it, the Agent shall have the same rights and
powers under this Agreement and the other Loan Documents as any Lender and may
exercise the same as though it were not the Agent, and the terms "Lender" and
"Lenders" shall include the Agent in its individual capacity.
10.9 Successor Agent. The Agent may resign as Agent upon 10 days'
notice to the Lenders. If the Agent shall resign as Agent under this Agreement
and the other Loan Documents, then the Required Lenders shall appoint from among
the Lenders a successor agent for the Lenders, which successor agent shall be
approved by the Borrower, whereupon such successor agent shall succeed to the
rights, powers and duties of the Agent, and the term "Agent" shall mean such
successor agent effective upon such appointment and approval, and the former
Agent's rights, powers and duties as Agent shall be terminated, without any
other or further act or deed on the part of such former Agent or any of the
parties to this Agreement or any holders of the Revolving Credit Loans. After
any retiring Agent's resignation as Agent, the provisions of this Section 10
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement and the other Loan Documents.
SECTION 11. MISCELLANEOUS
11.1 Amendments and Waivers. Neither this Agreement nor any other Loan Document,
nor any terms hereof or thereof may be amended, supplemented, restated, replaced
or modified except in accordance with the provisions of this Section 11.1. The
Required Lenders may, or, with the written consent of the Required Lenders, the
Agent may, from time to time, (a) enter into with the Loan Parties written
amendments, supplements or modifications hereto and to the other Loan Documents
for the purpose of adding any provisions to this Agreement or the other Loan
Documents or changing in any manner the rights of the Lenders or of the Loan
Parties hereunder or thereunder or (b) waive, on such terms and conditions as
the Required Lenders or the Agent, as the case may be, may specify in such
instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences; provided,
however, that no such waiver and no such amendment, supplement or modification
shall (i) reduce the amount or extend the scheduled date of maturity of any
Revolving Credit Loan or of any instalment thereof, or reduce the stated rate of
any interest or
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fee payable hereunder or extend the scheduled date of any payment thereof or
increase the amount or extend the expiration date of any Lender's Commitments,
in each case without the consent of each Lender affected thereby, or (ii) amend,
modify or waive any provision of this Section 11.1 or reduce the percentage
specified in the definition of Required Lenders, or consent to the assignment or
transfer by a Loan Party of any of its rights and obligations under this
Agreement and the other Loan Documents, in each case without the written consent
of all the Lenders, or (iii) amend, modify or waive any provision of Section 10
without the written consent of the then Agent. Any such waiver and any such
amendment, supplement or modification shall apply equally to each of the Lenders
and shall be binding upon the Loan Parties, the Lenders, the Agent and all
future holders of the Revolving Credit Loans. In the case of any waiver, the
Borrower, the Lenders and the Agent shall be restored to their former positions
and rights hereunder and under the other Loan Documents, and any Default or
Event of Default waived shall be deemed to be cured and not continuing; but no
such waiver shall extend to any subsequent or other Default or Event of Default
or impair any right consequent thereon.
11.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand,
when delivered, (b) in the case of delivery by mail, 3 days after being
deposited in the mail, postage prepaid, or (c) in the case of delivery by
facsimile transmission, when sent and receipt has been electronically confirmed,
addressed as follows in the case of the Borrower and the Agent, and as set forth
in Schedule I in the case of the other parties hereto, or to such other address
as may be hereafter notified by the respective parties hereto:
Any Loan Party: Dominion Bridge Corporation
500 Notre-Dame Street
Lachine, Quebec H8S 2B2
Attention: General Counsel
Fax: (514) 634-2448
With a copy Pouliot Mercure
to: 1155 Rene-Levesque Blvd. West
31st Floor
Montreal, Quebec
H3B 3S6
Attention: Mr. Brian Riordan
The Agent: BNY Financial Corporation - Canada
500 Rene-Levesque Blvd. West
Suite 1400
Montreal, Quebec
H2Z 1W7
With a copy BNY Financial Corporation
to: 1290 Avenue of the Americas
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New York, NY 10104
Attention: Mr. Frank Imperato
Fax: (212) 408-7162
provided that any notice, request or demand to or upon the Agent or the Lenders
pursuant to Section 3.3 or 4.8(b) shall not be effective until received.
11.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of the Agent or any Lender, any right, remedy, power or
privilege hereunder or under the other Loan Documents shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
11.4 Survival of Representations and Warranties. All representations and
warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Revolving Credit Loans hereunder.
11.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or
reimburse the Agent for all its out-of-pocket costs and expenses incurred in
connection with the development, preparation and execution of, and any
amendment, supplement or modification to, this Agreement and the other Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including, without limitation, the reasonable fees and
disbursements of counsel to the Agent, (b) to pay or reimburse the Agent for all
costs and expenses incurred in connection with enforcing, preserving,
evaluating, monitoring or realizing any rights under this Agreement, the other
Loan Documents and any such other documents, including, without limitation, the
fees and disbursements of counsel [(including the allocated fees and expenses of
in-house counsel)] engaged by the Agent, (c) to pay, indemnify, and hold each
Lender and the Agent harmless from, any and all recording and filing fees and
any and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or consummation or
administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the other Loan Documents and any such other documents, (d) to
pay, indemnify, and hold each Lender and the Agent harmless from and against any
and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Agreement, the other Loan Documents and any such other
documents, including, without limitation, any of the foregoing relating to the
violation of, non-compliance with or liability under, any Environmental Law
applicable to the operations of any Loan Party (or the operations of any
Non-Guarantor Subsidiary if such violation, non-compliance or liability causes a
Material Adverse Effect) or any of the Properties (all the foregoing in this
clause (d), collectively, the "indemnified liabilities"), provided, that the
Borrower shall have no obligation hereunder to the Agent or any Lender with
respect to indemnified liabilities arising from (i) the
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gross negligence or wilful misconduct of the Agent or any such Lender or (ii)
legal proceedings commenced against the Agent or any such Lender by any security
holder or creditor thereof arising out of and based upon rights afforded any
such security holder or creditor solely in its capacity as such. The agreements
in this Section shall survive repayment of the Revolving Credit Loans and all
other amounts payable hereunder.
11.6 Successors and Assigns; Participations and Assignments.
(a) This Agreement shall be binding upon and inure to the
benefit of the Loan Parties, the Lenders, the Agent and their
respective successors, assigns and legal representatives, except
that the Borrower may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent
of each Lender.
(b) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time
sell to one or more banks or other entities ("Participants")
participating interests in any Revolving Credit Loan owing to such
Lender, any Revolving Credit Commitment of such Lender or any other
interest of such Lender hereunder and under the other Loan
Documents. In the event of any such sale by a Lender of a
participating interest to a Participant, such Lender's obligations
under this Agreement to the other parties to this Agreement shall
remain unchanged, such Lender shall remain solely responsible for
the performance thereof, such Lender shall remain the holder of any
such Revolving Credit Loan for all purposes under this Agreement and
the other Loan Documents, and the Loan Parties and the Agent shall
continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement and
the other Loan Documents. The Loan Parties agree that if amounts
outstanding under this Agreement are due or unpaid, or shall have
been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall, to the
maximum extent permitted by applicable law, be deemed to have the
right of setoff in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of
its participating interest were owing directly to it as a Lender
under this Agreement, provided that, in purchasing such
participating interest, such Participant shall be deemed to have
agreed to share with the Lenders the proceeds thereof as provided in
Section 11.6(a) as fully as if it were a Lender hereunder. The
Borrower also agrees that each Participant shall be entitled to the
benefits of Sections 4.11, 4.12 and 4.13 with respect to its
participation in the Revolving Credit Commitments and the Revolving
Credit Loans outstanding from time to time as if it was a Lender;
provided that, in the case of Section 4.11, such Participant shall
have complied with the requirements of said Section and provided,
further, that no Participant shall be entitled to receive any
greater amount pursuant to any such Section than the transferor
Lender would have been entitled to receive in respect of the amount
of the participation transferred by such transferor Lender to such
Participant had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time
and from time to time assign to any Lender or any affiliate thereof
or, with the consent of the Borrower and the Agent, to an additional
bank or financial institution which, if such bank or financial
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institution is an Eligible Assignee, shall not be unreasonably
withheld (an "Assignee") all or any part of its rights and
obligations under this Agreement and the other Loan Documents
pursuant to an Assignment and Acceptance, substantially in the form
of Exhibit B, with appropriate completions or such other form as may
be agreed upon by the Agent, the Lender and the Assignee (an
"Assignment and Acceptance"), executed by such Assignee, such
assigning Lender (and, in the case of an Assignee that is not then a
Lender or an affiliate thereof, by the Borrower and the Agent) and
delivered to the Agent for its acceptance and recording in the
Register provided that, in the case of any such assignment to an
additional bank or financial institution, the sum of the aggregate
principal amount of the Revolving Credit Loans, the aggregate amount
of the L/C Obligations and the aggregate amount of the Available RC
Credit Commitment[s] being assigned and, if such assignment is of
less than all of the rights and obligations of the assigning Lender,
the sum of the aggregate principal amount of the Revolving Credit
Loans, the aggregate amount of the L/C Obligations and the aggregage
amount of the Available RC Credit Commitment[s] remaining with the
assigning Lender are each not less than $5,000,000.00 or such lesser
amount as may be agreed to by the Borrower and the Agent). The Loan
Parties shall execute and deliver in form satisfactory to the Agent,
such unconditional confirmations, acknowledgments and acquiescences
as may be requested by the Agent to evidence or effect any
assignment hereunder and such further confirmations and amendments
to security documents and instruments as the Agent may require to
give effect to such assignment. From and after the effective date
determined pursuant to an Assignment and Acceptance, the following
will apply, namely: (w) such assignment will not result in novation
of the Revolving Credit Commitment or any other obligations under
this Agreement, such novation being hereby expressly disclaimed, (x)
the obligation of the Assignee to make Revolving Credit Loans and to
issue or arrange for the issuance of Letters of Credit will be the
same obligation as that of the assigning Lender and not a new
obligation, notwithstanding any release of the assigning Lender from
such obligations, (y) the Assignee shall be a party hereto and, to
the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder with Revolving Credit
Commitments as set forth therein, and the obligations of the
Borrower arising from any Revolving Credit Loan advanced by or
Letter of Credit issued or arranged by the Assignee will form part
of the Obligations, will be secured by the Security Documents and
the Assignee, the Agent and all other Lenders will have a solidary
interest therein, and (z) the assigning Lender shall, to the extent
provided in such Assignment and Acceptance, be released from its
obligations under this Agreement. Notwithstanding any provision of
this paragraph (c) and paragraph (e) of this Section, the consent of
the Borrower shall not be required for any assignment which occurs
at any time when any of the events described in Section 9(f) shall
have occurred and be continuing.
(d) The Agent, on behalf of the Borrower, shall maintain at
the address of the Agent referred to in Section 11.2 a copy of each
Assignment and Acceptance delivered to it and a register (the
"Register") for the recordation of the names and addresses of the
Lenders and the Revolving Credit Commitments of, and principal
amounts of the Revolving Credit Loans made by, each Lender from time
to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Agent and the
Lenders may treat each Person whose name is recorded in
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the Register as a creditor of the Revolving Credit Loans or other
obligation hereunder for all purposes of this Agreement and the
other Loan Documents, notwithstanding any notice to the contrary.
Any assignment of any Revolving Credit Loan or other obligation
hereunder shall be effective only upon appropriate entries with
respect thereto being made in the Register. The Register shall be
available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an Assignee (and, in the case of an
Assignee that is not then a Lender or an affiliate thereof, by the
Borrower and the Agent) and, for any Assignment and Acceptance
executed more than fifteen (15) business days following the Closing
Date, together with payment to the Agent of a registration and
processing fee of $2,500.00, the Agent shall (i) promptly accept
such Assignment and Acceptance and (ii) on the effective date
determined pursuant thereto record the information contained therein
in the Register and give notice of such acceptance and recordation
to the Lenders and the Borrower.
(f) The Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "Transferee") and any prospective
Transferee, subject to the provisions of Section 11.15, any and all
financial information in such Lender's possession concerning the
Borrower and its Affiliates which has been delivered to such Lender
by or on behalf of the Borrower pursuant to this Agreement or which
has been delivered to such Lender by or on behalf of the Borrower in
connection with such Lender's credit evaluation of the Borrower and
its Affiliates prior to becoming a party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this Section concerning
assignments of Revolving Credit Loans relate only to absolute
assignments and that such provisions do not prohibit assignments
creating security interests, including, without limitation, any
pledge or assignment by a Lender of any Revolving Credit Loan to any
Federal Reserve Bank in accordance with applicable law.
11.7 Adjustments; Set-off.
(a) If any Lender (a "benefitted Lender") shall at any time
receive any payment of all or part of its Revolving Credit Loans, or
interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to
events or proceedings of the nature referred to in Section 9(f), or
otherwise), in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such
other Lender's Revolving Credit Loans, or interest thereon, such
benefitted Lender shall purchase for cash from the other Lenders a
participating interest in such portion of each such other Lender's
Revolving Credit Loan, or shall provide such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as shall
be necessary to cause such benefitted Lender to share the excess
payment or benefits of such collateral or proceeds ratably with each
of the Lenders; provided,
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however, that if all or any portion of such excess payment or
benefits is thereafter recovered from such benefitted Lender, such
purchase shall be rescinded, and the purchase price and benefits
returned, to the extent of such recovery, but without interest. The
Borrower agrees that each Lender so purchasing a portion of another
Lender's Revolving Credit Loan may exercise all rights of payment
(including, without limitation, rights of set-off) with respect to
such portion as fully as if such Lender were the direct holder of
such portion.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior
notice to the Borrower, any such notice being expressly waived by
the Borrower to the extent permitted by applicable law, upon any
amount becoming due and payable by the Borrower hereunder (whether
at the stated maturity, by acceleration or otherwise) to set-off or
compensate and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final),
in any currency, and any other credits, indebtedness or claims, in
any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such
Lender or any branch or agency thereof to or for the credit or the
account of the Borrower. Each Lender agrees promptly to notify the
Borrower and the Agent after any such set-off or compensation and
application made by such Lender, provided that the failure to give
such notice shall not affect the validity of such set-off and
application.
11.8 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
facsimile transmission of signature pages hereto), and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. A set
of the copies of this Agreement signed by all the parties shall be lodged with
the Borrower and the Agent.
11.9 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
11.10 Integration. This Agreement and the other Loan Documents represent
the agreement of the Loan Parties, the Agent and the Lenders with respect to the
subject matter hereof, and there are no promises, undertakings, representations
or warranties by the Agent or any Lender relative to subject matter hereof not
expressly set forth or referred to herein or in the other Loan Documents.
11.11 GOVERNING LAW. THIS AGREEMENT AND, EXCEPT AS AND TO THE EXTENT
OTHERWISE EXPRESSLY AGREED IN ANY LOAN DOCUMENT, THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE PROVINCE OF QUEBEC AND THE LAWS OF CANADA
APPLICABLE THEREIN.
11.12 Submission To Jurisdiction; Waivers. Each of the Loan Parties
irrevocably and
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unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents
to which it is a party, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general
jurisdiction of the Superior Court, District of Montreal and
appellate courts therefrom;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court
or that such action or proceeding was brought in an inconvenient
court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered
or certified mail (or any substantially similar form of mail),
postage prepaid, to it at its address set forth in Section 11.2 or
at such other address of which the Agent shall have been notified
pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or
proceeding referred to in this Section any special, exemplary,
punitive or consequential damages.
11.13 Acknowledgments. Each of the Loan Parties acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan
Documents;
(b) neither the Agent nor any Lender has any fiduciary
relationship with or duty to the Loan Parties arising out of or in
connection with this Agreement or any of the other Loan Documents,
and the relationship between the Loan Parties, on one hand, and
Agent and Lenders, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Loan Parties and
the Lenders.
11.14 WAIVERS OF JURY TRIAL. EACH OF THE LOAN PARTIES, THE AGENT AND THE
LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND
FOR ANY COUNTERCLAIM THEREIN.
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11.15 Confidentiality. Each Lender agrees to keep confidential all
non-public information provided to it by the Borrower pursuant to this Agreement
that is designated by the Borrower in writing as confidential; provided that
nothing herein shall prevent any Lender from disclosing any such information (i)
to the Agent or any other Lender, (ii) to any Transferee which receives such
information having been made aware of the confidential nature thereof, (iii) to
its employees, directors, agents, attorneys, accountants and other professional
advisors, (iv) upon the request or demand of any examiner or other Governmental
Authority having jurisdiction over such Lender, (v) in response to any order of
any court or other Governmental Authority or as may otherwise be required
pursuant to any Requirement of Law, (vi) which has been publicly disclosed other
than in breach of this Agreement, or (vii) in connection with the exercise of
any remedy hereunder.
11.16 Formal date. This Agreement may be referred to as bearing formal date
of September 12, 1997 notwithstanding the actual date of its execution or the
date on which this Agreement becomes effective. The formal date is for purposes
of reference only.
11.17 Currency Conversion. If, for purposes of obtaining judgment against
any Loan Party pursuant to this Agreement or any other Loan Document, it becomes
necessary to convert into Canadian funds an amount due hereunder or thereunder
in Dollars, then the conversion shall be made at the rate of exchange prevailing
on the last business day in Montreal, Quebec before the day on which the
judgment is rendered.
For this purpose, "rate of exchange" means the spot rate at
which the Agent or the Lender, as the case may be, is able to purchase Dollars
with Canadian funds on the relevant date. In the event that there is a change in
the rate of exchange prevailing between the day before the day on which the
judgment is rendered and the date of payment of the amount due, the Loan Party
in question will pay such additional amount(s) as may be necessary to ensure
that the amount paid on such date is the amount in Canadian funds which, when
converted at the rate of exchange prevailing on the date of payment, is the
amount then due in Dollars. Any amount due by a Loan Party under this paragraph
shall be due as a separate debt and shall not be affected by judgment being
obtained for any other sums due under this Agreement or any other Loan Document.
11.18 Language. The parties acknowledge that they have required that this
Agreement and all related documents be prepared in English. Les parties
reconnaissent avoir exige que la presente convention et tous les documents
connexes soient rediges en anglais.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
GROUP CEDAR CANADA INC./CEDAR
GROUP CANADA INC.
BY: /s/ Michel L. Marengere
-----------------------------
TITLE: Chairman
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<PAGE> 84
BNY FINANCIAL CORPORATION - CANADA,
AS AGENT AND AS A LENDER
BY: /S/Frank Imperato
----------------------------------
TITLE: Vice-President
By its execution and delivery of this Agreement, each of the undersigned
acknowledges having read and understood all terms hereof, represents and
warrants that all representations and warranties made by the Borrower in respect
of it or its property, operations or prospects is true and accurate in all
respect as at the date hereof and covenants and agrees to do and perform or not
to do or permit, as the case may be, each action, thing or circumstance which
the Borrower has covenanted and agreed to cause it to do or perform or not to do
or permit, as the case may be.
DOMINION BRIDGE CORPORATION DOMINION BRIDGE, INC.
By:/S/Michel L. Marengere By:/S/Michel L. Marengere
----------------------- -----------------------
Title: Chairman Title: Chairman
STEEN CONTRACTORS INC. INDUSTRIES DAVIE INC./DAVIE
INDUSTRIES INC.
By:/S/Michel L. Marengere By:/S/Michel L. Marengere
----------------------- -----------------------
Title: Chairman Title: Chairman
CEDAR GROUP AUSTRALIA PTY LES ENTREPRENEURS BECKER INC./
LIMITED BECKER CONTRACTORS INC.
By:/S/Michel L. Marengere By:/S/Michel L. Marengere
----------------------- -----------------------
Title: Chairman Title: Chairman
BECKER CONTRACTS LIMITED MIL INTERMODAL INC.
By:/S/Michel L. Marengere By:/S/Michel L. Marengere
----------------------- -----------------------
Title: Chairman Title: Chairman
-78-
<PAGE> 1
EXHIBIT 10.10
GROUPE CEDAR CANADA INC./
CEDAR GROUP CANADA INC.
500 Notre-Dame
Lachine, Quebec
H8S 2B2
RE: LETTER OF CREDIT FINANCING SUPPLEMENT
Dear Sirs:
Reference is made to the Credit Agreement bearing formal date of September 12,
1997 entered into among yourselves, Dominion Bridge Corporation, Dominion
Bridge, Inc., Steen Contractors Limited, Industries Davie Inc./Davie Industries
Inc., Cedar Group Australia PTY Limited, Les Entrepreneurs Becker Inc./Becker
Contractors Inc., Becker Contractors Limited, MIL Intermodal Inc., the Lenders
from time to time party thereto and us, as agent for the Lenders, as
supplemented, amended, restated, replaced or otherwise modified from time to
time ("Agreement"). The terms hereinafter appearing but not otherwise defined
herein shall have the meanings given in the Agreement.
From time to time, in order to assist you in establishing or opening Letters of
Credit with a Bank or trust company ("Bank"), you may request us to join in the
applications or act as applicant for such Letters of Credit and/or guarantee
payment or performance of your obligations pursuant to the Letters of Credit and
any drafts or acceptances thereunder, thereby lending our credit to you. These
arrangements shall be handled by us subject to the following terms and
conditions.
A. Our assistance in this matter shall at all times and in all respects be in
our sole discretion. The amount and extent of the Letters of Credit and the
terms and conditions thereof and of any drafts or acceptances thereunder, shall
in all respects be determined solely by us and shall be subject to change,
modification and revision by us, at any time and from time to time.
B. Any indebtedness, liability or obligation of any nature whatsoever, arising
or incurred in connection with any Letters of Credit, guarantees, drafts, or
acceptances thereunder or otherwise, including, without limitation, all amounts
due or which may become due under the Letters of Credit, guarantees, or any
drafts or acceptances thereunder, all amounts charged or chargeable to you or to
us by any Bank, other financial institutions or correspondent Bank which opens,
issues or is involved with any Letters of Credit; any other Bank charges, fees
and commissions; duties and taxes, costs of insurance; all such other charges
and expenses which may pertain either directly or
<PAGE> 2
- 2 -
indirectly to the Letters of Credit, drafts, acceptances, guarantees or to the
goods or documents relating thereto, and our charges as herein provided, shall
be incurred solely as an accommodation to you and for your account, shall
constitute "Obligations" (as defined in the Agreement), may be charged by us to
your account thereunder at any time without notice to you, shall be secured by
all security which you have heretofore granted to us or hereafter grant to us
(including without limitation all inventory acquired under the Letters of
Credit, all documents evidencing such inventory, and the proceeds thereof),
shall bear interest at the rates provided for in the Agreement, and shall be
repayable to us on demand.
C. You unconditionally agree to indemnify us and hold us harmless from and
against any and all loss, claim or liability arising from any transactions,
occurrences, errors or omissions relating to Letters of Credit established or
opened for your account; the goods acquired thereunder ("Goods"); the documents
evidencing the Goods ("Documents"); any discrepant or nonconforming provisions
thereof; steamship or airway guarantees, releases, indemnities or delivery
orders or similar documents; any drafts or acceptances; and all obligations
hereunder, including, but not limited to, any such loss, claim or liability due
to any action, errors or omissions attributable to any Bank, to us (save and
except if caused by our wilful misconduct or gross negligence), or to any other
entity, or any other cause. Your unconditional obligation to us hereunder shall
not be modified or diminished for any reason or in any manner whatsoever.
D. We shall not be responsible for: the existence, character, quality, quantity,
condition, packing, value or delivery of the Goods; any difference or variation
in the character, quality, quantity, condition, packing, value or delivery of
any Goods from that expressed in the Documents; the validity, sufficiency, or
genuineness of any Documents or of any endorsements thereon, even if such
Documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; any discrepant or nonconforming provisions
in any Documents; the time, place, manner or order in which shipment is made;
partial or incomplete shipment, or failure or omission to ship any or all of the
Goods referred to in the Letters of Credit or Documents; any deviation from
instructions; delay, default, or fraud by the shipper and/or anyone else in
connection with the Goods or the shipping thereof; or any breach of contract
between the shipper or vendors and yourselves. Furthermore, without being
limited by the foregoing, we shall not be responsible for any act or omission
with respect to or in connection with any of the Goods or the Documents.
E. You agree that any action taken by us, or any action
<PAGE> 3
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taken by any Bank under or in connection with the Letters of Credit, the
guarantees, the drafts or acceptances, or the Goods or the Documents, shall be
binding on you and shall not result in any liability on our part to you. In
furtherance thereof, we shall have the full right and authority to take any of
the following actions in our name or yours (and you agree that you shall not
have the right to take any such action without our express written consent in
writing): to clear and resolve any questions of non-compliance of documents; to
give any instructions as to acceptance or rejection of any documents or Goods;
to execute any and all applications for steamship or airways guarantees,
releases, indemnities or delivery orders or similar documents; to grant any
extensions of the maturity of, time of payment for, or time of presentation of,
any drafts, acceptances, or documents; and to agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letters of Credit, drafts or acceptances,
all in our sole name; and the Bank shall be entitled to comply with and honour
any and all such documents or instructions executed by or received solely from
us, all without any notice to or any consent from you.
F. You agree that any necessary import, export or other licenses or certificates
for the import or handling of the Goods will have been promptly procured; all
foreign and domestic governmental laws and regulations relating to the shipment
and importation of the Goods, or the financing thereof will have been promptly
and fully complied with; and any certificates in that regard that we may at any
time request will be promptly furnished. In this connection, you warrant and
represent that all shipments made under any Letters of Credit are in accordance
with the governmental laws and regulations of the countries in which the
shipments originate and terminate, and are not prohibited by any such laws and
regulations. You assume all risk, liability for, and agree to pay and discharge,
all local, state, federal or foreign taxes, duties or levies. Any embargo,
restriction, laws, customs or regulations of any country, state, city or other
political subdivision, where the Goods are or may be located, or wherein
payments are to be made, or wherein drafts may be drawn, negotiated, accepted,
or paid, shall be solely your risk, liability and responsibility.
G. Any rights, remedies, duties or obligations granted or undertaken by you to
any Bank in any application for Letters of Credit, or any standing agreement
relating to Letters of Credit or otherwise, shall be deemed to have been granted
to us and apply in all respects to us and shall be in addition to any rights,
remedies, duties or obligations contained herein or in any other agreements with
us.
<PAGE> 4
- 4 -
H. You hereby agree that prior to your repayment of all Obligations to us, we
may be deemed to be the absolute owner of, with unqualified rights to possession
and disposition of, the Goods and the Documents, all of which may be held by us
as security as herein provided. Should possession of any Goods or Documents be
transferred to you, they shall continue to serve as security as herein provided,
and may be sold, transferred or disposed of only as hereinabove provided.
I. The terms and provisions of all agreements executed by you in our favour
granting collateral security for the Obligations shall apply with equal force to
the Goods and the Documents, including, without limitation, provisions relating
to the insurance, maintenance and surrender.
J. In addition to any charges, fees or expenses charged to us directly or for
your account by any Bank in connection with these transactions (all of which
will be charged to your account as and when made by the Bank shall be conclusive
on us), you will pay us and we shall be entitled to charge your account with the
following:
1. Interest at the rate set forth in the Agreement with
respect to Revolving Credit Loans on all payments made by
us relating directly or indirectly to the Letters of
Credit or any guarantees given by us in connection
therewith; and
2. A fee with respect to each Letter of Credit, used or
unused, at the rate set forth in the Agreement.
For the purpose of the foregoing, Letters of Credit will be
deemed to include not only Letters of Credit established or opened for you with
our assistance as hereinabove provided, but also other letters of credit
established or opened for you by other institutions with respect to which we are
or hereafter become obligated to indemnify such institutions.
K. In the event that this agreement is addressed to and accepted by more than
one person, such persons shall be solidarily bound, obliged and liable to us for
the performance of all obligations hereunder and all references herein to the
words "you" and "yours" or similar references shall be deemed to be references
to such persons solidarily.
<PAGE> 5
- 5 -
This Agreement, which is subject to modification only in
writing, is supplementary to, and is to be considered as a part of, the
Agreement and shall take effect when dated, and signed by one of our officers.
DATED THE DAY OF SEPTEMBER, 1997.
BNY FINANCIAL CORPORATION-CANADA,
ACTING FOR ITSELF AS LENDER AND AS
AGENT FOR THE OTHER LENDERS FROM
TIME TO TIME PARTIES TO THE AGREEMENT.
PER: /s/ Frank Imperato
-----------------------------
We hereby agree to and accept the foregoing agreement and all of the foregoing
provisions, terms and conditions thereof.
DATED THE DAY OF SEPTEMBER, 1997.
GROUPE CEDAR CANADA INC./
CEDAR GROUP CANADA INC.
PER: /s/ Michel L. Marengere
----------------------------
DOMINION BRIDGE CORPORATION (GUARANTOR)
PER: /s/ Michel L. Marengere
----------------------------
DOMINION BRIDGE, INC. (GUARANTOR)
PER: /s/ Michel L. Marengere
----------------------------
STEEN CONTRACTORS LIMITED (GUARANTOR)
PER: /s/ Michel L. Marengere
----------------------------
<PAGE> 6
- 6 -
INDUSTRIES DAVIE INC./
DAVIE INDUSTRIES INC. (GUARANTOR)
PER: /s/ Michel L. Marengere
----------------------------
CEDAR GROUP AUSTRALIA PTY LIMITED (GUARANTOR)
PER: /s/ Michel L. Marengere
----------------------------
LES ENTREPRENEURS BECKER INC./ (GUARANTOR)
BECKER CONTRACTORS INC.
PER: /s/ Michel L. Marengere
----------------------------
BECKER CONTRACTORS LTD. (GUARANTOR)
PER: /s/ Michel L. Marengere
----------------------------
MIL INTERMODAL INC. (GUARANTOR)
PER: /s/ Michel L. Marengere
----------------------------
<PAGE> 1
EXHIBIT 10.11
G U A R A N T E E
BNY FINANCIAL CORPORATION - CANADA in its capacity as a "Lender" under the
"AGREEMENT" (as hereinafter defined) and any other Lenders from time to time
parties to the AGREEMENT by way of assignment or otherwise (hereinafter
collectively referred to as the "LENDERS")
- - AND -:
BNY FINANCIAL CORPORATION - CANADA ("BNY") in its capacity as "Agent" for the
LENDERS and any other party who from time to time may succeed BNY in its
capacity as Agent for the LENDERS (hereinafter collectively referred to as the
"AGENT")
(the LENDERS and the AGENT being hereinafter collectively referred to as the
"CREDITOR")
AND: GROUPE CEDAR CANADA INC./CEDAR GROUP CANADA INC. ("DEBTOR")
Dear Sirs:
1.0 DEFINITIONS
1.1 For purposes hereof the following terms have the following meanings:
(a) "AGREEMENT" means the Credit Agreement bearing formal date of September
12, 1997 among the DEBTOR, the CREDITOR and others as the same may be
amended, supplemented, modified, renewed, revised, restated or replaced
from time to time;
(b) "DEBTOR" means the Debtor referred to above, and all its successors,
assigns and legal representatives;
(c) "GUARANTOR" means the undersigned and its successors, assigns and legal
representatives.
(d) "OBLIGATIONS" means all debts, liabilities and obligations of or owing by
the DEBTOR to any one or more of the parties comprising the CREDITOR from
time to time, present and future, direct and indirect, absolute and
contingent, matured or not, whether arising from the AGREEMENT or any
other agreement entered into from time to time by any one or more of the
parties comprising the CREDITOR with the DEBTOR, alone
<PAGE> 2
- 2 -
or with others, or from any agreements, contracts or dealings with any
third party by which any one or more of the parties comprising the
CREDITOR may be or become in any manner whatsoever a creditor of the
DEBTOR, or howsoever otherwise arising, and whether the DEBTOR be bound
alone or with another and whether as principal or surety, and including,
without limitation, all liabilities of the DEBTOR arising as a consequence
of its failure to pay or fulfil any of the said debts or obligations and
any debts, liabilities and obligations which have been incurred or have
arisen or which may, in the future, be incurred or arise pursuant to the
AGREEMENT or otherwise.
2.0 GUARANTEE
2.1 SOLIDARY AND INDIVISIBLE OBLIGATION
For valuable consideration, receipt and sufficiency whereof are hereby
acknowledged, the GUARANTOR hereby, solidarily with the DEBTOR and with
any and all other guarantors, guarantees and binds itself in favour of the
CREDITOR, for the fulfilment and payment, when due, of all the
OBLIGATIONS. As a result of the foregoing, the GUARANTOR, the DEBTOR and
any other present or future solidary guarantor of the OBLIGATIONS may be
compelled separately to pay or fulfil the OBLIGATIONS. The obligations of
the GUARANTOR under this guarantee are indivisible.
2.2 UNLIMITED LIABILITY OF GUARANTOR
The liability of the GUARANTOR hereunder is unlimited and extends to the
full amount of the OBLIGATIONS.
2.3 WAIVER OF BENEFITS OF DIVISION AND DISCUSSION
The GUARANTOR hereby confirms that the CREDITOR will not be obliged,
before dealing with this guarantee or any security given to the CREDITOR
by the GUARANTOR, to exercise or exhaust its recourses against the DEBTOR
or against any other party or against any security held by or for the
benefit of the CREDITOR as security for the OBLIGATIONS, the GUARANTOR
hereby waiving the benefits of division and discussion.
2.4 CONTINUING NATURE OF GUARANTEE
This guarantee will be a continuing guarantee and will apply to and
guarantee any ultimate balance of the OBLIGATIONS due or remaining unpaid
or unfulfilled to any one or more of the parties comprising the CREDITOR,
subject to termination by the GUARANTOR for future liability as provided
in Section 7.1.
3.0 INFORMATION
3.1 At the request of the GUARANTOR, the CREDITOR will provide
<PAGE> 3
- 3 -
the GUARANTOR with any useful information respecting the content and the terms
and conditions of the OBLIGATIONS and the progress made in the performance of
the OBLIGATIONS. Any such request will be in writing and will be as precise as
possible. The GUARANTOR acknowledges that the CREDITOR will not be bound to
furnish any such information which has not been requested in writing.
4.0 GUARANTOR'S LIABILITY UNAFFECTED
4.1 The liability of the GUARANTOR hereunder will not be extinguished, lessened
or affected in any way by reason of the occurrence of any of the following:
(a) Any incapacity, inexistence, change of status, change of name,
amalgamation, merger or change in the structure, constitution or
membership of the DEBTOR, any of the parties comprising the CREDITOR, the
GUARANTOR or any other guarantor or if for any reason the entity which is
the creditor of any of the OBLIGATIONS is or becomes someone other than
any of the parties comprising the CREDITOR or any of the parties
comprising the CREDITOR is replaced by any other entity as a party to any
AGREEMENT or any party other than the DEBTOR becomes the debtor of any of
the OBLIGATIONS;
(b) If the DEBTOR, the GUARANTOR or any other guarantor becomes insolvent or
bankrupt or becomes subject to or seeks the protection or exercise of any
rights under any law relating to bankruptcy or insolvency;
(c) The cessation of any special duties to the extent that the present
guarantee may, in any manner, attach thereto or if the GUARANTOR ceases to
have business dealings with the DEBTOR or to hold any position or fulfil
any function whether as director, officer, administrator, partner,
employee or otherwise;
(d) If the DEBTOR sells or otherwise disposes of the whole or any portion of
its property, assets or enterprise or if any property, assets or
enterprise of the DEBTOR becomes subject to a sale or other disposition
giving rise to a distribution and the CREDITOR fails to make a claim or
makes only a partial claim or values its security in a manner which the
GUARANTOR considers inappropriate or refrains from valuing any security
held by it;
(e) Any irregularity, defect or informality in the creation of any of the
OBLIGATIONS or any increase or reduction of the OBLIGATIONS or
modification of the terms and conditions thereof;
(f) The failure of any other anticipated guarantor of the OBLIGATIONS to enter
into a guarantee in favour of the CREDITOR, or the release in whole or in
part, of any other
<PAGE> 4
- 4 -
guarantor or the termination of any guarantee of any other guarantor;
(g) If, whether or not with the GUARANTOR's knowledge, the CREDITOR grants
extensions of time, renewals, indulgences, waivers, releases, discharges,
makes any compromise or transaction or arrangement or otherwise deals with
any of the OBLIGATIONS, the DEBTOR or any other party or with any
security or guarantees held by it;
(h) The failure of the CREDITOR or any other party to take, protect, perfect
or preserve any rights, hypothecs or other security, from the DEBTOR or
any other party or the loss, diminution or unenforceability or
impossibility to realize or abstention from realization of any such
rights, hypothecs or other security, whether or not caused or resulting
from any act or omission of the CREDITOR or any person acting for or for
whom the CREDITOR may be responsible; or
(i) Any other act, omission or event whatsoever which might otherwise lessen,
affect or discharge a surety.
5.0 ACCOUNTS, IMPUTATION AND COMPENSATION
5.1 The GUARANTOR will be bound by any account settled between the CREDITOR and
the DEBTOR. Any statement by the CREDITOR of the amount owing by the DEBTOR will
constitute evidence of such indebtedness and will be binding on the GUARANTOR in
the same manner and to the same extent as it constitutes evidence and is binding
upon the DEBTOR.
5.2 The CREDITOR may apply any monies received from the DEBTOR or others or from
any security or guarantees held by the CREDITOR as it deems fit, and from time
to time modify such application.
5.3 The CREDITOR may, at its discretion, and without necessity of notice to the
GUARANTOR, set off and compensate any monies held or amounts owing by the
CREDITOR to the GUARANTOR, against any amounts owing to the CREDITOR by the
GUARANTOR under this guarantee.
6.0 POSTPONEMENT AND SUBROGATION
6.1 The GUARANTOR hereby postpones and subordinates payment of all claims, debts
and liabilities, present and future, of the DEBTOR to the GUARANTOR
("GUARANTOR'S CLAIMS") to payment in full of the OBLIGATIONS and hypothecates
and pledges the GUARANTOR'S CLAIMS in favour of the CREDITOR to the extent of an
amount equal thereto as security for the OBLIGATIONS. The GUARANTOR will not
assign or hypothecate any of the GUARANTOR'S CLAIMS to any party other than the
CREDITOR.
6.2 Should the GUARANTOR become subrogated in any hypothecs,
<PAGE> 5
- 5 -
rights or security of the CREDITOR against the DEBTOR, the property of the
DEBTOR or any third party or property of any third party, the right of the
GUARANTOR to enforce or exercise any such hypothecs, rights or security will be
suspended until the CREDITOR shall have received payment in full of the
OBLIGATIONS.
7.0 TERMINATION
7.1 This guarantee may be terminated at any time after the expiry of three (3)
years following the date of this guarantee by written notice of termination
given by the GUARANTOR to the CREDITOR and will terminate upon the death of the
GUARANTOR. Termination will take effect upon the expiry of thirty (30) days from
the date of receipt by the CREDITOR of the notice of termination or upon the
death of the GUARANTOR, as the case may be (herein referred to as the
"TERMINATION DATE"). Notwithstanding the termination of this guarantee, the
GUARANTOR giving notice of termination or the heirs, legatees, liquidators of
any succession, legal representatives, executors, trustees and beneficiaries of
the deceased GUARANTOR will remain liable and this GUARANTEE will not terminate
as regards the following OBLIGATIONS (even though subject to a condition or a
term), until they have been discharged, namely:
(a) OBLIGATIONS existing on the TERMINATION DATE or arising from transactions
having their inception prior to the TERMINATION DATE; and
(b) OBLIGATIONS arising as a result of the CREDITOR being obliged to make
advances or to incur liability in respect of the DEBTOR based upon any
agreement or undertaking, express or implied, made prior to the
TERMINATION DATE.
8.0 INVALID PAYMENTS AND EVICTION
8.1 If the CREDITOR receives any payment on account of the OBLIGATIONS which is
later set aside or required to be repaid by the CREDITOR in whole or in part,
then, to the extent of any sum not finally retained by the CREDITOR (regardless
of whether such sum is recovered from the CREDITOR by the DEBTOR, its trustee,
or any other party acting for, on behalf of or through the DEBTOR or its
representative), the amount of the payment so set aside or repaid by the
CREDITOR will form part of the OBLIGATIONS and the GUARANTOR will be liable to
the CREDITOR for repayment thereof, on demand, notwithstanding any termination
of this guarantee.
8.2 Notwithstanding any provision of law to the contrary, in the event that the
CREDITOR voluntarily accepts property in payment of the OBLIGATIONS and is
subsequently evicted therefrom or if such property is recovered from the
CREDITOR by any party, the GUARANTOR will not be discharged from its liability
under this guarantee.
<PAGE> 6
- 6 -
9.0 GENERAL
9.1 Any word herein containing the singular number will include the plural and
any word importing any gender will include the masculine, feminine and neuter
genders and any word importing a person will include a legal person,
corporation, a partnership and any other entity.
9.2 In the event that this guarantee is signed by more than one (1) GUARANTOR,
the guarantee of each GUARANTOR will be separate and distinct from the guarantee
of each other GUARANTOR in the same manner and to the same extent as if each
GUARANTOR had signed a separate document of guarantee in form and content
identical to the present guarantee. The release or termination of this guarantee
with respect to any GUARANTOR will not affect the liability of any other
GUARANTOR.
9.3 The GUARANTOR acknowledges and confirms that no representations, warranties,
inducements or undertakings were made or given to it or to the DEBTOR by the
CREDITOR in connection with this guarantee unless such representations,
warranties, inducements or undertakings were specifically made or given in a
written instrument signed by the CREDITOR or an authorized officer of the
CREDITOR. Moreover, any alteration or amendment to this guarantee or any future
undertaking by the CREDITOR, in order to be binding upon the CREDITOR, must be
made or given by way of such a written instrument.
9.4 The present guarantee is in addition to and not in substitution for nor to
be deemed substituted by any other undertakings, guarantees or security held or
which may hereafter be held by or for the benefit of the CREDITOR.
9.5 The GUARANTOR hereby agrees and confirms that the rights of each of the
parties comprising the CREDITOR are solidary and each of the parties comprising
the CREDITOR is entitled to exact the whole performance of the OBLIGATIONS from
the GUARANTOR, to give a full acquittance therefor and to exercise all rights
and recourses and to enforce any security created hereunder.
9.6 Notwithstanding anything contained herein, each of the parties comprising
the CREDITOR may act alone for all purposes under the present guarantee
including, without limitation, the exercise of any right, remedy, discretion or
rights to make any demand or decision contemplated by or provided for in the
present guarantee and the GUARANTOR shall be entitled to rely upon any act or
decision made or taken in such regard by any one of the parties comprising the
CREDITOR. Any notice, demand or other communication required or permitted to be
given under this guarantee or pursuant to applicable provisions of law shall be
valid if made or given by any one of the parties comprising the CREDITOR, acting
alone.
<PAGE> 7
- 7 -
9.7 The present guarantee will be governed and construed in accordance with the
laws of the Province of Quebec. The GUARANTOR expressly submits and consents to
the exclusive jurisdiction of the Superior Court, District of Montreal with
respect to any controversy arising out of or relating to this guarantee or any
supplement hereto or to any transactions in connection therewith.
9.8 Any demand or notice to be given to the GUARANTOR pursuant hereto shall be
delivered pursuant to the provisions of the AGREEMENT.
9.9 This guarantee shall not be considered as an indivisible whole and every
provision of this guarantee is and shall be independent of the other. In the
event that any part of this guarantee is declared invalid, illegal or
unenforceable, then the remaining terms, clauses and provisions of this
guarantee shall not be affected by such declaration and all of the remaining
clauses of this guarantee shall remain valid, binding and enforceable.
9.10 This guarantee may be referred to as bearing formal date of September 12,
1997 notwithstanding the actual date of execution.
9.11 The undersigned acknowledges having required that the present guarantee and
all documentation and notices entered into or given pursuant hereto or relating
directly or indirectly hereto be drawn up in English.
Le soussigne reconnait avoir exige la redaction en anglais du present
cautionnement ainsi que de tous documents et avis qui pourront etre executes ou
donnes a la suite de ou ayant un rapport direct ou indirect avec le present
cautionnement.
<PAGE> 8
- 8 -
AT MONTREAL THIS DAY OF SEPTEMBER 1997.
WITNESS: DOMINION BRIDGE CORPORATION
- ----------------------------------
NAME OF WITNESS PER: /s/ Michel L. Marengere
-------------------------
- ----------------------------------
SIGNATURE OF WITNESS
The DEBTOR named in the above guarantee hereby confirms the following:
1. The DEBTOR authorizes the CREDITOR to furnish the GUARANTOR with any
information relating to the DEBTOR, the AGREEMENT, and the OBLIGATIONS as
the CREDITOR, in its sole discretion, deems appropriate.
2. The DEBTOR acknowledges the postponement, subordination, pledge and
hypothecation by the GUARANTOR contained in the foregoing Guarantee and
acquiesces in the hypothecation and pledge of the GUARANTOR'S CLAIMS in
favour of the CREDITOR and undertakes that it will not make payment of any
of the GUARANTOR'S CLAIMS to the GUARANTOR until the OBLIGATIONS have been
paid in full.
AT MONTREAL, THIS DAY OF SEPTEMBER, 1997.
GROUPE CEDAR CANADA INC./
CEDAR GROUP CANADA INC.
PER: /s/ Michel L. Marengere
-----------------------
<PAGE> 1
EXHIBIT 10.12
HYPOTHECATION OF SECURITIES
BETWEEN: DOMINION BRIDGE CORPORATION, a
corporation, having a place of
business at 500 Notre-Dame Street,
in the City of Lachine, Province of
Quebec, H8S 2B2 herein acting and
represented by Michel L. Marengere,
its Chief Executive Officer, duly
authorized in virtue of a resolution
of directors, hereinafter referred
to as the
"GRANTOR"
AND: BNY FINANCIAL CORPORATION - CANADA,
a corporation, having a place of
business at 500 Rene-Levesque
Boulevard West, Suite 1400,
Montreal, Quebec, H2Z 1W7, acting
for itself as a "LENDER" in its
capacity as a "Lender" under the
"AGREEMENT" (as hereinafter defined)
and any other Lenders from time to
time parties to the AGREEMENT by way
of assignment or otherwise
(hereinafter collectively referred
to as the "LENDERS")
AND
BNY FINANCIAL CORPORATION - CANADA ("BNY")
in its capacity as "Agent" for the LENDERS
and any other party who from time to time
may succeed BNY in its capacity as Agent
for the LENDERS (hereinafter collectively
referred to as the "AGENT")
(the LENDERS and the AGENT being
hereinafter collectively referred to
as the "CREDITOR")
"CREDITOR"
WHEREAS the CREDITOR have entered into arrangements with the
"DEBTOR" (as hereinafter defined) whereby the DEBTOR is or may become indebted
to any one or more of the CREDITOR;
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WHEREAS the GRANTOR has agreed, as security for the
"OBLIGATIONS" (as hereinafter defined), to grant the security herein provided
for;
THE PARTIES AGREE AS FOLLOWS:
1.00 PREAMBLE
1.01 The preamble forms part hereof as if recited at full
length herein.
2.00 DEFINITIONS
2.01 Unless the context otherwise requires, the following expressions will have
the respective meanings hereinafter set forth:
(a) "ADDITIONAL HYPOTHEC AMOUNT" has the meaning attributed
to it in Section 3.02;
(b) "AGREEMENT" means the Credit Agreement bearing formal date of
September 12, 1997 among the DEBTOR, the CREDITOR and others
as the same may be amended, supplemented, modified, renewed,
revised, restated or replaced from time to time;
(c) "DEBTOR" means GROUPE CEDAR CANADA INC./CEDAR GROUP
CANADA INC.;
(d) "GUARANTEE" means, the Guarantee entered into by the GRANTOR
in favour of the CREDITOR bearing formal date of September 12,
1997 with respect to the indebtedness of the DEBTOR, as the
same may be amended, supplemented, revised, renewed, replaced
or restated from time to time;
(e) "EVENT OF DEFAULT" has the meaning attributed to it in
Section 7.00;
(f) "HYPOTHEC AMOUNT" means SEVENTY-FIVE MILLION DOLLARS
CANADIAN ($75,000,000.00 CDN);
(g) "INTEREST RATE" means twenty-five percent (25%) per
annum;
(h) "OBLIGATIONS" means, the indebtedness from time to time of the
GRANTOR to any one or more of the parties comprising the
CREDITOR pursuant to the GUARANTEE, the indebtedness from time
to time of the DEBTOR and/or the GRANTOR to any one or more of
the parties comprising the CREDITOR pursuant to the AGREEMENT
and any and all
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other indebtedness from time to time of the GRANTOR and/or the
DEBTOR to any one or more of the parties comprising the
CREDITOR including, without limitation, any and all sums
already advanced and to be advanced to or for the GRANTOR
and/or the DEBTOR and any indebtedness of any nature
whatsoever, present and future, direct and indirect, absolute
and contingent, matured or not, at any time owing or to become
owing by the GRANTOR and/or the DEBTOR to any one or more of
the parties comprising the CREDITOR, whether arising from the
AGREEMENT or any other agreement, undertaking or dealing
between the GRANTOR and/or the DEBTOR and any one or more of
the parties comprising the CREDITOR or from an agreement,
undertaking or dealing with any third party by which any one
or more of the parties comprising the CREDITOR may be or
become in any manner whatsoever a creditor of the GRANTOR
and/or the DEBTOR or by reason of guarantees or letters of
credit issued by or at request of any one or more of the
parties comprising the CREDITOR for the DEBTOR or indemnities
consented to by the GRANTOR and/or the DEBTOR, or howsoever
otherwise arising, and whether the GRANTOR and/or the DEBTOR
be bound alone or with another and whether as principal or
surety, and any and all interest accrued thereon and all costs
incurred by or on behalf of any one or more of the parties
comprising the CREDITOR for recovering or conserving any
property hypothecated in favour of the CREDITOR;
(i) "SECURITIES" means the SHARES together with all accessories
and accretions thereto, substitutions and replacements thereof
and all fruits and revenues emanating therefrom including,
without limitation:
(i) all certificates, options, rights, or other
distributions issued as an addition to, in
substitution for, in exchange for or in
renewal of the SHARES;
(ii) any and all dividends, whether in cash, kind
or stock, received or receivable upon or in
respect of any of the SHARES and all moneys or
other property payable or paid on account of
any return or repayment of capital in respect
thereof or otherwise distributed in respect
thereto or which shall in any way be charged
to, or payable or paid out of, the capital of
the issuer thereof;
(iii) any and all other property that may at any
time be received or receivable by or otherwise
distributed to the GRANTOR in respect of, or
in substitution for, or in addition to, or in
exchange for, any of the foregoing including,
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without limitation, all other or additional
stock or other securities or property
(including cash) paid or distributed in
respect of the SHARES by way of stock-split,
spin-off, split-up, reclassification,
combination of shares or similar arrangement;
and
(iv) any and all cash, securities and other
proceeds of the foregoing and all rights and
interests of the GRANTOR in respect thereof or
evidenced thereby;
(j) "SHARES" means all of the issued and outstanding shares of
every class of the capital stock of the DEBTOR which are at
any time owned by the GRANTOR including, without limitation,
the SPECIFIC SHARES;
(k) "SPECIFIC SHARES" means the shares in the capital stock
of the DEBTOR owned by the GRANTOR as described in
Schedule "A" hereto under the heading entitled "SPECIFIC
SHARES" together with all accessories and accretions
thereto, substitutions and replacements thereof and all
fruits and revenues emanating therefrom including,
without limitation:
(i) all certificates, options, rights, or other
distributions issued as an addition to, in
substitution for, in exchange for or in
renewal of the shares;
(ii) any and all dividends, whether in cash, kind
or stock, received or receivable upon or in
respect of any of the shares and all moneys or
other property payable or paid on account of
any return or repayment of capital in respect
thereof or otherwise distributed in respect
thereto or which shall in any way be charged
to, or payable or paid out of, the capital of
the issuer thereof;
(iii) any and all other property that may at any time
be received or receivable by or otherwise
distributed to the GRANTOR in respect of, or in
substitution for, or in addition to, or in
exchange for, any of the foregoing including,
without limitation, all other or additional
stock or other securities or property
(including cash) paid or distributed in respect
of the shares by way of stock-split, spin-off,
split-up, reclassification, combination of
shares or similar arrangement; and
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(iv) any and all cash, securities and other
proceeds of the foregoing and all rights and
interests of the GRANTOR in respect thereof or
evidenced thereby.
3.00 HYPOTHECATION
3.01 As security for the OBLIGATIONS, the GRANTOR hereby grants a
security interest in and hypothecates, in favour of the CREDITOR to the extent
of the HYPOTHEC AMOUNT with interest thereon at the INTEREST RATE, the
following:
(a) the SPECIFIC SHARES; and
(b) as a universality, to the extent not otherwise
effectively hypothecated hereunder, the SECURITIES.
3.02 ADDITIONAL HYPOTHEC
To further secure the performance and observance of all the
GRANTOR's obligations hereunder, the GRANTOR hereby hypothecates and grants a
security interest in the SECURITIES in favour of the CREDITOR to the extent of a
further amount equal to twenty-percent (20%) of the HYPOTHEC AMOUNT ("ADDITIONAL
HYPOTHEC AMOUNT").
4.00 DELIVERY OF SECURITIES
4.01 The AGENT acknowledges receipt of the certificates
representing the SPECIFIC SHARES, which have been endorsed in blank for
transfer, accompanied by transfer forms or powers of attorney duly executed in
blank. The GRANTOR consents and agrees that the CREDITOR shall hold the SPECIFIC
SHARES and any further SHARES delivered to it through the AGENT pursuant to
Section 4.02. In that regard, the AGENT acknowledges having received on the date
hereof the evidence in writing of the hypothec created hereunder.
4.02 If at any time or from time to time after the date hereof, the
GRANTOR shall acquire any additional or replacement SHARES (by purchase, stock
dividend, subscription, conversion, redemption, cancellation or otherwise), the
GRANTOR will forthwith deliver to the CREDITOR certificates representing such
additional or replacement SHARES, endorsed in blank for transfer and accompanied
by transfer forms or powers of attorney duly executed in blank by the GRANTOR.
5.00 VOTING, ETC.
5.01 Unless and until there occurs an EVENT OF DEFAULT, the GRANTOR
shall be entitled to vote any and all of the SHARES and to give consents,
waivers or ratifications in respect thereof, provided that no vote shall be cast
or any consent, waiver or ratification given or any action taken which would
violate any of
<PAGE> 6
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the terms of this agreement or any of the AGREEMENT or any instrument,
agreement or document relating to the OBLIGATIONS, or which would have the
effect of materially impairing the position or interests of the CREDITOR. All
such rights of the GRANTOR to vote and to give consents, waivers and
ratifications shall cease in case an EVENT OF DEFAULT shall occur, and Section
8.00 hereof shall become applicable. The GRANTOR agrees to grant to the CREDITOR
an irrevocable proxy in a form acceptable to the CREDITOR to vote the SHARES.
The proxy shall become effective from and after the occurrence of an EVENT OF
DEFAULT.
6.00 DIVIDENDS AND OTHER DISTRIBUTIONS
6.01 Unless an EVENT OF DEFAULT shall have occurred, without
prejudice to any prohibition with respect to the payment of dividends contained
in the AGREEMENT, all cash dividends payable in respect of the SHARES shall be
paid to the GRANTOR, provided that all cash dividends payable in respect of the
SHARES which are determined by the CREDITOR, in its absolute discretion, to
represent in whole or in part an extraordinary, liquidating or other
distribution in return of capital, shall be paid to the CREDITOR and at the
CREDITOR's option, held by it as part of the SECURITIES or applied by it against
any part of the OBLIGATIONS.
7.00 EVENTS OF DEFAULT
7.01 Each of the following events constitutes an "EVENT OF
DEFAULT" hereunder:
(a) If the GRANTOR or the DEBTOR fails to pay or fulfill any
of the OBLIGATIONS;
(b) If an "Event of Default" (as such term is defined in the
AGREEMENT) occurs.
8.00 RIGHTS OF CREDITOR
8.01 Upon the occurrence of an EVENT OF DEFAULT, the CREDITOR will
have all hypothecary rights and other remedies and recourses presently or in the
future available under law as well as all of the rights, powers and remedies
(whether vested in it by this agreement, the AGREEMENT or any other documents,
instruments or agreements relating to the OBLIGATIONS) for the protection and
enforcement of its rights in respect of the SECURITIES, and to the extent
permitted by applicable law, the CREDITOR shall be entitled, without limitation,
to exercise the following rights, which the GRANTOR hereby agrees to be
commercially reasonable:
(a) to receive all amounts payable in respect of the SECURITIES
otherwise payable under Section 6.00 to the GRANTOR and to
exercise all of the rights, powers, and remedies of the
GRANTOR in respect thereof;
(b) to vote all or any part of the SECURITIES (whether or
<PAGE> 7
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not transferred into the name of the CREDITOR) and give all
consents, waivers and ratifications in respect of the
SECURITIES and otherwise act with respect thereto as though it
were the outright owner thereof;
(c) to settle, adjust, compromise and arrange all accounts,
controversies, questions, claims and demands whatsoever
in relation to all or any part of the SECURITIES;
(d) to execute all contracts, agreements, deeds, documents and
instruments to bring, defend and abandon all actions, suits
and proceedings with respect to the SECURITIES, and to take
all actions in relation to all or any part of the SECURITIES
as the CREDITOR in its absolute discretion may determine;
(e) to become the absolute owner of the SECURITIES or any part
thereof in which event, the GRANTOR, concurrently with
surrender or at any time thereafter at the request of the
CREDITOR, will sign a voluntary Deed or agreement providing
for the CREDITOR to take in payment the SECURITIES or any part
thereof;
(f) at any time or from time to time to sell, assign and
deliver, or grant options to purchase, all or any part of
the SECURITIES in one or more parcels, or any interest
therein, upon such terms and conditions and by way of one
or more sales by private agreement, call for tenders or
public auction or combinations thereof, as the CREDITOR
sees fit, and the CREDITOR may, at any time, change or
substitute any method of sale for any other method of
sale of the SECURITIES. Notwithstanding any provision of
law to the contrary, in any call for tenders, the
CREDITOR will not be obliged to accept the highest offer or
any offer and, in the event that no offer is accepted, may
proceed to sell such SECURITIES by any other method. The
GRANTOR expressly agrees that the CREDITOR will not be
required to obtain and present to the Court any appraisals of
such SECURITIES and that such SECURITIES may be sold without
any upset price therefor;
(g) generally, to take all such other action as the CREDITOR
in its absolute discretion may determine as incidental or
conducive to any of the matters or powers mentioned in
the foregoing provisions of this Section 8.00 and which
the CREDITOR may or can do lawfully and to use the name
of the GRANTOR for the purposes aforesaid and in any
proceedings arising therefrom.
<PAGE> 8
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9.00 REMEDIES CUMULATIVE
9.01 The rights and remedies of the CREDITOR hereunder are
cumulative and not alternative and are in addition to every other right and
remedy now or hereafter existing in favour of the CREDITOR, whether by law or
otherwise.
10.00 APPLICATION OF PROCEEDS
10.01 All moneys collected by the CREDITOR upon any sale or other
disposition of the SECURITIES, together with all other moneys received by the
CREDITOR hereunder, shall be applied in respect of the OBLIGATIONS as the
CREDITOR deems best.
11.00 COSTS AND EXPENSES
11.01 The GRANTOR shall pay all reasonable out-of-pocket costs and
expenses incurred by the CREDITOR in connection with the administration,
preparation, execution and delivery of this agreement and the publication of the
CREDITOR's rights hereunder, and in connection with the preservation and
enforcement of rights under, and any renegotiation or restructuring of, this
agreement and any amendment, waiver or consent relating thereto including,
without limitation, all reasonable fees and disbursements of counsel for the
CREDITOR in connection with any of the foregoing.
12.00 NON-RESPONSIBILITY
12.01 The CREDITOR shall be deemed to have exercised reasonable care
in the custody and preservation of the SECURITIES in its possession if the
SECURITIES are accorded treatment substantially equal to that which the CREDITOR
accords its own property, it being understood that the CREDITOR shall not be
responsible for:
(a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturity, tenders or other matters
relating to the SECURITIES, whether or not the CREDITOR has or
is deemed to have knowledge of such matters; or
(b) taking any necessary steps to preserve rights against any
parties with respect to the SECURITIES.
13.00 TRANSFER BY THE GRANTOR
13.01 The GRANTOR will not sell or otherwise dispose of, grant any
option with respect to, or hypothecate, mortgage, pledge or otherwise assign,
transfer or encumber the SECURITIES or any interest therein.
14.00 REPRESENTATIONS AND WARRANTIES
14.01 The GRANTOR hereby represents and warrants that as of the date
of this agreement and at all times during which this
<PAGE> 9
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agreement is in effect:
(a) it has and will have legal title and is and will be the
registered holder of the SECURITIES;
(b) the SECURITIES are and will be free and clear of all pledges,
hypothecs, liens, mortgages, security interests, charges,
options and other encumbrances whatsoever, except the hypothec
created by this agreement;
(c) it has and will have the full power, authority and legal
right to hypothecate the SECURITIES pursuant to this
agreement;
(d) it has not ceded, assigned or transferred and will not cede,
assign or transfer its rights, interest and benefits in the
SECURITIES to any person nor has it performed any act or
executed any other instrument nor will it perform any act or
execute any other instrument which might prevent the CREDITOR
from exercising its rights under this agreement or which would
limit the CREDITOR in any such rights;
(e) no consent of any other party (including, without limitation,
any stockholder or creditor of the GRANTOR) and no order,
consent, license, permit, approval, validation or
authorization of, exemption by, notice to or registration,
recording, filing or declaration with, any governmental or
public body or authority is or will be required to be obtained
by the GRANTOR which has not or will not have been obtained in
connection with the execution, delivery or performance of this
agreement or consummation of the transactions contemplated
thereby, including, without limitation, the exercise by the
CREDITOR of the voting or other rights provided for in this
agreement or the remedies in respect of the SECURITIES
pursuant to this agreement (except as may be required in
connection with the disposition of the SECURITIES by laws
affecting the offering and sale of securities generally);
(f) the SECURITIES have been and will be duly and validly
issued, are fully paid and non-assessable;
(g) the SPECIFIC SHARES represent all of the issued and
outstanding shares owned by the GRANTOR in the capital
stock of the DEBTOR; and
(h) neither the execution and delivery of this agreement nor
the granting of the hypothec in respect of the
SECURITIES, constitutes or will constitute a violation or
breach of the documents of incorporation or the by-laws
of the GRANTOR or of any provision of any contract
<PAGE> 10
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or other instrument to which the GRANTOR is a party or of
any provision of law to which the GRANTOR is or may be
subject.
15.00 COVENANTS OF THE GRANTOR
15.01 The GRANTOR covenants and agrees that:
(a) it will defend the CREDITOR's right, title and interest
in and to the SECURITIES against the claims and demands
of all persons whomsoever;
(b) it will not, with respect to any SECURITIES, enter into any
shareholder agreements, voting agreements, voting trusts,
trust deeds, irrevocable proxies or any other similar
agreements or instruments without the prior written consent of
the CREDITOR;
(c) it will ensure that the hypothecation of SECURITIES in
favour of the CREDITOR is recorded in the securities
register of the minute book of the DEBTOR;
(d) no additional shares in the capital stock of the DEBTOR
shall be issued to any party other than the GRANTOR.
16.00 WAIVERS
16.01 No delay or failure on the part of the CREDITOR in exercising any right or
remedy hereunder shall affect such right or remedy, nor shall any single or
partial exercise hereof preclude any further exercise thereof or the exercise of
any other right or remedy. Any waiver by the CREDITOR of any of its rights or
remedies hereunder will be valid only if express and in writing. No waiver shall
be deemed to be or constitute a waiver of any other rights or remedies of the
CREDITOR. In no event will the CREDITOR's acceptance, after the full payment of
the OBLIGATIONS may have become due and payable, of any partial payment, be
deemed to alter or affect the CREDITOR's rights with respect to any subsequent
payment or default thereon. Moreover, should the CREDITOR grant or tolerate any
extension or delay for payment or performance of any obligations of the GRANTOR,
such extension, delay, indulgence or tolerance will not be deemed an
acquiescence by the CREDITOR in such default or waiver of any of the CREDITOR's
rights and remedies hereunder or in respect of any future default.
17.00 NATURE OF OBLIGATIONS AND SECURITY
17.01 Nothing contained in this agreement will be deemed to derogate from or
alter the demand nature of any of the OBLIGATIONS, except to the extent that the
CREDITOR has expressly and by separate written instrument granted a term for
payment.
17.02 The security hereby granted secures and will continue to secure the
OBLIGATIONS on a continuing and fluctuating basis and
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is and will be valid notwithstanding that the whole or any portion of the
prestations in consideration of which the GRANTOR has undertaken its obligations
towards the CREDITOR have not yet been received and notwithstanding that the
whole or any portion of the OBLIGATIONS may not yet exist.
17.03 The security hereby granted will remain in full force and effect for the
full HYPOTHEC AMOUNT and ADDITIONAL HYPOTHEC AMOUNT until such time as an
express written discharge is executed by the CREDITOR and delivered to the
GRANTOR. The hypothecs, security and rights hereby created in favour of the
CREDITOR will not be extinguished, reduced, novated or otherwise affected by any
payments made to or amounts received by the CREDITOR, directly or indirectly,
from the GRANTOR or any other party.
17.04 Should the OBLIGATIONS at any time be fully extinguished without an
express discharge of the security created hereunder having been granted, and
should new OBLIGATIONS arise, the security created hereunder will secure the new
OBLIGATIONS in the same manner and to the same extent as if there had never
occurred an extinction of the old OBLIGATIONS and the GRANTOR is and will be
obligated under the provisions hereof. The GRANTOR will be deemed to have
obligated itself for the new OBLIGATIONS pursuant to the provisions hereof and
the security herein created will secure such new OBLIGATIONS.
18.00 REGISTRATION AND PRESERVATION OF CREDITOR'S RIGHTS
18.01 The GRANTOR shall, without delay, effect the registrations required for
publication of this agreement in all registers in which, the opinion of the
CREDITOR, the registration thereof may be useful or necessary in order to
create, perfect, preserve and protect the charges created hereunder and shall,
as and when required, effect the registrations and publications, give all
notices and do all other things required for the renewal, extension or
preservation of this agreement and all documents, deeds and agreements
supplemental or ancillary hereto, as the case may be. All such registrations
shall be in form and content satisfactory to the CREDITOR and the GRANTOR shall
deliver to the CREDITOR, on demand, certificates evidencing such registrations
and renewals. Should the CREDITOR elect to effect any or all of the foregoing
registrations and publications, the GRANTOR shall cooperate with the CREDITOR,
to the extent deemed necessary or useful by the CREDITOR, in order that the
CREDITOR may effect such registrations and publications.
18.02 The GRANTOR shall:
(a) notify in advance and provide the CREDITOR with
information or details in connection with any additional
or replacement SHARES acquired by the GRANTOR (by
purchase, stock dividend, subscription, conversion,
redemption, cancellation or otherwise) or any transaction
involving the SECURITIES which may
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require registration or renewal of registration or any other
action in order to preserve or protect the rights of the
CREDITOR hereunder; and
(b) execute and deliver to the CREDITOR such supplemental
agreements or notices containing further descriptions of
any replacement or additional SHARES as well as such
deeds and documents as may, in the opinion of the
CREDITOR, be necessary or advisable to give the CREDITOR
valid and enforceable charges upon such replacement or
additional SHARES.
18.03 If the GRANTOR receives from the CREDITOR a written request or requests
that the GRANTOR cause any registration, qualification or compliance under any
securities law to be effected with respect to all or any part of the SECURITIES,
the GRANTOR as soon as practicable and at its own expense will use its best
efforts to cause such registration to be effected (and be kept effective) and
will use its best efforts to cause such qualification and compliance to be
effected (and be kept effective) as may be so requested and as would permit or
facilitate the sale and distribution of such SECURITIES, including, without
limitation, appropriate qualifications under applicable securities laws and
appropriate compliance with any other government requirements, and reasonably do
or cause to be done all such other reasonable acts and things as may be
necessary to make such sale of the SECURITIES valid and binding in compliance
with applicable securities laws. The GRANTOR will cause the CREDITOR to be kept
reasonably advised in writing as to the progress of each such registration,
qualification or compliance and as to the completion thereof, will furnish to
the CREDITOR such number of prospectuses, offering circulars or other documents
incident thereto as the CREDITOR from time to time may reasonably request, and
will indemnify the CREDITOR and all others participating in the distribution of
such SECURITIES against all claims, losses, damages and liabilities caused by
any untrue statement (or alleged untrue statement) of a material fact contained
therein (or in any related registration statement, notification or the like) or
by any omission (or alleged omission) to state therein (or in any related
transaction statement, notification or the like) a material fact required to be
stated therein or necessary to make the statements not misleading, except
insofar as the same may have been caused by an untrue statement or omission
based upon information furnished in writing to the GRANTOR by the CREDITOR
expressly for use therein.
18.04 If at any time when the CREDITOR shall determine to exercise its right to
sell all or any part of the SECURITIES pursuant to Section 8.00 hereof, such
SECURITIES or the part thereof to be sold shall not, for any reason whatsoever,
be effectively registered under any applicable securities law, the CREDITOR may,
notwithstanding the fact that such registration has not been completed, in its
sole and absolute discretion, sell such SECURITIES or part thereof by private
sale in such manner and under such circumstances as the CREDITOR may deem
necessary or
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advisable in order that such sale may legally be effected without such
registration. Without limiting the generality of the foregoing, in any such
event the CREDITOR, in its sole and absolute discretion may:
(a) proceed to make such private sale notwithstanding that a
registration statement for the purpose of registering such
SECURITIES or any part thereof shall have been filed under
such securities laws;
(b) approach and negotiate with a single possible purchaser
to effect such sale; and
(c) restrict such sale to a purchaser who will represent and
agree that such purchaser is purchasing for its own
account, for investment, and not with a view to the
distribution or sale of such SECURITIES or any part thereof.
In the event of any such sale, the CREDITOR shall incur no
responsibility or liability for selling all or any part of the
SECURITIES at a price which the CREDITOR, in its sole and
absolute discretion, may in good faith deem reasonable under
the circumstances, notwithstanding the possibility that a
substantially higher price might be realized if the sale were
deferred until after registration as aforesaid.
19.00 POWER OF ATTORNEY
19.01 The GRANTOR hereby absolutely and irrevocably constitutes and appoints
each party comprising the CREDITOR, acting alone, as the GRANTOR's true and
lawful agent and attorney-in-fact, with full power of substitution, in the name
of the GRANTOR upon the occurrence of an EVENT OF DEFAULT:
(a) to execute and do all such assurances, acts and things
which the GRANTOR ought to do but has failed to do under
the covenants and provisions contained in this agreement;
(b) to take any and all such action as such party or any of
its sub-agents, nominees or attorneys may, in its or
their sole and absolute discretion, reasonably determine
as necessary or advisable for the purpose of maintaining,
preserving or protecting the security constituted by this
agreement or any of the rights, remedies, powers or
privileges of the CREDITOR under this agreement; and
(c) generally, in the name of the GRANTOR, exercise all or
any of the powers, authorities, and discretions conferred
on or reserved to the CREDITOR by or pursuant to this
agreement, and (without prejudice to the generality of
any of the foregoing) to seal and deliver or otherwise
perfect any deed, assurance, agreement,
<PAGE> 14
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instrument or act as such party may deem proper in or for the
purpose of exercising any of such powers, authorities or
discretions. The GRANTOR hereby ratifies and confirms,
and hereby agrees to ratify and confirm, whatever lawful
acts any party comprising the CREDITOR or any of its
sub-agents or attorneys shall do or purport to do in the
exercise of the power of attorney granted pursuant to
this Section 19.00, which power of attorney, being given
for security, is irrevocable.
20.00 CREDITOR'S RIGHT TO MAKE PAYMENTS
20.01 If the GRANTOR fails to pay when due any sum payable hereunder or fails to
perform any of its obligations hereunder, whether or not the CREDITOR has
invoked any EVENT OF DEFAULT, the CREDITOR may do so on the GRANTOR's behalf
(but will not be obliged to), without notice to the GRANTOR, and the GRANTOR
will pay to the CREDITOR, on demand, all sums so paid by the CREDITOR together
with interest thereon at the INTEREST RATE. If, for any reason, the CREDITOR's
security or rights hereunder are diminished, the CREDITOR may do such things and
make such expenditures as are desirable or necessary to preserve its security or
rights, without notice to the GRANTOR, in which event the GRANTOR will pay to
the CREDITOR, on demand, all sums so paid by the CREDITOR, together with
interest thereon at the INTEREST RATE, the whole without prejudice to any other
recourse of the CREDITOR hereunder or by law.
21.00 NATURE OF OBLIGATIONS
21.01 Every obligation of the GRANTOR hereunder is and will remain indivisible
and the performance thereof in its entirety may be claimed from each of the
heirs, legatees, liquidators of any succession, trustees or legal
representatives of the GRANTOR.
21.02 If there be more than one (1) GRANTOR hereunder, all of the obligations of
the GRANTOR hereunder will be and remain solidary obligations of such persons,
each waiving the benefits of division and discussion, such that each of them may
be compelled separately to perform all of the obligations of the GRANTOR.
21.03 The GRANTOR hereby agrees and confirms that the rights of each of the
parties comprising the CREDITOR are solidary and that each of the parties
comprising the CREDITOR is entitled to exact the whole performance of the
OBLIGATIONS from the GRANTOR, to give a full acquittance therefor and to
exercise all rights and recourses and to enforce the security created hereunder.
21.04 Notwithstanding anything contained herein, each of the parties comprising
the CREDITOR may act alone for all purposes under the present agreement
including, without limitation, the exercise of any right, remedy, discretion or
rights to make any demand or decision contemplated by or provided for in the
present agreement and the GRANTOR shall be entitled to rely upon any act
<PAGE> 15
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or decision made or taken in such regard by any one of the parties comprising
the CREDITOR. Any notice, demand or other communication required or permitted to
be given under this agreement or pursuant to applicable provisions of law shall
be valid if made or given by any one of the parties comprising the CREDITOR,
acting alone.
22.00 OTHER SECURITY
22.01 The security created hereunder is in addition to and not in substitution
for nor deemed to be substituted by any other security now or hereafter held by
or for the benefit of the CREDITOR and shall not be diminished or novated or
otherwise affected by any other security or any promissory note or other
evidence of indebtedness which the CREDITOR or any party for the benefit of the
CREDITOR may have or obtain from the GRANTOR or any other person, nor shall any
other security or note or evidence of indebtedness be diminished or novated or
otherwise affected hereby.
23.00 ELECTION OF DOMICILE
23.01 Any notice to or demand upon the GRANTOR shall be given or made at the
ordinary place of business of the GRANTOR or at the address in the judicial
district referred to on the signature page of this agreement, or at the address
of such new place of business of which the GRANTOR shall have subsequently
notified the CREDITOR in writing. However, if the CREDITOR is unable to locate
the GRANTOR at such address, then any such notice or demand may be served upon
the GRANTOR at the Office of the Prothonotary of the Superior Court, District of
Montreal at which office in such event the GRANTOR elects domicile for the
purpose of this agreement.
24.00 NOTICE
24.01 Any notice, request or other communication hereunder to any party hereto
in connection with this agreement shall be given in accordance with the
provisions of the AGREEMENT.
25.00 GOVERNING LAW
25.01 This agreement shall be governed by and interpreted in accordance with the
laws of the Province of Quebec.
26.00 INTERPRETATION
26.01 Any word herein contained in the singular number will include the plural;
any word importing any gender will include the masculine, feminine and neuter
genders; any word importing a person will include a corporation, a partnership
and any other entity and vice-versa. The headings of this agreement are for
convenience of reference only and shall not affect in any manner any of the
terms and conditions hereof or the construction or interpretation of this
agreement.
<PAGE> 16
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27.00 OTHER DOCUMENTS
27.01 The GRANTOR undertakes to perform all acts and execute such deeds,
documents and agreements as may be useful or necessary or required by the
CREDITOR for purposes of giving full force and effect to the provisions hereof
or to perfect the rights of the CREDITOR hereunder or in connection with the
exercise by the CREDITOR of its rights and remedies hereunder.
28.00 SEVERABILITY
28.01 This agreement shall not be considered as an indivisible whole and every
provision of this agreement is and shall be independent of the other and in the
event that any part of this agreement is declared invalid, illegal or
unenforceable, then the remaining terms, clauses and provisions of this
agreement shall not be affected by such declaration and all of the remaining
clauses of this agreement shall remain valid, binding and enforceable.
29.00 CURRENCY CONVERSION
29.01 If, for purposes of obtaining judgment against the GRANTOR, it becomes
necessary to convert into Canadian funds an amount due hereunder in U.S. funds,
then the conversion shall be made at the rate of exchange prevailing on the last
business day in Montreal, Quebec before the day on which the judgment is
rendered.
For this purpose, "rate of exchange" means the spot rate at
which the relevant CREDITOR is able to purchase U.S. funds with Canadian funds
on the relevant date. In the event that there is a change in the rate of
exchange prevailing between the day before the day on which the judgment is
rendered and the date of payment of the amount due, the GRANTOR will pay such
additional amount, as may be necessary to ensure that the amount paid on such
date is the amount in Canadian funds which, when converted at the rate of
exchange prevailing on the date of payment, is the amount then due in U.S.
funds.
30.00 PRECEDENCE
30.01 In the event that any provisions of this agreement contradict or are
otherwise incapable of being construed in conjunction with the provisions of the
AGREEMENT, the following will apply: (a) the provisions of the AGREEMENT shall
take precedence over those contained in this agreement except that in the case
of contradiction between the AGREEMENT and the provisions of Sections 21.03 and
21.04 hereof, the latter shall take precedence; and, (b) if any act of the
GRANTOR is expressly permitted under the AGREEMENT but is prohibited under this
agreement, any such act shall be deemed to be permitted under this agreement;
the whole unless as a result thereof the hypothecs created herein or any of the
hypothecary remedies of the CREDITOR hereunder would be in any
<PAGE> 17
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way diminished or invalidated, in which case the provisions of this agreement
will govern.
31.00 FORMAL DATE
31.01 This agreement may be referred to as bearing formal date of September 12,
1997 notwithstanding the actual date of its execution.
32.00 LANGUAGE
32.01 The parties acknowledge that they have required that this agreement and
all related documents be prepared in English.
Les parties reconnaissent avoir exige que la presente
convention et tous les documents connexes soient rediges en anglais.
AT MONTREAL THIS DAY OF SEPTEMBER 1997.
DOMINION BRIDGE CORPORATION
PER: /s/ Michel L. Marengere
----------------------------
BNY FINANCIAL CORPORATION - CANADA
PER: /s/ Frank Imperato
-----------------------------
<PAGE> 18
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I N T E R V E N T I O N
For good and valuable consideration, the receipt of which is hereby acknowledged
by the DEBTOR, whereof quit, the DEBTOR hereby declares to have taken cognizance
of the foregoing Hypothecation of Securities, consents to and agrees to be bound
by the provisions contained therein insofar as same may be applicable to it.
GROUPE CEDAR CANADA INC./
CEDAR GROUP CANADA INC.
PER: /s/ Michel L. Marengere
____________________________
<PAGE> 19
SCHEDULE "A"
TO THE HYPOTHECATION OF SECURITIES
GRANTED BY IN FAVOUR OF DOMINION BRIDGE CORPORATION,
BEARING FORMAL DATE OF SEPTEMBER 12, 1997
SPECIFIC SHARES
NUMBER AND CLASS CERTIFICATE(S) NUMBER
1 Common C-1
26,220,000 Common C-2
6,300,000 Common C-3
<PAGE> 20
POWER OF ATTORNEY TO TRANSFER SHARES
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
______________________________________________________________________________
(Name of transferee)
of____________________________________________________________________________
(Address)
_______________________________________________ Shares in the capital stock of
____________________________________________________________ ("Corporation")
standing in the name of the undersigned on the books of the Corporation
represented by certificate(s) No(s) ___________________________________________
and hereby irrevocably constitutes and appoints _______________________________
the attorney of the undersigned to transfer the said certificate(s) on the books
of the Corporation with full power of substitution.
MONTREAL THIS DAY OF 199_.
/s/ Michel L. Marengere
____________________________________ ____________________________________
WITNESS
<PAGE> 1
Exhibit 10.13
HYPOTHEC ON MOVEABLE PROPERTY (GENERAL)
BETWEEN: DOMINION BRIDGE CORPORATION, a corporation,
having a place of business at 500 Notre-Dame
Street, in the City of Lachine, Province of
Quebec, H8S 2B2, herein acting and
represented by Michel L. Marengere, its
Chief Executive Officer, duly authorized in
virtue of a resolution of directors,
hereinafter referred to as the
"GRANTOR"
AND: BNY FINANCIAL CORPORATION - CANADA, a
corporation, having a place of business at
500 Rene-Levesque Boulevard West, Suite
1400, Montreal, Quebec, H2Z 1W7, acting for
itself as a "LENDER" in its capacity as a
"Lender" under the "AGREEMENT" (as
hereinafter defined) and any other Lenders
from time to time parties to the AGREEMENT
by way of assignment or otherwise
(hereinafter collectively referred to as the
"LENDERS")
AND
BNY FINANCIAL CORPORATION - CANADA ("BNY")
in its capacity as "Agent" for the LENDERS
and any other party who from time to time
may succeed BNY in its capacity as Agent for
the LENDERS (hereinafter collectively
referred to as the "AGENT")
(the LENDERS and the AGENT being
hereinafter collectively referred
to as the "CREDITOR")
WHEREAS the CREDITOR has entered into arrangements with the DEBTOR
(as hereinafter defined) whereby the DEBTOR is or may hereafter become indebted
to the CREDITOR;
WHEREAS the GRANTOR carries on an enterprise;
<PAGE> 2
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WHEREAS the GRANTOR has guaranteed the payment of any and all
indebtedness from time to time of the DEBTOR to the CREDITOR and the GRANTOR has
agreed, as security for payment of such indebtedness and for its obligations
under its guarantee, to grant the security herein provided for;
THE PARTIES AGREE AS FOLLOWS:
1.00 PREAMBLE
1.01 The preamble forms part hereof as if recited at length
herein.
2.00 DEFINITIONS
2.01 Unless the context otherwise requires, the following expressions will have
the respective meanings hereinafter set forth:
(a) "ADVERSE ENCUMBRANCE" means any hypothec, encumbrance, charge, right
or prior claim (other than the PERMITTED CHARGES) whether ranking
prior to, equal with or after the security hereby created in favour
of the CREDITOR, or any seizure or attachment, which affects the
whole or any portion of the CHARGED PROPERTY;
(b) "AGREEMENT" means the Credit Agreement bearing formal date of
September 12, 1997 among the DEBTOR, the CREDITOR and others as the
same may be amended, supplemented, modified, renewed, revised,
restated or replaced from time to time;
(c) "CHARGED PROPERTY" has the meaning attributed to it in
Section 3.01;
(d) "CLAIMS" means, collectively, all accounts receivable, book
accounts, book debts, debts, claims, monies, rentals, revenues,
incomes, loans receivable, demands, rebates, refunds, amounts owing
by or claimable from the crown, state or government or any
departments, agents or agencies thereof and choses in action which
now are or which may at any time hereafter be due or owing to or
owned by the GRANTOR or in which the GRANTOR now or hereafter has
any other interest and all security interests, hypothecs, including,
without limitation, the hypothecary rights of the GRANTOR under any
legal hypothec resulting from having taken part in the construction
or renovation of an immovable, assignments, guarantees, bills of
exchange, notes, negotiable instruments, contracts, including,
without limitation, joint venture contracts, invoices, books of
account, letters of credit and other documents and rights now held
or owned or which may be hereafter held
<PAGE> 3
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or owned by the GRANTOR or any third party on behalf of the GRANTOR
in respect of any of the foregoing and all rights of an unpaid
vendor , including rights to merchandise returned, repossessed or
recovered;
(e) "DEBTOR" means, GROUPE CEDAR CANADA INC./CEDAR GROUP CANADA INC.;
(f) "DOCUMENTS OF TITLE" means, collectively, all documents of title,
whether negotiable or non-negotiable including, without limitation,
all warehouse receipts and bills of lading in which the GRANTOR now
or hereafter has an interest;
(g) "EQUIPMENT" means, collectively, all machinery, equipment,
furniture, fixtures, materials, supplies, appliances, dyes, molds,
tanks, overhead bridge cranes, vehicles, furnaces, boilers, motors,
engines, accessories and tools now owned or hereafter acquired by
the GRANTOR, including, without limitation, the SCHEDULED EQUIPMENT,
whether or not the same be affixed to any immoveable property or
used upon or in connection therewith, together with all present and
future improvements, appurtenances and accessories thereto;
(h) "GUARANTEE" means, the Guarantee entered into by the GRANTOR in
favour of the CREDITOR bearing formal date of September 12, 1997
with respect to the indebtedness of the DEBTOR, as the same may be
amended, supplemented, revised, renewed, replaced or restated from
time to time;
(i) "HYPOTHEC AMOUNT" means the sum of SEVENTY-FIVE MILLION CANADIAN
DOLLARS ($75,000,000.00 CDN.);
(j) "INDEBTEDNESS" means, the indebtedness from time to time of the
GRANTOR to any one or more of the parties comprising the CREDITOR
pursuant to the GUARANTEE, the indebtedness from time to time of the
DEBTOR and/or the GRANTOR to any one or more of the parties
comprising the CREDITOR pursuant to the AGREEMENT and any and all
other indebtedness from time to time of the GRANTOR and/or the
DEBTOR to any one or more of the parties comprising the CREDITOR
including, without limitation, any and all sums already advanced and
to be advanced to or for the GRANTOR and/or the DEBTOR and any
indebtedness of any nature whatsoever, present and future, direct
and indirect, absolute and contingent, matured or not, at any time
owing or to become owing by the GRANTOR and/or the DEBTOR to any one
or more of the parties comprising the CREDITOR, whether arising from
the AGREEMENT or any other agreement, undertaking or dealing between
the GRANTOR and/or the DEBTOR and any
<PAGE> 4
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one or more of the parties comprising the CREDITOR or from an
agreement, undertaking or dealing with any third party by which any
one or more of the parties comprising the CREDITOR may be or become
in any manner whatsoever a creditor of the GRANTOR and/or the DEBTOR
or by reason of guarantees or letters of credit issued by or at the
request of any one or more of the parties comprising the CREDITOR
for the DEBTOR or indemnities consented to by the GRANTOR and/or the
DEBTOR, or howsoever otherwise arising, and whether the GRANTOR
and/or the DEBTOR be bound alone or with another and whether as
principal or surety, and any and all interest accrued thereon and
all costs incurred by or on behalf of any one or more of the parties
comprising the CREDITOR for recovering or conserving the CHARGED
PROPERTY (including those set forth in Sections 5.01 (b), 8.02 (b)
and 8.02 (h) hereof);
(k) "INSURANCE" means, collectively, all insurance policies relating
directly or indirectly to any of the CHARGED PROPERTY or any part
thereof and all rights and claims under all policies of insurance of
whatever nature including, without limitation, under life insurance
policies and under insurance against loss or damage;
(l) "INTANGIBLE PROPERTY" means, collectively, all incorporeal property
now owned or hereafter acquired by the GRANTOR or its interest
therein including, without limitation, the SCHEDULED INTANGIBLE
PROPERTY, and all patents and patents pending, registered and
unregistered trade marks, trade or brand names, service marks,
copyrights, industrial designs, formulae, processes, trade secrets,
goodwill, contractual rights, licences and permits;
(m) "INTEREST RATE" means twenty-five percent (25%) per annum;
(n) "INVENTORY" means, collectively, all property in stock and inventory
now owned and hereafter acquired by the GRANTOR including, without
limitation, all raw materials, goods in process, finished goods,
goods in transit and all packaging and shipping materials and all
materials and merchandise procured for the manufacture or production
thereof, including, without limitation, suits, tools and masks and
all goods, wares and merchandise held for sale, lease or resale or
furnished or to be furnished under contracts for service or used or
consumed in the business of the GRANTOR;
(o) "MONIES" means, collectively, all monies, cash, foreign currencies
and credits in which the GRANTOR now or hereafter has an interest
and all rights of the GRANTOR
<PAGE> 5
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in and to any deposit remitted by any person to the GRANTOR;
(p) "PERMITTED CHARGES" means "Permitted Liens" as such term is defined
in the AGREEMENT;
(q) "PROCEEDS" means, collectively, all property in any form derived
directly or indirectly from any dealings with any of the CHARGED
PROPERTY;
(r) "RECORDS" means, collectively, all computer programs, firmware and
software and all computer and other records and data, whether in
hard copy or otherwise, pertaining to any of the CHARGED PROPERTY
and the equipment containing same;
(s) "SCHEDULED EQUIPMENT" means any property described in Schedule "A"
hereto under the heading "SCHEDULED EQUIPMENT";
(t) "SCHEDULED INTANGIBLE PROPERTY" means any property described in
Schedule "A" hereto under the heading "SCHEDULED INTANGIBLE
PROPERTY";
(u) "SECURITIES" means, collectively, all shares, stocks, warrants,
bonds, debentures, debenture stock, and other securities in which
the GRANTOR now or hereafter has an interest.
3.00 HYPOTHEC AND ADDITIONAL HYPOTHEC
3.01 Hypothec
As security for the payment of the INDEBTEDNESS and the fulfilment
of the obligations of the GRANTOR hereunder, the GRANTOR hereby hypothecates and
grants a security interest to and in favour of the CREDITOR to the extent of the
HYPOTHEC AMOUNT with interest thereon at the INTEREST RATE, both before and
after maturity, demand, default and judgment, the following property of the
GRANTOR, wherever situate, and all renewals thereof, accretions thereto,
replacements thereof, substitutions therefor as well as everything united
thereto by accession (herein collectively referred to as the "CHARGED
PROPERTY"):
(a) As a universality, the CLAIMS;
(b) As a universality, the DOCUMENTS OF TITLE;
(c) As a universality, the PROCEEDS;
(d) As a universality, the RECORDS;
(e) As a universality, the MONIES;
<PAGE> 6
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(f) As a universality, the SECURITIES;
(g) As a universality, the INSURANCE;
(h) As a universality, the INTANGIBLE PROPERTY;
(i) As a universality, the INVENTORY;
(j) As a universality, the EQUIPMENT;
(k) As a universality, all other corporeal and incorporeal moveable and
personal property, assets, rights and undertakings of any nature and
kind, now owned or hereafter acquired by the GRANTOR.
3.02 Additional hypothec
To further secure the performance and observance of all the
GRANTOR'S obligations hereunder, the GRANTOR hereby hypothecates and grants a
security interest in the CHARGED PROPERTY in favour of the CREDITOR to the
extent of a further amount equal to twenty-percent (20%) of the HYPOTHEC AMOUNT.
3.03 Dealings with charged property
Notwithstanding the hypothecation of the CHARGED PROPERTY provided
herein until such time as the security created hereunder has become enforceable,
nothing will prevent the GRANTOR from selling, disposing of or dealing with any
of the INVENTORY in the ordinary course of its business, the whole subject to
the hypothec of the CREDITOR on any proceeds resulting from the disposition of
any INVENTORY and on any rights to such INVENTORY which are retained or
reacquired at any time by the GRANTOR.
4.00 INSURANCE
4.01 As additional security for the payment of the INDEBTEDNESS and the
performance of the GRANTOR's obligations hereunder, the GRANTOR will insure and
keep insured the CHARGED PROPERTY against loss or damage by fire and such other
perils as are customarily insured by those carrying on an enterprise similar to
that of the GRANTOR or as may from time to time be specified by the CREDITOR,
for their full insurable value, by means of a policy or policies each with loss
payable to the CREDITOR and containing a mortgage clause in form and terms
approved by the CREDITOR and issued by an insurer or insurers approved by the
CREDITOR. The GRANTOR obliges itself to effect such new insurance as the
CREDITOR may direct should the insurer(s) cease to have the approval of the
CREDITOR or should the CREDITOR be advised by the insurer or otherwise become
aware of any amendment to any policy which, in the sole and absolute discretion
of the CREDITOR, is unsatisfactory to the CREDITOR. At least ten (10) days
before the expiry or cancellation of any policy the GRANTOR will deliver to the
CREDITOR evidence of renewal or replacement thereof.
<PAGE> 7
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4.02 The GRANTOR will immediately notify the CREDITOR of any
loss of or damage to any of the CHARGED PROPERTY.
4.03 In the event that any insurance proceeds are paid to the CREDITOR,
it may, at its option, apply such proceeds in the payment or reduction of the
INDEBTEDNESS, whether or not exigible, and interest thereon, interest on
interest and all other sums owing to the CREDITOR by the GRANTOR or, at the
option of the CREDITOR, advance such proceeds to the GRANTOR, in such manner as
the CREDITOR deems advisable for the purpose of replacing, repairing or
restoring the CHARGED PROPERTY.
4.04 The GRANTOR will provide the CREDITOR with copies of all insurance
policies (including all amendments thereto and endorsements thereof) which may
be in force from time to time with respect to the CHARGED PROPERTY.
5.00 COVENANTS, REPRESENTATIONS AND WARRANTIES
5.01 The GRANTOR covenants, represents and warrants that as of the date
of this agreement and at all times during which this agreement is in effect:
(a) The GRANTOR and/or the DEBTOR will pay to the CREDITOR the
INDEBTEDNESS without the necessity of demand as and when it becomes
due and payable or on demand, if payable on a demand basis, in
accordance with the provisions of the AGREEMENT
(b) The GRANTOR will maintain the CHARGED PROPERTY in good repair and
prevent any use thereof which might diminish the value thereof or
the CREDITOR hypothec thereon, and from time to time at the request
of the CREDITOR give the CREDITOR's officers, employees and agents
access thereto for the purpose of inspection;
(c) The GRANTOR has and will have good and marketable title to the
CHARGED PROPERTY free and clear of all ADVERSE ENCUMBRANCES;
(d) The CHARGED PROPERTY is and will be kept only at the locations
indicated in Schedule "B" hereto and will not be removed or disposed
of without the prior written consent of the CREDITOR, except for
dispositions of INVENTORY in the ordinary course of the GRANTOR's
business and otherwise except in accordance with the provisions of
the AGREEMENT;
(e) Neither the execution and delivery of this agreement, nor the
granting of the hypothecs in respect of the CHARGED PROPERTY,
constitutes or will constitute a violation or breach of the
documents of incorporation or the by-laws of the GRANTOR or of any
provision of
<PAGE> 8
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any contract or other instrument to which the GRANTOR is a party or
of any provision of law to which the GRANTOR is or may be subject;
(f) The GRANTOR carries on and will carry on the enterprise referred to
in Schedule "B" and all of the CHARGED PROPERTY is and will be used
for the operation of such enterprise;
(g) None of the CHARGED PROPERTY is or will be property which is exempt
from seizure;
(h) None of the CHARGED PROPERTY is property which furnishes a main
residence or which is used by and is necessary for the life of a
household;
(i) The description of any CHARGED PROPERTY listed in Schedule "A" is
complete and accurate;
(j) The GRANTOR does not have rights with respect to any intellectual
property other than the SCHEDULED INTANGIBLE PROPERTY;
(k) The GRANTOR will not grant a hypothec on any of the CHARGED PROPERTY
in favour of any other party without the prior written consent of
the CREDITOR which it may, in its discretion, refuse, but if granted
will be subject to the beneficiary of the hypothec entering into
satisfactory arrangements with the CREDITOR including, without
limiting the generality of the foregoing, a provision in such
hypothec that upon sale of any of the CHARGED PROPERTY by or for the
account of the CREDITOR, such property will be sold free of any
hypothecs created therein, an undertaking that it will so confirm in
writing to the CREDITOR and any prospective buyer, and an
undertaking to grant mainlevee of its hypothec on such property at
the time of the sale;
(l) The GRANTOR is not the owner of, nor does the GRANTOR have rights
under, any insurance policies other than those listed in Schedule
"B";
(m) The GRANTOR and the DEBTOR shall duly observe and perform or cause
to be observed and performed each of its covenants and obligations
provided for in the AGREEMENT.
<PAGE> 9
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6.00 CREDITOR'S RIGHT TO MAKE PAYMENTS
6.01 If the GRANTOR fails to pay when due any sum payable under this
agreement or fails to perform any of its obligations hereunder, whether or not
the CREDITOR has invoked any EVENT OF DEFAULT, the CREDITOR may do so on the
GRANTOR's behalf (but will not be obliged to), without notice to the GRANTOR,
and the GRANTOR will pay to the CREDITOR, on demand, all sums so paid by the
CREDITOR together with interest thereon at the INTEREST RATE. If, for any
reason, the CREDITOR's security or rights hereunder are diminished, the CREDITOR
may do such things and make such expenditures as are desirable or necessary to
preserve its security or rights, without notice to the GRANTOR, in which event
the GRANTOR will pay to the CREDITOR, on demand, all sums so paid by the
CREDITOR, together with interest thereon at the INTEREST RATE, the whole without
prejudice to any other recourse of the CREDITOR or by law.
7.00 EVENTS OF DEFAULT
7.01 Each of the following events constitutes an "EVENT OF DEFAULT"
hereunder:
(a) Failure to pay the INDEBTEDNESS or any part thereof without the
necessity of demand as and when such sum becomes due and payable or
on demand, if payable on a demand basis;
(b) If an "Event of Default" (as such term is defined in the AGREEMENT)
occurs;
8.00 REMEDIES IN CASE OF DEFAULT
8.01 The occurrence of any one or more of the foregoing events, by the
mere lapse of time for performance and, unless expressly otherwise provided
without the necessity of any notice or other proceeding, shall constitute an
EVENT OF DEFAULT. Upon the occurrence of any EVENT OF DEFAULT (and without
prejudice to the demand nature of any of the INDEBTEDNESS), at the option of the
CREDITOR, the GRANTOR will lose the benefit of any term for payment granted by
the CREDITOR and all INDEBTEDNESS will become immediately due and payable and
the GRANTOR will, without the necessity of demand or notice (other than as may
be required by law) immediately repay the INDEBTEDNESS to the CREDITOR, failing
which, in addition to all hypothecary rights and other remedies and recourses
presently or in the future available under law:
(a) The CREDITOR may immediately take proceedings for the recovery of
all or any portion of the INDEBTEDNESS;
(b) Upon demand of the CREDITOR, the GRANTOR will surrender and abandon
the CHARGED PROPERTY, or the part thereof specified by the CREDITOR,
to the CREDITOR or such person as may be designated by the CREDITOR,
or will
<PAGE> 10
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consent in writing to turn such property over to the CREDITOR or
such person as may be designated by the CREDITOR at the time and
place specified by the CREDITOR.
8.02 Administration after surrender
In the event that the CREDITOR obtains the surrender of the whole or
any portion of the CHARGED PROPERTY and until such time as such CHARGED PROPERTY
is restored to the GRANTOR or, as regards any portion thereof, the CREDITOR has
concluded a recourse by way of taking in payment, sale by the CREDITOR, sale
under judicial authority or otherwise, then, notwithstanding any provision of
law to the contrary which may apply as a result of the CREDITOR having acquired
or being deemed to have acquired simple, full or any other administration of the
whole or any portion of the CHARGED PROPERTY:
(a) The CREDITOR will be entitled to generally delegate the whole or any
part of the administration of any CHARGED PROPERTY (including
without limitation, the exercise of all discretionary powers) to
such person(s) as the CREDITOR may designate or re-designate in the
CREDITOR's sole discretion (any such person being herein referred to
as an "ADMINISTRATOR");
(b) The CREDITOR and any ADMINISTRATOR will be entitled to reimbursement
of all costs and expenses (including, without limitation, all costs,
expenses and reasonable fees incurred by any attorneys or other
persons engaged by the CREDITOR or the ADMINISTRATOR in order to
assist in such administration or any matter pertaining thereto), as
well as all reasonable fees of the CREDITOR and the ADMINISTRATOR
incurred in such administration, all of which may be charged by the
CREDITOR against any fruits, revenues or proceeds of alienation of
the whole or any portion of the CHARGED PROPERTY;
(c) The CREDITOR or the ADMINISTRATOR may alienate any CHARGED PROPERTY
which by its nature is destined for alienation in the course of the
operation of the enterprise of the GRANTOR, by onerous title in such
manner as it, in its sole discretion, deems appropriate, the whole
notwithstanding that it may have only simple administration of the
CHARGED PROPERTY;
(d) The CREDITOR will be entitled to acquire the whole or any portion of
any CHARGED PROPERTY alienated by onerous title in the course of any
administration thereof;
(e) In the event that the CREDITOR or the ADMINISTRATOR acquires full
administration of any CHARGED PROPERTY,
<PAGE> 11
- 11 -
neither the CREDITOR nor the ADMINISTRATOR will be under any
obligation whatsoever to make such CHARGED PROPERTY productive,
increase such CHARGED PROPERTY or the value thereof or appropriate
such CHARGED PROPERTY to any purpose other than payment of the
INDEBTEDNESS;
(f) The CREDITOR and the ADMINISTRATOR will be entitled to use for their
own benefits any information which either of them may obtain by
reason of their administration of the whole or any portion of the
CHARGED PROPERTY;
(g) The CREDITOR and the ADMINISTRATOR will be entitled, whether or not
for value, to renounce to any right affecting, benefiting,
pertaining to and/or forming part of any CHARGED PROPERTY
administered by either of them;
(h) Neither the CREDITOR nor the ADMINISTRATOR will be obliged, in any
manner whatsoever, to prepare any inventory of any CHARGED PROPERTY,
insure any CHARGED PROPERTY or give any security for any CHARGED
PROPERTY or their administration thereof. Should the CREDITOR or the
ADMINISTRATOR, in its discretion, insure the whole or any portion of
any CHARGED PROPERTY, the costs and expenses of any insurance shall
form part of the costs and expenses referred to in subparagraph (b)
hereof;
(i) The CREDITOR and the ADMINISTRATOR may change the destination of the
whole or any portion of any CHARGED PROPERTY under their
administration and will not be bound to continue the use or
operation of any CHARGED PROPERTY under their administration which
produces fruits or revenues;
(j) Notwithstanding any provisions of law to the contrary, the CREDITOR
and the ADMINISTRATOR will only be obliged to render an account to
the GRANTOR upon the written request of the GRANTOR and once the
CREDITOR or ADMINISTRATOR has determined, to its satisfaction, the
details of such account.
<PAGE> 12
- 12 -
8.03 Taking in payment
In the event that the CREDITOR exercises its right to become the
absolute owner of the CHARGED PROPERTY or any part thereof, the GRANTOR,
concurrently with surrender or at any time thereafter at the request of the
CREDITOR, will sign a voluntary Deed or agreement providing for the CREDITOR to
take in payment the CHARGED PROPERTY or any part thereof. In the event that the
GRANTOR requires the CREDITOR to sell any such CHARGED PROPERTY, the GRANTOR
acknowledges that the CREDITOR will not be required to abandon its recourse of
taking in payment unless, before the expiration of the delay to surrender, the
CREDITOR: (i) shall have been furnished with security guaranteeing that the
CHARGED PROPERTY in question will be sold at a sufficiently high price for the
CREDITOR to be paid the amounts secured hereunder in full; (ii) shall have been
reimbursed the costs it has incurred; and (iii) shall have been advanced all
amounts necessary for the sale of the CHARGED PROPERTY in question.
All expenditures and improvements made by any holder of the CHARGED
PROPERTY and all payments made on account of the INDEBTEDNESS and the
accessories thereof will belong to the CREDITOR without return or compensation.
The CREDITOR will not be obliged to compensate or indemnify the GRANTOR or any
other person for any cause whatsoever.
8.04 Sale of charged property
In the event that the CREDITOR exercises its right to sell the whole
or any portion of the CHARGED PROPERTY by judicial authority or pursuant to a
sale by the CREDITOR, the following will apply:
(a) Such CHARGED PROPERTY may be sold subject to and upon such terms and
conditions (including, without limitation, terms extending credit)
by way of one (1) or more sales by private agreement, call for
tenders or public auction or combinations thereof as the CREDITOR or
the ADMINISTRATOR sees fit and the CREDITOR or the ADMINISTRATOR
may, at any time, change or substitute any method of sale for any
other method of sale of such CHARGED PROPERTY;
(b) Notwithstanding any provision of law to the contrary, in any call
for tenders, the CREDITOR or ADMINISTRATOR will not be obliged to
accept the highest offer or any offer and, in the event that no
offer is accepted, may proceed to sell such CHARGED PROPERTY by any
other method; and
<PAGE> 13
- 13 -
(c) The GRANTOR expressly agrees that the CREDITOR will not be required
to obtain or present to the Court any appraisals of such CHARGED
PROPERTY and that such CHARGED PROPERTY may be sold without any
upset price therefor.
9.00 CLAIMS
9.01 The following will apply with respect to CLAIMS:
(a) The CREDITOR will be the only party authorized and entitled to
collect, dispose of and deal with the CLAIMS and the proceeds
thereof will be dealt with in accordance with the provisions of the
AGREEMENT;
(b) the CREDITOR will have the right to collect, dispose of and deal
with the CLAIMS as it may deem expedient including, without limiting
the generality of the foregoing, to demand, sue for, enforce,
recover and receive payment of the CLAIMS and to compound,
compromise, grant extensions, take and give up securities, accept
compositions and grant releases and discharges with respect thereto,
the whole without notice to the GRANTOR and without any liability
for any loss resulting therefrom;
(c) Actions to enforce rights with respect to the CLAIMS may be
instituted by the CREDITOR, at its discretion, in its own name, in
the name of the GRANTOR, or in the name of the CREDITOR and the
GRANTOR jointly;
(d) The CREDITOR will not be obliged to inform the GRANTOR of any
irregularity in the payment of any of the CLAIMS.
9.02 All amounts collected or received by the GRANTOR in respect of the
CLAIMS will be deemed to have been collected or received by the GRANTOR as
mandatary of the CREDITOR and in trust for the CREDITOR and will be remitted to
the CREDITOR in identical form as received.
10.00 APPLICATION AND IMPUTATION OF PROCEEDS
10.01 Notwithstanding any provisions of law to the contrary, the proceeds
of enforcement of any rights of the CREDITOR with respect to the CHARGED
PROPERTY, including, without limitation, proceeds of any sale of the CHARGED
PROPERTY by the CREDITOR and collections of any CLAIMS, will be applied as
follows:
(a) To the reasonable costs and expenses incurred by or on behalf of the
CREDITOR in connection with exercising the rights of the CREDITOR;
<PAGE> 14
- 14 -
(b) To the payment of any claims ranking in priority to the rights of
the CREDITOR in respect of the CHARGED PROPERTY;
(c) To the CREDITOR in reduction of the INDEBTEDNESS, subject to its
right of imputation as provided herein.
10.02 The CREDITOR shall have the right to impute any amounts or proceeds
received by it from or for the account of the GRANTOR, whether pursuant to the
terms hereof or as a result of a judicial or other sale, or as an inducement to
grant mainlevee or discharge hereof or otherwise, against any portion of the
INDEBTEDNESS which it, in its sole discretion, determines and from time to time
to vary such determination, the whole notwithstanding any pretended contrary
imputation by the GRANTOR or by any other party.
11.00 REMEDIES CUMULATIVE
11.01 The different recourses of the CREDITOR hereunder are cumulative
and not alternative. The rights and remedies of the CREDITOR hereunder are in
addition to every other right and remedy now or hereafter existing in favour of
the CREDITOR, whether by law or otherwise.
12.00 WAIVERS
12.01 No delay or failure on the part of the CREDITOR in exercising any
right or remedy hereunder shall affect such right or remedy, nor shall any
single or partial exercise hereof preclude any further exercise thereof or the
exercise of any other right or remedy. Any waiver by the CREDITOR of any of its
rights or remedies hereunder will be valid only if express and in writing. No
waiver shall be deemed to be or constitute a waiver of any other rights or
remedies of the CREDITOR. In no event will the CREDITOR's acceptance, after the
full payment of the INDEBTEDNESS may have become due and payable, of any partial
payment, be deemed to alter or affect the CREDITOR's rights with respect to any
subsequent payment or default thereon. Moreover, should the CREDITOR grant or
tolerate any extension or delay for payment or performance of any obligations of
the GRANTOR, such extension, delay, indulgence or tolerance will not be deemed
an acquiescence by the CREDITOR in such default or waiver of any of the
CREDITOR's rights and remedies hereunder or in respect of any future default.
13.00 NATURE OF INDEBTEDNESS AND SECURITY
13.01 Nothing contained in this agreement will be deemed to derogate from
or alter the demand nature of any of the INDEBTEDNESS, except to the extent that
the CREDITOR has expressly and by separate written instrument granted a term for
payment.
13.02 The security hereby granted secures and will continue to secure the
INDEBTEDNESS on a continuing and fluctuating basis and is and will be valid
notwithstanding that the whole or any portion
<PAGE> 15
- 15 -
of the prestations in consideration of which the GRANTOR has undertaken its
obligations towards the CREDITOR have not yet been received and notwithstanding
that the whole or any portion of the INDEBTEDNESS may not yet exist.
13.03 The security hereby granted will remain in full force and effect
for the full HYPOTHEC AMOUNT and additional hypothec amount until such time as
an express written discharge is executed by the CREDITOR and delivered to the
GRANTOR. The hypothecs, security and rights hereby created in favour of the
CREDITOR will not be extinguished, reduced, novated or otherwise affected by any
payments made to or amounts received by the CREDITOR, directly or indirectly,
from the GRANTOR or any other party or as a result of any insurance indemnities
arising from loss or damage to any of the CHARGED PROPERTY or by reason of the
collection of any CLAIMS.
13.04 Should the INDEBTEDNESS at any time be fully extinguished without
an express discharge of the security created hereunder having been granted, and
should new INDEBTEDNESS arise, the security created hereunder will secure the
new INDEBTEDNESS in the same manner and to the same extent as if there had never
occurred an extinction of the old INDEBTEDNESS and the GRANTOR is and will be
obligated under the provisions hereof. The GRANTOR will be deemed to have
obligated itself for the new INDEBTEDNESS pursuant to the provisions hereof and
the security herein created will secure such new INDEBTEDNESS.
14.00 NATURE OF OBLIGATIONS
14.01 Every obligation of the GRANTOR hereunder is and will remain
indivisible and the performance thereof in its entirety may be claimed from each
of the heirs, legatees, liquidators of any succession, trustees or legal
representatives of the GRANTOR.
14.02 If there be more than one (1) GRANTOR hereunder, all of the
obligations of the GRANTOR hereunder will be and remain solidary obligations of
such persons, each waiving the benefits of division and discussion, such that
each of them may be compelled separately to perform all of the obligations of
the GRANTOR.
14.03 The GRANTOR hereby agrees and confirms that the rights of each of
the parties comprising the CREDITOR are solidary and that each of the parties
comprising the CREDITOR is entitled to exact the whole performance of the
INDEBTEDNESS from the GRANTOR, to give a full acquittance therefor and to
exercise all rights and recourses and to enforce the security created hereunder.
14.04 Notwithstanding anything contained herein, each of the parties
comprising the CREDITOR may act alone for all purposes under the present
agreement including, without limitation, the exercise of any right, remedy,
discretion or rights to make any demand or decision contemplated by or provided
for in the present agreement and the GRANTOR shall be entitled to rely upon any
act
<PAGE> 16
- 16 -
or decision made or taken in such regard by any one of the parties comprising
the CREDITOR. Any notice, demand or other communication required or permitted to
be given under this agreement or pursuant to applicable provisions of law shall
be valid if made or given by any one of the parties comprising the CREDITOR,
acting alone.
15.00 OTHER SECURITY
15.01 The security created hereunder is in addition to and not in
substitution for nor deemed to be substituted by any other security now or
hereafter held by or for the benefit of the CREDITOR and shall not be diminished
or novated or otherwise affected by any other security or any promissory note or
other evidence of indebtedness which the CREDITOR or any party for the benefit
of the CREDITOR may have or obtain from the GRANTOR or any other person, nor
shall any other security or note or evidence of indebtedness be diminished or
novated or otherwise affected hereby.
16.00 NOTICE
16.01 Any notice, request or other communication hereunder to any party
hereto in connection with this agreement shall be made and delivered in
accordance with the provisions of the AGREEMENT.
17.00 GOVERNING LAW & JURISDICTION
17.01 This agreement shall be governed by and interpreted in accordance
with the laws of the Province of Quebec. The GRANTOR expressly submits and
consents to the exclusive jurisdiction of the Superior Court, District of
Montreal, with respect to any controversy arising out of or relating to this
agreement or any supplement hereto or to any transaction in connection
therewith.
18.00 INTERPRETATION
18.01 Any word herein contained in the singular number will include the
plural; any word importing any gender will include the masculine, feminine and
neuter genders; any word importing a person will include a corporation, a
partnership and any other entity and vice-versa. The headings of this agreement
are for convenience of reference only and shall not affect in any manner any of
the terms and conditions hereof or the construction or interpretation of this
agreement.
<PAGE> 17
- 17 -
19.00 OTHER DOCUMENTS
19.01 The GRANTOR undertakes to perform all acts and enter into all
documentation which may be useful or necessary or required by the CREDITOR for
purposes of giving full force and effect to the provisions hereof or to perfect
the rights of the CREDITOR hereunder including, without limitation, the right to
recover and collect the CLAIMS and to exercise its hypothecary remedies with
respect thereto.
20.00 SEVERABILITY
20.01 This agreement shall not be considered as an indivisible whole and
every provision of this agreement is and shall be independent of the other. In
the event that any part of this agreement is declared invalid, illegal or
unenforceable, then the remaining terms, clauses and provisions of this
agreement shall not be affected by such declaration and all of the remaining
clauses of this agreement shall remain valid, binding and enforceable.
21.00 CURRENCY CONVERSION
21.01 If, for purposes of obtaining judgment against the GRANTOR, it
becomes necessary to convert into Canadian funds an amount due hereunder in U.S.
funds, then the conversion shall be made at the rate of exchange prevailing on
the last business day in Montreal, Quebec before the day on which the judgment
is rendered.
For this purpose, "rate of exchange" means the spot rate at which
the relevant CREDITOR is able to purchase U.S. funds with Canadian funds on the
relevant date. In the event that there is a change in the rate of exchange
prevailing between the day before the day on which the judgment is rendered and
the date of payment of the amount due, the GRANTOR will pay such additional
amount as may be necessary to ensure that the amount paid on such date is the
amount in Canadian funds which, when converted at the rate of exchange
prevailing on the date of payment, is the amount then due in U.S. funds.
22.00 PRECEDENCE
22.01 In the event that any provisions of this agreement contradict or
are otherwise incapable of being construed in conjunction with the provisions of
the AGREEMENT, the following will apply: (a) the provisions of the AGREEMENT
shall take precedence over those contained in this agreement except that in the
case of contradiction between the AGREEMENT and the provisions of Sections 14.03
and 14.04 hereof, the latter shall take precedence; and, (b) if any act of the
GRANTOR is expressly permitted under the AGREEMENT but is prohibited under this
agreement, any such act shall be deemed to be permitted under this agreement;
the whole unless as a result thereof the hypothecs created herein or any of the
hypothecary remedies of the CREDITOR hereunder would be in any
<PAGE> 18
- 18 -
way diminished or invalidated, in which case the provisions of this agreement
will govern.
23.00 FORMAL DATE
23.01 This agreement may be referred to as bearing formal date of
September 12, 1997 notwithstanding the actual date of its execution.
24.00 LANGUAGE
24.01 The parties acknowledge that they have required that this agreement
and all related documents be prepared in English.
Les parties reconnaissent avoir exige que la presente convention et
tous les documents connexes soient rediges en anglais.
AT MONTREAL, THIS DAY OF SEPTEMBER 1997.
DOMINION BRIDGE CORPORATION
PER: /s/ Michel L. Marengere
-----------------------
BNY FINANCIAL CORPORATION - CANADA
PER: /s/ Frank Imperato
-----------------------
<PAGE> 19
SCHEDULE "A"
TO THE HYPOTHEC ON MOVEABLE PROPERTY (GENERAL)
GRANTED BY DOMINION BRIDGE CORPORATION
IN FAVOUR OF BNY FINANCIAL CORPORATION - CANADA, BEARING FORMAL
DATE OF SEPTEMBER 12, 1997
I. SCHEDULED EQUIPMENT
- NIL -
II. SCHEDULED INTANGIBLE PROPERTY
- NIL -
<PAGE> 20
SCHEDULE "B"
TO THE HYPOTHEC ON MOVEABLE PROPERTY (GENERAL)
GRANTED BY DOMINION BRIDGE CORPORATION
IN FAVOUR OF BNY FINANCIAL CORPORATION - CANADA,
BEARING FORMAL DATE OF SEPTEMBER 12, 1997
I. LOCATION OF CHARGED PROPERTY
500 Notre-Dame Street
Lachine, Quebec
H8S 2B2
II. ENTERPRISE CARRIED ON BY THE GRANTOR
Holding Company
III. INSURANCE POLICIES
NAME OF INSURANCE CO. POLICY NO. TYPE OF INSURANCE
The Continental Insurance SSP-7627 Marine Package
Policy
Company (through M.O.A.C.)
Liberty International Canada SSP-7627 Marine Package
Policy
The London Assurance SSP-7627 Marine Package
Policy
(through Wm. H. McGee)
Boreal Property & Casualty SSP-7627 Marine Package
Policy
Insurance Company
(through Marine Underwriters
Canada Limited)
Gerling Global General SSP-7627 Marine Package
Policy
Insurance Company
CIGNA Insurance Company SSP-7627 Marine Package
Policy
of Canada
The Maritime Insurance SSP-7627 Marine Package
Policy
Company Limited
(through Eastern Marine
Underwriters)
Royal Insurance SSP-7627 Marine Package
Policy
<PAGE> 21
- 21 -
CIGNA Insurance Company SSP-7594 First & Second
Excess
of Canada Property
Liberty International Canada SSP-7594 First & Second
Excess
Property
<PAGE> 22
SCHEDULE "B"
TO THE HYPOTHEC ON MOVEABLE PROPERTY (GENERAL)
GRANTED BY DOMINION BRIDGE CORPORATION
IN FAVOUR OF BNY FINANCIAL CORPORATION - CANADA,
BEARING FORMAL DATE OF SEPTEMBER 12, 1997
III. INSURANCE POLICIES (CONT'D)
NAME OF INSURANCE CO. POLICY NO. TYPE OF INSURANCE
L'Assurance Royale Canada 7190398 Boiler & Machinery
CIGNA Insurance Company
of Canada CGL 022446 General Liability
Continental Insurance Company
of Canada (Lombard General
Insurance Company of Canada) CAE 8038558 Automobile
Liability
The Continental Insurance
Company (through M.O.A.C.) SSP-7636 Bumbershoot
Liability
Summerset Marine, Inc. SSP-7636 Bumbershoot
Liability
Reliance National SSP-7636 Bumbershoot
Liability
The Guarantee Company of
North America 920071 Crime
<PAGE> 1
Exhibit 11
DOMINION BRIDGE CORPORATION
COMPUTATIONS OF EARNINGS PER COMMON AND
COMMON-SHARE EQUIVALENT
(In thousands of U.S. dollars except share data)
- ---------------------------------------------------
<TABLE>
<CAPTION>
Year ended
September 30,
1997
<S> <C>
Income applicable to common stock $(22,320)
- -----------------------------------------------------------------------------------
Primary shares:
Average number of common shares outstanding during the period 28,834,000
Common-share equivalents attributable to options and preferred stock --
- -----------------------------------------------------------------------------------
Total common shares and common-share equivalents 28,834,000
- -----------------------------------------------------------------------------------
Primary earnings per common share and common-share equivalent (0.77)
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year ended
September 30,
1996
<S> <C>
Income applicable to common stock
- -----------------------------------------------------------------------------------
Fully diluted shares:
Average number of common shares outstanding during the period 18,174,000
Common-share equivalents attributable to options and preferred stock --
Dilutive preferred shares --
- -----------------------------------------------------------------------------------
Total common shares and common-share equivalents 18,174,000
- -----------------------------------------------------------------------------------
Fully diluted earnings per common share and common-share equivalents (.55)
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
Re: Dominion Bridge Corporation
We consent to the incorporation by reference into (i) post-
effective amendment on Form S-3 to the Registration Statement on Form SB-2
(Commission File No. 33-88796) of Dominion Bridge Corporation, formerly Cedar
Group, Inc. (the "Company") of our report dated December 16, 1997, except as to
Note 21 which is as of January 16, 1998, on the financial statements of the
Company as of and for the fiscal years ended September 30, 1997 and 1996
appearing in the Annual Report on Form 10-K for the year ended September 30,
1997 and 1996 appearing in the Annual Report on Form 10-K.
Chartered Accountants
January 16, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference into post-
effective amendment on Form S-3 to the Registration Statement on Form SB-2
(Commission File No. 33-88796) of Dominion Bridge Corporation (formerly Cedar
Group, Inc.) (the "Company") of our report dated December 20, 1995 on the
consolidated financial statements of the Company for the fiscal year ended
September 30, 1995, included in the Form 10-K of the Company for the year ended
September 30, 1997 filed with the Securities and Exchange Commission.
By: /s/ ERNST & YOUNG
-----------------
Ernst & Young
Montreal, Canada
Dated: January 16, 1998
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 9,021
<SECURITIES> 0
<RECEIVABLES> 108,190
<ALLOWANCES> (234)
<INVENTORY> 47,621
<CURRENT-ASSETS> 170,460
<PP&E> 79,249
<DEPRECIATION> (27,422)
<TOTAL-ASSETS> 242,764
<CURRENT-LIABILITIES> 167,205
<BONDS> 0
0
0
<COMMON> 34
<OTHER-SE> 35,365
<TOTAL-LIABILITY-AND-EQUITY> 242,764
<SALES> 567,578
<TOTAL-REVENUES> 567,578
<CGS> 518,955
<TOTAL-COSTS> 580,514
<OTHER-EXPENSES> 2,824
<LOSS-PROVISION> -
<INTEREST-EXPENSE> 5,215
<INCOME-PRETAX> (15,310)
<INCOME-TAX> 4,383
<INCOME-CONTINUING> (11,756)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,320)
<EPS-PRIMARY> (0.77)
<EPS-DILUTED> -
</TABLE>
