Royal Bank of Canada
L.James Blattman Business Banking Centre
Senior Account Manager 90 Sparks Street, P.O. Box 746, Station B
Advanced Technology Ottawa, Ontario K1P 5T6
January 7, l994 Transit 01196
Fax: (613) 564-4527
Toll Free: 1-800-267-0305
Gandalf Technologies Inc.
130 Colonnade Road South
Nepean, Ontario
K2E 7M4
Attention: Mr. Walter MacDonald
Vice-President, Finance
Dear Sirs:
Royal Bank of Canada (the "Bank") is pleased to offer Gandalf
Technologies Inc. (the "Borrower") the following credit facilities
(the "Credit Facility"), which, upon your acceptance shall
supersede and cancel the credit facilities provided to the Borrower
in our letter agreement of September 16, 1993. The Credit Facility
shall be governed by the following terms and conditions:
1. Definitions:
The definitions attached hereto in Schedule "A" are
incorporated in this agreement by reference as if set out in full
herein and unless otherwise provided, all accounting terms herein
shall be interpreted in accordance with GAAP.
2. Credit Facility:
The Credit Facility is available in the following segments
as follows:
Segment 1
Letters of Credit in Canadian or US Dollars ("L/Cs");
Segment 2
Foreign exchange forward contracts ("FEF Contracts").
Segment 3
(a) Royal Bank U.S. Base Rate based loans in US
Dollars ("RBUSBR Loans"),
(b) Royal Bank Prime based loans in Canadian Dollars
("RBP Loans"),
(c) Libor based loans in US Dollars ("Libor Loans"),
(d) Banker's Acceptances in Canadian Dollars
("B/As"), and
(e) Letters of Credit in Canadian or US Dollars
("L/Cs").
Each use of the Credit Facility by way of any of the
foregoing methods is referred to as a "Borrowing". The face amount
of each Borrowing outstanding shall be used to determine the amount
of Borrowings outstanding under the Credit Facility at any time
with the exception that the amount of Borrowings ascribed to FEF
Contracts shall be determined by the Bank, in its sole discretion,
from time to time and advised to the Borrower upon request.
3. Amount:
The amount available under the Credit Facility (the "Amount")
shall not exceed:
Segment 1 $1,350,000 or the Equivalent Amount in US Dollars
Segment 2 $6,500,000 or the Equivalent Amount in US Dollars
Segment 3 the lesser of:
(a) US $4,500,000 or the Equivalent Amount in
Canadian Dollars
(b) the Margin Requirement
4. Purpose:
The Borrower shall use the Credit Facility for the purpose of
accommodating:
Segment 1 L/C requirements
Segment 2 Foreign exchange hedging activities
Segment 3 General operating requirements.
5. Availability:
Borrowings under the Credit Facility are available on any
Business Day through the Branch of Account.
During the term of the Credit Facility, the Borrower may
borrow, repay and reborrow hereunder at any time, unless otherwise
provided.
FEF Contracts may not have maturities exceeding one year.
After the Maturity Date, the Credit Facility shall convert
to a demand facility, the Bank may cancel any undrawn portion of
the Amount at any time and all Borrowings outstanding shall be due
and payable on demand by the Bank.
6. Interest Rates and Fees:
(a) The interest rates applicable to the Credit Facility
shall be RBP, RBUSBR, Libor or RBPAF, as applicable, plus an
interest component (the "Fluctuating Interest Component") which
shall be determined by the profitability of the Borrower during its
previous fiscal quarter(s). The Fluctuating Interest Component
shall be set on a quarterly basis in accordance with the following
schedule, effective on the first day of the third month following
the end of such fiscal quarter, subject to receipt of the
information stipulated in Section 23 (d) (ii), failing which the
Borrower shall thereafter be conclusively deemed to have incurred
a net loss during such previous fiscal quarter.
Fluctuating Interest Component:
No. of
Consecutive
Profitable RBP RBUSBR Libor
Quarters Loans Loans Loans B/A's
one or less 1.375% 1.375% 2.375% 1.375%
two 1.00% 1.00% 2.00% 1.00%
three .75% .75% 1.75% .75%
four or more .50% .50% 1.25% .50%
(b) L/C fees to be quoted by the Bank at time of issue of
each L/C.
7. Calculation and Payment of Interest and Fees:
(a) RBP and RBUSBR Loans:
The Borrower shall pay interest on each RBP Loan in
Canadian Dollars and interest on each RBUSBR Loan in US Dollars
monthly in arrears on the first Business Day following the 24th of
each month. Such interest will accrue and be computed daily on the
daily closing balance on the basis of a year of 365 days. Any
change in RBP or RBUSBR shall be effective as of the opening of
business on the day such change takes place.
(b) Libor Loans:
The Borrower shall pay interest on each Libor Loan in
U.S. Dollars in arrears on each Libor Interest Date. Such
interest will accrue and be computed daily on the basis of a year
of 360 days.
(c) B/As:
The Borrower shall pay acceptance fees in Canadian
Dollars at the rates provided for above in advance on the date of
issue of each B/A. Acceptance fees shall be calculated on the face
amount of the B/A issued and based upon the number of days in
the term thereof and a year of 365 days.
(d) L/C Fees:
The Borrower shall pay an L/C fee on the date of
issuance of such L/C in the currency in which such L/C is issued.
Such fee shall be calculated on the face amount of the L/C issued
and based on the number of days in the term thereof and a year
of 365 days.
(e) Operation of Account Fee:
The Borrower shall pay fees of $100 and US$100 payable
monthly in arrears on the first day of each month to compensate the
Bank for the expense of revolving the Borrower's accounts.
(f) Standby Fee:
A standby fee equal to 3/16 of 1% per annum calculated
on the unused portion of Segment 3 is payable monthly in arrears
within the first five business days of each month.
(g) Arrangement fee:
An arrangement fee of $20,000 is payable upon
acceptance of this agreement. The arrangement fee is
non-refundable and will be deemed to have been earned by the Bank
upon acceptance of this offer, to compensate for time, effort and
expense incurred by the Bank to approve these facilities.
(h) Monitoring Fee:
The Borrower shall pay a fee of $250. monthly in
arrears on the first day of each month to compensate the Bank for
the cost of monitoring, reviewing and analyzing financial reports
of the Borrower and its Material Subsidiaries.
(i) Interest Act (Canada):
The annual rates of interest or fees to which the
rates calculated in accordance with this Agreement are equivalent,
are the rates so calculated multiplied by the actual number of
days in the calendar year in which such calculation is made
and divided by 365 or, in the case of Libor Loans, 360.
8. Time and Place of Payment:
Payments of principal, interest, fees and all other amounts
payable by the Borrower pursuant to this Agreement shall be paid at
the Branch of Account in immediately available funds in Canadian
Dollars except as otherwise herein provided. Each payment under
this Agreement shall be made for value on the day such payment is
due, provided that if any such day is not a Business Day such
payment shall be deemed for all purposes of this Agreement to be
due on the Business Day next following such day and all interest
and other fees shall continue to accrue until payment. Interest
and fees payable under this Agreement are payable both before and
after any or all of default, demand and judgment.
9. Withholding Taxes:
All payments required under this Credit Facility shall be
made free and clear of and without any withholding on account of
any taxes or other charges of any nature or kind whatsoever. If
any such taxes or charges are required to be withheld from any
payment made hereunder, the Borrower shall pay an additional amount
such that the net amount received by the Bank shall be equal to the
amount which would have been received if no such withholding were
required to be made.
10. Exchange Rate Fluctuations:
If, in the sole determination of the Bank, due to exchange
rate fluctuations or for any other reason, the value of Borrowings
outstanding under the Credit Facility, when converted to Canadian
Dollars, exceeds the Amount as of the 25th day of any month, the
Borrower shall either repay or otherwise retire the outstanding
Borrowings to the extent of the amount of such excess, or
shall secure the amount of such excess in a manner which is
satisfactory to the Bank.
11. Repayment:
Borrowings are repayable on the later of the Maturity Date or
the date of any demand by the Bank, provided that on or prior to
the Maturity Date the Bank may demand repayment pursuant to Section
24 hereof, and in such event, Borrowings shall be payable upon such
demand.
After the Maturity Date, all Borrowings made hereunder shall
be due and payable on demand by the Bank.
Upon any demand by the Bank hereunder, the Borrower shall
pay all amounts outstanding hereunder including, without
limitation, an amount equal to the aggregate of the face amounts of
all B/As and L/Cs and the amount advised by the Bank, pursuant to
Section 2 hereof, with respect to FEF Contracts which are unmatured
or unexpired, which amount shall be held by the Bank as collateral
security for the Borrower's obligations to the Bank with respect
thereto. With respect to such unmatured or unexpired B/As and L/Cs
and FEF Contracts, the Borrower will have the further obligation to
execute such security documents as the Bank may reasonably require.
12. Conversion:
The Borrower may convert a Borrowing into another basis of
Borrowing provided that no Event of Default has occurred and is
continuing and that the conditions for borrowing by way of such
instruments are fulfilled. Libor Loans may only be converted on
the last day of the relevant Libor Interest Period, B/As may only
be converted on their respective maturity dates and L/Cs may only
be converted on their expiry dates or such earlier date as agreed
by the Borrower, Bank and the beneficiary thereof.
13. Prepayment:
Libor Loans may only be prepaid on the last day of the
relevant Libor Interest Period and B/As may only be prepaid on
their respective maturity dates.
14. Evidence of Indebtedness:
The Bank shall open and maintain at the Branch of Account
accounts and records evidencing the Borrowings made available to
the Borrower by the Bank under this Agreement. The Bank shall
record the principal amount of each Borrowing, the payment of
principal and interest and all other amounts owing to the Bank.
The Bank's accounts and records constitute, in the absence of
manifest error, conclusive evidence of the indebtedness of the
Borrower to the Bank.
The Borrower authorizes and directs the Bank to automatically
debit any bank account of the Borrower for all amounts payable by
the Borrower to the Bank including, without limitation, the
repayment of all amounts due under this Agreement and all charges
for the keeping of such bank account.
This provision shall be interpreted as a separate contract
between the parties, independent of all other terms of this
Agreement and shall remain in full force and effect notwithstanding
that this Agreement shall have otherwise ceased to have any force
or effect.
15. Operating Account:
Pursuant to a central banking offset agreement dated on or
about April 1, 1993 between the Borrower, Gandalf Canada Ltd.
("GCL") and the Bank, the Bank shall establish an account in each
of Canadian Dollars and US Dollars (each a "Group Account"). If
the balance in a Group Account:
(a) is a credit, the Bank may apply at any time in its
discretion, the amount of such credit or any part thereof, rounded
to the nearest $100,000, or US$100,000, as applicable as a
repayment of Borrowings outstanding under Segment 3 hereunder, or
(b) is a debit, the Bank shall, provided that Borrowings
under Segment 3 hereunder are available, make available a Borrowing
by way of an RBP or RBUSBR Loan in an amount, rounded to the
nearest $100,000 or US$100,000, as applicable, as required to
place the affected Group Account at not less the balance set
out in this paragraph.
In either instance, a minimum net credit balance of $100,000
or US$100,000, as applicable as adjusted from time to time will be
maintained in each Group Account.
16. Libor Loan Conditions:
The Borrower may borrow by way of Libor Loan subject to the
following conditions:
(a) Libor Loans shall be made in minimum amounts of
US$1,000,000, as applicable or larger whole multiples of US
$100,000, as applicable;
(b) the Borrower may select the Libor Interest Period
applicable to any Libor Loan and shall notify the Bank of such
Libor Interest Period when giving notice pursuant to Schedule "B";
(c) if the Borrower fails to select and to notify the Bank
of the Libor Interest Period applicable to any Libor Loan, the
Borrower shall be deemed to have selected a 3 month Libor
Interest Period;
(d) the Borrower shall indemnify the Bank against any
loss, cost or expense (including without limitation, any loss
incurred by the Bank in liquidating or redeploying deposits
acquired to fund or maintain any Libor Loan) incurred by the Bank
as a result of:
(i) repayments, prepayments, conversions or
rollovers of a Libor Loan other than on the last day of the Libor
Interest Period applicable to such Libor Loan, or
(ii) failure to draw down a Libor Loan on the
requested date;
(e) if the Bank determines, which determination is final,
conclusive and binding upon the Borrower, that:
(i) adequate and fair means do not exist for
ascertaining the rate of interest on a Libor Loan,
(ii) the making or the continuance of a Libor Loan
has become impracticable by reason of circumstances which
materially and adversely affect the London interbank market,
(iii) deposits in US Dollars, as applicable, are not
available to the Bank in the London interbank market in sufficient
amounts in the ordinary course of business for the applicable Libor
Interest Period to make or maintain a Libor Loan during such Libor
Interest Period, or
(iv) the cost to the Bank of making or maintaining a
Libor Loan does not accurately reflect the effective cost to
the Bank thereof and if the costs to the Bank are increased or the
income receivable by the Bank is reduced in respect of a Libor
Loan,then the Bank shall promptly notify the Borrower of such
determination and the Borrower shall, prior to the next Interest
Determination Date, notify the Bank as to the basis of Borrowing it
has selected in substitution for such Libor Loan. If the Borrower
has not so notified the Bank, such Libor Loan will automatically be
converted into an RBUSBR Loan on the expiry of the then current
Libor Interest Period.
17. B/A Conditions:
The Borrower may borrow by way of B/A subject to the
following conditions:
<APGE>
(a) B/As shall be issued and mature on a Business Day and
shall be issued in minimum face amounts of $100,000 for terms of
not less than 30 and not more than 365 days with each issue being
for an aggregate face amount of $500,000 or such larger amount
as is a whole multiple of $100,000;
(b) the Bank may, in its sole discretion, refuse to accept
the Borrower's drafts or limit the amount of any B/A issued at any
time;
(c) the Borrower shall, by no later than 12:00 (noon) on
the day on which a B/A becomes payable, pay to the Bank at the
Branch of Account an amount equal to the face amount of such B/A;
(d) if any maturing B/A is paid by the Bank with its own
funds, then as of the date of such payment, the B/A will be deemed
to be converted into an RBP Loan hereunder in the face amount of
such B/A;
(e) in the event that there is any inconsistency at any
time between the terms of this Agreement and the terms of the B/A
Undertaking, the terms hereof shall govern.
18. L/C Conditions:
The Borrower may borrow by way of L/C subject to the
following conditions:
(a) the Bank may, in its sole discretion, refuse to issue
L/Cs at any time;
(b) each L/C shall expire on a Business Day and shall have
a term of not more than 365 days;
(c) prior to the issue of an L/C, the Borrower shall
execute a duly authorized application with respect thereto in form
and substance satisfactory to the Bank, and each L/C shall be
governed by the terms and conditions of the relevant application
for such instrument;
(d) the Borrower shall, by no later than 12:00 (noon) on
any day on which a drawing is made under an L/C, pay to the Bank at
the Branch of Account an amount equal to the face amount of
such drawing, and if the Borrower fails to make such payment,
the face amount of such drawing shall be converted, at the
option of the Bank into a loan with interest at either RBP or
RBUSBR;
(e) an L/C can only be revoked prior to its expiry date
with consent of the Borrower, Bank and the beneficiary thereof;
(f) in the event that there is any inconsistency at any
time between the terms of this Agreement and the terms of the
application for L/C, the terms thereof shall govern.
19. Increased Costs:
If, in the reasonable opinion of the Bank, the Bank is now or
hereafter becomes subject to, or there is a change in:
(a) any reserve, special deposit, deposit insurance, or
similar requirement against assets of, or deposits in or for the
account of, or credit extended by, or any acquisition of funds
by, the Bank,
(b) any reserve, special deposit, or similar requirement
with respect to all or any of the Borrowings or the undrawn portion
of all or any part of the Credit Facility,
(c) taxation of, or the basis of, taxation of any payments
due to the Bank hereunder (except for taxes on the overall net
income of the Bank) or taxation on reserves or deemed reserves with
respect to all or any part of the Credit Facility,
(d) any requirement relating to capital adequacy, or
(e) any other condition imposed by Applicable Law or any
interpretation of Applicable Law by an entity charged with the
administration thereof or any other condition with which
financial institutions operating in Canada are accustomed to
comply or have generally complied, whether or not having the
force of law, and the result of any of the foregoing, in the
sole determination of the Bank, is to increase the cost to, or to
reduce any amount received or receivable by, the Bank hereunder, or
to reduce the Bank's effective return hereunder to a level below
that which the Bank could have otherwise achieved (using any
reasonable averaging and attribution method), the Bank shall
determine that amount of money which shall compensate it for such
increase in cost or reduction in income or reduction in rate of
return on the Bank's capital, and the Borrower shall pay to the
Bank upon demand such amount in respect of such increased cost or
reduction as the Bank may determine to be required to compensate
the Bank. The Bank's determination of such increased cost or
reduction shall be conclusive absent manifest error.
20. Illegality:
If the introduction of or any change in Applicable Law makes
it unlawful, or prohibited for the Bank, in its sole opinion, to
perform its obligations under this Agreement, the Bank may, by
written notice to the Borrower, terminate its obligations under
this Agreement, and the Borrower shall prepay the Borrowings
immediately or at the end of such period as the Bank may agree,
together with all interest and fees which have accrued to the date
of payment.
21. Conditions Precedent to Disbursement:
(a) The obligation of the Bank to make available any
Borrowing is subject to and conditional upon the receipt in form
and substance satisfactory to the Bank, of:
(i) a duly executed copy of this Agreement;
(ii) the following documents (the "Security
Documents"):
(a) a general security agreement (the "GSA") on
the Bank's standard form signed by the Borrower and representing a
first charge on all assets of the Borrower other than real estate
and purchase money security interests ("PMSIs"),save for PMSIs over
the Borrower's inventory;
(b) a general assignment of debts on the Bank's
standard form signed by the Borrower;
(c) assignment by the Borrower of all of its
shares in Gandalf Systems Corporation ("GSC"), Gandalf Digital
Communications Ltd. ("GDCL") and GCL;
(d) assignment by the Borrower of all patents,
trademarks and licenses;
(e) a general assignment of leases signed by the
Borrower covering 130 Colonnade Rd. S. and 40 Concourse Gate, both
in Nepean, Ontario;
(f) a general security agreement on the Bank's
standard form signed by GSC and representing a first charge on all
assets of GSC other than real estate;
(g) a guarantee & postponement of claim on the
Bank's standard form in the principal amount of not less than US
$4,500,000 plus interest and fees, signed by GSC;
(h) assignment by GSC of all of its shares in
Infotron Systems Limited and Infotron Systems International
Limited;
(i) assignment by GSC of all patents, trademarks,
copyrights and licenses;
(j) a guarantee & postponement of claim on the
Bank's standard form in the principal amount of $3,000,000 plus
interest and fees signed by GCL;
(k) a guarantee & postponement of claim on the
Bank's standard form in the principal amount of not less than US
$4,500,000 plus interest and fees signed by GCL;
(l) a general security agreement on the Bank's
standard form signed by GCL and representing a second charge on all
assets of GCL other than real estate and PMSIs over GCL's
inventory;
(m) a general assignment of debts on the Bank's
standard form signed by GCL;
(n) a general hypothecation signed by the Borrower
with respect to any Liquid Collateral Security;
(o) assignment of insurance policies
covering inventory of GSC; all of which shall have been duly
registered in all appropriate jurisdictions in order to perfect and
maintain the security created by the Security Documents;
(iii) a duly executed B/A Undertaking; and
(iv) a review of all documentation by legal counsel
to the Bank; and
(v) such other documents as the Bank may
reasonably request.
22. Representations and Warranties of the Borrower:
The Borrower represents and warrants to the Bank, which
representations and warranties are repeated as of the time of each
Borrowing and as of the time at which each payment of interest or
fees is due hereunder, that:
(a) the Borrower is a corporation validly incorporated and
existing under the laws of Ontario and are duly registered or
qualified to carry on business in all jurisdictions where the
nature of its properties, assets or business makes such
registration or qualification necessary or desirable;
(b) the execution and delivery of this Agreement and the
Security Documents have been duly authorized by all necessary
actions and do not (i) violate any law, regulation or rule by which
the Borrower is bound, (ii) violate any provision of its
constating documents, by-laws or any unanimous shareholders'
agreement to which it is subject, (iii) result in a breach of,
or a default under, any agreement or instrument to which
either it is a party or by which it or any of its properties
or assets may be bound or affected, or (iv) result in the
creation of any encumbrance on any of its properties or
assets, except as contemplated herein;
(c) its most recent audited, consolidated financial
statements are correct and complete in all material respects;
(d) no Event of Default has occurred and no event has
occurred which constitutes, or which with giving of notice, lapse
of time or the occurrence of any other condition would constitute
a default having a material adverse effect on its financial
condition under or in respect of any agreement, undertaking or
instrument to which the Borrower or any of its properties or
assets may be subject;
(e) it is in compliance with all Applicable Laws,
including, without limitation, those dealing with the environment;
(f) the Borrower has filed all material income tax returns
which were required to be filed, paid or made provision for payment
of all material taxes (including interest and penalties) which
are due and payable, and provided adequate reserves for
payment of any tax, the payment of which is being contested;
(g) no consent, approval, order, authorization, licence,
exemption or designation of or by any governmental body or person
is required in connection with the execution, delivery and
performance of this Agreement or the Security Documents or the
transactions contemplated hereby on behalf of the Borrower and
no registration, qualification, designation, declaration or
filing with any governmental body is necessary to enable or
empower either of them to perform their respective obligations
under this Agreement, except such as have been made or
obtained, which are in full force and effect.
The representations and warranties made in this Section shall
continue in effect until payment and performance of all debts,
liabilities and obligations under this Agreement.
23. Covenants:
Without affecting or limiting in any way the right of the
Bank to terminate its commitment and demand all Borrowings under
the Credit Facility after the Maturity Date, the Borrower covenants
and agrees with the Bank, while this Agreement is in effect or any
Borrowings are outstanding:
(a) to maintain as at the end of any fiscal quarter
Tangible Net Worth on a consolidated basis of not less than US
$60,000,000 minus any Allowable Reduction,
(b) not to permit its Current Ratio on a consolidated
basis to be less than 1.50:1 as at the end of any fiscal quarter;
(c) not to permit its Total Liabilities to Tangible Net
Worth Ratio on a consolidated basis to exceed .90:1 as at the end
of any fiscal quarter;
(d) to provide the Bank with the following:
(i) an aged list of accounts receivable owned by
GSC within 15 Business Days of the end of each month,
accompanied by a certificate of the Borrower and GSC;
(ii) quarterly consolidated and non-consolidated
unaudited financial statements within 45 days of the end of each
fiscal quarter, accompanied by a certificate in the form of
Schedule "C" hereto; and
(iii) quarterly consolidated analysis of bookings,
billings and backlog within 45 days of the end of each fiscal
quarter, and
(iv) annual consolidated audited financial
statements of each of the Borrower and GSC within 90 days of each
fiscal year end,
(v) details of securities pledged as Liquid
Collateral Security determined in accordance with Schedule D
each of the above financial statements to be accompanied by a
certificate in form satisfactory to the Bank.
(e) to give the Bank prompt notice upon acquiring
knowledge of any Event of Default or any event which, with notice
or lapse of time or both, would constitute an Event of Default;
(f) not to do anything to affect the ranking of this debt.
(g) to maintain its corporate existence as a validly
existing corporate entity;
(h) to provide the Bank with access to its business and
records as may be requested from time to time including, without
limitation, its annual financial forecasts and plans;
(i) to insure and to keep insured with insurers acceptable
to the Bank all properties customarily insured by companies
carrying on similar business in similar locations against all
risks, including but not limited to business interruption, with
loss payable to the Bank as loss payee or mortgagee, as the case
may be;
(j) to file all income tax returns which are to be filed
from time to time, to pay or make provision for payment of all
taxes (including interest and penalties) and Potential Preferred
Claims which are or will become due and payable and to provide
adequate reserves for the payment of any tax, the payment of
which is being contested;
(k) to comply with all Applicable Laws including, without
limitation, those dealing with the environment and to hold the
Bank harmless for any costs or expenses which it incurs for
any environment-related liabilities which exist now or in the
future with respect to the Borrower's property;
(l) not to grant, create, assume or suffer to exist any
mortgage, charge, lien, pledge, security interest or other
encumbrance affecting any of its properties, assets or other
rights, without the prior written consent of the Bank;
(m) during any fiscal year of the Borrower, not to sell,
transfer, convey, lease, assign or otherwise dispose of any part of
its undertaking, property, assets or rights with an aggregate
value exceeding $5,000,000, other than inventory in the
ordinary course of business and on commercially reasonable
terms, without the prior written consent of the Bank;
(n) not to change its name or merge, amalgamate,
consolidate or otherwise enter into any other form of business
combination with any other person without the prior written consent
of the Bank, such consent not to be unreasonably withheld.
(o) not to make any capital expenditures in any fiscal
year of the Guarantor except those as may be set out in the
Guarantor's operating budgets as provided to the Bank from time to
time, plus an allowance of 20%, without the Bank's prior written
consent;
(p) not to directly or indirectly, guarantee or otherwise
provide for on a direct or indirect contingent basis, the payment
of any monies or performance of any obligations by any third
party, other than wholly owned Subsidiaries, for an amount in
excess of $5,000,000 in the aggregate, except as may be
consented to in writing by the Bank from time to time;
(q) To refrain from making any principal repayments on the
Convertible Subordinated Debenture.
(r) to make best efforts to arrange an operating facility
for GSC with a US lender, in replacement of Segment 3 hereunder.
24. Events of Default:
During the Term Period if any one or more of the following
events has occurred and is continuing:
(a) the non-payment when due of principal, interest, fees
or any other amounts due under this Agreement;
(b) the breach by the Borrower or its Affiliates of any
provision of this Agreement or any other agreement with the Bank or
any of the Bank's Subsidiaries;
(c) the default by the Borrower or its Affiliates under
any obligation to repay borrowed money in excess of $1,000,000,
other than amounts due under this Agreement, or in the
performance or observance of any agreement or condition in
respect of such borrowed money where, as a result of such
default, the maturity of such obligation is accelerated;
(d) if any representation or warranty made or deemed to
have been made herein shall be false or inaccurate in any
materially adverse respect;
(e) if in the opinion of the Bank there is a material
adverse change in the financial condition, ownership or operation
of the Borrower or any of its Material Subsidiaries;
(f) if proceedings for the bankruptcy, receivership,
dissolution, liquidation, winding-up, reorganization or
readjustment of debt of the Borrower or its Affiliates or for the
suspension of the operations of the Borrower or its Affiliates are
commenced, unless such proceedings are being actively and
diligently contested in good faith;
(g) if the Borrower or any of its Affiliates is insolvent,
or is adjudged or declared bankrupt or insolvent, or makes an
assignment for the benefit of its creditors, or petitions or
applies to any tribunal for the appointment of a receiver or
trustee for it or for any substantial part of its property, or
commences any proceedings relating to it under any
reorganization, arrangement, readjustment of debt,
dissolution, liquidation or other similar proceeding under
Applicable Law, or by any act or failure to act indicates its
consent to, approval of, or acquiescence in, any such
proceeding for it or any substantial part of its property, or
suffers the appointment of any receiver or trustee;
(h) if the Borrower should incur a loss exceeding US
$5,000,000, excluding restructuring charges to an aggregate maximum
of $2,000,000 during the Term Period, in any fiscal quarter.
then in such event the ability of the Borrower to make further
Borrowings under the Credit Facility shall immediately terminate
and the Bank may, by written notice to the Borrower, declare the
Borrowings outstanding hereunder to be immediately due and payable.
After the Maturity Date, nothing in this Agreement shall be
construed to affect or limit in any way the right of the Bank to
terminate its commitment and demand all Borrowings under the Credit
Facility.
25. Expenses:
The Borrower shall pay the reasonable fees (including,
without limitation, all documentation fees charged by the Bank for
use of its internal legal counsel) and expenses incurred by the
Bank in connection with the preparation, negotiation, documentation
and operation of the Credit Facility and the Security Documents,
including the enforcement of the Bank's rights under the Credit
Facility whether or not any amounts are advanced hereunder.
26. Indemnity:
The Borrower shall indemnify the Bank from and against all
losses, damages, expenses and liabilities (including legal fees on
a solicitor and client basis) which the Bank sustains or incurs as
a consequence of any breach by the Borrower under any of the
provisions of this Agreement or of any document or instrument
delivered in connection hereunder.
27. Limit on Rate of Interest:
The Borrower shall not be obliged to pay any interest under
or in connection with this Agreement to the extent such interest
exceeds the effective annual rate of interest on the credit
advanced hereunder that would be lawfully permitted under the
Criminal Code. For purposes of this section, "interest" and
"credit advanced" have the meanings ascribed to such terms in the
Criminal Code, and the "effective annual rate of interest" shall be
calculated in accordance with generally accepted actuarial
practices and principles.
28. Judgment Currency:
If for the purpose of obtaining judgment in any court in any
jurisdiction with respect to this Agreement, it is necessary to
convert into the currency of such jurisdiction (the "Judgment
Currency") any amount due hereunder in any currency other than the
Judgment Currency, then such conversion shall be made at the rate
of exchange prevailing on the Business Day before the day on which
judgment is given. For this purpose "rate of exchange" means the
rate at which the Bank will, on the relevant date, sell such
currency in Toronto, Ontario against the Judgment Currency.
In the event that there is a change in the rate of exchange
prevailing between the Business Day before the day on which the
judgment is given and the date of payment of the amount due, the
Borrower will, on the date of payment, pay such additional amounts
(if any) or be entitled to receive reimbursement of such amount, if
any, as may be necessary to ensure that the amount paid on such
date is the amount in the Judgment Currency which, when converted
at the rate of exchange prevailing on the date of payment, is the
amount then due under this Agreement in such other currency. Any
additional amount due from the Borrower under this Section will be
due as a separate debt and shall not be affect by judgment being
obtained for any other sums due under or in respect of this
Agreement.
29. Notices:
Any notice or demand hereunder shall be given in writing by
telecopier or letter, in each case addressed to an officer of the
receiving party. A telecopier communication shall be deemed
received on the date of transmission provided such transmission is
received prior to 5:00 p.m. on a day on which the receiving party's
office is open for normal business, and otherwise on the next such
day. A letter shall be deemed received when hand-delivered to the
receiving party, at the address shown herein or at such other
address as the receiving party may notify the other from time to
time. Each party shall be bound by any notice given hereunder and
entitled to act in accordance therewith, unless otherwise agreed.
The addresses of the parties for the purpose hereof shall be:
as to the Borrower:
Gandalf Technologies Inc.
130 Colonnade Road South
Nepean, Ontario K2E 7M4
Attention: Vice-President, Finance
Telecopier: (613) 727-0617
as to the Bank:
Royal Bank of Canada
90 Sparks Street
Ottawa, Ontario K1P 5T6
Attention: Senior Account Manager, Advanced Technology
Telecopier: (613) 564-4527
or such other address for delivery as each party from time to
time may notify the other as aforesaid.
30. Assignment:
This Agreement shall be binding upon and enure to the benefit
of the Bank and the Borrower and their respective successors and
permitted assigns. The Borrower cannot assign or transfer all or
any of its rights and obligations hereunder without the prior
written consent of the Bank.
31. Set-Off:
The Bank is authorized (but not obligated), at any time and
without notice, to apply any credit balance (whether or not then
due) to which the Borrower is then beneficially entitled on any
account (in any currency) at any branch or office of the Bank in or
towards satisfaction of the obligations and liabilities of the
Borrower due to the Bank under this Agreement. For that purpose,
the Bank is authorized to use all or any part of any such credit
balance to buy such other currencies as may be necessary to effect
such application.
32. Waivers and Amendments:
No failure to exercise and no delay in exercising on the part
of the Bank, any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege preclude any other right, power or
privilege. No amendment, modification or waiver of any provision
of this Agreement or consent to any departure by the Borrower from
any provision of this Agreement will in any event be effective
unless it is in writing signed by the Borrower and the Bank, and
then the amendment, modification, waiver or consent will be
effective only in the specific instance, for the specific purpose
and for the specific length of time for which it is given by the
Bank.
33. Counterparts:
This Agreement may be executed in any number of counterparts,
each of which when executed and delivered is an original but all of
which taken together constitute one and the same instrument, and
any party may execute this Agreement by signing any counterpart of
it.
34. Further Assurances:
The Borrower shall from time to time promptly upon the
request of the Bank take such action and execute and deliver such
further documents, as shall be reasonably required in order to
fully perform the terms of, and to carry out the intention of, this
Agreement.
35. Severability:
If any provision of this Agreement is or becomes prohibited
or unenforceable in any jurisdiction, such prohibition or
unenforceability shall not invalidate, affect or impair any of the
remaining provisions hereof or invalidate or render unenforceable
the provision concerned in any other jurisdiction.
36. Governing Law and Submission to Jurisdiction:
This Agreement shall be construed in accordance with and
governed by the laws of the Province of Ontario and of Canada
applicable therein. The Borrower irrevocably submits to the
non-exclusive jurisdiction of the courts of such Province and
acknowledges the competence of such courts and irrevocably agrees
to be bound by a judgment of any such court.
37. Periodic Review:
The Credit Facility is subject to an annual review by the
Bank on or before the Maturity Date. The Bank may, in its sole
discretion, terminate the Credit Facility following such annual
review without limiting or affecting the Bank's rights pursuant to
Section 24 hereof.
38. Whole Agreement:
This Agreement and any agreements delivered pursuant to or
referred to in this Agreement constitute the whole and entire
agreement between the parties in respect of the Credit Facility,
and cancel and supersede any prior written or verbal agreements
including undertakings, declarations or representations made with
respect thereto.
39. Effective Date:
Except as otherwise provided in this Agreement, the date on
which this Agreement becomes effective is the date the offer is
accepted by the Borrower.
40. Expiry Date:
This offer is open for acceptance until close of business at
the Branch of Account on January 21 , 1994 unless extended in
writing by the Bank.
Please acknowledge your acceptance of the above terms and
conditions by signing the attached copy of this letter in the space
provided below and returning it to the undersigned.
Yours truly,
s/L.J.BLATTMAN
ORIGINAL SIGNED BY
L.J.BLATTMAN
We acknowledge and accept the terms and conditions of this
Agreement on the 21st day of January, 1994.
THE BORROWER:
GANDALF TECHNOLOGIES INC.
By: s/W.R. MACDONALD
Name/Title: WALTER MACDONALD, VP FINANCE
By: s/B.R. HEDGES
Name/Title: BRIAN HEDGES, PRESIDENT
SCHEDULE "A"
Schedule "A" to the Agreement dated as of the 7th day of January,
1994 between Gandalf Technologies Inc. as Borrower and Royal Bank
of Canada as the Bank.
DEFINITIONS:
"Affiliate" of a person means any person which directly or
indirectly, controls or is controlled by or is under common control
with such first mentioned person, and for the purposes of this
definition, "control" (including with correlative meanings the
terms "controlled by" and "under common control with") means the
power to direct or cause the direction of the management and
policies of any person, whether through the ownership of shares or
by contract or otherwise, and without restricting the above, one
corporate body shall be deemed to be affiliated with another
corporate body if one of them is the Subsidiary of the other or
both are Subsidiaries of the same corporate body;
"Agreement" means collectively this agreement and all schedules
attached hereto;
"Allowable Reduction" means the amount, not exceeding $2,000,000
in aggregate, expended by the Borrower to restructure between April
1, l993 and March 31, l994.
"Applicable Law" means, in respect of any person, property,
transaction or event, all present or future applicable laws,
statutes, regulations, treaties, judgments and decrees and (whether
or not having the force of law) all applicable official directives,
rules, guidelines, orders and policies of any governmental body
having jurisdiction;
"B/A Undertaking" means the Bank's standard form of undertaking in
respect of bankers acceptances issued by borrowers and accepted by
the Bank;
"Branch of Account" means the Bank's branch at 90 Sparks Street,
Ottawa, Ontario;
"Business Day" means a day, excluding Saturday, Sunday, and any
other day which shall be in the City of Toronto, Ontario a legal
holiday or a day on which banking institutions are closed and, with
respect to a Libor Loan, "Business Day" means a day with the
foregoing characteristics which is also a day on which dealings in
US Dollar deposits by and between leading banks in the London
interbank market may be conducted;
"Canadian Dollars" and the symbols "Cdn$" and "$" each means
lawful money of Canada;
"Convertible Subordinated Debenture" means the Cdn $30,000,000
8.5% convertible subordinated debenture due November 10, 2002
issued by the Borrower;
"Current Ratio" of a person means the ratio of that person's
current assets to that person's current liabilities, net of cash on
hand;
"Equivalent Amount" determines the amount of availability only
and means on any date, the amount of Canadian Dollars required to
convert from Canadian Dollars to U.S. Dollars at the rate of 1.30
Canadian Dollars for 1.00 US$; The Equivalent amount will be
amended by the Bank from time to time to reflect changes in the
rate of exchange and such amendments will be advised to the
Borrower in writing.
"Event of Default" means each of the events listed in the section
entitled "Events of Default";
"GAAP" means generally accepted accounting principles in effect
from time to time in Canada applied in a consistent manner from
period to period;
"Good Accounts Receivable" means US based trade receivables owing
to GSC excluding without duplication:
(a) those outstanding more than 90 days after the billing
date,
(b) those between GSC and any Affiliate
(c) those subject to any mortgage, charge, assignment,
lien, security interest or other encumbrance ranking in priority to
or equal to that granted to the Bank pursuant to this
Agreement,
(d) those subject to any claim or assertion of a right of
set-off on the part of the account debtor to the extent of such
claim or assertion,
(e) those which would be required to be treated as bad or
doubtful accounts in accordance with GAAP including, without
limitation, those outstanding from entities which are bankrupt,
insolvent or which have suspended operations, and
(f) those subject to a contractual right on the part of
the account debtor to refuse payment either in whole or in part;
"Interest Determination Date" means, with respect to a Libor Loan,
the date which is 2 Business Days prior to the first day of
theLibor Interest Period applicable to such Libor Loan;
"Letter of Credit" or "L/C" each means a documentary credit
issued by the Bank on behalf of the Borrower for the purpose of
providing security to a third party that the Borrower will perform
a contractual obligation owed to such third party;
"Libor" means, with respect to each Libor Interest Period
applicable to a Libor Loan, the annual rate of interest (rounded
upwards, if necessary, to the nearest whole multiple of one
sixteenth of one percent (1/16th%)), at which the Bank, in
accordance with its normal practice, would be prepared to offer to
leading banks in the London interbank market for delivery on the
first day of such Libor Interest Period and for a period equal to
such Libor Interest Period, deposits in US Dollars of amounts
comparable to such Libor Loan to be outstanding during such Libor
Interest Period, at or about 10:00 a.m. (Toronto time) on the
Interest Determination Date;
"Libor Interest Date" means, with respect to any Libor Loan, the
last day of each Libor Interest Period and, if the Borrower selects
a Libor Interest Period longer than 3 months, the Libor Interest
Date shall be the date falling every 3 months after the beginning
of such Libor Interest Period as well as the last day of such Libor
Interest Period;
"Libor Interest Period" means, with respect to any Libor Loan, a
period (subject to availability) of approximately 1 month (or
longer whole multiples of 1 month to and including 12 months as
selected by the Borrower and notified to the Bank) commencing with
the date on which such Libor Loan is made, the date on which
another method of Borrowing is converted to such Libor Loan or the
last day of the immediately prior Libor Interest Period;
"Liquid Collateral Security" means the liquid collateral security
determined in accordance with Schedule "D";
"Margin Requirement" means the total amount of Borrowings
available under this Agreement, which amount may not exceed 75% of
Good Accounts Receivable;
"Material Subsidiary" means any Subsidiary of the Borrower now or
hereinafter located in Canada, the United States, the United
Kingdom, France or the Netherlands, as well as any Subsidiary of
the Borrower which is identified as being a Material Subsidiary by
the Bank in writing to the Borrower from time to time and
"Material Subsidiaries" means any such Subsidiaries of the
Borrower;
"Maturity Date" means July 31, 1994;
"Potential Preferred Claims" means amounts accrued or owing for
wages, vacation pay, employee benefits or pensions, municipal tax,
corporate tax, sales tax, Canadian goods and services tax, source
deductions and remittances (including income tax, Canada Pension
Plan and unemployment insurance obligations), Government royalties,
purchase money security interests and any other statutory preferred
claims as well as the aggregate of the next three months rent
payments for each rental property of the Borrower;
"Royal Bank Prime" (in this Agreement, "RBP") means the annual
rate of interest announced by the Bank from time to time as being
a reference rate then in effect for determining interest rates on
Canadian Dollar commercial loans made in Canada;
"Royal Bank Prime Acceptance Fee" (in this Agreement, "RBPAF")
means the annual rate announced by the Bank from time to time as
being a reference rate then in effect for determining fees on
Canadian Dollar bankers' acceptances accepted by the Bank in
Canada;
"Royal Bank US Base Rate" (in this Agreement, "RBUSBR") means the
annual rate of interest announced by the Bank from time to time as
being a reference rate then in effect for determining interest
rates on US Dollar commercial loans made in Canada;
"Subsidiary" of a person means (i) any corporation of which the
person and/or any one or more of its Affiliates, holds, directly or
beneficially, other than by way of security only, securities to
which are attached more than 50% of the votes that may be cast to
elect directors of such corporation, or (ii) a corporation of which
such person has through operation of law or otherwise, the ability
to elect or cause the election of a majority of the directors of
such corporation and "Subsidiaries" of such person mean all such
corporations;
"Tangible Net Worth" of a person means its shareholders' equity
plus, but not in duplication, the amount of the Convertible
Subordinated Debenture less the aggregate of its goodwill, deferred
income taxes, deferred software costs and other assets (all as
defined and set out on the person's audited annual financial
statements), that the Bank deems to be intangible. For the purpose
of calculating shareholders' equity, items on the balance sheet of
the relevant person under the heading "foreign exchange translation
amount" shall be deemed to be zero;
"Term Period" means the period of time from the date of this
Agreement to and including the Maturity Date;
"Total Liabilities" of any person means all liabilities appearing
on the balance sheet of that person, net of cash on hand;
"Total Liabilities to Tangible Net Worth Ratio" of a person means
the ratio of that person's Total Liabilities to that person's
Tangible Net Worth;
"US Dollars" and "US$" each means lawful money of the United
States of America in same day immediately available funds or, if
such funds are not available, the form of money of the United
States of America that is customarily used in the settlement of
international banking transactions on the day payment is due
hereunder.
SCHEDULE "B"
Schedule "B" to the Agreement dated as of the 7th day of January,
1994 between Gandalf Technologies Inc. as Borrower and Royal Bank
of Canada as the Bank.
Notice Requirements for Drawdowns and Conversions
RBP LOANS AND RBUSBR LOANS
Amount: Prior Notice;
Under Cdn$ or US$10,000,000 by 12:00 (noon) on the day
of drawdown or conversion
Cdn$ or US$10,000,000,
up to and including the Amount by 12:00 (noon) 1 Business
Day prior to drawdown or
conversion
B/As
Amount Prior Notice
Under Cdn$10,000,000 by 12:00 (noon) on the day of
drawdown or conversion
Cdn$10,000,000 up to and
including the Amount by 12:00 (noon) 1 Business Day
prior to drawdown or conversion
Libor Loans
Amount Prior Notice
Under US$10,000,000 or the
Equivalent Amount in Pounds
Sterling by 10:00 a.m. on the Interest
Determination Date
US$10,000,000 up to and including
the Amount or the Equivalent
Amount in Pounds Sterling by 10:00 a.m. 1 Business Day
prior to the Interest
Determination Date
SCHEDULE "C"
Schedule "C" to the Agreement dated as of the 4th day of January,
1994 between Gandalf Technologies Inc. as Borrower and Royal Bank
of Canada as the Bank.
OFFICER'S COMPLIANCE CERTIFICATE
We, ___________________________________, of the City of
__________________ and the City of _______________________,
respectively in the Province of Ontario, and hereby certify as
follows:
1. That we are the [office] and [office], respectively of
Gandalf Technologies Inc. (the "Borrower")
2. That we have read the provisions of the letter agreement (the
"Agreement") dated January 7, 1994 between the Borrower and Royal
Bank of Canada (the "Bank") which are relevant to this compliance
certificate and have made such examination or investigation as is
reasonably necessary to enable us to express an informed opinion on
the matters contained in this certificate. Terms defined in the
Agreement have the same meanings where used in this certificate.
As of the date of this certificate:
(a) the representations and warranties contained in the
Agreement are true and correct;
(b) no Event of Default or event which would with lapse of
time or the happening of some further condition constitute an Event
of Default has occurred and is continuing; and
(c) the covenants contained in the Agreement have not been
breached and during the next fiscal quarter of the Borrower
there is no reason to believe that any of such covenants will
be breached.
3. The attached report of aged accounts receivable owned by
Gandalf Systems Corporation is complete and accurate in all
material respects.
DATED this _______ day of _________________, 19__.
By: ____________________________________
Name/
Title: ____________________________________
By: ____________________________________
Name/
Title: ____________________________________
SCHEDULE "D"
Schedule "D" to the Agreement dated as of the 7th day of January,
1994 between Gandalf Technologies Inc. as Borrower and Royal Bank
of Canada as the Bank.
LIQUID COLLATERAL SECURITY
LIQUID COLLATERAL SECURITY APPLICABLE LOANING
VALUE
A. Canada Savings Bonds, and Savings 100% of par value
Bonds redeemable at par issued by
Provincial Governments; Province
of British Columbia Parity Bonds
redeemable at par and fully
guaranteed by the Province of British
Columbia, issued in the names of
Provincial Crown Corporations.
B. Government of Canada or Government 95% of market value
of Canada guaranteed bonds and
Treasury Bills except as indicated
in (a) above.
(c) Provincial Government or Provincial 95% of market value
Government guaranteed bonds and
Treasury Bills except as indicated
in (a) above.
(d) Bankers acceptances or similar 95% of market value
investments effectively assigned
to the Bank. ________________
= LIQUID
COLLATERAL
SECURITY