December 27, 2000
PMC - Sierra, Inc.
105 - 8555 Baxter Place
Burnaby, B.C.
V5A 4V7
Attention: Mr. John Sullivan
Dear Sirs:
We, CIBC Inc., are pleased to establish the following credit for you,
our customer.
Committed Operating Line
Credit Limit: U.S. $25,000,000, less the U.S. equivalent of the
principal amount at the time of the liabilities of
PMC-Sierra Ltd., a Canadian corporation, ("PMC Ltd.")
in connection with its operating line facility pursuant
to the credit agreement issued by Canadian Imperial
Bank of Commerce ("CIBC") on or about the date hereof,
as amended and replaced from time to time, (the "CIBC
Credit Agreement").
Availability: May be availed by you by way of U.S. alternate base
rate loans, and/or LIBOR Loans and/or financial standby
letters of credit. Availments by way of U.S. alternate
base rate loans and/or LIBOR Loans will be limited to
minimum draws of $1,000,000.
Description and Rate: A revolving committed credit, for general business
purposes, having the following parts:
(1) U.S. alternate base rate loans. The
Interest Rate is as follows: U.S.
Alternate Base Rate plus 0% per year.
(2) U.S. dollar LIBOR loans. The Interest
Rate is as follows: LIBO Rate plus 1.0%
per year.
(3) Financial standby letters of credit. The
fees are equal to 1% of the principal
amount of the L/C, plus out of pocket
expenses.
Letters of Credit: L/Cs may not have terms to expiry of more than 12
months or beyond the committed term of this Credit. Our
standard L/C documentation is also required. If we
issue an L/C, the available Credit Limit will be
reduced by 100% of the face amount of the L/C. If there
is a drawing under any L/C, you will forthwith upon
demand pay us the amount(s) drawn under the L/C. If you
do not pay us the amount demanded interest will accrue
on the amount drawn under the L/C at the Default
Interest Rate until the amount drawn under the L/C is
paid in full, unless you have made other arrangements
with us.
Repayment/Termination: Repayments of U.S. alternate base rate loans and/or
LIBOR Loans must be in minimum amounts of $1,000,000
or, if less, the then outstanding amount thereof.
This Credit will expire two years after the date of
this Agreement, except CIBC Inc. may from time to time
renew its commitment by an additional year; provided
that this Credit must be repaid in full immediately
upon, and further availments will cease to be available
upon, the earlier of the expiry of the committed term
of this Credit, the occurrence of an Event of Default,
or there having occurred (in our reasonable opinion) a
change in effective control of your company or PMC Ltd.
with respect to the power to elect the majority of the
Board of Directors of your company or PMC Ltd. ("Change
of Control").
Standby Fee: A standby fee of 25 basis points per year, payable
monthly in arrears, will apply to the unused portion of
this Credit.
Security
Security: Unsecured.
Covenants
Financial Covenants: You will ensure that the following financial
covenants/requirements, tested at the end of each of
your fiscal quarters, are satisfied on the basis of
your consolidated financial statements:
Quick Ratio: The Quick Ratio (cash or equivalents plus
accounts receivable plus the unused portion of this
Credit, divided by current liabilities) must not be
less than 0.8:1.
Debt to Effective Equity Ratio: The Debt to Effective
Equity Ratio (using the following definitions) must not
exceed 2:1.
Debt is defined as all debts and liabilities
(whether absolute or contingent, and including all
lease obligations which would be required to be
disclosed on your consolidated financial
statements) excluding deferred income taxes and
excluding debt subordinated and postponed to CIBC
Inc. and CIBC (provided that all the terms of
which are satisfactory to such lenders).
Effective Equity is 0fined as the aggregate of:
(a) amounts paid up on issued and outstandin
shares of all classes;
(b) retained earnings;
(c) contributed surplus;
(d) debt subordinated and postponed to CIBC Inc.
and CIBC (provided that all the terms of which
are satisfactory to such lenders) to the
prior repayment and satisfaction of all debts
and liabilities pursuant to this Agreement, the
CIBC Credit Agreement and your guarantee
thereunder; plus
(e) Special Shares of PMC Ltd convertible into
your common stock;
minus all intangibles including, but not limited
to goodwill, copyrights, patents, trademarks,
licences, research and development costs, and
deferred development costs; provided that for the
purposes of this ratio, equity investments in
non-affiliated companies will not be treated as
intangibles so long as the combined total of all
such investments does not exceed $40,000,000 (or
any higher amount agreed to in this regard by us
in writing).
Profitability: An operating loss must not be incurred
in two consecutive fiscal quarters except where the
operating loss is caused by In Process Research and
Development charges relating to purchase method
accounting for acquisitions.
Capital Expenditures (excluding acquisitions): Total
capital expenditures, excluding acquisitions permitted
below under "Restriction on Acquisitions", must not
exceed $120,000,000 in fiscal 2000 and $200,000,000 in
fiscal 2001 without our prior written consent (which
consent will not be unreasonably withheld).
Other Covenants: Restriction on Acquisitions: "All Stock Acquisitions":
So long as the Borrower's Debt to Effective Equity
Ratio is less than 1:1, the Borrower or any of its
Subsidiaries are permitted to make all stock
acquisitions up to an aggregate total of U.S. $2
billion (Note: this limit excludes the recent
acquisitions of Toucan Technology, AANetcom Inc., and
Extreme Packet Devices, Inc.) annually without the
Lenders' consent being obtained providing the Borrower
remains within all of the provisions of the credit
facilities.
All other forms of acquisitions will be governed by the
following restrictions:
Neither you nor any of your subsidiaries will make any
material acquisitions (excluding all stock acquisitions
as detailed above) without our prior written consent,
except, provided no Event of Default exists nor will
result from the proposed acquisition during the fiscal
quarter immediately succeeding the fiscal quarter
within which the acquisition was made (calculated on
the basis of your financial statements on a
consolidated basis submitted for your fiscal quarter
immediately preceding the date of the acquisition), and
provided there has not been a Change of Control of your
company or PMC Ltd:
(a) you, or any of your subsidiaries, may make an
acquisition without our prior written consent if
the purchase price in respect of the proposed
acquisition does not exceed the Applicable Limit
referred to below; and
(b) if the purchase price in respect of the proposed
acquisition exceeds the Applicable Limit referred
to below, you, or any of your subsidiaries, may
nevertheless make the proposed acquisition if you
first provide proforma financial statements to us
which take into account the effect of the proposed
acquisition and all debt incurred or assumed in
connection therewith, and which demonstrate
compliance with all financial
covenants/requirements set forth herein, both
before and after the proposed acquisition.
For the purposes hereof, the "Applicable Limit" means
$250,000,000 unless your Debt to Effective Equity Ratio
on a consolidated basis (exclusive of the acquisition)
exceeds 1:1, in which case the "Applicable Limit" means
$125,000,000.
Restriction on Divestments: Neither you nor any of your
subsidiaries will make any material business
divestment, other than for cash, without our prior
written consent. The cash proceeds from the material
divestment will be used in the first instance to retire
any outstanding borrowings/indebtedness under the
credit facilities established hereunder which, however,
may be readvanced or incurred subject to your continued
compliance with all of the terms and conditions of the
credit facilities provided for hereunder.
Restriction on Cash Dividends: You will not issue any
cash dividends without our prior written consent.
Negative Pledge: Neither you nor any of your
subsidiaries will create or allow any Lien on any of
your/their present or future assets, nor will you/they
assign any right to any income, without our prior
written consent, except you/they are permitted to enter
into lease commitments or Purchase Money Liens on
normal commercial terms, in the ordinary course of
business up to $50,000,000 in each fiscal year,
provided no Event of Default exists nor will the
proposed transaction give rise to an Event of Default,
and provided there has not been a Change of Control of
your company or PMC Ltd.
Reporting Requirements: (1) Within 30 days of each quarter-end, you will
provide us with a consolidated aged list of trade
accounts receivable, as of that quarter-end.
(2) Within 60 days of the end of each of the first,
second and third quarters, you will provide us
with a copy of your Form 10-Q, as of each
quarter-end.
(3) Within 120 days of each fiscal year-end, you will
provide us with a copy of your Form 10-K as of
that year-end, which is to include a copy of your
audited consolidated year-end financial
statements.
Other Provisions
Indemnity re Reserves, If the introduction or implementation of or any change
Capital Adequacy, Etc. in or in the interpretation of, or any change in its
application to us of, any law or any regulation or
guideline issued by any central bank or other
governmental authority (whether or not having the force
of law), including without limitation any reserve or
special deposit requirement or any tax (other than tax
on our general income) or any capital requirement, has
(due to our compliance) the effect, directly or
indirectly, of (i) increasing the cost to us of
performing our obligations hereunder or under any L/C;
(ii) reducing any amount received or receivable by us
hereunder or our effective return hereunder or on our
capital; or (iii) causing us to make any payment or to
forgo any return based on any amount received or
receivable by us hereunder or in respect of any L/C;
then upon demand from time to time you will pay such
amount as shall compensate us for any such cost,
reduction, payment or forgone return. You will further
indemnify us for all out-of-pocket costs, losses and
expenses incurred by us in connection with any L/C and
agree that we will have no liability to you for any
reason in respect of any availment other than on
account of our gross negligence or wilful misconduct.
Any certificate of CIBC Inc. in respect of the
foregoing will be conclusive and binding upon you,
except for manifest error, provided that we shall
determine the amounts owing to us in good faith using
any reasonable averaging and attribution methods.
Obligations re L/Cs if You will pay to us on demand all of our contingent
Credit Terminated: liability in respect of (i) any L/C outstanding upon
any termination of this Credit and (ii) any L/C which
is the subject matter of any order, judgment,
injunction or other such determination restricting
payment by us under and in accordance with such L/C or
extending our liability under such L/C beyond the
expiration date stated therein (an "Order"). We agree
that we will, with respect to each such L/C, upon the
later of:
(a) the earlier of: (i) the date on which either the
original counterpart of such L/C is returned to us
for cancellation or we are released by the
beneficiary from any further obligations in
respect of such L/C; and, (ii) the expiry of such
L/C; and
(b) the date on which any final order, judgment or
other such determination has been rendered or
issued either terminating the applicable Order, or
permanently enjoining us from paying under such
L/C;
pay to you an amount equal to any excess of the amount
received by us hereunder in respect of our contingent
liability under such L/C (the "Received Amount") over
the total of amounts applied to reimburse us for
amounts paid by us under such L/C (CIBC Inc. having the
right to so appropriate such funds), together with an
additional amount computed by applying to the amount of
such excess from time to time a per annum rate equal to
3% per year less than the U.S. Alternate Base Rate.
Such additional amount shall be calculated daily on the
basis of a calendar year for the actual number of days
elapsed from and including the date of payment to us of
the Received Amount to (but not including) the date of
return to you of the excess.
Default Interest Rate: Currently 21% per year.
Next Scheduled Review May 31, 2001. Such that CIBC Inc. may renew its
Date: commitment by an additional one year on mutually
agreeable terms.
Termination of Agreement This Agreement may be terminated by you at any time
by Borrower: upon written notice to CIBC Inc. and upon payment and
satisfaction of all of your debts and liabilities,
absolute and contingent, to CIBC Inc. and CIBC.
Standard Credit Terms: The attached Schedule - Standard Credit Terms
(including the revisions indicated thereon in
bold-faced or struck-out text) forms part of this
Agreement.
Expenses and Costs: All reasonable out of pocket expenses incurred by us
(excluding any syndication or participation expenses)
will be for your account.
Amendment: This Agreement may only be amended by a document
executed by the party against whom enforcement of the
amendment is sought.
Assignment: You may not assign this Agreement. We may assign or
grant participation in our rights and obligations
hereunder, with each such assignee or participant being
entitled to rely on all indemnities contained herein.
Governing Law: This Agreement will be construed in accordance with the
laws of the State of New York.
Set-Off: Upon the occurrence of an Event of Default and so long
as the Event of Default exists, we may at any time and
from time to time, without notice to you (any such
notice being expressly waived), set-off and apply any
and all deposits (general or special) and any other
indebtedness at any time held by or owing by us to you
or for your credit or your account, against and on
account of any or all of your debts and liabilities to
us hereunder, whether or not then due, whether absolute
or contingent, and irrespective of the currency(ies) in
question.
Entire Agreement: In accordance with the scheduled review date set out in
the Credit Agreement dated June 15, 2000, issued by
CIBC Inc. to you the "Previous Credit Agreement", this
Agreement extends the Previous Credit Agreement and
restates the terms thereof as set out above. There are
no understandings, inducements, representations,
warranties, collateral agreements or conditions
affecting or supported by this Agreement other than as
expressed in this Agreement.
Accounting Terms All accounting terms not otherwise defined have the
and GAAP: meanings assigned to them in accordance with GAAP. In
this Agreement, "GAAP" means generally accepted
accounting principles from time to time applicable in
the United States of America and approved by the
Financial Accounting Standards Board or any successor
thereto, as applied on a basis consistent with the
financial statements of the preceding fiscal period,
except as disclosed therein or where the inconsistency
is immaterial.
Successors:
In this Agreement, Unless otherwise indicated all dollar amounts referred
any reference to a to in this Agreement are in lawful money of the United
corporate entity that States of America
is a successor to such
entity, whether immediate
or derivative. Currency:
Waviers of Jury Trial: CIBC Inc. and PMC - Sierra, Inc. hereby irrevocably and
unconditionally waive trial by jury in any legal action
or proceeding relating to this Agreement or any other
loan document and for any counterclaim therein.
Please indicate your acceptance of these terms by returning a signed copy of
this Agreement. If we do not receive a signed copy by December 31, 2000, then
this offer will expire.
Upon acceptance, this Agreement extends the Previous Credit Agreements and
restates the terms thereof, as set out above. Outstanding amounts (and security)
under the Previous Credit Agreement will be covered by this Agreement.
Yours truly,
CIBC Inc.
by:_________________________
Howard A. Palmer
Authorized Signatory
Phone no.: (212) 856-3504
Fax no.: (212) 856-3761
Acknowledgement: The undersigned certifies that all information provided
to CIBC Inc. is true, and acknowledges receipt of a
copy of, and accepts the terms of, this Agreement
(including the attached Schedule - Standard Credit
Terms).
Accepted this day of ______, 2000.
-----
PMC - Sierra, Inc.
By:_______________________
Name:_____________________
Title:____________________
By:_______________________
Name:_____________________
Title:____________________
Form 6326-95/06 (WP51CRED)
Schedule - Standard Credit Terms
ARTICLE 1 - GENERAL
1.1 Interest Rate. You will pay interest on each Credit at nominal rates per
year equal to:
(a) for amounts above the Credit Limit of a Credit or a part of a Credit or
for amounts that are not paid when due, the Default Interest Rate, and
(b) for any other amounts, the rate specified in this Agreement.
1.2 Variable interest. Each variable interest rate provided for under this
Agreement will change automatically, without notice, whenever the Prime Rate or
the U.S. Alternate Base Rate, as the case may be, changes.
1.3 Payment of interest. Interest is calculated on the daily balance of the
Credit at the end of each day. Interest is due once a month, unless the
Agreement states otherwise and you will pay the interest when it is due. Unless
you have made other arrangements with us regarding the payment of interest, we
will automatically debit your Operating Account for interest amounts owing. If
your Operating Account is in overdraft and you do not deposit to the account an
amount equal to the monthly interest payment, the effect is that we will be
charging interest on overdue interest (which is known as compounding). Unpaid
interest continues to compound whether or not we have demanded payment from you
or started a legal action, or get judgment, against you.
1.4 Default Interest. To determine whether Default Interest is to be charged,
the following rules apply:
(a) Default Interest will be charged on the amount that exceeds the Credit
Limit of any particular Credit.
(b) If there are several parts of a Credit, Default Interest will be charged
if the Credit Limit of a particular part is exceeded. For example, if Credit
A's limit is $250,000, and the limit of one part is $100,000 and the limit of
that part is exceeded by $25,000, Default Interest will be charged on that
$25,000 excess, even if the total amount outstanding under Credit A is less
than $250,000.
1.5 Fees. You will pay CIBC Inc.'s fees for each Credit as outlined in the
Letter. You will also reimburse us for all reasonable fees (including legal
fees) and out-of-pocket expenses incurred in registering any security, and in
enforcing our rights under this Agreement or any security. We will automatically
debit your Operating Account for fee amounts owing.
1.6 Our rights re demand Credits. At CIBC Inc., we believe that the
banker-customer relationship is based on mutual trust and respect. It is
important for us to know all the relevant information (whether good or bad)
about your business. CIBC Inc. is itself a business. Managing risks and
monitoring our customers' ability to repay is critical to us. We can only
continue to lend when we feel that we are likely to be repaid. As a result, if
you do something that jeopardizes that relationship, or if we no longer feel
that you are likely to repay all amounts borrowed, we may have to act. We may
decide to act, for example, because of something you have done, information we
receive about your business, or changes to the economy that affect your
business. Some of the actions that we may decide to take include requiring you
to give us more financial information, negotiating a change in the interest rate
or fees, or asking you to get further accounting assistance, put more cash into
the business, provide more security, or produce a satisfactory business plan. It
is important to us that your business succeeds. We may, however, at our
discretion, demand immediate repayment of any outstanding amounts under any
demand Credit. We may also, at any time and for any cause, cancel the unused
portion of any demand Credit. Under normal circumstances, however, we will give
you 30 days' notice of any of these actions.
1.7 Payments. If any payment is due on a day other than a Business Day, then
the payment is due on the next Business Day.
1.8 Applying money received. If you have not made payments as required by this
Agreement, or if you have failed to satisfy any term of this Agreement (or any
other agreement you have that relates to this Agreement), or at any time before
default but after we have given you appropriate notice, we may decide how to
apply any money that we receive. This means that we may choose which Credit to
apply the money against, or what mix of principal, interest, fees and overdue
amounts within any Credit will be paid.
1.9 Information requirements. We may from time to time reasonably require you to
provide further information about your business. We may require information from
you to be in a form acceptable to us. We will use your information only in
connection with the credits and will keep it confidential unless required to be
disclosed by law or court order.
1.10 Insurance. You will keep all your business assets and property insured (to
the full insurable value) against loss or damage by fire and all other risks
usual for property such as yours (plus for any other risks we may reasonably
require). If we request, these policies will include a loss payee clause (and if
you are giving us mortgage security, a mortgagee clause). As further security,
you assign all insurance proceeds to us. If we ask, you will give us either the
policies themselves or adequate evidence of their existence. If your insurance
coverage for any reason stops, we may (but do not have to) insure the property.
We will automatically debit your Operating Account for these amounts. Finally,
you will notify us immediately of any loss or damage to the property.
1.11 Environmental. You will carry on your business, and maintain your assets
and property, in accordance with all applicable environmental laws and
regulations. If (a) there is any release, deposit, discharge or disposal of
pollutants of any sort (collectively, a "Discharge") in connection with either
your business or your property, and we pay any fines or for any clean-up, or (b)
we suffer any loss or damage as a result of any Discharge, you will reimburse
CIBC Inc., its directors, officers, employees and agents for any and all losses,
damages, fines, costs and other amounts (including amounts spent preparing any
necessary environmental assessment or other reports, or defending any lawsuits)
that result. If we ask, you will defend any lawsuits, investigations or
prosecutions brought against CIBC Inc. or any of its directors, officers,
employees and agents in connection with any Discharge. Your obligation to us
under this section continues even after all Credits have been repaid and this
Agreement has terminated.
1.12 Consent to release information. We may from time to time give any credit or
other information about you to, or receive such information from, (a) any
financial institution, credit reporting agency, rating agency or credit bureau,
(b) any person, firm or corporation with whom you may have or propose to have
financial dealings, and (c) any person, firm or corporation in connection with
any dealings you have or propose to have with us. You agree that we may use that
information to establish and maintain your relationship with us and to offer any
services as permitted by law, including services and products offered by our
subsidiaries when it is considered that this may be suitable to you.
1.13 Our pricing policy: Fees, interest rates and other charges for your banking
arrangements are dependent upon each other. If you decide to cancel any of these
arrangements, you will have to pay us any increased or added fees, interest
rates and charges we determine and notify you of. These increased or added
amounts are effective from the date of the changes that you make.
1.14 Proof of debt. This Agreement provides the proof, between CIBC Inc. and
you, of the credit made available to you. There may be times when the type of
Credit you have requires you to sign additional documents. Throughout the time
that we provide you credit under this Agreement, our loan accounting records
will provide complete proof of all terms and conditions of your credit (such as
principal loan balances, interest calculations, and payment dates).
1.15 Renewals of this Agreement. This Agreement will remain in effect for your
Credits for as long as they remain unchanged. We have shown a Next Scheduled
Review Date in the Letter. If there are no changes to the Credits this Agreement
will continue to apply, and you will not need to sign anything further. If there
are any changes, we will provide you with either an amending agreement, or a new
replacement Letter, for you to sign.
1.16 Confidentiality: The terms of this Agreement are confidential between you
and CIBC Inc.. You therefore agree not to disclose the contents of this
Agreement to anyone except your professional advisors or (as required by law)
any regulatory or governmental body, including, without limitation, the United
States Securities and Exchange Commission.
1.17 Pre-conditions. You may use the Credits granted to you under this
Agreement only if:
(a) we have received properly signed copies of all documentation that we may
reasonably require and which we have provided to you in connection with the
operation of your accounts and your ability to borrow and give security;
(b) all the required security has been received and registered to our
satisfaction; (c) any special provisions or conditions set forth in the Letter
have been complied with; and (d) if applicable, you have given us the required
number of days notice for a drawing under a Credit.
1.18 Notices. We may give you any notice in person or by telephone, or by
letter that is sent either by fax or by mail.
1.19 Use of the Operating Line. You will use your Operating Line only for your
business operating cash needs. You are responsible for all debits from the
Operating Account that you have either initiated (such as cheques, loan
payments, pre-authorized debits, etc.) or authorized us to make. Payments are
made by making deposits to the Operating Account. You may not at any time exceed
the Credit Limit. We may, without notice to you, return any debit from the
Operating Account that, if paid, would result in the Credit Limit being
exceeded, unless you have made prior arrangements with us. If we pay any of
these debits, you must repay us immediately the amount by which the Credit Limit
is exceeded.
1.20 Foreign Currency Conversion. If this Agreement includes foreign currency
Credits, then currency changes may affect whether either the Credit Limit of any
Credit or the Overall Credit Limit has been exceeded.
(a) See section 1.4 for the general rules on how Default Interest is
calculated.
(b) To determine the Overall Credit Limit, all foreign currency amounts are
converted to U.S. dollars, even if the Credit Limits of any particular Credits
are quoted directly in a foreign currency (such as Canadian dollars). No
matter how the Credit Limit of a particular Credit is quoted, therefore,
currency fluctuations can affect whether the Overall Credit Limit has been
exceeded. For example, if Credits X and Y have Credit Limits of US$100,000 and
CDN$50,000, respectively, with an Overall Credit Limit of US$135,000, if
Credit X is at US$90,000 and Credit Y is at CDN$45,000, Default Interest will
be charged only if, after converting the Cdn. dollar amount, the Overall
Credit Limit is exceeded.
(c) Whether the Credit Limit of a particular Credit has been exceeded will
depend on how the Credit Limit is quoted, as described below.
(d) If the Credit Limit is quoted as, for example, the Canadian dollar
equivalent of a U.S. dollar amount, daily exchange rate fluctuations may
affect whether that Credit Limit has been exceeded. If, on the other hand, the
Credit Limit is quoted in a foreign currency (for example, directly in Cdn.
dollars), whether that Credit Limit has been exceeded is determined by
reference only to the closing balance of that Credit in that currency.
(e) For example, assume an outstanding balance of a Credit on a particular day
of CDN$200,000. If the Credit Limit is stated as "the Cdn. dollar equivalent
of US$140,000", then whether the Credit Limit of that Credit has been exceeded
will depend on the value of the U.S. dollar on that day. If the conversion
calculations determine that the outstanding balance is under the Credit Limit,
a drop in the value of the U.S. dollar the next day (without any change in the
balance) may have the effect of putting that Credit over its Credit Limit. If,
on the other hand, the Credit Limit is stated as "CDN$200,000", the Credit
Limit is not exceeded, and a drop in the value of the dollar the next day will
not change that (although the Overall Credit Limit may be affected).
(f) Conversion calculations are done on the closing daily balance of the
Credit. The conversion factor used is the mid-point between the buying and
selling rate offered by CIBC Inc. (or if such rates can not be determined, the
mid-point between such rates offered by CIBC) for that currency on the
conversion date.
1.21 Instalment Loans. The following terms apply to each Instalment Loan.
(a) Non-revolving loans. Unless otherwise stated in the Letter, any Instalment
Loan is non-revolving. This means that any principal payment made permanently
reduces the available Loan Amount. Any payment we receive is applied first to
overdue interest, then to current interest owing, then to overdue principal,
then to any fees and charges owing, and finally to current principal.
(b) Floating Rate Instalment Loans. Floating Rate Instalment Loans may have
either (i) blended payments or (ii) payments of fixed principal amounts, plus
interest, as described below.
(i) Blended payments. If you have a Floating Rate Loan that has blended
payments, the amount of your monthly payment is fixed for the term of the
loan, but the interest rate varies with changes in the Prime or U.S.
Alternate Base Rate (as the case may be). If the Prime or U.S. Alternate
Base Rate during any month is lower than what the rate was at the outset,
you may end up paying off the loan before the scheduled end date. If,
however, the Prime or U.S. Alternate Base Rate is higher than what it was
at the outset, the amount of principal that is paid off is reduced. As a
result, you may end up still owing principal at the end of the term
because of these changes in the Prime or U.S. Alternate Base Rate.
(ii) Payments of principal plus interest. If you have a Floating Rate Loan
that has regular principal payments, plus interest, the principal payment
amount of your Loan is due on each payment date specified in the Letter.
The interest payment is also due on the same date, but it is debited from
your Operating Account one or two banking days later. Although the
principal payment amount is fixed, your interest payment will usually be
different each month, for at least one and possibly more reasons, namely:
the reducing principal balance of your loan, the number of days in the
month, and changes to the Prime Rate or U.S. Alternate Base Rate (as the
case may be).
(c) Prepayment. Unless otherwise agreed, the following terms apply to
prepayment of any Instalment Loan:
(i) Floating Rate Instalment Loans. You may prepay all or part of a
Floating Rate Instalment Loan (whether it is a Demand or a Committed Loan)
at any time without notice or penalty.
(ii) Fixed Rate Instalment Loans. You may prepay all or part of a Fixed
Rate Instalment Loan, on the following condition. You must pay us, on the
prepayment date, a prepayment fee equal to the interest rate differential
for the remainder of the term of the Loan, in accordance with the standard
formula used by CIBC Inc. in these situations.
(d) Demand of Fixed Rate Demand Instalment Loans. If you have a Fixed Rate
Demand Instalment Loan and we make demand for payment, you will owe us (i) all
outstanding principal, (ii) interest, (iii) any other amount due under this
Agreement, and (iv) a prepayment fee. The prepayment fee is equal to the
interest rate differential for the remainder of the term of the loan, in
accordance with the standard formula used by CIBC Inc. in these situations.
1.22 Notice of Default. You will promptly notify us of the occurrence of any
event that is an Event of Default (or any that would be an Event of Default if
the only thing required is either notice being given or time elapsing, or both).
ARTICLE 1 - LIBO RATE PROVISIONS
1.1 Definitions. In this Agreement, the following terms have the following
meanings:
"LIBO Rate" for any LIBOR Period means a rate of interest per year equal to the
rate at which we are prepared to offer, as at 11:00 a.m. (London, England time)
on the second LIBOR Business Day before the start of that LIBOR Period, deposits
to leading banks in London, England interbank eurocurrency market in an amount
of U.S. dollars similar to the amount of the applicable LIBOR Loan and for a
deposit period comparable to that LIBOR Period; except that, if we do not
receive proper or timely notice as required below but we permit your request,
then the LIBOR Rate for such LIBOR Period means the rate of interest per year as
determined by us (in our absolute discretion) and offered to you and immediately
accepted by you.
"LIBOR Business Day" means a Business Day on which U.S. dollar transactions can
be carried out between leading banks in the interbank eurocurrency market in
London, England and between CIBC Inc. and other leading banks in New York City.
"LIBOR Loan" means a Fixed Rate Loan in U.S. dollars in whole multiples of
US$1,000,000 on which interest is calculated by reference to a LIBO Rate.
"LIBOR Period" means the period selected by you in accordance with this
Agreement for computing interest from time to time on a LIBOR Loan.
1.2 Availability. LIBOR Loans are available only in whole multiples of
US$1,000,000 each, for terms of one to six months.
1.3 Required Notice.
(a) You may draw down or roll over a LIBOR Loan, or convert another type of
Credit under this Agreement to a LIBOR Loan, or repay a LIBOR Loan, but only
as provided in this Article. Any such action must be done on a LIBOR Business
Day. Also, you must give notice (in the form we require) to the CIBC Inc.
Branch/Centre before 10:00 a.m. (local time where the CIBC Inc. Branch/Centre
is located). The notice must be given on the third LIBOR Business Day before
the requested date of drawdown, rollover, conversion or repayment. You may
roll over or convert an existing LIBOR Loan only on the expiry of its LIBOR
Period.
(b) If we do not receive proper or timely notice as required by the preceding
paragraph, we may (but we are not obliged to) decide what you are permitted to
do for that LIBOR Loan. We may, on the other hand, simply roll over an
existing LIBOR Loan at the end of its LIBOR Period for a new LIBOR Loan with a
new LIBOR Period determined by us.
1.4 Maturity Limitation. The expiry date of a LIBOR Period for any LIBOR Loan
may not (a) be after a scheduled or required maturity or termination date for
that Credit or (b) conflict, in our opinion, with any scheduled or mandatory
repayment for that Credit.
1.5 Repayments. You may only repay all (but not part) of a LIBOR Loan, and only
on the last day of the LIBOR Period for that LIBOR Loan.
1.6 Interest Calculation and Payment. Interest at a LIBO Rate will be calculated
on the daily balance of each LIBOR Loan for the actual number of days elapsed,
on the basis of a 360 day year. You will pay interest on each LIBOR Loan in
arrears at the end of each LIBOR Period. If a LIBOR Period is greater than three
months, you will pay interest at the end of each three month period during that
LIBOR Period, except that overdue interest will be payable immediately on
demand. Overdue amounts in respect of a LIBOR Loan (including any overdue
interest) may at our option be either converted to another type of loan (if
available) under any Credit or considered to be a LIBOR Loan for one or more
LIBOR Periods as we may determine.
1.7 Interest Act. Each nominal rate of interest referenced to a LIBO Rate,
expressed as an annual rate for purposes of the Interest Act (Canada), is that
rate multiplied by the actual number of days in the calendar year in which the
rate is to be ascertained, and divided by 360.
1.8 Lack of LIBO Rate. At any time before the start of any LIBOR Period, we
might determine that (a) by reason of circumstances affecting the London,
England interbank eurocurrency market generally, adequate and fair means do not
exist for determining the LIBO Rate applicable for that LIBOR Period, or (b)
deposits in U.S. dollars are not in the ordinary course of business available to
CIBC Inc. in that market for deposit periods comparable to that LIBOR Period in
a total amount similar to that LIBOR Loan bearing interest at a rate no greater
than the LIBO Rate applicable to that LIBOR Loan. If we do, then from and after
that date, you may not roll over any existing LIBOR Loan at the end of its LIBOR
Period, or obtain any new LIBOR Loan. Our determination of any events under this
paragraph will be conclusive.
1.9 Illegality. If at any time we determine in good faith that any legal
requirement or any official directive or request (whether or not having the
force of law) by a central bank or other governmental authority will make it
unlawful or impossible for us to make, maintain or fund any LIBOR Loan, we will
notify you accordingly. Upon receiving such a notice, you will either (a) on the
last day of the LIBOR Period of any LIBOR Loan, if we can continue to maintain
that loan, or (b) immediately, if we cannot legally maintain that loan,
(1) pay us in full the then outstanding principal amount of each such LIBOR
Loan, together with all accrued interest, or
(2) convert that loan into another type of loan allowed under this Agreement.
For clarification, upon a payment or conversion of a LIBOR Loan made under this
section in the middle of its LIBOR Period, you will immediately on demand
compensate us as provided elsewhere in this Agreement. Our determination of any
matters under this paragraph will be conclusive.
ARTICLE 2 - DEFINITIONS
2.1 Definitions. In this Agreement, the following terms have the following
meanings:
"Alternate Base Rate Loan" means a U.S. dollar loan on which interest is
calculated by reference to the U.S. Alternate Base Rate.
"Business Day" means any day (other than a Saturday or a Sunday) that the CIBC
Inc. Branch/Centre is open for business.
"CIBC Inc. Branch/Centre" means the CIBC Inc. branch or banking centre noted on
the first page of this Agreement, as changed from time to time by agreement
between the parties.
"Committed Instalment Loan" means an Instalment a Loan (including an operating
line)that is payable in regular instalments but is repayable in full only upon
the earlier of the expiry of the committed term of the Loan, the occurrence of
an Event of Default, or there having occurred (in our reasonable opinion) a
Change of Control of (as defined in the Letter) of your company or PMC Ltd. Such
a Loan may be either at a fixed or a floating rate of interest.
"Credit" means any credit referred to in the Letter, and if there are two or
more parts to a Credit, "Credit" includes reference to each part.
"Credit Limit" of any Credit means the amount specified in the Letter as its
Credit Limit, and if there are two or more parts to a Credit, "Credit Limit"
includes reference to each such part.
"Default Interest Rate", unless otherwise defined in the Letter, means the
Standard Overdraft Rate.
"Demand Instalment Loan" means an Instalment Loan that is payable upon demand.
Such a Loan may be either at a fixed or a floating rate of interest.
"Event of Default" means, in connection with any Committed Instalment Loan (even
if that Loan has not yet been drawn), the occurrence of any of the following
events (or the occurrence of any other event of default described in this
Agreement, in any of the security documents or in any other agreement or
document you have signed with us):
(1) You do not pay, when due, any amount that you are required to pay us under
this Agreement or otherwise and such failure is not remedied within 5 days
after notice, or you do not perform any of your other obligations to us under
this Agreement or otherwise and any such failure (if curable) is not remedied
within 10 days after notice.
(2) Any part of the security terminates or is no longer in effect, without our
prior written consent.
(3) You cease to carry on your business in the normal course, or it reasonably
appears to us that that may happen.
(4) A representation that you have made (or deemed to have made in any
certificate or document delivered to CIBC hereunder) in this Agreement or in
any security agreement is incorrect or misleading in any material respect.
(5) (i) An actual or potential default or event of default occurs in
connection with any debt owed by you or by PMC Ltd (including any actual or
potential default or event of default under the CIBC Credit Agreement), with
the result that the payment of the debt has become, or is capable of becoming,
accelerated, or (ii) you do not make a payment when due in connection with any
such debt after the expiration of any applicable grace period. (This
subsection (5), however, applies only to amounts that we reasonably consider
to be material.)
(6) If you are a corporation, there is, in our reasonable opinion, a change in
effective control of the corporation, or if you are a partnership, there is a
change in the partnership membership.
(7) We believe, in good faith and upon commercially reasonable grounds, that
all or a material part of your property part of the property subject to any of
the security is or is about to be placed in jeopardy or that a material
adverse change in your business operations, or financial affairs has occurred.
(8) The holder of a Lien or a receiver or similar official takes possession of
all or a material part of your property; or a distress, execution or other
similar process is levied against any such property.
(9) You (i) become insolvent; (ii) are unable generally to pay your debts as
they become due; (iii) make a proposal in bankruptcy, or file a notice of
intention to make such a proposal; (iv) make an assignment in bankruptcy; (v)
bring a court action to have yourself declared insolvent or bankrupt; or
someone else brings an action for such a declaration; or (vi) you default in
payment or breach any other material obligation to any of your other
creditors.
(10) If you are a corporation, (i) you are dissolved; (ii) your shareholders
or members pass a resolution for your winding-up or liquidation; (iii) someone
goes to court seeking your winding-up or liquidation, or the appointment of an
administrator, conservator, receiver, trustee, custodian or other similar
official for you or for all or substantially all your assets; or (iv) you seek
protection under any statute offering relief against the company's creditors.
"Fixed Rate Instalment Loan" means an Instalment Loan that is also a Fixed Rate
Loan.
"Fixed Rate Loan" means any loan drawn down, converted or extended under a
Credit at an interest rate which was fixed for a term, instead of referenced to
a variable rate such as the Prime Rate or U.S. Alternate Base Rate, at the time
of such drawdown, conversion or extension. For purposes of certainty, a Fixed
Rate Loan includes a LIBOR Loan.
"Floating Rate Instalment Loan" means an Instalment Loan that is either a Prime
Rate Loan or an Alternate Base Rate Loan.
"Instalment Loan" means a loan that is repayable either in fixed instalments of
principal, plus interest, or in blended instalments of both principal and
interest. A Demand Instalment Loan is repayable on demand. A Committed
Instalment Loan is repayable only upon the occurrence of an Event of Default.
"Letter" or "Agreement" means the letter agreement between you and CIBC Inc. to
which this Schedule and any other Schedules are attached and includes the
schedule(s).
"Letter of Credit" or "L/C" means a documentary or stand-by letter of credit, a
letter of guarantee, or a similar instrument in form and substance satisfactory
to us.
"L/C Acceptance" means a draft (as defined under the Bills of Exchange Act
(_____________)) payable to the beneficiary of a documentary L/C which the L/C
applicant or beneficiary, as the case may be, has presented to us for acceptance
under the terms of the L/C.
"Lien" includes a mortgage, charge, lien, security interest or encumbrance of
any sort on an asset, and includes conditional sales contracts, title retention
agreements, capital trusts and capital leases.
"Normal Course Lien" means a Lien that (a) arises by operation of law or in the
ordinary course of business as a result of owning any such asset (but does not
include a Lien given to another creditor to secure debts owed to that creditor)
and (b), taken together with all other Normal Course Liens, does not materially
affect the value of the asset or its use in the business.
"Operating Account" means the account that you normally use for the day-to-day
cash needs of your business, and may be either or both of a U.S. dollar and a
Canadian dollar account.
"Prime Rate" means the variable reference rate of interest per year declared by
CIBC from time to time to be its prime rate for Canadian dollar loans made by
CIBC in Canada.
"Prime Rate Loan" means a Canadian dollar loan on which interest is calculated
by reference to Prime Rate.
"Purchase Money Lien" means a Lien incurred in the ordinary course of business
only to secure all or part of the purchase price of an asset, or to secure debt
used only to finance all or part of the purchase of the asset.
"Standard Overdraft Rate" means the variable reference interest rate per year
declared by CIBC Inc. from time to time to be its standard overdraft rate on
overdrafts in U.S. or Canadian dollar accounts maintained with CIBC Inc. in the
United States of America.
"U.S. Alternate Base Rate" means the variable reference interest rate per year
as declared by CIBC Inc. from time to time to be its base rate for U.S. dollar
commercial demand loans made by CIBC Inc. in the United States of America, and
means on any day a fluctuating rate of interest per year equal to the highest
of:
(a) the rate of interest most recently established by CIBC Inc. as its base
rate for U.S. dollar commercial demand loans made by CIBC Inc. in the United
States; and
(b) the "Federal Funds Rate" plus 0.5%, where the Federal Funds Rate means,
for any particular day, the variable rate of interest per year, calculated on
the basis of a year of 360 days, equal to the weighted average of rates on
overnight federal funds transactions with members of the Federal Reserve
System arranged by Federal Funds brokers as released on the next succeeding
business day by the Federal Reserve Bank of New York;
Neither the U.S. Alternate Base Rate nor any component thereof is necessarily
intended to be the lowest rate of interest determined by CIBC Inc. in connection
with extensions of credit.