Bank of Scotland
Corporate Banking
155 Bishopsgate
London
EC2M 3BY
Direct Line: 0207 012 9188
Fax: 0207 012 9459
London Pacific Group Limited
(Company Number 30810)
6 Minden House
Minden Place
St Helier
Jersey
(the "Parent")
and each company listed in Schedule 8
20 December 2002
Dear Sirs,
TERM LOAN AND GUARANTEE FACILITY OF UP TO $23,000,000
We are pleased to offer London Pacific Group Limited and each company listed in
Schedule 8 (each a "Borrower" and together the "Borrowers") an extension of the
multicurrency facility reduced to $23,000,000 (the "Facility"). This offer is
open for acceptance by the Borrowers until 21 December 2002, when it will lapse.
If accepted, this letter and its schedules will form the agreement between the
Borrowers and BoS for the Facility.
The definitions which shall apply to this letter are given in Schedules 4 and 7.
1. Conditions Subsequent
The Borrowers shall deliver to BoS the documents and evidence detailed in
Schedule 1, in a form and content satisfactory to BoS, within the
timescales detailed therein (unless waived or extended by BoS).
2. The Facility
2.1 Purpose
The Borrowers may only use the Facility for its general corporate
purposes and BoS shall not be obliged to concern itself with the
application of any Advance.
2.2 Interest in respect of Advances
2.2.1 The period for which each Advance is outstanding
shall be divided into successive Interest Periods
each of which will start on the expiry of the
previous period or, in the case of the first
Interest Period, on drawdown.
2.2.2 The Borrowers will pay interest on each Advance for
each Interest Period at the annual rate which is the
sum of (1) the Margin, (2) LIBOR and (3) the MLA
Costs.
2.2.3 Interest will be paid in arrears on each Interest
Payment Date.
2.2.4 The Borrowers may select Interest Periods of one or
three months (subject to Clause 2.2.6 below and/or
as otherwise agreed by BoS acting in its sole
discretion).
2.2.5 If the Borrowers do not select an Interest Period by
11 am on the Business Day preceding its commencement
then subject to Clause 2.2.6 below, that Interest
Period will be three months.
2.2.6 No Interest Period may be selected which (1) extends
beyond the Final Repayment Date or (2) would require
the Borrowers to prepay an Advance before the end of
the relevant Interest Period to ensure that the
Facility reduces in accordance with Clause 2.4
below.
2.3.7 If there is a repayment, prepayment or recovery of
all or any part of an Advance other than on the last
day of an Interest Period, then the Borrowers will
pay BoS an amount equal to the amount (if any) by
which the interest which would have been payable on
the amount received at the end of that Interest
Period exceeds the interest which, in the opinion of
BoS, would have been payable on a deposit in the
currency of the amount received or recovered equal
to the amount placed by it with a prime bank in
London for a period from the first Business Day
after the early payment or recovery until the end of
that Interest Period and the Borrowers indemnify BoS
against any other costs, liabilities or expenses
incurred by BoS in connection with that early
payment or recovery.
2.3 Guarantee Fees
The Borrowers will pay a fee in respect of each Guarantee
(other than in respect of the guarantee by the Parent of
Borrowings due to BoS from Furniture Builders Limited) at
an annual rate of the Margin of the full amount of the
Guarantee Exposure. The fee shall be payable quarterly in
advance.
2.4 Reduction in Facility Exposure
2.4.1 Subject to the other provisions of this letter, on
each of the dates set out in Column 1 below the
Facility Exposure shall be reduced to the level set
out in Column 3 by the amount set out in Column 2
and the Available Facility will be reduced by the
same amount.
1 2 3
- - -
31 December 2002 $3,000,000 $20,000,000
31 March 2003 $5,000,000 $15,000,000
30 June 2003 $5,000,000 $10,000,000
30 September 2003 $5,000,000 $5,000,000
31 December 2003 $5,000,000 -
2.4.2 The reduction in the Facility Exposure shall be
achieved by either (1) the repayment of principal in
respect of a Guarantee (and the resultant release by
BoS of its obligations under that element of the
relevant Guarantee) or (2) the prepayment of
Advances drawn down under the Facility or (3) the
collateralisation of the Facility Exposure by means
of a payment to the Cash Collateral Account pursuant
to Clause 2.7 below.
2.5 Early Reduction in Facility Exposure
The Borrowers may reduce the Facility Exposure early
provided that:-
2.5.1 they have given BoS at least two Business Days'
notice in writing of their intention to reduce
early;
2.5.2 where the reduction is achieved by the repayment of
an Advance, the repayment is made on the last day of
an Interest Period or it has met its obligations
under Clause 2.2.7 above;
2.5.3 any amount applied in early reduction of the
Facility Exposure may not be re-borrowed or
re-utilised and the Available Facility will be
reduced accordingly;
2.5.4 any notice issued to BoS under Clause 2.5.1 is
irrevocable; and
2.5.5 the reduction is applied against the next due
reduction or otherwise as agreed between the Parent
and BoS.
2.6 Mandatory Reduction in Facility Exposure
2.6.1 The Borrowers will reduce the whole Facility early
on a Sale (or if the net sale proceeds are less than
total liabilities due by the Borrowers to BoS, then
the Borrowers will reduce the Facility to the extent
of the net sale proceeds) or Listing.
2.6.2 The Borrowers will reduce the Facility early on the
recovery of Net Proceeds or Cost Savings (to the
extent of any Net Proceeds or Cost Savings at any
time recovered) in accordance with Clause 2.6.3
below.
2.6.3 All Net Proceeds or Cost Savings shall be paid into
the Proceeds Account. BoS shall, on any Interest
Payment Date when the balance standing to the credit
of the Proceeds Account exceeds $500,000 or
otherwise upon the occurrence of an Event of Default
be entitled to apply the whole or any part of the
sums standing to the credit of the Proceeds Account
in the name of the Parent in or towards early
reduction of the Facility in accordance with Clause
2.5.5.
2.6.4 For the purposes of this Clause 2.6, the Parent
shall establish the Proceeds Account in the name of
the Parent with BoS. BoS shall have sole signing
rights to the Proceeds Account. The Parent shall not
be entitled at any time to withdraw or transfer any
sums from the Proceeds Account except with the prior
consent of BoS.
2.6.5 The Parent shall not sell, assign, transfer or
otherwise encumber or charge all or any of its
right, title and interest in and to the sum or sums
from time to time standing to the credit of the
Proceeds Account and/or any other rights in respect
of the Proceeds Account, other than pursuant to the
BoS Documents.
2.6.6 The Parent irrevocably authorises BoS in the name of
the Parent to do all such acts and execute all such
documents which the Parent itself could do or
execute in relation to the Proceeds Account in
connection with any of the matters dealt with in
this Clause 2.6.
2.6.7 The amount credited to the Proceeds Account shall
bear interest, from the time it is so credited until
the sum it is withdrawn from that account or
otherwise applied in accordance with this Clause 2.6
at the Rate and such interest shall be credited to
the Proceeds Account. After reduction of the
Facility Exposure to nil, BoS shall transfer any
interest, proceeds, benefits or title which has
accrued under, in or to the Proceeds Account to an
account nominated by the parent for that purpose
(after deduction of any applicable Taxes).
2.7 Cash Collateral Account
2.7.1 For the purposes of Clauses 2.4 and 2.5, the Parent
shall establish the Cash Collateral Account in the
name of the Parent with BoS. BoS shall have sole
signing rights to the Cash Collateral Account. The
Parent shall not be entitled at any time to withdraw
or transfer any sums from the Cash Collateral
Account except with the prior consent of BoS.
2.7.2 BoS shall, at any time upon the occurrence of an
Event of Default or where a demand has been made of
BoS under a Guarantee, be entitled to apply the
whole or any part of the sums standing to the credit
of the Cash Collateral Account in the name of the
Parent in or towards payment of any unpaid sums at
any time due from the Borrowers to BoS under the
Facility and/or any sums demanded from BoS under a
Guarantee
and BoS may effect such transactions as are
appropriate to implement any such payment and any
usual charges or expenses (including any breakage
costs) and all applicable Taxes in relation to such
transactions shall be paid by the Borrowers.
2.7.3 The Parent shall not sell, assign, transfer or
otherwise encumber or charge all or any of its
right, title and interest in and to the sum or sums
from time to time standing to the credit of the Cash
Collateral Account and/or any other rights in
respect of the Cash Collateral Account, other than
pursuant to the BoS Documents.
2.7.4 The Parent irrevocably authorises BoS in the name of
the Parent to do all such acts and execute all such
documents which the Parent itself could do or
execute in relation to the Cash Collateral Account
in connection with any of the matters dealt with in
this Clause 2.7.
2.7.5 The amount credited to the Cash Collateral Account
shall bear interest, from the time it is so credited
until the sum it is withdrawn from that account or
otherwise applied in accordance with this Clause
2.7, at the Rate and such interest shall be credited
to the Cash Collateral Account and applied in
reduction of the Facility Exposure on each Interest
Payment Date. After reduction of the Facility
Exposure to nil, BoS shall transfer any interest,
proceeds, benefits or title which has accrued under,
in or to the Cash Collateral Account to an account
nominated by the Parent for that purpose (after
deduction of any applicable Taxes).
2.8 Counter indemnity
2.8.1 The Borrowers agree to pay to BoS on demand an
amount equal to each amount demanded of BoS under
each Guarantee and agree to indemnify and undertakes
to keep indemnified BoS against all costs, losses,
damages, actions, claims, demand, liabilities and
expenses of whatsoever nature and howsoever arising
which BoS may incur, suffer or sustain by reason of
or arising in any way whatsoever (save to the extent
resulting from its or its employees or agents
negligence or wilful default) in connection with a
Guarantee or the issue of a Guarantee or any
payments made thereunder.
2.8.2 BoS shall at all times be entitled to make any
payment under a Guarantee for which a prima facie
valid request or demand has been made by or on
behalf of a beneficiary under a Guarantee without
further investigation or enquiry or any reference to
or authority from any Borrower. BoS need not concern
itself with the enforceability and/or propriety of
any claim which is made in the manner required by
the Guarantee nor shall any Borrowers be entitled to
refuse payment of any amount claimed from it by BoS
under Clause 2.8.1 of this letter on the basis that
BoS was or might have been entitled to refuse to
make any payment to any beneficiary under the
Guarantee. Any payment by BoS to any beneficiary
shall be accepted by the parties hereto as
conclusive evidence that BoS was liable to make such
payment.
2.8.3 If a demand for payment under a Guarantee is made to
BoS, BoS shall promptly give notice to the Parent
setting out details of the demand and shall make a
copy of the demand available to it. An amount equal
to the amount demanded of BoS shall be due and
payable by the Borrowers to BoS in accordance with
Clause 2.
2.8.4 The obligations of the Borrowers hereunder are
continuing obligations and shall not in any way be
discharged or impaired by reason of:-
2.8.4.1 the illegality or unenforceability of the
obligations hereunder under any other
document of any other party hereto;
2.8.4.2 any time or other indulgence which may be
granted by any beneficiary under a Guarantee
to BoS or by BoS to any Borrower or to any
other person from whom it may seek
reimbursement in respect of any sums paid
out by it hereunder or in connection with
a Guarantee;
2.8.4.3 the illegality or unenforceability of or any
variation of the terms of a Guarantee; or
2.8.4.4 any circumstance which would or might (but
for this provision) constitute a legal or
equitable discharge or defence of any
Borrower.
2.8.5 Any rights conferred on BoS by this letter shall be
in addition to and not in substitution for or
derogation from any other rights which BoS may from
time to time have or seek for reimbursement or
indemnification from any person.
2.8.6 BoS shall not be obliged before taking any steps to
enforce any rights, powers or remedies conferred
upon it by this letter or by law:-
2.8.6.1 to take action or obtain judgement in any
court against any other person from whom it
may seek reimbursement in respect of sums
paid out by it under a Guarantee or this
letter; or
2.8.6.2 to make or file any claim in any bankruptcy,
winding-up, liquidation or reorganisation of
any Borrower or any other person; or
2.8.6.3 to enforce or seek to enforce any other
rights which it may have against any
Borrower or any other person or persons.
3. Hedging
3.1 The Parent, after consultation with BoS, shall enter into such
interest rate protection agreements (with BoS Group) regarding its
exposure to interest rates or foreign exchange rates as the Parent
and BoS may agree from time to time. Any fee or premium payable to
BoS or to any other person in connection with such agreements
shall be payable by the Borrower on demand and the Borrowers
hereby indemnify BoS (and any of its subsidiaries) against all and
any liabilities, losses, damages, costs and other amounts which
may arise out of or in connection with such arrangements
(including, without limitation, the termination or closing out of
such arrangements) save to the extent resulting from the gross
negligence or wilful default of BoS or any of its subsidiaries.
3.2 In consideration of (1) Treasury (now or in the future) entering
into any of the agreements contemplated in Clause 3.1 above with
any Borrower and (2) BoS entering into the Treasury Guarantee, the
Borrowers shall indemnify BoS against the Indemnified Events. In
addition, each Borrower:-
3.2.1 authorises BoS to make any payments and comply with
any demands made under the Treasury Guarantee
without further authority from that Borrower and
agrees that any such payment shall be binding on
that Borrower without further evidence from BoS of
its liability to make such payment to Treasury;
3.2.2 undertakes to pay to BoS on demand an amount equal
to each amount demanded under the Treasury Guarantee
and authorises BoS to debit any of that Borrower's
accounts with such sums; and
3.2.3 agrees that this indemnity shall be a continuing
security until such time as all liabilities, claims,
damages, costs and expenses incurred or sustained by
that Borrower under this indemnity have been paid or
discharged in full.
4. Default Interest
4.1 If any Borrower fails to pay any sum under or in relation to the
Facility on its due date then the Borrowers will pay interest on
it until it is paid at the Default Rate.
4.2 Default interest payable must be paid monthly in arrear and if not
paid will itself bear interest at the Default Rate.
5. Security
5.1 As security for the Facility and any other money owing or incurred
to BoS by any Group Company (including contingent liabilities and
all amounts due to BoS in respect of payment commitments entered
into by BoS on behalf of any Group Company but not yet debited to
that company's account) the Borrowers will deliver or procure
delivery of the security detailed in Schedule 1.
5.2 The Borrowers will grant (to the extent legally possible) such
further security to BoS as it may require from time to time and
procure that any subsidiary undertaking which is created or is
acquired by any Group Company after the date of this letter will
grant such security to BoS as it shall notify to the Borrower from
time to time and all such further security will secure the
Facility and any other money owing or incurred to BoS by any Group
Company (including contingent liabilities) provided that BoS will
not take any security over the Group's cash accounts required for
operational purposes unless there has occurred an Event of Default
and BoS requests such security in writing.
6. Representations and Warranties
The Borrowers by signing this letter make the representations and
warranties set out in Schedule 2 and repeat each of them (save for 7, 8,
10, 11, 17 and 18) on each Interest Payment Date and on each date on
which guarantee fees are payable pursuant to Clause 2.3 of this letter.
7. Covenants
The Borrowers covenant with BoS that from the date of its acceptance of
this letter until all the Borrower's obligations under it have been
discharged:-
7.1 General Covenants
The Borrowers will at all times comply and procure compliance by
each other Group Company with the general covenants set out in
Schedule 3.
7.2 Financial Covenants
The Borrowers will at all times comply with the financial
covenants set out in Schedule 4.
7.3 Financial Information Covenants
The Borrowers will at all times comply with the financial
information covenants set out in Schedule 5.
8. Default and Indemnity
8.1 If an Event of Default occurs and has not been waived by BoS in
writing, BoS may by notice in writing to the Parent:-
8.1.1 cancel any part of the Facility then undrawn or
unutilised; and/or
8.1.2 require repayment (immediately or otherwise as BoS
may require) of the Facility together with accrued
interest;
8.1.4 call for cash cover in respect of any Guarantee;
and/or
8.1.5 require that interest and/or guarantee fees are
payable on the Facility at the Default Rate.
8.2 The Borrowers will indemnify (and keep indemnified) BoS on written
demand against any loss or expense (reasonably incurred),
including legal fees, which BoS sustains or incurs:-
8.2.1 because of a default by any Group Company of any
obligation assumed by it under any BoS Document; or
8.2.2 as a consequence of any Event of Default or
Potential Event of Default.
9. Taxes and Increased Cost
9.1 All payments by a Borrower to BoS (being a Qualifying Bank) under
this letter shall be free and without deduction of tax unless that
Borrower is required by law to make a payment subject to deduction
or withholding of tax, in which case the amount payable by the
Borrower will be sufficiently increased to ensure that BoS
receives and retains a net sum equal to that which it would have
received and retained were no deduction or withholding made. If
BoS subsequently receives a tax credit which is referable to the
increased payment and which enhances its position, then it will
reimburse that Borrower sufficient to redress the position up to
the amount received so long as by so doing it does not prejudice
receipt or retention of the tax credit.
9.2 If BoS incurs an Increased Cost, then the Borrowers will indemnify
it and will promptly pay to it the amount BoS certifies as
payable. BoS will disclose, in reasonable detail, the basis of its
calculation but not any matter which it considers confidential.
10. Payment, Set Off and Interest Calculations
10.1 All payments of principal, interest or commission will be paid to
BoS at the Parent's branch unless BoS otherwise directs and shall
be in cleared US Dollar funds free of set-off or counterclaim.
10.2 All sums of interest or commission will be calculated on the basis
of a year of 360 days and for the actual number of days elapsed
following decree or judgement as well as before it.
10.3 Any determination by BoS of any amount of principal, interest,
commission or charges or an applicable interest rate shall, in the
absence of manifest error, be conclusive and binding on the
Borrowers.
10.4 Where the due date for payment of any sum under any BoS Document
is not a Business Day then (without affecting subsequent payment
dates) actual payment will be required on the next Business Day
unless that day falls in the next calendar month, in which case
payment will be on the preceding Business Day.
10.5 The Borrowers agree that any monies from time to time standing to
its credit on any account with BoS may be retained as cover for
and at any time without notice to the Borrowers applied by BoS in
or towards payment or satisfaction of any monies or liabilities
now or from time to time due, owing or incurred by the Borrowers
to BoS in whatsoever manner, whether presently payable or not,
whether actually or contingently, whether solely or jointly with
any other person and whether as principal or surety.
10.6 If BoS exercises any right of set-off in respect of any liability
of the Borrowers and that liability or any part of it is in a
different currency from any credit balance against which BoS seeks
to set it off, BoS may use the currency of the credit balance to
purchase an amount in the currency of the liability at the then
prevailing spot rate of exchange and to pay out of the credit
balance all costs, charges and expenses incurred by BoS in
connection with that purchase.
10.7 If the Borrowers fail to pay any amount due to BoS in US dollars
but makes such payment in another optional currency, the Borrowers
shall indemnify BoS against the full cost incurred by BoS
(including all costs, charges and expenses) of converting that
payment into US dollars.
11. Illegality
If, in the opinion of BoS, the introduction of any law or regulation or
change in its interpretation, makes it unlawful for BoS to maintain any
part of the Facility or carry out any of its obligations in relation to
it then BoS will serve notice to that effect on the Parent and that
notice will release BoS from those
obligations. The Borrowers will then repay to BoS (on its demand or on
whatever later date BoS reasonably specifies) the Facility together with
any other sums payable to BoS under this letter.
12. Assignment and Transfer
12.1 This letter is for the benefit of the Borrowers and BoS and their
successors and assignees and transferees of BoS.
12.2 The Borrowers may not assign or transfer all or any of their
rights, obligations or benefits under this letter.
12.3 BoS will be entitled (after consultation with the Parent) to (1)
assign, novate or transfer and/or (2) permit a participation in
all or any part of its rights and obligations under this letter to
or by any other Qualifying Bank or Banks. The Borrowers undertake
to execute and to procure that each Group Company will execute all
documents BoS may reasonably require to give effect to an
assignment, novation or transfer. If BoS does enter into a
participation arrangement, the Borrowers will continue to deal
directly with BoS as agent.
12.4 BoS will be entitled to enter into any sub-participation or other
contractual arrangement with any person in relation to the BoS
Documents and (subject to Clause 12.5 below) to provide
information in relation to the Group to such persons for such
purpose.
12.5 BoS will be entitled to disclose to any prospective or actual
assignee, transferee or participant, any other member of the BoS
Group or any other person who enters or proposes to enter into
contractual relations with BoS in relation to the BoS Documents
confidential information concerning each Group Company and its
financial condition and any other information which may be given
to BoS in relation to this letter, provided that the person to
whom such information is disclosed undertakes to BoS to maintain
the confidentiality of such information.
13. Notices
Unless otherwise provided in this letter, all notices or other
communications to or between the parties will be in writing and:-
13.1 will be by first-class pre-paid post or by fax transmission,
authenticated to the satisfaction of BoS and if by letter, will be
deemed to have been received forty-eight hours after posting
(unless hand delivered and then at the time of delivery) and if by
fax, when sent (provided a transmission report is received);
13.2 in order to prove that a notice or demand has been made, BoS need
only establish that the notice or demand was properly addressed
and posted or transmitted;
13.3 if given to BoS, it will be given at the address at the head of
this letter or at any other address in the UK which BoS may
designate at any time by notice to the Parent;
13.4 if given to any Borrower, it will be deemed to be duly given if
given at the address at the front of this letter;
13.5 BoS may rely upon any communication by telephone or fax or
purporting to be on behalf of any Borrower by anyone notified to
BoS as being authorised without enquiry by BoS as to authority or
identity. The Borrowers agree to indemnify BoS against any
liability incurred or sustained by BoS as a result.
14. Press Release
The Borrowers and BoS shall agree the terms of any public announcement or
press release (other than documents that any Borrower is required to file
on any public register) concerning the terms of this letter.
15. Obligations
The obligations of each Borrower in relation to the Facility are joint
and several.
16. Waivers and Severability
16.1 No failure or delay by BoS in exercising any right or remedy under
any BoS Document shall operate as a waiver, and no single or
partial exercise shall prevent further exercise, of any right or
remedy.
16.2 If any part of this letter is not valid or enforceable then that
shall not affect any other part.
16.3 The Schedules referred to in this letter shall form part of this
letter.
17. Fees and Expenses
17.1 The Borrowers will pay to BoS:-
17.1.1 a restructuring fee of (pound)180,000 payable on the
earlier of (1) any sale of all or substantially all of the
shares or assets held by LPAL or BCM or their Subsidiaries
to the extent of the balance due of the restructuring fee
or (2) in instalments of (pound)60,000 on each of 30 June
2003, 30 September 2003 and 31 December 2003 and which
shall be debited to the current account of the Parent with
BoS;
17.1.2 accrued management fees of (pound)60,000 which shall be
payable within 10 Business Days of the date of this letter
and which shall be debited to the credit account of the
Parent with BoS;
17.1.3 a management fee of (pound)10,000 per month commencing on 1
March 2003 payable (to the extent such fee has accrued) on
(1) any sale of all or substantially all of the shares or
assets held by LPAL or BCM or their Subsidiaries and (2)
the Final Repayment Date and which shall be debited to the
current account of the Parent with BoS;
17.1.3 a facility fee calculated as the average Facility Exposure
for each quarter ending on the quarter date listed in
Column 1 multiplied by the Facility Fee Margin listed in
Column 2 below. Such facility fee shall be payable in
arrears on the relevant quarter date and shall be debited
to the current account of the Parent with BoS;
Column 1 Column 2
-------- --------
31 December 2002 0.5% per annum
31 March 2003 1.0% per annum
30 June 2003 2.0% per annum
30 September 2003 2.5% per annum
31 December 2003 2.5% per annum
17.1.4 external legal fees for the preparation and negotiation of
this letter, the approval of documents presented to BoS in
terms of Schedule 1 and for the instruction or preparation
of the Security Documents and which shall be debited to the
current account of the Parent with BoS.
17.2 The Borrowers will pay or reimburse to BoS (on a full indemnity
basis) all reasonable legal, accountancy, valuation, due diligence
and other fees, costs and expenses or tax charged to or incurred
by BoS in connection with BoS Documents (including the amendment,
waiver, enforcement or preservation of the BoS rights) on demand.
18. Special Inter-Borrower Provisions
18.1 Borrowers Acknowledgements and Agreements
18.1.1 Each Borrower acknowledges that it will enjoy significant
benefits from the business conducted by the other Borrowers
because of, among other things, their combined abilities to
bargain with other persons including without limitation
their ability to receive the Facility on the terms granted
by BoS which would not have been available to any
individual Borrower acting alone. Each Borrower has
determined that it is in its best interest to procure the
Facility which the Borrowers will utilise as contemplated
by this letter.
18.1.2 BoS has advised the Borrowers that it is unwilling to enter
into this letter and make available the Facility extended
hereby to any Borrower unless each Borrower agrees, among
other things, to be jointly and severally liable for the
due and proper payment of the obligations of each other
Borrower under the Facility. Each Borrower has determined
that it is in its best interest and in pursuit of its
purposes that it so induce BoS to extend credit pursuant to
the Facility and the documents executed in connection
therewith (i) because of the desirability to each Borrower
of the Facility, the interest rates and the modes of
borrowing available thereunder, (ii) because each Borrower
may engage in transactions jointly with other Borrowers and
(iii) because each Borrower may require, from time to time,
access to funds under the Facility for the purposes set
forth in this letter.
18.1.3 Each Borrower has determined that it has and will have,
access to adequate capital for the conduct of its business
and the ability to pay its debts from time to time incurred
in connection therewith as such debts mature and that the
value of the benefits to be derived by such Borrower from
the access to funds under this letter (including, without
limitation, the inter-Borrower arrangement set forth in
this Clause 18.1) is reasonably equivalent to the
obligations undertaken pursuant hereto.
18.1.4 The Parent (on behalf of each Borrower) shall maintain
records specifying (a) all obligations incurred by each
Borrower, (b) the date of such incurrence, (c) the date and
amount of any payments made in respect of such obligations
and (d) all inter-Borrower obligations pursuant to this
Clause 18. The Parent shall make copies of such records
available to the BoS, upon request.
18.2 To the extent that applicable law otherwise would render the full
amount of the joint and several obligations of any Borrower
hereunder and under any other documents invalid or unenforceable,
such Borrower's obligations hereunder and under any other
documents shall be limited to the maximum amount which does not
result in such invalidity or unenforceability, provided, however,
that each Borrower's obligations hereunder and under the other
documents shall be presumptively valid and enforceable to their
fullest extent in accordance with the terms hereof or thereof, as
if this clause 18.2 were not a part of this Agreement.
18.3 Authorisation of the Parent by Borrowers
18.3.1 Each of the Borrowers hereby irrevocably authorises the
Parent to give notices, make requests, make payments,
receive payments and notices, give receipts and execute
agreements, make agreements or take any other action
whatever on behalf of such Borrower under and with respect
to this letter or the Facility and each Borrower shall be
bound thereby. This authorisation is coupled with an
interest and shall be irrevocable, and BoS may rely on any
notice, request, information supplied by Parent, every
document executed by Parent every agreement made by Parent
or other action taken by Parent in respect of the Borrowers
or any thereof as if the same were supplied, made or taken
by any or all Borrowers. Without limiting the generality of
the foregoing, the failure of one or more Borrowers to join
in the execution of any writing in connection herewith
shall not, unless the context clearly requires, relieve any
such Borrower from obligations in respect of such writing.
18.3.2 The Borrowers acknowledge that the credit provided
hereunder is on terms more favourable than any Borrower
acting alone would receive and that each Borrower benefits
directly and indirectly from all Advances hereunder. Each
of the other Borrowers, shall be jointly and severally
liable for all obligations regardless of which Borrower
requested (or received the proceeds of) a particular
Advance.
19. Counterparts
This letter may be executed in any number of counterparts and all the
counterparts when executed and taken together shall constitute one and
the same letter.
20. Additional Borrowers
For the purposes of the entry of London Pacific Technologies, Inc.,
London Pacific Advisors, Inc. and London Pacific Advisory Services, Inc.
to accede to this letter as Borrowers, the Parent shall deliver or cause
to be delivered to BoS an accession agreement duly executed by the
parties thereto in form and context satisfactory to BoS. This letter
shall thereafter be read and construed as if each person which is a party
to such accession agreement as a proposed additional borrower were a
party to this letter having the same rights and obligations of a Borrower
and all references to the "Borrowers" hereunder shall be construed
accordingly.
21. Law
This letter will be governed by and construed according to English law.
22. Jurisdiction
22.1 Each of the parties hereto irrevocably agrees for the benefit of
BoS that the courts of England shall have jurisdiction to hear and
determine any suit, action or proceeding, and to settle any
disputes, which may arise out of or in connection with this
Agreement (respectively "Proceedings" and "Disputes") and, for
such purposes, irrevocably submits to the jurisdiction of such
courts.
22.2 Each of the Borrowers irrevocably agrees that the courts of the
State of New York and the courts of the United States of America,
in each case sitting in the County of New York, shall have
jurisdiction to hear and determine any Proceedings and to settle
any Disputes and, for such purposes, irrevocably submits to the
jurisdiction of such courts.
22.3 Each of the Borrowers irrevocably waives any objection which it
might now or hereafter have to the courts referred to in Clause
22.1 and Clause 22.2 being nominated as the forum to hear and
determine any Proceedings and to settle any Disputes and agrees
not to claim that any such court is not a convenient or
appropriate forum.
22.4 The Parent and each Borrower agrees that the process by which any
Proceedings are begun may be served on it by being delivered (i)
in connection with any Proceedings in England, to the process
agent to be confirmed in accordance with paragraph 4.4 of Schedule
1 (ii) in connection with any Proceedings in New York, the process
agent to be confirmed in accordance with paragraph 4.4 of Schedule
1. If the appointment of either of the persons mentioned in this
Clause 22.4 ceases to be effective in respect of any Borrower,
such Borrower shall immediately appoint a further person in
England or, as the case may be, New York to accept service of
process on its behalf in England or, as the case may be, New York
and, failing such appointment within 15 days, BoS shall be
entitled to appoint such a person by notice to the Parent. Nothing
contained herein shall affect the right to serve process in any
other manner permitted by law.
22.5 The submission to the jurisdiction of the courts referred to in
Clause 22.1 and Clause 22.2 shall not (and shall not be construed
so as to) limit the right of BoS to take Proceedings against any
Borrower in any other court of competent jurisdiction nor shall
the taking of Proceedings in any one or more jurisdictions
preclude the taking of Proceedings in any other jurisdiction
(whether concurrently or not) if and to the extent permitted by
applicable law.
Yours faithfully
.....................................................
for and on behalf of
THE GOVERNOR AND COMPANY
OF THE BANK OF SCOTLAND
Agreed and accepted on behalf of LONDON PACIFIC GROUP LIMITED
By ......................................................... Director
............................................................. Director/Secretary
Date:
Executed as a Deed by
BERKELEY INTERNATIONAL CAPITAL CORPORATION acting by in the presence of this
witness:
................................................. Signature
................................................. Name
................................................. Address
.................................................
Executed as a Deed by BERKELEY INTERNATIONAL CAPITAL LIMITED acting by in the
presence of this witness:
................................................. Signature
................................................. Name
................................................. Address
.................................................
Executed as a Deed by NORTH AMERICAN FIDUCIARY SERVICES, INC acting by in the
presence of this witness:
................................................. Signature
................................................. Name
................................................. Address
.................................................
Executed as a Deed by BERKELEY (USA) HOLDINGS LIMITED acting by in the presence
of this witness:
................................................. Signature
................................................. Name
................................................. Address
.................................................
Executed as a Deed by BERKELEY CAPITAL MANAGEMENT acting by in the presence of
this witness:
................................................. Signature
................................................. Name
................................................. Address
.................................................
Executed as a Deed by BERKELEY INSTITUTIONAL INVESTMENT, INC. acting by in the
presence of this witness:
................................................. Signature
................................................. Name
................................................. Address
.................................................
IMPORTANT NOTICE: As with any legally binding agreement, we recommend that you
consult your solicitor or other independent legal adviser before accepting this
letter.
SCHEDULE 1
CONDITIONS SUBSEQUENT
1. Security
On or prior to 7 February 2003:-
1.1 a charge over all securities held by Berkeley International
Capital Limited.
1.2 accession to this agreement as Borrowers by London Pacific
Advisors, Inc., London Pacific Advisory Services, Inc. and London
Pacific Technologies, Inc. and charges over all Intellectual
Property Rights held by London Pacific Advisors, Inc..
1.3 a pledge over the shares in Berkeley Capital Management and London
Pacific Advisors, Inc.
1.4 a pledge of Berkeley International Capital Limited's 8% preference
shareholding in Nazareth International.
2. Warrants
On or prior to 7 February 2003:-
Warrants in favour of BoS or one of its subsidiaries to acquire 3% of the
equity share capital of the Parent.
3. Secretarial
To be delivered within 10 Business Days of the date of the Borrowers'
execution of this letter:-
3.1 A Certified Copy of the constitutive documents of each Borrower.
3.2 A Certified Copy of the board resolutions of each Borrower
approving the execution, delivery and performance of this
Agreement.
3.3 A Secretary's Certificate from each Borrower.
3.4 Evidence of the process agent that has agreed to act as agent of
each Borrower for the service of process in England and of the
process agent has agreed to act as agent of each Borrower for the
service of process in New York.
3.5 The information and evidence in respect of the Borrowers required
by BoS to comply with its anti money laundering procedures.
4. Legal Opinions
To be delivered concurrently with each relevant document (or as otherwise
agreed with BoS):-
An opinion by the relevant counsel to BoS relating to the due execution
by each non UK Group Company of this letter and any Security Document.
SCHEDULE 2
REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants that:-
1. each Group Company is duly incorporated and validly existing under the
laws of the jurisdiction of its incorporation;
2. no Group Company has any Borrowings (other than Permitted Borrowings) and
no Security Right (other than a Permitted Security Right) exists over the
property or assets of any of them;
3. no Event of Default nor Potential Event of Default has occurred and is
continuing unwaived;
4. each Borrower has power to enter into and comply with its obligations in
terms of the BoS Documents;
5. everything has been done (including obtaining any necessary consents) in
order (1) for each Borrower to comply with its obligations under the BoS
Documents and (2) to ensure that those obligations are legally binding;
6. execution of and compliance with the BoS Documents does not cause any
Borrower to breach:-
(a) any law, regulation, judicial or official order to which it is
subject;
(b) its constitutive documents; or
(c) any letter, undertaking or restriction to which it is a party or
subject;
and will not result in the imposition of any Security Right (other than a
Permitted Security Right) on any of its assets;
7. each statement of fact contained in the Business Plan is materially
correct and, so far as the Borrowers are aware, there are no other
matters concerning any Group Company not already disclosed in writing to
and accepted by BoS which would materially qualify or contradict the
Business Plan;
8. all statements of opinion in the Business Plan were, when made, given in
good faith after careful consideration and are still honestly and
reasonably held; all forecasts and projections contained in the Business
Plan were prepared in good faith, after careful consideration and on the
basis of reasonable assumptions and the Borrowers are not aware of
anything which might affect their accuracy;
9. save as disclosed to BoS in compliance with Clause 2.2 of Schedule 3, no
Material Litigation is current, pending or threatened against any Group
Company or its assets;
10. the copies of all Certified Copy documents and other documents delivered
to BoS are true, accurate and complete in all material respects;
11. the most recent Financial Statements of the Group delivered to BoS in
terms of Schedule 5 were prepared in accordance with US GAAP and give a
true and fair view of the financial condition of the Group at the end of
the relevant period and there has been no material adverse change in the
financial condition of the Group since the date of those statements;
12. each Borrower (other than the Parent) is a wholly owned (direct or
indirect) subsidiary of the Parent;
13. each Group Company holds all licences and consents (including
Environmental Licences) necessary for the ownership, occupation or use of
its property and which allow it to comply with the terms of the BoS
Documents and to conduct its business and has complied in all material
respects with those licences and consents and with Environmental Law;
14. no Dangerous Substance is present on, in, under or adjacent to any
property owned or occupied by a Group Company or has been used, disposed
of or released at or from any property owned or occupied
by a Group Company or (to the best of the Borrowers' knowledge) from any
adjoining property, which, in either case, is likely to result in a
liability which, in the opinion of BoS, would have a Material Adverse
Effect;
15. all acts, conditions and things required to be done, fulfilled and
performed in order (a) to enable it lawfully to enter into, exercise its
rights under and perform and comply with the obligations expressed to be
assumed by it in this letter and any guarantee of the obligations of the
Borrowers hereunder to which it is a party, (b) to ensure that the
obligations expressed to be assumed by it in this letter and any such
guarantee are legal, valid, binding and enforceable and (c) to make this
letter and any such guarantee admissible in evidence in its jurisdiction
of incorporation have been done, fulfilled and performed;
16. under the laws of its jurisdiction of incorporation in force at the date
hereof, the claims of BoS against it under this letter and any guarantee
of the obligations of the Borrowers will rank at least pari passu with
the claims of all its other unsecured and unsubordinated creditors save
those whose claims are preferred solely by any bankruptcy, insolvency,
liquidation or other similar laws of general application;
17. (save in respect of any filing any Borrower is obliged to make with the
Securities and Exchange Commission and with the Financial Services
Authority) under the laws of its jurisdiction of incorporation in force
at the date hereof, it is not necessary that this letter be filed,
recorded or enrolled with any court or other authority in such
jurisdiction or that any stamp, registration or similar tax be paid on or
in relation to this letter;
18. under the laws of its jurisdiction of incorporation in force at the date
hereof, it will not be required to make any deduction or withholding from
any payment it may make hereunder.
SCHEDULE 3
GENERAL COVENANTS
1. Each Borrower shall, save with the prior written consent of BoS:-
1.1 ensure that its obligations in respect of the Facility and the
obligations of itself and each other Group Company under the
Security Documents at all times rank ahead of all other Borrowings
of each Group Company unless statutorily preferred;
1.2 notify BoS of any Event of Default or Potential Event of Default
immediately upon becoming aware of it, at the same time describing
the steps (if any) being taken to nullify or mitigate its effects.
2. Each Borrower shall, and shall procure that each other Group Company
shall, unless it has a prior written waiver from BoS:-
2.1 effect and maintain (with BoS interest noted on them) sufficient
and appropriate policies of insurance of its business and assets
and supply copies or evidence of them on written demand by BoS;
2.2 advise BoS promptly of Material Litigation;
2.3 take whatever steps and execute whatever documents BoS may
reasonably require in order to give effect to the Security
Documents;
2.4 have and maintain all licences and authorisations necessary under
any law or regulation affecting the conduct of its business;
2.5 comply with all Statutory Controls and promptly give to BoS a copy
of any notice concerning compliance with them;
2.6 preserve its Intellectual Property Rights and observe all
covenants and stipulations affecting them;
2.7 at the Borrowers' expense, permit BoS to obtain valuations of
whatever Group assets which BoS may, at any time, reasonably
require;
2.8 on receiving the same, notify BoS of any actual or threatened
claim against any Group Company in respect of an alleged breach of
Environmental Law or Remedial Action or liability under such law
which could, if well-founded, (1) have a Material Adverse Effect
or (2) constitute a material liability of that Group Company
(which shall be judged solely by BoS);
2.9 indemnify BoS, any receiver appointed by BoS and their respective
officers, employees and agents against all costs and expenses
suffered or incurred by them which arise as a result of (1) any
actual or threatened breach of Environmental Law, (2) any actual
or threatened release of or exposure to a Dangerous Substance on,
at or from the premises or operations of any Group Company or (3)
any actual or threatened claim referred to in Clause 2.9 above
whether such claim has a Material Adverse Effect or not;
2.10 where harm in terms of the Environmental Protection Act 1990 (as
amended by the Environment Act 1995) has been caused to any
property belonging to any Group Company over which BoS has or will
have a security interest pursuant to a Security Document, ensure
that none of the Group Companies is held liable for the harm or
the Remedial Action associated with such harm and is not the
"appropriate person" in terms of that Act who has caused or
knowingly permitted that harm or contamination of land to occur
and be aware both of the identity of the appropriate person and of
that person's current financial condition.
3. Each Borrower shall not, and shall procure that each other Group Company
shall not, save with the prior written consent of BoS:-
3.1 grant or permit to subsist any Security Right other than a
Permitted Security Right;
3.2 incur or contract to incur or permit to subsist any Borrowings
other than Permitted Borrowings;
3.3 dispose of or part with control of (whether by a single
transaction or a series of transactions) any asset or undertaking
(other than a Permitted Disposal);
3.4 carry on any business other than that undertaken at the date of
acceptance of this letter;
3.5 lend or give credit to or indemnify or guarantee any other
person(s) unless it is (1) to or on account of the obligations of
another Group Company which has granted Full Group Security, (2)
in the ordinary course of trade or (3) employee loans of up to
(pound)20,000 in aggregate;
3.6 join any partnership or joint venture with any other person or
amalgamate with any other person (other than as part of a solvent
reconstruction with the prior written consent of BoS);
3.7 alter the accounting principles and practices applied in its
Financial Statements (unless to comply with US GAAP or on the
advice of its auditors);
3.8 alter its accounting reference date;
3.9 enter an arrangement for finance not shown in its balance sheet as
Borrowings;
3.10 factor or discount its debts;
3.11 allow any dormant company to undertake any significant accounting
transaction or otherwise commence trading or to acquire or assume
any rights or liabilities without first having granted Full Group
Security.
4. The Parent covenants that it shall keep BoS fully informed of any
prospective sale of FBL (where either the shares held by the Parent in
FBL are sold or substantially all of the assets of FBL are sold) and
shall promptly ensure that Net Proceeds arising from such sale are
promptly applied in reduction of the Facility Exposure.
SCHEDULE 4
FINANCIAL COVENANTS
1. The Borrowers covenant with BoS as follows:-
1.1 Core Operating Profit
Core Operating Profit shall not be more than 15% adverse variance of the
forecast identified in the Business Plan.
1.2 Cash Balances
Cash Balances shall not be less than 85% of the amounts identified in the
Business Plan.
2. The financial covenants shall be tested on a quarterly basis (and in
respect of the Core Operating Profit Covenant, by reference to the period
commencing 1 October 2002) in each case by reference to the latest
financial statements of the Parent or, if more recent, to the latest
management accounts of the Group, provided that, where any financial
covenant is tested by reference to management accounts it shall be tested
again by reference to financial statements when the relevant financial
statement become available.
3. For the purposes of this Schedule 4:-
"Core Operating Profit" means, for any specified period, the operating
profit of the consolidated Group, excluding that of LPAL and its
subsidiaries, and excluding interest, income, interest expense, realised
and unrealised investment gains and losses, goodwill amortisation and
write-offs, income taxes, the loss on disposal of London Pacific Life &
Annuity Company, fees and expenses owed or paid to BoS including
management fees, restructuring fees, facility fees, guarantee fees, legal
fees (including legal fees incurred in relation to this Agreement),
accountancy fees, valuation fees, due diligence fees and other fees,
costs and expenses), and amounts paid on behalf of Furniture Builders
Limited ("FBL") and its Subsidiaries relating to FBL's and its
Subsidiaries borrowings from BoS (including principal payments, interest,
facility fees and other fees, costs and expenses).
"Cash Balances" means the cash balances of the consolidated Group
excluding that of LPAL and its Subsidiaries, A.C.O.T Trustee Limited and
the London Pacific Group 1990 Employee Share Option Trust, and excluding
London Pacific Securities, Inc., cash that is restricted due to a
regulatory capital requirements. The Cash Balances will be adjusted for
the add back of interest paid to BoS in excess of that included in the
Business Plan, principal payments to BoS, fees and expenses paid to BoS
(including management fees, restructuring fees, facility fees, guarantee
fees, legal fees (including legal fees incurred in relation to this
Agreement), accountancy fees, valuation fees, due diligence fees and
other fees, costs and expenses), and amounts paid on behalf of FBL and
its Subsidiaries relating to their borrowings from BoS (including
principal payments, interest, facility fees and other fees, costs and
expenses).
4. If the Borrowers breach the terms of any of the financial covenants
specified above, without prejudice to any of its other rights or
remedies, BoS shall be entitled to:-
4.1 initiate an investigation and instruct any report (accounting,
legal and valuation or otherwise) on the business and affairs of
any Borrower or any other Group Company which BoS deems necessary
to ascertain the financial position of the Group, all costs
incurred by BoS in so doing being payable by the Borrowers; and/or
4.2 increase the Margin by one per cent (1%).
SCHEDULE 5
financial information COVENANTS
The Parent covenants that it will supply to BoS:-
1. within 120 days after the end of each financial year of the Parent two
copies of its Financial Statements;
2. within 30 days after the end of each month in each financial year of the
Parent, a management information pack (including the management accounts
and a profit and loss account, balance sheet and cash flow statements) on
a consolidated basis for the Group and showing a comparison with the
Business Plan together with commentary by the finance director on all
material aspects of those management accounts;
3. at the same time as it delivers the Financial Statements and on each
testing date of the financial covenants a certificate of compliance with
the financial covenants set out in Schedule 4 signed by a director of the
Parent, setting out in reasonable detail supporting computations and in
form and content acceptable to BoS;
4. from time to time, promptly after filing of the same, provide the Bank
with a copy of the form 10-K filed by the Parent with the Securities and
Exchange Commission of the United States.
5. such further financial information about the business and financial
condition of the Group as BoS may from time to time reasonably require.
The Parent also covenants that it will identify from any consolidated accounts
prepared for itself and its Subsidiaries the financial performance of any
undertaking included in those accounts as a subsidiary undertaking (which is not
a Subsidiary) and will provide details of all financing agreements and
arrangements to which any Group Company is a party which need not be shown in
the Financial Statements of the Parent.
SCHEDULE 6
events of default
1. Any Borrower fails to pay any sum due under a BoS Document on its due
date, other than as a result of the failure of the appropriate payment
transmission system which is not within the Borrower's control;
2. any written information or projection given or any representation,
warranty or statement made or repeated by or on behalf of any Borrower
under the BoS Documents (whether before or after the date of this letter)
is incorrect, inaccurate, incomplete or, in the opinion of BoS,
misleading in any material respect and, if the relevant circumstances are
capable of remedy, those circumstances are not remedied within seven
days;
3. any Borrowings in excess of $50,000 of any Group Company are not paid
when due for payment (whether because of acceleration or otherwise) or
within any originally permitted period of grace or any creditor of all or
any of the Group Companies becomes entitled to declare any such
borrowings due and payable prior to their stated maturity;
4. Any Borrower fails to comply with the terms of Schedule 4 or any Group
Company fails to deliver the documents and evidence listed in Schedule 1
within the timescales therein or fails to comply with the terms of any of
Clauses 3.1, 3.2, 3.3, 3.5, 3.11 or 4 of Schedule 3;
5. any Borrower fails to comply with any other covenant, undertaking or
obligation given or owed by it under a BoS Document which is not remedied
to the satisfaction of BoS within fourteen days after the first of (1) a
Borrower being aware of the failure or (2) notice by BoS calling for its
remedy (should BoS reasonably consider it to be remediable);
6. any Group Company ceases or threatens to cease to carry on its business
or a significant part of it (unless as part of a solvent reconstruction
approved by BoS) or suspends or threatens to suspend payment of its debts
or is unable or is deemed to be unable to pay its debts within the
meaning of Section 123 (1) of the Insolvency Act 1986;
7. a proposal is made or a nominee or supervisor is appointed for any Group
Company for a composition in satisfaction of its debt or for a scheme of
arrangement of its affairs or other arrangement or any proceedings for
the benefit of its creditors are commenced under any law, regulation or
procedure relating to the reconstruction or readjustment of debt;
8. a petition is made for an administration order under the Insolvency Act
1986 with respect to any Group Company;
9. any steps are taken by a Group Company (without BoS prior written
consent) or any other person (unless in the case of a person other than a
Group Company those steps are reasonably considered by BoS to be
frivolous or vexatious) to wind up or dissolve any Group Company or to
appoint a liquidator, trustee, receiver, administrative receiver or
similar officer to any Group Company or any part of its undertaking or
assets;
10. any legal process (not being reasonably considered by BoS to be
defensible or vexatious, in good faith and where the total liability of
the Borrowers could reasonably be expected to exceed $200,000) is levied,
enforced or sued against a Group Company or its assets or any person
validly takes possession of any of the property or assets of a Group
Company or steps are taken by any person to enforce any Security Right
against any of the property or assets of a Group Company;
11. any event occurs or proceedings are taken in respect of a Group Company
in any jurisdiction to which it is subject which has an effect equivalent
or similar to any of the events mentioned in paragraphs 6 to 10 above
(inclusive);
12. any part of a BoS Document ceases to be legal or effective (or a Group
Company so alleges) or any consent required to enable a Group Company to
perform its obligations under a BoS Document ceases to have effect;
13. notice of withdrawal or discontinuance of any guarantee or security
provided by any third party (including any Group Company) is served on
BoS and a replacement guarantor suitable to BoS cannot be found within
seven days of receipt of such notice;
14. control of any Group Company passes to any person or persons (whether
acting individually or in concert) who is or are not a shareholder in it
immediately after the date of this letter without the prior written
consent of BoS;
15. any licence, authority, permit, consent, agreement or contract which is
material to the business from time to time of any Group Company is
terminated, withheld or modified which in the opinion of BoS, will have a
Material Adverse Effect;
16. in the reasonable opinion of BoS at any time after the date of this
letter:-
16.1 there is a risk of material liability to BoS under Environmental
Law or because it has taken security (direct or third party) for
the Facility; or
16.2 the value of any asset of any Group Company may be diminished in
any material way because of Environmental Law or any Environmental
Condition; or
16.3 any Group Company does not comply with regulations or the law
applicable to its business or with Environmental Law or Licence(s)
which failure to comply will have a Material Adverse Effect;
17. the Financial Statements of any Borrower are qualified (except where the
qualification is of a technical nature and the remedy for the matter
giving rise to the qualification would have no effect on the results for
the period to which the Financial Statements relate or on the financial
position of the Group as at the end of that period) or there is any
material adverse change in the financial condition of the Group;
18. any other circumstance or event occurs or arises which will have a
Material Adverse Effect.
SCHEDULE 7
DEFINITIONS AND INTERPRETATION
"Advance" means an advance under the Facility.
"Available Facility" means the amount of the Facility at any time less the
Facility Exposure.
"BCM" means Berkeley Capital Management.
"Borrowings" means (without double counting):-
1. money borrowed or raised and includes capitalised interest;
2. any liability under any bond, note, debenture, loan stock, redeemable
preference share capital or other instrument or security;
3. any liability for acceptance or documentary credits or discounted
instruments;
4. any liability for the acquisition cost of assets or services payable on
deferred payment terms where the period of deferment is more than 90
days;
5. any liability under debt purchase, factoring and similar agreements and
capital amounts owing under finance leases, hire purchase or conditional
sale agreements or arrangements; and
6. any liability under any guarantee or indemnity (except product
warranties).
"BoS" means The Governor and Company of the Bank of Scotland and its successors,
assignees and transferees.
"BoS Documents" means this letter, the Security Documents, any agreement for
working capital and all documents supplemental to any of them.
"BoS Group" means BoS, any Subsidiary of it, any holding company of it and any
Subsidiary of its holding company.
"Business Day" means a day when the branch of BoS at which the Parent's account
is located is open for business.
"Business Plan" means the business plan (including any schedules and appendices)
prepared by the Parent dated 7 November 2002 as amended from time to time with
the prior written consent of BoS and initialled for identification purposes by
BoS and the Parent.
"Cash Collateral Account" means the account to be established by the Parent
pursuant to Clause 2.7.
"Certified Copy" means a copy certified as true, complete and up to date by the
specified person or, if no-one is specified, by either the secretary of the
relevant Group Company or the Borrowers' solicitors.
"Cost Savings" means any savings generated by the Group (and identified as such
in the Management Information pack delivered pursuant to Schedule 5) which are
not required for the ongoing working capital purposes of the Group.
"Dangerous Substances" means any substances capable of causing harm to man or
any other living organism or to the soundness of repair and condition of
buildings or damaging the environment.
"Default Rate" means the rate which is one per cent (1%) per annum over the rate
at which interest and/or guarantee fees are paid on the Facility under this
letter.
"Environmental Condition" means the presence of any Dangerous Substance on, in,
under or adjacent to any property or any part of it or in any controlled waters
(as defined in the Water Resources Act 1991) which are on,
in, under or adjacent to the property owned or occupied by a Group Company or
the escape, release or migration of any Dangerous Substance from any property
owned or occupied by a Group Company.
"Environmental Law" means all laws, statutes, regulations, rules, orders,
ordinances, directives, codes of practice, circulars, guidance notices and court
decisions (whether in the UK, UK or elsewhere) concerning the protection of
human health or welfare or the environment (as defined in the Environmental
Protection Act 1990 or the Comprehensive Environmental Response, Compensation
and Liability Act) or the conditions of the work place (as promulgated under the
Occupational Safety and Health Act in the USA) or the generation,
transportation, storage, treatment, management, handling, emission, release,
discharge or disposal of Dangerous Substances.
"Environmental Licence" means any licence, authorisation or approval required by
Environmental Law.
"Event of Default" means an event set out in Schedule 6.
"Facility" means the term loan and guarantee facility given under this letter
and the amount of it outstanding at any time and the terms attaching to it as
these may be varied by further agreement between the Borrowers and BoS.
"Facility Exposure" means the aggregate of the amount of the Advances
outstanding under the Facility and the Guarantee Exposure (but disregarding any
Advance made in order to reduce the Guarantee Exposure in order to avoid double
counting).
"FBL" means Furniture Builders Limited whose registered office is 1209 Orange
Street, Wilmington, Delaware 19801, USA.
"Final Repayment Date" means 31 December 2003.
"Financial Statements" means the audited annual profit and loss account and
balance sheet of the relevant company for each of its financial years
(consolidated for each financial year during which that company has a
subsidiary) together with related directors' and auditors' reports.
"Full Group Security" means guarantees in favour of BoS from each Group Company
on account of the obligations of each other Group Company and any other security
(fixed or floating) which BoS may require.
"Group" means the Parent and each of its Subsidiaries which is not dormant and
"Group Company" is construed accordingly.
"Guarantee" means a guarantee issued by BoS pursuant to this letter in form and
content acceptable to BoS or a letter of credit on behalf of the Borrower under
the terms of the Uniform Customs and Practice for Documentary Credits (as
revised from time to time) and otherwise on BoS standard terms and conditions
(which will be set out in the BoS application for the documentary credit, a copy
of which will be provided to the relevant Borrower if so requested) and in
accordance with the tariffs applicable for levers of credit issued to the Parent
from time to time.
"Guarantee Exposure" means the aggregate maximum amount for which BoS may be
liable under a Guarantee or Guarantees from time to time.
"Increased Cost" means:-
1. an additional or increased cost incurred by BoS as a result of it having
entered into, or performing, maintaining or funding its obligations under
this letter; or
2. that portion of an additional or increased cost incurred by BoS in
making, funding or maintaining all or any advances comprised in a class
of advances formed by or including the Facility; or
3. a reduction in any amount payable to BoS or in the effective return to
BoS under the Facility or on its capital; or
4. the foregone amount of any payment made or interest or other return on or
calculated by reference to any amount received or receivable by BoS under
the Facility;
in each case arising as a result of any change, introduction, interpretation or
administration of any law or regulation after the date of this letter or any
compliance after the date of this letter with any law or regulation relating to
reserve assets, special deposits, cash ratios, liquidity or capital adequacy
requirements or any other form of banking or monetary control (including
controls and requirements of the Bank of England, the Financial Services
Authority, the European Central Bank or any other governmental or regulatory
authority) or the introduction of, changeover to or operation of a single or
unified European currency or otherwise but excluding (1) costs compensated for
by the MLA Costs or (2) payments in respect of tax under Clause 9.1 of this
letter or (3) costs not generally applicable to U.K. banks.
"Indemnified Events" means all actions, suits, proceedings, claims, demands,
liabilities, costs, expenses, losses, damages and charges whatsoever (except
those arising as a result of the gross negligence or wilful misconduct of BoS)
which may occur in relation to or arising out of BoS having given the Treasury
Guarantee.
"Intellectual Property Rights" means patents, patent applications, trade marks,
community trade marks, service marks, trade names, brand names, registered
designs, copyright and all other industrial and intellectual property rights.
"Interest Payment Date" means the last Business Day of each Interest Period
unless its duration is more than three months in which case it will also be the
last Business Day of each three month period during that Interest Period.
"Interest Period" means each period selected under Clause 2.3 and to which a
rate of interest calculated by reference to that clause applies.
"Issue Request" means a written request in the form set out in Schedule 8B
requesting the issue of a Guarantee.
"LIBOR" means the rate (expressed as an annual percentage rate) at which US
Dollar deposits in an amount equal to the relevant Advance are offered to BoS in
the London Inter Bank Market by prime banks, selected by BoS, at or about 11 am
on the first Business Day of an Interest Period for the same period and amount
in US Dollar.
"Listing" means the admission to the Official List of London Stock Exchange
Limited of any shares of any Group Company or the granting or permission for any
such shares to be dealt in on any recognised investment exchange (within the
meaning of Section 207 of the Financial Services Act 1986) or any other market
for the public trading of securities in any country or a reverse take-over
(within the meaning contained in the London Stock Exchange publication titled
"The Listing Rules" current at the date of this Agreement) by the relevant Group
Company of another company whose shares are already the subject any of the
foregoing.
"LPAL" means London Pacific Assurance Limited of 6 Minden House, Minden Place,
St Helier, Jersey.
"Margin" means :-
3.5% in respect of Facility Exposure up to $10,000,000; and
4.5% in respect of Facility Exposure above $10,000,000 up to
$23,000,000.
"Material Adverse Effect" means any effect which, in the reasonable opinion of
BoS, might:-
1. affect the ability of any Group Company to comply with its obligations
under a BoS Document;
2. give rise to a breach of the financial covenants set out in Schedule 4;
3. adversely affect the business, assets or financial condition of the Group
as a whole; or
4. (where the context so admits) result in any of the Security Documents not
being legal, valid and binding on, and enforceable substantially in
accordance with its terms against any party to that Security Document or
not providing BoS with enforceable security over the assets to be covered
by it.
"Material Litigation" means any litigation, arbitration or administrative
proceeding raised or threatened against, or defended by or judgement outstanding
in relation to any Group Company, which involves, or if an
adverse finding were made would involve, a total liability (whether actual or
contingent) in excess of (pound)50,000 and which is to be reported in detail by
the Borrowers to BoS.
"MLA Costs" means the costs (expressed as an annual percentage at a rate rounded
up to the nearest one eighth per cent) calculated by BoS in accordance with its
usual practice of complying with any reserve asset and/or special deposit and/or
cash ratio and/or liquidity and/or capital adequacy and/or banking control or
similar requirements of Bank of England, the Financial Services Authority, the
European Central Bank or any other governmental or regulatory authority.
"Net Proceeds" means the sale proceeds of any asset disposed of by any Group
Company and payable to that Group Company less the reasonable expenses of sale
approved by BoS but excluding Permitted Disposals.
"Notice of Drawdown" means a written notice in the form set out in Schedule 8A
requesting drawdown of an Advance.
"Permitted Borrowings" means:-
1. the Facility and amounts due in respect of it;
2. Borrowings between Group Companies where each have granted Full Group
Security; and
3. commitments of members of the Group under finance lease, hire purchase or
conditional sale agreements or arrangements which do not at any time
exceed (pound)200,000 in aggregate.
Permitted Disposals" means:-
1. the disposal of assets on an arm's length basis in the ordinary and usual
course of trading including the use of cash for any such purpose;
2. disposals between Group Companies where the transferee has granted Full
Group Security;
2. disposals where the proceeds are applied towards the acquisition of a
replacement within 30 days of the disposal;
3. disposals made other than in the ordinary and usual course of trading and
not referred to in paragraphs 1 and 2 above but on an arm's length basis
and only if the value of the assets disposed of (whether by a single or
several transaction) when taken together with all similar disposals made
by the Group is not in total more than $25,000.
"Permitted Security Rights" means (1) liens and rights of set-off securing
obligations which are not overdue beyond their standard payment dates, arising
by operation of law in the ordinary and usual course of trading (2) Security
Rights arising out of title retention provisions in a supplier's standard
conditions of supply of goods acquired in the ordinary and usual course of
trading or (3) Security Rights granted in terms of the BoS Documents or with the
prior written approval of BoS.
"Potential Event of Default" means any event, act or condition which, with the
giving of notice and/or lapse of time, and/or any other event, act or condition
which, in the reasonable opinion of BoS, will or is likely to constitute an
Event of Default.
"Proceeds Account" means the account to be established by the Parent pursuant to
Clause 2.6.
"Qualifying Bank" means a bank for the purposes of Section 349 of the Income and
Corporation Taxes Act 1988 which is within the charge to UK corporation tax as
regards any interest payable to it under or in connection with this letter
and/or any other BoS Document at the time when such interest is paid.
"Rate" means 0.5% under BoS base rate as that rate varies from time to time.
"Remedial Action" means any action, works or operations required at any time to
be carried out by or on behalf of any Group Company in order to remove, remedy,
prevent, clean-up, abate, contain, eradicate or mitigate the effects of any
Environmental Condition, including (without prejudice) any such action, works or
operations agreed or determined to be carried out pursuant to any negotiations
entered into with any statutory authority by
any Group Company with a view to mitigating any loss attributed to Environmental
Law or Environmental Condition.
"Sale" means any transaction pursuant to which a person (or persons acting in
concert) obtain control of any Borrower (other than those persons having control
of that Borrower immediately after the date of this letter) or in terms of which
all or substantially all of the assets of the a Borrower of a Group Company are
sold to any person (other than a member of the Group).
"Secretary's Certificate means a certificate as appropriate for the relevant
jurisdiction of each Borrower to be executed by the Secretary of the relevant
Borrower.
"Security Documents" means the documents listed under the heading of Security in
Schedule 1 and any other security granted to BoS.
"Security Right" means any mortgage, charge, security, pledge, lien, right of
set-off, right to retention of title or other encumbrance, whether fixed or
floating, over any present or future property, assets or undertaking.
"Statutory Control" means each of the following which affects any Group Company
or any of its assets from time to time:-
1. any legislation (including delegated legislation);
2. any consent made or given under any legislation; and
3. any notice, order or correspondence related to paragraphs 1. or 2. above
and having the force of law.
"Sterling" and the figure "(pound)" shall mean the lawful currency of the UK.
"Subsidiary" and "holding company" shall have the meanings given to them in
Section 736 of the Companies Act 1985 (including any Subsidiary acquired after
the date of this letter) and "Subsidiaries" shall mean all or any of them, as
appropriate.
"Treasury" means HBOS Treasury Services PLC (registered number 2692890), having
its registered office at 33 Old Broad Street, London, EC2N 1HZ.
"Treasury Guarantee" means the agreed form guarantee entered into between
Treasury and BoS now or in the future in relation to all sums due and payable by
the Parent or any Group Company under any hedging/swap/interest rate/currency
documentation or any similar documentation in respect of any forward foreign
exchange contracts or other derivative contracts entered into now or in the
future between the Parent or any Group Company and Treasury.
"US GAAP" means generally accepted accounting principles in the United States of
America.
"US Dollars" and "$" shall mean the lawful currency of the United States of
America.
Interpretation
Any reference in this letter to:-
(1) statutes, statutory provisions and other legislation shall include all
amendments, substitutions, modifications and re-enactments for the time
being in force.
(2) "control" of any company shall be interpreted in accordance with Section
840 of the Income and Corporation Taxes Act 1988.
(3) "including" shall not be construed as limiting the generality of the
words preceding it.
(4) "a Schedule" shall be construed as a reference to the schedules to this
letter.
(5) any term or phrase defined in the Companies Act 1985 (as amended from
time to time) shall bear the same meaning in this letter.
(6) words importing the singular shall include the plural and vice versa and
words denoting any gender shall include all genders.
(7) this letter and to any provisions of it or to any other document referred
to in this letter shall be construed as references to it in force for the
time being and as amended, varied, supplemented, restated, substituted or
novated from time to time.
(8) a person are to be construed to include references to a corporation,
firm, company, partnership, joint venture, unincorporated body of
persons, individual or any state or any agency of a state, whether or not
a separate legal entity.
(9) any person are to be construed to include that person's assignees or
transferees or successors in title, whether direct or indirect.
Clause headings are for ease of reference only and are not to affect the
interpretation of this letter.
SCHEDULE 8
The Borrowers
London Pacific Group Limited
Berkeley International Capital Corporation
Berkeley International Capital Limited
North America Fiduciary Services Inc.
Berkeley (USA) Holdings Limited
Berkeley Capital Management
Berkeley Institutional Investments Inc.
--------------------
FACILITY LETTER
20 December 2002
--------------------
BANK OF SCOTLAND
Funding of up to
$23,000,000
to
LONDON PACIFIC GROUP LIMITED
MACLAY MURRAY & SPENS
3 Glenfinlas Street
Edinburgh EH3 6AQ
Tel: 0131-226-5196
Fax: 0131-226-3174