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EXHIBIT 10.58
PRIORITIES AGREEMENT
THIS AGREEMENT dated as of the 14th day of December, 2001.
B E T W E E N:
BANK OF NOVA SCOTTIA, a Canadian
chartered bank, having a branch at
40 King Street West, Toronto,
Ontario
(hereinafter referred to as the
"Bank")
OF THE FIRST PART;
-and-
ROYNAT CAPITAL INC., a corporation
incorporated under the laws of
Canada and having a place of
business in the Province of Ontario
at 40 King Street West, 26th Floor,
Toronto, Ontario, M5H 1H1
(hereinafter referred to as
"RoyNat")
OF THE SECOND PART;
-and-
REGAL GREETINGS & GIFTS COMPANY, a
corporation Incorporated under the
laws of the Province of Ontario,
having its chief executive office in
Toronto, Ontario
(hereinafter referred to as the
"Company")
OF THE THIRD PART;
WHEREAS the Company has executed various security agreements
including a general security agreement (the "General Security Agreement") dated
as of December 14, 2001 in favour of the Bank, a Financing Statement for which
was registered under the PPSA as No. granting the Bank a security interest in
the undertaking of the Company and all of the Company's assets, including Goods,
Chattel Paper, Documents of Title, Instruments, Intangibles, Securities,
Inventory, Equipment and Debts, both present and future, as more particularly
therein described; and
WHEREAS the General Security Agreement and any other security
which may be held by the Bank now or hereafter on the property and assets of the
Company for its existing indebtedness and any future indebtedness of the Company
to the Bank are sometimes herein collectively referred to as the "Bank
Security"; and
WHEREAS RoyNat has agreed, subject to certain conditions, to
provide financing to the Company, such financing to be secured by a debenture
(the "RoyNat Debenture") constituting:
(a) a fixed and specific mortgage and charge of and on all real and
immoveable property and all furniture, machinery, equipment,
vehicles, accessories and tangible personal property other than
Inventory and Equipment now owned or hereafter acquired by the
Company, together with any proceeds of sale or disposition
thereof; and
(b) a floating charge over its undertaking and all its other property
and assets, both present and future; and
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WHEREAS the RoyNat Debenture and any other security which may be
held by RoyNat now or hereafter on the property and assets of the Company for
this or any future financing provided by the RoyNat are sometimes herein
collectively referred to as the "RoyNat Security"; and
WHEREAS the parties hereto have agreed to enter into this
Agreement in order to set out the respective priorities of the Bank Securities
and the RoyNat Security.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of
the premises and other good and valuable consideration, the parties hereto
hereby covenant, undertake, declare and agree as follows:
ARTICLE I. - CONSENT
1.1 The Bank hereby acknowledges its consent to the creation and issue by the
Company to RoyNat of the RoyNat Security and to the incurring by the Company of
the indebtedness evidenced thereby and that the creation, issue, existence and
incurring of the same does not constitute a default or event of default under
the Bank Security.
1.2 RoyNat hereby acknowledges its consent to the creation and issue by the
Company to the Bank of the Bank Security and to the incurring by the Company of
the indebtedness evidenced thereby and that the creation, issue, existence and
incurring of the same does not constitute a default or event of default under
the RoyNat Security.
ARTICLE 2. - SUBORDINATION
2.1. The Bank and RoyNat agree the RoyNat Security is hereby postponed and
subordinated in all respects to the security constituted by the Bank Security to
the extent of the Borrower's indebtedness to the Bank from time to time to a
maximum principal amount of twenty-three million ($23,000,000) dollars plus all
accrued interest thereon and all costs, charges and expenses incurred by the
Bank in connection therewith (the "BANK DEBT"), such that all payments,
recoveries and proceeds of the assets of the Company shall be firstly secured in
favour of the Bank, save as to any policy of life insurance which shall be
specifically assigned to RoyNat, which RoyNat shall hold under the RoyNat
security in first priority.
2.2. The subordinations and postponements contained herein shall apply in all
events and circumstances regardless of:
(a) the date of execution, attachment, registration or perfection of
any security interest held by the Bank or RoyNat; or
(b) the date of any advance or advances made to the Company by the
Bank or RoyNat; or
(c) the date of default by the Company under any of the Bank Security
or the RoyNat Security or the dates of crystallization of any
floating charges held by the Bank or RoyNat; or
(d) any priority granted by any principle of law or any statute.
2.3. Any insurance proceeds, and any proceeds of any nature or kind, arising
for any reason, received by the Company or by the Bank or RoyNat in respect of
the collateral charged by the Bank Security or the RoyNat Security shall be
dealt with according to the preceding provisions hereof as though such insurance
proceeds or proceeds were paid or payable as proceeds of realization of the
collateral for which they compensate; save and except that the interest of
RoyNat held under any specifically assigned policy of life insurance shall be
held by RoyNat under the RoyNat Security as to first and prior security interest
and the proceeds and payments thereof shall be firstly paid to RoyNat.
2.4. If any of collateral which is subject to the Bank Security or the RoyNat
Security is validly claimed in priority by a trustee in bankruptcy, or the Bank
Security or the RoyNat Security otherwise is found by a court of competent
jurisdiction, to be unenforceable, invalid, unregistered or unperfected, then
the foregoing provisions of
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this Article 2 shall not apply to such security to the extent that such security
is so claimed or found to be unenforceable, invalid, unregistered or unperfected
as against a third party unless the secured party shall be diligently contesting
such claim or appealing such decision and has provided the other secured party
with a satisfactory indemnity as to any loss of priority that may be caused by
the priorities herein.
2.5. Each of the parties hereto shall permit any of the other parties hereto
and their employees, agents and contractors, access at all reasonable times to
any property and assets of the Company upon which it has a prior charge or
security interest in accordance with the terms hereof and to permit such other
party to remove such property and assets from the premises of the Company at all
reasonable times without interference, provided that such other party shall
promptly repair any damage caused to the premises by the removal of any such
property or assets.
2.6 Each of the Bank and RoyNat agree that they will use their best efforts
to give prompt written notice to the other secured party of any action taken by
them against the Company to enforce their security, and will provide a copy of
any notice or demand provided to the Company to the other of them. Such notice
may be given prior to or forthwith after taking such action, but failure to give
such notice will not give the Bank of RoyNat any cause of action or right to
damages or other remedy against one another.
2.7 Each of the Bank and RoyNat agree that if the Bank provides written
notice to RoyNat of a material default by the Company under the Bank Security,
which default the Bank shall advise RoyNat is such that the Bank intends to
provide notice of default to the Company ("Bank Default Notice"), RoyNat shall
cease to receive and will postpone all payments due on the indebtedness to
RoyNat on the RoyNat Debt until the earliest of (i) the Bank advising that the
default has been cured; or (ii) the Bank Debt is repaid in full; or (iii) 90
days after the giving of the notice by the Bank to RoyNat. Each of the Bank and
RoyNat agree that if the Bank causes acceleration of the Bank Debt and starts
realization against the assets of the Company after default by the Company under
the Bank Security, subject to RoyNat's rights under Section 2.8 hereof and to
RoyNat's rights, as provided for in Sections 2.1 and 2.3 hereof, in any policy
of life insurance which is specifically assigned to RoyNat and which RoyNat
holds under the RoyNat Security in first priority, RoyNat shall cease to receive
and will postpone all payments due on the indebtedness to RoyNat on the RoyNat
debt until the earliest of (i) the Bank advising that the default has been
cured; or (ii) the Bank Debt is repaid in full. Prior to the provision of a Bank
Default Notice by the Bank to RoyNat, the Company may pay to RoyNat the
regularly scheduled payments under the RoyNat Debenture, without amendment and
without acceleration. Any funds received by RoyNat contrary to the terms and
priorities of this agreement shall be received and held in trust for the Bank,
and promptly remitted to the Bank.
2.8 Neither RoyNat nor any person on its behalf shall deliver any enforcement
notice or make any demand under, accelerate, sue in respect of, or realize,
exercise or enforce any right, entitlement, power or remedy under or in respect
of or otherwise take any action with respect to any RoyNat Security unless and
until either (a) the Bank Debt has been paid in full in cash and all agreements
or obligations on the part of the Bank to make further financial accommodation
available to the Company shall have been terminated or (b) a standstill period
of ninety (90) days from the date of a notice provided by RoyNat to the Bank
that there is a material default under the RoyNat Security and RoyNat intends to
exercise its rights in relation thereto (the "STANDSTILL PERIOD") has expired.
Notwithstanding the foregoing and Section 2.7 hereof, the provisions of this
section prohibiting acceleration, demand and the delivery of a notice of
intention to enforce security under the BANKRUPTCY AND INSOLVENCY ACT (Canada)
shall not apply at any time after any portion of the Bank Debt has been
accelerated or the applicable Standstill Period has expired, whereupon RoyNat
may exercise its rights as secured lender but subject to the priority of the
security interest of the Bank Security, including, but not limited to, delivery
of any enforcement notice or making any demand under, accelerating, suing in
respect of, or realizing, exercising or enforcing any right, entitlement, power
or remedy under or in respect of or otherwise taking any action with respect to
any RoyNat Security.
ARTICLE 3. - COVENANTS OF COMPANY
3.1 The Company hereby confirms to and agrees with the Bank and RoyNat that:
(a) so long as any of the indebtedness of the Company herein referred
to remains outstanding, it shall stand possessed of its assets so
charged for the Bank and for RoyNat in accordance with their
respective interests and priorities as herein set out;
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(b) none of the provisions of this Agreement create any rights in
favour of the Company or affect the manner in which the Bank or
RoyNat or any receiver and manager appointed by them over the
property, assets and undertaking of the Company exercises its
rights under the Bank Security and the RoyNat Security; and
(c) the Company shall promptly provide the Bank or RoyNat upon request
with any information which either reasonably requests about the
business and affairs of the Company.
ARTICLE 4. - GENERAL
4.1 From time to time upon request therefore the Bank and RoyNat may advise
each other of any information which it may have relating to the affairs of the
Company, including its business and financial affairs and the particulars of the
indebtedness and liability of the Company to each other and all security held by
each therefor. The Company hereby consents to any such exchange of information.
4.2 Neither the Bank nor RoyNat shall take any action to defeat the
priorities set forth in this Agreement including taking any steps or actions to
challenge or question the security of the other. Each of the Bank and RoyNat
hereby waives any right the other may have to require the other to marshall in
its favour.
4.3 Each of the Bank, RoyNat and the Company shall do, perform, execute and
deliver all acts, deeds and documents as may be necessary from time to time to
give full force and effect to the intent of this Agreement; provided, however,
that no consent of the Company shall be necessary to any amendment of the terms
hereof by the Bank and RoyNat unless the interests of the Company are directly
affected thereby.
4.4. This Agreement may be executed in several counterparts, each of which
when so executed shall be deemed to be an original and such counterparts
together shall constitute one and the same instrument and shall be effective as
of the formal date hereof.
4.5. This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns.
4.6. Where there is any conflict between the provisions in this Agreement
regarding the priority of the security of the parties hereto and similar
provisions in the RoyNat Security, including section 6 of the RoyNat Debenture,
the provisions of this Agreement will prevail.
4.7. Neither the Bank nor RoyNat shall assign all or part of any of its Bank
Security or RoyNat Security, as the case may be, without first obtaining a
written agreement from the assignee under which the assignee agrees to be bound
by the terms of this Agreement.
4.8. This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario and the laws of Canada applicable therein.
4.9. The Agreement applies to all present and future property of the Company.
4.10. The Bank and RoyNat, with the consent of the Company hereby given, shall
provide to the other, upon request of the other, information as to the
collateral, security and indebtedness of the Customer.
THE NEXT PAGE IS THE SIGNING PAGE
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IN WITNESS WHEREOF the parties hereto have executed this Agreement
under the hands of their duly authorized officers.
BANK OF NOVA SCOTIA
By:
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Name:
Title:
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Name:
Title:
I/We have authority to bind the Bank.
ROYNAT CAPITAL INC.
By:
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Name:
Title:
By:
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Name:
Title:
I/We have authority to bin the
Corporation.
REGAL GREETINGS AND GIFTS CORPORATION
By:
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Name:
Title:
I have authority to bind the
Corporation.