Exhibit 10.64
March 29
th , 2006.
Stockeryale Canada
Inc.
275 Kesmark Street
Dollard Des Ormeaux (Qc)
H9B 3J1
Attention: Mark W. Blodgett,
Chairman & CEO
Dear Sir,
RE: OFFER OF FINANCING :
temporary extension and tolerance period.
We are pleased to present to you the
terms and conditions under which National Bank of Canada (
the Bank ) will make the financing below available to
Stockeryale Canada Inc. ( the Borrower ) totalizing $
CDN 2,725,000;
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“A”
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$2,500,000
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Operating
credit (renewal)
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“B”
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$75,000
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MasterCard
BusinessCard (renewal)
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“C”
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$150,000
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Exchange
risk operating credit (renewal)
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This Offer of Financing amends the
offer of financing dated March 21, 2005 the whole
without novation and derogation, except as hereinafter set
forth.
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1.
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FACILITY
“A” - OPERATING CREDIT
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Subject to the provisions hereof,
the Bank agrees to make available to the Borrower an operating
credit facility on a temporary and tolerance basis for a principal
amount not exceeding CDN $2,500,000 , which is to be used to
finance the Borrower’s usual operating
requirements.
Subject to the terms and conditions
hereof, the Borrower may use and reuse this credit facility, up to
the maximum allowed, by means of variable-rate
advances.
The variable-rate advances shall
bear interest, from the time of disbursement until payment in full,
at the Canadian Prime rate of the Bank plus 2.50% , or
7.75% as at the date hereof. Interest shall be calculated
daily and payable monthly on the 26th day of each month.
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Offer of
Financing
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Page 2 of 13
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Standby fees calculated at an annual
rate of 0.50% on the unused portion of the operating credit
shall be payable monthly by the Borrower.
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1.5.
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Disbursement and Repayment
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The credit facility is repayable on
demand and may be reviewed periodically by the Bank. The whole
credit facility shall be repaid no later than September 30,
2006 . Consequently, said facility will not be renewed upon the
arrival of its term and the Borrower shall take advantage of the
period of time to elapse between the date hereof and the expiration
date mentioned hereabove to find an alternate financing to allow
the Borrower to pay out the whole facility as soon as this
alternate financing is available, but for no reason whatsoever
later than September 30, 2006 .
Disbursements and payments shall be
made to or collected in equal multiples of
$250,000.
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1.6.
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Financing
Conditions
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Notwithstanding the amount of the
credit facility, the aggregate amount of advances shall at no time
exceed the total of:
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75% of
the Borrower’s net Canadian accounts receivable
(excluding holdbacks receivable, contra or inter-company accounts,
accounts of doubtful quality and those aged 90 days or more);
and
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65% of
the Borrower’s net U.S. accounts receivable (excluding
holdbacks receivable, contra or inter-company accounts, accounts of
doubtful quality and those aged 90 days or more); and
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85% of
the Borrower’s net foreign accounts receivable insured by
ATRADIUS CREDIT INSURANCE (ZURICH) (excluding holdbacks receivable,
contra or inter-company accounts, accounts of doubtful quality and
those aged 90 days or more); and
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25% of
the Borrower’s inventory (finished goods and raw materials)
up to a maximum amount of $750,000 . The Borrower’s
inventories will be calculated pursuant to the Borrower’s
declarations of goods less a statuary reserve of 500,000$ for
obsolete inventories ;
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The value of the Borrower’s
accounts receivable and inventory shall be established, from time
to time, by taking into account claims ranking prior to the
security of the Bank. Each month, on the 20th day of the
following month, the Borrower shall furnish to the Bank a detailed
list of its accounts receivable by identifying Canadian, American
and foreign accounts, a detailed list of its accounts payable
according to age, and a detailed list of its inventory. Fixed
monthly fees of $350.00 shall be charged to the Borrower for
monitoring accounts receivable and inventory and a monthly fee of
$250 shall be charged for the general monitoring of the
file.
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Stockeryale
Canada Inc.
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Initialled by:
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Offer of
Financing
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Page 3 of 13
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2.
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FACILITY
“B” – MASTERCARD BUSINESSCARD
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The MasterCard BusinessCard shall be
issued for business development purposes. This facility is a
renewal of previous Facility “C” that shall continue to
be applicable according to the same terms and conditions for a
maximum amount of $75,000.00 . Such facility will expire on
September 30, 2006 and all amounts owed thereunder
shall be repaid at said expiration date.
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3.
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FACILITY
“C “ - EXCHANGE RISK OPERATING
CREDIT
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Subject to the terms and conditions
hereof, the Bank agrees to renew the currency conversion risk
facility previously made available to the Borrower for an amount
not exceeding CDN $150,000 , which shall serve to enable the
Borrower to conclude transactions with the Bank for contracts with
respect to the sale or purchase of foreign currencies freely
negotiated by the Bank, the whole subject to the following
conditions:
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3.1.1.
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The Borrower
may sell or buy foreign currencies through the Bank, giving prior
notice thereof to the Bank, in accordance with the customs and
practices of the market, specifying the amount, currency and
effective date of delivery of the chosen currency;
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3.1.2.
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The maximum
amount of foreign currency which the Borrower may sell or buy by
reason hereof shall not exceed the permitted amount, as determined
hereinafter; the said permitted amount shall be determined by the
Bank by multiplying the face value of the chosen currency by the
level of risk, as per the schedule in effect at the Bank expressed
as a percentage (for illustration purposes only: chosen currency
$50,000 at a risk level of 10% equals a currency conversion risk
amount of $5,000);
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3.1.3.
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The Borrower
undertakes to deposit in its US$ current account held at the Bank
sufficient amounts to pay for the foreign currencies bought or
sold, no later than on the date of their delivery, failing which,
the Bank shall be authorized to make a variable-rate advance in
Canadian dollars under Credit Facility A hereof for an amount equal
to the US$ amount necessary to pay for said currencies and any fees
and expenses incurred by the Bank due to insufficient funds in the
Borrower’s US$ current account on the date of
delivery.
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Moreover, if such advance exceeds
the credit amount authorized under Credit Facility A, the Bank
shall then be authorized to debit said current account for an
amount equal to such excess amount; all overdrafts in the
Borrower’s current account shall bear interest, until payment
in full, at the rate on overdrafts prevailing from time to time at
the Bank;
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3.1.4.
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The Borrower
shall execute, upon presentation, any agreement, contract, document
or other writing required by the Bank, including, without
limitation, the International Swap and Derivatives Association
(ISDA) contract, the International Foreign Exchange Master
Agreement (IFEMA) and confirmation, as applicable, of such
contract, in accordance with the documents in use at the Bank,
providing for, inter alia, the terms and conditions, amount,
currency and fees payable to the Bank;
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Stockeryale
Canada Inc.
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Initialled by:
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Offer of
Financing
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Page 4 of 13
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3.1.5.
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Acceptance by
the Bank of any request for the sale or purchase of foreign
currencies is subject to the availability of such funds on the
foreign exchange market and approval of each request is at the
Bank’s discretion.
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This credit facility may be revised
from time to time by the Bank and may be revoked by the Bank at any
time. This facility shall expire on September 30, 2006
, and all amounts then outstanding and owed to the Bank shall be
paid by the Borrower no later than September 30, 2006
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As a general and continuing security
for the performance by the Borrower of all its obligations, present
and future, towards the Bank, including, without limitation, the
repayment of advances granted hereunder and the payment of
interest, fees and incidental charges provided for hereunder and
under the security documents, the Borrower undertakes to grant to
the Bank the following security, if deemed satisfactory by the
Bank, in accordance with the forms in use at the Bank:
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4.1.1
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First-ranking
general movable hypothec of $2,600,000 on the universality
of the Borrower’s inventory and accounts receivable, present
and future, wherever the inventory and debtors of these receivables
are located;
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4.1.2
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The security on
all goods in inventory under section 427 of the Bank
Act;
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4.2.1.
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Commitment from
the mother-company to refund losses if occurred within 30 days of
the bank request;
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4.2.2.
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Hypothecation
of securities on a term deposit in the amount of CDN
$250,000 held at the National Bank, until final
reimbursement of all facilities by Borrower;
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4.2.3.
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First-ranking
general movable hypothec of $ 4,800,000 on all the
Client’s corporeal and incorporeal movable property
(including intellectual property), present and future, regardless
of the location of such property;
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4.2.4.
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Subordination
agreement of Stockeryale US’s advances.
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5.
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REPRESENTATIONS AND WARRANTIES OF THE
BORROWER
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The Borrower represents and warrants
to the Bank that:
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5.1.
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It is a duly
constituted or incorporated, and registered and organized business
in compliance with the legislation governing it, and that it has
the powers, permits and licenses required to operate its business
or enterprise and to own, manage and administer its
property;
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Stockeryale
Canada Inc.
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Initialled by:
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Offer of
Financing
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Page 5 of 13
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5.2.
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It is not
involved in any dispute or legal proceedings likely to materially
affect its financial position or its capacity to operate its
business;
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5.3.
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It has valid
title to all its goods and property, which have a good market value
and are free and clear of any prior claims, mortgages, hypothecs,
charges or other similar encumbrances other than the mortgages,
hypothecs and other charges previously granted to the
Bank;
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5.4.
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It is not in
default under the contracts to which it is a party or under the
applicable legislation and regulations governing the operation of
its business or its property, including, without limitation, all
environmental requirements; and
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5.5.
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Any taxes,
assessments, deductions at source, income taxes or other levies,
the payment of which is secured by a legal privilege, prior claim
or legal hypothec, have been/will be paid by the Borrower without
subrogation or consolidation.
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6.
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CONDITIONS PRECEDENT TO ANY DISBURSEMENT OF
FUNDS
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Before any disbursement, renewal or
maintenance of this credit facility, the Borrower shall meet the
following conditions to the satisfaction of the Bank:
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6.1.
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The Borrower
shall sign all documents that the Bank may reasonably request in
order to give full effect to the provisions hereof;
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6.2.
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The Borrower
and the guarantors, as applicable, shall meet all of the conditions
hereof and execute all documents that the Bank may reasonably
request in order to give full effect to the provisions
hereof;
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6.3.
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All collateral
security shall be duly published in accordance with the
above-mentioned ranking and any other required formality shall be
fulfilled, as applicable;
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6.4.
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The Borrower
shall furnish to the Bank any other document, certificate and
opinion that it may reasonably require, including, but not limited
to, any incorporating instrument related to the Borrower and the
guarantor, and any other document and opinion related to the
hypothecated property, as applicable;
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6.5.
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The Borrower
shall present its audited financial statements dated
December 31, 2005 showing no material change compared
to the in-house financial statements;
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6.6.
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The credit
insurance policy pertaining to foreign receivables, by ATRADIUS
CREDIT INSURANCE (ZURICH) already forwarded to the Bank shall meet
the approval of the Bank, as to its terms and conditions, said
approval being at the entire discretion of the Bank.
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During the entire term of this
financing agreement, the Borrower shall:
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7.1.
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Use the
proceeds of the financing for the purposes provided for
herein;
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7.2.
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Operate its
business in a diligent and continuous manner;
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Stockeryale
Canada Inc.
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Initialled by:
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Offer of
Financing
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Page 6 of 13
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7.3.
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Keep and
maintain proper books of account and other accounting records in
accordance with generally accepted accounting
principles;
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7.4.
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Furnish to the
Bank its internal monthly financial statements within 20
days of the end of each quarter;
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7.5.
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Furnish to the
Bank two copies of its audited annual financial statements
within 90 days of the end of its fiscal year;
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7.6.
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At all times,
give the Bank’s representatives the right
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