FIDELITY LEASING CANADA INC.
As Borrower
- and -
BANK OF MONTREAL
As Lender
CDN. $5,000,000
CREDIT AGREEMENT
MAY 19, 1999
Fraser ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
ARTICLE I......................................................................1
Section 1.1 Defined Terms.................................................1
Section 1.2 Computation of Time Periods..................................17
Section 1.3 Accounting Terms.............................................17
Section 1.4 Incorporation of Schedules...................................17
Section 1.5 Headings.....................................................17
Section 1.6 Singular, Plural, Gender.....................................17
Section 1.7 Conflict.....................................................17
Section 1.8 Currency.....................................................18
Section 1.9 Time.........................................................18
Section 1.10 Control......................................................18
Section 1.11 References to Conversion of Advances.........................18
ARTICLE II....................................................................18
Section 2.1 Credit Facility..............................................18
Section 2.2 Drawdown Availability........................................19
Section 2.3 Renewal of Drawdown Period...................................19
Section 2.4 Advance Requests.............................................20
Section 2.5 Prime Rate Loans.............................................21
Section 2.6 Currency.....................................................21
Section 2.7 Conversion of Advance........................................21
Section 2.8 Certain Provisions Relating to Bankers' Acceptances..........21
Section 2.9 Reduction of Maximum Commitment Level........................25
Section 2.10 Use of Proceeds..............................................25
ARTICLE III...................................................................25
Section 3.1 Interest on Prime Rate Loans.................................25
Section 3.2 Acceptance Fee...............................................26
Section 3.3 Facility Fee.................................................26
Section 3.4 Reimbursement Obligations....................................26
Section 3.5 Yearly Rate Statements.......................................26
ARTICLE IV....................................................................27
Section 4.1 Repayment on Maturity........................................27
Section 4.2 Mandatory Repayment of Credit Facility.......................27
ARTICLE V.....................................................................27
Section 5.1 Maintenance of Accounts......................................27
Section 5.2 Due Date of Payments.........................................27
Section 5.3 Time of Payments.............................................27
Section 5.4 Form and Amount of Payments..................................28
Section 5.5 Charging Borrower's Account..................................28
ARTICLE VI....................................................................28
Section 6.1 Additional Payments..........................................28
Section 6.2 Option to Prepay.............................................29
ARTICLE VII...................................................................30
Section 7.1 Conditions Precedent to Initial Advance......................30
Section 7.2 Conditions Precedent to Each Advance.........................32
ARTICLE VIII..................................................................33
Section 8.1 Representations and Warranties by the Borrower..............33
Section 8.2 Survival of Representations and Warranties..................39
ARTICLE IX....................................................................39
Section 9.1 Affirmative Covenants.......................................39
Section 9.2 Negative Covenants..........................................43
ARTICLE X.....................................................................46
Section 10.1 Events of Default...........................................46
Section 10.2. Remedies Upon Default.......................................49
Section 10.3. Right of Set-Off............................................50
Section 10.4. Judgment Currency...........................................50
ARTICLE XI....................................................................51
Section 11.1 Evidence of Debt............................................51
Section 11.2 Additional Expenses.........................................51
Section 11.3 Invalidity of any Provisions................................51
Section 11.4 Amendments, Waivers, etc....................................51
Section 11.5 Notices, etc................................................52
Section 11.6 Costs and Expenses..........................................52
Section 11.7 Indemnification.............................................53
Section 11.8 Taxes.......................................................55
Section 11.9 Calculations................................................55
Section 11.10 Assignments and Participations..............................56
Section 11.11 Governing Law...............................................56
Section 11.12 Consent to Jurisdiction.....................................57
Section 11.13 Binding Effect..............................................57
Section 11.14 Interest Savings Clause.....................................57
Section 11.15 Entire Agreement............................................57
Section 11.16 Counterparts................................................57
SCHEDULES
Schedule 2.4(a) Form of Advance Request
Schedule 2.4(c) Form of Borrowing Base Certificate
Schedule 2.4(d) Form of Assignment Agreement
Schedule 8.1(f)(A) Outstanding Encumbrances
Schedule 8.1(f)(B) Places of Business and Locations of Books and Records
Schedule 8.1(g) Subsidiaries and Affiliates of the Borrower
Schedule 8.1(q) Intellectual Property Assets
Schedule 9.1(i) Form of Compliance Certificate
THIS CREDIT AGREEMENT is made as of the 19th day of May, ▇▇▇▇,
▇ ▇ ▇ ▇ ▇ ▇ ▇:
FIDELITY LEASING CANADA INC., a corporation
incorporated under the laws of the Province of Ontario,
as the Borrower hereunder,
- and -
BANK OF MONTREAL, one of the chartered banks of Canada,
as the Lender hereunder
WHEREAS Bank of Montreal has agreed, on and subject to the
terms and conditions hereof, to make available the credit facilities in favour
of Fidelity Leasing Canada Inc. provided for herein in the maximum aggregate
principal amount of Cdn. $5,000,000;
NOW THEREFORE in consideration of these premises and the
agreements hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Defined Terms.
Unless the context otherwise requires, the following
capitalized terms shall have the following respective meanings in this Agreement
and in each of the other Loan Documents:
"Acceptance Fee" means the fee payable in Canadian dollars to
the Lender in respect of the Bankers' Acceptances accepted by the Lender prior
to and as a condition of such acceptance, computed in accordance with Section
3.2;
"Account" has the meaning ascribed to the term "account" in
the PPSA;
"Adjusted Debt to Tangible Net Worth Ratio" has the meaning
ascribed to that term in the FLI Credit Agreement in effect on the date of this
Agreement, as such term may be supplemented, amended, modified or restated from
time to time with the consent of the Lender hereunder;
"Advance" means any extension of credit by the Lender
hereunder in the form of a Prime Rate Loan or a BA Advance (each of which is
referred to herein as a "Type of Advance"), including the conversion of an
Advance into another Type of Advance or to an Advance pursuant to Section
2.8(h);
"Advance Request" means a request for an Advance duly
completed and executed on behalf of the Borrower by the chief financial officer
of the Borrower or another officer of the Borrower acceptable to the Lender,
substantially in the form of Schedule 2.4(a) hereto;
"Affiliate" has the meaning ascribed thereto in the OBCA;
"Aggregate Eligible Lease Receivable Balance" means as of any
date of determination, the aggregate Lease Receivable Balances of all Eligible
Leases on that date;
"Agreement" means this credit agreement as supplemented,
amended, modified or restated from time to time, and the expressions "Article",
"Section" and "Schedule" followed by a number mean and refer to the specified
Article, Section or Schedule of this Agreement, respectively;
"Assets" means, with respect to any Person, any interest of
such Person in all present or future property, assets and undertaking of such
Person, real or personal, moveable or immovable, tangible or intangible, of
whatsoever nature or kind and wherever situate, including without limitation
anything properly classified as an asset in accordance with Generally Accepted
Accounting Principles;
"Assigned Lease" means a Lease reported by the Borrower to the
Lender as an Eligible Lease and included by the Borrower in calculating the
Borrowing Base set out in a Borrowing Base Certificate;
"Assigned Leased Property" means Leased Property pursuant to
an Assigned Lease;
"Assignee Lender" has the meaning set out in Section 11.10;
"Assignee Lender's Commitment" has the meaning set out in
Section 11.10;
"Assignee Lender's Commitment Percentage" has the meaning set
out in Section 11.10;
"Assignment Agreement" has the meaning set out in Section
2.4(d);
"Available Commitment" means at any time the amount at such
time of the Borrowing Base less the amount of the Outstanding Principal
Obligations at such time;
"BA Advance" means any Advance by way of the acceptance of any
Draft drawn by the Borrower on, and the purchase of the resulting Bankers'
Acceptance by the Lender;
2
"BA Discount Proceeds" means in respect of any Bankers'
Acceptance being purchased by the Lender on any day an amount (rounded to the
nearest whole Canadian cent, and with one-half of one Canadian cent being
rounded up) calculated on such day by multiplying
(a) the Face Amount of such Bankers' Acceptance, by
(b) the quotient equal to one divided by the sum of one plus the
product of:
(A) the BA Reference Rate (expressed as a decimal) applicable
to such Bankers' Acceptance; and
(B) a fraction, the numerator of which is the number of days
remaining in the term of such Bankers' Acceptance and the
denominator of which is 365,
with such quotient being rounded up or down to the nearest
fifth decimal place and .000005 being rounded up,
less the amount of the Acceptance Fee payable to the Lender in respect of, and
as a condition precedent to the issuance by the Lender of, such Bankers'
Acceptance;
"BA Reference Rate" means, as applicable to any Bankers'
Acceptance being purchased by the Lender on any day, the per annum percentage
discount rate (expressed to two decimal places and rounded upward, if necessary,
to the nearest 1/100th of 1%), quoted by the Lender as that at which the Lender
would, in accordance with its normal practice, on such day be prepared to
purchase Bankers' Acceptances in an amount and having a maturity date comparable
to the amount and maturity date of such Bankers' Acceptance;
"Bankers' Acceptance" means a Draft of the Borrower
denominated in Canadian Dollars which has been accepted by the Lender pursuant
to Article II;
"Bankers' Acceptance Liabilities" means, at any time and in
respect of any Bankers' Acceptance, the Face Amount thereof if still outstanding
and unpaid or, following maturity thereof, the aggregate unpaid amount of all
Reimbursement Obligations at that time due and payable in respect of such
Bankers' Acceptance upon maturity;
"Books and Records" means all of the Borrower's original
ledger cards, payment schedules, credit applications, Contract Rights,
Encumbrances, guarantees and other Intangibles relating in any way to the
Assigned Leases or Assigned Leased Property;
"Borrower" means Fidelity Leasing Canada Inc., a corporation
incorporated under the laws of the Province of Ontario, and any successors and
permitted assigns thereof;
"Borrower's Account" means the Canadian Dollar account to be
maintained by the Borrower with the Lender at the Lender's Branch in accordance
with Article V;
"Borrowing Base" means as of any date of determination, an
amount equal to the lesser of:
3
(a) the Maximum Commitment Limit on that date, and
(b) 75% of the Aggregate Eligible Lease Receivable Balance on that
date;
"Borrowing Base Certificate" means a certificate setting out
the then current Borrowing Base and Available Commitment, duly completed and
executed on behalf of the Borrower by the chief financial officer of the
Borrower or another officer of the Borrower acceptable to the Lender,
substantially in the form of Schedule 2.4(c) hereto;
"Business Day" means any day of the year, other than Saturday
or Sunday or any other day on which banks are closed for normal business in
Toronto, Ontario;
"Canada Treasury ▇▇▇▇ Rate" means on any day and for any
discount calculation period the rate for Government of Canada Treasury bills for
a period approximately equal to such discount calculation period appearing on
the "Reuters Screen ISDD Page" (as defined in the International Swap and
Derivatives Association, Inc. definitions, as modified and amended from time to
time) at approximately 10:00 a.m. (Toronto, Ontario time) on such day, or if
such day is not a Business Day then on the immediately preceding Business Day;
"Canadian Dollars" and the symbols "Can. $" and "Cdn. $" mean
lawful money of Canada;
"Canadian Dollar Equivalent" means, at any time, the amount of
Canadian Dollars which could be purchased from the Lender by the payment of a
specified amount of another currency using the Lender's relevant spot rate for
the sale of Canadian Dollars quoted by the Lender's treasury department at such
time;
"Capital Adequacy Guideline" means the capital adequacy
requirements from time to time specified by OSFI or any other applicable
Governmental Authority and published by it as one or more guidelines for
chartered banks in Canada;
"Capital Lease" means any lease of (or other agreement
conveying the right to use) immovable or real property or movable or personal
property, which would be classified as a capital lease under Generally Accepted
Accounting Principles;
"CDOR Rate" means, on any day, the annual rate which is the
rate determined by the Lender as being the arithmetic average (rounded up or
down, if necessary, to the nearest 0.01% and 0.005% being rounded up) of the
discount rates applicable to Canadian Dollar bankers' acceptances for a period
of one month appearing on the "Reuters Screen CDOR Page" (as defined in the
International Swap and Derivatives Association, Inc. definitions, as modified
and amended from time to time) at approximately 10:00 a.m. on such day, or if
such day is not a Business Day then on the immediately preceding Business Day;
provided, however, if such rates do not appear on the Reuters Screen CDOR Page
for such one month period as contemplated, then the CDOR Rate on any day shall
be calculated as the rate as determined by the Lender equal to the BA Reference
Rate that would be applicable to any Drafts required to be purchased by the
Lender on such day and having a term to maturity of 30 days;
4
"Change of Control" means the occurrence of one or more of the
following events:
(a) in the case of FLI:
(i) RAI shall cease to be the beneficial owner, directly,
or indirectly through wholly owned Subsidiaries, of
at least 51% of all of the issued and outstanding
Voting Shares of FLI; or
(ii) if RAI would not have the ability to elect or appoint
a majority of FLI's Board of Directors;
(b) in the case of the Borrower:
(i) RAI or FLI shall cease to be the beneficial owner,
directly, or indirectly through wholly owned
Subsidiaries, of all of the issued and outstanding
Voting Shares of the Borrower; or
(ii) nominees of RAI or FLI, or their designees, shall
cease to represent a majority of the Borrower's Board
of Directors; and
(c) in the case of FLSCI or any other Subsidiary of the Borrower:
(i) the Borrower shall cease at any time to be the
beneficial owner, directly, or indirectly through
wholly owned Subsidiaries, of all of the issued and
outstanding Voting Shares of such Subsidiary; or
(ii) nominees of the Borrower, or their designees, shall
cease to represent a majority of such Subsidiary's
Board of Directors;
"Chattel Paper" has the meaning ascribed to the term "chattel
paper" in the PPSA;
"Claim" means any claim of any nature whatsoever including,
without limitation, any demand, liability, obligation, cause of action, suit,
proceeding, judgment, award, assessment and reassessment, whether present or
future;
"Closing" means the execution and delivery of this Agreement
and the other Loan Documents by the respective parties thereto;
"Closing Date" means that date on which the Closing shall
occur;
"Closing Financial Statements" means the financial statements
of the Borrower as of;
"Collateral" means all now or hereafter existing Assigned
Leases and Assigned Leased Property, Books and Records and all cash and noncash
proceeds, thereof, including insurance proceeds;
5
"Commitment" means at any time the obligation of the Lender,
subject to and in accordance with the terms and conditions of this Agreement, to
make Prime Rate Loans and accept and purchase Bankers' Acceptances in an
aggregate amount of Outstanding Principal Obligations at any one time
outstanding up to (but not exceeding) the Borrowing Base at that time;
"Compensating Amount" has the meaning set out in Section 6.1;
"Compliance Certificate" means a certificate duly completed
and executed on behalf of the Borrower by the chief financial officer of the
Borrower or another officer of the Borrower acceptable to the Lender,
substantially in the form of Schedule 9.1(i) hereto;
"Consolidated Capitalization" means at any time the aggregate
(without duplication) of the Subordinated Indebtedness of the Borrower,
unsecured intercompany indebtedness of the Borrower to its Affiliates (other
than any Securitization Subsidiary) and the Consolidated Shareholder Equity of
the Borrower;
"Consolidated Shareholder Equity" of any Person means at any
time, the sum of the following, determined (without duplication) in accordance
with Generally Accepted Accounting Principles:
(a) the stated capital (but for greater certainty excluding any
treasury shares and subscribed but unissued shares) of such
Person, less any amount thereof attributable to any preferred
or special shares of such Person which are subject to any
sinking fund or mandatory redemption provisions under which
any amount must be paid by such Person, or are retractable at
the option of the holder thereof, prior to the Term Date; and
(b) the aggregate amount of the consolidated contributed surplus
and consolidated retained earnings of such Person or, in the
case of a consolidated contributed surplus or consolidated
retained earnings deficit, minus the amount of such deficit;
but excluding (1) any amount attributable to consolidation of any Assets,
revenues, income, contributed capital or surplus or retained earnings of any
Securitization Subsidiary, and (2) any exchange gains or losses arising from the
translation of the financial statements of any Subsidiary and accumulated in the
foregoing;
"Contaminant" means, any pollutants, dangerous substances,
liquid waste, industrial waste, hauled liquid waste, toxic substances, hazardous
wastes, hazardous materials, hazardous substances or contaminants as defined or
dealt with in any Environmental Law;
"Contract Rights" means all rights under contracts not yet
earned by performance;
"Cover" for any Bankers' Acceptance Liabilities shall be
effected by paying to the Lender immediately available and freely transferable
6
funds in Canadian Dollars in the full amount of such Bankers' Acceptance
Liabilities, which funds shall be held by the Lender in a collateral account
maintained by the Lender and assigned to the Lender as general and continuing
collateral security for the payment of such Bankers' Acceptance Liabilities
using documentation reasonably satisfactory to the Lender. Such funds shall be
retained by the Lender in such collateral account until such time as the
applicable Bankers' Acceptances shall have matured and the related Bankers'
Acceptance Liabilities shall have been fully satisfied; provided, however, that
at such time if an Event of Default has occurred and is continuing, the Lender
shall not be required to release any of the said funds in such collateral
account until such Event of Default shall have been cured or waived;
"Credit Facility" means the revolving credit facility to be
made available to the Borrower hereunder during the Drawdown Period by way of
Advances pursuant to Section 2.1;
"Default" means any event which with the giving of notice, the
passage of time, or both, would constitute an Event of Default;
"Discount" means as applicable to any BA Advance the
difference between the aggregate Face Amount and the aggregate BA Discount
Proceeds of Bankers' Acceptances purchased by the Lender in respect of such BA
Advance;
"Draft" means at any time a ▇▇▇▇ of exchange, within the
meaning of the Bills of Exchange Act (Canada), drawn by the Borrower on the
Lender and bearing such distinguishing letters and numbers as the Lender may
determine, but which at such time has not been completed or accepted by the
Lender;
"Drawdown Date" means a day which the Borrower has notified
the Lender in an Advance Request as the date on which the Borrower requests an
Advance in accordance with Article II;
"Drawdown Period" means the period from the Closing Date to
1:00 p.m. (Toronto, Ontario time) on the Term Date;
"Eligible Lease" means each Lease which as of any date of
determination, and the Leased Property associated therewith, complies with all
representations and warranties set forth in Section 8.1(r) hereof;
"Encumbrance" means any mortgage, charge, hypothec, legal
hypothec, pledge, security interest, trust, lien or deposit arrangement or any
other encumbrance of any kind or nature, whether fixed or floating, that in
substance secures the payment of any indebtedness or liability or the observance
or performance of any obligation owed to, or a claim of any kind or nature in
property by, a Person, other than (a) the beneficial owner of the property, or
(b) any interest of a Lessee pursuant to the terms of a Lease (and any interest
of any Person claiming through such Lessee provided such interest is subordinate
to the Borrower and the Lender in the Leased Property), regardless of form and
whether consensual or arising by law, statutory or otherwise, on or in, any
property, whether immovable or real, movable or personal, or mixed, tangible or
7
intangible and including, but not limited to, a conditional sale or other title
retention agreement, lease, consignment or bailment for security purposes;
"Environmental Activity" means any activity, event or
circumstances in respect of a Contaminant, including, without limitation, its
storage, use, holding, collection, purchase, accumulation, assessment,
generation, manufacture, construction, processing, treatment, stabilization,
disposition, handling or transportation, or its Release, escape, leaching,
dispersal or migration into the natural environment, including the movement
through or in the air, land surface or subsurface strata, surface water or
groundwater;
"Environmental Law" means any and all applicable Legal
Requirements relating to pollution or protection of human health or the
environment or any Environmental Activity;
"Equipment" has the meaning ascribed to the term "equipment"
in the PPSA and shall include, without limitation, all additions, improvements,
accessions, attachments, upgrades, replacements and substitutions thereto or
therefor;
"Event of Default" means any of the events specified in
Section 10.1;
"Face Amount" means in respect of a Draft or a Bankers'
Acceptance, the amount stated therein to be payable to the holder thereof on its
maturity;
"Facility Fee" has the meaning specified in Section 3.3;
"Fixed Charge Coverage Ratio" has the meaning ascribed to that
term in the FLI Credit Agreement in effect on the date of this Agreement, as
such term may be supplemented, amended, modified or restated from time to time
with the consent of the Lender hereunder;
"FLI" means Fidelity Leasing, Inc., a corporation incorporated
under the laws of the State of Pennsylvania, and any successors and permitted
assigns thereof;
"FLI Credit Agreement" means the amended and restated loan and
security agreement dated September 30, 1998 among FLI, First Union National
Bank, as agent and as lender, and certain other lending institutions party to
such agreement, as lenders thereunder, as (unless otherwise specified herein)
supplemented, amended, modified or restated from time to time;
"FLI Subordinated Indebtedness" has the meaning ascribed to
the term "Subordinated Indebtedness" in the FLI Credit Agreement in effect on
the date of this Agreement, as such term may be supplemented, amended, modified
or restated from time to time with the consent of the Lender hereunder;
"FLSCI" means FL Sales Canada Inc., a corporation incorporated
under the laws of the Province of Ontario, and any successors and permitted
assigns thereof;
8
"Generally Accepted Accounting Principles" means, at any time,
accounting principles generally accepted in Canada as recommended in the
Handbook of the Canadian Institute of Chartered Accountants applied on a basis
consistent with prior years;
"Governmental Authority" means any nation or government, and
any political subdivision thereof, and any central bank, agency, department,
commission, board, bureau, court, tribunal or other entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government;
"Guarantee Liability" means, with respect to any Person, any
Liabilities of another Person which such guaranteeing Person has guaranteed or
in respect of which such guaranteeing Person is liable, contingently or
otherwise, including, without limitation, liable by way of agreement to purchase
property or services, to provide funds for payment, to supply funds to or
otherwise invest in such other Person, or otherwise to assure a creditor of such
other Person against loss, other than endorsements for collection or deposit in
the ordinary course of business;
"Guarantor" means each of RAI and FLI;
"IBM Canada" means IBM Canada Ltd., a corporation incorporated
under the laws of Canada;
"IBM Direction" has the meaning set out in Section 7.1(g);
"IBM Leasing Program Agreements" means, collectively, the
Master Agreement For Sale And Assignment Of Equipment Lease Receivables made as
of February, 1999 between FLSCI, IBM Canada and the Borrower, the Master
Agreement of Sale made as of February, 1999 between the Borrower and FLSCI and
the Small Business Leasing Program Agreement made as of October 6, 1998 between
the Borrower, FLSCI and IBM Canada;
"Indebtedness" means, without duplication, for any Person:
(a) all indebtedness of such Person for or in respect of borrowed
money, credit or other financial accommodation including,
without limitation, obligations evidenced by bonds,
debentures, notes, commercial paper or similar instruments;
(b) all obligations of such Person with respect to letters of
credit, letters of guarantee, banker's acceptances or similar
instruments issued or accepted by banks or other financial
institutions for the account of such Person;
(c) all obligations of such Person to purchase, redeem, retract or
otherwise acquire any securities issued by such Person;
(d) all indebtedness of such Person for or in respect of the
purchase or acquisition price of property or services, whether
or not recourse is limited to the repossession and sale of any
such property, but excluding any such indebtedness incurred in
9
the ordinary course of business for the purpose of carrying on
the same, consistent with historical practice, owing to the
suppliers of such goods or services;
(e) all obligations, whether or not assumed, secured by
Encumbrances on, or payable out of the proceeds or production
from, property owned by such Person;
(f) all obligations of such Person under a Capital Lease entered
into by such Person as lessee;
(g) all Guarantee Liability of such Person; and
(h) all obligations for exposures (calculated using the ▇▇▇▇ to
market formula with respect to the applicable agreement or in
the manner specified from time to time by the Lender) under
interest rate protection agreements, currency hedging
agreements, commodity hedging agreements and other risk
management arrangements;
"Instrument" has the meaning ascribed to the term "instrument"
in the PPSA;
"Intangibles" has the meaning ascribed to the term
"intangibles" in the PPSA and shall include, but not be limited to, all Contract
Rights, documents, instruments, books, records, ledgers, journals, cheque books,
print outs, blue prints, designs, computer programs, computer tapes, punch
cards, formulae, drawings, customer lists, choses in action, claims, goodwill,
designs and plans, licenses, license agreements, tax and all other types of
refunds, returned and unearned insurance premiums, rights and claims under
insurance policies, patents, patent application, trademarks, trade names, trade
styles, trademark applications and copyrights;
"Inventory" has the meaning ascribed to the term "inventory"
in the PPSA and shall include, without limitation, all additions, improvements,
accessions, attachments, upgrades, replacements and substitutions thereto or
therefor;
"Investment" means any loan, advance, deposit, extension of
credit, capital contribution or investment to or in any Person, or any purchase
or other acquisition for a consideration of any evidences of Indebtedness,
capital stock or other securities of any Person or the acquisition of assets of
another Person in circumstances which would qualify such acquisition as a bulk
sale of an enterprise;
"Lease" means an equipment lease (whether a "true lease" or a
lease intended as security), rental or other similar agreement under which the
Borrower is the lessor, together with all schedules, supplements, amendments,
renewals or extensions thereof and guarantees of rights and obligations
thereunder;
"Lease Receivable" means, with respect to each Lease as of any
date of determination, an amount equal to the gross value as of that date of the
remaining contractual monthly payments to be made under such Lease during the
10
remaining term of such Lease, plus the absolute and unconditional obligation, if
any, of the Lessee thereunder to make any payments at the end of the stated
Lease term;
"Lease Receivable Balance" means, with respect to each Lease
as of any date of determination, an amount equal to the lesser of:
(a) the Lease Receivable as of that date in respect of such Lease
(net of any deposits or other advance cash receipts and
excluding any portion of the Lease Receivable representing
taxes payable by the Lessee, other than such as represent
reimbursement to the Borrower for such taxes already remitted
by the Borrower to the relevant taxation authority); and
(b) the acquisition cost (excluding Taxes or commissions) to the
Borrower, at the time of creation of the Lease, of the Leased
Property leased or financed pursuant to such Lease;
"Leased Property" means any personal property leased or to be
leased or financed by the Borrower pursuant to a Lease. The term "Leased
Property" includes all of the Borrower's Inventory or Equipment so leased;
"Legal Requirement" means any law, statute, ordinance, decree,
requirement, order, judgment, treaty, rule, guideline, bulletin, license, permit
or regulation, and any applicable determination, interpretation, ruling, order
or decree, of any Governmental Authority, whether presently existing or arising
in the future, including without limitation all Guidelines and Bulletins issued
by OSFI;
"Lender" means Bank of Montreal and the banks and any other
bank or financial institution to which a Commitment in the Credit Facility is
assigned by the Lender or a further permitted assignee thereof in accordance
with Section 11.10, and their respective successors and permitted assigns;
"Lender's Branch" means the Lender's ^ Main Toronto Branch, or
such other branch of the Lender in Canada as the Lender may from time to time
specify to the Borrower;
"Lessee" means the lessee(s) or obligor(s) responsible for
payment and/or performance under a Lease;
"Liabilities" of any Person and its Subsidiaries means any
Indebtedness or liability, contingent or otherwise and whether or not incurred
in the ordinary course of business, which would be shown in consolidated
financial statements of such Person prepared in accordance with Generally
Accepted Accounting Principles;
"Loan Documents" means this Agreement, the Security Documents,
the Required Guarantees and all other documents, certificates, instruments and
agreements to be executed and delivered to the Lender by the Borrower or by any
other Person as contemplated hereunder and thereunder;
11
"Loss" means any loss, cost or expense whatsoever, whether
direct or indirect, including, without limitation, any damages, judgments,
penalties, fines, fees, charges, claims, demands, liabilities and any and all
legal and other professional fees and disbursements, and, with respect to any
Advance by the Lender, any loss, cost or expense incurred by reason of the
liquidation or re-employment of deposits or other funds acquired by the Lender
to fund or maintain such Advance, except any such loss representing loss of
profit;
"Material Adverse Effect" means, when used in relation to the
Borrower, a material adverse effect on the business, operations, Assets or
condition (financial or otherwise) of the Borrower and its Subsidiaries taken as
a whole, or on the ability of the Borrower or its Subsidiaries to perform any of
its obligations under this Agreement and the other Loan Documents and, when used
in relation to a Guarantor, means a material adverse effect on the business,
operations, Assets or condition (financial or otherwise) of the Guarantor and
its Subsidiaries taken as a whole, or on the ability of the Guarantor or its
Subsidiaries to perform any of its obligations under the FLI Credit Agreement or
the Loan Documents;
"Material Assets" means any Asset or group of Assets the loss
of which would have a Material Adverse Effect and includes, without limitation,
any Material Contracts and, with respect to the Borrower, the Collateral and the
Investment by the Borrower in FLSCI;
"Material Contracts" means those contracts, agreements,
instruments, leases, licenses or permits to which any Person is a party or by
which it or any of its Assets is bound, the breach, termination or amendment of
which could reasonably be expected to have a Material Adverse Effect and
includes, without limitation, with respect to the Borrower, the IBM Leasing
Program Agreements;
"Maximum Commitment Limit" means the amount of Cdn $5,000,000,
as such amount may be reduced or cancelled from time to time in accordance with
the provisions of this Agreement;
"Minimum Required Amount" means, as of the last day of each
fiscal quarter of FLI, an amount equal to the minimum Tangible Net Worth
required to be maintained by FLI as of such day under the FLI Credit Agreement
in effect on the date of this Agreement, as such amount may be amended or
modified from time to time with the consent of the Lender hereunder;
"Nonrecourse Debt" means all Liabilities of a Person which are
non-recourse in nature and treated as non-recourse obligations in such Person's
financial statements but shall not include any Liabilities in respect of which
such Person is subject to any partial recourse even if treated as off balance
sheet Liabilities in such Person's financial statements;
"OBCA" means the Business Corporations Act (Ontario), as the
same may be amended, replaced or supplemented from time to time;
"Obligations" means, at any time, the sum of (a) the aggregate
principal amount of all Prime Rate Loans advanced to the Borrower and all
12
accrued and unpaid interest thereon outstanding and unpaid at such time, (b) the
aggregate Bankers' Acceptance Liabilities of the Borrower at such time in
respect of all Bankers' Acceptances purchased by the Lender at or prior to such
time, including all accrued and unpaid interest on any then outstanding
Reimbursement Obligations in respect of any such Bankers' Acceptances, (c) the
payment of all reasonable amounts advanced by the Lender to preserve, protect
and enforce rights hereunder and in the Collateral and all expenses and costs
incurred by the Lender in connection therewith, and (d) all other then
outstanding liabilities, obligations and indebtedness of the Borrower, whether
joint or several, related or unrelated, primary or secondary, matured or
contingent, due or to become due, to the Lender under this Agreement or any of
the other Loan Documents;
"OSFI" means the Office of the Superintendent of Financial
Institutions (Canada);
"Outstanding Principal Obligations" means, at any time, the
sum of the aggregate principal amount of all Prime Rate Loans advanced to the
Borrower outstanding and unpaid at such time and the aggregate Bankers'
Acceptance Liabilities outstanding and unpaid at such time;
"Past Due Rate" means, on any day, a rate per annum equal to
the Prime Rate plus one percent;
"Permitted Debt" means:
(h) any Indebtedness incurred (whether or not to the transferor),
assumed or arising by operation of law after the date hereof
to provide the obligor with funds to pay the whole or part of
the consideration for the acquisition of any Asset and which
is secured only by the Asset being acquired by the obligor,
and includes the renewal, extension or refinancing of any such
Indebtedness secured thereby upon the same Asset if such
Indebtedness and the security therefor are not increased
thereby; and
(j) any Indebtedness incurred, assumed or arising by operation of
law pursuant to a Securitization Transaction;
"Permitted Encumbrances" means:
(a) any Encumbrance for taxes, assessments and governmental
charges or liens not yet due or, if due, the validity of which
is being diligently contested in good faith and by appropriate
proceedings and in respect of which adequate provision has
been made on the books of the Borrower or the relevant
Subsidiary of the Borrower to the Lender's sole satisfaction;
(b) any mechanics', construction, workers' or repairers' lien or
other like Encumbrance arising in the ordinary course of
business for amounts the payment of which is either not yet
due or, if due, the validity of which is being contested in
good faith and by appropriate proceedings and in respect of
which adequate provision has been made on the books of the
Borrower or Subsidiary of the Borrower to the Lender's sole
satisfaction;
13
(c) any Encumbrance arising out of any judgment or award with
respect to which an appeal or proceeding for review is then
being prosecuted in good faith and by appropriate proceedings
and in respect of which adequate provision has been made on
the books of the Borrower or the relevant Subsidiary of the
Borrower to the Lender's sole satisfaction, and with respect
to which there shall have been secured a stay of execution
pending such appeal or proceeding for review;
(d) any servitude, easement, restriction, right-of-way and other
similar right in real or immovable property or any interest
therein which will not in the aggregate materially impair the
value, marketability or use of such property;
(e) any right reserved to or vested in any Governmental Authority,
by the terms of any lease, licence, franchise, grant or permit
acquired by the Borrower or relevant Subsidiary of the
Borrower or by any statutory provision, to terminate any such
lease, license, franchise, grant or permit, or to require
annual or other payments as a condition to the continuance
thereof;
(f) any Encumbrance resulting from the deposit of cash or
securities in connection with any contract, tender or
compensation, surety or appeal bond, or in respect of the
costs of any litigation when required by law;
(g) any Encumbrances given to a public utility or any Governmental
Authority when required to obtain the services of such utility
or other authority in connection with the operations of the
Borrower or the relevant Subsidiary of the Borrower in the
ordinary course of its business;
(h) any Encumbrance given (whether or not to the transferor),
assumed or arising by operation of law after the date hereof
to provide or secure or to provide the obligor with funds to
pay the whole or part of the consideration for the acquisition
of any Asset and which is secured only by the Asset being
acquired by the obligor, and includes the renewal, extension
or refinancing of any such Encumbrance and of the Indebtedness
secured thereby upon the same Asset if such Indebtedness and
the security therefor are not increased thereby;
(i) any Encumbrance given, assumed or arising by operation of law
after the date hereof to provide or secure Nonrecourse Debt
and includes the renewal, extension or refinancing of any such
Encumbrance and of the Nonrecourse Debt secured thereby upon
the same Asset if such Indebtedness and the security therefor
are not increased thereby; and
(j) any Encumbrance given, assumed or arising by operation of law
pursuant to a Securitization Transaction in respect of the
specific Assets of the Borrower used to secure the notes
issued pursuant to such Securitization Transaction;
"Permitted Purpose" means the use by the Borrower of the
proceeds of any Advance hereunder to finance the origination of Eligible Leases
14
and the acquisition of Leased Property leased or to be leased or financed by the
Borrower pursuant to an Eligible Lease and for the conversion of Advances to
other Advances hereunder;
"Person" includes an individual, partnership, whether general,
limited or undeclared, corporation, limited liability corporation, joint stock
company, trust, unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature;
"PPSA" means the Personal Property Security Act (Ontario), as
the same may be amended, replaced or supplemented from time to time;
"Prime Rate" means, on any day, the greater of (a) the
floating rate of interest per annum announced from time to time by the Lender,
and in effect on such day, as the reference rate of interest the Lender will use
to determine rates of interest for Canadian Dollar commercial loans made by the
Lender to borrowers in Canada, and (b) the rate as determined by the Lender
equal to (i) the CDOR Rate, plus (ii) 0.75% per annum;
"Prime Rate Loan" means any Advance made by the Lender to the
Borrower in Canadian Dollars bearing interest by reference to the Prime Rate;
"RAI" means Resource America, Inc., a corporation incorporated
under the laws of the State of Delaware, and any successors and permitted
assigns thereof;
"Refunding BA Advance" means a BA Advance pursuant to Section
2.8(h);
"Refunding Bankers' Acceptance" has the meaning set out in
Section 2.8(h);
"Reimbursement Obligations" means, at any time, without
duplication, the obligations of the Borrower to reimburse to the Lender the Face
Amount of any Bankers' Acceptance drawn by the Borrower upon the Lender on the
maturity thereof;
"Release" means discharge, spray, inject, inoculate, abandon,
deposit, spill, leak, seep, pour, emit, empty, throw, dump, place and exhaust,
and when used as a noun has a similar meaning;
"Renewal Acceptance" has the meaning set out in Section 2.3;
"Renewal Request" has the meaning set out in Section 2.3;
"Required Guarantee" has the meaning set out in Section
7.1(g);
"Security Documents" means all agreements, instruments,
indentures and other documents at any time held by the Lender to secure payment
and performance of the Obligations and the indebtedness and liability of the
Borrower and each Guarantor to the Lender hereunder or under the Loan Documents,
including the documentation provided for in Section 7.1(g) and each Assignment
Agreement delivered pursuant to Section 2.4(d);
15
"Securitization Subsidiary" means any Subsidiary of the
Borrower that enters, or at any time has entered into, any Securitization
Transaction and includes, without limitation, FLSCI;
"Securitization Transaction" means any securitization
transaction of which the Lender has received 30 days prior written notice,
using, in part, specific Assets of the Borrower to secure notes issued by the
Borrower or a special purpose subsidiary of the Borrower or other securitization
vehicle and in connection with which, the Borrower will be subject to no
recourse or recourse arising out of a servicing agreement limited to such
specific Assets or the lesser of (a) the net realizable, and (b) the book value,
of such specific Assets;
"Subordinated Indebtedness" means all Indebtedness which is
subordinate in all respects to the Obligations pursuant to a subordination
agreement acceptable to the Lender in its sole discretion;
"Subsidiary" of a Person means a company or corporation
controlled by that Person;
"Tangible Net Worth" has the meaning ascribed to that term in
the FLI Credit Agreement in effect on the date of this Agreement, as such term
may be supplemented, amended, modified or restated from time to time with the
consent of the Lender hereunder;
"Tax" or "Taxes" means all taxes, assessments, levies,
imposts, stamp taxes, duties, charges to tax, fees, deductions, withholdings and
any restrictions or conditions resulting in a charge imposed, levied, collected,
withheld or assessed as of the date of this Agreement or at any time in the
future, and all penalty, interest and other payments on or in respect thereof
but does not include any tax on the overall income or capital of the Lender;
"Term Date" means the date that occurs 364 days after the
Closing Date, or, if such date is extended pursuant to Section 2.3(c), the date
to which it has been extended;
"Termination Date" means in respect of a Credit Facility, the
earlier of (a) the Term Date, and (b) the date on which the Obligations shall
automatically, or by virtue of a declaration by the Lender made in accordance
with this Agreement, become due and payable;
"Voting Shares" means the shares of any class or classes of
shares in the capital of a corporation which carry voting rights under any
circumstances provided that, for the purposes hereof, shares which only carry
the right to vote conditionally on the happening of an event shall be considered
Voting Shares only upon the happening of such event and then only while they
retain the right to vote;
"Written" or "in writing" shall include printing, typewriting,
or any electronic means of communication capable of being visibly reproduced at
the point of reception including telegraph and telecopier.
16
Section 1.2 Computation of Time Periods.
In this Agreement, in the computation of periods of time from
a specified date to a later specified date, unless otherwise expressly stated
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".
Section 1.3 Accounting Terms.
Each accounting term, including all defined terms, used in
this Agreement shall be construed in accordance with Generally Accepted
Accounting Principles and in accordance with the auditing and accounting
recommendations and guidelines issued from time to time by the Canadian
Institute of Chartered Accountants, as amended from time to time, unless
something in the subject matter or the context otherwise is inconsistent
therewith.
Section 1.4 Incorporation of Schedules.
The following Schedules annexed hereto shall, for all purposes
hereof, form an integral part of this Agreement:
Schedule 2.4(a) Form of Advance Request
Schedule 2.4(c) Form of Borrowing Base Certificate
Schedule 2.4(d) Form of Assignment Agreement
Schedule 8.1(f)(A) Outstanding Encumbrances
Schedule 8.1(f)(B) Places of Business and Locations of Books
and Records
Schedule 8.1(g) Subsidiaries and Affiliates of the Borrower
Schedule 8.1(q) Intellectual Property Assets
Schedule 9.1(i) Form of Compliance Certificate
Section 1.5 Headings.
The inclusion of headings and a table of contents in this
Agreement is intended for convenience of reference only and shall not affect in
any way the construction or interpretation hereof.
Section 1.6 Singular, Plural, Gender
As used herein, gender is used as a reference term only and
applies with the same effect whether the parties are masculine, feminine,
corporate or other form, and the singular shall include the plural and the
plural the singular, as the context shall require.
Section 1.7 Conflict.
In the event of a conflict between the provisions of this
Agreement and the provisions of any of the other Loan Documents, the provisions
of this Agreement shall prevail.
17
Section 1.8 Currency.
Unless otherwise expressly stated, any reference herein to any
sum of money shall be construed as a reference to Canadian Dollars. Any amount
denominated in another currency required herein to be expressed at any time in
Canadian Dollars shall be so expressed as the Canadian Dollar Equivalent at such
time of such amount.
Section 1.9 Time.
Unless otherwise expressly stated, any reference herein to
time shall be construed as a reference to local time in ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇, and time is and shall be construed to be of the essence.
Section 1.10 Control.
For the purposes of this Agreement, a Person or Persons
control(s) a company or corporation if that Person or Persons and/or one or more
of its or their Subsidiaries and/or other Persons controlled directly or
indirectly by that Person or Persons beneficially own(s), directly or
indirectly, an aggregate amount of the Voting Shares of such company or
corporation sufficient to enable it or them to elect a majority of the directors
(or other persons performing similar functions) of that company or corporation
regardless of the manner in which other Voting Shares are voted or has or have,
through the operation of any agreement or otherwise, the ability to elect or
cause the election of a majority of the directors (or other persons performing
similar functions), and the expressions "controlled by" and "under common
control" shall have correlative meanings.
Section 1.11 References to Conversion of Advances.
References to "convert" and "conversion", and other similar
terms, in the context of Advances or Types of Advances, shall, unless the
context otherwise requires, mean and refer to an election to have the
Outstanding Principal Obligations of the referenced Advance or Type of Advance
bear interest or fees on a different basis or fixed rate henceforth and so on
from time to time, and any reference to the conversion of an Advance or Type of
Advance to another Type of Advance includes, without limitation, the conversion
of any BA Advance to a Refunding BA Advance.
ARTICLE II
THE CREDIT FACILITY
Section 2.1 Credit Facility.
Upon and subject to the terms and conditions of this
Agreement, the Lender agrees to extend to the Borrower a revolving credit
facility available from time to time during the Drawdown Period by way of
Advances in an aggregate principal amount such that the maximum aggregate amount
of Outstanding Principal Obligations in respect of such Advances (after giving
18
effect to the making of any such Advances, all repayments of Outstanding
Principal Obligations made concurrently with making any such Advances and any
conversion of outstanding Advances from one Advance to another in accordance
with Section 2.7) shall not exceed at any time for all Advances made by the
Lender an amount equal at such time to the Borrowing Base at such time, provided
that the Lender shall have no obligation to make any such Advance if the amount
of the Outstanding Principal Obligations would exceed its then Available
Commitment. The Borrower may borrow, prepay in whole or in part and reborrow
Advances during the Drawdown Period, all in accordance with the terms and
conditions hereof.
Section 2.2 Drawdown Availability.
Subject to the terms and conditions of this Agreement:
(a) the Drawdown Period shall terminate at 1:00 p.m. (Toronto,
Ontario time) on the Term Date;
(b) from and after such time on such Term Date, the Borrower shall
cease to be entitled to obtain any further Advance under the
Credit Facility; and
(c) on such Term Date the Commitment shall automatically be
cancelled on a permanent basis.
Section 2.3 Renewal of Drawdown Period.
(a) The Borrower may request, once annually but at least
twice in total, that the Lender agree to a renewal of the Drawdown Period for an
additional period of 364 days upon the terms and conditions of this Section 2.3
by notice in writing (a "Renewal Request") to the Lender given not less than 60
days and not more than 90 days prior to the then current Term Date.
(b) Upon receipt of any Renewal Request from the Borrower, the
Lender shall undertake a credit assessment of the Borrower consistent with the
Lender's then current credit standards and practices and when the Lender
decides, in its sole and total discretion, to renew or not to renew the Drawdown
Period for an additional 364 day period, the Lender shall give the Borrower
notice in writing of its decision not less than 30 days prior to the then
current Term Date.
(c) If (i) the Lender gives the Borrower a notice in writing
(a "Renewal Acceptance ") as provided above that the Lender has agreed in its
sole and total discretion to renew the Drawdown Period for an additional 364 day
period, then on and as of the date such Renewal Acceptance is given to the
Borrower, the Term Date will automatically be extended to the date that occurs
364 days after the date such Renewal Acceptance is given to and deemed to have
been received by the Borrower pursuant to the terms of this Agreement.
19
(d) If (i) the Lender fails to advise the Borrower of its
decision as provided above, or (ii) the Lender shall give the Borrower notice in
writing of its decision not to renew the Drawdown Period pursuant to such
Renewal Request, the provisions of Section 2.2 shall continue to apply to the
Credit Facility up until its then current Term Date and the Borrower may
continue to obtain further Advances during the Drawdown Period ending on the
then current Term Date upon and subject to the terms and conditions of this
Agreement.
(e) The Borrower acknowledges that the Lender has not made any
representations to the Borrower regarding its intention to renew the Drawdown
Period as set forth in this Section 2.3 and that the Lender shall not have any
obligation to renew the Drawdown Period.
Section 2.4 Advance Requests.
(a) The Borrower if it wishes to obtain an Advance, or to
convert an existing Advance to another Type of Advance, shall deliver to the
Lender an Advance Request in writing, substantially in the form of Schedule
2.4(a) hereto, in respect of such Advance not later than 1:00 p.m. (Toronto,
Ontario time) one Business Day prior to the proposed date of such Advance, in
the case of a BA Advance, and on the proposed date of such Advance, in the case
of a Prime Rate Loan, specifying the date of the Advance, which date shall be a
Business Day, the Type of Advance, the aggregate amount thereof and (in the case
of a BA Advance) the term or terms to maturity of the requested Bankers'
Acceptances.
(b) Any such Advance Request, once delivered by the Borrower
to the Lender, shall be binding, and (subject to the conditions precedent
provided for herein conditioning the Borrower's right to obtain the requested,
or any, Advance), the Borrower shall be obligated to take the requested Advance
on the date specified in such Advance Request. The Lender may rely and act upon,
and shall incur no liability under or in respect of this Agreement by in good
faith relying or acting upon, any Advance Request delivered to the Lender
believed by the Lender to be genuine (without any verification inquiries) and to
be signed or sent or given on behalf of the Borrower, or by acting upon any
representation or warranty of the Borrower made or deemed to be made hereunder
by reason of or as a result of such Advance Request.
(c) The Borrower shall deliver with each Advance Request, and
at least monthly on the first Business Day of each month or more frequently if
so requested by the Lender, a Borrowing Base Certificate in writing,
substantially in the form of Schedule 2.4(c) hereto, setting out the then
current Borrowing Base and Available Commitment.
(d) With each Borrowing Base Certificate delivered by the
Borrower to the Lender, the Borrower shall also deliver to the Lender the
following:
(i) an assignment, substantially in the form of Schedule 2.4(d)
hereto (the "Assignment Agreement"), assigning to the Lender
all new Assigned Leases with Lease Receivable Balances
reflected in the calculation of the Borrowing Base and
Available Commitment set out in the Borrowing Base Certificate
(the "New Assigned Leases"), and the Assigned Leased Property
associated therewith, not previously assigned to the Lender
20
pursuant to an Assignment Agreement, or the assignment
delivered pursuant to Section 7.1(g)(vi); and
(ii) such other information and documentation concerning the New
Assigned Leases and all Assigned Leased Property and all other
Collateral associated therewith as may be reasonably requested
by the Lender from time to time.
(e) Upon fulfillment of the above conditions set forth in this
Section 2.4 with respect to an Advance, the Lender will make the funds to be
advanced by the Lender to the Borrower in respect of such Advance available to
the Borrower in accordance with Section 5.3.
Section 2.5 Prime Rate Loans.
The aggregate of all Prime Rate Loans to be made by the Lender
in connection with any particular Advance shall not be less than the lesser of
(i) the Available Commitment, and (ii) Cdn. $200,000 or such greater amount
which is an integral multiple of Cdn. $100,000.
Section 2.6 Currency.
Advances under the Credit Facility shall only be denominated
in Canadian Dollars, and any Advance shall be repayable, and all interest and
fees in respect thereof or in connection therewith shall accrue and be payable,
by the Borrower in Canadian Dollars.
Section 2.7 Conversion of Advance.
Subject to the terms and conditions hereof, the Borrower shall
be entitled from time to time to convert any outstanding Advance to any Type of
Advance by giving notice thereof to the Lender in accordance with Section 2.4,
provided that such conversion does not result in the Outstanding Principal
Obligations exceeding the then current Commitment of the Lender.
Any Advance so converted shall cease to bear interest and fees
as the former Advance, and shall begin to bear interest and fees as the new
Advance, on and as of the date of such conversion. If the Borrower gives notice
to the Lender that all or any portion of the principal amount of, or the BA
Discount Proceeds in respect of, any new Advance to be advanced by the Lender to
the Borrower is to be applied to repay Outstanding Principal Obligations in
respect of any outstanding Advance, the Lender may directly apply such amount to
repay such Outstanding Principal Obligations.
Section 2.8 Certain Provisions Relating to Bankers' Acceptances.
(a) Upon and subject to the terms and conditions of this
Agreement, on the requested date of a BA Advance, the Lender agrees to create
Bankers' Acceptances, by completing one or more Drafts in accordance with the
applicable Advance Request and accepting such Drafts, and to purchase the
Bankers' Acceptances thereby created for an amount equal to the BA Discount
21
Proceeds thereof and, except in the case of a conversion to a Refunding BA
Advance pursuant to Section 2.8(h), the Lender shall deposit into the Borrower's
Account in immediately available funds on such date the amount of the BA
Discount Proceeds in respect thereof, which amount (for greater certainty) shall
be net of the amount of the Acceptance Fee payable by the Borrower to the Lender
under Section 3.2 in respect of such Draft. In the case of a conversion to a
Refunding BA Advance pursuant to Section 2.8(h), the Borrower shall no later
than 11:00 a.m. (Toronto, Ontario time) on the applicable conversion date pay to
the Lender an amount equal to the Discount applicable to such Refunding BA
Advance, to be applied against the Bankers' Acceptance Liabilities in respect of
the maturing BA Advance being so converted.
(b) Each BA Advance under a Credit Facility shall be
constituted by the creation and purchase of Bankers' Acceptances or the purchase
of Drafts on the same Business Day in a minimum aggregate Face Amount of not
less than Cdn. $200,000, or such greater amount which is an integral multiple of
Cdn. $100,000, effected by the Lender in accordance with Section 2.8(a). Each
determination by the Lender of the Acceptance Fee and BA Discount Proceeds
applicable to any BA Advance shall, in the absence of manifest error, be final,
conclusive and binding on the Borrower and the Lender. No Draft may be made or
accepted or purchased on or after the Termination Date, nor may any Bankers'
Acceptance be prepaid or converted to another Advance, prior to the maturity
date of such Bankers' Acceptance except where the Borrower provides Cover in
respect of such Bankers' Acceptance or otherwise fully indemnifies the Lender,
to the Lender's satisfaction, for any Loss from such prepayment or conversion
prior to maturity.
(c) Drafts presented by the Borrower for purchase pursuant to
this Agreement:
(i) will be denominated in Canadian Dollars, in amounts of
$100,000 or integral multiples thereof;
(ii) will have a term, subject to availability, of 30, 60 or 90
days;
(iii) will mature on a Business Day on or before the Term Date; and
(iv) will be in form and substance satisfactory to the Lender,
acting in accordance with then customary and accepted
practices.
(d) Bankers' Acceptances purchased by the Lender hereunder may
be held by it for its own account until the maturity date of such Bankers'
Acceptance or sold, rediscounted or otherwise disposed by it at any time prior
thereto, in the Lender's sole discretion.
(e) To enable the Lender to make BA Advances in the manner
specified in this Section 2.8, the Borrower shall supply the Lender with such
number of blank forms of Drafts as the Lender may reasonably request, duly
endorsed and executed on behalf of the Borrower. In addition, the Borrower shall
deliver to the Lender powers of attorney, in form satisfactory to the Lender,
whereby the Borrower appoints the Lender as its attorney to sign and endorse on
its behalf, in handwriting or by facsimile or mechanical signature blank forms
of Drafts in accordance with the terms of such powers of attorney. The Borrower
22
recognizes and agrees that, in the absence of manifest error, all Bankers'
Acceptances signed and/or endorsed on its behalf by the Lender in accordance
with the terms of such powers of attorney shall bind the Borrower as fully and
effectually as if signed in the handwriting of and duly issued by the proper
signing officer of the Borrower. The Lender is hereby authorized to issue such
Bankers' Acceptances endorsed in blank in such Face Amounts as may be determined
by the Lender provided that the aggregate amount thereof is equal to the
aggregate Face Amount of Drafts required to be purchased by the Lender. The
Lender shall not be responsible or liable for its failure to accept a Bankers'
Acceptance or purchase a Draft if the cause of such failure is, in whole or in
part, due to the failure of the Borrower to provide duly executed and endorsed
Drafts to the Lender on a timely basis nor shall the Lender be liable for any
damage, loss or other claim arising by reason of any loss or improper use of any
such instrument, provided the Lender exercises such care in the custody and
safekeeping of such instruments as it would exercise in the custody and
safekeeping of similar property owned by it. The Lender shall maintain a record
with respect to Drafts (i) received by it from the Borrower in blank hereunder,
(ii) voided by it for any reason, (iii) accepted or purchased by it hereunder,
and (iv) canceled at their respective maturities.
(f) A Draft may be manually signed by any duly authorized
officer of the Borrower or the signature of any duly authorized officer of the
Borrower on a Draft may be mechanically reproduced in facsimile and Bankers'
Acceptances bearing such facsimile signature shall be binding upon the Borrower
as if they had been manually signed by such officers. Notwithstanding that any
of the individuals whose manual or facsimile signature appears on any Bankers'
Acceptance as one of such officers may no longer hold office at the date thereof
or at the date of its acceptance or purchase by, or issue to, the Lender
hereunder or at any time thereafter, any Bankers' Acceptance so signed shall be
valid and binding upon the Borrower, unless, in the case only of blank forms of
Drafts that have not been completed, issued, accepted or purchased hereunder,
the Borrower has given to the Lender in a timely manner written notice to the
contrary.
(g) The Borrower waives presentment for payment and any other
defense to payment of any amounts due to the Lender in respect of a Bankers'
Acceptance accepted or purchased by, or issued to, the Lender pursuant to this
Agreement which might exist solely by reason of such Bankers' Acceptance being
held, at the maturity thereof, by the Lender in its own right and the Borrower
agrees not to claim any days of grace if the Lender as holder sues the Borrower
on any such Bankers' Acceptance for payment of the amount payable by the
Borrower thereunder.
(h) With respect to any outstanding BA Advance, the Borrower,
prior to the occurrence and continuation of an Event of Default, may give notice
to the Lender in accordance with Section 2.4 of the Borrower's intention to
issue one or more Bankers' Acceptances (each a "Refunding Bankers' Acceptance")
on the maturity date of the Bankers' Acceptances in respect of such outstanding
BA Advance to provide for the payment of such maturing Bankers' Acceptances (it
being understood that payments by the Borrower and fundings by the Lender in
respect of each maturing Bankers' Acceptance and the related Refunding Bankers'
Acceptances shall be made on a net basis reflecting the difference between the
Face Amount of such maturing Bankers' Acceptance and the BA Discount Proceeds of
23
such Refunding Bankers' Acceptances and shall satisfy the Borrower's
Reimbursement Obligations in respect of such maturing Bankers' Acceptances). If
the Borrower fails to give such notice or to give notice in accordance with this
Agreement of the conversion of such outstanding BA Advance to another Type of
Advance, then subject to satisfaction of the conditions in Section 7.2, the
Borrower shall be irrevocably deemed to have requested and to have been advanced
a Prime Rate Loan in the Face Amount of such maturing Bankers' Acceptance on the
maturity date of such Bankers' Acceptance, which Prime Rate Loan shall
thereafter bear interest as such in accordance with the provisions hereof until
paid in full. Should the Borrower not be entitled to a Prime Rate Loan at all or
in an amount sufficient to fully reimburse the Lender for the Face Amount of
such maturing Bankers' Acceptance, the Face Amount of such maturing Bankers'
Acceptance, shall constitute Reimbursement Obligations of the Borrower to the
Lender due and payable on the maturity date of such maturing Bankers' Acceptance
and shall bear interest in accordance with Section 3.4.
(i) If the Lender determines in good faith and acting
reasonably, which determination shall be final, conclusive and binding upon the
Borrower, and notifies the Borrower that, by reasons of circumstances or changes
affecting the market for bankers' acceptances it is no longer possible to
establish the BA Reference Rate or that the market for bankers' acceptances no
longer exists, is too weak for its normal use by the Lender or is not capable,
in the normal course of business, to absorb Bankers' Acceptances accepted by the
Lender pursuant to this Agreement, then,
(i) the right of the Borrower to request BA Advances
shall be suspended until the Lender determines that
the circumstances causing such suspension no longer
exist and the Lender so notifies the Borrower; and
(ii) any Advance Request for any BA Advance which is
outstanding shall be deemed to constitute a request
for an Advance by way of a Prime Rate Loan.
(j) The Lender shall promptly notify the Borrower of the
suspension of the Borrower's right to request BA Advances and of the termination
of any such suspension.
(k) For the purposes of this Agreement, when calculations are
made to determine the outstanding amount, principal amount or unpaid principal
amount of any BA Advance, the full Face Amount of Bankers' Acceptances related
to such BA Advance shall be used without deduction or adjustment in respect of
applicable Acceptance Fees or any other difference between such Face Amount and
the applicable BA Discount Proceeds.
(l) If an Event of Default shall have occurred and then be
continuing (whether or not any declaration pursuant to Article X is made), the
Borrower shall upon request by the Lender forthwith provide Cover to, and while
such Event of Default is continuing shall maintain Cover with, the Lender in
respect of all outstanding Bankers' Acceptances.
(m) Bankers' Acceptances accepted or purchased by the Lender
under this Agreement after clearing services as provided for in the Depository
Bills and Notes Act (Canada) acceptable to the Lender are available may, at the
24
option of the Lender, be issued in the form of a "depository ▇▇▇▇" and deposited
with a "clearing house", as each such term is defined in the Depository Bills
and Notes Act (Canada).
Section 2.9 Reduction of Maximum Commitment Level.
(a) The Borrower shall have the right, exercisable by it at
any time and from time to time upon not less than thirty days prior written
notice to the Lender and without penalty, but subject to the terms of this
Section 2.9, to reduce in whole or in part the Maximum Commitment Limit,
provided that any such partial reduction shall be in an amount not less than
Cdn. $200,000 or such greater amount which is an integral multiple of Cdn.
$100,000. Notwithstanding the foregoing, the Borrower shall not be entitled to
thereby (i) reduce the Maximum Commitment Limit below the then Outstanding
Principal Obligations, or (ii) to prepay any outstanding BA Advance, unless the
Borrower shall pay to the Lender all interest accrued to the date of such
prepayment on the Advances so prepaid, provide Cover to and thereafter maintain,
until such time as the applicable Bankers' Acceptances shall have matured and
the related Bankers' Acceptance Liabilities shall have been fully satisfied,
Cover with, the Lender in respect of all outstanding Bankers' Acceptances
related to such BA Advances and on demand pay to the Lender any additional
amounts payable pursuant to Section 11.7. No such reduction of the Commitment
pursuant to this Section may be reinstated without the prior written approval of
the Lender. Concurrently with the giving of any such notice, the Borrower shall
prepay the Facility Fee that will have accrued due on the amount of the
terminated portion of the Commitment to the effective date of such termination.
(b) On the Termination Date, the Commitment shall be
terminated in its entirety.
Section 2.10 Use of Proceeds.
The proceeds of the Advances shall be used by the Borrower
only for Permitted Purposes, provided that as against the Borrower and any other
Person, the Lender shall not have any responsibility as to the use of any such
proceeds.
ARTICLE III
INTEREST AND FEES
Section 3.1 Interest on Prime Rate Loans.
The Borrower shall pay interest on the outstanding principal
amount of each Prime Rate Loan outstanding under the Credit Facility from the
date on which such Prime Rate Loan was made until such outstanding principal
amount shall have been repaid in full, and both before and after maturity,
default and judgment, at a floating rate per annum equal to the Prime Rate in
effect from time to time plus 0.75% per annum, calculated daily and compounded
and payable (a) monthly in arrears on the last Business Day of each month of
each year, and (b) on the date on which such Prime Rate Loan becomes due and
payable or is converted to another Type of Advance as contemplated by Article
II, in each case based on the actual number of days elapsed and a year of 365 or
366 days, as the case may be.
25
Section 3.2 Acceptance Fee.
The Borrower shall pay the Lender a fee equal to 2.25% of the
Face Amount of each Bankers' Acceptance accepted or purchased by the Lender
multiplied by a fraction the numerator of which is the term to maturity of such
Bankers' Acceptance, expressed in days, and the denominator of which is 365,
which fee shall be paid as a condition precedent to any obligation on the part
of the Lender to accept or purchase such Bankers' Acceptance.
Section 3.3 Facility Fee.
The Borrower shall pay the Lender a facility fee of Cdn.
$25,000 per annum payable monthly in arrears in equal monthly instalments of
$2,083.33 on the last Business Day of each month and on the Term Date.
Section 3.4 Reimbursement Obligations.
The amount of any Reimbursement Obligation may, if the
applicable conditions precedent specified in Article VII hereof have been
satisfied, be paid with the proceeds of Prime Rate Loans or, as provided in
Section 2.8(h), by the purchase of Refunding Bankers' Acceptances. Pending any
such repayment in full, the Borrower shall pay to the Lender interest on any
Reimbursement Obligation at the Past Due Rate, from and including the date on
which such Reimbursement Obligations arose to the date of payment in full,
calculated daily and compounded monthly in arrears based on the number of days
elapsed and a year of 365 or 366 days, as the case may be, and payable on
demand, both before and after judgement in respect thereof.
Section 3.5 Yearly Rate Statements.
For the purpose of complying with the Interest Act (Canada),
it is expressly stated that:
(a) where interest is calculated pursuant hereto at a rate
based on a 365 day period, the yearly rate or percentage of interest to which
such rate is equivalent is such rate multiplied by the actual number of days in
the year (365 or 366, as the case may be) divided by 365; and
(b) the rates of interest specified in this Agreement are
nominal rates and not effective rates or yields and the parties hereto
acknowledge that there is a material distinction between the nominal and
effective rates of interest, that they are capable of making the calculations
necessary to compare such rates and that the principle of deemed reinvestment of
interest shall not apply to any calculations of interest hereunder.
26
ARTICLE IV
REPAYMENT OF OBLIGATIONS
Section 4.1 Repayment on Maturity.
The Obligations shall become due and payable, and shall be
paid in full, on the Termination Date.
Section 4.2 Mandatory Repayment of Credit Facility.
Subject to the terms and conditions hereof, the Outstanding
Principal Obligations, to the extent that for any reason the Outstanding
Principal Obligations exceed the then current Borrowing Base, whether as a
result of oversight or otherwise, shall be repaid forthwith, whether or not
demanded by or on behalf of the Lender, together with all accrued interest to
the date of such repayment on the principal amount so repaid and any other
amounts payable to the Lender by the Borrower hereunder in respect thereof
including, without limitation, pursuant to Section 11.7, provided that any such
repayment of the amount by which the Outstanding Principal Obligations exceed
the Borrowing Base in respect of any BA Advance shall be discounted for the
period to the maturity of the Bankers' Acceptances outstanding in respect of
such BA Advance at the Canada Treasury ▇▇▇▇ Rate for such discount calculation
period in effect on the date of such repayment or the Borrower may pay such
amount to the Lender and irrevocably authorize and direct the Lender to apply
such payment as a prepayment of the amount by which the Outstanding Principal
Obligations exceed the Borrowing Base on the next maturity date such that the
Outstanding Principal Obligations, after giving effect to the payment, do not
exceed the Borrowing Base.
ARTICLE V
PAYMENTS AND ACCOUNTS
Section 5.1 Maintenance of Accounts.
The Borrower shall open in its name and maintain the
Borrower's Account with the Lender at the Lender's Branch.
Section 5.2 Due Date of Payments.
Whenever any payment hereunder shall be stated to be due on a
day other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of interest or fees, as the case may be, payable on such date.
Section 5.3 Time of Payments.
(a) All payments to be made by the Borrower to the Lender
shall be paid in immediately available funds no later than 1:00 p.m. (Toronto,
27
Ontario time) on the date on which such payment is due. Any such payment made
after such time on such date shall be deemed to have been paid on the next
following Business Day.
(b) The funds to be advanced by the Lender to the Borrower in
respect of any Advances shall be credited by the Lender to the Borrower's
Account no later than 5:00 p.m. (Toronto, Ontario time) on the Drawdown Date, in
the case of a Prime Rate Loan where the Advance Request in respect of such Prime
Rate Loan is delivered to the Lender on the Drawdown Date, and in any other
case, no later than 1:00 p.m. (Toronto, Ontario time) on the Drawdown Date.
Section 5.4 Form and Amount of Payments.
All amounts due hereunder, whether for principal, interest, or
otherwise, shall be paid in full by the Borrower in Canadian Dollars, and all
amounts due hereunder in respect of costs and expenses shall be paid in full by
the Borrower in the currency in which such costs or expenses were originally
incurred, in any case without set-off, withholding or deduction of any kind or
nature whatsoever unless required by law, and then subject to Section 11.8.
Section 5.5 Charging Borrower's Account.
The Borrower hereby authorizes the Lender, if and to the
extent that any payment owed to the Lender by the Borrower in respect of such
Obligations is not made when due hereunder, to charge from time to time against
any or all of the Borrower's accounts with the Lender, including without
limitation the Borrower's Account, the full amount of the payment so due.
ARTICLE VI
INCREASED COSTS
Section 6.1 Additional Payments.
If subsequent to the date hereof (a) any change in applicable
law, regulation, rule, treaty, decree or regulatory requirements or any change
in the interpretation or application thereof by any Governmental Authority; or
(b) compliance by the Lender with any change in applicable guidelines,
directions, requests or requirements (whether or not having the force of law) of
any Governmental Authority shall have the effect of:
(i) increasing the cost to the Lender of continuing to provide or
maintain the Credit Facility (including, without limitation,
the costs of maintaining any reserve or special deposit or
similar requirements with respect to this Agreement, or with
respect to its obligations hereunder or thereunder);
(ii) imposing on the Lender or expecting there to be maintained by
the Lender any additional capital adequacy or additional
capital requirement (including, without limiting the
28
generality of the foregoing, under any Capital Adequacy
Guideline or any other requirement which affects the Lender's
allocation of capital resources to its obligations) in respect
of the Lender's obligations hereunder;
(iii) reducing any amount paid or payable to the Lender under this
Agreement in any amount it deems material;
(iv) causing the Lender to make any payment or to forego any
return, on a basis calculated by reference to any amount
received or receivable by the Lender under this Agreement; or
(v) directly or indirectly reducing the effective return to the
Lender under this Agreement or on the Lender's overall capital
as a result of entering into this Agreement or as a result of
any of the transactions or obligations contemplated by this
Agreement (other than a reduction resulting from a generally
applicable higher rate of tax imposed on the net income of the
Lender) received or receivable by the Lender under this
Agreement,
the Borrower shall, subject to the terms and conditions hereof, pay such amount
(the "Compensating Amount") as the Lender may specify to be necessary to
compensate the Lender for and will indemnify the Lender against any such
additional cost, reduction, payment or foregone return. The payment by the
Borrower of such Compensating Amount is not, and shall not be deemed to be or
construed as, a repayment on account of any Outstanding Principal Obligations.
The Lender shall, forthwith after the Lender becoming aware of
the occurrence of an event having the effect set out in (i), (ii), (iii), (iv),
or (v) above entitling the Lender to the payment of a Compensating Amount and
the Lender determining to claim such Compensating Amount (which determination
the Lender shall make without undue delay), give notice to the Borrower of the
Compensating Amount claimed with details of the events giving rise thereto and
shall at that time provide to the Borrower a certificate setting out in
reasonable detail a calculation of the Compensating Amount claimed (and where
appropriate the Lender's reasonable allocation to its Advances hereunder of
Compensating Amounts with respect to the aggregate of such similar credits
granted by the Lender affected by such event). The certificate of the Lender
with respect to the Compensating Amount shall be final and conclusive in the
absence of manifest error. The Borrower shall within fifteen days of receipt of
such notice from the Lender pay to the Lender the Compensating Amount. The
obligation to pay such a Compensating Amount for subsequent periods will
continue, subject as herein provided, until the earlier of the payment in full
of the Obligations owed to the Lender and the lapse or cessation of the event
giving rise to the Compensating Amount. The Lender shall notify the Borrower in
writing as soon as reasonably possible of any such lapse or cessation.
Section 6.2 Option to Prepay.
If any notification of a Compensating Amount is given under
Section 6.1 in respect of any Advance, then the Borrower may, by written notice
to the Lender given within fifteen Business Days next following the date of the
29
notification, elect to prepay such Advance (in the case of Outstanding Principal
Obligations in respect of any BA Advance, discounted for the period to the
maturity of the Bankers' Acceptances outstanding in respect of such BA Advance
at the Canada Treasury ▇▇▇▇ Rate for such discount calculation period in effect
on the date of such prepayment) or to convert all such Advances to any other
Type of Advance, but should it do so the Borrower shall pay to the Lender all
interest accrued to the date of such prepayment on the Advances so prepaid and
on demand all such amounts as are required to compensate the Lender for (a) any
Compensating Amount payable pursuant to Section 6.1, and (b) any additional
amounts payable pursuant to Section 11.7.
ARTICLE VII
CONDITIONS PRECEDENT TO LENDING
Section 7.1 Conditions Precedent to Initial Advance.
The obligation of the Lender to make its initial Advance under
the Credit Facility is subject to the Lender having received the following, each
dated as of a date satisfactory to the Lender and in form and substance
reasonably satisfactory to the Lender, provided that such condition precedent,
being for the sole benefit of the Lender, may be unilaterally waived by it in
whole or in part at any time on or before the date of the initial Advance:
(a) certified copies of the articles and extracts of the by-laws
of the Borrower, FLSCI and each Guarantor relating to the
authority to borrow or guarantee and the execution of
documents, together with a related certificate of
non-restriction;
(b) certified copies of the resolutions of the board of directors
of the Borrower, FLSCI and each Guarantor approving and
authorizing the execution, delivery and performance of each
Loan Document to which it is a party;
(c) a certificate of status or like certificate with respect to
the Borrower, FLSCI and each Guarantor issued by the
appropriate Governmental Authority of the jurisdiction of its
incorporation;
(d) a certificate of a senior officer of the Borrower, FLSCI and
each Guarantor, certifying as to the names and true signatures
of its officers authorized to sign each Loan Document to which
it is a party;
(e) a certificate of a senior officer of the Borrower to the
effect that all representations and warranties of the Borrower
set forth in Article VIII are true in all material respects as
of the initial Drawdown Date;
(f) a certificate of a senior officer of FLSCI and each Guarantor
to the effect that all its representations and warranties set
forth in each Loan Document to which it is a party are true in
all material respects as of the initial Drawdown Date;
(g) the following Security Documents as security for the payment
and performance of the Obligations:
30
(i) a general security agreement in favour of the Lender
by the Borrower as security for the Obligations
granting security interests in all of the Borrower's
Assets;
(ii) a guarantee (each a "Required Guarantee") in favour
of the Lender by each of FLI and RAI of the
Obligations;
(iii) an assignment in favour of the Lender by the Borrower
of all of the Borrower's rights under all Assigned
Leases and Assigned Leased Property outstanding as of
the Closing Date, together with such information and
documentation concerning each such Assigned Lease and
all Assigned Leased Property and all other Collateral
associated therewith as may be reasonably requested
by the Lender;
(iv) intercreditor agreement between the Lender, FLSCI and
the Borrower providing for subordination and security
ranking in respect of any Indebtedness or other
Liabilities of the Borrower to FLSCI and Encumbrances
granted by the Borrower to FLSCI;
(v) unless incorporated into the Required Guarantees,
subordination agreements in favour of the Lender by
each of FLI and RAI in respect of any Indebtedness or
other Liabilities of the Borrower to either of them;
(vi) a certified copy of or certificate of insurance
particulars with respect to, and an assignment of,
each of the insurance policies referred to in Section
9.1(c);
(vii) an irrevocable direction (the "IBM Direction") in
writing from the Borrower and FLSCI to IBM Canada,
acknowledged in writing by IBM Canada, providing (1)
that from and after the Closing Date, all payments
from IBM Canada to the Borrower or to FLSCI pursuant
to the IBM Leasing Program Agreements shall be paid
by IBM Canada into the Borrower's Account, and (2)
confirmation by IBM Canada that each of the IBM
Leasing Program Agreements is in full force and
effect, unamended, and that there is no event of
default thereunder;
(h) true copies of all Material Contracts, Assigned Leases and
Books and Records requested by the Lender;
(i) a certificate of a senior officer of each Guarantor (1)
attaching the most currently available audited, and any later
interim unaudited, financial statements of the Guarantor, and
(2) in the case of FLI, attaching the latest certificate of an
officer of FLI delivered pursuant to section 6.11 of the FLI
Credit Agreement;
(j) a Compliance Certificate certifying that no Default or Event
of Default shall have occurred and be continuing, with work
31
sheets attached thereto setting forth in reasonable detail the
computations necessary to determine whether a Default or an
Event of Default specified in Section 10.1(u), (v), (w), (x)
or (y) shall have occurred and be continuing;
(k) an opinion of counsel to the Borrower with respect to the
Borrower, the Loan Documents to which the Borrower is a party
and the transactions contemplated thereby;
(l) an opinion of counsel to FLSCI and each Guarantor with respect
to such Person, the Loan Documents to which such Person is a
party and the transactions contemplated thereby;
(m) such other certificates and documentation relating to the
Borrower, FLSCI and each Guarantor or their respective Assets
as the Lender may reasonably request;
(n) results with all aspects of the Lender's review of the
Borrower and its Affiliates, businesses, Assets and capital
structure, the IBM Leasing Program Agreements and the Loan
Documents, including, without limitation, the results of
searches with respect to outstanding Encumbrances;
(o) true copies of any consent, approval, order, authorization,
licence, exemption or designation of or by any Governmental
Authority or other Person required in connection with the
execution, delivery or performance of this Agreement or any
other Loan Document or the incurrence, payment or performance
of the Obligations; and
(p) the favourable report of counsel to the Lender with respect to
the transactions contemplated by the Loan Documents.
Section 7.2 Conditions Precedent to Each Advance.
The obligation of the Lender to make any Advance (including
the initial Advance) under the Credit Facility is subject to the fulfilment of
each of the following conditions precedent to the reasonable satisfaction of the
Lender (provided that each such condition precedent, being for the sole benefit
of the Lender, may be unilaterally waived by it in whole or in part at any time
either generally or with respect to any particular Advance):
(a) the Lender shall have received from the Borrower a duly
completed Advance Request and Borrowing Base Certificate in
accordance with the provisions of this Agreement in that
regard;
(b) the representations and warranties set forth herein and in any
other Loan Document shall be true and correct in all material
respects, both on the date of such Advance Request and on the
requested date of Advance;
32
(c) the Borrower and each Guarantor shall have observed and
performed in all material respects all covenants set forth
herein and in any other Loan Document;
(d) no Default or Event of Default shall have occurred and be
continuing or will result from giving effect to such Advance
Request;
(e) the making of the requested Advance shall not be prohibited by
any Legal Requirement;
(f) subject to any Permitted Encumbrances and the Encumbrances
granted under section 3.1 of the FLI Credit Agreement, the
obligations and liabilities of a Guarantor to the Lender under
or in respect of any Required Guarantee shall rank at least
pari passu with the most senior Indebtedness of the Guarantor,
secured or unsecured; and
(g) where any Lessee or any Leased Property under a Lease
identified in the Borrowing Base Certificate delivered with
such Advance Request is located, resident or has an address in
any jurisdiction outside the Province of Ontario, the
Encumbrances provided for in the Security Documents shall be
registered, or notice thereof shall be filed or otherwise
recorded in all such jurisdictions in which, at any time, it
is necessary or desirable in the opinion of the Lender to
obtain a perfected security interest in the Collateral
associated with each such Lease or to protect the interests of
the Lender thereunder.
The submission by the Borrower of an Advance Request shall be
deemed to constitute a representation and warranty by the Borrower that the
conditions precedent to the making of the Advance requested thereby set forth in
this Article VII have been satisfied in full.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
Section 8.1 Representations and Warranties by the Borrower.
The Borrower represents and warrants to the Lender as follows,
and acknowledges that the Lender is relying thereon without independent inquiry
in entering into this Agreement and providing Advances from time to time:
(a) Organization and Qualification. The Borrower and each
Subsidiary of the Borrower is a corporation duly incorporated or amalgamated (as
the case may be), and organized, and is validly existing and up-to-date in the
filing of all corporate, financial and other returns under the laws of its
jurisdiction of incorporation. The Borrower and each Subsidiary of the Borrower
is duly registered, licensed or qualified as an extra-provincial or foreign
corporation, and is up-to-date in the filing of all corporate, financial and
other returns under the laws of each jurisdiction in which it owns Material
Assets or carries on a material portion of its business or where the failure to
be so registered, licenced or qualified could result in a Material Adverse
Effect. The Borrower has delivered to the Lender a complete and correct copy of
the charter documents and by-laws of the Borrower and each Subsidiary of the
33
Borrower, in each case as amended to the date of such delivery, and there have
been no amendments to any such charter documents or by-laws other than as have
been disclosed to the Lender;
(b) Corporate Power. The Borrower has full corporate right,
power and authority to enter into and perform its obligations under each of the
Loan Documents and the Borrower and each Subsidiary of the Borrower has full
corporate power and authority to own and operate its Assets and to carry on its
business as now conducted and as presently proposed to be conducted;
(c) Conflict with Other Instruments. The execution and
delivery by the Borrower of the Loan Documents, the performance by the Borrower
of its obligations thereunder and hereunder (as the case may be) and compliance
with the terms, conditions and provisions thereof and hereof do not and will not
after completion of the Closing:
(i) conflict with or result in a breach of any of the terms,
conditions or provisions of (A) the charter documents or
by-laws of the Borrower or any of its Subsidiaries, (B) any
Legal Requirement applicable to the Borrower or any of its
Subsidiaries or any Material Assets, (C) the IBM Leasing
Program Agreements, or (D) except as disclosed to the Lender
in writing, any Material Contract; or
(ii) result in, require or permit (A) the imposition of any
Encumbrance upon or with respect to any Material Assets now
owned or hereafter acquired, (B) the acceleration of the
maturity of any Indebtedness of, binding on or affecting the
Borrower or any of its Subsidiaries or any Material Assets, or
(C) any third party to terminate or acquire rights under the
IBM Leasing Program Agreements or any other Material Contract;
(d) Authorization, Governmental Approvals, etc. The execution
and delivery of each of the Loan Documents by the Borrower and the performance
by the Borrower of its obligations hereunder and thereunder (as the case may be)
have been duly authorized by all necessary corporate action; no consent,
approval, order, authorization, licence, exemption or designation of or by any
Governmental Authority or other Person is required in connection with the
ownership and operation of its Assets and the carrying on of its business as now
conducted and as presently proposed to be conducted or the execution, delivery
and performance by the Borrower of this Agreement or any of the other Loan
Documents except such as have been obtained and true copies of which have been
delivered to the Lender on or prior to the Closing Date; and no registration,
qualification, designation, declaration or filing with any Governmental
Authority is or was necessary to enable or empower the Borrower to own and
operate its Assets and to carry on its business as now conducted and as
presently proposed to be conducted or to enter into and to perform its
obligations under the Loan Documents except such as have been made or obtained
and are in full force and effect, unamended;
(e) Due Execution. The Loan Documents have each been duly
executed and delivered by the Borrower and each constitutes a legal, valid and
binding obligation of the Borrower enforceable in accordance with its terms,
34
subject to bankruptcy, insolvency, arrangement and other laws affecting the
enforcement of creditors' rights generally (other than those pertaining to
settlements, fraudulent conveyances, assignments and preferences) and the
availability, in the discretion of a court of competent jurisdiction, of
equitable remedies;
(f) Ownership of Assets and Places of Business. The Borrower
is the absolute beneficial owner of, with good and marketable title to, all
Collateral and all of its Material Assets free and clear of all Encumbrances
other than the Encumbrances set forth in Schedule 8.1(f)A attached hereto and
any other Permitted Encumbrances and leasehold interests of the Lessees
thereunder. The only places of business of Borrower, and the places where it
keeps and intends to keep copies of the Assigned Leases and its Books and
Records concerning the Collateral, are at the addresses listed in Schedule
8.1(f)(B) attached hereto and the name of each owner of record of each such
place of business is also set forth on Schedule 8.1(f)(B);
(g) Subsidiaries and Affiliates. On the Closing Date, the only
Subsidiaries and Affiliates of the Borrower are as set out in Schedule 8.1(g).
None of the Borrower or any of its Subsidiaries has agreed or offered to acquire
any shares in the capital of any other corporation or any ownership interest in
any other Person which after acquisition thereof would amount to a Material
Asset or to acquire or lease any other Material Asset or business operations. No
Person has any agreement or option, or any right or privilege (whether by law,
pre-emptive or contractual) capable of becoming an agreement or option, for the
purchase from the Borrower, or for the purchase or issue, of any securities of
any Subsidiary of the Borrower;
(h) Indebtedness. None of the Borrower or any of its
Subsidiaries has any outstanding Indebtedness other than:
(i) Indebtedness reflected in the Closing Financial Statements,
including, without limitation, Subordinated Indebtedness and
unsecured intercompany Indebtedness of the Borrower to its
Affiliates;
(ii) Non-Recourse Debt; and
(iii) Indebtedness owed or otherwise incurred to the Lender under
the Loan Documents;
(i) No Default Under Material Contracts. None of the Borrower
or any of its Subsidiaries is in default or breach in any material respect of
any Material Contract to which it is a party or by which it or any of its
Material Assets may be bound and there exists no state of facts which after
notice or the passage of time, or both, would constitute such a default or
breach, and all such Material Contracts are in good standing in all material
respects;
(j) Tax Matters. All Taxes that are or may become payable by
the Borrower or any of its Subsidiaries in respect of any prior period have been
fully paid or fully disclosed and fully provided for in the books and financial
statements of the Borrower and each such Subsidiary of the Borrower. There are
no actions, audits, assessments, reassessments, suits, proceedings,
investigations or claims pending or threatened against the Borrower or any of
35
its Subsidiaries in respect of any Taxes or any matters under discussion with
any Governmental Authority relating to any Taxes;
(k) Litigation and Other Proceedings. There is no court,
administrative, regulatory or other proceeding (whether civil, quasi-criminal or
criminal), arbitration or other dispute settlement procedure, or any
investigation or inquiry, by or before any Governmental Authority against or
involving the Borrower or any of its Subsidiaries (whether in progress or
threatened);
(l) Financial Statements.
(i) the Closing Financial Statements of the Borrower and its
Subsidiaries have been prepared in accordance with Generally
Accepted Accounting Principles and present fairly in all
material respects the financial position of each of the
Borrower and its Subsidiaries as at o and the results of their
operations for the period then ended; and
(ii) all other financial statements delivered to the Lender
relating to each of the Borrower and its Subsidiaries have
been prepared in accordance with Generally Accepted Accounting
Principles and present fairly in all material respects the
financial position of each of the Borrower and its
Subsidiaries, as the case may be, and the results of their
operations for the period covered thereby;
(m) Pension Plans. No pension plans are provided by the
Borrower or its Subsidiaries as of the Closing Date;
(n) Compliance with Laws. The Borrower and each of its
Subsidiaries has complied and is complying in all material respects with all
Legal Requirements applicable to its business, property, Assets and operations
in each jurisdiction in which such corporations own any Material Assets or carry
on any material portion of their respective businesses;
(o) Year 2000 Compliance. The Borrower has been informed by
its software and hardware suppliers that all information, communication and
systems technology and all systems and equipment dependent on embedded
microchips or operating or application software, of or used by the Borrower and
its Subsidiaries, including related supporting data and files, will, except
where failure to function correctly could not reasonably be expected to have a
Material Adverse Effect on the Borrower, function correctly when dealing with
dates and times and date or time related data to, without interruption,
accurately process date and time data from, into, and between the twentieth and
twenty-first centuries and the years 1999 and 2000 and perform leap year
calculations and do not, as a result of the processing of such date or time, (i)
create any logical or mathematical inconsistency, (ii) malfunction, or (iii)
cease to function. Accurate processing as referred to above, includes accurately
outputing, extracting, displaying, calculating, comparing, sorting, sequencing
and printing such data;
(p) Disclosure. The Borrower has made available to the Lender
prior to the Closing Date all of the material agreements, arrangements and
36
undertakings, both written and oral, relating to the IBM Leasing Program
Agreements and all material information known to it to such date relating to the
IBM Leasing Program Agreements. To the best of the knowledge of the Borrower,
the Guarantors or their respective Affiliates, as the case may be, all such
information, and all other information supplied to the Lender by the Borrower or
the Guarantors or their respective Affiliates (i) with respect to any and all
factual matters, is true and correct in all material respects (except as
otherwise disclosed to the Lender in writing on or before the Closing Date),
(ii) with respect to any projections or forecasts therein and the assumptions on
the basis of which such information was prepared, is believed to be reasonable
in the circumstances (except as otherwise disclosed to the Lender in writing on
or before the Closing Date), and (iii) with respect to any other matters being
the subject of opinion, is believed on reasonable grounds to be true and correct
in all material respects (except as otherwise disclosed to the Lender in writing
on or before the Closing Date). There is no fact known to the Borrower as of the
Closing Date which could reasonably be expected to have a Material Adverse
Effect with respect to the Borrower or any Guarantor which has not been fully
and adequately disclosed to the Lender prior to the Closing Date;
(q) Names. The Borrower has not conducted business under or
used any other name (whether corporate or assumed) except for the names shown on
Schedule 8.1(q), attached hereto. All trademarks, patents or copyrights which
the Borrower or any Subsidiary of the Borrower uses, plans to use or has a right
to use are listed on Schedule 8.1(q) attached hereto and any and all business
done and all invoices issued in such trade names are Borrower's or FLSCI's
sales, leases, business and invoices. The Borrower is the sole owner of such
Assets except to the extent any other Person has claims or rights in such
Assets, as such claims and rights are described on such Schedule 8.1(q). To the
best of the Borrower's knowledge, the Borrower is not in violation of any rights
of any other Person with respect to such Assets;
(r) Assigned Leases and Assigned Leased Property. Each Lease
reported to the Lender as an Eligible Lease and the Leased Property associated
therewith shall, at all times when such Leases are included in the Borrowing
Base calculation, be in compliance with all of the following representations:
(i) each such Lease is genuine, based on contracts that are
enforceable in accordance with their terms against the Lessee
and the Leased Property named and referenced therein,
constitutes the entire agreement for the leasing of the Leased
Property thereby covered, has not been altered or amended, and
Borrower's Books and Records relating thereto are accurate,
complete and genuine;
(ii) each item of such Leased Property has been delivered to and,
in all instances, accepted by the Lessee and is in good
condition, ordinary wear and tear excepted, has not been
returned, rejected, lost, stolen, destroyed or damaged and has
not been removed from service;
(iii) each such Lease has been duly executed by the Borrower and
each Lessee, is a valid, legal and binding obligation of
Borrower and such Lessee, and is enforceable against Borrower
37
and such Lessee in accordance with its terms. Borrower is the
sole owner of each of such Leases and has the authority to
assign all of its right, title and interest therein upon the
terms set forth in the Security Documents and the IBM Leasing
Program Agreements but, at any time when such Lease is
included in any Borrowing Base or Available Commitment
calculation, no such Lease or any Lease Receivable under such
Lease, or any Leased Property or other Collateral associated
therewith or any interest therein, shall have been sold or
otherwise disposed to FLSCI, IBM Canada or any other party
pursuant to any IBM Leasing Program Agreement or otherwise;
(iv) each such Lease and all Leased Property which is the subject
matter thereof at the time of its assignment to the Lender
pursuant to a Security Document and at all times thereafter,
will be free and clear of any and all assignments, options,
rights, or other Encumbrances whatsoever other than security
interests for the benefit of the Lender and the rights of the
Lessee(s) thereunder;
(v) all costs, fees, and expenses incurred in making and closing
each such Lease have been paid and each such Lease is and will
be current at the time of the assignment thereof to the Lender
pursuant to a Security Document. No default exists or event
exists which with the giving of notice or the passage of time
or both, will result in the occurrence of a default of any
obligation, as expressed in any such Lease;
(vi) the Lender has a first perfected security interest in the
Collateral associated with each such Lease (including without
limitation each Lease and the Leased Property which is the
subject matter thereof) subject to no other Encumbrance. In
the case of any such Lease in respect of Leased Equipment with
an acquisition cost in excess of Cdn. $ 25,000, Borrower has
taken and in the future, shall take all steps necessary to
maintain Lender's first perfected security interest in the
Collateral, including, if required, perfecting Borrower's
security interest by filing financing statements, amendments
thereto, or assignments and/or continuations thereof and
recording of the documentation necessary to perfect Borrower's
security interest;
(vii) each such Lease represents the undisputed obligation of the
Lessee named therein and no payment required thereunder is
and, at any time during the term of such Lease, has been, more
than thirty (30) days contractually past due;
(viii) each item of Leased Property leased pursuant to each such
Lease has been insured in the ordinary course of Borrower's or
the Lessee's business;
(ix) the Borrower has not received notice of a bankruptcy,
receivership, reorganization or insolvency of any Lessee under
any such Lease or any material adverse change in the financial
condition of any such Lessee;
(x) no Lessee under any such Lease is a Subsidiary or Affiliate of
the Borrower, or is an officer or employee of the Borrower or
of a Subsidiary or Affiliate of the Borrower;
38
(xi) each such Lease is not subject to any defense, set off,
counterclaim, deduction, or allowance or adjustment and
contains a provision whereby the Lessee agrees not to assert
any claim or reduction, counterclaim, setoff, recoupment or
any other claim, allowance or adjustment against any assignee
of Borrower;
(xii) the Lessee under any such Lease is not otherwise in default
under such Lease;
(xiii) unless otherwise agreed to in writing by the Lender, each such
Lease provides for the lease of Leased Property with an
aggregate invoice price of less than Cdn. $50,000;
(xiv) each such Lease arose in the ordinary course of the Borrower's
business within the 120 days preceding the date it is reported
to the Lender as an Eligible Lease and will not have been
assigned to the Lender for a period of more than 120 days;
(xv) each such Lease does not have a term in excess of forty-eight
(48) months;
(xvi) each such Lease is a Lease with a Lease Receivable, which
together with all other Lease Receivables owed by the same
Lessee or a Subsidiary or Affiliate of such Lessee, does not
exceed Cdn. $100,000 in the aggregate; and
(xii) Lease Receivables under each such Lease are eligible for
assignment to IBM Canada pursuant to the IBM Leasing Program
Agreements.
Section 8.2 Survival of Representations and Warranties.
The representations and warranties herein set forth or
contained in any certificates or documents delivered to the Lender pursuant
hereto shall survive the execution and delivery hereof and any Advance hereunder
and any investigation at any time made by or on behalf of the Lender. The
representations and warranties shall be deemed to be continuing and repeated by
the Borrower upon each Drawdown Date, and all references to the Closing Date
contained in such representations and warranties shall be deemed to refer to
such Drawdown Date.
ARTICLE IX
COVENANTS OF THE BORROWER
Section 9.1 Affirmative Covenants.
From and after the Closing Date and so long as any Obligations
remain outstanding and unpaid or the Commitment shall continue to exist, the
Borrower shall:
(a) Payment of Obligations to Lender. Duly and punctually pay
to the Lender all amounts payable by the Borrower hereunder as and when the same
become due;
(b) Payment of Taxes, etc. Pay and discharge, and cause each
of its Subsidiaries to pay, before the same shall become delinquent, all Taxes,
39
except any such Taxes which are being contested in good faith and by proper
proceedings and for which adequate provision for payment has been made to the
satisfaction of the Lender, acting reasonably;
(c) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable insurance
companies in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which the Borrower or such Subsidiary, as the case may be,
operates, such policies to show the Lender as loss payee thereof under a
mortgage clause in a form approved by the Insurance Bureau of Canada, and
promptly furnish or cause to be furnished to the Lender evidence of the
maintenance of all such insurance satisfactory to the Lender. In the event the
Borrower fails to procure or cause to be procured any such insurance or to
timely pay or cause to be paid the premiums on any such insurance, the Lender
may do so for the Borrower, but the Borrower shall continue to be liable for the
same;
(d) Preservation of Corporate Existence, etc. Preserve and
maintain, and cause each of its Subsidiaries to preserve and maintain, its and
their respective corporate existence and rights (charter and statutory) and
maintain, and cause each of its Subsidiaries to maintain, up-to-date
registrations and licences and filings of all corporate, financial and other
returns under the laws of all jurisdictions where the Borrower or such
Subsidiary owns any Material Assets or carries on a material portion of its
business, where the failure to do so could have a Material Adverse Effect; and
maintain and cause its Subsidiaries to maintain full corporate right, power and
authority to perform their respective obligations under each of the Loan
Documents to which each is a party and to own and operate their respective
Assets and to carry on their respective businesses where the failure to do so
could have a Material Adverse Effect;
(e) Enforceability. Ensure that at all times and from time to
time the execution and delivery of each of the Loan Documents by it and the
performance by it of its obligations thereunder will be, upon the execution and
delivery thereof, duly authorized by all necessary corporate action; that all
consents, approvals, orders, authorizations, licenses, exemptions or
designations of or by any Governmental Authority or other Person required in
connection with the execution, delivery and performance by it of any such
documents have been obtained; and that all registrations, qualifications,
designations, declarations or filings with any Governmental Authority necessary
to enable or empower it to enter into and to perform its obligations under any
such documents have been obtained and continue in full force and effect as
required for such purpose; and that any and all Loan Documents to which it is a
party have been duly executed and delivered by it and that each will constitute
its legal, valid and binding obligation enforceable in accordance with its
terms, subject only to bankruptcy, insolvency, arrangement and other laws
affecting the enforcement of creditors' rights generally (other than those
pertaining to settlements, fraudulent conveyances, assignments and preferences)
and the availability, in the discretion of a court of competent jurisdiction, of
equitable remedies;
(f) Compliance with Laws, etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects with all applicable Legal
Requirements, and duly observe all valid requirements of any Governmental
Authority;
40
(g) Keeping of Books. Keep, and cause each of its Subsidiaries
to keep, financial books and records systems in accordance with Generally
Accepted Accounting Principles and all applicable Legal Requirements, and in
such books and records make full and correct entries of all financial
transactions, Assets, liabilities, shareholders equity, participation accounts
and business of the Borrower and each of its Subsidiaries in accordance with
Generally Accepted Accounting Principles;
(h) Maintenance of Assets, etc. Maintain and preserve, and
cause each of its Subsidiaries to maintain and preserve, all of its or their
Material Assets in all material respects in good repair, working order and
condition (reasonable wear and tear excepted) and, from time to time, make all
needful and proper repairs, renewals, replacements, additions and improvements
thereto, so that the business carried on may be properly and advantageously
conducted at all times in accordance with prudent business management; and,
without limiting the generality of the foregoing, maintain, preserve and
protect, and cause each of its Subsidiaries to maintain, preserve and protect
its or their intangibles, including all trademarks, trade names, copyrights,
licences and other intellectual property, that constitute Material Assets,
without conflict with the rights of others;
(i) Reporting Requirements. Furnish to the Lender:
(i) annually, as soon as available and in any event within 120
days after the end of each fiscal year of the Borrower,
(A) Audited Financial Statements. The audited annual
financial statements of the Borrower and its
Subsidiaries for such fiscal year; and
(B) Compliance Certificate. A Compliance Certificate dated
the date of delivery thereof, with work sheets
attached thereto setting forth in reasonable detail
the computations necessary to determine whether a
Default or an Event of Default specified in Section
10.1(u), (v), (w), (x) or (y) shall have occurred and
be continuing;
(ii) quarterly, as soon as available and in any event within 60
days after the end of each fiscal quarter,
(A) Quarterly Financial Statements. The quarterly
financial statements of the Borrower and its
Subsidiaries for such fiscal quarter; and
(B) Compliance Certificate. A Compliance Certificate dated
the date of delivery thereof, with work sheets
attached thereto setting forth in reasonable detail
the computations necessary to determine whether a
Default or an Event of Default specified in Section
10.1(u), (v), (w), (x) or (y) shall have occurred and
be continuing;
(iii) monthly, as soon as available and in any event within 30 days
after the end of each month,
41
(A) Monthly Financial Statements. The monthly financial
statements of the Borrower and its Subsidiaries for
such month; and
(B) Compliance Certificate. A Compliance Certificate dated
the date of delivery thereof, with work sheets
attached thereto setting forth in reasonable detail
the computations necessary to determine whether a
Default or an Event of Default specified in Section
10.1(u), (v), (w), (x) or (y) shall have occurred and
be continuing;
(iv) as soon as available, and in any event, within 10 days after
release of such statements to shareholders or investors or the
public, the audited annual financial statements and quarterly
financial statements of each of RAI and FLI for each fiscal
year and each fiscal quarter of each of RAI and FLI;
(v) promptly after becoming aware thereof, notice of any existing
or threatened action, suit or proceeding by or before any
Governmental Authority which, if adversely decided, could have
a Material Adverse Effect with respect to the Borrower or any
Guarantor;
(vi) promptly on reasonable demand, a Compliance Certificate dated
the date of delivery thereof, with work sheets attached
thereto setting forth in reasonable detail the computations
necessary to determine whether a Default or an Event of
Default specified in Section 10.1(u), (v), (w), (x) or (y)
shall have occurred and be continuing;
(vii) promptly upon becoming aware thereof, notice of any fact or
change which has had, is having or is expected to have a
Material Adverse Effect with respect to the Borrower or any
Guarantor; and
(viii) such other information respecting the Assets, business and
affairs, financial or otherwise, of the Borrower or any of its
Subsidiaries or Affiliates, as the Lender may from time to
time reasonably request, including, without limitation,
details of Collateral distribution, delinquencies, residual
recoveries and loan loss experience;
(j) Cure Defects. Promptly cure or cause to be cured, or cause
its Subsidiaries to cure or cause to be cured, any defects in the execution,
delivery, validity or enforceability of any of the Loan Documents or any of the
other agreements, instruments or documents contemplated thereby or executed
pursuant hereto or thereto and at its expense, execute and deliver or cause to
be executed and delivered all such agreements, instruments and other documents
and make all necessary filings and recordings as the Lender may consider
reasonably necessary or desirable for the foregoing purposes;
(k) Notice of Default, etc.. Notify the Lender forthwith in
writing of the occurrence of a Default, an Event of Default or any fact or
circumstance which has resulted or can reasonably be expected to result in a
42
Material Adverse Effect with respect to the Borrower or any Guarantor, and in
such notice and in further notices delivered from time to time thereafter to
(and in any event forthwith in response to any request for such a notice by) the
Lender, provide the Lender with the particulars of the steps being taken to
remedy any such Default, Event of Default or fact or circumstance giving rise to
any such Material Adverse Effect;
(l) Places of Business. Give thirty (30) days prior written
notice to the Lender of any changes in the location of any of its respective
places of business, of the places where Books and Records are kept, or the
establishment of any new, or the discontinuance of any existing place of
business;
(m) Sale of Collateral. ▇▇▇▇ its Books and Records to indicate
Lender's security interest in the Collateral and, unless Lender consents
otherwise in writing, Borrower shall retain title at all times to the Assigned
Leased Property; provided however, that so long as no Event of Default or
Default has occurred, Borrower may sell Assigned Leases and Assigned Leased
Property to FLSCI, and FLSCI may sell interests in such Assigned Leases and
Assigned Leased Property and Lease Receivables thereunder to IBM Canada,
pursuant to the IBM Leasing Program Agreements and the IBM Direction and upon
receipt of the proceeds from the sale of such Assigned Leases and/or Assigned
Leased Property and/or Lease Receivables in accordance with the IBM Direction,
the Lender shall execute such documentation as is reasonably necessary to
release its security interest in such Assigned Leases and/or Assigned Leased
Property and/or Lease Receivables;
(n) Inspection. Permit any of the Lender's officers or other
representatives to visit and inspect any of Borrower's locations or where any
Collateral is kept during regular business hours, to examine and audit all of
Borrower's Books and Records, books of account, records, reports and other
papers, to make copies and extracts therefrom and to discuss its affairs,
finances and accounts with its officers, employees and accountants or auditors.
All such examinations shall be at Borrower's expense at the standard rates
charged by the Lender or an outside firm engaged to perform such services, for
such activities (plus the Lender's or such outside firm's reasonable
out-of-pocket expenses); and
(o) Further Assurances. At its cost and expense, upon request
of the Lender, duly execute and deliver, or cause to be duly executed and
delivered, to the Lender all such further agreements, instruments, documents and
other assurances and do and cause to be done all such further acts and things as
may be necessary or desirable in the reasonable opinion of the Lender to carry
out more effectually the provisions and purposes of this Agreement or any of the
other Loan Documents.
Section 9.2 Negative Covenants.
From and after the Closing Date and so long as any Obligations
remain outstanding and unpaid or any Commitment shall continue to exist, the
Borrower shall not, without the prior written consent of the Lender, which
consent shall not be unreasonably withheld:
43
(a) Indebtedness. Create, incur, assume or suffer to exist, or
permit any of the Subsidiaries to create, incur, assume or suffer to exist any
Indebtedness other than:
(i) Indebtedness owed or otherwise incurred to the Lender under
the Loan Documents;
(ii) Subordinated Indebtedness and unsecured intercompany
Indebtedness of the Borrower to its Affiliates (other than a
Securitization Subsidiary);
(iii) Non-Recourse Debt; and (iv) Permitted Debt;
(b) Encumbrances, etc. Create or suffer to exist, or permit
any of its Subsidiaries to create or suffer to exist, any Encumbrance on any of
its or their respective Assets other than a Permitted Encumbrance;
(c) Sale of Material Assets. Effect, or permit any of its
Subsidiaries to effect, any sale, lease, exchange, transfer, assignment or other
disposition (whether in one transaction or a series of related transactions) of
more than 10% of the aggregate Assets of the Borrower and its Subsidiaries other
than (i) in the ordinary course of business, (ii) pursuant to the IBM Leasing
Program Agreements and the IBM Direction, (iii) pursuant to a Securitization
Transaction, or (iv) for the purpose of effecting a repayment or repayments on
account of the then outstanding Obligations;
(d) Issue or Transfer of Shares. Other than expressly provided
for herein, issue any shares in its capital or any options, warrants or other
rights to purchase any shares in its capital or other equity interests, or
securities exchangeable or convertible into shares in its capital or other
equity interests, or permit any of its Subsidiaries to do so;
(e) Change in Nature of Business. Make, or permit any of its
Subsidiaries to make, any material change in the nature of its or their
business;
(f) Mergers, etc. Amalgamate with any other Person or Persons,
or enter into any transaction (whether by way of reconstruction, reorganization,
consolidation, amalgamation, merger, transfer, sale, lease or otherwise) whereby
all or a material portion of its Assets would become the property of any other
Person or, in the case of any such merger, of the continuing corporation
resulting therefrom, or permit any of its Subsidiaries to amalgamate with any
other Person or Persons or to enter into any such transaction;
(g) Investments. Make, or permit any of its Subsidiaries to
make, any Investment which would constitute a Material Asset, otherwise than in
the ordinary course of its business and in compliance with all applicable Legal
Requirements;
44
(h) Change of Control. Effect, or permit any of its
Subsidiaries to effect, whether in one transaction or a series of related
transactions, any Change of Control in respect of the Borrower or any of its
Subsidiaries;
(i) Transactions with Affiliates. Except as otherwise
expressly contemplated or permitted by this Agreement, directly or indirectly:
(i) make any Investment, or permit any of its Subsidiaries to make
any Investment, in any Affiliate;
(ii) transfer, sell, lease, assign or otherwise dispose of, or
permit any of its Subsidiaries to transfer, sell, lease,
assign or otherwise dispose of, any Asset to any Affiliate;
(iii) merge into or consolidate with or purchase or acquire any
Assets from, or permit any of its Subsidiaries to merge into,
or consolidate with or purchase or acquire any Assets from,
any Affiliate; or
(iv) enter into, or permit any of its Subsidiaries to enter into,
any other transaction directly or indirectly with or for the
benefit of any Affiliate (including, without limitation, any
guarantee or assumption of any obligation of any Affiliate),
provided that (A) any Affiliate who is an individual may serve as a director,
officer or employee of the Borrower or any of its Affiliates, or any one or more
of them, and receive reasonable compensation in connection with services
rendered by such individual in such capacity, and (B) the Borrower and any of
its Subsidiaries may enter into any such transaction with any Affiliate if such
transaction is in the ordinary course and subject to the reasonable requirements
of its business and if the terms and conditions thereof are at least as
favourable to the Borrower or such Subsidiary as market terms and conditions,
and if such transaction would otherwise be permitted under this Agreement and
all applicable Legal Requirements;
(j) Fiscal Year. Change its fiscal year, or permit any of its
Subsidiaries to change their respective fiscal years, to other than September 30
or to have a fiscal year that does not end on September 30 of each calendar
year;
(k) Minimum Capitalization. Permit the Consolidated
Capitalization to be less than Cdn. $1,000,000; and
(l) Amendments. Supplement, amend, modify, restate or
terminate, or cause or permit any Subsidiary of the Borrower, to supplement,
amend, modify, restate or terminate, or otherwise make, permit, consent to or
acquiesce in any modification of any term or condition of, the IBM Leasing
Program Agreements or the IBM Direction or any obligations or liabilities
arising thereunder or pursuant thereto, unless at least 10 Business Days prior
written notice thereof is given to the Lender.
45
ARTICLE X
ACCELERATION
Section 10.1 Events of Default.
If any one or more of the following events (each an "Event of
Default") shall occur and be continuing then the Lender may, (i) terminate the
Lender's obligations to make any further Advance under the Credit Facility, and
(ii) (at the same time or at any time after such termination) declare the
Obligations to be immediately due and payable, provided that should any Event of
Default specified in Sections 10.1(g), 10.1(h), 10.1(i) or 10.1(j) occur then
the Obligations shall, to the extent permitted by applicable law, be and become
immediately due and payable without any declaration or other act on the part of
the Lender:
(a) the Borrower makes default in the payment on the due date
thereof of any amount payable by it hereunder on account of the Outstanding
Principal Obligations under the Credit Facility;
(b) the Borrower makes default in the payment when due of any
amount payable by it hereunder on account of interest, fees, costs, expenses or
other amounts payable by it hereunder, and such default shall continue for five
days after the earlier of the Borrower becoming aware of such default and notice
of such default being given to the Borrower by the Lender;
(c) the Borrower fails to perform any covenant, agreement or
undertaking under this Agreement other than those referred to in paragraphs (a)
and (b) of this Section 10.1 or in any other Loan Document, provided that if
such failure is capable of being remedied or cured within a ten Business Day
period, the Borrower, subject to the other provisions of this Section 10.1,
shall have a period of ten Business Days after the earlier of the Borrower
becoming aware of such default and notice of such default being given to the
Borrower by the Lender within which to remedy or cure such failure;
(d) any representation or warranty made by the Borrower in
this Agreement or in any other Loan Document is incorrect in any material
respect when made (or when deemed to be made hereunder or thereunder), provided
that, notwithstanding any lack of correctness of any such representation or
warranty as so stated as at the Closing Date, if the subject matter of such
representation and warranty is capable of being remedied or cured within a ten
Business Day period such that it would be true if so stated at such later time,
the Borrower, subject to the other provisions of this Section 10.1, shall have a
period of ten Business Days after the earlier of receipt of written notice from
the Lender specifying the representation or warranty concerned and the Borrower
otherwise becoming aware that such representation or warranty is incorrect in
any material respect, within which to remedy or cure such lack of correctness;
(e) FLSCI or a Guarantor makes default in the payment when
due, or otherwise fails to perform any covenant, agreement or undertaking under
a Required Guarantee or other Loan Document, whether before or after the
occurrence of any other Default or Event of Default under this Agreement,
46
provided that if such failure is capable of being remedied or cured within a ten
Business Day period, FLSCI or the Guarantor, subject to the other provisions of
this Section 10.1, shall have a period of ten Business Days after the earlier of
FLSCI or the Guarantor becoming aware of such default and notice of such default
being given to FLSCI or the Guarantor by the Lender within which to remedy or
cure such failure;
(f) any representation or warranty made by FLSCI or a
Guarantor to the Lender in a Required Guarantee or other Loan Document is
incorrect in any material respect when made (or when deemed to be made
thereunder), provided that, notwithstanding any lack of correctness of any such
representation or warranty as so stated as at the Closing Date, if the subject
matter of such representation and warranty is capable of being remedied or cured
within a ten Business Day period such that it would be true if so stated at such
later time, FLSCI or the Guarantor, subject to the other provisions of this
Section 10.1, shall have a period of ten Business Days after the earlier of
receipt of written notice from the Lender specifying the representation or
warranty concerned and FLSCI or the Guarantor otherwise becoming aware that such
representation or warranty is incorrect in any material respect, within which to
remedy or cure such lack of correctness;;
(g) the Borrower or any of its Subsidiaries or a Guarantor
ceases or threatens to cease to carry on business or becomes insolvent or
bankrupt or ceases paying its debts generally as they fall due, other than any
such debts which are contested in good faith and by appropriate proceedings and
for which adequate provision has been made to the Lender' sole satisfaction, or
the Borrower or any of its Subsidiaries or a Guarantor commits any act of
bankruptcy or makes an assignment for the benefit of creditors or otherwise
acknowledges its insolvency, or a trustee, receiver, receiver and manager,
liquidator, agent or similar official is appointed for the Borrower or any of
its Subsidiaries or a Guarantor or for any material part of its Assets, or
bankruptcy, reorganization, proposal, arrangement, moratorium, compromise or
similar proceedings shall be instituted by or in respect of the Borrower or any
of its Subsidiaries or a Guarantor under the laws of any jurisdiction;
(h) without limiting the generality of paragraph (g) of this
Section 10.1, any Governmental Authority shall take control of the Borrower or
any of its Subsidiaries or a Guarantor, or shall take control of the Assets of
any such Person or any Material Assets;
(i) any proceeding is instituted by the Borrower or any of its
Subsidiaries or a Guarantor, any order is made or any resolution is passed for
the winding-up of the Borrower or any of its Subsidiaries or a Guarantor;
(j) any petition shall be filed or other action or proceeding
shall be commenced, whether judicial, quasi-judicial or administrative in nature
or by or in respect of the Borrower or any of its Subsidiaries or a Guarantor,
to adjudge the Borrower or any of its Subsidiaries or a Guarantor insolvent or a
bankrupt, or to give notice of, consider or approve any proposal,
reorganization, compromise, moratorium or arrangement with all or any of the
creditors of the Borrower or any of its Subsidiaries or a Guarantor, or to
appoint a trustee, receiver, receiver and manager, liquidator, agent or similar
47
official of the Borrower or any of its Subsidiaries or a Guarantor or any of its
Assets or any Material Assets, or to wind-up, dissolve or otherwise liquidate
the Borrower or any of its Subsidiaries or a Guarantor, provided that, if the
Borrower or any of its Subsidiaries or the Guarantor shall be contesting such
petition, action or proceeding in good faith and by appropriate proceedings
based, in the Lender' sole opinion, on reasonable and substantial grounds, the
Borrower and each of its Subsidiaries or the Guarantor, subject to the other
provisions of this Section 10.1, shall have a period of forty-five days after
the date of the filing or commencement of such petition, action or proceeding
within which to obtain or procure an abandonment, dismissal, withdrawal,
quashing or permanent stay of such petition, action or proceeding;
(k) any execution, sequestration or any other process of any
court, any work order or any distress or analogous process becomes enforceable
against the Borrower or any of its Subsidiaries or a Guarantor or any Material
Assets, if enforcement thereof could have a Material Adverse Effect;
(l) the Borrower or any of its Subsidiaries shall permit any
sum in excess of Cdn. $250,000, or RAI or FLI shall permit any sum in excess of
U.S. $250,000, which has been admitted as due by it or is not disputed to be due
by it to remain unpaid for five Business Days after proceedings have been taken
to enforce the same;
(m) the Borrower or any of its Subsidiaries or a Guarantor
makes default under the terms of any agreement or instrument for or in respect
of any Indebtedness in excess of Cdn. $250,000, or in excess of U.S. $250,000,
in the case of RAI or FLI, and such default remains unremedied for the
applicable grace period, if any, specified in such agreement or instrument and
has not been waived by the Person to whom such Indebtedness is owed or by its
authorized representative or agent;
(n) a Material Adverse Effect with respect to the Borrower or
a Guarantor shall occur;
(o) there is any material adverse qualification to any of the
financial statements of the Borrower or any of its Subsidiaries or a Guarantor
by their respective auditors;
(p) a Change of Control shall occur;
(q) this Agreement or a Required Guarantee or other Loan
Document shall cease to be in full force and effect and to constitute a legal,
valid and binding obligation of any of the parties signatory thereto enforceable
against such parties in accordance with its terms, subject to bankruptcy,
insolvency, arrangement and other laws affecting the enforcement of creditors'
rights generally (other than those pertaining to settlements, fraudulent
conveyances, assignments and preferences) and the availability, in the
discretion of a court of competent jurisdiction, of equitable remedies;
(r) the operation of a Required Guarantee or other Loan
Document shall be stayed or the Borrower or FLSCI or a Guarantor shall be
resisting or disputing its obligations thereunder, whether or not pursuant to
court proceedings;
48
(s) subject to Permitted Encumbrances, the Lender's rights and
entitlement to be paid the Obligations hereunder shall cease to rank in priority
to all other Indebtedness of the Borrower, secured or unsecured;
(t) subject to any Permitted Encumbrances and the Encumbrances
granted under section 3.1 of the FLI Credit Agreement, the obligations and
liabilities of a Guarantor to the Lender under or in respect of any Required
Guarantee shall cease to rank at least pari passu with the most senior
Indebtedness of the Guarantor, secured or unsecured;
(u) FLI shall at any time fail to maintain an Adjusted Debt to
Tangible Net Worth Ratio on a consolidated basis, measured quarterly as of the
last day of each fiscal quarter of each fiscal year of FLI, of not more than 5.5
to 1;
(v) FLI shall at any time incur, assume or otherwise become
responsible or liable in any manner with respect to unsecured intercompany
Indebtedness to Affiliates of FLI in excess of three (3) times the then
outstanding principal amount of the FLI Subordinated Indebtedness;
(w) FLI shall, as of the last day of each fiscal quarter of
each fiscal year of FLI, fail to maintain Tangible Net Worth at not less than
the Minimum Required Amount;
(x) FLI shall, as of the last day of each fiscal quarter of
each fiscal year of FLI, based on financial information for the twelve month
period ending as of the end of such fiscal quarter, fail to maintain a Fixed
Charge Coverage Ratio of not less than 1.25 to 1;
(y) the Borrower shall, as of the last day of each fiscal
quarter of each fiscal year of the Borrower, fail to maintain the Consolidated
Capitalization at not less than Cdn. $1,000,000; or
(z) any IBM Leasing Program Agreement or the IBM Direction
shall be amended or terminated by any party or parties thereto without the prior
written consent of the Lender.
Section 10.2. Remedies Upon Default.
Upon the occurrence of an Event of Default and acceleration of
the maturity of the Obligations owed to the Lender hereunder, the Lender may,
commence such litigation or proceedings as it may deem expedient, all without
any additional notice, presentation, demand, protest, notice of dishonour,
including entering into of possession of any of the property or assets of the
Borrower, or any other action, notice of all of which the Borrower hereby
expressly waives. In addition to the foregoing in the event of the institution
of any proceeding against the Borrower or the Borrower making an assignment for
the general benefit of creditors or otherwise voluntarily initiating any
proceeding in respect of its property or creditors under any law relating to
bankruptcy, insolvency or organization or relief of debtors the effect of which
49
is to cause an automatic stay to come into effect with respect to the Borrower
or an actual or deemed entry of an order for relief with respect to any
proceeding instituted by or against the Borrower under the Bankruptcy and
Insolvency Act (Canada) or the Companies' Creditors Arrangement Act (Canada) (as
amended, supplemented or replaced from time to time), as may be applicable, or
any other applicable bankruptcy or insolvency laws which provide for an
automatic stay, the obligations of the Lender to make any further Advance under
this Agreement shall automatically be terminated and the Obligations shall
automatically become due and payable, without presentment, demand, protest or
any notice of any kind, all of which are hereby expressly waived by the
Borrower. For greater certainty, the Borrower will be considered to be in
default of its obligations hereunder by the mere lapse of time provided herein
for performing such obligations, without any requirement of further notice or
other act of the Lender unless a notice is specifically required under this
Agreement. The rights and remedies of the Lender hereunder are cumulative and
are in addition to and not in substitution for any other rights or remedies
provided by law. Nothing contained herein or in any Loan Documents now or
hereafter held by the Lender with respect to the Obligations of the Borrower to
the Lender, or any part thereof, nor any act or omission of the Lender with
respect to such Loan Documents, shall in any way prejudice or affect the rights,
remedies and powers of the Lender with respect to any other such Loan Documents.
Section 10.3. Right of Set-Off.
Upon the occurrence of an Event of Default and the
acceleration of the maturity of the Obligations owed to the Lender hereunder,
the Lender is hereby authorized by the Borrower at any time and from time to
time and shall to the fullest extent permitted by law, set off, appropriate and
apply any and all deposits (general or special, time or demand, matured or
unmatured, provisional or final) at any time held and other Indebtedness at any
time owing to or for the credit or the account of the Borrower against any and
all of the Obligations of the Borrower now or hereafter existing hereunder. The
Lender shall promptly notify the Borrower after any such set-off and application
made by the Lender, provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of the Lender
under this Section 10.3 are in addition to all other rights and remedies
(including, without limitation, other rights of set-off) which the Lender may
have.
Section 10.4. Judgment Currency.
The obligation of the Borrower to make payments on any
Obligations to the Lender hereunder in any currency (the "first currency") shall
not be discharged or satisfied by any tender or recovery pursuant to any
judgment expressed in or converted into any other currency (the "second
currency") except to the extent to which such tender or recovery shall result in
the effective receipt by the Lender of the full amount of the first currency
payable, and accordingly the primary obligation of the Borrower shall be
enforceable as an alternative or additional cause of action for the purpose of
recovery in the second currency of the amount (if any) by which such effective
receipt shall fall short of the full amount of the first currency payable and
shall not be affected by a judgment being obtained for any other sum due
hereunder.
50
ARTICLE XI
GENERAL
Section 11.1 Evidence of Debt.
The Obligations of the Borrower hereunder, in respect of or in
connection with the Advances under the Credit Facility made from time to time by
the Lender or otherwise, shall, absent manifest error, be conclusively evidenced
by the records of the Lender.
Section 11.2 Additional Expenses.
If during the continuation of an Event of Default the Borrower
should fail to observe or perform any covenant or agreement to be observed or
performed by the Borrower hereunder the Lender may but shall not be obliged to
perform or cause to be performed the same for which purpose the Borrower hereby
appoints the Lender to be the lawful attorney of the Borrower, and all
reasonable expenses incurred or payments made by the Lender in so doing shall be
paid by the Borrower to the Lender forthwith upon demand and any such unpaid
amount shall bear interest, both before and after judgment, at the Past Due
Rate, calculated daily and compounded monthly in arrears and payable on demand,
and the Borrower hereby indemnifies the Lender against any loss incurred by the
Lender in that regard.
Section 11.3 Invalidity of any Provisions.
Any provision of this Agreement or any of the other Loan
Documents which is prohibited by the laws of any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition without
invalidating the remaining terms and provisions hereof or thereof and no such
invalidity shall affect the obligation of the Borrower to pay the Obligations in
full. The rate of interest chargeable or collectable on overdue instalments of
interest shall not exceed the maximum rate permitted by applicable law.
Section 11.4 Amendments, Waivers, etc.
No amendment, modification or waiver of any provision of, and
no waiver of the strict observance, performance or compliance by the Borrower
with any term, covenant, condition or agreement contained in this Agreement and
no indulgence granted by the Lender or consent to any departure by the Borrower
therefrom, shall in any event be effective unless it shall be in writing and
signed by the Lender (and the Borrower in the case of amendments or
modifications or waivers by the Borrower), and then such amendment,
modification, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which it is given. Notwithstanding the
foregoing, no failure to exercise and no delay in exercising any right, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege under this Agreement
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The remedies herein provided are cumulative and not
exclusive of any other rights or remedies available at or provided by law.
51
Section 11.5 Notices, etc.
All notices and other communications provided for hereunder
shall, except as otherwise permitted hereunder, be in writing personally
delivered by messenger or courier or facsimile or telecopy transmission, if
(a) to the Borrower, to it at:
Fidelity Leasing Canada Inc.
c/o Fidelity Leasing, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
for the attention of: ▇▇▇▇ ▇▇▇▇, Chief Financial Officer
(b) to the Lender, to it at:
Bank of Montreal
▇▇▇▇ ▇▇▇▇▇, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
for the attention of: Director, Asset Portfolio Management
or to such other address or facsimile or telecopy number as any party hereto may
from time to time designate to the other parties hereto in such manner. All such
notices and communications shall be effective, and deemed to be received by the
intended recipient, on the date delivered or transmitted, if delivered or
transmitted before 3:00 p.m. (Toronto, Ontario time) on a Business Day, or, in
any other case, on the first Business Day following the date delivered or
transmitted. A copy of any notice or communication sent by facsimile or telecopy
transmission shall also be delivered personally by messenger or courier as
aforesaid but such notice or communication shall be effective, and deemed to be
received by the intended recipient, on the date it is sent by facsimile or
telecopy transmission, if so transmitted before 3:00 p.m. (Toronto, Ontario
time) on a Business Day, or, in any other case, on the first Business Day
following the date it is so transmitted.
Section 11.6 Costs and Expenses.
The Borrower shall pay to the Lender, on demand all reasonable
out of pocket costs and expenses (including, without limitation, all reasonable
legal fees and disbursements) incurred by the Lender in connection with this
Agreement, the other Loan Documents and the Credit Facility including, without
52
limitation, (a) the negotiation, preparation, execution, delivery and
interpretation, both prior and subsequent to the Closing Date, of this Agreement
and the other Loan Documents or any agreement or instrument contemplated hereby
or thereby; (b) the performance by the Lender of its obligations and duties
under this Agreement and the other Loan Documents; (c) advice of counsel with
respect to the interpretation of the Credit Facility, the Loan Documents or any
transaction contemplated thereunder; (d) the enforcement of any of the Loan
Documents or the enforcement or preservation of rights under and the
refinancing, renegotiation or restructuring of the Credit Facility under this
Agreement or the other Loan Documents or the bringing of any action, suit or
proceeding with respect to the enforcement of any of the Loan Documents or any
such right or seeking any remedy which may be available to the Lender at law or
in equity; and (e) any amendments, waivers or consents requested by the Borrower
pursuant to the provisions hereof or any other Loan Document. The Borrower shall
supply all statements, reports, certificates, opinions, appraisals and other
documents or information required to be furnished to the Lender pursuant to this
Agreement without cost to the Lender.
Section 11.7 Indemnification.
(a) The Borrower agrees to indemnify the Lender and its
directors, officers and employees from and against any and all Claims and Losses
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against the Lender or the directors, officers or employees of the
Lender, arising by reason of any default by the Borrower under any Loan
Document, except any such Claims or Losses based upon the Lender's gross
negligence or wilful misconduct, breach of this Agreement or breach of
applicable Legal Requirement.
(b) The Borrower shall pay to the Lender on demand any amounts
required to compensate the Lender for any Loss suffered or incurred by the
Lender as a result of (i) any payment being made (due to acceleration of the
maturity of any Advance pursuant to Article X, a mandatory or optional
prepayment of principal or otherwise) in respect of any Bankers' Acceptance
other than on the maturity date of such Bankers' Acceptance; (ii) the failure of
the Borrower to give any notice in the manner and at the times required by this
Agreement; (iii) the failure of the Borrower to effect an Advance in the manner
and at the time specified in any Advance Request; or (iv) the failure of the
Borrower to make a payment or a mandatory repayment in the manner at the time
specified in this Agreement or any notice given by the Borrower to the Lender in
accordance with this Agreement. A certificate as to the amount of any such Loss,
providing reasonable detail of the calculation of such Loss and submitted in
good faith by the Lender to the Borrower shall be conclusive and binding for all
purposes, absent manifest error.
(c) The Borrower agrees to indemnify and hold the Lender, and
the directors, agents, officers and employees of the Lender (each an
"Indemnified Party") harmless from and against any and all Claims and Losses of
any kind or nature whatsoever which may be imposed on, incurred by, or asserted
against an Indemnified Party by reason of, relating to, arising out of or
resulting from any one or more of the following:
53
(i) the Release or the threat of a Release of any Contaminant in
violation of Environmental Laws from, or the presence of any
Contaminant affecting, the property of the Borrower or any
Subsidiary of the Borrower (the "Property") in violation of
Environmental Laws, whether or not the same originates or
emanates from any such Property or any contiguous real
property;
(ii) (A) any costs of removal or remedial action incurred by any
federal, provincial, state, municipal, local or other
government, (B) any costs incurred by any other Person or
damages from injury to, destruction of, or loss of natural
resources, including costs of assessing such injury,
destruction or loss incurred in relation with the Property, or
(C) the operations and activities of the Borrower or any
Subsidiary of the Borrower; in each case as a result of the
violation of Environmental Laws by the Borrower or any
Subsidiary of the Borrower;
(iii) with respect to or as a result of any Environmental Activity
related to the Borrower or any Subsidiary of the Borrower,
liability for personal injury or property damage arising under
any statutory or common or civil law tort or delict theory,
including, without limitation, damages assessed for the
maintenance of a public or private nuisance or for the
carrying on of an Environmental Activity at, near, or with
respect to the Property; and
(iv) any other environmental matter affecting the Property or the
operations and activities of the Borrower or any Subsidiary of
the Borrower within the jurisdiction of any federal
environmental agency, or any provincial, municipal or local
environmental agency;
other than, in respect to an Indemnified Party, any such Claims which shall
arise or be incurred as a result of the gross negligence or wilful misconduct of
such Indemnified Party. In litigation or the preparation therefor, the
Indemnified Parties shall be entitled to select one counsel and, in addition to
such indemnity, the Borrower shall pay promptly the reasonable fees and expenses
of such counsel; provided however that if an Indemnified Party shall have
concluded reasonably that representation of such Indemnified Party by such
counsel would be inappropriate due to actual or potential differing interests
between the Indemnified Parties in the conduct of the defence of such
litigation, the Borrower shall pay promptly the reasonable fees and expenses of
additional counsel for such Indemnified Party.
(d) The provisions of this Section 11.7 shall survive the
termination of this Agreement and the repayment of all Obligations. The Borrower
acknowledges that neither its obligation to indemnify, nor any actual
indemnification by it, of the Lender or any other Indemnified Party hereunder in
respect of such Person's Losses for the legal fees and expenses of such Person's
counsel shall in any way affect the confidentiality or privilege relating to any
information communicated by such Person to its counsel.
54
Section 11.8 Taxes.
(a) Any and all payments to the Lender by the Borrower
hereunder (or under any of the other Loan Documents) shall be made free and
clear of and without deduction or withholding for any and all present and future
Taxes, imposed by any Governmental Authority including, without limitation, any
Taxes which arise from the execution, delivery or registration of, or otherwise
with respect to, this Agreement or any of the other Loan Documents, unless such
Taxes are required by law or the administration thereof to be deducted or
withheld. If the Borrower shall be required by law or the administration thereof
to deduct or withhold any such Taxes from or in respect of any amount payable
hereunder, (i) the amount payable shall be increased as may be necessary so that
after making all required deductions or withholdings (including deductions or
withholdings applicable to additional amounts paid under this paragraph), the
Lender receives an amount equal to the amount it would have received if no such
deduction or withholding had been made; (ii) the Borrower shall make such
deductions or withholdings; and (iii) the Borrower shall pay forthwith the full
amount deducted or withheld to the relevant taxation or other authority in
accordance with applicable law.
(b) The Borrower agrees to indemnify the Lender for the full
amount of Taxes not deducted or withheld and paid by the Borrower in accordance
with Section 11.8 (a) to the relevant taxation or other authority and any Taxes
imposed by any jurisdiction on amounts payable by the Borrower under this
Section 11.8, paid by the Lender and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, whether or not
any such Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within fifteen days from the date the Lender makes
written demand therefor. A certificate as to the amount of such Taxes, providing
reasonable details of the calculation thereof, and evidence of payment thereof
submitted to the Borrower by the Lender shall be conclusive evidence of the
amount due from the Borrower to the Lender absent manifest error.
(c) The Borrower shall furnish to the Lender the original or a
certified copy of a receipt evidencing any payment of Taxes made by the
Borrower, as soon as such receipt becomes available.
(d) The provisions of this Section 11.8 shall survive the
termination of this Agreement and the repayment of all Obligations.
Section 11.9 Calculations.
Except as otherwise provided herein, the financial statements
and returns to be furnished to the Lender pursuant to this Agreement shall be
made and prepared in accordance with Generally Accepted Accounting Principles
consistently applied throughout the periods involved (except as set forth in the
notes thereto or as otherwise disclosed in writing by the Borrower to the
Lender).
55
Section 11.10 Assignments and Participations.
(a) The Borrower shall not be entitled to assign its rights
and obligations hereunder or any interest herein without the prior consent of
the Lender.
(b) The Lender, may on and after the occurrence of an Event of
Default, without the prior consent of the Borrower but on notice to the
Borrower, and, in any other case, with the prior consent of the Borrower, such
consent not to be unreasonably withheld or delayed, sell, assign or grant a
participation in all or part of the Lender's Commitments and the Obligations
then owed to the Lender to one or more Persons (each of which is hereinafter in
this Section called the "Assignee Lender") in consideration of the agreement of
each such Assignee Lender to advance or hold that percentage of the Lender's
Commitments and Obligations owed to the Lender as corresponds with the
percentage thereof so assigned to such Assignee (hereinafter called the
"Assignee Lender's Commitment" and the "Assignee Lender's Commitment
Percentage", respectively).
(d) If the Lender assigns all or any part of its Commitment
hereunder to an Assignee Lender as provided above, all references in this
Agreement to the Lender shall thereafter be construed as references to the
Lender and such Assignee Lender to the extent of their respective Commitments
and, if such Assignee Lender is not an Affiliate of the Lender the Borrower
shall thereafter look only to such Assignee Lender (and not to the Lender) in
respect of that proportion of the Lender's Commitment as corresponds to such
Assignee Lenders' Commitment therein and accordingly the Lender's obligation, if
any, to provide Advances in accordance with its Commitment hereunder shall be
reduced correspondingly and such Assignee Lender shall assume a Commitment
equivalent to such reduction in the Lender's Commitment, provided that the
Borrower shall not as a result of such assignment be liable hereunder for the
amount of any costs to the Lender and Assignee Lender hereunder in excess of the
costs that would have been incurred by the Lender hereunder if such assignment
had not occurred.
(e) The Lender may on and after the occurrence of an Event of
Default, without the prior consent of the Borrower but on notice to the
Borrower, and, in any other case, with the prior consent of the Borrower, such
consent not to be unreasonably withheld or delayed, disclose to a potential
participant or potential Assignee Lender such information concerning or
pertaining to the Obligations of the Borrower and its Subsidiaries as is known
to the Lender, and may in addition express to any such Person any opinion it may
have with respect to any matter, provided such potential participant or
potential Assignee Lender covenants in favour of the Borrower and the Lender to
only use such information in connection with its evaluation as to whether to
take any such participation or assignment and, should it do so, in connection
therewith, and to strictly maintain the confidential nature of all such
information.
Section 11.11 Governing Law.
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.
56
Section 11.12 Consent to Jurisdiction.
The Borrower hereby irrevocably submits to the non-exclusive
jurisdiction of the Courts of the Province of Ontario in respect of any action,
suit or proceeding arising out of or relating to this Agreement and the other
Loan Documents and the Credit Facility hereby extended and hereby irrevocably
agrees that all Claims in respect of any such action, suit or proceeding may be
heard and determined in any such Ontario Court. The Borrower hereby irrevocably
waives, to the fullest extent it and they may effectively do so, the defense of
an inconvenient forum to the maintenance of such action or proceeding. The
Borrower agrees that a final judgment in any such suit, action or proceeding
shall be conclusive and may be enforced in another jurisdiction by suit on the
judgment or in any other manner provided by law. Nothing in this Section 11.12
shall affect the right of the Lender to bring any suit, action or proceeding
against the Borrower or its assets in the courts of any other jurisdiction.
Section 11.13 Binding Effect.
This Agreement shall be binding upon and enure to the benefit
of the parties hereto and their respective successors and permitted assigns.
Section 11.14 Interest Savings Clause.
Nothing contained in this Agreement or in any promissory notes
made by the Borrower to the Lender or in any of the other Loan Documents shall
be construed to permit the Lender to receive at any time interest, fees or other
charges in excess of the amounts which the Lender is legally entitled to charge
and receive under any law to which such interest, fees or charges are subject.
In no contingency or event whatsoever shall the compensation payable to the
Lender by the Borrower, howsoever characterized or computed, hereunder or under
any other agreement or instrument evidencing or relating to the Obligations of
the Borrower to the Lender hereunder, exceed the highest rate permissible under
any law to which such compensation is subject. There is no intention that the
Lender shall contract for, charge or receive compensation in excess of the
highest lawful rate, and, in the event it should be determined that any excess
has been charged or received, then, ipso facto, such rate shall be reduced to
the highest lawful rate so that no amounts shall be charged which are in excess
thereof; and the Lender shall apply such excess against the Obligations of the
Borrower to the Lender then outstanding and, to the extent of any amounts
remaining thereafter, refund such excess to the Borrower.
Section 11.15 Entire Agreement.
This Agreement, including the Schedules hereto, constitutes
the entire agreement between the Borrower and the Lender and supersedes all
prior agreements, whether oral or written, between the Borrower and the Lender
in respect of the Credit Facility extended hereby.
Section 11.16 Counterparts.
This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which, taken together, shall constitute
one and the same instrument.
57
IN WITNESS WHEREOF the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
FIDELITY LEASING CANADA INC.
Per:_______________________________
Authorized Signing Officer
BANK OF MONTREAL
Per:_______________________________
Authorized Signing Officer
58
SCHEDULE 2.4(a)
[Date of Request] ,
Bank of Montreal
Attention:
Telecopy:
Dear Sirs:
ADVANCE REQUEST
The undersigned refers to the credit agreement (the "Credit
Agreement") dated as of the o day of o, 1999, between Fidelity Leasing Canada
Inc., as Borrower, and Bank of Montreal, as Lender thereunder. All capitalized
terms used herein shall have the respective meanings attributed thereto in the
Credit Agreement.
The undersigned hereby requests, in accordance with Article II
of the Credit Agreement, the following Advance:
Requested Advance:
Type ____________________________________________________
Amount __________________________________________________
If BA Advance requested,
maturity date of Bankers' Acceptances ___________________
Proposed Drawdown Date of such Advance: _________________
Day/Month/Year
If requested Advance required for conversion of
outstanding Advances identify Type, Outstanding
Principal Amount and dates of outstanding Advances to
be converted
The undersigned hereby confirms that the Advance requested
hereby complies with the requirements of the Credit Agreement, that this Advance
Request is executed on behalf of the Borrower by representatives of the Borrower
duly authorized in that behalf and that no Default or Event of Default has
occurred and is continuing or will result from giving effect to the Advance
requested hereby.
FIDELITY LEASING CANADA INC.
By: ____________________________
Name:
Title: Chief Financial Officer
SCHEDULE 2.4(c)
TO: BANK OF MONTREAL (the "Lender")
BORROWING BASE CERTIFICATE
The undersigned is the chief financial officer of Fidelity
Leasing Canada Inc., a corporation incorporated under the laws of the Province
of Ontario (the "Borrower"), and, as such, is authorized to execute and deliver
this certificate on behalf of the Borrower pursuant to the credit agreement (the
"Credit Agreement") dated as of , 1999, as amended from time to time, between
the Borrower and the Lender, and hereby certifies that:
1. [The aggregate of the Lease Receivable Balances of all
Eligible Leases previously assigned to the Lender pursuant to the assignment
delivered pursuant to Section 7.1(g)(vi) of the Credit Agreement is][The
Aggregate Eligible Lease Receivable Balance set out in the last Borrower Base
Certificate delivered to the Lender is]:
Cdn. $
2. The aggregate of the Lease Receivable Balances of all
Eligible Leases assigned to the Lender pursuant to the Assignment Agreement
delivered to the Lender with this Borrowing Base Certificate is:
Cdn. $
3. The aggregate of the Lease Receivable Balances of any Eligible
Leases previously assigned to the Lender, where such Leases or any Lease
Receivables under such Leases, or any Leased Property or other Collateral
associated therewith or any interest therein, shall have been sold or otherwise
disposed to FLSCI, IBM Canada or any other party or determined not to be an
Eligible Lease since the date of the last Borrowing Base Certificate delivered
to the Lender, is:
Cdn. $
4. The Aggregate Eligible Lease Receivable Balance (line 1 plus
line 2, minus line 3) is:
Cdn. $
5. 75% of the Aggregate Eligible Lease Receivable Balance is:
Cdn. $
6. The Maximum Commitment Limit is:
Cdn. $ [5,000,000]
7. The Borrowing Base (lesser of line 5 and line 6) is:
Cdn. $
8. The Outstanding Principal Obligations are:
Cdn. $
9. The Available Commitment (excess, if any, of line 7 over line
8) is:
Cdn. $
All capitalized terms used herein shall have the respective
meanings attributed thereto in the Credit Agreement.
DATED this day of , .
FIDELITY LEASING CANADA INC.
By: ___________________________
Name:
Title: Chief Financial Officer
2
SCHEDULE 2.4(d)
FORM OF ASSIGNMENT AGREEMENT
SCHEDULE 8.1(f)(A)
OUTSTANDING ENCUMBRANCES
PPSA Registration in favour of FL Sales Canada Inc., as secured party, under
file no. 847305477, registration no. 981230 1812 1531 4590, perfecting the
absolute assignment of accounts receivable by Fidelity Leasing Canada Inc. to FL
Sales Canada Inc. pursuant to the IBM Leasing Program Agreements.
SCHEDULE 8.1(f)(B)
PLACES OF BUSINESS AND LOCATIONS OF
BOOKS AND RECORDS
Books and records are kept at Fidelity Leasing Canada Inc.'s head Canadian
office, Meadowvale Corporate Centre, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇.
Minute Books are kept at the offices of Stikeman, Elliott, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇.
SCHEDULE 8.1(g)
SUBSIDIARIES AND AFFILIATES OF THE BORROWER
Fidelity Leasing, Inc.
FL Canada Leasing Inc., a Subsidiary of Fidelity Leasing, Inc.
FL Sales Canada Inc., a Subsidiary of Fidelity Leasing Canada Inc.
SCHEDULE 8.1(q)
INTELLECTUAL PROPERTY ASSETS
Trademark applications have been filed with Industry Canada with respect to the
following names:
One Lease and design (filed by Fidelity Leasing, Inc.)
Fidelity Leasing Canada (filed by Fidelity Leasing Canada Inc.)
Fidelity Leasing, Inc. was granted a license to use the trademark "SUCCESSLEASE"
by International Business Machines Corporation by a Trademark License Agreement
dated as of October 6, 1998.
SCHEDULE 9.1(i)
TO: BANK OF MONTREAL (the "Lender")
COMPLIANCE CERTIFICATE
The undersigned is the chief financial officer of Fidelity
Leasing Canada Inc., a corporation incorporated under the laws of the Province
of Ontario (the "Borrower"), and, as such, is authorized to execute and deliver
this certificate on behalf of the Borrower pursuant to the credit agreement (the
"Credit Agreement") dated as of , 1999, as amended from time to time, between
the Borrower and the Lender, [in the alternative, a certificate of a senior
officer of FLI may be provided with respect to items IV, V, VI and VII below,
and item VIII insofar as it relates to such items] and hereby certifies that:
I. The representations and warranties of the Borrower set
forth in Article VIII of the Credit Agreement and in any documents delivered
pursuant to the Credit Agreement are true and correct with the same effect as
though made on and as of the date of this certificate.
II. The Borrower is in compliance with all of the provisions
contained in the Credit Agreement on its part to be observed and performed and
as of the date of this certificate and after giving effect to any Advance in
respect of which this certificate is delivered, no Default or Event of Default
has occurred and is continuing.
III. As of the date of this certificate, the Consolidated
Capitalization is Cdn. $ .
IV. The Adjusted Debt to Tangible Net Worth Ratio on a
consolidated basis, measured quarterly as of the last day of the last completed
fiscal quarter of FLI is to 1.
V. As of the date of this certificate, the unsecured
intercompany Indebtedness of FLI to its Affiliates is U.S. $ and the
outstanding principal amount of the FLI Subordinated Indebtedness is U.S. $ .
VI. The Tangible Net Worth, as of the last day of the last
completed fiscal quarter of FLI is U.S. $ .
VII. The Fixed Charge Coverage Ratio, as of the last day of
the last completed fiscal quarter of FLI, based on financial information for the
twelve month period ending as of the end of such fiscal quarter, is to 1.
VIII. Attached to this certificate are work sheets showing the
calculations used to derive the amounts and ratios set out above from the
financial statements of the Borrower and its Subsidiaries and Affiliates.
All capitalized terms used herein shall have the respective
meanings attributed thereto in the Credit Agreement.
DATED this day of , .
FIDELITY LEASING CANADA INC.
By: _____________________________
Name:
Title: Chief Financial Officer