TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS
Section 1.01 Definitions........................................... 2
Section 1.02 Headings.............................................. 18
Section 1.03 Number................................................ 18
Section 1.04 Accounting Principles................................. 18
Section 1.05 Business Days......................................... 18
Section 1.06 Severability.......................................... 18
Section 1.07 Currency.............................................. 19
Section 1.08 Exhibits.............................................. 19
ARTICLE 2 TERMS OF CONCURRENT LEASE
Section 2.01 Concurrent Lease...................................... 19
Section 2.02 Rent for Concurrent Lease............................. 21
Section 2.03 Settlement Procedures................................. 22
Section 2.04 Deferred Rental Account............................... 25
Section 2.05 Concurrent Lessee's Capital........................... 26
Section 2.06 Clean-Up Provision.................................... 26
Section 2.07 Deemed Collections.................................... 27
Section 2.08 Payments and Computations, Etc........................ 28
Section 2.09 Allocation of Collections............................. 29
Section 2.10 Reporting............................................. 29
Section 2.11 Fees.................................................. 30
Section 2.12 Further Action to Protect Designated Eligible Leases.. 30
Section 2.13 Ineligible Leases..................................... 31
Section 2.14 Sales Taxes........................................... 32
Section 2.15 Termination of the Concurrent Lease................... 33
Section 2.16 Permitted Investments................................. 33
ARTICLE 3 CONDITIONS OF LEASE
Section 3.01 Conditions Precedent to Concurrent Lease under Initial
Equipment Schedule.................................... 33
Section 3.02 Conditions Precedent to Concurrent Lease under Supplemental
Equipment Schedules........................................................... 36
ARTICLE 4 REPRESENTATIONS AND WARRANTIES
Section 4.01 Representations and Warranties of the Lessor.................................. 37
Section 4.02 Representations and Warranties of the Performance Guarantor and IKON Capital.. 41
Section 4.03 Representations and Warranties of the Concurrent Lessee....................... 43
ARTICLE 5 COVENANTS OF THE
LESSOR, PERFORMANCE GUARANTOR AND IKON CAPITAL
Section 5.01 Affirmative Covenants of the Lessor........................................... 43
Section 5.02 Negative Covenants of the Lessor.............................................. 48
Section 5.03 Covenants of the Performance Guarantor
and IKON Capital.............................................................. 48
ARTICLE 6 ADMINISTRATION AND COLLECTION
Section 6.01 Designation of Collector...................................................... 51
Section 6.02 Duties of Collector........................................................... 52
Section 6.03 Collector Fee................................................................. 53
Section 6.04 Responsibilities of the Lessor................................................ 53
ARTICLE 7 SIGNIFICANT EVENTS
Section 7.01 Meaning of Significant Event.................................................. 53
Section 7.02 Action Upon a Significant Event............................................... 55
Section 7.03 Waiver........................................................................ 56
ARTICLE 8THE ADMINISTRATIVE AGENT AND MATTERS RELATING TO LIABILITY
Section 8.01 Authorization and Action...................................................... 56
Section 8.02 Liability of Concurrent Lessee and Administrative Agent....................... 57
Section 8.03 Limitation of Liability....................................................... 57
ARTICLE 9 INDEMNIFICATION
Section 9.01 Indemnities by the Lessor................................. 57
Section 9.02 Cooperation in Litigation and Proceedings................. 60
ARTICLE 10 MISCELLANEOUS
Section 10.01 Amendments, Etc........................................... 60
Section 10.02 Notices, Etc.............................................. 61
Section 10.03 No Waiver, Remedies....................................... 61
Section 10.04 Binding Effect; Assignability; Severability............... 61
Section 10.05 Costs, Expenses and Taxes................................. 62
Section 10.06 No Petition............................................... 62
Section 10.07 Set Off................................................... 62
Section 10.08 Confidentiality........................................... 63
Section 10.09 Change in Circumstance.................................... 63
Section 10.10 Governing Law............................................. 64
Section 10.11 Further Assurances........................................ 64
Section 10.12 Execution in Counterparts................................. 65
EXHIBIT 10.11
DRAFT: April 29, 1998
---------------------
MASTER CONCURRENT LEASE AGREEMENT
DATED AS OF APRIL 29, 1998
BETWEEN
IKON OFFICE SOLUTIONS, INC.
AS LESSOR AND A COLLECTOR
- AND -
IKON CAPITAL, INC.
AS A SUB-COLLECTOR
- AND -
PRIME TRUST
AS CONCURRENT LESSEE
- AND -
IKON OFFICE SOLUTIONS, INC. (U.S.)
AS PERFORMANCE GUARANTOR
- AND -
TD SECURITIES INC.
AS ADMINISTRATIVE AGENT
MCCARTHY TETRAULT
This MASTER CONCURRENT LEASE AGREEMENT dated as of the 29th day of
April, 1998.
B E T W E E N:
IKON OFFICE SOLUTIONS, INC., a corporation incorporated under the laws
of the Province of Ontario
(hereinafter referred to as the "Lessor")
OF THE FIRST PART
- and -
IKON CAPITAL, INC., a corporation incorporated under the laws of
Canada
(hereinafter referred to as "IKON Capital")
OF THE SECOND PART
- and -
PRIME TRUST, a trust established under the laws of the Province of
Ontario
(hereinafter referred to as the "Concurrent Lessee")
OF THE THIRD PART
- and -
IKON OFFICE SOLUTIONS, INC., a corporation incorporated under the laws
of the State of Ohio
(hereinafter referred to as "IKON U.S." or "Performance Guarantor")
OF THE FOURTH PART
- and -
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TD SECURITIES INC., a corporation incorporated under the laws of
Province of Ontario
(hereinafter referred to as the "Administrative Agent")
OF THE FIFTH PART.
WHEREAS the Lessor now owns Equipment subject to certain leases which
qualify as Eligible Leases and may hereafter own Equipment which is subject to
leases which will qualify as Eligible Leases;
AND WHEREAS the Lessor intends to concurrently lease from time to time
such Equipment to the Concurrent Lessee;
AND WHEREAS the Concurrent Lessee desires to concurrently lease from
time to time such Equipment from the Lessor;
AND WHEREAS the Lessor has been requested and is willing to act as
collector hereunder;
AND WHEREAS IKON Capital has been requested and is willing to act as a
sub-collector hereunder;
AND WHEREAS IKON U.S. has been requested and is willing to act as a
performance guarantor as contemplated hereunder;
AND WHEREAS TD Securities Inc. has been requested and is willing to
act as Administrative Agent hereunder;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
respective covenants and agreements of the parties herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINITIONS
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In this Agreement, the following terms shall have the following
meanings:
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"ADDITIONAL LEASE TERMINATION DATE" means the date of occurrence of the
earliest to occur of any of the following events:
(i) a Lock-Up Event;
(ii) the Termination Date;
(iii) the debt rating of the senior short term notes of the
Concurrent Lessee by DBRS falls below R-1(middle);
(iv) an "Event of Default" as defined under the Liquidity
Agreement;
(v) an "Event of Default" as defined under the Credit Enhancement
Agreement; or
(vi) an "Event of Default" as defined under the Trust Indenture.
"ADVERSE CLAIM" means a lien (other than a statutory lien or deemed trust
securing, or in respect of obligations which are not yet due and payable),
security interest, charge, encumbrance, hypothec, ownership interest, right
of set-off or other right or claim of any Person (other than the Concurrent
Lessee or Persons claiming through the Concurrent Lessee) where such right
or claim ranks ahead of or pari passu with the interests of the Concurrent
Lessee created hereunder.
"AFFILIATE" means, when used with respect to a Person, an affiliate of such
Person for purposes of the Business Corporations Act (Ontario).
"AFFILIATED LESSEE" means any Lessee which is an Affiliate of another
Lessee.
"AGGREGATE FINANCE BALANCE" means, at any time, the amount that is the
aggregate of the Finance Balance for all Designated Eligible Leases in the
Lease Portfolio, as at such time.
"ATLANTIC MARKETPLACE" means the geographical area encompassing the
provinces of Nova Scotia, New Brunswick, Prince Edward Island and
Newfoundland.
"BUSINESS DAY" means any day, other than a Saturday, Sunday or public
holiday, on which banks are open for business in Toronto, Ontario, Calgary
and Edmonton, Alberta and Malvern, Pennsylvania.
"COLLECTIONS" means, with respect to any Designated Eligible Lease, all
cash collections and other cash proceeds of such Designated Eligible Lease
received (save and except insurance premiums or Sales Taxes), all cash
proceeds of Lease Rights
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relating to such Designated Eligible Lease and any Collections under such
Designated Eligible Lease deemed to have been received pursuant to Sections
2.07(a), (b) and (c) and 2.13 including the Concurrent Lessee's pro-rata
share of the Net Proceeds (determined in accordance with Section 2.08(d))
arising as a result of the disposition of Equipment which has been
repossessed from a Lessee who has defaulted under a Designated Eligible
Lease, but not any other Net Proceeds. For greater certainty "Collections"
shall, with respect to any Designated Eligible Lease, only include the
amounts referred to above which are received during the time such
Designated Eligible Lease is a Designated Eligible Lease.
"COLLECTOR" means, at any time, the Lessor or such other person or persons
then authorized pursuant to Section 6.01 to service and administer the
Designated Eligible Leases and to collect rents and other amounts owing
thereunder.
"COLLECTOR FEE" has the meaning assigned to that term in Section 6.03.
"CONCENTRATION LIMIT" means for any Lessee, together with all its
Affiliated Lessees:
(i) whose non-convertible unsecured debt is rated AAA by DBRS or
is rated with an equivalent rating from an equivalent rating
agency acceptable to the Concurrent Lessee, the greater of
100% of the aggregate of the Required Reserve and the
External Credit Enhancement and 200% of the Required Reserve;
(ii) whose non-convertible unsecured debt is rated AA or better
but less than AAA by DBRS or is rated with an equivalent
rating from an equivalent rating agency acceptable to the
Concurrent Lessee, the greater of 50% of the aggregate of the
Required Reserve and the External Credit Enhancement and 100%
of the Required Reserve;
(iii) whose non-convertible unsecured debt is rated A or better but
less than AA by DBRS or is rated with an equivalent rating
from an equivalent rating agency acceptable to the Concurrent
Lessee, the greater of 33.3% of the aggregate of the Required
Reserve and the External Credit Enhancement and 50% of the
Required Reserve;
(iv) whose non-convertible unsecured debt is rated BBB or better
but less than A by DBRS or is rated with an equivalent rating
from an equivalent rating agency acceptable to the Concurrent
Lessee, the greater of 25% of the aggregate of the Required
Reserve and the External Credit Enhancement and 33.3% of the
Required Reserve; and
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(v) whose non-convertible unsecured debt is rated BB or better
but less than BBB by DBRS or is rated with an equivalent
rating from an equivalent rating agency acceptable to the
Concurrent Lessee or whose debt does not carry a rating, the
greater of 16.7% of the aggregate of the Required Reserve and
the External Credit Enhancement and 33.3% of the Required
Reserve.
"CONCURRENT LESSEE" means Prime Trust.
"CONCURRENT LESSEE'S ACCOUNT" means the account maintained by the
Concurrent Lessee at The Toronto-Dominion Bank, Toronto Dominion Centre
branch, Toronto Ontario, (account no. 1068-0360503), or such other account
which is designated by the Concurrent Lessee in writing by notice to the
Collector as the Concurrent Lessee's Account for the purposes hereof.
"CONCURRENT LESSEE'S FUNDING COST" means, in respect of a Settlement
Period, the amount equal to (i) the product of the Discount Rate for the
period from but not including the last day of the previous Settlement
Period (or, in respect of the initial Settlement Period, from and including
the Initial Prepayment Date) to and including the last day of such
Settlement Period multiplied by the number of days in such period, (ii)
divided by 365 or 366, as the case may be, and (iii) multiplied by the
daily weighted average of the Program Amount during such Settlement Period.
"CONCURRENT LESSEE'S INDEBTEDNESS" means any obligation or liability
incurred by the Concurrent Lessee in connection with the funding of its
obligations hereunder.
"CREDIT AND COLLECTION POLICY" means the Lessor's credit, collection and
administration policies and procedures relating to Leases, Designated Lease
Receivables, Lease Rights and Equipment, as represented to and approved by
the Concurrent Lessee, as such administrative policies and procedures may
be amended in compliance with Section 5.02(ii). A copy of such
administrative policies and procedures is attached as Exhibit A.
"CREDIT ENHANCEMENT AGREEMENT" means the agreement to be entered into by
the Concurrent Lessee providing for a credit enhancement facility or
facilities in respect of the Designated Eligible Leases, as the same may be
amended, modified, restated or replaced from time to time.
"CUT-OFF DATE" has the meaning assigned to that term in Section 2.01(a).
"DBRS" means Dominion Bond Rating Service Limited or its successors.
"DEFAULTED LEASE" means a Lease in respect of which the following has
occurred:
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(i) any payment, or part thereof, whether on account of rent or
otherwise, remains unpaid for 121 days or more from the due
date for such payment,
(ii) the Lessee thereof has taken any action, or suffered any
event to occur, of the type described in Section 7.01(iv), or
(iii) has been, or which, in accordance with the Credit and
Collection Policy, should be, written off as uncollectible.
"DEFERRED RENT" means, in respect of a Lease Tranche with respect to any
Settlement Period, the further amounts payable to the Lessor as rent, in
respect of the Designated Eligible Leases included in such Lease Tranche in
an aggregate amount equal to the sum of:
(i) the positive difference, if any, between,
(a) the aggregate Finance Balance of the Designated Eligible
Leases included in such Lease Tranche as at the Relevant
Cut-off Date plus any portion of the Unearned Finance
attributed to such Designated Eligible Leases which was
earned prior to the Relevant Cut-off Date but not yet
received, and
(b) the Prepaid Rent in respect of such Lease Tranche,
and
(ii) the amount, if any, by which the aggregate amount of Unearned
Finance receivable by the Concurrent Lessee accruing in such
Settlement Period in respect of the Designated Eligible
Leases included in such Lease Tranche other than any portion
of such Unearned Finance included in the calculation in
(i)(a) above exceeds the Concurrent Lessee's Funding Cost
applicable to such Lease Tranche for such Settlement Period,
as increased, reduced, refunded or paid from time to time in accordance
with the terms hereof. For greater certainty, no Deferred Rent shall be
payable in respect of a Lease Tranche where the Concurrent Lessee has not
exercised its option to make a prepayment of periodic rent payable in
respect thereof pursuant to Section 2.02(b).
"DEFERRED RENTAL ACCOUNT" means the interest bearing account maintained by
the Concurrent Lessee in trust for the Lessor at The Toronto-Dominion Bank,
Toronto Dominion Centre branch, Toronto, Ontario (account no. 0435743-02)
or such other
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account which is designated by the Concurrent Lessee by notice in writing
to the Lessor as the Deferred Rental Account for the purposes hereof.
"DELINQUENCY RATIO" means, as at the last Business Day of each Settlement
Period, the average of the ratio (expressed as a percentage) for such
Settlement Period and each of the ratios for the three immediately
preceding Settlement Periods or if there are not three immediately
preceding Settlement Periods then, such number of immediately preceding
Settlement Periods as have occurred, calculated by dividing:
(i) the aggregate Finance Balance of all Designated Eligible
Leases in the Lease Portfolio that were Delinquent Leases as
at the last Business Day of the Settlement Period, by
(ii) the Aggregate Finance Balance as at the last Business Day of
the Settlement Period.
"DELINQUENT LEASE" means a Lease that is not a Defaulted Lease and in
respect of which any payment, or part thereof, whether on account of rent
or otherwise, remains unpaid for 61 days or more from the due date for such
payment.
"DESIGNATED ELIGIBLE LEASES" means all Eligible Leases which are, at any
time, set out on the Equipment Schedules delivered to and accepted by the
Concurrent Lessee from time to time pursuant hereto, in respect of which
the Equipment leased thereunder is concurrently leased to the Concurrent
Lessee pursuant to Section 2.01, provided that, any Eligible Lease set out
on such an Equipment Schedule shall be a Designated Eligible Lease as of
and from the day following the Cut-off Date in respect of the Initial
Equipment Schedule and as of and from the day following the relevant
Subsequent Cut-off Date in respect of a Supplemental Equipment Schedule
regardless of when such Equipment Schedule is accepted by the Concurrent
Lessee and, provided that, any Eligible Lease shall cease to be a
Designated Eligible Lease if:
(i) the Finance Balance of such Eligible Lease becomes zero; or
(ii) the concurrent lease of Equipment covered by such Designated
Eligible Lease is terminated pursuant to Sections 2.06, 2.07
(b) and (c) or 2.13.
"DESIGNATED LEASE RECEIVABLES" means all moneys payable with respect to any
Lease which is a Designated Eligible Lease (not including rentals, prepaid
rentals, security deposits or other amounts which have been paid to the
Lessor in respect of any period ending on or before such Lease became a
Designated Eligible Lease) including, without limitation, all rentals,
termination fees, mandatory purchase
-8-
obligation amounts, purchase option amounts and guaranteed residual
amounts, if any, and other moneys payable by the Lessee under such Lease
(exclusive of costs, expenses, charges (except enforcement charges),
amounts payable by way of indemnity, Sales Taxes or other taxes payable
under such Lease) during the period such Lease is a Designated Eligible
Lease.
"DISCOUNT RATE" means for any Settlement Period the rate per annum
determined by the Concurrent Lessee in accordance with Section 2.05(b).
"ELIGIBLE LEASE" means a Lease which meets the following criteria:
(i) the Lessee thereunder is a Person who is resident in or
carrying on business in Canada;
(ii) the lease receivables in respect of the Lease are payable in
Canada only and are denominated in Canadian Dollars;
(iii) the Lessee thereunder is not the subject of any insolvency or
bankruptcy proceedings;
(iv) the Lessee thereunder is not the lessee under any Defaulted
Lease;
(v) the Lessee thereunder is not an Affiliate of the Lessor;
(vi) the Lease has been duly authorized, executed and delivered by
the parties thereto, which Lease together with all Lease
Rights relating thereto, (including, without limitation, any
guarantee, indemnity or agreement referred to in clause (vii)
of the definition of Lease Rights herein), is in full force
and effect and constitutes a legal, valid and binding
obligation of the Lessee thereof enforceable against such
Lessee in accordance with its terms subject to bankruptcy,
insolvency, reorganization, winding-up, moratorium and other
laws affecting the rights of creditors generally and by
general principles of equity;
(vii) the Lease is not subject to any dispute, set-off,
counterclaim or defence whatsoever by the Lessee against the
Lessor and the Lease and Equipment leased thereunder are free
of any Adverse Claim and the Lease has not been extended or
otherwise modified except in the ordinary course of business
and in accordance with the Credit and Collection Policy;
(viii) the Term of the Lease does not exceed 84 months;
-9-
(ix) the provisions of the Lease do not contravene in any material
respect any laws, rules or regulations applicable thereto
(including, without limitation, laws, rules and regulations
relating to consumer protection, usury or interest rate
disclosure) and no party thereto is in violation of any such
law, rule or regulation in any material respect;
(x) the Lease is a lease and not a sale for purposes of the
Income Tax Act (Canada);
(xi) the Lease originated in the normal course of the Lessor's
business or was originated by a company with which the Lessor
amalgamated or which was wound up into the Lessor, is in
respect of Equipment, does not include a servicing component
and is in accordance with the Credit and Collection Policy
and in respect of which all registrations and filings have
been made in compliance with the Credit and Collection Policy
to perfect or preserve the Lessor's interest in the Equipment
which is subject to such Lease;
(xii) the Lease is not a Defaulted Lease;
(xiii) the Lease is not a Delinquent Lease;
(xiv) the Finance Balance of the Lease, when added to the aggregate
Finance Balance of all Leases within the Lease Portfolio with
the same Lessee and any of its Affiliated Lessees, does not
result in such Lessee exceeding its Concentration Limit;
(xv) rights under the Lease are permitted to be assigned in whole
or in part by the Lessor without notice to or the consent of
the Lessee;
(xvi) the Lease provides that the Lessee is required to insure the
Equipment which is the subject of such Lease;
(xvii) the Equipment leased thereunder has been delivered to and
accepted by the Lessee and is and will, at all times, be
located in Canada and under the terms of the Lease the Lessee
is required to maintain the Equipment in good operating
condition, reasonable wear and tear only excepted;
(xviii) the Lease was not originated out of any office of the Lessor
which is located in the Atlantic Marketplace;
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(xix) the Lessor has not been notified by the Concurrent Lessee
that the Lease has been excluded from the category of
Eligible Leases by the Concurrent Lessee; and
(xx) satisfies all further reasonable criteria which may be
specified by the Concurrent Lessee by notice in writing to
the Lessor.
"EQUIPMENT" means the office or business equipment, including all
attachments, replacement parts, accessories, intangibles, substitutions and
additions associated therewith, leased by the Lessor to Lessees pursuant to
Leases.
"EQUIPMENT SCHEDULE" means both the Initial Equipment Schedule and any
Supplemental Equipment Schedules delivered to and accepted by the
Concurrent Lessee pursuant hereto.
"EXTERNAL CREDIT ENHANCEMENT" means, at any time, an amount equal to 6% of
the Program Amount as at such time.
"FINAL COLLECTION DATE" means the earliest date on which (i) the Program
Amount has been reduced to zero in accordance with the terms hereof, (ii)
the Collector (if the Lessor is not the Collector) has received the accrued
Collector Fee and all other amounts payable to it hereunder, and (iii) all
amounts owing to the Administrative Agent and the Concurrent Lessee
hereunder and in respect of the Designated Eligible Leases and the Lease
Rights relating thereto have been paid in full.
"FINANCE BALANCE" means, with respect to a Lease, at any time, the amount
equal to the present value of all outstanding scheduled rental payments
discounted at the Lessor's Funding Rate.
"GENERAL ACCOUNT" means the account established in the name of the
Concurrent Lessee pursuant to Section 2.03(a).
"GROSS CONTRACT BALANCE" means, with respect to a Lease, at any time, the
aggregate amount of all regularly scheduled rental payments required to be
made during the Term of such Lease which remain outstanding at such time.
"GST" means the goods and services tax imposed under Part IX of the Excise
Tax Act (Canada), as amended.
"HEDGING AGREEMENT" means any interest rate exchange agreement, interest
rate cap, collar, floor or swap agreement, forward rate agreement or
similar agreement entered into between the Concurrent Lessee and a
counterparty in connection with a
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Lease Tranche and includes one or more of such agreements, as identified in
the related swap confirmation.
"HST" means the harmonized sales tax imposed under Part IX of the Excise
Tax Act (Canada).
"INDEMNIFICATION AGREEMENT" means the indemnification agreement entered
into by the Performance Guarantor and the Concurrent Lessee dated the date
hereof.
"INITIAL EQUIPMENT SCHEDULE" means the schedule, in the form attached
hereto as Exhibit B, that is delivered by the Lessor to the Concurrent
Lessee on or after the execution and delivery of this Agreement to effect
the concurrent lease of the first items of Equipment.
"INITIAL PREPAYMENT DATE" has the meaning assigned to that term in Section
2.02(b).
"LEASE" means a lease agreement, with or without an option to purchase,
with respect to Equipment that is owned by the Lessor under which at the
time such lease agreement was entered into the Lessor was the lessor and in
respect of which the Lessor continues to be the lessor or is a head lessor
or concurrent lessor, as such lease agreement may be amended, modified or
restated, and any replacement thereof, provided that the Equipment leased
thereunder and the Lessee thereunder are the same, but a "Lease" shall not
include this Agreement.
"LEASE PORTFOLIO" has the meaning assigned to that term in Section 2.01(a).
"LEASE PORTFOLIO AND COMPLIANCE REPORT" means a report substantially in the
form of Exhibit C.
"LEASE RIGHTS" means, in respect of any Equipment leased under a Lease, the
following:
(i) all rights and benefits accruing to the Lessor under the
Lease, including, without limitation, all right, title and
interest in and to the Designated Lease Receivables payable
in respect of the Equipment which is the subject of such
Lease;
(ii) all rights in or to payments (including, without limitation,
both proceeds and premium refunds) under any insurance
policies maintained by the Lessee pursuant to the terms of
such Lease, to the extent the same indemnify for loss or
damage to such Equipment;
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(iii) all rights in or to all payments made on account of any loss
of or damage to such Equipment whether under such Lease or
otherwise;
(iv) all claims, demands, actions, damages and indemnities owing
to the Lessor with respect to any patent and copyright
indemnity agreements or manufacturers' or sellers' warranties
relating to such Equipment, except to the extent that the
same indemnify against liability to others;
(v) the benefit of all covenants with respect to such Equipment
by the Lessee under such Lease, including all indemnities and
covenants with respect to maintenance and repair, use and
insurance obligations, except to the extent that the same
indemnify against liability to others;
(vi) the right of the Lessor to ask for, demand, sue for, collect,
receive and enforce any and all sums payable under such Lease
in respect of such Equipment and to enforce all other
covenants, obligations, rights and remedies thereunder with
respect thereto, except to the extent that such right relates
to indemnification against liability to others;
(vii) all of the right, title and interest of the Lessor in, to and
under all guarantees, indemnities (except to the extent that
the same indemnify against liability to others) and other
agreements or arrangements of whatsoever character (including
all security interests and all property subject thereto) from
time to time supporting or securing payment or performance of
the Lessee's obligations in respect of such Equipment subject
to such Lease, whether pursuant to such Lease or otherwise;
(viii) all Records pertaining to such Equipment under such Lease;
and
(ix) all proceeds of or relating to the foregoing.
"LEASE TRANCHE" has the meaning assigned to that term in Section 2.01(a).
"LESSEE" means a Person obligated under a Lease to pay the Designated Lease
Receivables in respect thereof including, where the context permits or
requires, any Person obligated to make such payments pursuant to any
guarantee, indemnity or agreement referred to in clause (vii) of the
definition of Lease Rights hereunder.
"LESSOR'S FUNDING RATE" means the amount (expressed as a percentage) which
is set out on the Lessor's lease info sheet for each Lease as the "System
Calculated Cost of Funds" or as the "Calculated Rate".
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"LIQUIDITY AGREEMENT" means the liquidity agreement, in respect of the
Lessor, to be entered into by the Concurrent Lessee, as the same may be
amended, modified, supplemented, restated or replaced from time to time.
"LOCK-UP EVENT" means any of the following events or circumstances:
(i) the occurrence of any Significant Event which has not been
waived by the Concurrent Lessee;
(ii) the average of the Loss Ratio for any particular Settlement
Period and each of the three immediately preceding Settlement
Periods, or if there are not three immediately preceding
Settlement Periods then, such number of immediately preceding
Settlement Periods as have occurred, is equal to or greater
than 4%;
(iii) the Delinquency Ratio is at any time equal to or greater than
12%; and
(iv) on any Settlement Date, after drawing from the Deferred
Rental Account, in accordance with Sections 2.03 and 2.04,
the amounts transferred to any other account of the
Concurrent Lessee pursuant to Sections 2.03(b) and 2.03(c)(v)
are less than the amounts required to be transferred in
accordance with such Sections.
"LOSS RATIO" means, as at the last Business Day of a Settlement Period, 12
times the ratio (expressed as a percentage), calculated by dividing,
(i) the Losses for such Settlement Period, by
(ii) the average of the Aggregate Finance Balance as at the last
Business Day of such Settlement Period and each of the eleven
immediately preceding Settlement Periods or, if there are not
eleven immediately preceding Settlement Periods then, such
number of immediately preceding Settlement Periods as have
occurred.
"LOSSES" means, with respect to a Settlement Period, the excess of (i) an
amount equal to the aggregate Finance Balance of all Designated Eligible
Leases that became Defaulted Leases in such Settlement Period, over (ii) an
amount equal to all Collections with respect to Defaulted Leases contained
in the Lease Portfolio which are received in such Settlement Period.
"MOODY'S" means Moody's Investors Service, Inc. or any successor thereof.
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"NET PROCEEDS" means the cash proceeds (other than amounts on account of
taxes) received by the Lessor from the disposition of Equipment or from
insurance proceeds in respect of Equipment, less all out-of-pocket costs
and expenses with respect to such disposition (including the refurbishing
of Equipment) or the collection of such insurance proceeds incurred by or
on behalf of the Lessor.
"NON-COMMINGLING EVENT" means any of the following events or circumstances:
(i) the Lessor is no longer the Collector;
(ii) IKON Capital or any other Subsidiary of the Performance
Guarantor is no longer the Sub-Collector unless the Lessor
has ceased to sub-contract its collection duties hereunder;
(iii) the Performance Guarantor fails to maintain a rating of at
least Baa3 or better from Moody's and at least BBB- or better
from S&P; or
(iv) the occurrence of a Significant Event which has not been
waived by the Concurrent Lessee and the Rating Agencies.
"PERMITTED INVESTMENTS" means
(i) negotiable instruments or securities in bearer or registered
form with a term to maturity of not more than 45 days, which
evidence:
(1) obligations of or guaranteed by the Government of Canada
as to both credit and timeliness;
(2) obligations of or guaranteed by a province or
municipality of Canada so long as they have the Required
Rating;
(3) deposits, bankers' acceptances or subordinated
debentures issued or accepted by any Canadian bank so
long as they have the Required Rating;
(4) commercial paper, secured bonds or senior unsecured
obligations of Canadian corporations or other Canadian
issuers so long as it has the Required Rating; or
(ii) demand deposits in any Canadian bank so long as they have the
Required Rating,
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provided that, the aggregate balance of all investments by
the Concurrent Lessee in securities of any one issuer, other
than securities referred to in (i)(1) above, will be limited
to 10% of the face amount of all Permitted Investments.
"PERSON" means an individual, partnership, corporation, charitable
organization, trust, unincorporated association, joint venture, Indian
band, government (or any agency or political subdivision thereof) or other
entity.
"PREPAID RENT" means an amount in respect of rent which is payable to the
Lessor by the Concurrent Lessee hereunder and which is prepaid on the
Initial Prepayment Date or a Subsequent Prepayment Date pursuant to Section
2.02(b).
"PRIME RATE" means a fluctuating annual interest rate which, on any day,
shall be equal to the rate of interest most recently established by The
Toronto-Dominion Bank at its head office in Toronto, Ontario as its
reference rate of interest for the purpose of determining interest rates it
will charge on that day for demand loans made in Canada in Canadian Dollars
to its Canadian commercial customers and which it refers to as its "Prime
Rate".
"PROGRAM AMOUNT" means an amount initially equal to the Prepaid Rent in
respect of the concurrent lease hereunder of Equipment listed in the
Initial Equipment Schedule, as such amount may be adjusted from time to
time as a consequence of the parties hereto entering into one or more
Supplemental Equipment Schedules, pursuant to the liquidation procedures
described herein or otherwise pursuant to the terms of this Agreement.
"PROGRAM FEE" has the meaning assigned to that term in Section 2.11(c).
"PST" means any retail sales tax imposed by any provincial taxing authority
(other than in the province of Quebec).
"QST" means the sales tax imposed under An Act Respecting Quebec Sales Tax,
as amended from time to time.
"RATING AGENCIES" means Dominion Bond Rating Service Limited and any other
rating organization which may be providing a rating in respect of the
senior short term notes of the Concurrent Lessee, and any successors
thereof.
"RECORDS" means all contracts, books, records, credit applications, credit
analysis and reports and other documents and information (including,
without limitation, to the extent obtainable by way of existing software
controlled by the Lessor, hard copies of all data maintained in databases
of the Lessor, tapes, disks and punch
-16-
cards) maintained by the Lessor or the Collector with respect to the Leases
and the Equipment and Lessees relating thereto, including without
limitation, any agreement pursuant to which the Lessor acquired its right,
title and interest in and to the Leases for the Equipment under which it is
not the original lessor.
"RELEVANT CUT-OFF DATE" means (i) with respect to the Initial Equipment
Schedule, the Cut-off Date and (ii) with respect to any Supplemental
Equipment Schedule, the related Subsequent Cut-off Date.
"REQUIRED DEFERRED RENTAL ACCOUNT BALANCE" means, on a Settlement Date, the
greatest of:
(i) 2% of the Program Amount as at the last Business Day of the
most recently completed Settlement Period;
(ii) 1.5 times the Loss Ratio times the Program Amount as at the
last Business Day of the most recently completed Settlement
Period; and
(iii) $500,000,
except that where a Lock-Up Event has occurred, the Required Deferred
Rental Account Balance shall, at any time thereafter, be equal to the
Program Amount at such time.
"REQUIRED RATING" means, in respect of any Person, a rating of such
Person's short term indebtedness of R-1 (middle) or better from DBRS (or an
equivalent rating should such designation change) or such lower rating as
DBRS may permit for any particular purpose.
"REQUIRED RESERVE" means, at any time, an amount equal to the greater of
(i) the product of 9.85% multiplied by the Program Amount (the "Reserve"
for purposes of this definition), and (ii) 40% multiplied by the largest
Reserve to have occurred as at that time.
"RESIDUAL BALANCE" means, in respect of a Designated Eligible Lease, the
residual established by the Lessor in accordance with the Credit and
Collections Policy.
"S&P" means Standard & Poor's Rating Group, a division of The McGraw-Hill
Companies or any successor thereof.
"SALES TAXES" includes GST, HST, QST and PST.
"SETTLEMENT DATE" means, with respect to a Settlement Period, the last
Business Day of the month following such Settlement Period.
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"SETTLEMENT PERIOD" means initially, the period commencing on the day
following the Cut-off Date and ending on the last day of the month
following the month in which the Cut-off Date occurred and, thereafter,
each calendar month.
"SIGNIFICANT EVENT" has the meaning assigned to that term in Section 7.01.
"SUB-COLLECTOR" means, at any time, IKON Capital or such other person or
persons then authorized pursuant to Section 6.01 to be a sub-collector
hereunder.
"SUBSIDIARY" means, with respect to the Performance Guarantor, any
corporation of which the Performance Guarantor holds, directly or
indirectly, voting securities carrying more than 50% of the votes for the
election of directors (other than by way of security) and the votes carried
by such securities are sufficient, if exercised, to elect a majority of the
board of directors.
"SUBSEQUENT CUT-OFF DATE" has the meaning assigned to that term in Section
2.01(a).
"SUBSEQUENT PREPAYMENT DATE" has the meaning assigned to that term in
Section 2.02(b).
"SUPPLEMENTAL EQUIPMENT SCHEDULE" means each schedule, in substantially the
form attached hereto as Exhibit B, that is delivered by the Lessor to the
Concurrent Lessee from time to time pursuant to the terms hereof, following
delivery of the Initial Equipment Schedule, to effect the concurrent lease
of Equipment hereunder.
"TERM" means, in respect of a Lease, the period commencing on the
commencement date thereof and ending on the last day of the month in which
the last payment in respect of rental payments is due thereunder and, for
greater certainty, includes any extension of the period during which
payments are due in respect of rental payments.
"TERMINATION DATE" means April 29, 2003 or such other date agreed to in
writing by the parties hereto from time to time.
"TRUST INDENTURE" means an indenture of trust made as of December 3, 1997
between CIBC Mellon Trust Company and the Concurrent Lessee, as the same
may be amended, modified, supplemented, restated or replaced from time to
time.
"UNEARNED FINANCE" means with respect to a Lease, at any time, an amount
equal to the Gross Contract Balance of such Lease less the Finance Balance
of such Lease, each as at such time.
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SECTION 1.2 HEADINGS
--------
The division of this Agreement into Articles and Sections and the
insertion of an index and headings are for convenience of reference only and
shall not affect the construction or interpretation of this Agreement. The
terms "this Agreement", "hereof", "hereunder" and similar expressions refer to
this Agreement and not to any particular Article, Section, Exhibit Schedule or
other portion hereof and include any agreement supplemental hereto. Unless
something in the subject matter or context is inconsistent therewith, reference
herein to Articles and Sections are to Articles and Sections of this Agreement.
SECTION 1.3 NUMBER
------
Words importing the singular number shall include the plural and vice
versa, words importing the masculine gender shall include the feminine and
neuter genders and vice versa and words importing persons shall include
individuals, partnerships, associations, trusts, unincorporated organizations
and corporations and vice versa.
SECTION 1.4 ACCOUNTING PRINCIPLES
---------------------
Wherever in this Agreement reference is made to generally accepted
accounting principles, such reference shall be deemed to be to the generally
accepted accounting principles from time to time approved by the Canadian
Institute of Chartered Accountants, or any successor institute, applicable as at
the date on which such calculation is made or required to be made in accordance
with generally accepted accounting principles consistently applied by the Lessor
from year to year except for such changes as may be approved by the independent
auditors of the Lessor.
SECTION 1.5 BUSINESS DAYS
-------------
Whenever any payment to be made hereunder shall be stated to be due or
any action to be taken hereunder shall be stated to be required to be taken on a
day other than a Business Day, unless otherwise specifically provided for
herein, such payment shall be made or such action shall be taken on the next
succeeding Business Day and in the case of the payment of any monetary amount,
the extension of time shall be included for the purposes of computation of
interest.
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SECTION 1.6 SEVERABILITY
------------
In the event that one or more of the provisions contained in this
Agreement shall be invalid, illegal or unenforceable in any respect under any
applicable law, the validity, legality or enforceability of the remaining
provisions hereof shall not be affected or impaired thereby. Each of the
provisions of this Agreement is hereby declared to be separate and distinct.
SECTION 1.7 CURRENCY
--------
All amounts expressed herein in terms of money refer to lawful
currency of Canada and all payments to be made hereunder shall be made in such
currency.
SECTION 1.8 EXHIBITS
--------
Following are the Exhibits annexed hereto and incorporated by
reference and deemed to be part hereof:
Exhibit A Credit and Collection Policy
Exhibit B Form of Equipment Schedule
Exhibit C Lease Portfolio and Compliance Report
Exhibit D Forms of Opinions
Exhibit E Chief Executive and Branch Offices of Lessor
-20-
ARTICLE 2
TERMS OF CONCURRENT LEASE
SECTION 2.1 CONCURRENT LEASE
----------------
(a) From time to time and upon the terms and subject to the conditions
contained in this Agreement, the Lessor may lease to the Concurrent Lessee and
the Concurrent Lessee may lease from the Lessor the Equipment which is the
subject of the Designated Eligible Leases listed on the Initial Equipment
Schedule and on each Supplemental Equipment Schedule (the Designated Eligible
Leases set out on the Initial Equipment Schedule and on each Supplemental
Equipment Schedule each being referred to herein as a "Lease Tranche" and
collectively as the "Lease Portfolio") which Equipment Schedules shall be
delivered by the Lessor to the Concurrent Lessee within 5 Business Days after
the date (the "Cut-off Date" in respect of the Initial Equipment Schedule and a
"Subsequent Cut-off Date" in respect of each Supplemental Equipment Schedule) on
which the information contained in the relevant Equipment Schedule is based.
The concurrent lease of Equipment pursuant hereto shall grant to the Concurrent
Lessee the right to use and possess such Equipment for the term of the
concurrent lease thereof subject to the Designated Eligible Lease relating to
such Equipment. It is hereby expressly acknowledged and agreed that the interest
of the Concurrent Lessee under the concurrent lease granted pursuant hereto in
and to the Equipment subject to Designated Eligible Leases is that of lessee
only and that title to such Equipment shall remain vested in the Lessor.
(b) Within five Business Days of receipt of an Equipment Schedule
delivered in accordance with Section 2.01(a), the Concurrent Lessee may execute
and deliver to the Lessor the Equipment Schedule received by it (with such
amendments as it in its discretion may require) which, upon such execution and
delivery, shall evidence the binding agreement between the Concurrent Lessee,
the Lessor, the Collector, the Sub-Collector and the Performance Guarantor with
respect to the concurrent lease hereunder of the Equipment set forth in such
Equipment Schedule. Failing such execution and delivery, the Equipment Schedule
shall be deemed to be refused by the Concurrent Lessee.
(c) The concurrent lease provided for in Section 2.01(a) shall:
(i) with respect to each item of Equipment included in the Initial
Equipment Schedule, commence on the day following the Cut-off
Date, and
(ii) with respect to each item of Equipment included in each
Supplemental Equipment Schedule, commence on the day following
the Subsequent Cut-off Date,
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and shall, with respect to each item of Equipment, terminate at 11:59 p.m. on
the day following the last day of the Term of the Designated Eligible Lease
relating to such Equipment unless otherwise terminated hereunder. On the day
following the Cut-off Date and on the day following each Subsequent Cut-off Date
beneficial ownership of all Lease Rights in respect of the Designated Eligible
Leases described in the Initial Equipment Schedule and in the related
Supplemental Equipment Schedule, respectively, shall automatically become vested
in the Concurrent Lessee and the Concurrent Lessee shall have the right to use
and possess the Equipment subject to the Designated Eligible Leases set out on
the relevant Equipment Schedule for the term of and pursuant to the concurrent
lease provided for in Section 2.01(a) without further action on the part of the
Lessor.
(d) The Lessor agrees that, until the Final Collection Date, it will hold
in trust for the benefit of the Concurrent Lessee the Lease Rights relating to
the Designated Eligible Leases, and the parties hereby confirm that beneficial
ownership of the Lease Rights relating to the Designated Eligible Leases shall
be vested in the Concurrent Lessee for the term of the concurrent lease of the
Equipment subject to the Designated Eligible Leases, such term to be determined
in accordance with Section 2.01(c), to be dealt with by the Concurrent Lessee in
accordance with the terms of this Agreement and each Designated Eligible Lease.
The Lessor hereby irrevocably appoints and constitutes any officer of the
Administrative Agent its true and lawful attorney, with full power of
substitution, after the Termination Date, to execute and deliver in the name of
the Lessor all such deeds, documents and other instruments that the
Administrative Agent considers necessary or expedient in the course of the
exercise or performance by the Concurrent Lessee of any of the Lease Rights
relating to Designated Eligible Leases.
(e) If at any time the Concurrent Lessee, the Administrative Agent or the
Lessor determines that as at the Cut-off Date in respect of the Initial
Equipment Schedule or as at the relevant Subsequent Cut-off Date with respect to
any Supplemental Equipment Schedule the aggregate Finance Balance of the
Designated Eligible Leases listed on the applicable Equipment Schedule was less
than the amount of the aggregate Finance Balance set out in such Equipment
Schedule (such difference being the "Deficiency"), the Lessor shall on the
second Business Day following the date of such determination pay to the
Concurrent Lessee, as a refund of a portion of the Prepaid Rent, an amount
equal to 1/1.0985 of the Deficiency, or, as a refund of any periodic rent paid
pursuant to Section 2.02(a), an amount equal to the amount of applicable
periodic rent paid in respect of the Deficiency (in either case, such amount
shall result in a corresponding deduction in the Program Amount). To the extent
that the aggregate Finance Balance of such Designated Eligible Leases was
greater than the aggregate Finance Balance set out in the applicable Equipment
Schedule (such difference being the "Excess"), the Concurrent Lessee shall have
the option of (i) on the first Settlement Date following the date of such
determination paying to the Lessor an amount equal to 1/1.0985 of the Excess on
account of Prepaid Rent for such Designated Eligible Leases, or, of paying the
applicable periodic rent payable in respect of the Excess or (ii) immediately
terminating the concurrent lease of sufficient items of Equipment which
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are subject to such Designated Eligible Leases so as to eliminate the need for a
payment in respect of all or a substantial portion of the Excess (any Excess not
completely eliminated would be dealt with in accordance with (i) above). For
greater certainty, upon termination of the concurrent lease of Equipment
pursuant to this Section 2.01(e), the Concurrent Lessee shall surrender, assign
and transfer to the Lessor and the Lessor shall accept the transfer of all
right, title and interest of the Concurrent Lessee in the Lease Rights under the
Designated Eligible Leases relating to such Equipment and the Lessor shall
release the Concurrent Lessee from all of its remaining obligations hereunder
with respect to such Equipment relating to such Leases.
SECTION 2.2 RENT FOR CONCURRENT LEASE
-------------------------
(a) The aggregate rent payable hereunder by the Concurrent Lessee to the
Lessor for Equipment included within a Lease Tranche and concurrently leased
hereunder shall be equal to the aggregate of all regularly scheduled rental
payments required to be made during the Term of all Designated Eligible Leases
relating to such Equipment included within the Lease Tranche and shall, subject
to Section 2.02(b), be payable at the same time as the regularly scheduled
rental payments are due under such Designated Eligible Leases.
(b) The Lessor acknowledges and agrees that the Concurrent Lessee may
satisfy its obligations to pay the periodic rental payments required under
Section 2.02(a) by: (i) prepaying a portion of such periodic rental payments,
which amount shall be determined separately with respect to the Equipment
included in each Lease Tranche, by making a prepayment of rent by way of
certified cheque or wire transfer (the "Prepaid Rent") to the Lessor on the 8th
Business Day (or such other day as may be agreed to by the Lessor and the
Concurrent Lessee) following receipt of the Initial Equipment Schedule (the
"Initial Prepayment Date") and on the 8th Business Day (or such other day as may
be agreed to by the Lessor and the Concurrent Lessee) following receipt of a
Supplemental Equipment Schedule (a "Subsequent Prepayment Date") equal to
1/1.0985 of the aggregate Finance Balance of the Designated Eligible Leases in
the applicable Lease Tranche; and (ii) paying Deferred Rent in the manner and at
the times required by Section 2.03 and 2.04.
SECTION 2.3 SETTLEMENT PROCEDURES
---------------------
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(a) Subject to the next following sentence, from and including the day
following the Relevant Cut-off Date, and on each day thereafter, the Collector
shall hold for the account of the Concurrent Lessee, the Collections of
Designated Eligible Leases received on each day. On the Business Day
immediately following the date on which a Non-Commingling Event occurs and is
continuing, the Concurrent Lessee or, at the direction of the Concurrent Lessee
and the Rating Agencies, the Collector shall establish an account in the name of
the Concurrent Lessee (the "General Account") and until such time as there is no
Non-Commingling Event continuing, the Collector shall deposit to, unless
otherwise agreed to by the Concurrent Lessee, the General Account within two
Business Days of receipt (or such other period as may be agreed to by the
Concurrent Lessee and the Rating Agencies) all Collections of Designated
Eligible Leases received by the Collector in respect of each Settlement Period
less an amount set forth in Section 2.03(b)(v) which amount shall forthwith be
paid to the Lessor.
(b) On each Settlement Date, the Collector is hereby authorized and
directed by the Concurrent Lessee to cause to be transferred from the General
Account or otherwise to the Concurrent Lessee's Account the amount, if any, by
which the sum of:
(i) the amount of the Collections received with respect to the Designated
Eligible Leases in the immediately preceding Settlement Period
(including, without limitation, any amount received pursuant to
Sections 2.06 and 2.07) and any other Collections received with
respect to the Designated Eligible Leases relating to any prior
Settlement Period;
(ii) any amounts payable to the Concurrent Lessee pursuant to Sections
2.08, 2.13, 7.02, 9.01, 9.02, 10.05 and 10.09 since the last
Settlement Date or, with respect to the first Settlement Date, since
the Cut-off Date;
(iii) any other amount received by the Collector since the last Settlement
Date or, with respect to the first Settlement Date, since the Cut-off
Date in payment of any other amount payable hereunder and not
otherwise referred to in (i) or (ii) above; and
(iv) any amount remaining in the General Account,
exceeds:
(v) any amount in respect of any asserted set-off, reduction or
cancellation by a Lessee received by the Collector from the Lessor or
deposited by the Lessor to the Concurrent Lessee's Account in
accordance with Section 2.07 for which the Lessee has been found,
during the immediately preceding Settlement Period, to be liable.
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For greater certainty, in no event shall the Collector transfer
amounts into the Concurrent Lessee's Account more than once in respect of the
same item of Collections or be permitted to deduct more than once amounts in
respect of any items of set-off referred to above.
(c) From the amounts available in the Concurrent Lessee's Account
(including any interest received on amounts held therein) following the deposits
thereto contemplated in Section 2.03(b), the Concurrent Lessee shall on each
Settlement Date, in the following order of priority:
(i) to the extent that the Collector has deposited any applicable amount
to the Concurrent Lessee's Account in respect of amounts payable by
the Lessor in accordance with Sections 9.01, and 10.05, pay such
amount to the applicable party;
(ii) pay any costs, fees, expenses or damages or other amounts incurred by
the Concurrent Lessee as a result of a default by the Lessor under
any Hedging Agreement entered into in connection with a Lease
Tranche;
(iii) pay the amount of any Collector Fee then payable;
(iv) pay to the Lessor in respect of Deferred Rent, if any, an amount
equal to the excess, if any, of:
(A) the positive difference if any between the aggregate Unearned
Finance determined on the last day of the Settlement Period prior
to such Settlement Period and the aggregate Unearned Finance
determined on the last day of such Settlement Period, in respect
of Designated Eligible Leases, over
(B) the Concurrent Lessee's Funding Cost during such Settlement
Period plus 1.95% of the Aggregate Finance Balance;
(v) transfer to any other account of the Concurrent Lessee an amount
equal to the Concurrent Lessee's Funding Cost for the then current
Settlement Period;
(vi) transfer to any other account of the Concurrent Lessee:
(1) on each Settlement Date prior to the first Settlement Date after
the occurrence of a Lock-Up Event, an amount equal to the amount
by which (X) the Program Amount (determined without reference to
this section) exceeds the positive difference, if any, between
(Y) the aggregate Finance Balance of the Lease Portfolio
(excluding
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Designated Eligible Leases that are Defaulted Leases) as at the
end of the immediately preceding Settlement Period, and (Z) the
Required Reserve at such time; and
-26-
(2) on the first Settlement Date after the occurrence of a Lock-Up
Event and on each Settlement Date thereafter, an amount equal to
the lesser of (X) the Program Amount at such time, and (Y) the
aggregate of the remaining balance in the Concurrent Lessee's
Account and the available balance of the Deferred Rental Account
each as at such time,
and, in each case, the Program Amount shall be reduced by the amount
so transferred;
(vii) pay all expenses incurred by the Collector on behalf of the
Concurrent Lessee related to the enforcement of the Concurrent
Lessee's rights in respect of the Designated Eligible Leases or
advice with respect thereto;
(viii) pay the amount of any Adverse Claim upon Equipment subject to
Designated Eligible Leases or upon the interest of the Concurrent
Lessee in Designated Eligible Leases; and
(ix) transfer to any other account of the Concurrent Lessee an amount
equal to any other reasonable expenses incurred in respect of the
Lessor by the Concurrent Lessee or by the Administrative Agent on
behalf of the Concurrent Lessee;
provided that where the available balance in the Concurrent Lessee's Account on
any Settlement Date is less than the sum of the amounts referred to in (i)
through (ix) above, the Lessor hereby irrevocably directs that, as a refund of a
portion of Deferred Rent, if any, an amount equal to the lesser of:
(x) the amount of such shortfall; and
(y) the then available balance in the Deferred Rental Account;
shall be transferred by the Concurrent Lessee from the Deferred Rental Account
to the Concurrent Lessee's Account and shall be distributed in accordance with
this Section 2.03(c).
(d) Any amounts then remaining in the Concurrent Lessee's Account on
each Settlement Date following all transfers or payments made as herein above
provided in this Section 2.03 shall be paid to the Lessor by transfer to the
Deferred Rental Account and allocated in accordance with Section 2.04.
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SECTION 2.4 DEFERRED RENTAL ACCOUNT
-----------------------
(a) The Lessor hereby irrevocably directs that on each Settlement Date,
the then available balance in the Deferred Rental Account (including interest
received on amounts held therein), after making the transfers and adjustments
required by Sections 2.03(c) and 2.03(d), shall be held in trust by the
Concurrent Lessee for the benefit of the Lessor. The Lessor hereby grants in
favour of the Concurrent Lessee a security interest in the Deferred Rental
Account for the purposes of securing the obligations of the Lessor with respect
to the payments set forth herein. Such available balance shall be applied by the
Concurrent Lessee in the following priority:
(i) to transfer to any account of the Concurrent Lessee the amount by
which the Program Amount at such time exceeds the positive
difference, if any, between (X) the aggregate Finance Balance of the
Lease Portfolio (excluding any Designated Eligible Leases that are
Defaulted Leases) as at the end of the immediately preceding
Settlement Period and (Y) the Required Reserve at such time, and the
Program Amount shall be reduced by the amount so transferred with
such amount being paid as a refund of a portion of the Deferred Rent,
if any;
(ii) to ensure that there is held in the Deferred Rental Account an
aggregate amount equal to the Required Deferred Rental Account
Balance;
(iii) to make any payment otherwise due and unpaid from the Lessor
hereunder; and
(iv) to release to the Lessor as a payment in respect of Deferred Rent, if
any, any amount then available in the Deferred Rental Account after
giving effect to the applications described in (i) through (iii)
above.
(b) On the Final Collection Date, any balance remaining in the Deferred
Rental Account shall be released by the Concurrent Lessee to the Lessor in full
satisfaction of all amounts owing in respect of Deferred Rent, if any, and the
Concurrent Lessee shall have no further obligations in respect of Deferred Rent.
SECTION 2.5 CONCURRENT LESSEE'S CAPITAL
---------------------------
(a) The Concurrent Lessee shall finance Prepaid Rent by incurring
Concurrent Lessee's Indebtedness to raise capital.
(b) Prior to 12:00 noon (Toronto time) on the last Business Day of each
Settlement Period, the Administrative Agent shall notify the Lessor in writing
of the Discount Rate for the current Settlement Period for the purpose of
determining the
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Concurrent Lessee's Funding Cost. Such notified Discount Rate shall be equal to
the sum of (i) the Concurrent Lessee's estimate of the weighted average capital
cost (which capital cost shall, for greater certainty, take into account the
cost of the Concurrent Lessee's Indebtedness, drawings made under the Liquidity
Agreement and payments or receipts from Hedging Agreements entered into in
respect of the Lease Tranche) for such Settlement Period, together with any
adjustments determined by the Concurrent Lessee to be necessary by reason of the
difference between (x) the actual weighted average capital cost of the
Concurrent Lessee for the immediately preceding Settlement Period, and (y) the
estimated weighted average capital cost of the Concurrent Lessee for such
immediately preceding Settlement Period and (ii) the percentage specified in the
relevant Equipment Schedule as the "Program Fee Rate".
(c) The cost of borrowings under the Liquidity Agreement shall be equal to
the 30-day bankers' acceptance rate quoted from time to time by The Toronto-
Dominion Bank plus 0.50%.
(d) The Concurrent Lessee shall provide the Lessor with information with
respect to the Concurrent Lessee's Indebtedness as such information is available
in hard copy or that may be produced from available databases with existing
software of the Concurrent Lessee as the Lessor may reasonably request.
SECTION 2.6 CLEAN-UP PROVISION
------------------
The concurrent lease by the Lessor to the Concurrent Lessee under this
Agreement of the Equipment subject to an outstanding Designated Eligible Lease
may be terminated, at the election of either the Lessor or the Concurrent
Lessee, at any time when the Program Amount is less than or equal to 10% of the
largest Program Amount incurred up to such time, and the Lessor shall pay to the
Concurrent Lessee, as consideration for the economic loss sustained by the
Concurrent Lessee as a consequence of such termination, an amount equal to the
Aggregate Finance Balance and any amounts owing hereunder, which amount shall be
transferred to the Concurrent Lessee's Account to be disbursed in accordance
with Section 2.03. For greater certainty, on such termination, the Concurrent
Lessee shall surrender, assign and transfer to the Lessor and the Lessor shall
accept the transfer of all right, title and interest of the Concurrent Lessee in
the Lease Rights under the Designated Eligible Leases relating to such Equipment
and the Lessor shall release the Concurrent Lessee from all of its remaining
obligations hereunder.
SECTION 2.7 DEEMED COLLECTIONS
------------------
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(a) If on any day prior to the Final Collection Date, the balance of the
remaining Designated Lease Receivables of any Designated Eligible Lease is
either (a) reduced as a result of any adjustment by the Lessor or (b) reduced or
cancelled as a result of a set-off in respect of any claim by the Lessee thereof
against the Collector (whether such claim arises out of the same or a related
transaction or an unrelated transaction), the Lessor shall be deemed to have
received on such day a Collection under such Designated Eligible Lease in the
amount of such reduction or cancellation and shall, on or before the first
Settlement Date following such day, remit such amount to the Collector for
deposit to the General Account or the Concurrent Lessee's Account, as
applicable, for payment to the Concurrent Lessee in accordance with Section
2.03.
(b) If on any day prior to the Final Collection Date, any of the
representations or warranties in Section 4.01(xi) is no longer true with respect
to a Designated Eligible Lease or the Lessor or the Concurrent Lessee determines
that there is an Adverse Claim in respect of any Designated Eligible Lease or
the Equipment subject thereto which the Lessor does not cause to be removed
immediately, the Lessor shall be deemed to have received on such day a
Collection of such Designated Eligible Lease in full equal to the Finance
Balance plus an amount equal to the portion of the Unearned Finance attributed
to such Designated Eligible Lease for the Settlement Period in which such day
occurred, the concurrent lease of the Equipment subject to such Designated
Eligible Lease shall be terminated and the Lessor shall, on or before the first
Settlement Date following such day, remit such amount to the Collector for
deposit to the General Account or Concurrent Lessee's Account, as applicable,
for payment to the Concurrent Lessee in accordance with Section 2.03.
(c) Upon the termination of any Lease which is a Designated Eligible Lease
for any reason whatsoever, including default by the Lessee under such Lease or
in conjunction with the exercise by the Lessee of an option or other right to
purchase or otherwise acquire the Equipment subject thereto or in conjunction
with the trade in of Equipment and the leasing of new Equipment by a Lessee, the
Concurrent Lessee may elect to terminate the concurrent lease of such Equipment
pursuant hereto and the Lessor shall pay to the Concurrent Lessee, as
consideration for the economic loss sustained by the Concurrent Lessee as a
consequence of such termination on the first Settlement Date following such
termination, an amount equal to the lesser of (A) the Finance Balance of such
Designated Eligible Lease plus an amount equal to the amount of Unearned Finance
attributed to such Designated Eligible Lease for the Settlement Period in which
such termination occurred up to the date on which such termination occurred, and
(B) the aggregate of the Concurrent Lessee's pro rata share of Net Proceeds of
such Equipment as determined in accordance with Section 2.08(d) and any amounts
received or to be received by the Collector from or on behalf of the Lessee in
respect of such termination, provided that, if the amount in (B) has not yet
been determined, the Lessor shall, on or before the first Settlement Date
following such termination, remit the amount referred to in (A) to the Collector
for deposit to the General Account or the Concurrent Lessee's Account, as
applicable, for payment to the Concurrent Lessee in accordance with Section 2.03
and upon the determination by the
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Lessor of the amount referred to in (B) the appropriate adjustments shall be
made on the next Settlement Date following such determination. Effective upon
receipt of the prepaid rent referred to in Section 2.02, the Lessor grants to
the Concurrent Lessee a continuing security interest in the Equipment for the
purpose of securing the Lessor's obligations under this Section 2.07(c).
(d) For greater certainty, upon termination of the concurrent lease of
Equipment pursuant to Section 2.07(b) or (c), the Concurrent Lessee shall
surrender, assign and transfer to the Lessor and the Lessor shall accept the
transfer of all right, title and interest of the Concurrent Lessee in the Lease
Rights under the Designated Eligible Lease relating to such Equipment and the
Lessor shall release the Concurrent Lessee from all of its remaining obligations
hereunder with respect to such Equipment relating to such Lease. If the
concurrent lease of the Equipment pursuant hereto is terminated in conjunction
with the exercise by the Lessee of an option or other right to purchase or
otherwise acquire the Equipment and the Concurrent Lessee has surrendered its
rights hereunder in respect of the Equipment to the Lessor as aforesaid, the
Lessor shall assume all of the Concurrent Lessee's obligations under the related
Lease to sell the Equipment to the Lessee.
SECTION 2.8 PAYMENTS AND COMPUTATIONS, ETC.
-------------------------------
(a) All amounts to be paid or deposited by the Lessor, Sub-Collector, the
Performance Guarantor or the Collector to the Concurrent Lessee will be paid or
deposited no later than 2:00 p.m. (Toronto time) on the day when due in
accordance with the terms hereof in same day funds to the applicable account as
required hereunder.
(b) The Lessor shall pay to the Concurrent Lessee interest (both before and
after default and judgment, with interest on overdue interest at the same rate)
on all amounts not paid or deposited when due hereunder (whether owing by the
Lessor on its own behalf or in its capacity as Collector) at a rate equal to the
Prime Rate plus 1% per annum, payable on demand. Such interest shall be paid by
the Lessor to the Collector for deposit to the Concurrent Lessee's Account on
the next Settlement Date. The yearly rate of interest for any day to which the
Prime Rate is applicable is the rate so determined multiplied by the actual
number of days in that year and divided by 365 or 366, as the case may be.
Interest rate charges will be effective for interest computation periods from
the date on which the Prime Rate changes and the Lessor and the Concurrent
Lessee will be bound by any and all changes of the Prime Rate with or without
notice thereof.
(c) The Lessor shall, on its own behalf or in its capacity as Collector,
make all payments required to be made by it hereunder without deduction (other
than for applicable taxes or as otherwise authorized hereunder), regardless of
any defence or counterclaim (whether based on any law, rule or policy now or
hereafter issued or enacted by an government authority or regulatory body),
except as contemplated hereunder.
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(d) At any time the Concurrent Lessee is entitled under this Agreement to
Net Proceeds with respect to a Designated Eligible Lease, the Concurrent Lessee
shall be entitled to the portion of such Net Proceeds that the Finance Balance
of such Designated Eligible Lease represents of the aggregate of the Finance
Balance and the Residual Balance of such Designated Eligible Lease as at such
time, and the Lessor shall be entitled to the remainder of such Net Proceeds.
SECTION 2.9 ALLOCATION OF COLLECTIONS
-------------------------
Except as otherwise required by law, if the Collector, after using its
reasonable efforts, cannot determine the proper allocation of any non-directed
payments made by a Lessee in respect of any indebtedness owed by it to the
Lessor, such amounts shall be allocated by the Collector consistent with the
practices of the Lessor existing as at the Cut-off Date as set out in the Credit
and Collection Policy or as otherwise mutually agreed to by the Lessor and the
Concurrent Lessee.
SECTION 2.10 REPORTING
---------
(a) On or before the twelfth Business Day of each month, the Collector
shall, with all necessary co-operation of the Lessor, if the Lessor is not the
Collector, prepare and deliver to the Concurrent Lessee:
(i) a Lease Portfolio and Compliance Report relating to the
Designated Eligible Leases as of the close of business of the
Collector on the last day of the most recently completed
Settlement Period; and
(ii) if requested by the Administrative Agent, a listing by Lessee of
the Finance Balance of the Equipment as of such last day,
determined in accordance with the Lessor's customary practice.
(b) The Lessor shall provide the Concurrent Lessee with such other Records
that are available in hard copy or that may be produced from available databases
with existing software of the Lessor as the Concurrent Lessee may reasonably
request.
(c) The Concurrent Lessee shall on or before each Settlement Date provide
the Lessor with written notice detailing any expenses which are required to be
paid to the Concurrent Lessee pursuant to Sections
2.03(c)(ii),(iii),(vii),(viii) and (ix) and any interest earned on the Deferred
Rental Account.
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SECTION 2.11 FEES
----
(a) The Lessor shall, promptly after the Initial Prepayment Date, pay all
legal expenses (including fees, disbursements and taxes) incurred by TD
Securities Inc. on behalf of the Concurrent Lessee in connection with the
preparation and entering into of this Agreement by the Concurrent Lessee.
(b) The Lessor shall, promptly after each Subsequent Prepayment Date, pay
all legal expenses (including fees, disbursements and taxes) incurred by TD
Securities Inc. on behalf of the Concurrent Lessee in connection with the
preparation and entering into of the related Equipment Schedule.
(c) The Lessor shall pay to the Concurrent Lessee a fee (the "Program Fee")
in respect of each Settlement Period prior to the Final Collection Date in an
amount equal to (i) the product of the number of days in such Settlement Period
multiplied by a program fee rate agreed to by the parties for such Settlement
Period, (ii) divided by 365 or 366, as the case may be, and (iii) multiplied by
the daily weighted average of the Program Amount outstanding during such
Settlement Period. The Program Fee for a Settlement Period shall be
incorporated in the Concurrent Lessee's Funding Cost and shall be paid pursuant
to Section 2.03(c)(v).
(d) In the event that the Lessor is not the Collector, the Lessor shall pay
to the Concurrent Lessee, on the last day of each Settlement Period for such
Settlement Period for payment to the Concurrent Lessee in accordance with
Section 2.03(c)(iii), an amount equal to the Collector Fee required to be paid
by the Concurrent Lessee for such Settlement Period.
SECTION 2.12 FURTHER ACTION TO PROTECT DESIGNATED ELIGIBLE LEASES
----------------------------------------------------
(a) The Lessor shall, from time to time at its expense, promptly execute
and deliver all instruments and documents and take all action that the
Concurrent Lessee may reasonably request, in order to perfect, protect or more
fully evidence (i) the Concurrent Lessee's interest in, inter alia, the
Designated Eligible Leases and the Lease Rights relating thereto, and (ii) the
Concurrent Lessee's security interest in and to the Deferred Rental Account, or
to enable the Concurrent Lessee to exercise or enforce, inter alia, any of its
rights hereunder or thereunder (other than any registrations required to perfect
the Lessor's interest under particular Leases). Without limiting the generality
of the foregoing, and for greater certainty, the Lessor shall, at the request of
the Concurrent Lessee, hypothecate the Deferred Rental Account in favour of the
Concurrent Lessee.
(b) Upon any termination of the concurrent lease hereunder with respect to
Equipment and upon the occurrence of the Final Collection Date, the Concurrent
Lessee shall, from time to time at the Lessor's expense, promptly execute and
deliver all
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instruments and documents and take all action that the Lessor may reasonably
request, in order to perfect, protect or more fully evidence the Lessor's
interest in, inter alia, the Leases, and to enable the Lessor to exercise or
enforce, inter alia, any of its rights hereunder or thereunder (other than any
registrations required to perfect the Lessor's interest under particular
Leases). Without limiting the generality of the foregoing, and for greater
certainty, upon any such termination of the concurrent lease hereunder with
respect to Equipment, the Concurrent Lessee shall assign to the Lessor all
right, title and interest of the Concurrent Lessee in the related Designated
Eligible Leases and the Lease Rights relating thereto and upon the request of
and at the expense of the Lessor, cancel and discharge any of the security
constituted by this Agreement and execute such instruments as are reasonably
required by the Lessor for that purpose.
SECTION 2.13 INELIGIBLE LEASES
-----------------
If, at any time after any Relevant Cut-off Date, the Administrative
Agent, the Concurrent Lessee or the Lessor determines that, on such Relevant
Cut-off Date, any Lease designated as a Designated Eligible Lease was not an
Eligible Lease (for the purposes of this Section 2.13, an "Ineligible Lease"),
the Administrative Agent, the Concurrent Lessee or the Lessor, as the case may
be, shall forthwith notify the other parties of such ineligibility and within
two Business Days of receipt of such notice (or on the date of notification, if
a Significant Event has occurred and is continuing), the Concurrent Lessee shall
terminate the concurrent lease of the Equipment relating to such Designated
Eligible Lease and the Lessor shall pay to the Collector, for deposit to the
Concurrent Lessee's Account or the General Account, as applicable, to be paid to
the Concurrent Lessee in accordance with Section 2.03, as consideration for the
economic loss sustained by the Concurrent Lessee as a consequence of such
termination, an amount equal to the Finance Balance of such Ineligible Lease
plus the Unearned Finance attributed to such Ineligible Lease for the Settlement
Period in which the termination occurred. For greater certainty, upon such
termination of the concurrent lease of the Equipment relating to such Ineligible
Lease, the Concurrent Lessee shall surrender, assign and transfer to the Lessor
and the Lessor shall accept the transfer of all right, title and interest of the
Concurrent Lessee in the Ineligible Lease and Lease Rights relating thereto, the
Lessor shall assume all of the Concurrent Lessee's obligations under such
Ineligible Lease and the Lessor shall release the Concurrent Lessee from all of
its remaining obligations hereunder with respect to such Equipment relating to
such Ineligible Lease. It is also hereby acknowledged that a Lease shall cease
to be an Ineligible Lease by reference to paragraph (xiv) of the definition of
"Eligible Lease" if, after taking into account any transactions under this
Section 2.13, the outstanding Finance Balance of such Lease, when added to the
remaining outstanding Finance Balance of all other Leases to the same Lessee and
any Affiliated Lessee, no longer exceeds the Concentration Limit.
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SECTION 2.14 SALES TAXES
-----------
(a) Unless otherwise specified herein or in any other agreement between the
parties hereto, all amounts and payments referred to herein are exclusive of any
Sales Taxes, which are or may become exigible in connection with any
transactions performed in accordance with the terms of this Agreement.
(b) Subject to Section 2.14(c), the payor of any particular payment
hereunder (the "Particular Payment") shall be liable and shall pay to the payee
on the date on which the Particular Payment becomes payable, in addition to the
Particular Payment, any Sales Taxes properly payable by the payor and
collectible by the payee upon or in connection with the Particular Payment.
(c) The Lessor shall fund and remit to Revenue Canada (Customs and Excise),
or other applicable taxing authority, the amount of any tax payable by the
Concurrent Lessee under the Excise Tax Act (Canada) and any tax payable under
the An Act Respecting Quebec Sales Tax (Quebec) and any similar goods and
services or value added tax which may, now or in the future, be imposed by any
governmental authority in respect of any Prepaid Rent. The Concurrent Lessee
agrees to apply in a timely manner for the applicable GST, HST and QST input tax
credits or input tax reimbursements and to pay to the Lessor, forthwith upon
receipt thereof, such input tax credits or input tax reimbursements, in respect
of the GST, HST or QST, as applicable, payable by the Concurrent Lessee and
remitted by the Lessor.
(d) Any tax payable by the Concurrent Lessee to the Lessor under the Excise
Tax Act (Canada) or An Act Respecting Quebec Sales Tax (Quebec) in respect of
any Particular Payment, other than Prepaid Rent, shall be paid by the Collector,
on behalf of the Concurrent Lessee, to the Lessor.
(e) The Collector shall collect, account for and remit all taxes payable
under the Excise Tax Act (Canada) and An Act Respecting Quebec Sales Tax by
Lessees in respect of the Equipment. In connection therewith and to the extent
required, the Collector and the Concurrent Lessee agree to execute elections
under subsection 177(1.1) of the Excise Tax Act (Canada) and section 41.0.1 of
An Act Respecting Quebec Sales Tax. Any such election shall remain in effect
until terminated by the Lessor and the Concurrent Lessee.
(f) The Collector shall collect from Lessees all PST payable by the Lessees
in respect of the Equipment in any particular tax reporting period prescribed by
the relevant taxation authority. Except where a request is made under Section
5.01(xix), the Collector shall remit to the Concurrent Lessee all such taxes
required to be collected in respect of a particular tax reporting period no
later than five business days prior to the day on which such taxes must be
remitted to the relevant taxation authority.
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(g) The Collector shall prepare and issue to the Concurrent Lessee
certificates itemizing, and attesting to, all Sales Taxes collected and
accounted for in respect of the particular tax reporting period for each taxing
jurisdiction. In the case of PST, the certificates shall accompany the
remittance referred to in Section 2.14(f) above. In the case of GST, HST and
QST, the certificates shall be forwarded to the Concurrent Lessee no later than
fifteen days following the date on which returns itemizing the collection of
such taxes are forwarded to the Department of National Revenue or Revenue
Quebec, as applicable.
(h) The Concurrent Lessee may, at its option, appoint the Lessor as its
agent or mandatary for the purpose of making supplies of the Equipment to the
extent required to permit the Lessor to account for GST, HST and QST on such
supplies in the manner contemplated by subsection 177(1.1) of the Excise Tax Act
(Canada) and section 41.0.1 of An Act Respecting Quebec Sales Tax. Any such
appointment shall be made in writing and shall remain in force until revoked by
the Concurrent Lessee.
SECTION 2.15 TERMINATION OF THE CONCURRENT LEASE
------------------------------------
Except as provided herein, the Lessor shall not be entitled to
terminate this Agreement with respect to Equipment subject to any Designated
Eligible Leases.
SECTION 2.16 PERMITTED INVESTMENTS
---------------------
Subject to Section 2.04(a), the balance available in the Deferred
Rental Account shall be invested in Permitted Investments by the Concurrent
Lessee. If any General Account shall be established, the balance available in
such General Account shall be invested in Permitted Investments by the Collector
as may be directed by the Concurrent Lessee. The Concurrent Lessee shall
maintain and direct the Collector to maintain a portion of the aggregate
balances in such accounts equal to the amount due and payable by the Lessor on
the next following Settlement Date in Permitted Investments which mature no
later than such Settlement Date. The Concurrent Lessee shall, upon the request
of the Lessor, advise the Lessor of the Permitted Investments in which such
balances are invested.
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ARTICLE 3
CONDITIONS OF LEASE
SECTION 3.1 CONDITIONS PRECEDENT TO CONCURRENT LEASE UNDER INITIAL EQUIPMENT
----------------------------------------------------------------
SCHEDULE
--------
The concurrent leasing hereunder of Equipment subject to the
Designated Eligible Leases described in the Initial Equipment Schedule is
subject to the condition precedent that the Concurrent Lessee shall have
received on or before the Initial Prepayment Date the following, in form and
substance satisfactory to the Concurrent Lessee, unless any condition or
conditions are waived in writing by the Concurrent Lessee:
(i) certified copies of all necessary corporate authorizations of the
Lessor, IKON Capital and the Performance Guarantor to authorize
the execution, delivery and performance of this Agreement and of
the transactions contemplated hereby;
(ii) certificates of the Lessor, IKON Capital and the Performance
Guarantor as to the names and true signatures of the officers
authorized to sign this Agreement and all other documents to be
delivered hereunder on its behalf on which certificates the
Concurrent Lessee shall be entitled to conclusively rely in
respect of each Lease Tranche until such time as the Concurrent
Lessee receives from the Lessor, IKON Capital or the Performance
Guarantor, as the case may be, a replacement certificate meeting
the requirements of this Section 3.01(ii);
(iii) certified copies of the constating documents and by-laws of the
Lessor, IKON Capital and the Performance Guarantor;
(iv) a certificate of status, of good standing or of compliance, as
appropriate, with respect to each of the Lessor, IKON Capital and
the Performance Guarantor issued by their respective
jurisdictions of incorporation and in respect of the Lessor by
each jurisdiction in which the registrations referred to in
Section 3.01(v) have been made;
(v) copies of proper financing statements, with the registration
date, time and number stamped thereon dated a date on or prior to
the Initial Prepayment Date, naming the Lessor as debtor and the
Concurrent Lessee as secured party or other similar registration,
instruments or documents, as may be necessary or in the opinion
of the Concurrent Lessee desirable under all relevant personal
property security legislation or any comparable law in Canada to
reflect the Concurrent Lessee's interest in Equipment, subject to
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all Designated Eligible Leases, and leased hereunder and in all
other Lease Rights relating thereto;
(vi) executed copies of all discharges, releases or subordinations if
any, necessary to discharge, release or subordinate all security
interests and all other rights or interests of any person in the
Designated Eligible Leases or Equipment leased thereunder
previously granted by the Lessor and copies of the relevant
financing change statements or other appropriate discharge or
subordination instruments with the registration date, time and
number stamped thereon;
(vii) an executed copy of this Agreement;
(viii) an executed copy of the Initial Equipment Schedule which has been
accepted by the Concurrent Lessee pursuant to Section 2.01(b);
(ix) certificates of the Lessor, IKON Capital and the Performance
Guarantor (i) that the representations and warranties set out in
Section 4.01 or 4.02, as applicable, are true and correct, (ii)
that no event has occurred and is continuing which constitutes a
Lock-Up Event, (iii) that no event has occurred and is
continuing, or would result from the leasing of the Equipment set
out in the Initial Equipment Schedule, which would constitute a
Significant Event or would constitute a Significant Event but for
the requirement that notice be given or time elapse or both, and
(iv) as to such other matters as the Concurrent Lessee may
reasonably request;
(x) favourable opinions of counsel for the Lessor and IKON Capital
and counsel for the Performance Guarantor in substantially the
form of Schedules D and D-1, respectively, and as to such other
matters as the Concurrent Lessee may reasonably request;
(xi) a favourable opinion of Messrs. McCarthy Tetrault, counsel for
the Concurrent Lessee, as to such matters as the Concurrent
Lessee may reasonably request;
(xii) a certificate showing the Concurrent Lessee as an additional loss
payee and a named insured in respect of (i) all risk property
damage insurance held by the Lessor, if any, in respect of the
Equipment subject to Designated Eligible Leases in an amount not
less than the Finance Balance thereof and (ii) public liability
insurance in an amount of not less than $2,000,000 per
occurrence;
(xiii) an executed copy of the confirmation confirming any Hedging
Agreement entered into by the Concurrent Lessee and the Lessor
with respect to the Initial Equipment Schedule, together with any
fee payable by the Concurrent
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Lessee or the Lessor on the Initial Prepayment Date in connection
with such Hedging Agreement;
(xiv) an executed copy of the Indemnification Agreement; and
(xv) the written consent of the Rating Agencies to such concurrent
lease and such other approvals, opinions or documents as the
Concurrent Lessee may reasonably request.
SECTION 3.2 CONDITIONS PRECEDENT TO CONCURRENT LEASE UNDER SUPPLEMENTAL
-----------------------------------------------------------
EQUIPMENT SCHEDULES
-------------------
The concurrent leasing hereunder of Equipment subject to
Designated Eligible Leases described in all Supplemental Equipment Schedules, is
subject to the conditions precedent that the Concurrent Lessee shall have
received on or before the relevant Subsequent Prepayment Date with respect to
each such Supplemental Equipment Schedule the following, in form and substance
satisfactory to the Concurrent Lessee unless any condition or conditions are
waived in writing by the Concurrent Lessee and the Rating Agencies:
(i) an executed copy of the Supplemental Equipment Schedule which has
been accepted by the Concurrent Lessee pursuant to Section
2.01(b);
(ii) certificates of the Lessor, IKON Capital and the Performance
Guarantor (i) that the representations and warranties set out in
Section 4.01 or 4.02, as applicable, are true and correct, (ii)
that no event has occurred and is continuing which constitutes a
Lock-Up Event, (iii) that no event has occurred and is
continuing, or would result from the leasing of the Equipment set
out in the relevant Supplemental Equipment Schedule, which
constitutes a Significant Event or would constitute a Significant
Event but for the requirement that notice be given or time elapse
or both, (iv) there are no changes in its constating documents
(or disclosing same), and (v) as to such other matters as the
Concurrent Lessee may reasonably request;
(iii) such registrations, instruments or documents, as may be necessary
or, in the opinion of the Concurrent Lessee, desirable under all
personal property security legislation or comparable law in
Canada to reflect the Concurrent Lessee's interest in the
Equipment subject to all Designated Eligible Leases and
concurrently leased hereunder and in all other Lease Rights
relating thereto;
(iv) executed copies of all discharges, releases or subordinations, if
any, necessary to discharge, release or subordinate all security
interests and all
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other rights or interests of any person in the Designated
Eligible Leases or Equipment leased thereunder previously granted
by the Lessor and copies of the relevant financing change
statements or other appropriate discharge or subordination
instruments with the registration date, time and number stamped
thereon;
(v) all fees due and payable hereunder by the Lessor shall have been
paid;
(vi) confirmation that the Additional Lease Termination Date has not
occurred;
(vii) the written consent of the Rating Agencies to such concurrent
lease, if necessary; and
(viii) such other approvals, opinions or documents as the Concurrent
Lessee may reasonably request.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 REPRESENTATIONS AND WARRANTIES OF THE LESSOR
--------------------------------------------
The Lessor hereby represents and warrants to the Concurrent
Lessee on a continuous basis (unless otherwise indicated in the applicable
representation and warranty to be made as at a particular point in time) as
follows:
(i) it is a corporation validly existing under the laws of its
jurisdiction of incorporation and is duly qualified to do
business in every jurisdiction where failure to be so qualified
would adversely affect the collectibility of the Designated Lease
Receivables and the other Lease Rights related to the Designated
Eligible Leases;
(ii) the execution, delivery and performance by it of this Agreement,
the Initial Equipment Schedule, or any Supplemental Equipment
Schedule and the other documents delivered by it hereunder and
the transactions contemplated hereby and thereby are within its
corporate powers, have been duly authorized by all necessary
corporate action, do not contravene:
(1) its constating documents or by-laws;
(2) any law, rule or regulation applicable to it;
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(3) any indenture, loan or credit agreement, lease, mortgage,
security agreement, bond, note or other agreement or
instrument binding upon it or affecting its property which
is of a material nature; or
(4) any order, writ, judgment, award, injunction or decree
binding on it or affecting its property which is of a
material nature;
and do not result in or require the creation of any lien,
security interest or other charge or encumbrance upon or with
respect to any of its properties other than with respect hereto;
(iii) as at the Cut-off Date with respect to the Initial Equipment
Schedule and as at the relevant Subsequent Cut-off Date with
respect to a Supplemental Equipment Schedule, no authorization,
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for the due
execution, delivery and performance by it of this Agreement, the
Initial Equipment Schedule or any Supplemental Equipment Schedule
or the other documents delivered by it hereunder, except for such
notices or filings that are required to reflect the Concurrent
Lessee's interest in the Equipment which is the subject of all
Designated Eligible Leases and concurrently leased hereunder and
in all other Lease Rights relating thereto;
(iv) as at the Cut-off Date with respect to the Initial Equipment
Schedule and as at the relevant Subsequent Cut-off Date with
respect to a Supplemental Equipment Schedule, this Agreement, the
Initial Equipment Schedule and each Supplemental Equipment
Schedule, as applicable, and all other documents delivered by it
hereunder have been duly executed and delivered by it or on its
behalf;
(v) this Agreement (including the Initial Equipment Schedule and any
Supplemental Equipment Schedule executed and delivered hereunder)
is the legal, valid and binding obligation of it enforceable
against it in accordance with its terms (assuming due and valid
execution and delivery thereof by the other parties thereto)
subject to applicable bankruptcy, insolvency, reorganization,
winding-up, moratorium or similar laws affecting creditors'
rights generally and subject, as to enforceability, to equitable
principles of general application (regardless of whether
enforcement is sought in a proceeding in equity or at law);
(vi) its consolidated balance sheet as at September 30, 1997 and the
related statements of income and retained earnings for the fiscal
year then ended, copies of which have been furnished to the
Concurrent Lessee together with a certificate of the senior
financial officer of the Performance Guarantor
-41-
certifying the accuracy of such statements, fairly present in all
material respects its consolidated financial position as at such
date and the consolidated results of its operations for the
period ended on such date, all in accordance with generally
accepted accounting principles; and since September 30, 1997
there has been no material adverse change in any such position or
operations;
(vii) its unconsolidated balance sheet as at December 31, 1997 and the
related statements of income and retained earnings for the fiscal
quarter then ended, copies of which have been furnished to the
Concurrent Lessee together with a certificate of the senior
financial officer of the Performance Guarantor certifying the
accuracy of such statements, fairly present in all material
respects its financial position as at such date and the results
of its operations for the period ended on such date, all in
accordance with generally accepted accounting principles; and
since December 31, 1997 there has been no material adverse change
in such position or operations;
(viii) there are no actions, suits or proceedings of which it has not
advised the Concurrent Lessee in writing against or affecting it
or any of its subsidiaries or any of their respective property
before any court, governmental body or arbitrator (nor to its
knowledge, any such actions pending or threatened) which may
materially adversely affect its ability to perform its
obligations hereunder or under the other documents delivered by
it hereunder and it is not in default with respect to any order
of any court, governmental body or arbitrator which materially
adversely affects its ability to perform its obligations
hereunder or thereunder;
(ix) no event of default has occurred and is outstanding under any
agreement or instrument referred to in Section 4.01(ii)(3) which
would entitle the creditor, secured party or lessor thereunder,
without the requirement of having to give any further notice or
that a further specified period of time shall have elapsed, to
accelerate the payment by the Lessor of a material amount;
(x) all taxes, including, without limitation, sales, social services
and goods and services taxes relating to each Designated Eligible
Lease are the obligation of the Lessee thereunder;
(xi) each Designated Eligible Lease and the Equipment leased
thereunder is and will at all times be owned by the Lessor free
and clear of any Adverse Claims which, when added to the
aggregate of Adverse Claims in respect of all other Designated
Eligible Leases in the Lease Portfolio and the Equipment subject
thereto, would result in an amount exceeding $50,000; and no
effective financing statements or other instrument similar in
effect covering any
-42-
Designated Eligible Lease, the Equipment leased thereunder or the
Lease Rights or Collections relating thereto is or will at any
time be on file in any recording office except such as may be
filed in favour of the Concurrent Lessee in accordance with this
Agreement, or in respect of which the secured party thereunder
has acknowledged that it claims no security interest or
subordinates its security interest in the Designated Eligible
Leases, the Equipment leased thereunder or the Lease Rights and
Collections relating thereto.
(xii) each Lease set out on an Equipment Schedule is, subject to
Section 4.01(xi), an Eligible Lease, and has been registered or
recorded, or a financing statement in respect thereof has been
registered, in accordance with the requirements of the Credit and
Collection Policy;
(xiii) no Lease Portfolio and Compliance Report (if prepared by the
Lessor, or to the extent that information contained therein is
supplied by the Lessor), Equipment Schedule, information,
exhibit, financial statement, document, book, record or report
furnished or to be furnished by the Lessor to the Concurrent
Lessee in connection with this Agreement is or will be inaccurate
in any material respect as of the date it is or will be dated or
(except as otherwise disclosed to the Concurrent Lessee at such
time) as of the date so furnished, or contains or will contain
any material misstatement of fact or omits or will omit to state
a material fact or any fact necessary to make the statements
contained therein not materially misleading;
(xiv) the chief executive office of the Lessor and the chief places of
business of the Lessor in each of the provinces and territories
are located at the addresses of the Lessor set out in Exhibit E
(or at such other locations as the Concurrent Lessee has been
notified of in any Equipment Schedule). The offices where the
Lessor keeps the books, records and documents relating to
Designated Eligible Leases and the Equipment leased thereunder
are located at the addresses of Lessor set out in Exhibit E (or
at such other locations as the Concurrent Lessee has been
notified of in any Equipment Schedule);
(xv) the offices of Lessor listed on Exhibit E (or such other
locations as the Concurrent Lessee has been notified of in any
Equipment Schedule) are all of the offices to which Lessees are
instructed to send Collections of Designated Eligible Leases;
(xvi) the Lessor has as of the date hereof fully complied with all of
its obligations under each Designated Eligible Lease and all
other agreements, including relevant maintenance contracts,
entered into by the Lessor in connection therewith;
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(xvii) information technology issues arising or which may arise from
matters related to the year 2000 and related risks will not have
a material adverse effect on the business or operations of the
Lessor or on the collectibility or enforceability of the
Designated Lease Receivables or the ability of the Lessor to
collect Designated Lease Receivables or the ability of the
Lessor, IKON Capital or the Performance Guarantor to perform its
obligations hereunder;
(xviii) the Lessor is not a non-resident as defined under the Income Tax
Act;
(xix) Lessor has treated and will continue to treat the Designated
Eligible Leases for income tax purposes as leases, and not sales,
and has prepared and filed and will continue to prepare and file
its tax returns under the Income Tax Act (Canada) and any
applicable corresponding provincial legislation with respect to
income tax in a manner consistent with the foregoing treatment;
(xx) the Lessor has delivered to the Concurrent Lessee true copies of
all forms of lease agreements now used by the Lessor in
connection with the entering into of a Lease;
(xxi) the Lessor is, as at the date hereof, registered under Part IX of
the Excise Tax Act (Canada) with registration no. R87300-8189-
RT0012 and that it is registered under An Act Respecting Quebec
Sales Tax (Quebec) with registration no. 142370535; and
(xxii) as at the Initial Prepayment Date and each Subsequent Prepayment
Date, no event has occurred and is continuing and no condition
exists which constitutes a Lock-Up Event.
SECTION 4.2 REPRESENTATIONS AND WARRANTIES OF THE PERFORMANCE GUARANTOR AND
---------------------------------------------------------------
IKON CAPITAL
------------
Each of the Performance Guarantor and IKON Capital hereby
represents and warrants to the Concurrent Lessee on a continuous basis (unless
otherwise indicated in the applicable representation and warranty to be made as
at a particular point in time and/or by only one of the Performance Guarantor or
IKON Capital) as follows:
(i) it is a corporation validly existing under the laws of its
jurisdiction of incorporation;
(ii) the execution, delivery and performance by it of any of this
Agreement, the Initial Equipment Schedule and any Supplemental
Equipment Schedule to
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which it is a party, and the other documents to be delivered by
it hereunder or thereunder are within its corporate powers, have
been duly authorized by all necessary corporate action and do not
contravene:
(1) its charter documents or by-laws;
(2) any law, rule or regulation applicable to it;
(3) any indenture, loan or credit agreement, lease, mortgage,
security agreement, bond, note or other agreement or
instrument binding upon it or affecting its property which
is of a material nature; or
(4) any order, writ, judgment, award, injunction or decree
binding on it or affecting its property which is of a
material nature;
(iii) this Agreement, the Initial Equipment Schedule, all Supplemental
Equipment Schedules and all other documents delivered by it
hereunder or thereunder have been duly executed and delivered by
or on its behalf;
(iv) as at the Cut-off Date with respect to the Initial Equipment
Schedule and as at the relevant Subsequent Cut-off Date with
respect to any Supplemental Equipment Schedule, no authorization,
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for the due
execution, delivery and performance by it of this Agreement, the
Initial Equipment Schedule, any Supplemental Equipment Schedule
and any other documents delivered by it hereunder or thereunder;
(v) this Agreement (including the Initial Equipment Schedule and all
Supplemental Equipment Schedules) is its legal, valid and binding
obligation enforceable against it in accordance with its terms
(assuming due and valid execution and delivery thereof by the
other parties thereto) subject to applicable bankruptcy,
reorganization, insolvency, reorganization, winding-up,
moratorium or similar laws affecting creditors' rights generally
and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought
in a proceeding in equity or at law);
(vi) no material default has occurred and is outstanding under any
agreement or instrument referred to in Section 4.02(ii)(3) which
default would materially and adversely affect its ability to
perform its obligations hereunder or under the other documents
delivered by it hereunder;
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(vii) there are no actions, suits or proceedings of which it has not
advised the Concurrent Lessee in writing against or affecting it
or any of its property before any court, governmental body or
arbitrator (nor to its knowledge, any such actions pending or
threatened) which may materially adversely affect its ability to
perform its obligations hereunder or under the other documents
delivered by it hereunder and it is not in default with respect
to any order of any court, governmental body or arbitrator which
materially adversely affects its ability to perform its
obligations hereunder or thereunder;
(viii) in the case of the Performance Guarantor, its long term debt is
rated by Moody's at Baa3 or better and by S&P at BBB- or better;
and
(ix) in the case of the Performance Guarantor, no Equipment Schedule
or financial statement furnished or to be furnished by the Lessor
to the Concurrent Lessee is or will be inaccurate in any material
respect as of the date it is or will be dated or (except as
otherwise disclosed to the Concurrent Lessee at such time) as of
the date so furnished, or contains or will contain any material
misstatement of fact or omits or will omit to state a material
fact or any fact necessary to make the statements contained
therein not materially misleading.
SECTION 4.3 REPRESENTATIONS AND WARRANTIES OF THE CONCURRENT LESSEE
-------------------------------------------------------
The Concurrent Lessee hereby represents and warrants to the
Lessor on a continuous basis as follows:
(i) that it is a trust duly established and validly existing under
the laws of the Province of Ontario and the execution, delivery
and performance by it of this Agreement, the Initial Equipment
Schedule and any Supplemental Equipment Schedule and of the
transactions contemplated hereby are within its purposes and
powers and have been duly authorized by all necessary action; and
(ii) that it is duly licensed or has made the appropriate application
to become duly licensed to collect provincial sales tax in all
applicable Canadian provincial jurisdictions and is registered
under Part IX of the Excise Tax Act (Canada) with registration
no. 87390 0443.
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ARTICLE 5
COVENANTS OF THE LESSOR, PERFORMANCE GUARANTOR AND IKON CAPITAL
SECTION 5.1 AFFIRMATIVE COVENANTS OF THE LESSOR
-----------------------------------
From the date hereof until the Final Collection Date, each of the
Lessor and the Collector (if the Lessor is the Collector) shall, unless the
Concurrent Lessee otherwise consents in writing:
(i) comply with all laws, rules, regulations and orders applicable to
all or any of the Lessor, the Collector, their respective
businesses, and properties and the Lease Rights relating to the
Designated Eligible Leases, except where the failure to do so
would not materially adversely affect the Concurrent Lessee's
interests hereunder, the enforceability of Designated Eligible
Leases (including the collectibility of the Designated Lease
Receivables) or the ability of the Lessor or the Collector to
perform its obligations hereunder or thereunder;
(ii) preserve and maintain its corporate existence and qualify and
remain qualified as a foreign or extra-provincial corporation in
each jurisdiction in which the failure to do so would materially
adversely affect the interests of the Concurrent Lessee
hereunder, the enforceability of Designated Eligible Leases
(including the collectibility of the Designated Lease
Receivables) or the ability of the Lessor or the Collector to
perform its obligations thereunder or hereunder;
(iii) maintain and implement prudent and reasonable administrative and
operating procedures (including an ability to recreate records
evidencing the Designated Eligible Leases and the Lease Rights
relating thereto in the event of the destruction of the originals
thereof) and keep and maintain all books, records, documents and
other information reasonably necessary or advisable for the
collection of all Designated Lease Receivables (including,
without limitation, records adequate to permit all Collections of
and reductions or adjustments to the Designated Lease
Receivables);
(iv) (1) furnish to the Concurrent Lessee promptly, from time to
time, such documents, records, information or reports with
respect to the Designated Eligible Leases, the Equipment
subject thereto and the Lease Rights relating thereto or the
conditions or operations, financial or otherwise, of the
Lessor as may be in existence in written form or, if
available in databases maintained by the Lessor, may be
produced
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with existing software and which the Concurrent Lessee may from
time to time reasonably request; and
(2) at any time and from time to time during regular business hours,
permit the Concurrent Lessee, its agents or representatives upon
two Business Days' prior notice to (i) examine and make copies of
all Records relating to the Designated Eligible Leases, the
Equipment subject thereto and the Lease Rights relating thereto
in the possession (or under the control) of the Lessor, and (ii)
visit the offices and properties of the Lessor for the purpose of
examining such Records and discussing matters relating to the
Designated Eligible Leases, the Equipment subject thereto and the
Lease Rights relating thereto and the Lessor's performance under
the Designated Eligible Leases or hereunder with any of the
Lessor's officers or employees having knowledge of such matters;
(v) furnish to the Concurrent Lessee:
(1) as soon as available and in any event within 60 days after the
end of each of the first three quarters in each fiscal year of
the Lessor, the consolidated and unconsolidated balance sheet of
the Lessor as of the end of such quarter and the consolidated and
unconsolidated statements of income of the Lessor for the period
commencing at the end of the previous fiscal year and ending with
the end of such quarter, certified by the senior financial
officer of the Performance Guarantor as to the accuracy of the
information contained therein; and
(2) as soon as available and in any event within 120 days after the
end of each fiscal year of the Lessor, a copy of the consolidated
and unconsolidated financial statements for such year for the
Lessor, such financial statements to contain at least a balance
sheet, an earnings statement, a statement of changes in financial
position and a statement of retained earnings and certified by
the senior financial officer of the Performance Guarantor as to
the accuracy of the information contained therein;
(vi) furnish to the Concurrent Lessee promptly after the sending or filing
thereof, copies of all reports which the Lessor sends to any holders
of securities which it has offered to the public, and copies of all
reports and documents which the Lessor files with any securities
commission or any similar regulatory body;
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(vii) furnish to the Concurrent Lessee as soon as possible, and in any
event within five Business Days after an officer of the Lessor
becomes aware or ought to have become aware of the occurrence of
each Significant Event and each event which, with the giving of
notice or lapse of time or both, would constitute a Significant
Event, a statement of the Lessor's V-P Finance setting forth details
as to such Significant Event or event and the action which the
Lessor has taken and/or is proposing to take with respect thereto;
(viii) promptly upon becoming aware thereof, advise the Concurrent Lessee
of any material adverse change in its business, operations or
financial condition which reasonably could adversely affect the
Concurrent Lessee's interest hereunder, the enforceability of the
Lease Rights relating to any Designated Eligible Lease (including
the collectibility of the Designated Lease Receivable related
thereto), or its ability to perform its obligations hereunder or
under any Designated Eligible Lease.
(ix) notify the Concurrent Lessee at least ten Business Days prior to
changing its corporate name;
(x) notify the Concurrent Lessee at least 30 Business Days prior to
changing its chief place of business or chief executive office;
(xi) direct and require its auditors, at the Lessor's expense, to assist
the Concurrent Lessee's auditors to the extent and in such manner as
is required for the Concurrent Lessee's auditors to report on the
status of the Designated Eligible Leases and the Lease Rights
relating thereto;
(xii) timely and fully perform and comply with all terms, covenants and
other provisions required to be performed and observed by it under
the Designated Eligible Leases;
(xiii) comply in all respects with the Credit and Collection Policy (as
such policy may be amended from time to time, subject to Section
5.02(ii)) in regard to each Designated Eligible Lease and the
Designated Lease Receivables and notify the Concurrent Lessee, on
each Settlement Date prior to the occurrence of a Significant Event,
or promptly, following the occurrence of a Significant Event, of any
amendments to a Designated Eligible Lease in accordance with the
Credit and Collection Policy which would result in the information
set out in any Equipment Schedule no longer being accurate;
(xiv) in accordance with the Credit and Collection Policy, in the case of
the Lessor, if the Lessor is the Collector, make all renewal and
other
-49-
registrations necessary to maintain any registrations respecting
the Concurrent Lessee's interest hereunder as against third
parties;
(xv) in the case of the Lessor, if the Lessor is the Collector, take all
steps necessary to obtain the discharge or partial discharge, as
the case may be, of any financing statement, registration,
recording, filing or other document similar in effect relating to
any Designated Eligible Lease and the Lease Rights or Collections
relating thereto on file which are in respect of Adverse Claims;
(xvi) instruct all Lessees under Designated Eligible Leases to remit all
Collections to the Collector (provided that so long as the Lessor
shall remain the Collector, no special instruction need be given by
the Lessor to any Lessee which currently is instructed to remit
such Collections to the Lessor) and remit all such Collections
received by the Lessor to the Collector;
(xvii) use its best efforts to collect on behalf of the Concurrent Lessee,
in accordance with the provisions hereof and the Credit and
Collection Policy, all Designated Lease Receivables and to hold the
Collections of such Designated Lease Receivables in trust for the
Concurrent Lessee and to remit such Collections to the Concurrent
Lessee in accordance with the terms hereof;
(xviii) apply all amounts as promptly as practicable following receipt
thereof by the Lessor, if the Lessor is the Collector, in
accordance with Section 2.09;
(xix) make all payments payable by it when due to government agencies and
others where a statutory lien or deemed trust might arise having
priority over the Concurrent Lessee's interest in any Designated
Eligible Leases and the Lease Rights relating thereto and, where a
portion of the Collections received by it represents an amount
owing in respect of Sales Taxes, remit and account for such Sales
Taxes in accordance with Section 2.14 hereof;
(xx) maintain the Concurrent Lessee as a named insured, as its interest
may appear, under all policies of insurance, if any, carried by the
Lessor with respect to any of the Equipment;
(xxi) as soon as possible, and in any event within ten Business Days of
the Lessor's knowledge thereof, give the Concurrent Lessee notice
of any litigation, investigation or proceeding against the Lessor
which may exist at any time which, in the reasonable judgment of
the Lessor, could materially adversely affect the Concurrent
Lessee's interest hereunder, the enforceability of any Lease Rights
(including the collectibility of the Designated Lease
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Receivables) or the Lessor's ability to perform its obligations
hereunder or under the Designated Eligible Leases;
(xxii) promptly upon the occurrence thereof, advise the Concurrent
Lessee of any changes in the registration numbers set out in
Section 4.01(xxi); and
(xxiii) provide updated opinions of counsel for the Lessor and IKON
Capital and counsel for the Performance Guarantor to the
Concurrent Lessee (with such addressees as are set out in
Exhibits D and D-1, respectively) on every twelve month
anniversary of the Initial Prepayment Date provided that, if
there has not been a Supplemental Equipment Schedule delivered
since the last twelve month anniversary, no such opinions shall
be required to be provided to the Concurrent Lessee.
SECTION 5.2 NEGATIVE COVENANTS OF THE LESSOR
--------------------------------
From the date hereof until the Final Collection Date, the Lessor
shall not, without the Concurrent Lessee's written consent:
(i) except as otherwise provided or permitted herein or pursuant to
an amalgamation or wind-up, sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist
any Adverse Claim upon or with respect to, any Designated
Eligible Lease and the Equipment and Lease Rights relating
thereto, including the Designated Lease Receivables and
Collections (if the sum of such Adverse Claim and any other
Adverse Claims upon or with respect to such Designated Lease
Receivables or any other Lease Rights relating to Designated
Eligible Leases would exceed $50,000) or any account to which any
such Collections are sent, or assign any right to receive income
in respect of such Designated Eligible Leases and Lease Rights or
do any other thing to derogate from its grant hereunder or
prejudice the rights of the Concurrent Lessee hereunder or
thereunder;
(ii) make any change in the Credit and Collection Policy, which change
would impair the collectibility of any Designated Lease
Receivable;
(iii) extend, amend or otherwise modify or waive any term or condition
of any Designated Eligible Lease unless otherwise permitted in
accordance with the terms of the Credit and Collection Policy;
(iv) consent or agree to any financing statement, registration,
recording, filing or other document similar in effect relating to
any Designated Eligible Lease and the Lease Rights or Collections
relating thereto to be on file which would constitute an Adverse
Claim; or
-51-
(v) account for any Designated Eligible Lease other than in
accordance with generally accepted accounting principles or file
any tax return in which any Designated Eligible Lease is not
treated as a lease for purposes of the Income Tax Act (Canada).
SECTION 5.3 COVENANTS OF THE PERFORMANCE GUARANTOR AND IKON CAPITAL
-------------------------------------------------------
From the date hereof until the Final Collection Date the
Performance Guarantor covenants, and from the date hereof until such time as
IKON Capital ceases to be a Sub-Collector hereunder IKON Capital covenants, with
the Concurrent Lessee that it shall, unless the Concurrent Lessee otherwise
consents in writing:
(i) comply with all laws, rules, regulations and orders applicable to
it and all or any of its businesses and properties, except where
the failure to do so would not materially adversely affect its
ability to perform its obligations hereunder or the Concurrent
Lessee's interest hereunder;
(ii) preserve and maintain its corporate existence;
(iii) furnish to the Concurrent Lessee, unless the Lessor has
previously complied with Section 5.01(vii), as soon as possible
and in any event within five Business Days after an officer of
the Performance Guarantor or IKON Capital, as applicable, becomes
aware or ought to have become aware of the occurrence of each
Significant Event and each event which, with the giving of notice
or lapse of time or both, would constitute a Significant Event, a
statement of an officer of the Performance Guarantor or IKON
Capital, as applicable, setting forth details as to such
Significant Event and the action which the Performance Guarantor
or IKON Capital, as applicable, has taken or is proposing to take
with respect thereto;
(iv) (1) in the case of the Performance Guarantor, guarantee
unconditionally and irrevocably the due performance of all
of the obligations of the Lessor, including those arising in
its capacity as Collector, so long as the Lessor is
Collector, under this Agreement and any document delivered
in connection herewith to which the Lessor is a party,
including any Hedging Agreement, and, in the event of any
failure of the Lessor to perform such obligations, assume
all of the liabilities of the Lessor including those arising
in its capacity as Collector, so long as the Lessor is at
such time the Collector, under this Agreement and any
document delivered in connection herewith; and
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(2) in the case of IKON Capital comply in all respects with the
Credit and Collection Policy with respect to each of the
Designated Eligible Leases;
(v) make all payments to be made by it in the performance of its
obligations hereunder and, in the case of IKON Capital, in the
performance of its obligations as Sub-Collector, without set-off
or counterclaim and without deduction or withholding for or on
account of any present or future taxes, levies, imposts, duties,
charges, assessments or fees of any nature (including any
interest, penalties and additions thereto) unless such deduction
or withholding is required by any applicable treaty, law, rule or
regulation (as modified by the practice of any relevant
governmental revenue authority then in effect), in which case it
shall pay to the Concurrent Lessee, in addition to any payment to
which the Concurrent Lessee is otherwise entitled under this
Agreement or any document delivered in connection herewith, such
additional amount as is necessary to ensure that the net amount
actually received by the Concurrent Lessee will equal the full
amount the Concurrent Lessee would have received had no such
deduction or withholding been required; and
(vi) in the case of the Performance Guarantor, furnish to the
Concurrent Lessee:
(1) as soon as available and in any event within 60 days after
the end of each of the first three quarters in each fiscal
year of the Performance Guarantor the consolidated balance
sheet of the Performance Guarantor as of the end of such
quarter and any consolidated statements of income, retained
earnings and cash flows of the Performance Guarantor for the
period commencing at the end of the previous fiscal year
ending with the end of such quarter, certified by the senior
financial officer of the Performance Guarantor, to be
prepared to the best of his/her knowledge and belief in
accordance with generally accepted accounting principles in
the United States, subject to year-end audit and normal
year-end adjustments as applicable; and
(2) as soon as available and in any event within 120 days after
the end of each fiscal year of the Performance Guarantor, a
copy of the consolidated financial statements of the
Performance Guarantor for such year reported on by a
nationally recognized firm of North American certified
public accountants, such financial statements to contain at
least a balance sheet, an earning statement, a statement of
cash flows and a statement of retained earnings, and such
report to
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state that such financial statements have been prepared in
accordance with generally accepted accounting principles in
the United States.
(vii) in the case of IKON Capital, furnish to the Concurrent Lessee:
(1) as soon as available and in any event within 60 days after
the end of each of the first three quarters in each fiscal
year of IKON Capital the balance sheet of IKON Capital as of
the end of such quarter and any statements of income,
retained earnings and cash flows of IKON Capital for the
period commencing at the end of the previous fiscal year
ending with the end of such quarter, certified by the senior
financial officer of the Performance Guarantor as to the
accuracy of the information contained therein; and
(2) as soon as available and in any event within 120 days after
the end of each fiscal year of IKON Capital, a copy of the
financial statements of IKON Capital for such year, such
financial statements to contain at least a balance sheet, an
earning statement, a statement of cash flows and a statement
of retained earnings, and to be certified by the senior
financial officer of the Performance Guarantor as to the
accuracy of the information contained therein.
-54-
ARTICLE 6
ADMINISTRATION AND COLLECTION
SECTION 6.1 DESIGNATION OF COLLECTOR
------------------------
The Designated Eligible Leases will be administered, and the
Designated Lease Receivables collected, by the Collector in trust for the
Concurrent Lessee. Until the Concurrent Lessee designates a new Collector in
accordance with this Section 6.01, the Lessor is hereby designated as, and
hereby agrees to perform the duties and obligations of, the Collector pursuant
to the terms hereof. The Concurrent Lessee may, upon notice to the Lessor at
any time after the occurrence of and during the continuation of a Significant
Event (other than a Significant Event described in Section 7.01(v) in which case
the Concurrent Lessee shall provide the Lessor with five Business Days notice),
designate as the Collector any Person with a permanent establishment in Canada
to succeed the Lessor or any successor Collector, on the condition in each case
that any such Person so designated shall agree to perform the duties and
obligations of the Collector pursuant to the terms hereof and agree to be bound
by the terms of this Agreement. The Collector, with the Concurrent Lessee's
prior written consent, may subcontract with any other Person for the
administration of the Designated Eligible Leases and the collecting of the
Designated Lease Receivables; provided, however, that the Collector will remain
liable for the performance of the duties and obligations so subcontracted and
all other duties and obligations of the Collector pursuant to the terms hereof.
So long as the Lessor is the Collector, IKON Capital or any of its Affiliates or
a third party with the approval of the Concurrent Lessee may be designated as a
Sub-Collector. In that regard, IKON Capital or any permitted successor is
hereby appointed the Sub-Collector and it shall continue to perform the duties
and obligations it has been delegated by the Collector on or prior to the Cut-
off Date, and may not resign from such position, unless and until (i) the Lessor
agrees to perform such duties and obligations itself, or (ii) the Concurrent
Lessee designates a new Collector in accordance with this Section 6.01 and
specifically determines to release IKON Capital or any permitted successor from
its designation as Sub-Collector, at which time, the Concurrent Lessee may or
may not appoint a new Sub-Collector.
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SECTION 6.2 DUTIES OF COLLECTOR
-------------------
(a) The Collector shall take or cause to be taken all such actions
as may be necessary or advisable to collect all Designated Lease Receivables
under each Designated Eligible Lease from time to time, all in accordance with
applicable laws, rules and regulations, with reasonable care and diligence, and
in accordance with the Credit and Collection Policy. The Collector shall
segregate all records relating to the Designated Eligible Leases and shall mark
on all relevant computer records to the effect that the Equipment covered by
such Designated Eligible Leases is subject to an interest of the Concurrent
Lessee. The Collector, at all times, will use commercially reasonable best
efforts to collect amounts owing under Designated Eligible Leases including,
where appropriate to repossess the collateral and enforce all of the rights of
the Lessor and/or the Concurrent Lessee under the related Lease Rights. Each of
the Lessor, the Concurrent Lessee and the Administrative Agent hereby appoints
as its agent the Collector, from time to time designated pursuant to Section
6.01, to enforce its respective rights and interests in and under the Designated
Eligible Leases and the Lease Rights relating thereto. The Collector shall remit
all Collections in accordance with Article 2. The Collector shall segregate and
hold in trust to be paid to the appropriate Person, all amounts received with
respect to the Designated Eligible Leases in respect of PST, GST, HST, QST and
insurance premiums, if any.
(b) The Collector, if other than the Lessor, shall as soon as
practicable upon demand, deliver to the Concurrent Lessee all documents,
instruments and records in its possession which evidence or relate to Designated
Eligible Leases.
(c) The Collector shall maintain and implement prudent and
reasonable administrative and operating procedures (including an ability to
recreate records evidencing the Designated Eligible Receivables) and keep and
maintain all books, records, documents and other information reasonably
necessary or advisable for the collection of all Designated Eligible Receivables
(including records adequate to permit all collections of and reductions or
adjustments to such Designated Eligible Receivables) all in accordance with the
Credit and Collection Policy.
(d) To the extent the Records consist in whole or in part of
computer programs which are leased by the Collector, the Collector shall, upon
the demand of the Concurrent Lessee, use its best efforts to arrange for the
license or sublicense of such programs to the Concurrent Lessee to the extent
permitted by the terms of such license for the sole use of the Concurrent Lessee
or its agent in facilitating the collection of the Designated Eligible
Receivables.
(e) The Collector shall, with respect to any amount not paid by
the Collector when required to be paid hereunder, pay interest to the Concurrent
Lessee (before and after default and judgment, with interest on overdue interest
at the same rate) at a rate per annum, calculated daily, equal to the Prime Rate
plus 1%, payable on demand, provided
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that nothing in this Section 6.02(e) shall be construed to require the payment
of interest on amounts for which interest is paid pursuant to Section 2.08(b)
above. Such interest will be for the account of the Concurrent Lessee and shall
be paid by the Collector free and clear of, and without deduction for, any taxes
of any kind whatsoever to the Concurrent Lessee's Account to be applied in
accordance with Article 2 on the next Settlement Date.
(f) The Collector's appointment as agent of the Concurrent Lessee
under this Agreement for the purposes set out herein shall terminate on the
Final Collection Date.
SECTION 6.3 COLLECTOR FEE
-------------
If the Collector is not the Lessor, the Collector shall be
paid, as a fee (the "Collector Fee"), such commercially reasonable amount as may
be negotiated between the Concurrent Lessee and such Collector from time to
time. Such Collector Fee shall be payable in arrears on each Settlement Date.
For greater certainty, any fee payable to a Sub-Collector or any other Person
acting on behalf of the Collector shall be paid by and shall be the sole
responsibility of the Collector.
SECTION 6.4 RESPONSIBILITIES OF THE LESSOR
------------------------------
Anything herein to the contrary notwithstanding:
(i) the Lessor shall perform all of the obligations of the Lessor
under the Designated Eligible Leases to the same extent as if
the Equipment covered by the Designated Eligible Leases had
not been concurrently leased hereunder and the exercise by the
Concurrent Lessee of its rights hereunder shall not relieve
the Lessor from such obligations; and
(ii) the Concurrent Lessee shall not have any obligation or
liability with respect to any Designated Eligible Leases, nor
shall it be obligated to perform any of the obligations of the
Lessor thereunder.
ARTICLE 7
SIGNIFICANT EVENTS
SECTION 7.1 MEANING OF SIGNIFICANT EVENT
----------------------------
The term "Significant Event" means any of the following events
or circumstances:
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(i) the Lessor, IKON Capital, the Collector (if the Lessor is not
the Collector) or Performance Guarantor fails to make any
payment or deposit to be made by it hereunder when due;
(ii) the Lessor, IKON Capital, the Collector (if the Lessor is not
the Collector) or the Performance Guarantor fails to perform
or observe any term, condition or covenant to be performed or
observed by it hereunder (other than as contemplated in
Section 7.01(i)), and such failure, remains unremedied for ten
Business Days after written notice thereof has been given to
the Lessor, Collector or Performance Guarantor (except with
respect to any failure on the part of the Lessor, IKON Capital
or Performance Guarantor to perform its obligations under
Section 5.01(vii) or Section 5.03(iii), as applicable, in
which case no notice shall be required and no cure period
shall apply);
(iii) any representation or warranty made by the Lessor, IKON
Capital or the Performance Guarantor or any of their
respective officers in or pursuant to this Agreement, any
Lease Portfolio and Compliance Report or any other document
delivered in connection herewith proves to have been false or
incorrect in any material respect when made and such
representation or warranty, if capable of being cured, is not
cured within 10 Business Days after written notice thereof has
been given to the Lessor, IKON Capital or the Performance
Guarantor, as applicable;
(iv) the Lessor, IKON Capital or the Performance Guarantor shall
not pay its debts generally as they become due, or shall admit
in writing its inability to pay its debts generally, or shall
make a general assignment for the benefit of creditors; or any
proceedings shall be instituted by or against the Lessor, IKON
Capital or the Performance Guarantor seeking to adjudicate it
a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors,
or seeking the entry of an order for relief by the appointment
of a receiver, trustee or other similar official for it or for
any substantial part of its property and, if such proceeding
has been instituted against the Lessor, IKON Capital or the
Performance Guarantor, either such proceeding has not been
stayed or dismissed within 45 days or a receiver, trustee,
custodian or other similar official is appointed for it or any
substantial part of its property; or the Lessor, IKON Capital
or the Performance Guarantor takes any corporate action to
authorize any of the actions described in this Section
7.01(iv);
(v) there shall have been, in the opinion of the Concurrent
Lessee, any change in the financial condition or operations of
the Lessor, IKON Capital or the Performance Guarantor since
December 31, 1997 or there shall have
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occurred any other event, if such change or event would
materially adversely affect the collectibility or
enforceability of the Designated Lease Receivables or the
ability of the Lessor to collect Designated Lease Receivables
or the ability of the Lessor, IKON Capital or the Performance
Guarantor to perform its obligations hereunder;
(vi) the Performance Guarantor fails to maintain a rating of at
least BBB- or better from Moody's and Baa3 or better from S&P;
(vii) the Performance Guarantor fails to perform any of its
obligations under the Indemnification Agreement;
(viii) a default by the Lessor under a Hedging Agreement entered into
in respect of this Agreement if such default is not cured
within the applicable cure period provided for in such Hedging
Agreement;
(ix) if at any time the Delinquency Ratio exceeds 16%;
(x) if any time the average of the Loss Ratio for any particular
Settlement Period and each of the three immediately preceding
Settlement Periods, or if there are not three immediately
preceding Settlement Periods then, such number of immediately
preceding Settlement Periods as have occurred, is equal to or
greater than 8%; and
(xi) if either the Lessor or the Sub-Collector does not continue to
be a Subsidiary of the Performance Guarantor.
SECTION 7.2 ACTION UPON A SIGNIFICANT EVENT
-------------------------------
(a) If any Significant Event has occurred and is continuing, the
Concurrent Lessee shall have, in addition to the right to appoint a new
Collector pursuant to Section 6.01 and its other rights and remedies hereunder
and under any documents delivered in connection herewith, all other rights and
remedies under any applicable law and otherwise, which rights and remedies shall
be cumulative.
(b) From time to time following the applicable effective date of
appointment by the Concurrent Lessee of a Collector, other than the Lessor,
pursuant to Section 6.01:
(i) the Lessor shall, at the Concurrent Lessee's request and at
the Lessor's expense, notify all or any Lessees under
Designated Eligible Leases of the Concurrent Lessee's right
and interest in any or all of the Designated Eligible Leases
and direct that payments in respect thereof be made directly
to the Concurrent Lessee or its designee;
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(ii) the Lessor shall, at the Concurrent Lessee's request and at
the Lessor's expense, assemble all or any of the Designated
Eligible Leases and the guarantees, indemnities and other
agreements forming part of the Lease Rights relating thereto
and make the same available to the Concurrent Lessee at a
place selected by it or its designee, and segregate, in a
manner reasonably acceptable to the Concurrent Lessee, all
cash, cheques and other instruments constituting Collections,
Net Proceeds or Permitted Investments, relating to the
Designated Eligible Leases, received or held by the Lessor
from time to time, and, promptly upon receipt, remit same to
the Concurrent Lessee or its designee duly endorsed or with
duly executed instruments of transfer;
(iii) the Lessor shall, at the Concurrent Lessee's request, advise
the Concurrent Lessee, in writing, of any changes in the name
or address of any Lessee of Equipment subject to Designated
Eligible Leases which, prior to such request, came to the
attention of the officer of the Lessor responsible for
monitoring the status of the applicable Designated Eligible
Leases; and
(iv) the Concurrent Lessee may take any and all steps, as lessor
under the Designated Eligible Leases and in the Lessor's name
and on its behalf, necessary or desirable in the Concurrent
Lessee's opinion, to collect the Designated Lease Receivables
forming part of the Lease Rights under the Designated Eligible
Leases, including taking actions contemplated in Section
7.02(b)(i) where the Lessor has failed to do so, and to remit
the proceeds of such Designated Lease Receivables to the
Collector for deposit in the General Account.
SECTION 7.3 WAIVER
------
The Significant Events are inserted for the sole benefit of
the Concurrent Lessee and may be waived by the Concurrent Lessee in whole or in
part, with or without terms and conditions.
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ARTICLE 8
THE ADMINISTRATIVE AGENT AND MATTERS RELATING TO LIABILITY
SECTION 8.1 AUTHORIZATION AND ACTION
------------------------
The Concurrent Lessee may delegate to the Administrative Agent
all or any of its powers, rights and discretions hereunder and the
Administrative Agent may from time to time take such actions and exercise such
powers as are delegated to it by the Concurrent Lessee hereunder or contemplated
hereby and all such powers as are reasonably incidental thereto.
SECTION 8.2 LIABILITY OF CONCURRENT LESSEE AND ADMINISTRATIVE AGENT
-------------------------------------------------------
Neither the Concurrent Lessee, the Administrative Agent nor
any of its directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them hereunder or in connection
with this Agreement except for its or their own gross negligence or wilful
misconduct. Notwithstanding any provision of this Agreement, other than the
preceding sentence, neither the Lessor, IKON Capital, the Performance Guarantor
nor any Person acting on their behalf shall have recourse against the Concurrent
Lessee or the Administrative Agent, at law or in equity, in respect of any of
the obligations of the Concurrent Lessee or the Administrative Agent under this
Agreement or any document delivered in connection therewith other than against
the interests of the Concurrent Lessee in the Designated Eligible Leases.
Without limiting the foregoing, the Administrative Agent: (i) may consult with
legal counsel (including counsel for the Lessor), independent public accountants
and other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (ii) makes no warranty or representation to the
Concurrent Lessee and shall not be responsible to the Concurrent Lessee for any
statements, warranties or representations made in or in connection with this
Agreement; (iii) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement on the part of the Lessor or to inspect the property (including the
books and records) of the Lessor except as otherwise agreed to by the Concurrent
Lessee and the Administrative Agent; (iv) shall not be responsible to the
Concurrent Lessee for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any instrument or
document furnished pursuant hereto; and (v) shall incur no liability under or in
respect of this Agreement by acting upon any notice (including notice by
telephone), consent, certificate or other instrument or writing (which may be by
telex) believed by it to be genuine and signed or sent by the proper party or
parties.
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SECTION 8.3 LIMITATION OF LIABILITY
-----------------------
The obligations hereunder are not binding upon TD Trust
Company except in its capacity as trustee of the Concurrent Lessee, nor will
resort be had to the property of TD Trust Company except in its capacity as
trustee of the Concurrent Lessee, but the assets only of the Concurrent Lessee
will be bound hereby.
ARTICLE 9
INDEMNIFICATION
SECTION 9.1 INDEMNITIES BY THE LESSOR
-------------------------
(a) Without limiting any other rights which the Administrative
Agent, the Concurrent Lessee, any assignee of the Concurrent Lessee or any
Affiliate of any of them or their respective agents may have hereunder or under
applicable law, the Lessor hereby agrees to indemnify the Administrative Agent,
the Concurrent Lessee, any assignee of the Concurrent Lessee, and each of their
Affiliates and their respective agents from and against any and all damages,
losses, claims, liabilities and related costs and expenses, including reasonable
legal fees and disbursements awarded against or incurred by any of them
("losses") arising out of or as a result of:
(i) reliance on any written representation or warranty made by the
Lessor (or any of its officers) in or pursuant to this
Agreement, any Lease Portfolio and Compliance Report,
Equipment Schedule, information, exhibit, financial statement,
document, book, record or report furnished to the Concurrent
Lessee in connection with this Agreement which was incorrect
in any materially adverse respect when made or deemed made or
delivered;
(ii) the failure by the Lessor on its own behalf or in its capacity
as Collector, to comply with any applicable law, rule or
regulation with respect to any Designated Eligible Leases or
with respect to any Designated Lease Receivables or to perform
its obligations thereunder, or the non-conformity of any
applicable Designated Lease Receivable with any applicable
law, rule or regulation;
(iii) the failure to vest and maintain vested in the Concurrent
Lessee a beneficial interest in all Lease Rights relating to
Designated Eligible Leases free and clear of any Adverse Claim
whether existing at the time of the concurrent lease hereunder
or at any time thereafter;
(iv) any dispute, claim, offset or defence (other than discharge in
bankruptcy of the Lessee) of a Lessee to the payment of any
Designated Lease Receivable under, or purporting to be under,
a Designated Eligible Lease (including
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without limitation, a defence based on the Designated Eligible
Lease not being a legal, valid and binding obligation of such
Lessee enforceable against it in accordance with its terms);
(v) any failure of the Lessor, as Collector or otherwise, to
perform its duties or obligations in accordance with the
provisions of Article 6;
(vi) any product liability claim or personal injury or property
damage suit or other similar or related claim or action of
whatsoever sort arising out of or in connection with any
Equipment, including any losses attributable to the Lessee's
failure to insure any Equipment;
(vii) any Canadian, foreign, federal, provincial, state, municipal,
local or other tax of any kind or nature whatsoever, including
any capital, income, business, property tax or Sales Taxes,
any customs duty, and any penalty or interest in respect of
any thereof, which may be imposed on the Concurrent Lessee or
the Administrative Agent on account of any payment made by the
Lessor under this Section 9.01;
(viii) any claims, disputes, damages, penalties and losses arising in
respect of a Designated Eligible Receivable or from the Lease
Rights relating to the Designated Eligible Leases, other than
losses attributable to any Lessee's failure to discharge its
payment obligations or other default under the applicable
Designated Eligible Lease;
(ix) the return or transfer by the Concurrent Lessee in error of
any amount of Collections received pursuant to Article 2 to
the Lessor for any reason whatsoever other than pursuant
hereto;
(x) any failure of the Lessor to comply with any applicable law
regarding the filing or discharge of registrations required to
be made in respect of the Designated Eligible Leases in
accordance with the laws of the applicable province or
territory of Canada;
(xi) actual losses as a result of the failure of the Lessor or the
Concurrent Lessee to comply with the requirements of any
applicable bulk sales legislation;
(xii) the characterization by any relevant taxing authority of a
Designated Eligible Lease as other than a lease of the
Equipment subject thereto;
(xiii) any priority over the interest of the Concurrent Lessee in any
Designated Eligible Leases, the related lease agreement for
which may constitute "chattel paper" within the meaning of the
applicable Personal Property Security Act of the Provinces of
British Columbia, Alberta, Saskatchewan, Manitoba or
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Ontario that is gained by a purchaser or pledgee of such
chattel paper who takes possession of it in the ordinary
course of business, to the extent that such purchaser gives
new value, where the purchaser did not know that the chattel
paper was subject to the Concurrent Lessee's interest;
(xiv) any investigation, litigation or proceeding related to this
Agreement or the application of Collections or the ownership
of any Designated Eligible Leases and the Lease Rights
relating thereto; or
(xv) any claims by any governmental authority in respect of amounts
included in or collected under (or purported to be included in
or collected under) any Designated Lease Receivable as or on
account of any Sales Taxes;
other than losses attributed to the negligence or wilful misconduct of the
Concurrent Lessee or the Administrative Agent. Any amount owing under this
Section 9.01 shall be paid to the Collector for deposit to the General Account
or Concurrent Lessee's Account, as applicable, and shall be applied in
accordance with Section 2.03.
(b) Without limiting any other rights which the Administrative
Agent, the Concurrent Lessee, any assignee of the Concurrent Lessee or any
Affiliate of any of them or their respective agents may have hereunder or under
applicable law, the Lessor hereby indemnifies the Concurrent Lessee, the
Administrative Agent and each of their Affiliates and their respective agents
and agrees to save them harmless from and against any and all damages, losses,
claims, liabilities, costs and expenses (including reasonable legal fees and
disbursements on a solicitor and client basis) incurred in respect of a Lease
Tranche by or on behalf of the Concurrent Lessee or the Administrative Agent in
respect of any amounts payable by the Concurrent Lessee arising out of or as a
result of any breach of the terms hereof or of any document delivered in
connection herewith by the Lessor, IKON Capital or the Performance Guarantor and
not otherwise recoverable from the Lessor, IKON Capital or the Performance
Guarantor, provided that, notwithstanding any other provision of this Agreement,
the Lessor shall not be obligated to indemnify the Concurrent Lessee, the
Administrative Agent, each of their Affiliates nor their respective agents for
any claims, disputes, damages, penalties or losses which result directly from
the negligence or wilful misconduct of such parties.
SECTION 9.2 COOPERATION IN LITIGATION AND PROCEEDINGS
-----------------------------------------
Each of the Lessor and the Concurrent Lessee agrees to assist
the other party, at the request of such other party, and at such requesting
party's expense, in any action, suit or proceeding brought by or against, or any
investigation involving, such requesting party (including the Administrative
Agent, with respect to the Concurrent Lessee but not including actions against
each other) relating to any of the transactions contemplated hereby or to any of
the Designated Eligible Leases and the Lease Rights relating thereto. If the
Lessor may be liable under Section 9.01 in respect of any damages, losses,
claims,
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liabilities, costs or expenses as a result of or in connection with any
such action, suit, proceeding or investigation, the Lessor shall have the right,
on behalf of the Concurrent Lessee but at the Lessor's expense, to defend such
action, suit or proceeding, or participate in such investigation, with counsel
selected by it, and shall have sole discretion as to whether to litigate, appeal
or settle.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1 AMENDMENTS, ETC.
----------------
No amendment or waiver of any provision of this Agreement nor
consent to any departure by the Lessor, IKON Capital or the Performance
Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by (i) the Lessor, IKON Capital, the Performance Guarantor,
the Administrative Agent and the Concurrent Lessee (with respect to an
amendment) or (ii) the Administrative Agent and the Concurrent Lessee (with
respect to a waiver or consent by them) or the Lessor (with respect to a waiver
or consent by it), or by IKON Capital (with respect to a waiver or consent by
it), or the Performance Guarantor (with respect to a waiver or consent by it) as
the case may be, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. This Agreement
and the Equipment Schedules delivered in connection herewith contain a final and
complete integration of all prior expressions by the parties hereto with respect
to the subject matter hereof and shall constitute the entire agreement among the
parties hereto with respect to the subject matter hereof, superseding all prior
oral or written undertakings.
SECTION 10.2 NOTICES, ETC.
-------------
All notices and other communications provided for hereunder shall,
unless otherwise stated herein, be in writing (including telecopied
communication) and telecopied or delivered, as to each party hereto, at its
address set forth under its name on the signature pages hereof or at such other
address as shall be designated by such party in a written notice to the other
parties hereto. All such notices and communications shall be effective, in the
case of notice by telecopy, when telecopied and addressed as aforesaid, except
that notices and communications pursuant to Article 2 shall not be effective
until received.
SECTION 10.3 NO WAIVER, REMEDIES
-------------------
No failure on the part of the Administrative Agent or the
Concurrent Lessee to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any other right. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
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SECTION 10.4 BINDING EFFECT; ASSIGNABILITY; SEVERABILITY
-------------------------------------------
This Agreement shall be binding upon and inure to the benefit of
the Lessor, IKON Capital, the Performance Guarantor, the Administrative Agent,
the Concurrent Lessee and their respective successors and permitted assigns;
provided, however, that neither the Lessor, IKON Capital nor the Performance
Guarantor may assign its rights hereunder or any interest herein without the
prior written consent of the Administrative Agent, and the Concurrent Lessee may
not assign its rights hereunder or any interest herein to, and the Concurrent
Lessee represents and warrants to the Lessor that it is not, a non-resident
within the meaning of the Income Tax Act (Canada). This Agreement shall create
and constitute the continuing obligations of the parties hereto in accordance
with its terms, and shall remain in full force and effect until the Final
Collection Date; provided, however, that the rights and remedies with respect to
any breach of any representation and warranty made by the Lessor pursuant to
Article 4 and the provisions of Article 9 and of Section 10.05 shall be
continuing and shall survive any termination of this Agreement for a period of
six years.
SECTION 10.5 COSTS, EXPENSES AND TAXES
-------------------------
(a) In addition to the rights of indemnification granted to the
Administrative Agent and the Concurrent Lessee under Article 9 hereof and the
fees and expenses to be paid by the Lessor pursuant to Section 2.11, the Lessor
agrees to pay on demand all reasonable costs and expenses in connection with the
administration (including periodic auditing) of this Agreement and the other
documents to be delivered hereunder which arise out of or are necessitated by
any breach or threatened breach by the Lessor of any of the provisions of this
Agreement, including, without limitation, the reasonable fees and out-of-pocket
expenses of legal counsel for the Administrative Agent and the Concurrent
Lessee, with respect to advising the Administrative Agent and the Concurrent
Lessee as to their respective rights and remedies under this Agreement in the
event of a breach thereof, and all reasonable costs and expenses, if any
(including reasonable legal fees and expenses), in connection with the
enforcement of this Agreement and the other documents to be delivered hereunder.
The Lessor shall bear its own costs and expenses, including legal and accounting
fees, incurred in the preparation, negotiation and execution and delivery of
this Agreement.
(b) In addition, the Lessor shall pay any and all taxes and fees
payable or determined to be payable in connection with the execution, delivery,
filing and recording of this Agreement or the other documents to be delivered
hereunder, and any and all taxes (other than income taxes) payable by the
Concurrent Lessee as a result of its interest in and collection of payments
under Designated Eligible Leases and agrees to indemnify the Administrative
Agent and the Concurrent Lessee and their Affiliates against any liabilities
with respect to or resulting from any delay in paying or omission to pay such
taxes and fees.
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SECTION 10.6 NO PETITION
-----------
Each of the Lessor and the Collector covenants and agrees, and any
successor Collector shall covenant and agree, that prior to the date which is
one year and one day after payment in full of all Concurrent Lessee's
Indebtedness, it will not institute against, or join any other person in
instituting against, the Concurrent Lessee, any bankruptcy, reorganization,
arrangement, insolvency, liquidation or other similar proceedings under federal
or provincial bankruptcy or similar law. This Section 10.06 shall survive the
termination of this Agreement.
SECTION 10.7 SET OFF
-------
(a) Each of the Lessor and the Collector hereby irrevocably and
unconditionally waives, and any Collector shall irrevocably and unconditionally
waive, all right of set-off that it may have under contract (including this
Agreement), applicable laws or otherwise, with respect to any funds or monies of
the Concurrent Lessee held by it or in its possession.
(b) Each of the Lessor and the Collector hereby irrevocably and
unconditionally waives any and all right to any counterclaim or other defence to
payment of amounts owing to the Concurrent Lessee in respect of this Agreement.
SECTION 10.8 CONFIDENTIALITY
---------------
The Concurrent Lessee and the Administrative Agent shall endeavour
to maintain confidential any information provided to any of them by the Lessor
relating to the Lessees, the Leases or any Eligible Leases and none of the
Concurrent Lessee nor the Administrative Agent will at any time use any such
confidential information for any purpose which is not related to the ownership
of and collection of amounts owing under Designated Eligible Leases and
Defaulted Leases, provided that the Concurrent Lessee and the Administrative
Agent may disclose such information to its professional advisors in connection
with the administration and enforcement of this Agreement and to any Collector
(other than the Lessor) designated pursuant to Section 6.01. Neither the Lessor,
IKON Capital, the Performance Guarantor, the Concurrent Lessee nor the
Administrative Agent shall disclose the terms of this Agreement except to their
respective professional advisors and bankers solely for the purposes of the
transaction contemplated hereby or as required by law or to a Collector (other
than the Lessor) designated pursuant to Section 6.01.
SECTION 10.9 CHANGE IN CIRCUMSTANCE
----------------------
If either:
(a) the introduction of or any change (including, without limitation,
any change by way of imposition of a capital or other tax) in or in
the interpretation of
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any law or regulation by any court or governmental authority
charged with the administration thereof; or
(b) the compliance by the Concurrent Lessee with any guideline or
request from any governmental authority (whether or not having the
force of law),
has the effect of
(i) increasing the cost to the Concurrent Lessee of making,
funding or maintaining a lease hereunder or agreeing to
make a lease hereunder, or reducing the rate of return to
the Concurrent Lessee in connection therewith; or
(ii) reducing the amount receivable with regard to any
Designated Eligible Lease in the Lease Portfolio;
the Lessor shall, from time to time, upon demand by the Concurrent Lessee and to
the extent not otherwise recovered pursuant to Section 2.04(a)(iii), pay to the
Concurrent Lessee that portion of such increased costs incurred, amounts not
received or receivable, or compensation for such reduction in rate of return
which is attributable to making, funding or maintaining such lease hereunder. In
addition, upon the occurrence of an event or events referred to above, the
Lessor shall have the option of terminating the concurrent lease of all
Equipment hereunder and the Lessor shall pay to the Concurrent Lessee, as
consideration for the economic loss sustained by the Concurrent Lessee as a
consequence of such termination, an amount equal to the Aggregate Finance
Balance plus an amount equal to the amount of Unearned Finance attributed to the
Lease Portfolio for the Settlement Period in which such termination occurred and
upon such termination the Concurrent Lessee shall surrender, assign and transfer
to the Lessor and the Lessor shall accept the transfer of all right, title and
interest of the Concurrent Lessee in the Lease Portfolio, the Lessor shall
assume all of the Concurrent Lessee's obligations under the relevant Leases and
the Lessor shall release the Concurrent Lessee from all of its remaining
obligations hereunder with respect to such Equipment relating to such Leases.
The Concurrent Lessee shall provide the Lessor with a certificate setting forth
its computation of such increased costs, amounts not received or receivable or
reduction in rate of return, which computation may utilize such averaging and
attribution methods the Concurrent Lessee believes to be reasonable. Such
certificate shall be prima facie evidence, absent manifest error, of the amount
payable to the Concurrent Lessee pursuant to this Section 10.09. The Concurrent
Lessee shall, upon becoming aware of an event or circumstance that is likely to,
with the passage of time or otherwise, entitle it to demand payment pursuant to
this Section 10.09, promptly notify the Lessor.
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SECTION 10.10 GOVERNING LAW
-------------
This Agreement shall be governed by and construed in accordance with, the
laws of the Province of Ontario, except to the extent that the validity or
perfection of the Concurrent Lessee's interests in any Designated Eligible
Leases or the Lease Rights relating thereto or its remedies hereunder in respect
thereof are governed by the laws of a different jurisdiction.
SECTION 10.11 FURTHER ASSURANCES
------------------
The parties hereto agree, from time to time, to enter into such further
agreements and to execute all such further instruments as may be reasonably
necessary or desirable to give full effect to the terms of this Agreement.
SECTION 10.12 EXECUTION IN COUNTERPARTS
-------------------------
This Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original and all of which when
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the date first above written.
IKON OFFICE SOLUTIONS, INC.
By: /s/ J.F. Quinn
---------------------------------
Name: J.F. Quinn
Title: Treasurer
Address for Notices:
Suite 810
715 5th Avenue S.W.
Calgary, Alberta
T2P 2X6
Attention: Controller
Facsimile No.: (403) 264-9963
-69-
IKON CAPITAL, INC.
By: /s/ J.F. Quinn
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Name: J.F. Quinn
Title: Treasurer
Address for Notices:
16007 - 116th Avenue
Edmonton, Alberta
T5M 3Y1
Attention: Controller
Facsimile No.: (403) 489-4411
IKON OFFICE SOLUTIONS, INC. as
Performance Guarantor
By: /s/ J.F. Quinn
----------------------------
Name: J.F. Quinn
Title: Treasurer
Address for Notices:
70 Valley Stream Parkway
P.O. Box 834
Malvern, PA 19355
U.S.A.
Attention: Treasurer
Facsimile No.: (610) 408-7022
-70-
PRIME TRUST, by its administrative agent,
TD SECURITIES INC.
By: /s/ Signature
--------------------------------
Name:
Title:
By: /s/ Signature
--------------------------------
Name:
Title:
Address for Notices:
222 Bay Street
Ernst & Young Tower, 7th Floor
Toronto, Ontario
M5K 1A2
Attention: Asset Securitization Group
Facsimile No.: (416) 307-8840
TD SECURITIES INC. as
Administrative Agent
By: /s/ Signature
--------------------------------
Name:
Title:
By: /s/ Signature
--------------------------------
Name:
Title:
-71-
Address for Notices:
222 Bay Street
Ernst & Young Tower, 7th Floor
Toronto, Ontario
M5K 1A2
Attention: Asset Securitization Group
Facsimile No.: (416) 307-8840
EXHIBIT A
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CREDIT AND COLLECTION POLICY
EXHIBIT B
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FORM OF EQUIPMENT SCHEDULE
- ATTACHED -
[INITIAL] [SUPPLEMENTAL] EQUIPMENT SCHEDULE
(SCHEDULE TO MASTER CONCURRENT LEASE AGREEMENT ("MCLA")
DATED AS OF THE 29TH DAY OF APRIL, 1998
BETWEEN IKON OFFICE SOLUTIONS, INC., PRIME TRUST AND OTHERS)
1. This [INITIAL][SUPPLEMENTAL] Equipment Schedule is delivered pursuant to
Section 2.01 of the MCLA. Terms used herein and not otherwise defined
herein have the meaning ascribed thereto in the MCLA.
2. [INITIAL] [SUBSEQUENT] Prepayment Date: ___________________________.
3. Cut-off [SUBSEQUENT CUT-OFF] Date: ________________________________.
4. Program Fee Rate:__________________________________________________.
5. Aggregate Finance Balance for
Lease Tranche: _________________________________________________.
6. Prepaid Rent:______________________________________________________.
7. List of Designated Eligible Leases: See Exhibit A.
8. Additional Office Locations: See Exhibit B.
Dated.________________________________
IKON CAPITAL, INC. IKON OFFICE SOLUTIONS, INC.
By: _____________________________ By: _____________________________
Name: Name:
Title: Title:
Name:
Title:
IKON OFFICE SOLUTIONS, INC. (U.S.)
By: _____________________________
Name:
Title:
Acknowledged and Accepted [DATE]
PRIME TRUST, BY ITS
ADMINISTRATIVE AGENT, TD SECURITIES INC.
By: _____________________________
Name:
Title:
EXHIBIT A
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LIST OF DESIGNATED ELIGIBLE LEASES
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[EQUIPMENT Description Lessee Commencement Term Finance
IDENTIFICATION #] of (name/address) Date Balance
OR IF NONE Equipment
[CONTRACT
IDENTIFICATION #]
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_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
______________________________________________________________________________
EXHIBIT B
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ADDITIONAL OFFICE LOCATIONS
[NIL]
EXHIBIT C
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LEASE PORTFOLIO AND COMPLIANCE REPORT
- Attached -
EXHIBIT D
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FORMS OF OPINION OF COUNSEL FOR THE LESSOR, IKON CAPITAL AND PERFORMANCE
GUARANTOR
- Attached -
EXHIBIT E
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CHIEF EXECUTIVE OFFICE AND BRANCH OFFICES OF LESSOR
- Attached -