EXHIBIT 10.2
[FIRST NATIONAL LOGO]
FINANCIAL CORPORATION
May 12, 2005
Steelbank Tubular Inc.
0000 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
ATTENTION: XX. XXXXX XXXXXXXX
Dear Sirs:
RE: STEELBANK TUBULAR INC.
0000 XXXXXX XXXX, XXXXXXX, XXXXXXX.
First National Financial Corporation (the "Lender") is pleased to offer a first
mortgage loan (the "Loan") to Steelbank Tubular Inc. (the "Borrower") on the
terms and conditions set out in this letter (the "Commitment").
1. LOAN AMOUNT
$3,500,000.00
2. INTEREST RATE
In accordance with the attached Schedule 3.
3. TERM
One (1) year from the Interest Adjustment Date (as hereinafter defined)
(the "Term").
4. AMORTIZATION
Twenty Five (25) years (the "Amortization Period").
5. INTEREST ADJUSTMENT DATE
The interest adjustment date (the "Interest Adjustment Date") shall be the
first day of the calendar month Immediately following the date of the
first advance under the Loan, or at the Lender's option, the first day of
the month in which the first advance of the Loan is made, unless the first
advance of the Loan is made on the first day of
000 Xxxxxxxxxx Xxxxxx. Suite 700, North Tower . Toronto. Ontario Canada M5J 1V6
Tel. 000.000.0000 Fax. 000.000.0000 xxx.xxxxxxxxxxxxx.xx
VANCOUVER CALGARY TORONTO MONTREAL HALIFAX
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a month in which case the Interest Adjustment Date shall be the date of
the advance.
In the case of multiple advances, at the Lender's option the Interest
Adjustment Date may by the first day of the month following the final
advance.
6. REPAYMENT
Equal instalments of principal and interest based on the above
amortization period shall be payable on the first day of each month during
the Term, the first instalment being payable on the first day of the month
after the Interest Adjustment Date and the last, on the maturity date of
the Loan.
Until the Interest Adjustment Date, simple interest on the portion of the
Loan advanced, calculated daily, is payable either on the Interest
Adjustment Date or if applicable, on the first day of each month prior to
the Interest Adjustment Date, or, at the option of the Lender, such
interest may be deducted from the amount of the advance.
7. PREPAYMENT
There shall be the right of prepayment of the Loan in whole or in part
without penalty.
8. REALTY TAXES
Borrower will pay to the Lender on the first day of each month an amount
stipulated by the Lender from time to time sufficient to provide a fund to
pay in full, the annual property taxes (including any local improvement
charges) for the Property (as hereinafter defined) at the time that the
first instalment of taxes for each year becomes due, based on estimated
annual taxes and subject to adjustment based on taxes actually levied.
9. PROCESSING FEE
The Borrower shall pay to the Lender upon the acceptance of this
Commitment a non-refundable loan processing fee of $35,000.00, which will
be deducted on closing.
10. COMMITMENT FEE
The Borrower shall pay to the Lender upon the acceptance of this
Commitment, a commitment fee of $70,000.00 (the "Commitment Fee") by
certified cheque. Upon disbursement of the whole Loan Amount, the
Commitment Fee shall be returned to the Borrower, without interest. If
Lender defaults on advance the Borrower will be reimbursed the Commitment
Fee and Processing Fee. In the event this Commitment is cancelled by the
Borrower, the Commitment Fee shall be retained by the Lender as liquidated
damages, and not as a penalty, without prejudice to the right of the
Lender to claim such further and other damages as it may sustain by reason
of the occurrence of any of the events detailed in subsections (i) through
(v)
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of the Section of this Commitment headed "Cancellation of Commitment". It
is agreed that the Commitment Fee represents the reasonable cost of the
Lender's work and expenses in underwriting the Loan and that it is not a
penalty.
11. SECURITY
The following security shall be required for the Loan:
(a) a first in priority mortgage and charge (the "Mortgage") of the fee
simple interest of the Borrower in the following lands and
improvements thereon (the "Property"):
Municipal Address: 0000 Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx
Site Area: Site Area: 12.26 acres
Description: a freestanding, single storey office building
and a separate rear industrial building,
together totalling 99,848 square feet,
approximately 40 years old.
(b) a first in priority general assignment of rents and/or leases of the
Property;
(c) a second in priority general security agreement over all the
Borrower's present and after-acquired personal property located on,
related to, arising from or used or acquired in connection with the
Property;
(d) Intentionally deleted.
(e) a Guarantee and Postponement of Claim from
Tarpon Industries Inc.
(the "Additional Covenantors") who shall be jointly and severally
liable with the Borrower for all obligations of the Borrower under
the Mortgage, all security collateral thereto and this Commitment;
and
(f) such further security as the Lender may reasonably require
(the documents in (a) through (f) above being herein referred to as
the "Security Documents"). The Security Documents shall be prepared
by the Lender's counsel in form and content determined by the
Lender.
12. SPECIAL CONDITIONS
Repair Holdback
A holdback of $80,000.00 shall be required until such time as the Borrower
provides evidence satisfactory to the Lender that the following repairs in
paragraph (i) below to the Property have been completed:
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(I) THE REMOVAL OF THE EXISTING ROOF SYSTEM DOWN TO THE STEEL DECK AND THE
INSTALLATION OF APPROXIMATELY 87,000 SQUARE FEET OF NEW EPDM ROOF CONSTRUCTION,
INCLUDING 1.5-INCH POLYISOCYANURATE INSULATION.
(II) THE DECOMMISSIONING AND REMOVAL OF THE TWO EXISTING UNDERGROUND STORAGE
TANKS PRESENT ON THE NORTH SIDE OF THE PROPERTY ALONG WITH THE CONDUCTION OF
SOIL SAMPLING. ANY CONTAMINATION ENCOUNTERED SHALL BE REMEDIATED ACCORDING TO
THE STANDARDS DETAILED IN ONTARIO RE. 153/04.
Prior to funding, the Borrower shall provide an undertaking to complete the
aforesaid repairs in a good and workmanlike manner. Prior to release of the
holdback monies the Borrower will provide the Lender with a report from an
engineering consultant satisfactory to the Lender confirming that the aforesaid
repairs in (i) above have been completed in a good and workmanlike manner.
The holdback monies shall be treated as advanced and the Borrower shall pay
interest thereon in accordance with the Mortgage as if such monies had been
advanced.
Default under the undertaking shall constitute default under the Mortgage. In
the event that the Borrower does not complete the aforesaid repairs by December
30, 2005, then the Lender may, at its sole option, declare the Loan immediately
due and payable or arrange for the completion of such repairs on behalf of the
Borrower and may apply the holdback monies thereto. All monies expended by the
Lender in excess of the holdback monies shall be payable forthwith by the
Borrower to the Lender, shall bear interest at the Interest Rate from the date
same were expended by the Lender and shall be secured by the Mortgage.
13. CONDITIONS PRECEDENT TO FUNDING
On or before funds are advanced, the following conditions shall have been
satisfied.
(a) The executed Security Documents shall have been delivered and
registered with the priority required herein at all appropriate
registration offices.
(b) The Lender shall have been provided with an appraisal report for the
Property addressed to it, prepared by an appraiser acceptable to the
Lender and setting out a market value for the Property, which is
satisfactory to the Lender.
(c) The Lender shall have received an environmental site assessment for
the Property addressed to it, prepared by an environmental
consultant acceptable to it and confirming to the Lender's
satisfaction that there are no hazardous substances on or about the
Property and that the Property complies with all environmental
laws.
The Security Documents shall contain representations, warranties and
covenants and an indemnity with respect to environmental matters,
all as set out in Schedule 1 hereto.
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(d) The Lender shall have received an engineering report for the
Property, addressed to it and prepared by an architect or engineer
satisfactory to it, reporting on the physical condition of the
Property and setting out the cost to remedy any deficiencies, all of
which shall be acceptable to the Lender; this report should
indicate, inter alia, that the buildings on the Property are
structurally sound and are not composed of unbonded, post-tensioned
structures.
(e) Delivery of certified copies of the property, liability and other
insurance policies in compliance with the insurance requirements
hereinafter set out and the review and approval of same by the
Lender's insurance consultant at the Borrower's expense ($375.00
plus GST).
(f) Delivery of a building location survey/certificate of location for
the Property prepared by a licensed surveyor and satisfactory to the
Lender.
(g) Title to the Property shall be satisfactory to the Lender and all
realty taxes, local improvement charges and rates in respect of the
Property shall have been paid.
(h) The Lender shall be satisfied that the Property complies with all
applicable building and zoning by-laws, that the use of the Property
is in compliance with all applicable legislation, including the
applicable Fire Code and that there are no outstanding work orders,
deficiency notices, directives, investigations or the like with
respect to the Property.
(i) Intentionally deleted.
(j) Intentionally deleted.
(k) The Lender shall have received and approved a copy of the property
management agreement for the Property (if applicable).
(1) The Lender shall have received certified or notarized copies of the
constating documents of the Borrower, & government issued
certificate confirming that the Borrower is in good standing and an
opinion from the Borrower's counsel addressed to the Lender
confirming both the Borrower's capacity to grant the security
required herein and the due authorization, execution and delivery of
the Security Documents, in form and content satisfactory to the
Lender. Similar documentation and a similar opinion shall also be
delivered for each corporate Guarantor.
(m) The Borrower shall have delivered to the Lender the executed "pre-
authorized payment" documents hereinafter required.
(n) Such financial and other information, statements and documentation
as the Lender may reasonably require in connection with the
underwriting or closing of the Loan shall have been delivered to it
and all other requirements of this Commitment shall have been
satisfied.
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All conditions precedent to funding expressed herein are for the sole
benefit of the Lender and may be waived at its option. The Borrower shall
do everything necessary to meet all such conditions precedent.
14. LEASES
Intentionally Deleted.
15. PROPERTY MANAGEMENT
The Lender acting reasonably shall have the right to require the Borrower
to retain professional property management for the Property satisfactory
to the Lender. The Lender shall also have the right to approve the terms
and conditions of the management agreement. Any change in the management
of the Property shall require the prior written approval of the Lender,
both as to manager and the terms and conditions of the management
agreement.
16. INSURANCE
The Borrower will comply with the insurance requirements set out in
Schedule 2 hereto.
17. FINANCIAL REPORTING
Within 120 days of the end of each of its fiscal years, or if the Borrower
is an individual, each calendar year, or more often if requested by the
Lender, the Borrower shall provide to the Lender:
(a) Audited financial statements of the Borrower and of any corporate
Additional Covenantor, including a Balance Sheet and supporting
schedules, a detailed Statement of Income and Expenditures and
supporting schedules, and a Statement of Change in Cash Flow; in the
case of an individual Borrower or Additional Covenantor, net worth
statements may be supplied in lieu of financial statements;
(b) Audited financial statements in respect of the Property, including a
Balance Sheet and supporting schedules and a detailed Statement of
Income and Expenditures and supporting schedules;
(C) a current rent roll for the Property containing such detail as may
be required by the Lender, and
(d) a budget for the Property for the next fiscal year, forecasting both
operating income and expenses and capital expenditures.
Each Borrower and Additional Covenantor hereby authorizes the Lender to
obtain such financial information from third parties respecting it or him
as the Lender may require and covenants to deliver any further financial
information requested by the Lender.
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18. DUE ON SALE, CHANGE OF CONTROL ETC.
If:
(a) the Borrower directly or indirectly sells, conveys, transfers or
otherwise disposes of its interest in the lands or any part thereof
or agrees to do so;
(b) there is a change in the effective voting control of the Borrower;
or
(c) the Borrower amalgamates or merges;
without the prior written consent of the Lender being obtained, such
consent not to be unreasonably withheld, then the Lender may, at its
option, declare forthwith due and payable the entire balance of the unpaid
principal together with accrued and unpaid interest due thereon. The
decision to accelerate the Loan shall be at the sole option of the Lender.
Consent to one such transaction shall not be deemed to be a waiver of the
right to require consent to future or successive transactions.
The Borrower will provide reasonable notice to the Lender of any
anticipated or impending transaction which would require the consent of
the Lender under this Section together with such reasonable information as
the Lender may require to determine whether or not to grant its consent
thereto.
19. CHANGES AND ALTERATIONS
Any major changes in excess of $100,000, additions, and/or alterations
contemplated to the Property, including major changes in use of the
Property, must receive the Lender's written consent, such consent not to
be unreasonably withheld, prior to the commencement of the changes,
addition and/or alterations. If the Borrower changes and/or alters the
Property without the prior written consent of the Lender being obtained,
then the Lender may, at its sole option, declare forthwith due and payable
the entire balance of the unpaid principal together with the accrued
interest due thereon. The Borrower will provide reasonable notice to the
Lender of any anticipated or impending transaction which would require the
consent of the Lender under this Section together with such reasonable
information as the Lender may require to determine whether or not to grant
its consent thereto.
20. NO FURTHER ENCUMBRANCES
The Borrower shall not, without the Lender's prior written approval not
to be unreasonably withheld, further charge or otherwise encumber the
Property or any interest therein. The Lender acknowledges and approves a
15-month, Vendor Take Back mortgage of $1,200,000.00 with an interest rate
of 8% and a 15-month, $500,000.00 3rd mortgage with an interest rate of
10%.
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21. REPRESENTATION AND WARRANTY
The Borrower and each Additional Covenantor, if any, represent and warrant
to the Lender that all information and material submitted and all
representations made to the Lender by the Borrower and/or any Additional
Covenantor are true, complete and accurate and each of the foregoing
parties acknowledges that the Lender has relied on such information,
material and representations in approving the Loan. Any breach of this
representation and warranty shall constitute a default under the Security
Documents which shall entitle the Lender to exercise all its rights and
remedies for default in payment thereunder.
22. CANCELLATION OF COMMITMENT
At the sole option of the Lender, this Commitment may be cancelled and
there shall be no obligation to disburse the Loan if:
(i) due to the failure, for any reason, of the Borrower or any
Additional Covenantor to satisfy any of the provisions or
requirements hereof, the Lender has not been willing or able to
disburse the Loan Amount on or before June 30, 2005 (the "Close Out
Date");
(ii) the Borrower or any Additional Covenantor is in breach of any
provision, representation or warranty herein;
(iii) in the sole opinion of the Lender there is a material adverse change
in the position, financial or otherwise, of the Borrower or any
Additional Covenantor from that represented to the Lender as at the
date hereof;
(iv) in the sole opinion of the Lender, there has been a material adverse
change in the condition of the Property or in the actual or
anticipated revenues therefrom from that existing at the date
hereof; or
(v) any situation exists which would constitute a default hereunder or
under any of the Security Documents.
If the whole Loan Amount has not been disbursed on or before the Close Out
Date, the Lender may, at its sole option, close out the Loan Amount at
the amount then disbursed, if any.
If the Lender agrees to an extension of the Close Out Date for any reason
after it has fixed the Interest Rate, the Interest Rate shall increase by
one and a half basis point (0.015%) for each 7-day period or part thereof
that the Close Out Date is extended. If this increase results in the
Interest Rate exceeding the Maximum Rate, the amount of the required buy
down will be deducted from the advance of funds.
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23. LIENS
On each disbursement date, there shall have been full and complete
compliance with all requirements of the applicable construction,
mechanics' or builders' lien legislation and the Borrower shall submit to
the Lender, in form and substance satisfactory to the Lender, evidence of
such compliance. The Lender may retain from any disbursement such amounts
as it considers advisable to protect its interest from subordination under
such legislation. The Borrower shall provide additional security,
information and documentation as may be required by the Lender to preserve
and ensure in all respects the absolute first priority of the Mortgage
over any rights of any existing or potential lien claimants.
24. FIRST RIGHT OF REFUSAL ON MATURITY
Intentionally Deleted.
25. PRE-AUTHORIZED PAYMENTS
The Borrower shall execute the requisite documents to allow the Lender to
withdraw the regular monthly payments of principal, interest and taxes
from the Borrower's bank account.
26. EXPENSES
Whether or not the Loan Amount is disbursed and notwithstanding retention
of the Commitment Fee by the Lender, all of the Lender's costs and
expenses, including without limitation all legal fees and disbursements
and the cost of all reports, appraisals, inspections and investigations
incurred by the Lender in relation to the Loan and/or this Commitment
shall be paid by the Borrower. The Borrower shall also be responsible for
any commission or finder's fee payable in connection with this Commitment.
All such amounts are payable forthwith, on demand by the Lender, and may
be added to the principal balance of the Mortgage and shall bear interest
at the Interest Rate.
27. CREDIT INVESTIGATIONS
The Borrower and each Additional Covenantor authorize the Lender to make
inquiries concerning the character, general reputation, personal
characteristics, financial and credit data of the Borrower and each
Additional Covenantor, including its respective directors, officers,
shareholders, and principals, and to verify any information provided to
the Lender hereunder, all for the purpose of underwriting and servicing
the Loan.
28. CONSENT TO DISCLOSURE
In the event the Lender sells the Loan or securitizes it into the
secondary market, the Borrower and each Additional Covenantor consent to
the release by the Lender of all information and materials in the Lender's
possession concerning the Borrower, each Additional Covenantor and/or the
Property to such party or parties.
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(including the public in any offering memorandum as may be necessary or
desirable to facilitate such sale or securitization. In addition, the
Borrower and each Additional Covenantor agrees that the Lender my share
any information concerning the Borrower or any Additional Covenantor, as
the case may be, with (a) any proposed assignee of this Commitment or the
Loan, (b) the Lender's duly authorized agents or representatives who are
engaged in the processing or servicing of the Loan.
29. ADDITIONAL COVENANTORS
The Additional Covenantors, if any, hereby acknowledge and agree that each
of them is jointly and severally liable for all covenants and obligations
of the Borrower under this Commitment and under the Loan.
30. PUBLICITY
On completion of funding, the Lender may, at its option, issue a press
release announcing the Loan with Xxxxxxxx's written consent, not to be
reasonably withheld. During the construction of any improvements, the
Lender may require a sign to be erected and maintained by the Borrower
evidencing the Lender's financing of same and may place notices thereof in
the media.
31. NON-MERGER OF COMMITMENT
Neither the execution and delivery of any Security Documents nor the
advance of the Loan shall in any way merge or extinguish this Commitment
or the terms and conditions contained herein. This Commitment and all its
provisions shall continue in full force and effect until the Loan has been
repaid In full; provided that in case of any inconsistency or conflict
between any provision or provisions of this Commitment and any provision
or provisions of the Security Documents, the Lender may elect which
instrument or provision is to prevail.
32. NO AGENCY
The Borrower acknowledges that First National Financial Corporation
("FNFC") may assign this Commitment to a third party and if it does so
will receive a fee or commission in connection with such assignment. FNFC
may also receive a fee in connection with the servicing of this Loan. FNFC
is not acting as the Borrower's agent or otherwise in any fiduciary
capacity in relation to the Borrower in connection with this Loan.
33. ASSIGNMENT
Neither this Commitment nor any of the Loan proceeds may be assigned by
the Borrower. This Commitment and the Security Documents may be assigned
in whole or in part by the Lender at any tune before or after the advance.
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34. ENTIRE AGREEMENT
This Commitment and the Schedules attached hereto, when accepted by the
Borrower, will constitute the entire agreement and understanding between
the parties hereto with respect to the Loan and supercede all other
agreements, understandings or commitments, oral or written.
35. APPROVALS AND CONSENTS
Any approvals or consents required to be made or given by the Lender
hereunder must be expressly given pursuant hereto and shall not be implied
or construed by the delivery or receipt of documents.
36. AMENDMENTS AND WAIVERS
Except as otherwise expressly provided herein, this Commitment cannot be
waived, altered, amended, discharged or terminated other than by an
agreement in writing signed by the party against whom enforcement of any
such waiver, alteration, amendment, discharge or termination is sought.
37. COMMUNICATIONS
All communications provided for hereunder shall be in writing, personally
delivered, sent by prepaid first class mail or sent by electronic
transmission, and if to the Lender addressed to the address above-noted to
the attention of the Manager, Mortgage Investments and if to the Borrower
to the address noted above. The date of receipt of any such communication
shall be deemed to be the date of delivery, if delivered as aforesaid, or
the third Business Day following the date of mailing, if mailed, as
aforesaid. If sent by electronic transmission before 4:00 pm on any
Business Day, such communication shall be deemed to have been received on
the date sent; if sent after 4:00 pm on any Business Day or if sent on a
day which is not a Business Day, such communication shall be deemed to
have been received on the next following Business Day. Any party hereto
may change its address for service from time to time by notice in the
manner herein provided. In the event of a postal disruption or an
anticipated postal disruption, prepaid first class mail will not be an
acceptable means of communication.
38. FURTHER ASSURANCES
The Borrower and each Additional Covenantor, if any, shall, at the
Lender's request, execute or deliver such further documentation and enter
into such other agreements as are necessary for the securing of the Loan
and the fulfilling of the terms contained herein.
39. TIME OF THE ESSENCE
Time shall be of the essence of this Commitment in all respects.
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40. GOVERNING LAW
This agreement shall be governed by and construed in accordance with the
laws of the Province in which the Property is situate.
41. INTERPRETATION
(i) The headings of all provisions herein are inserted as a matter of
convenience only and not to define the intent of this document.
The necessary changes in grammar and gender required to apply to
the parties hereto shall be assumed as though expressed.
(ii) If there is more than one Borrower or if there is an Additional
Covenantor, or more than one Additional Covenantor, each of the
covenants, agreements and obligations herein shall, as between and
among each Borrower and each Additional Covenantor, be deemed to be
joint and several, except as may otherwise herein specifically be
provided, and the term "Borrower" shall be read as if each Borrower
were specifically named and the term "Additional Covenantor" shall
be read as if each Additional Covenantor were specifically named
and any default by any one Borrower shall be deemed to be a default
by each Borrower and any default by any one Additional Covenantor
shall be deemed to be a default by each Additional Covenantor.
(iii) "Business Day" means a day of the week, other than Saturday, Sunday
or any other day which is a statutory or a municipal holiday in the
municipality in which the Property is situate.
(iv) "Person" includes any individual, partnership, joint venture,
trust, unincorporated organization or any other association,
corporation and government or any department or agency thereof.
(v) The words "hereto", "herein", "hereunder", "hereof", "hereby",
"this Commitment", "this agreement" and similar expressions used in
this Commitment, including the schedules attached hereto, mean or
refer to this Commitment as a whole and not to any particular
provision, section or paragraph or other portion of this Commitment
and include any instrument supplemental or ancillary hereto.
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Acceptance of this Commitment shall create a binding agreement between the
parties hereto on the terms and conditions set out herein. TO ACCEPT THIS
COMMITMENT, KINDLY EXECUTE SAME WHERE INDICATED BELOW AND RETURN IT TOGETHER
WITH THE $70,000.00 COMMITMENT FEE TO THE LENDER BY NO LATER THAN 2 P.M. LOCAL
TIME ON MAY 12, 2005 AT THE ADDRESS NOTED ABOVE.
Failing receipt by the Lender of the executed Commitment together with the
Commitment Fee by the date and time aforesaid, the offer contained in this
Commitment shall be null and void and of no further force and effect unless the
Lender shall have otherwise agreed in writing whether before, on or after such
date.
Yours truly,
FIRST NATIONAL FINANCIAL CORPORATION
Per: /s/ Xxxxx X. Xxxxx
---------------------------
Xxxxx X. Xxxxx
Vice President
Mortgage Investments
Accepted on the 12th day of MAY, 2005
STEELBANK TUBULAR INC.
Per: /s/ X. Xxxxx XXXXXXXX
-----------------------------
Authorized Signatory
Name: X. XXXXX XXXXXXXX
Title: CHAIRMAN & CEO.
Per: _____________________________
Authorized Signatory
Name:
Title:
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ADDITIONAL COVENANTOR(S):
TARPON INDUSTRIES INC.
Per: /s/ X. Xxxxx Xxxxxxxx
------------------------------
Authorized Signatory
Name: X. XXXXX XXXXXXXX
Title: CHAIRMAN & CEO.
Attachments
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Schedule 1 - Environmental Provisions
Schedule 2 - Insurance Requirements
Schedule 3 - Interest Rates
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SCHEDULE 1
In this Schedule and in the Mortgage the following words shall have the
following meanings:
"APPLICABLE LAWS" means, in respect of any person, property, transaction or
event, all applicable federal, provincial or municipal laws, statutes,
regulations, rules, by-laws, policies and guidelines, orders, permits, licences,
authorizations, approvals and all applicable common law or equitable principles
in force and effect during the currency of this Charge.
"ENVIRONMENTAL LAWS" means all present and future Applicable Laws, standards and
requirements relating to environmental or occupational health and safety
matters, including those relating to the presence, release, reporting,
licensing, permitting, investigation, disposal, storage, use, remediation and
clean-up or any other aspect of a Hazardous Substance.
"ENVIRONMENTAL PROCEEDING" means any investigation, action, proceeding,
conviction, fine, judgement, notice, order, claim, directive, permit, license,
approval, agreement or Lien of any nature or kind arising under or relating to
Environmental Laws.
"HAZARDOUS SUBSTANCE" means any substance or material that is prohibited,
controlled, otherwise regulated by any governmental authority or is otherwise
hazardous in fact, including without limitation contaminants, pollutants,
asbestos, lead, urea formaldehyde foam insulation, polychlorinated by-phenyls or
hydrocarbon products, any materials containing same or derivates thereof,
explosives, radioactive substances, petroleum and associated products,
underground storage tanks, dangerous or toxic substances or materials,
controlled products, and hazardous wastes.
Representations Regarding Environmental Matters
The Property and all businesses and operations conducted thereon comply with all
Environmental Laws. The Property has not been used for or designated as a waste
disposal site and, except as disclosed in the environmental audit obtained by
the Chargee prior to the advance of funds under this Charge (the "Environmental
Audit"), contains no Hazardous Substances and there is no existing or threatened
Environmental Proceeding against or affecting the Property. Copies of all
existing environmental assessments, audits, tests and reports relating to the
Property have been delivered to the Chargee. To the best of the Chargor's
knowledge and belief, there are no pending or proposed changes to Environmental
Laws or to any Environmental Proceedings which would render illegal or
materially restrict or change the present use and operation of the Property.
Except as disclosed in the Environmental Audit, neither of the Chargor nor, to
the best of the Chargor's knowledge and belief after due inquiry and
investigation, any other person or organization: (i) has used or permitted the
use of the Property to generate, manufacture, refine, treat, transport, store,
handle, dispose, transfer, produce or, process Hazardous Substances; (ii) has
been subject to any Environmental Proceeding related to the Property; (iii) has
caused or permitted the release or discharge of any Hazardous Substance on or in
the vicinity of the Property; (iv) has received or otherwise has knowledge of
any Environmental Proceedings or of any facts which could give rise to any
Environmental Proceeding related to the Property; (v) has undertaken any
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remediation or clean-up of any Hazardous Substance on or in the vicinity of the
Property; or (vi) has defaulted in reporting any occurrence or circumstance to
any governmental authority in relation to the Property which is or was required
to be reported pursuant to any Environmental Laws.
Covenants Regarding Environmental Matters
The Chargor shall: (i) ensure that the Property and the Chargor comply with all
Environmental Laws at all times; (ii) not permit any Hazardous Substance to be
located, manufactured, stored, spilled, discharged or disposed of at, on or:
under the Property (except in the ordinary course of business of the Chargor or
any tenant and in compliance with all Environmental Laws) nor permit any other
activity on or in respect of the Property that might result in any Environmental
Proceeding affecting the Property, Chargor or Chargee; (iii) notify the Chargee
promptly of any threatened or actual Environmental Proceedings; (iv) remediate
and cure in a timely manner any non-compliance by the Property or the Chargor
with Environmental Laws, including removal of any Hazardous Substances from the
Property; (v) maintain all environmental and operating documents and records
including all permits, licenses, certificates, approvals, orders and agreements
relating to the Property as required by Environmental Laws; (vi) provide the
Chargee promptly upon request with such information, documents, records,
permits, licences, certificates, approvals, orders, agreements, environmental
audits, reports, assessments and inspections and take such other steps (all at
the Chargor's expense) as may be required by the Chargee to confirm and/or
ensure compliance by the Property and the Chargor with Environmental Laws, and
(vii) execute all consents, authorizations and directions necessary to permit
any inspection of the Property by any governmental authority and to permit the
release to the Chargee or its representatives, of any information relating to
the Property and the Chargor.
Environmental Indemnity
Without limiting any other provision of this Charge or any;document collateral
hereto, the Chargor shall indemnify and pay, protect, defend and save the
Chargee harmless from and against all actions, proceedings, losses, damages,
liabilities, claims, demands, judgments, costs, expenses, (including legal fees
and disbursements on a solicitor and his own client basis) (collectively
"Environmental Claims"), imposed on, made against or incurred by the Chargee
arising from or relating to, directly or indirectly, and whether or not
disclosed by the Environmental Audit and whether or rot caused by the Chargor or
within its control, (i) any actual or alleged breach of Environmental, Laws
relating to or affecting the Property, (ii) the actual or alleged presence,
release, discharge or disposition of any Hazardous Substance in, on, over,
under, from or affecting all or part of the Property or surrounding lands,
including any personal injury, or property damage prising therefrom, (iii) any
actual or threatened Environmental Proceeding affecting the Property including
any settlement thereof, (iv) any assessment, investigation, containment,
monitoring, remediation and/or removal of all Hazardous Substances from all or
part of the Property or surrounding areas or otherwise complying with
Environmental Laws, or (v) any breach by the Chargor of any covenant hereunder
or under any document collateral hereto or under Applicable Law relating to
environmental matters. This indemnity shall survive repayment of the loan
secured hereby, foreclosure upon this Charge and any other extinguishing of the
obligations of the Chargor under this Charge and any other exercise by the
Chargee of any remedies available to it against the Chargor.
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SCHEDULE 2
Insurance Requirements
The Borrower will at all times during the Term maintain the insurance required
by the Mortgage including without limitation the following coverages:
(a) all risks of direct physical loss or damage, including, without
limitation, coverage for the foundations of all improvements and
flood and earthquake coverage, ail on a replacement cost basis with,
loss payable to the Lender under an Insurance Bureau of Canada
mortgage clause; the policy should allow for the improvements on
the Property to be completed (if applicable), for partial occupancy,
and for the Property to be vacant and unoccupied for a period of at
least 30 days;
(b) comprehensive broad form boiler and machinery insurance covering
all pressure vessels (whether fired or unfired), air conditioning
and miscellaneous electrical apparatus on the Property, for an
amount satisfactory to the Lender, with loss payable to the Lender
under a Boiler and Machinery Insurance Association mortgage clause;
(c) business interruption or rental income loss coverage on a gross
profits or rentals form sufficient to cover 100% of the loss of rent
or loss of business income from the business conducted on the
Property for a period of twelve (12) months, based on the greater of
actual or projected revenue, in respect of all perils described in
(a) and (b) above; and
(d) comprehensive general liability insurance, inclusive of bodily
injury, death or property damage or loss, for a minimum amount of
$5,000,000 per occurrence or such other amount as the Lender may
reasonably request.
The coverage required by sections (a) and (b) above shall include by-law
endorsements acceptable to the Lender, including but not limited to same
site waiver, increased cost of construction, undamaged portion coverage
and demolition and debris coverage.
All policies shall be on a "no co-insurance" basis. All such insurance shall be
placed with a company or companies satisfactory to the Lender. Deductible
amounts shall also be subject to Lender's approval. All cancellations and
alteration clauses in the above referenced policies; Including those obtained in
the mortgage clause endorsements, shall provide for at least thirty (30) days
prior written notice to the Lender of any cancellation of or material alteration
to the policy. The Borrower shall provide evidence of policy renewal or
satisfactory replacement annually at least thirty (30) days prior to expiry, The
Borrower shall deliver to the Lender original or certified copies of all
policies required hereunder. The Lender shall be entitled to require coverage of
such other risks and perils as the Lender may from time to time consider
advisable or; desirable and in respect of which insurance coverage is available.
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SCHEDULE 3
Interest Rate
The annual interest rate under the Mortgage shall be the Prime Rate plus 1.25%
calculated monthly not in advance.
Prime Rate means the annual rate of interest announced from time to time by
Royal Bank of Canada during the period when interest accrues hereunder, as a
reference rate then in effect for determining interest rates on Canadian dollar
commercial loans made in Canada.
Notwithstanding the provisions of Section 6 of this. Commitment, instalments of
interest only (with no principal payment) shall be payable in arrears on the
first day of each month.
