8-K
Strategic Storage Trust VI, Inc. (SGST)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 27, 2023
Strategic Storage Trust VI, Inc.
(Exact name of registrant as specified in its charter)
| Maryland | 333-256598 | 85-3494431 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
10 Terrace Road, Ladera Ranch, California 92694
(Address of principal executive offices, including zip code)
(877) 327-3485
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
|---|---|---|
| None | None | None |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Item 1.01. Entry into a Material Definitive Agreement.
Don Mills Property Purchase Agreement
On January 27, 2023, a subsidiary of Strategic Storage Trust VI, Inc. (the “Company”) entered into an assignment agreement with an affiliate of SmartStop Self Storage REIT, Inc. (“SmartStop”) to acquire such affiliate’s right, title and interest in and to a purchase and sale agreement (the “Purchase Agreement”) with an unaffiliated third party for the acquisition of a self storage facility located in Toronto, Ontario, Canada (the “Don Mills Property”). On January 31, 2023, subsidiaries of the Company closed on the purchase of the Don Mills Property. Please see Item 2.01 below. The information set forth under Item 2.01 of this Current Report on Form 8-K is incorporated by reference into this Item 1.01.
Preferred Equity and Issuance of Operating Partnership Units
On January 30, 2023, the Company, its operating partnership (the “Operating Partnership”), and a subsidiary of SmartStop (the “Preferred Investor”) entered into a Series A Cumulative Redeemable Preferred Unit Purchase Agreement (the “Preferred Unit Purchase Agreement”) pursuant to which the Operating Partnership issued and sold to the Preferred Investor, and the Preferred Investor purchased 600,000 Series A Cumulative Redeemable Preferred Units of Limited Partnership Interest (the “Preferred Units”) at a liquidation preference of $25.00 per unit (the “Liquidation Amount”) in consideration for the Preferred Investor making a capital contribution to the Operating Partnership in an amount of $15 million (the “Preferred Investment”). The proceeds of the Preferred Investment will be used solely in connection with the acquisition, development, and improvement of self storage facilities and working capital or other general partnership purposes. In connection with the Preferred Investment, the Preferred Investor was paid an investment fee equal to $150,000.
On the same date, the Company and the Operating Partnership entered into Amendment No. 1 to the Second Amended and Restated Limited Partnership Agreement of the Operating Partnership (the “Amendment”). The following description is qualified in its entirety by the Preferred Unit Purchase Agreement and the Amendment attached as Exhibits 10.2 and 10.3, respectively, to this Current Report on Form 8-K.
Operating Partnership Agreement Amendment
The Amendment sets forth the key terms of the Preferred Units.
Distribution Rate
The Preferred Units will receive current distributions (the “Current Distributions”) at a rate of 7.0% per annum on the Liquidation Amount until the second anniversary of the date of issuance, 8.0% per annum commencing thereafter until the third anniversary of the date of issuance, 9.0% per annum commencing thereafter until the fourth anniversary of the date of issuance, and 10% per annum thereafter, payable monthly and calculated on an actual/360 basis.
Redemptions; Repurchases
The Preferred Units may be redeemed by the Operating Partnership, in whole or in part, at the option of the Operating Partnership at any time or from time to time following the second anniversary of the initial date of issuance. The redemption price for the Preferred Units will be equal to the sum of the Liquidation Amount plus all accumulated and unpaid distributions thereon to the date of redemption (the “Redemption Price”). If fewer than all of the outstanding Preferred Units are to be redeemed at the option of the Operating Partnership, the Preferred Units to be redeemed will be determined pro rata or by lot or in such other manner as determined by the Company, as the general partner of the Operating Partnership.
A holder of Preferred Units may require the Operating Partnership to repurchase the Preferred Units upon the occurrence of any of the following (each an “Optional Repurchase Event” and as defined within the Amendment): (A) a breach of any of the Protective Provisions; (B) an Event of Default; (C) a Change of Control that has not been
consented to in accordance with the terms of the Amendment; or (D) the Company’s failure to qualify as a REIT under the Internal Revenue Code (the “Code”). The repurchase price for the Preferred Units will be the Redemption Price.
Covenants
The Amendment contains a number of covenants applicable to the Company and the Operating Partnership, including, but not limited to, certain covenants that require that distributions on the Preferred Units be given priority over other disbursements, including distributions on Common Units and certain redemptions of the Company’s shares of common stock, each under the circumstances outlined further in the Amendment.
Events of Default
The occurrence of any of the following shall constitute an Event of Default under the Amendment: (i) a material default in the performance of, or material breach of any covenant, warranty or other agreement contained in the Second Amended and Restated Limited Partnership Agreement, the Amendment or the Unit Purchase Agreement by the Company or the Operating Partnership, as applicable, and the continuance of such default or breach for a period of 10 business days after written notice is given to the Company and the Operating Partnership; (b) an Event of Bankruptcy as to the Company, the Operating Partnership or any of their subsidiaries that has not been consented to in advance by the holders of the Preferred Units; (c) any breach or default or event of default that occurs under any instrument, agreement or indenture pertaining to any indebtedness of the Company or the Operating Partnership or any of its subsidiaries aggregating more than $5 million, the effect of which is to cause an acceleration, mandatory redemption or other required repurchase of such indebtedness or such indebtedness is otherwise declared to be due and payable or required to be prepaid, redeemed, or otherwise repurchased by the Company or the Operating Partnership or any such subsidiary prior to maturity thereof; and (d) the Company’s failure to qualify as a REIT under the Code.
Protective Provisions
Pursuant to the terms of the Amendment, the Company, the Operating Partnership and their subsidiaries are prohibited from undertaking the following activities while the Preferred Units are outstanding without first obtaining the prior written consent of the holders of a majority of the Preferred Units then outstanding (capitalized terms are as defined in the Amendment):
• authorizing or issuing additional (1) preferred stock or units that are equal to or senior to the Preferred Units with respect to certain rights and preferences, or (2) junior stock or units that interferes with the rights of the Preferred Units or interferes in any way with the Company’s management or the management of the Operating Partnership;
• altering the terms of (1) the Amendment or the Unit Purchase Agreement, or (2) the Company’s organizational documents or the organizational documents of the Operating Partnership, or any of their respective subsidiaries, to the extent the amendment would reasonably be expected to adversely affect the Preferred Units or the holders of the Preferred Units;
• in the case of the Operating Partnership, redeeming, repurchasing or acquiring junior equity securities, and in the case of the Company, its subsidiaries, and subsidiaries of the Operating Partnership, redeeming any equity securities, other than (1) redemptions pursuant to the Company’s share redemption program, (2) redemptions of units of limited partner interest of the Operating Partnership in exchange for shares of the Company’s common stock;
• engaging in a Change of Control;
• commencing or suffering to exist an Event of Bankruptcy as to the Company, the Operating Partnership, or any of their respective subsidiaries;
• paying any distributions, other than a distribution made on a regular monthly basis consistent with past practice on (1) in the case of the Operating Partnership, Common Units or other equity securities that rank, as to distributions and upon liquidation, junior to the Preferred Units, and (2) in the case of the Company, its subsidiaries, or a subsidiary of the Operating Partnership, shares of common stock or common equity securities or other equity securities that rank, as to distributions and upon liquidation,
junior to such entity’s shares of preferred stock or preferred equity securities; provided, however, that the foregoing shall not prohibit special distributions that are necessary to preserve the Company’s status as a REIT under the Code; and
• engaging in a recapitalization, reorganization, merger, unit or stock split, statutory unit or stock exchange, sale of all or substantially all of such entity’s assets, tender offer for all or substantially all of its Common Units, shares of common stock or other common equity securities, as the case may be, or other similar transaction.
The information set forth above in this Item 1.01 does not purport to be complete and is qualified in its entirety by the full text of the Preferred Unit Purchase Agreement and the Amendment attached to this Current Report on Form 8-K as Exhibits 10.2 and 10.3, respectively, each of which is incorporated into this Item 1.01 by reference.
National Bank Loan
On January 31, 2023, the Company, through certain wholly-owned subsidiaries (the “Borrowers”), entered into a CAD$25 million financing with National Bank of Canada (“National Bank”) as lender pursuant to a non-revolving term facility credit agreement (the “Loan”). Please see Item 2.03 below. The information set forth under Item 2.03 of this Current Report on Form 8-K is incorporated by reference into this Item 1.01.
Item 2.01. Completion of Acquisition or Disposition of Assets.
On January 31, 2023, subsidiaries of the Company closed on the purchase of the Don Mills Property. The Don Mills Property contains approximately 104,750 net rentable square feet of storage space and 1,020 self storage units. The purchase price for the Don Mills Property was approximately CAD$50.5 million, plus closing and acquisition fees, which was funded with a combination of proceeds from the Company’s public offering, the Loan, as described in Item 2.03 below, and the Preferred Investment, as described in Item 1.01 above.
The information set forth above in this Item 2.01 does not purport to be complete and is qualified in its entirety by the full text of the Purchase Agreement attached to this Current Report on Form 8-K as Exhibit 10.1, which is incorporated into this Item 2.01 by reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
As described in Item 1.01, above, on January 31, 2023, the Company entered into the Loan with National Bank. The Loan is secured by a first mortgage on the Don Mills Property.
Pursuant to the loan agreement for the Loan (the “Loan Agreement”), the interest rate is equal to the 1 month Canadian Dollar Offered Rate ("CDOR"), plus 2.4%. As of the date of closing, the interest rate on the Loan was approximately 6.36%. The Loan also has an initial term of two years, maturing on January 31, 2025. The Loan is interest-only for the first year, payable monthly, and payments of principal and interest, calculated using a 25 year amortization, are due monthly after.
The Loan Agreement contains a debt service coverage ratio covenant applicable to the Borrowers whereby the Don Mills Property must, in general, have a debt service coverage ratio of not less than 1.30 to 1.00 at the closing date. The Loan Agreement also contains customary affirmative, negative and financial covenants, agreements, representations, warranties and borrowing conditions, and events of default, all as set forth in the Loan Agreement. The Company serves as a full recourse guarantor with respect to the Loan for up to CAD $27 million.
The information set forth above in this Item 2.03 does not purport to be complete and is qualified in its entirety by the full text of the Loan Agreement attached to this Current Report on Form 8-K as Exhibit 10.4, which is incorporated into this Item 2.03 by reference.
Item 7.01. Regulation FD Disclosure.
On January 31, 2023, the Company issued press releases announcing the acquisition of the Don Mills Property, as well as a self storage facility located in Edmonton, Alberta, Canada (the “Edmonton Property”). Copies of the press
releases are attached as Exhibits 99.1 and 99.2 to this Current Report on Form 8-K and are incorporated herein solely for purposes of this Item 7.01 disclosure.
Pursuant to the rules and regulations of the Securities and Exchange Commission, the information in this Item 7.01 disclosure, including Exhibits 99.1 and 99.2, and information set forth therein, is deemed to have been furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Such information shall not be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
10.1 Purchase Agreement, dated as of December 22, 2022
10.2 Series A Cumulative Redeemable Preferred Unit Purchase Agreement, dated as of January 30, 2023
10.4 Non-Revolving Term Facility Credit Agreement, dated as of January 31, 2023
99.1 Press Release for the Don Mills Property, dated January 31, 2023
99.2 Press Release for the Edmonton Property, dated January 31, 2023
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| STRATEGIC STORAGE TRUST VI, INC. | |
|---|---|
| Date: January 31, 2023 | By: /s/ Matt F. Lopez |
| Matt F. Lopez | |
| Chief Financial Officer and Treasurer |
EX-10.1
Exhibit 10.1
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this Agreement) is dated as of the date it has been executed and delivered by all parties hereof (the Effective Date) and is between NYX DON MILLS STORAGE LP (the Seller), DON MILLS STORAGE INC. (the Nominee) and SST II ACQUISITIONS, LLC, (the Purchaser), a Delaware limited liability company.
In consideration of the mutual covenants and representations herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser agree as follows:
Article 1 PURCHASE AND SALE
1.1 Purchase and Sale. Subject to the terms and conditions of this Agreement, Seller agree to sell, assign and transfer to Purchaser, and Purchaser agrees to purchase from Seller, on the Closing Date (as defined in Section 8.1(a)), the following (the Land, Real Property, Leases, Tangible Personal Property, Construction Contract and Intangible Property collectively, the Property):
(a) Land. The parcels of land described in Schedule 1.1(a), all privileges and appurtenances, and rights and benefits (including easements and rights of way) belonging thereto (the Land);
(b) Improvements. In respect of the Land, all buildings, structures, improvements, appurtenances, attachments, fixtures (including trade fixtures) and fixed equipment located thereon or affixes thereto, including all systems including heating, ventilation, air-conditioning, electrical, lighting, plumbing and water systems and all elevators, escalators, floor coverings, furnaces and boilers and fittings owned by the Seller (the Improvements and together with the Land, the Real Property);
(c) Leases. Seller’s interest under all written leases, occupancy agreements and rental agreements, in each case, for rental units relating to the Land and Improvements, including all tenant leasing files, all tenant security deposits held by Seller on the Closing Date (as defined below) and all records, books and accounts relating thereto, including, without limitation, the leases for storage space described in the rent roll (the Rent Roll) attached hereto as Schedule 1.1(c) and the lease for REEF Kitchens (collectively, the Leases);
(d) Tangible Personal Property. All fixtures, furniture, equipment, machinery, signage, tools, office equipment, supplies, computers, telephones and other tangible personal property owned by or on behalf of Seller as set forth on Schedule 1.1(d) attached (the Tangible Personal Property);
(e) Construction Contract. Seller’s right, title and interest in, and relating to, the Construction Contract (as defined below), subject to the provisions of Section 4.4; and
(f) Intangible Property. All intangible property owned by Seller and pertaining to the ownership and/or occupancy of the Property and the operation of the business being conducted on the Land, including, without limitation: (i) all transferable telephone exchange numbers including the telephone numbers and facsimile numbers set out In Schedule 1.1(f), (ii) all plans, specifications and studies, including development, engineering and landscaping plans and environmental studies, (iii) all licenses, permits, designs and systems, certificates of occupancy, authorizations and approvals, (iv) all transferable utility contracts, and (v) all assignable warranties and guarantees relating to the Property, or any part thereof (collectively, the Intangible Property).
Article 2 PURCHASE PRICE
2.1 Purchase Price. The purchase price (the Purchase Price) for the Property shall be the sum of Fifty Million and Five Hundred Thousand Dollars ($50,500,000) and shall be paid, accounted for and satisfied (subject to adjustment as hereinafter expressly provided) as follows:
(a) The sum of One Million, Two Hundred and Fifty Thousand Dollars ($1,250,000), by wire transfer to be paid to McMillan LLP (the Seller’s Solicitors), in trust, within three (3) Business Days after the Acceptance Date (as defined below) (the Deposit), which Deposit shall be held by Seller’s Solicitors, in trust, in accordance with the provisions of this Agreement; and
(b) The balance of the Purchase Price shall be paid by wire transfer to Seller’s Solicitors, (or to whom Seller may direct) at Closing (as defined below).
2.2 Purchase Price Allocation. Each of Seller and Purchaser agrees that, subject to Section 9.2(c) below in respect of Casualty, it shall use reasonable commercial efforts to agree at least ten (10) Business Days prior to the Closing Date on the allocation of the Purchase Price between the Land and Improvements forming part of the Real Property, provided that such agreement shall in no event be a condition of Closing. Once Seller and Purchaser have agreed on such allocation, each of Seller and Purchaser undertake to make all filings and returns under the Income Tax Act (Canada) and other applicable taxation statutes in accordance with such said allocation. If Seller and Purchaser do not agree on an allocation, each shall nonetheless file its tax returns with the relevant revenue authorities based on its own respective reasonable allocations.
Article 3 DEPOSIT
3.1 Deposit. The Deposit and interest earned thereon (the Deposit Interest, together with the Deposit collectively, the Downpayment) shall be held and disbursed by Seller’s Solicitors, in trust, on the terms hereinafter set forth:
(a) Seller’s Solicitors shall deposit the Deposit in an interest bearing account of a Canadian chartered bank.
(b) In the event that this Agreement is terminated by Purchaser pursuant to Section 5.2(b) below, the Downpayment shall forthwith be released to Purchaser forthwith, and the provisions of Section 5.2(b) shall apply.
(c) If the Closing takes place as contemplated pursuant to this Agreement, then Seller’s Solicitors shall disburse the Downpayment on the Closing Date to Seller, and Purchaser shall receive a credit against the Purchase Price in an amount equal to the Downpayment.
(d) If the Closing does not take place as contemplated pursuant to this Agreement for any reason, other than by reason of a Seller’s default, the Downpayment shall be paid to the Seller forthwith.
(e) If the Closing does not take place as contemplated pursuant to this Agreement by reason of a Seller’s Default, in addition to any and all other remedies which Purchaser may have in respect thereof, whether in law and/or equity, the Downpayment shall be returned to the Purchaser forthwith, provided however that the Seller’s liability in respect of any Seller’s Default shall be capped at the amount of the Deposit.
(f) If there is any dispute as to whom the Downpayment is to be released upon termination of this Agreement, Sellers’ Solicitors shall not release the Downpayment to either party, but in such event, Sellers’ Solicitors shall hold same until receipt by Seller’s Solicitors of an authorization in writing, signed by both Sellers and Purchaser, directing the disposition of same, or, in the absence of such authorization, Seller’s Solicitors shall hold the Downpayment until the final determination of the rights of the parties in an appropriate proceeding. If such written authorization is not given, or proceedings for such determination are not begun within thirty (30) days after the Closing Date and diligently continued, Seller’s Solicitors may bring an appropriate action or proceeding for leave to deposit the Downpayment in court pending such determination. Seller’s Solicitors shall be reimbursed for all costs and expenses of such action or proceeding including, without limitation, reasonable attorneys’ fees and disbursements, by the party determined not to be entitled to the Downpayment.
Article 4 ADJUSTMENTS
4.1 Adjustments. The following adjustments are to be apportioned as between Seller and Purchaser as of 11:59 p.m. on the evening immediately preceding the Closing Date, with the Closing Date being for the account and expense of Purchaser:
(a) Realty Taxes. All Realty Taxes (as defined below) and personal property taxes and other taxes and charges imposed on Seller and relating to the Property and not paid by others. Adjustments in respect of such taxes shall be made on the basis of the calendar year;
(b) Utility Charges. Utility charges payable by Seller, including, without limitation, electric or water rates and charges and sewer charges. If there are any water meters on the Property (other than meters measuring electric or water consumption costs which are the obligation of Tenants to pay), upon Purchaser request, Seller shall authorize Purchaser to obtain readings to a date not more than five (5) Business Days prior to the Closing Date, and the unfixed electric or water rates and charges and sewer taxes and rents, if any, based thereon for the intervening time, shall be pro-rated on the basis of such readings. In no event shall the readings be taken after the Closing Date and where practicable, any and all meter readings shall be taken on the day prior to the Closing Date. Seller shall bear the charges for utility services based on such readings, and Purchaser shall bear the charges for all such utility services from the time immediately following such readings. Purchaser confirms and acknowledges that Seller shall be credited with all deposits, if any, on account with utility companies servicing the Property (and Seller and Purchaser agree to cooperate to effectuate the transfer of any such deposits), or alternatively, all such deposits shall be refunded to Seller and Purchaser shall provide, on or before Closing, to such utility companies, its own deposits in substitution therefor;
(c) Fuel. Fuel on hand, if any, based on an estimate provided by Seller’s fuel supplier, at Seller’s cost valued at the price therefor charged by such supplier and including any applicable taxes (it being agreed that notwithstanding the foregoing, if any fuel tank located on the Property is not full on the Closing Date, then Purchaser shall receive a credit in an amount equal to the cost necessary to fill such fuel tank);
(d) Licenses, Permits. Annual license, permit, design and system, authorization and inspection fees, provided such are assignable to Purchaser;
(e) Rent. Rent in respect of the Leases, subject to Section 4.2 below;
(f) Contracts. Charges under the Existing Site Plan Agreement (as defined below), the Proposed Site Plan Agreement (as defined below), if executed, and the Construction
Contract (as defined below), in accordance with the provisions of this Agreement, subject to Sections 4.3 and 4.4 below, as applicable; and
(g) Other Items. Such other items as are customarily adjusted in purchase and sale transactions similar to the purchase and sale transaction contemplated by this Agreement.
4.2 Rent, Operating Expenses and Trade Accounts.
(a) Rents Paid. To the extent that Seller receive rent or other similar payments under the Leases, after the Closing Date, the same shall be held in trust and dealt with pursuant to Section 4.2(b) below, as if Purchaser received them.
(b) Allocation of Late Rent Payments. To the extent that Purchaser receives any late rent or other similar payments under any Lease or other occupancy arrangements after the Closing Date, Purchaser shall render an accounting to Seller with respect to such late payments, and such rents or payments shall be applied in the following order of priority, to the extent such calendar months have not been paid: (i) first to any calendar month or months following the calendar month in which the Closing occurred until the Tenant under such Lease is current with respect to all rents payable after the Closing Date, (ii) then to the calendar month in which the Closing occurred, and (iii) then to calendar months prior to the month in which the Closing occurred.
(c) Collection of Rents. Purchaser shall be under no obligation, and Seller shall have no right, after Closing, to commence any legal action to collect any rental arrears accruing in respect of the Leases prior to the Closing Date. Any such rental arrears collected pursuant to any legal proceedings initiated by Purchaser shall be applied first to the payment of Purchaser’s costs and expenses incurred in bringing and prosecuting such legal proceedings, and then disbursed between Seller and Purchaser in accordance with the terms of this Agreement.
(d) Books and Records Available. Seller agrees to make available for Purchaser’s examination, promptly after the Acceptance Date, and thereafter from time to time upon reasonable notice, all records, statements and accounts bearing on or relating to (a) rents and revenues generated from the Leases and the collection thereof, and (b) the operation of the Real Property and expenditures made in connection therewith, the foregoing to include, without limitation, the operating statements for the Real Property since the commencement of such business to the year immediately preceding the calendar year in which the Closing Date occurs.
4.3 Contracts.
(a) Contracts. Seller represents and warrants that all contracts relating to or otherwise encumbering the Property (other than the Existing Site Plan Agreement, the Construction Contract and the Permitted Encumbrances) (the Contracts) shall be terminated by Seller on or before Closing, at its sole cost and expense, which Contracts shall include, without limitation, any Contracts relating to (i) the management of the Property, and (ii) the realty tax appeal (as described in Section 11.23 below.
(b) Development – Security.
(i) Seller represents and warrants that it has deposited with the City of Toronto security in respect of the proposed development of the Property pursuant to a Site Plan Agreement entered into between the Seller and the City of Toronto dated August 9, 2019 (the “Existing Site Plan Agreement”), the sum of One Hundred and Thirsty Eight Thousand Two Hundred and Six Dollars ($138,206.00) (the Security).
(ii) Purchaser covenants and agrees to undertake commercially reasonably efforts, on or prior to the Closing Date, at its sole cost, to lodge replacement security with the relevant Governmental Authority in replacement of the Security (the Replacement Security) such that the Security is released to the Seller, or as it may direct, on or before Closing, failing which, Seller covenants and agrees that its interest in such Security shall be assigned to Purchaser on or before Closing, which assignment shall include, inter alia, an irrevocable direction to such relevant Governmental Authority directing the release of such Security to Purchaser upon the satisfaction of all release conditions applicable thereto, in exchange for which Seller shall receive a credit in the amount of such Security, on the Statement of Adjustments.
4.4 Construction Contract. Each of Seller and Purchaser confirms, acknowledges, covenants and agrees as follows:
(a) The Land is presently under development and construction and that Seller has entered into a CCDC 14 Design-Build Stipulated Price Contract (2013) dated April 18, 2022 between NYX Don Mills Storage LP and Rossclair Contractors Inc. (the Construction Contract);
(b) Subject to the other provisions of this Section 4.4, the Construction Contract to the extent assumable by Purchaser, shall be assumed by and be the responsibility of the Purchaser from and after the Closing Date pursuant to an assignment and assumption agreement (the Construction Assumption Agreement) entered into on Closing. All costs and expenses relating to the assignment and assumption of such Construction Contract, including in respect of obtaining the consent of Rossclair Contractors Inc. in respect thereof (the Consent), shall be for the sole cost and expense of Seller.
(c) Seller shall be responsible for the performance of all covenants and obligations of the “Owner” pursuant to the Construction Contract up to (but not including) the Closing Date and all payments accruing pursuant thereto as at the Closing Date.
(d) Purchaser shall receive a credit on the Statement of Adjustments in an amount equivalent to the requisite holdback to be maintained by Seller in respect of the Construction Contract pursuant to and in compliance with the Construction Act (Ontario).
(e) Any adjustments and/or payments to be made and/or accruing in respect of the Construction Contract shall be quantified and certified by the quantity surveyors or other consultant retained pursuant to the Construction Contract, which quantifications and certifications, absent manifest error, shall be final and binding on Seller and Purchaser.
(f) Notwithstanding any other provision in this Agreement, in the event that the Seller is unable to obtain consent for the assignment and assumption of the Construction Agreement to the Purchaser on Closing, the Seller may terminate the Construction Agreement, at its sole cost and expense, and shall thereafter be relieved of the obligation to assign the Construction Agreement to the Purchaser on Closing.
(g) This Section 4.4 shall survive Closing.
4.5 Development Obligations. Seller and Purchaser covenant and agree to enter into, on or before Closing, an agreement effecting the Purchaser’s assumption of Seller’s obligations pursuant to the Existing Site Plan Agreement and, if it is executed prior to the Closing Date, the proposed site plan agreement between the Seller and the City of Toronto dated for reference at or about August 19, 2022 (the “Proposed Site Plan Agreement”), which agreement, inter alia, shall include reciprocal indemnities between the Seller and Purchaser in respect thereof (collectively, the Development Assumption Agreement).
4.6 Operating Expenses and Trade Accounts. Seller shall be responsible for all operating expenses and trade accounts relating to the Property (including, without limitation, any due and unpaid amounts under the Contracts) up to and including 11:59 P.M. on the night preceding the Closing Date. Seller shall pay such amounts in the ordinary course of business up to the Closing Date, and to the extent any outstanding balances are then known at the Closing Date, pay same at the Closing. Seller agrees to indemnify and hold harmless Purchaser from and against any claim, loss, damage or liability (including reasonable attorneys’ fees and costs of enforcement of the foregoing indemnification obligation) arising out of Seller’s failure to pay such amounts which obligation of indemnification, Seller hereby covenants and agrees, shall expressly survive the Closing.
4.7 Statement of Adjustments. Except as otherwise provided in this Article 4, all adjustments for any income and operating expenses, utilities (if any), taxes (including local improvement charges and assessments and business taxes) and in relation to the Construction Contract (as defined above) shall be made pursuant to a statement of adjustments in respect of the Property (the Statement of Adjustments). Seller shall prepare, acting reasonably, the initial draft of the Statement of Adjustments, and shall deliver such initial draft to Purchaser by no later than noon on the fifth (5th) Business Day prior to the Closing Date. Seller and Purchaser shall each act diligently, expeditiously and reasonably in settling any disputes arising in respect of the initial and any subsequent draft of the Statement of Adjustments.
4.8 Survival. The provisions of this Article 4 shall survive the Closing for: (a) a period of Twelve (12) months in respect of Section 4.1 though to Section 4.7 above. In relation to Section 4.7 above, during such Twelve (12) month period, the parties shall correct any errors in the adjustments utilized on the Closing Date and re-adjust any items based on new or updated information and Seller shall comply with it’s covenant pursuant to Section 4.7 above. After the expiration of the applicable periods as set out above, Seller’s covenant pursuant to Section 4.7 above shall expire and the parties will be deemed to have waived any further right to adjust any such amounts, as applicable. Each party shall promptly make payments to the other party in order to effectuate the adjustments and any re-adjustments described in this Agreement.
Article 5 TITLE – PERMITTED ENCUMBRANCES; VIOLATIONS; INSPECTIONS;
5.1 Seller’s Obligations - Due Diligence. Seller represents and warrants that Seller has delivered to Purchaser all of the due diligence items in Seller’s possession and/or control that are listed in Schedule 5.1(a) hereto (collectively, the Due Diligence Items) by way of an electronic data room (the Data Room).
5.2 Title; Permitted Encumbrances; Requisitions
(a) At Closing, Seller shall convey or caused to be conveyed, registered and beneficial title to the Property, free of any claims, restrictions, charges, liens or encumbrances, except those exceptions and encumbrances set out in Schedule 5.2(a) attached hereto (the Permitted Encumbrances).
(b) Requisitions. Title to the Property will be examined by Purchaser, at Purchaser’s expense. Purchaser will be allowed until 6:00 p.m. (Toronto time) on the date that is fifteen (15) days following the Effective Date (the “Requisition Date”) to investigate title to the Property, and to conduct its off-title searches with respect thereto. If prior to the expiry of the Requisition Date, Purchaser furnishes Seller: (i) with any valid objections to title to the Property relating solely to encumbrances that are not Permitted Encumbrances; or (ii) with any objections in connection with its off-title searches revealing material matters that are not Permitted Encumbrances (collectively, in this section, the “Requisitions”), which Requisitions Seller is unable or unwilling to remove, remedy or satisfy prior to Closing and which Purchaser will not waive, this Agreement may, notwithstanding any intermediate acts
or negotiations with respect to such objections, at the option of the Purchaser, in its sole and absolute discretion, be terminated, by notice in writing to Seller, and upon such termination, the Downpayment shall be released by Seller’s Solicitors to Purchaser, without deduction, and Seller and Purchaser shall be released from all obligations under this Agreement (except for those obligations which are expressly stated to survive the termination of this Agreement), Seller shall provide Purchaser with written notice of its intent to satisfy or not satisfy such Requisitions, within ten (10) days of receipt thereof from Purchaser provided, however, that if Seller cannot remedy the subject matter of such requisition on or before the Closing Date, but Seller is of the view, in its sole and absolute discretion, that it would be possible to remedy same given further time to do so, then Seller, in its sole and absolute discretion, may extend the Closing Date, from time to time for a total period not to exceed ninety (90) days, upon written notice to Purchaser to be delivered on or prior to the date that is five (5) Business Days prior to the Closing Date, and shall remedy the subject matter of such requisition on or before such extended Closing Date. Save and except as to any Requisitions made by the Requisition Date, Purchaser shall be deemed to have irrevocably waived its right to raise any objection to, or to have or make any claim regarding, any defect, matter or issue in respect of the Property or any other aspect thereof of any nature whatsoever, unless: (i) the foregoing first arose or was created after the expiry of the Requisition Date (in which event, the provisions set out in the preceding sentence shall apply, mutatis mutandis), whether as a result of a Seller’s breach of this Agreement or otherwise; or (ii) the foregoing is subject to adjustment in accordance with Article 4 of this Agreement, and then, in each case, only to the extent otherwise permitted pursuant to this Agreement.
5.3 Consents, Authorizations. Seller agrees to execute such consents, authorizations, approvals or directions to any and all parties as Purchaser may, from time to time, deem appropriate, permitting the release to Purchaser, and its solicitors, attorneys, consultants, representatives or agents of information relating to the Real Property, including such written authorization to make the necessary searches of any Governmental Authorities. Purchaser agrees that it shall not request any inspections by a Governmental Authority with respect to the Land and none is authorized by Seller.
5.4 Inspection. During the currency of this Agreement, at any time and from time to time during normal business hours, Seller shall provide Purchaser, and/or its servants, agents, employees, representatives, environmental engineers and consultants, access to the Land for purposes of conducting such inspections, studies, examinations, testing, and/or surveying of the Property, and any and all portions thereof, including physical and mechanical inspections, as Purchaser may deem necessary (acting reasonably) provided that same shall not interfere (and Purchaser undertakes to use its reasonable commercial efforts not to so interfere), in any material respect, with the use, operation and enjoyment of the Land and Improvements by Seller or the Tenants. For greater certainty, Purchaser shall be entitled to commission a customary Phase I environmental site assessment with respect to the Real Property, and any and all portions thereof, and to the extent recommended by any such Phase I environmental site assessment so conducted, a follow up Phase 2 environmental site assessment, all without Seller’s prior written consent, but subject to notice to Seller as hereinafter provided. Seller shall cooperate in good faith with Purchaser, Purchaser’s agents and independent contractors in connection with all such inspections, studies, exams, tests and surveys, and making available during normal business hours all relevant personnel to answer any questions which Purchaser may have regarding the Property. Purchaser, at Purchaser’s sole cost and expense, shall repair any and all damage resulting from any of the tests, studies, inspections and investigations performed by or on behalf of Purchaser pursuant to this Section 5.4.
5.5 Discharge of Seller Encumbrances. The Purchaser acknowledges and agrees that if the Seller’s title to the Property is subject to any financial encumbrance held by an institutional lender, meaning that the lender is a corporation incorporated pursuant to the Trust and Loan Companies Act (Canada), or a chartered bank, trust company, credit union, caisse populaire or insurance
company, which the Seller is required to discharge pursuant to this Agreement, the Seller will not be required to clear title prior to the receipt of the balance of the Purchase Price and the Purchaser or the Purchaser’s Solicitors will pay the balance of the Purchase Price to the Seller’s Solicitors in trust, provided the Seller’s Solicitors deliver to the Purchaser their undertaking addressed to the Purchaser’s Solicitors, Purchaser and, if required, the Purchaser’s lender’s solicitors (which undertaking shall be in a form satisfactory to the Purchaser’s Solicitors and the Purchaser’s lender’s solicitors acting reasonably), to pay out from the balance of the Purchase Price the outstanding balance, including any interest and penalties, under such institutional mortgage as required to obtain a discharge of any such financial encumbrance and to obtain a discharge of such financial encumbrance within 60 days of the Closing Date or such other period of time mutually agreeable to both parties acting reasonably, together with a copy of a discharge statement from the holder of such financial encumbrance. In addition to the foregoing, the Closing procedures for the discharge of the above-noted financial encumbrance shall comply with all applicable mortgage discharge procedures established by the Law Society of Ontario.
Article 6 REPRESENTATIONS AND WARRANTIES
6.1 Purchaser’s Representations and Warranties. Purchaser represents and warrants to Seller that as of the Effective Date:
(a) Purchaser is a limited liability company incorporated under the laws of Delaware and has the full right, power and authority, without the joinder of any other person or entity, to enter into, execute and deliver this Agreement and to perform all duties and obligations imposed on Purchaser under this Agreement;
(b) the execution and delivery of and performance by Purchaser of this Agreement and the consummation of the purchase and sale contemplated hereby has been duly authorized by all necessary corporate action on the part of Purchaser;
(c) neither the execution nor the delivery of this Agreement, nor the consummation of the purchase and sale contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement conflict with or will result in the breach of any of the terms, conditions, or provisions of any agreement or instrument to which Purchaser is a party or by which Purchaser or any of its assets is bound;
(d) this Agreement has been duly executed and delivered by Purchaser and constitutes a legal, valid and binding agreement, enforceable against Purchaser in accordance with the terms thereof, subject only to any limitation under applicable laws relating to (i) bankruptcy, winding-up, insolvency, arrangement, fraudulent preference and conveyance, assignment and preference and other similar laws of general application affecting the enforcement of creditors’ rights, and (ii) the discretion that a court may exercise in the granting of equitable remedies such as specific performance and injunction; and
(e) Purchaser shall be, at Closing, a registrant for the purposes of any taxes imposed under Part IX of the Excise Tax Act, R.S., 1985, c. E-15;
Purchaser shall deliver a certificate to Seller at Closing updating and recertifying all of the foregoing representations and warranties to Seller as of the Closing Date (the Purchaser’s Bringdown Certificate). All of the foregoing representations and warranties expressly shall survive the Closing for a period of one (1) year thereafter.
6.2 Seller’s Representations and Warranties. Seller represents and warrants to Purchaser that as of the Effective Date:
(a) Seller that is an entity, is duly formed, organized or created, as the case may be, validly existing and in good standing under the laws of the jurisdiction of its formation, organization or creation, as the case may be, and has the power and authority to own, collectively, legal and beneficial ownership of the Property, and enter into and perform all duties and obligations imposed on Seller under this Agreement.
(b) Seller has the power and authority to operate and lease the Property it owns and to carry on its business, and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification.
(c) Seller is, and will continue to be at Closing, the legal and beneficial owner of all of the Property, subject only to the Permitted Encumbrances;
(d) neither the execution nor the delivery of this Agreement, nor the consummation of the purchase and sale contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement conflict with or will result in a material breach of any of the terms, conditions, or provisions of any agreement or instrument to which Seller is a party or by which Seller or any of Seller’s assets is bound;
(e) this Agreement has been duly executed and delivered by Seller and constitutes a legal, valid and binding agreement, enforceable against Seller in accordance with the terms thereof, subject only to any limitation under applicable laws relating to (i) bankruptcy, winding-up, insolvency, arrangement, fraudulent preference and conveyance, assignment and preference and other similar laws of general application affecting the enforcement of creditors’ rights, and (ii) the discretion that a court may exercise in the granting of equitable remedies such as specific performance and injunction;
(f) the Nominee is the sole registered owner of the Land and Improvements, as nominee for and on behalf of, Seller, who is the sole beneficial owners thereof;
(g) Seller is not a non-resident of Canada within the meaning of the Income Tax Act of Canada and Seller is a registrant for the purposes of any taxes imposed under Part IX of the Excise Tax Act, R.S., 1985, c. E-15;
(h) there are no parties in possession of, or claiming any possession to, any portion of the Real Property, other than pursuant to the Leases, and there are no leases, service contracts, maintenance agreements or other contracts relating to or otherwise encumbering the Real Property, other than the Permitted Encumbrances and the Contracts;
(i) save and except as disclosed pursuant to the Due Diligence Items or on the Statement of Adjustments, Seller has not received a deposit from any Tenant pursuant to the Leases;
(j) to the Knowledge of Seller, the Rent Roll (which is effective as of the date indicated thereon) is true, correct and complete in all material respects, with no concessions, discounts or other periods of free or discounted rent having been given to any tenant in respect thereof save and except as disclosed in the Rent Roll. The Rent Roll shall be updated and recertified by Sellers, at Closing, and shall at such time, to the Knowledge of Seller, be true, correct and complete in all material respects with no concessions, discounts or other periods of free or discounted rent having been given, save and except as disclosed in the Rent Roll;
(k) Seller has not entered into any agreements with any department of buildings, fire, labor, health or other federal, provincial, county, municipal or other departments and governmental agencies, authorities, courts, and officers, having jurisdiction over and affecting the Real Property (including without limitation, those having jurisdiction over environmental matters) (collectively, the Governmental Authorities), other than Permitted Encumbrances, or as otherwise disclosed in writing and delivered to Purchaser;
(l) to the Knowledge of Seller, the Improvements have been constructed in a good and workmanlike manner, materially in accordance with the plans and specifications for the construction thereof, are structurally sound and are fully functional without defect, reasonable wear and tear excepted, and to the Knowledge of Seller, are in compliance with all applicable laws and with all restrictions registered against title to the Real Property;
(m) to the Knowledge of Seller, there are no defects in the drainage systems, foundations, roofs, walls, superstructures, plumbing, air conditioning and heating equipment, electrical wiring, boilers, hot water heaters or other portions of the Real Property;
(n) to the Knowledge of Seller, the Improvements are wholly within the boundaries of the Land, as applicable, and do not infringe on any easement or right-of-way affecting such parcel of Land, and there are no improvements on any adjoining land, whether public or private, that encroach on any of the Land. To the Knowledge of Seller, there have been no alterations or modifications to the location of Improvements as depicted in the surveys delivered to Purchaser that would cause such surveys to inaccurately depict the location of such Improvements;
(o) to the Knowledge of Seller, the Real Property and its use, operation and maintenance by Seller or Tenants, as applicable, is in compliance with all applicable laws and with all restrictions registered against title to the Land;
(p) to the Knowledge of Seller, Seller has not violated or breached, in any respect, any of the terms or conditions of any Permitted Encumbrance, and to the Knowledge of Seller, without inquiry, all the covenants to be performed by any other party to the Permitted Encumbrances have been fully performed;
(q) all accounts that are due and owing for work or services performed or materials placed or furnished upon or in respect of the construction, completion, repair, renovation or maintenance of the Real Property have been fully paid to date, and at Closing, there will be no such outstanding accounts that could result in the filing of any encumbrance or lien against the Property;
(r) Seller has no Knowledge of, nor has Seller received any written notice of, any violation of any applicable laws from any Governmental Authorities concerning the Real Property, including, without limitation, any outstanding work orders or deficiency or non-compliance notices;
(s) Seller has no Knowledge of, nor has a Seller received written notice from any Governmental Authority as of the Effective Date regarding any change to the zoning classification, any condemnation, expropriation or similar proceedings pending or threatened against the Real Property, or any proceedings to widen or realign any street or highway adjacent to the Real Property or that otherwise affects the Real Property;
(t) Seller has not received any written notice or request from any insurance company or board of fire underwriters (or any organization exercising functions similar thereto) requesting the performance of any material work or alterations with respect to the Real Property;
(u) there are no tax arrears, local improvement or capital charges, sewer taxes, special levies or assessments, or other rates or charges of a similar nature associated with or pertaining to the Real Property (collectively, the Realty Taxes) other than those Realty Taxes accruing from day to day, no Seller has received written notice in connection therewith and no agreement has been entered into by Seller with the municipality or with any Governmental Authority which would have the effect of making all or part of the Real Property subject to or assessed for any such Realty Taxes. There are no appeals, claims, actions, suits, or proceedings pending, or, to the Knowledge of Seller, threatened against Seller relating to such Realty Taxes (save and except for appeals initiated by Seller) and no Seller has Knowledge of any valid basis for any such claim, action, suit, proceeding, investigation or discussion;
(v) to the Knowledge of Seller, there are no actions, suits, arbitrations, alternative dispute resolution processes, or administrative or other proceedings by or before any Governmental Authorities or other person, pending, or, to the Knowledge of Seller, affecting the Property, and Seller has no Knowledge of any valid basis for any such action, suit, arbitration process or proceeding. To the Knowledge of Seller, there are no investigations by any Governmental Authorities in progress with respect to the Property and Seller has no Knowledge of any valid basis for any such investigation. Seller is not subject to any judgment, order or decree entered in any lawsuit or proceeding nor has a Seller settled any claim prior to being prosecuted in respect of it. Seller is not a plaintiff or complainant in any action, suit, arbitration, alternative dispute resolution process or proceeding arising out of or connected with the Property;
(w) there are no options to purchase the Property, or any portion thereof, in favor of any third party, and there are no rights of first refusal relating to the Property, or any portion thereof, in favor of any third party;
(x) Seller does not employ any individuals at the Property;
(y) to the Knowledge of Seller, all Due Diligence Items delivered by Seller to Purchaser are true, correct and complete in all material respects;
(z) Seller has not entered into any union or collective bargaining agreements with respect to, or which will impact any owner of the Property; and
(aa) Seller has not as of the Effective Date received notice of any environmental contamination on, at or adjacent to the Real Property, nor does Seller have Knowledge of any environmental contamination on, at or adjacent to the Property, or of any contravention of any environmental law applicable to the Real Property.
For all purposes of this Section 6.2 and 6.3, and for all purposes in the Seller’s Bringdown Certificate, “Knowledge of Seller” or representation or warranty that “Seller has no Knowledge of” and any other qualification of a representation or warranty in this Section 6.2 as to Knowledge of Seller or that Seller has no Knowledge of (referred to herein as a Knowledge Qualification), means the actual knowledge (and not constructive, implied or imputed knowledge) of Yashar Fatehi.
Seller shall deliver a certificate to Purchaser at Closing certifying to Purchaser that all of the foregoing representations and warranties in this Section 6.2 are materially true, subject to any Permitted Qualifications, as of the Closing Date (the Seller’s Bringdown Certificate). In the event that Yashar Fatehi is informed by the Purchaser of facts regarding the Property after the Effective Date or Yashar Fatehi otherwise becomes aware of facts as a result of Purchaser’s investigations or by receipt of any reports or other documentation generated by or for Purchaser after the Effective Date, and Yashar Fatehi was not aware of such facts on the Effective Date, Seller shall be entitled to include such facts as qualifications (Permitted Qualifications) in the Seller’s Bringdown
Certificate to any representation or warranty that is subject to a Knowledge Qualification in this Section 6.2 and such Permitted Qualifications shall apply to the condition in Section 6.3.
All of the foregoing representations and warranties expressly shall survive the Closing for a period of one (1) year thereafter.
6.3 Purchaser’s Conditions Precedent to Closing – Seller’s Representations and Warranties. It shall be a condition precedent to Purchaser’s obligations to consummate the purchase and sale transaction contemplated by this Agreement, that all representations and warranties material to the value of the Property made herein by Seller are true and correct in all material respects, and subject to any Permitted Qualifications, as of the Closing Date, failing which, Purchaser, at its option, and in addition to any and all remedies available to the Purchaser at law, or in equity (subject to the provisions herein), shall be entitled to terminate this Agreement, and neither Seller nor Purchaser shall have any further right or obligation under this Agreement other than those obligations which expressly survive the Closing and Seller’s Solicitors obligation to forthwith pay the Downpayment, without deduction, to Seller in accordance with Section 3.1(d).
6.4 As-Is-Where-Is. Purchaser acknowledges that, except as expressly provided in this Agreement, Seller is selling and Purchaser is purchasing the Property on an “as is, Where is” basis as shall exist on the Closing Date, and materially as it existed on the Effective Date, including any latent or patent defects and including any reasonable wear and tear that occurs during the term of this Agreement. No representation, warranty or condition is expressed or can be implied in respect of any matter of thing whatsoever concerning the Property, save and except as expressly provided for in this Agreement.
6.5 No Sandbagging. Prior to Closing, each party covenants to give written notice to the other party if it becomes aware of any breach of any representation or warranty given by that party that is contained in this Agreement. Notwithstanding any other provision in this Agreement, to the extent that a party has knowledge of a breach of a representation or warranty by the other party on or prior to the Effective Date, there shall be no claim or recourse in respect of such breach hereunder.
Article 7 COVENANTS OF SELLER
7.1 Seller covenants and agrees with Purchaser, that from and after the Acceptance Date:
(a) No Modification to Lease. Seller shall not:
(i) enter into any new leases of space or any other occupancy agreements affecting the Real Property other than in the ordinary course of the operation of such Seller’s business on the Real Property consistent with such Seller’s past leasing practices; or
(ii) modify, cancel, extend, renew or otherwise change in any manner any of the terms, covenants or conditions of any of the Leases or other occupancy agreements affecting the Real Property in a manner inconsistent with the terms of this Section 7.1 and such Seller’s past leasing practices.
(b) No Modification to Contracts. Seller shall not consent to materially modify, cancel, extend, renew or otherwise materially change any of the terms, covenants or conditions of any of the Contracts affecting the Real Property, without the prior written consent of Purchaser, which consent shall not be unreasonably withheld or delayed, provided, however, Seller shall be permitted to enter into any new agreement that may be terminated prior to Closing, at the Seller’s sole cost and expense;
(c) Operation of Real Property. Seller shall operate the Real Property in a manner consistent with current practices, which are equivalent to the operational standards employed by a prudent property manager of similar properties located within the Province of Ontario;
(d) Maintain Real Property. Seller shall maintain the Real Property in good order and repair so that same shall be in materially the same condition on the Closing Date as they are in on the Acceptance Date, reasonable wear and tear excepted;
(e) Maintain Insurance. Seller shall keep in full force and effect in respect of the Real Property, such builder’s risk, public liability, property damage and other customary classes of insurance covering the Real; Property as a prudent owner would maintain insuring against fire and other hazards covered by extended coverage endorsement and commercial general liability insurance against claims for bodily injury, death and property damage occurring in, on or about the Real Property, and pay all premiums for such insurance prior to the applicable due dates;
(f) Cooperation with Purchaser’s Due Diligence. Seller shall reasonably cooperate with Purchaser in connection with the Due Diligence conducted by Purchaser pursuant to the terms of this Agreement;
(g) Violation Notices. Seller shall immediately provide Purchaser with a copy any violation of law or municipal ordinances issued by any Governmental Authorities having jurisdiction over or affecting the Real Property or the business of Seller following Seller’s receipt of same by the Seller;
(h) Tangible Personal Property. Without Purchaser’s prior written consent, which consent may be granted or withheld in Purchaser’s sole and absolute discretion, Seller shall not remove from the Real Property any Tangible Personal Property that is materially significant to the operation of the business of Seller, except as may be necessary for repairs, or the discarding of worn out or useless items that are replaced by (and at the sole cost and expense of) Seller;
(i) Zoning. Without Purchaser’s prior written consent, which consent may be granted or withheld in Purchaser’s sole and absolute discretion, Seller shall not initiate, consent to, approve or otherwise take any action with respect to the zoning, or any other governmental rule or regulation, presently applicable to all or any part of the Land; and
(j) Obligation to Provide Notices. Seller shall provide Purchaser with copies of any and all written notices which Seller may receive after the Effective Date concerning any of the following: (i) any proposed or threatened condemnation of the Property; (ii) any notice of violation issued by any Governmental Authorities having jurisdiction over or affecting the Real Property or the business of Seller; or (iii) any litigation filed or credibly threatened against Seller or the Property.
Article 8 CLOSING
8.1 Closing.
(a) Closing Date. Assuming that all conditions to closing have been satisfied or affirmatively waived by Purchaser and Sellers, and this Agreement has not otherwise been terminated, the consummation of the Transaction (the “Closing”) shall take place on January 31, 2023 except as hereinafter provided.
The Purchaser shall use best efforts to obtain a registration number for HST purposes on or before January 26, 2023 and if, notwithstanding the Purchaser’s application of such best efforts it has not obtained an HST registration number on or before January 26, 2023, the Purchaser may extend the Closing Date, in one (1) week increments thereafter up to and including February 28, 2023, provided that each such extension shall be contingent upon the Purchaser having applied its best efforts to obtain an HST registration number during the prior extension period.
Seller and Purchaser agree that the Closing shall be consummated through the customary practice among Canadian solicitors representing sellers and purchasers of real property in Ontario, Canada, and neither party need be present at Closing. In furtherance of the foregoing, on the Closing Date, all documents and funds shall be delivered to Seller’s Solicitors, and shall be held by them in trust until release is authorized as set out in a document registration agreement, in the form adopted by the Joint LSUC-CBAO Committee on Electronic Registration of Title Documents on March 29, 2004 or any successor version thereto, and acceptable to Seller’s Solicitors and Purchaser’s solicitors, acting reasonably, and entered into by Purchaser’s solicitors and Seller’s Solicitors at or prior to Closing, providing for the holding and release of documents and funds. On or before the Closing Date, Seller’s Solicitors shall prepare the electronic transfer and message it to Purchaser’s solicitors for completion.
(b) Possession. Purchaser will have possession of the Real Property at the Closing and after payment of the Purchase Price adjusted as provided herein, free from all encumbrances except the Permitted Encumbrances.
(c) Extensions to Closing for Liens. In the event that a construction lien is registered on the Closing Date, the Seller shall be entitled to extend the Closing Date for successive periods, which shall be no more than 90 days in the aggregate, to allow for the Seller to arrange for a discharge of such construction lien.
(d) Extensions for Cautions. In the event that a caution or other similar instrument is registered on title to the Real Property prior to Closing without consent of the Seller, the Seller shall be entitled to extend the Closing Date for successive periods, which shall be no more than 90 days in the aggregate, to allow for the Seller to arrange for a discharge of any such instruments.
8.2 Registration, Closing Costs, HST.
(a) Registration. Registration of all the requisite documents in all appropriate offices of public record and all matters of payment and delivery of documents by each party to the other shall be deemed to be concurrent requirements of Closing so that the Closing shall not be completed hereunder until everything has been paid, delivered and registered.
(b) Closing Costs. Seller shall pay, on the Closing Date, the fees and expenses of Seller’s solicitors and other professionals or consultants providing counsel to Seller in connection with the transactions contemplated in this Agreement. Purchaser shall pay, on the Closing Date: (i) all recording costs relating to the Transfer; (ii) any applicable property transfer taxes, Land Title Office registration fees or taxes and similar charges relating to the transfer of the Property; and (iii) the fees and expenses of Purchaser’s solicitors and other professionals or consultants providing counsel to Purchaser in connection with the transactions contemplated in this Agreement.
(c) HST. Purchaser confirms that it will be registered on the Closing Date with Canada Revenue Agency or any successor thereto (the CRA) in compliance with Part IX of the Excise Tax Act (Canada) relating to the federal goods and services tax (the HST). Purchaser agrees that the Purchase Price and any other amounts payable to Seller
hereunder do not include HST or any other applicable taxes and that, if and to the extent required under the Excise Tax Act (Canada) (the “ETA”), Purchaser will remit to Seller on the Closing Date any HST that may be exigible under the ETA in respect of the transaction contemplated herein, and Seller agrees that it will remit such funds or otherwise account for such funds to the Canada Revenue Agency (the “CRA”) in accordance with its obligations under the ETA. Notwithstanding the foregoing, if Purchaser is a corporation which is registered for HST purposes and, on or before the Closing Date, Purchaser provides Seller with a certificate as to the HST registered status of Purchaser containing Purchaser’s HST registration number, Purchaser will not be required to pay the HST to Seller but will be entitled to self-assess the HST and account for the same directly to the CRA. Such certificate shall be in the customary form and shall contain an indemnity from Purchaser in favour of Seller with respect to the payment of HST by Purchaser in accordance with the provisions hereof.
Purchaser covenants and agrees, from and after the Acceptance Date, to apply for, and to proceed diligently and continuously to obtain, a registration number for HST purposes.
Notwithstanding the foregoing, the parties will use their commercially reasonable efforts to minimize (or eliminate) any taxes described in this Section 8.2(c) as are applicable to the purchase and sale of the Property, including any taxes payable under the Excise Tax Act (Canada) in respect of the Closing. To the extent applicable, the parties agree to make the joint election under Section 167 of Part IX of the Excise Tax Act (Canada) in respect of the sale of the Property. Purchaser shall be responsible for filing such election with the applicable taxing regulatory authorities within the time set out in subsection 167(1.1) of the Excise Tax Act (Canada) and shall indemnify Seller in respect of any HST payable on the Purchase Price in accordance with the terms hereof.
The Purchaser shall deliver to the Seller on Closing a certificate and indemnity in which the Purchaser will certify that it is an HST registrant and indemnify and save harmless the Seller from all Claims incurred, suffered or sustained as a result of a failure of the Seller to collect HST or a failure by the Purchaser: (i) to pay any federal, provincial or other taxes required to be paid by the Purchaser under the Excise Tax Act (Canada) and any other legislation in connection with the conveyance or transfer of the Property, whether arising from a reassessment or otherwise, including HST; (ii) to self-assess and remit the HST payable in connection with the transfer and remit HST applicable on the sale of the Property as a result of the Seller relying on the Purchaser’s HST certificate and indemnity described herein; or (iii) to file any returns, certificates, filings, elections, notices or other documents required to be filed by the Purchaser with any federal, provincial or other taxing authorities in connection with the conveyance or transfer of the Property.
In the event that the Purchaser directs registered or beneficial title to another party on Closing, such party shall provide an indemnity to Seller as contemplated from Purchaser as set out in this Section 8.2(c), provided Seller confirms and acknowledges that any party that is solely a registered owner of title need not be registered for HST purposes.
(d) Nominee. Purchaser, in its sole discretion, may elect to appoint a nominee and bare trustee (the Bare Trustee) to hold the legal title to the Land in trust for and on behalf of Purchaser following Closing. If Purchaser elects to have a Bare Trustee to hold title, on the Closing Date, Seller will transfer title to the name of the Bare Trustee and transfer the beneficial interest in the Land to Purchaser as may be directed by way of a title direction from Purchaser to Seller, provided Purchaser delivers to Seller the form of the bare trust agreement with respect to same, prior to Closing. Notwithstanding any such title direction, Purchaser shall remain bound to pay the Purchase Price, including any unpaid balance thereof on Closing.
8.3 Seller’s Closing Deliveries. Seller covenants and agrees to deliver possession of the Property to Purchaser on Closing following delivery of the Purchase Price, subject only to the Permitted Encumbrances (including the Leases), and shall deliver the following documents to Purchaser on or prior to Closing:
(a) Evidence of Authority. Such organizational and authorizing documents of Seller as shall be reasonably required to evidence Seller’s authority to consummate the transactions contemplated by this Agreement;
(b) Transfer. An electronic transfer (the Transfer) from the applicable Seller containing the statements of the transferor and the transferor’s solicitor as set out in section 50(22) of the Planning Act transferring to the Purchaser, or the Bare Trustee (as the Purchaser may direct), registered fee simple title to the Land;
(c) Beneficial Conveyance. In the event registered fee simple title is transferred to the Bare Trustee A beneficial conveyance from the applicable Seller transferring to the Purchaser beneficial ownership in the fee simple title to the Land and the Improvements,;
(d) Residency Certificate. A certificate of an officer of Seller stating that, on Closing, such Seller is not a “non-resident” of Canada within the meaning and purpose of Section 116 of the Income Tax Act (Canada) and that, no officer, director or shareholder of Seller, nor any of its spouses, if applicable, have resided or have any right to reside within or upon any part of the lands as their matrimonial home;
(e) Statement of Adjustments. A Statement of Adjustments prepared in accordance with Article 4 of this Agreement and an undertaking by Seller to readjust the same upon written request of Purchaser after Closing;
(f) Undertaking to Re-adjust. An undertaking by Seller to readjust the Statement of Adjustments upon written request of Purchaser after Closing;
(g) Re-affirmation Certificate. The Seller’s Bringdown Certificate;
(h) Tangible Personal Property. A bill of sale from Seller to Purchaser transferring all legal and beneficial interests in all Tangible Personal Property;
(i) Assignment of Intangible Property. An assignment of Intangible Property from Seller to Purchaser transferring all legal and beneficial interests in all Intangible Property, including without limitation, all Leases, all subsisting and transferrable warranties and/or guarantees in respect of the Tangible Personal Property and in respect of the Real Property and any work performed in respect thereof;
(j) Certificate – Rent Roll. A certificate of an officer of Seller, which certification shall be made only to the Knowledge of Seller, attaching a rent roll for the Real Property which is current as of the Closing Date and which contains all material information typically included in a rent roll for similar properties;
(k) Reliance Letters. Reliance letters addressed to Purchaser and any lender to Purchaser from the consultants who prepared the environmental and building condition reports that were prepared on or after December 31, 2021 confirming that Purchaser may rely on such reports, at its sole cost and expense, provided that all such reliance letters shall be requested by the Purchaser in writing (which request shall identify the author and date of the report for which a reliance letter is required) on or before December 31, 2022; and
(l) Further Documentation. Such further documentation relative to the completion of this transaction as otherwise referred to herein, or as may be required by law or as may be the usual practice of a purchaser’s solicitor in completing transactions similar to the sale of the Property contemplated herein in the Province of Ontario.
All such documentation, except as otherwise provided herein, shall be in form and substance acceptable to both Seller and Purchaser, each acting reasonably and in good faith.
8.4 Purchaser’s Closing Deliverables. Purchaser covenants to deliver the following to Seller on or prior to Closing:
(a) Purchase Price. The balance of the Purchase Price, as described in Section 2.1(c) (net of the Downpayment to be applied against the Purchase Price, and subject to adjustments as contemplated pursuant to this Agreement);
(b) Undertaking to Re-adjust. An undertaking by Purchaser to readjust the Statement of Adjustments upon written request of Seller after Closing;
(c) Re-affirmation Certificate. The Purchaser’s Bringdown Certificate;
(d) Purchaser’s Certificate. A certificate confirming Purchaser’s HST registration number to Seller in the customary form; and
(e) Further Documentation. Such further documentation relative to the completion of this transaction as otherwise referred to herein, or as may be required by law or as may be the usual practice of a seller’s solicitor in completing transactions similar to the sale of the Property contemplated herein in the Province of Ontario.
All such documentation, except as otherwise provided herein, shall be in form and substance acceptable to both Seller and Purchaser, each acting reasonably and in good faith.
8.5 Documents to be executed by Seller and Purchaser. At the Closing, Seller and Purchaser shall also execute and deliver the following:
(a) Tenant Notice. An executed direction to each of the Tenants notifying such Tenant that the Real Property has been transferred to Purchaser, directing such Tenant to pay future rental payments to Purchaser, and notifying such Tenant of the new address where Tenant is to make rental payments after the Closing Date;
(b) Construction Contract. Provided that the Construction Agreement has not been terminated in accordance with the terms of this Agreement, the Construction Assumption Agreement to be executed by Seller and Purchaser in respect of the assignment by Seller of the Construction Contract and the assumption by Purchaser thereof, and which shall include, inter alia, acknowledgement from the contractor pursuant to the Construction Contract of such assignment and assumption and reciprocal indemnities between the Seller and Purchaser in respect thereof;
(c) Assignment of Permitted Encumbrances. Assumption and assignment agreement to be executed by Seller and Purchaser in respect of the assignment by Seller and assumption by Purchaser of the Permitted Encumbrances, which shall include, inter alia, reciprocal indemnities between the Seller and Purchaser in respect thereof; and
(d) Development Assumption Agreement. The Development Assumption Agreement.
All such documentation, except as otherwise provided herein, shall be in form and substance acceptable to both Seller and Purchaser, each acting reasonably and in good faith.
Article 9 RISK OF LOSS
9.1 Condemnation. If, prior to the Closing, action is initiated to take all or any portion of the Real Property, by expropriation proceedings or by deed or transfer in lieu thereof, which expropriation would, if completed, cause a materially detrimental reduction in the value of the Property, the Purchaser may either at or prior to Closing: (a) terminate this Agreement, in which event the Downpayment shall be refunded, without deduction, to Purchaser, without the consent or joinder of Seller being required and notwithstanding any contrary instructions which might be provided by Seller, and neither Seller nor Purchaser shall have any further right or obligation hereunder, or (b) consummate the Closing, in which latter event all of Seller’s assignable right, title and interest in and to the award of the expropriating authority shall be assigned to Purchaser at the Closing and there shall be no reduction in the Purchase Price.
9.2 Casualty.
(a) Seller assumes all risks and liability for damage to or injury occurring to the Property by fire, storm, accident, or any other casualty or cause until the Closing has been consummated. If the Property suffers any damage equal to or in excess of One Million Dollars ($1,000,000.00) prior to the Closing from fire, storm, accident, or any other casualty, Purchaser may either at or prior to Closing: (a) terminate this Agreement, in which event, the Downpayment shall be refunded to Purchaser forthwith, without deduction, and without the consent or joinder of Seller being required and notwithstanding any contrary instructions which might be provided by Seller, and neither Seller nor Purchaser shall have any further right or obligation under this Agreement other those obligations which expressly survive the Closing, or (b) consummate the Closing, in which latter event all of Seller’s right, title and interest in and to the proceeds of any insurance covering such damage, and including any and all rent loss insurance proceeds relating to the period from and after Closing Date, shall be assigned to Purchaser at the Closing and Purchaser shall receive a credit against the Purchase Price at Closing in an amount equal to the sum of: (x) Seller’s deductible under its insurance policy, and (y) the amount of the uninsured or underinsured loss.
(b) If the Property suffers any damage less than One Million Dollars ($1,000,000.00) prior to the Closing from fire or other casualty, Purchaser agrees that it will consummate the Closing and accept an assignment of the proceeds of any insurance covering such damage, including any and all rent loss insurance proceeds relating to the period from and after the Closing Date (plus receive a credit against Purchase Price in an amount equal to the sum of: (x) Seller’s deductible under its insurance policy, and (y) the amount of the uninsured or underinsured loss) and there shall be no other reduction in the Purchase Price.
Article 10 DEFAULT
10.1 Default. Subject to the limit on liability of the Seller imposed in Section 3.1(e), in case of an alleged default by any party to this Agreement, Seller and Purchaser shall have all remedies available at law or in equity open or available to each party.
10.2 Notice and Cure. In the event of a Seller’s default or a Purchaser’s default under this Agreement, the non-defaulting party shall provide the defaulting party with notice and ten (10) days to cure such default, prior to pursuing any remedies available with respect to such default; provided, however,
that: (i) no such notice and cure shall be provided with respect to a party’s default in failing to timely close, or with respect to any party’s anticipatory breach of this Agreement; and (ii) in no event shall any such notice and cure period result in an extension of the Closing Date.
Article 11 MISCELLANEOUS
11.1 Notices. All notices, demands and requests which may be given or which are required to be given by either party to the other, and any exercise of a right of termination provided by this Agreement, shall be in writing and shall be deemed effective either: (a) on the date personally delivered to the address below, as evidenced by written receipt therefor, whether or not actually received by the person to whom addressed; (b) on the first Business Day after being deposited into the custody of a nationally recognized overnight delivery service such as Federal Express Corporation, addressed to such party at the address specified below, or (c) on the date delivered by facsimile or email to the respective numbers/ email addresses specified below. For purposes of this Section 11.1, the addresses of the parties for all notices are as follows (unless changed by similar notice in writing given by the particular person whose address is to be changed):
If to Seller:
| Don Mills Storage Inc.<br><br>400-1131A; Leslie Street<br><br>Toronto, ON<br><br>M3C 3L8<br><br>Attention: Yashar Fatehi<br><br>Email: yashar@nyxcapital.com |
|---|
and with a copy to:
| McMillan LLP<br><br>Brookfield Place, 181 Bay Street, Suite 4400<br><br>Toronto, Ontario M5J 2T3 |
|---|
Robert Shore
| Email: robert.shore@mcmillan.ca |
|---|
If to Purchaser:
| SST II Acquisitions, Inc. |
|---|
| c/o SmartStop Self Storage REIT, Inc<br><br>10 Terrace Road,<br>Ladera Ranch, CA 92694, USA<br><br><br><br>Attention: H. Michael Schwartz<br>Email: hms@smartstop.com |
and with a copy to:
| SST II Acquisitions, Inc. |
|---|
| c/o SmartStop Self Storage REIT, Inc.<br><br>8235 Douglas Ave, Suite 1250<br>Dallas TX 75225, USA<br><br><br><br>Attention: Wayne Johnson, President and CIO<br>Email: wjohnson@smartstop.com |
and with a copy to:
| Norton Rose Fulbright Canada LLP |
|---|
| Norton Rose Fulbright Canada LLP<br>Suite 1500 - 45 O’Connor Street<br>Ottawa, Ontario K1P 1A4<br><br><br><br>Attention: Norman B. Lieff<br>Email: nlieff@nortonrosefulbright.com |
11.2 Real Estate Commissions. Neither Seller nor Purchaser have authorized any broker or finder to act on any party’s behalf in connection with the sale and purchase hereunder and neither Seller nor Purchaser have dealt with any broker or finder purporting to act on behalf of any other party. Purchaser agrees to indemnify and hold harmless Seller from and against any and all claims, losses, damages, costs or expenses of any kind or character arising out of or resulting from any agreement, arrangement or understanding alleged to have been made by Purchaser or on Purchaser’s behalf with any broker or finder in connection with this Agreement or the transaction contemplated hereby. Seller agrees to indemnify and hold harmless Purchaser from and against any and all claims, losses, damages, costs or expenses of any kind or character arising out of or resulting from any agreement, arrangement or understanding alleged to have been made by Seller or on Seller’s behalf with any broker or finder in connection with this Agreement or the transaction contemplated hereby. Notwithstanding anything to the contrary contained herein, this Section 11.2 shall survive the Closing or any earlier termination of this Agreement.
11.3 Exclusivity. Form and after the Acceptance Date and until Closing or the earlier termination of this Agreement (the Exclusivity Period), unless otherwise expressly pre-authorized in writing by Purchaser, Seller covenants and agrees that neither Seller, nor any of Seller’s representatives, employees, advisors or agents will, directly or indirectly, make, solicit or initiate enquiries from, or seek or respond to the submission of proposals or offers from, any third party or enter into any agreement relating to the sale or other disposition of the Property (or any other similar transaction or proposal whatsoever) or respond to or participate in any discussions or negotiations regarding, or furnish to any other person or entity any information with respect to, or otherwise co-operate in any way with, or assist or participate in or facilitate, any effort or attempt by any person or entity to do or seek to do any of the foregoing and, to the extent any such discussions or negotiations have occurred with any third parties prior to the Exclusivity Period, such Seller hereby agrees to terminate them immediately.
11.4 Entire Agreement. This Agreement embodies the entire agreement between the parties relative to the subject matter hereof, and there are no oral or written agreements between the parties, nor any representations made by either party relative to the subject matter hereof, which are not expressly set forth herein.
11.5 Amendment. This Agreement may be amended only by a written instrument executed by the party or parties to be bound thereby.
11.6 Headings. The captions and headings used in this Agreement are for convenience only and do not in any way limit, amplify, or otherwise modify the provisions of this Agreement.
11.7 Time of Essence. Time is of the essence of this Agreement; however, if the final date of any period which is set out in any provision of this Agreement falls on a Saturday, Sunday or legal holiday under the laws of the United States, Canada or the Province of Ontario, then, in such event, the time of such period shall be extended to the next Business Day (as defined below). Where in this Agreement a number of days is prescribed, the number shall be computed by excluding the first day and including the last day.
11.8 Governing Law. This Agreement shall be governed by the laws of the Province of Ontario and the parties hereto attorn to the jurisdiction of the Ontario courts.
11.9 Successors and Assigns; Assignment. This Agreement shall bind and inure to the benefit of Seller and Purchaser and their respective successors and permitted assigns. Notwithstanding anything contained in this Agreement to the contrary, SST II Acquisitions, LLC (the Original Purchaser) shall be entitled to assign this Agreement, in whole or in part, or alternatively, direct that title to all or part of the Property be transferred, without Seller’s consent, to: (i) an affiliate (as such term is defined in the Canada Business Corporations Act) of Original Purchaser; (ii) an entity in which SmartStop Self Storage REIT, Inc. a Maryland corporation, Strategic Storage Growth Trust III, Inc., a Maryland corporation, Strategic Storage Trust VI, Inc., a Maryland corporation, or any subsidiary of the foregoing, has a direct or indirect ownership interest; (iii) a real estate investment trust of which Original Purchaser, or an affiliate of Original Purchaser, is the external advisor; (iv) a Delaware statutory trust of which Original Purchaser, or an affiliate of Original Purchaser is the signatory trustee, or (v) a partnership or joint venture in which Original Purchaser, or any entity described in paragraphs (i) through (iv) above, has an interest (any party referenced in paragraphs (i) through (v) above being herein called, a Permitted Assignee); provided, however, that: (y) Original Purchaser delivers to the Seller prior written notice of such assignment and/or direction regarding title; and (z) prior to such an assignment taking effect, any Permitted Assignee shall assume the obligations of Original Purchaser hereunder (including the obligation to deliver an HST Declaration and Indemnity on Closing), and Original Purchaser shall be released from any liability under the terms of this Agreement.
11.10 Invalid Provision. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement; and, the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by such illegal, invalid, or unenforceable provision or by its severance from this Agreement.
11.11 Acceptance Date. For purposes of this Agreement, the “Acceptance Date” shall mean the date that this Agreement has been executed and delivered by both Seller and Purchaser.
11.12 Schedules. The following schedules are attached to this Agreement and incorporated herein by this reference and made a part hereof for all purposes:
(a) Schedule 1.1(a) – Land;
(b) Schedule 1.1(c) - Rent Roll;
(c) Schedule 1.1(d) - Tangible Personal Property;
(d) Schedule 1.1(f) – Intangible Property;
(e) Schedule 5.1(a) - Due Diligence Items;
(f) Schedule 5.2(a) - Permitted Encumbrances; and
(g) Schedule 11.18 - Representation Letter.
11.13 No Registration. Seller and Purchaser hereby acknowledge that neither this Agreement nor any memorandum or affidavit thereof shall be recorded in the public records of any municipality or province.
11.14 Disclosure. Seller and Purchaser hereby covenant and agree that for a period of six months after Closing, unless consented to in writing by the other party (which consent may be granted or withheld in the sole discretion of the party whose consent is being requested), no press release or other public disclosure concerning this transaction shall be made by or on behalf of Seller or Purchaser, and each party agrees to use best efforts to prevent disclosure of this transaction by any third party. Notwithstanding the foregoing: (i) each party shall be entitled to make disclosures concerning this Agreement and materials provided hereunder to its lenders, attorneys, solicitors, accountants, employees, agents and other service professionals as may be reasonably necessary in furtherance of the transactions contemplated hereby; (ii) Purchaser shall be entitled to make disclosures concerning this transaction and materials provided hereunder to its potential debt and equity sources; and (iii) each party shall be entitled to make such disclosures concerning this Agreement and materials provided hereunder as may be necessary to comply with any court order or directive of any applicable governmental authority. The provisions of this Section 11.14 shall survive Closing or any termination of this Agreement.
11.15 Confidentiality. Other than with the written consent of Seller (and in the case of personal information or personal health information, such further consents of the subjects thereof as may be required by applicable law), Purchaser shall not, directly or indirectly, disclose, communicate, publish or disseminate any Confidential Information, or, by any act or omission below the standard of care a reasonable person would take to protect its own confidential information, cause or fail to take reasonable steps to prevent the disclosure such Confidential Information, nor shall it use any of the Confidential Information for any purpose other than the performance of this Agreement. For these purposes, Confidential Information means all non-public information concerning the business, affairs and/or financial position of Seller and the existence of and terms and conditions of this Agreement, whether in written, graphic, electronic, digital or oral form, which Purchaser has obtained, directly or indirectly from Seller including, but not limited to, financial, business and personal data, records, business and marketing plans, strategies and methods, concepts, ideas, know-how, studies, charts, plans, tables and compilations, operating manuals and customer and supplier lists; provided however that Confidential Information shall not include any information which (i) was already known to Purchaser prior to the time of disclosure by Seller as evidenced by written records, (ii) is available or becomes generally available to the public other than through a breach of this Agreement by Purchaser, (iii) is acquired or received rightfully and without confidential limitation by Purchaser from a third party, or (iv) is independently developed by Purchaser without breach of this Agreement. For greater certainty, Seller confirms, acknowledges and agrees that Purchaser shall be entitled to disclose Confidential Information as contemplated in Section 11.14 above.
11.16 Seller/Nominee – Joint and Several. Each of Seller and Nominee hereby confirms, acknowledges and agrees that, unless expressly provided otherwise to the contrary in this Agreement, all covenants, representations, warranties and/or indemnities by Seller pursuant to this Agreement shall be deemed to be covenants, representations, warranties and/or indemnities by each of Seller and Nominee, on a joint and several basis.
11.17 Covenants of Good Faith and Best Efforts. Each of Seller and Purchaser covenants and agrees to conduct itself reasonably and with the utmost good faith with respect to all matters related to this Agreement and it shall furthermore use its best efforts in fulfilling any of its respective covenants, agreements or obligations pursuant to this Agreement.
11.18 Cooperation with Purchaser’s Auditors and SEC Filing Requirements.
(a) From and after the Acceptance Date through and including seventy five (75) days after the Closing Date, Seller shall provide to Purchaser (at Purchaser’s sole cost and expense) copies of, or shall provide Purchaser access to, the books and records with respect to the ownership, management, maintenance and operation of the Property and shall furnish Purchaser with such additional information concerning the same as Purchaser shall reasonably request and which is in the possession and/or control of Seller, or any of its
affiliates, agents, or accountants, to enable Purchaser or its assignee, and each of their respective Affiliates, to file its or their Form 8-K, if, as and when such filing may be required by the Securities and Exchange Commission (SEC). At Purchaser’s sole cost and expense, Seller shall allow Purchaser’s auditor (BDO, CohnReznick LLP or any successor auditor selected by Purchaser) to conduct an audit of the income statements of the Property for the calendar year prior to Closing (or to the date of Closing) and the two (2) prior years, and shall cooperate (at no cost to Seller) with Purchaser’s auditor in the conduct of such audit. In addition, Seller agree to provide to Purchaser’s auditor a letter of representation substantially in the form attached hereto as Schedule 11.18 (the Representation Letter), and, if requested by such auditor, historical financial statements for the Property, including income and balance sheet data for the Property, whether required before or after Closing. Without limiting the foregoing: (i) Purchaser or its auditor may audit Seller’s operating statements of the Property, at Purchaser’s sole cost and expense, and Seller shall provide such documentation as Purchaser or its auditor may reasonably request in order to complete such audit; and (ii) Seller shall furnish to Purchaser such financial and other information as may be reasonably required by Purchaser to make any required filings with the SEC or other governmental authority; provided, however, that the foregoing obligations of Seller shall be limited to providing such information or documentation as may be in the possession of, or reasonably obtainable by, Seller, or its agents and accountants, at no cost to Seller, and in the format that Seller (or its respective agents or accountants) have maintained such information; and (iii) Seller and Purchaser acknowledge and agree that the Representation Letter is not intended to expand, extend, supplement or increase the representations and warranties made by Seller to Purchaser pursuant to the terms and provisions of this Agreement or to expose Seller to any risk of liability to third parties. The provisions of this Section 11.18 shall survive Closing.
11.19 Currency. All references in this Agreement to dollars, or to $ are expressed in Canadian currency unless otherwise specifically indicated.
11.20 Execution - Counterparts, E-mail. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Each party (i) has agreed to permit the use of Docusigned or emailed .pdf signatures in order to expedite the transaction contemplated by this Agreement; (ii) intends to be bound by its Docusigned or emailed .pdf signature; (iii) is aware that the other will rely on the Docusigned or emailed .pdf signature; and (iv) acknowledges such reliance and waives any defenses (other than fraud) to the enforcement of any document based on the fact that a signature was sent by Docusign or emailed .pdf.
11.21 Business Day. For greater certainty and for purposes of this Agreement, Business Day shall mean any day, excluding Saturday, Sunday or any other day on which banks are required or authorized to close in Toronto, Ontario, or on which the Land Title Office is closed.
11.22 Survival of Provisions. All provisions of this Agreement which contemplate obligations or activities taking place after Closing shall survive the Closing.
11.23 Realty Tax Appeals
(a) Purchaser shall continue any pending realty tax appeals or reassessments initiated by Seller in respect of the Real Property for the period prior to and following the Closing Date and the Purchaser may elect to commence any realty tax appeal for years that the Seller has not yet commenced a realty tax appeal. Seller or any party who Seller may designate (collectively, the Seller Recipient) shall be entitled to receive any payment resulting therefrom where applicable to the period prior to the Closing Date, subject to the Purchaser deducting its reasonable third party out-of-pocket expenses in conducting any such tax appeal or reassessment, including any commissions payable to agents or consultants (collectively Appeal Costs). Seller agrees to co-operate with Purchaser with respect to all
such appeals or reassessments and to provide Purchaser and its agents or consultants with access to any necessary documents or materials in order to continue any such appeals or reassessments. To the extent Purchaser receives payment of any refund or reassessment for the period prior to the Closing Date, it shall hold such refund or reassessment payment in trust for Seller Recipient and deliver to Seller Recipient all payment to which the Seller is entitled forthwith upon receipt, subject to the rights of Tenants and to Purchaser deducting Appeal Costs. To the extent Purchaser receives payment of any refund or reassessment for the year in which Closing occurs, the amount to which Purchaser and Seller Recipient shall be entitled, subject always to the deductions aforementioned, shall be prorated having regard to the portion of the year during which Seller or Purchaser was the owner of the Real Property.
(b) All right, title and benefit to any realty tax appeals and re-assessments and any rebates or re-assessment of realty taxes for the Real Property for the period from and after the Closing Date shall be transferred and assigned by Seller to Purchaser on Closing, subject to the provisions of this Section 11.23 and Seller and Purchaser shall direct the applicable Governmental Authority to pay all proceeds arising from rebates and/or re-assessments of realty taxes in respect of the Real Property to the Purchaser.
(c) Subject to the provisions hereof, it is acknowledged that Seller shall be ultimately entitled to any reassessments or rebates attributable to any space that was vacant up to and including the Closing Date, for the period it was vacant.
(d) The Seller Recipient, to the extent that it is not a party to this Agreement, shall be entitled to rely on the provisions of this 11.23 and may enforce its rights to receive payment hereunder notwithstanding that it is not a party to this Agreement.
(e) This Section 11.23 shall survive Closing.
[signature page to follow]
Exhibit 10.1
Executed with effect by Nominee this _22nd day of _December___________, 2022.
| DON MILLS STORAGE INC. | |
|---|---|
| Per: | /s/ Yashar Fatehi /s/ Jamie Bennett |
| Name: Yashar Fatehi / Jamie Bennett | |
| Title: Authorized Signatory / Authorized Signatory | |
| I/We have the authority to bind the corporation |
Executed with effect by Seller this _22nd day of __ December__________, 2022.
| NYX DON MILLS STORAGE LP, by its general partner, DON MILLS STORAGE INC. | |
|---|---|
| Per: | /s/ Yashar Fatehi /s/ Jamie Bennett |
| Name: Yashar Fatehi / Jamie Bennett | |
| Title: Authorized Signatory / Authorized Signatory | |
| I/We have the authority to bind the corporation and the corporation has the authority to bind the Seller |
Executed with effect by Purchaser as of _22nd day of ___ December____________, 2022.
| SST II ACQUiSITIONS, llc | |
|---|---|
| Per: | /s/ H. Michael Schwartz |
| Name: H. Michael Schwartz | |
| Title: CEO | |
| I have the authority to bind the corporation |
EX-10.2
Exhibit 10.2
STRATEGIC STORAGE OPERATING PARTNERSHIP VI, L.P.
Series A Cumulative Redeemable Preferred Unit PURCHASE AGREEMENT
THIS Series A Cumulative Redeemable Preferred Unit PURCHASE AGREEMENT (this “Agreement”) is made and entered into this 30th day of January, 2023, by and among Strategic Storage Operating Partnership VI, L.P., a Delaware limited partnership (the “Operating Partnership”), Strategic Storage Trust VI, Inc., a Maryland corporation and the sole general partner of the Operating Partnership (the “Company”), and SSSR Preferred Investor, LLC, a Delaware limited liability company (the “Purchaser”).
WHEREAS, the Operating Partnership proposes to issue and sell to the Purchaser up to an aggregate of 600,000 Series A Cumulative Redeemable Preferred Units of Limited Partnership Interest at a liquidation preference of $25.00 per unit (the “Preferred Units”) in consideration for the Purchaser making a capital contribution to the Operating Partnership in an amount up to an aggregate of $15,000,000 (the “Total Investment”), which Total Investment may be made in one or more tranches (each an “Investment,” and collectively, the “Investments”);
WHEREAS, subject to the terms and conditions and representations and warranties set forth in this Agreement, the Purchaser hereby agrees to purchase up to an aggregate of 600,000 Preferred Units in one or more Closings (as defined below);
WHEREAS, the terms and provisions of the Preferred Units shall be set forth and established in Amendment No. 1 (the “Amendment”), dated as of the date hereof, to the Second Amended and Restated Limited Partnership Agreement of the Operating Partnership, effective as of March 17, 2022 (the “Partnership Agreement”), which Amendment shall be substantially in the form attached hereto as Exhibit A-1 and which Partnership Agreement is attached hereto as Exhibit A-2;
WHEREAS, the Preferred Units are being offered and sold by the Operating Partnership to the Purchaser without being registered with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “1933 Act”), in reliance upon the Section 4(a)(2) private placement exemption therefrom; and
WHEREAS, certain terms used in this Agreement are defined in Section 14 hereof.
NOW, THEREFORE, in consideration of the promises and the mutual covenants contained herein, the parties hereby agree as follows:
Section 1. Representations and Warranties of the Operating Partnership and the Company. Except as set forth in the disclosure schedules hereto, the Operating Partnership and the Company, jointly and severally, represent and warrant to the Purchaser, as of the date hereof and as of each Closing Date (as defined below) and agree with the Purchaser, as follows:
(a) As of January 30, 2023, the only subsidiaries of the Operating Partnership and the Company are the subsidiaries listed on Schedule I hereto (the “Subsidiaries”).
(b) Each of the Operating Partnership and the Company has been duly organized and is validly existing as a limited partnership or corporation, as the case may be, in good standing under the laws of the jurisdiction of its organization. Each Subsidiary has been duly organized
and is validly existing as a corporation, general or limited partnership, or limited liability company, as the case may be, in good standing under the laws of the jurisdiction of its organization, except where the failure to be in good standing would not, individually or in the aggregate, result in a Material Adverse Effect. Each of the Operating Partnership, the Company and the Subsidiaries has full power and authority (limited partnership, corporate and other) to own or lease, as the case may be, and operate its properties and to conduct its business, and in the case of each of the Operating Partnership and the Company, to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. Each of the Operating Partnership, the Company and the Subsidiaries is duly qualified or registered to do business in each jurisdiction in which it owns or leases real property or in which the conduct of its business requires such qualification or registration, except where the failure to be so qualified or registered would not, individually or in the aggregate, result in a Material Adverse Effect; and, as of the date hereof and as of each Closing, neither the Operating Partnership nor the Company owns or will own any stock or other beneficial interest in any corporation, partnership, joint venture or other business entity, other than the interests held in the Subsidiaries.
(c) The Company is the sole general partner of the Operating Partnership and, as of the date hereof, holds all of the general partnership interest of the Operating Partnership. As of January 26, 2023, there were a total of approximately 16,687,404 partnership units of the Operating Partnership outstanding, consisting of approximately 1,854,746 outstanding Class A units, approximately 11,417,259 outstanding Class P units, approximately 3,161,621 outstanding Class T units and approximately 253,778 outstanding Class W units, approximately 16,137,184 of which Class A, Class P, Class T and Class W units are owned by the Company, approximately 220 of which Class P units are owned by SmartStop Storage Advisors, LLC, approximately 549,451 of which Class P units are owned by SmartStop OP, L.P., and approximately 549 of which Class P units are owned by H. Michael Schwartz, Chief Executive Officer of the Company; and no preferred units of limited partnership interest of the Operating Partnership were issued and outstanding. All of the issued and outstanding general partnership interests in the Operating Partnership and all of the issued and outstanding capital stock or ownership interests of each Subsidiary have been duly authorized and are validly issued, fully paid and non-assessable and, except as set forth on Schedule I hereto, are wholly-owned by the Company, directly or indirectly through Subsidiaries, free and clear of any Lien. All of the issued and outstanding Partnership Units have been duly authorized and are validly issued, and holders of Partnership Units do not have any obligation to make payments to the Operating Partnership or its creditors (other than the purchase price for the Partnership Units) or contributions to the Operating Partnership or its creditors solely by reason of such holders’ ownership of Partnership Units. All issued and outstanding Partnership Units held by the Company are wholly-owned free and clear of any Lien. None of the outstanding Partnership Units was issued in violation of preemptive or other similar rights of any security holder or partner of the Operating Partnership arising by operation of law, under the Partnership Agreement, or any agreement to which the Operating Partnership is a party. All of the issued and outstanding Partnership Units have been offered, sold and issued in compliance with all applicable laws, including without limitation, federal and state securities laws.
(d) As of January 26, 2023, the authorized capital stock of the Company consists solely of 700,000,000 shares of common stock (the “Common Stock”), and 200,000,000 shares of preferred stock (“Preferred Stock”). The aggregate par value of all authorized shares of Common Stock and Preferred Stock is $900,000. As of January 26, 2023, there were approximately
10,867,039 outstanding shares of Class P Common Stock, approximately 1,854,746 outstanding shares of Class A Common Stock, approximately 3,161,621 outstanding shares of Class T Common Stock, approximately 253,778 outstanding shares of Class W Common Stock and no shares of Preferred Stock issued and outstanding. All of the issued and outstanding shares of capital stock of the Company have been duly authorized and are validly issued, fully paid and non-assessable. None of the outstanding shares of capital stock of the Company was issued in violation of preemptive or other similar rights of any security holder of the Company arising by operation of law, under the First Articles of Amendment and Restatement of the Company, as amended and supplemented (the “Charter”), the bylaws of the Company, or any agreement to which the Company is a party. All of the issued and outstanding shares of capital stock of the Company have been offered, sold, and issued in compliance with all applicable laws, including without limitation, federal and state securities laws, except as would not have a Material Adverse Effect.
(e) There is no outstanding option, warrant, or other right requiring the issuance of, and no commitment, plan, or arrangement to issue, any equity interests in the Operating Partnership or any shares of capital stock of the Company or any equity interests in any Subsidiary or any security convertible into or exchangeable for such interests or shares.
(f) This Agreement has been duly authorized, executed, and delivered by each of the Operating Partnership and the Company and constitutes the legal, valid, and binding obligation of each of the Operating Partnership and the Company, enforceable against each of the Operating Partnership and the Company in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally or by general principles of equity.
(g) The Partnership Agreement has been duly authorized and executed by the Company, in its capacity as general partner of the Operating Partnership, and constitutes a legal, valid, and binding obligation, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally or by general principles of equity. The Partnership Agreement is in full force and effect as of the date hereof and the Partnership Agreement shall be in full force and effect as of each Closing Date.
(h) The Amendment has been duly authorized by the Company, in its capacity as general partner of the Operating Partnership, and, when executed and delivered by the Company, in its capacity as general partner of the Operating Partnership, will constitute a legal, valid, and binding obligation, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally or by general principles of equity.
(i) The Preferred Units have been duly and validly authorized by the Operating Partnership for issuance and sale pursuant to this Agreement and, when issued and delivered by the Operating Partnership pursuant to the terms of this Agreement against payment of the consideration therefor specified herein, will be validly issued, and the Purchaser will not have any obligation to make payments to the Operating Partnership or its creditors (other than the purchase price for the Preferred Units) or contributions to the Operating Partnership or its creditors solely by reason of the Purchaser’s ownership of Preferred Units. The issuance of the Preferred Units will not be subject to the preemptive or other similar rights of any security holder or partner of the Operating
(j) There are no transfer taxes or other similar fees or charges under federal law or the laws of any state, or any political subdivision thereof, or any other Governmental Authority required to be paid in connection with the execution and delivery of this Agreement or the issuance and sale by the Operating Partnership of the Preferred Units.
(k) The execution, delivery, and performance by each of the Operating Partnership and the Company of this Agreement and consummation of the transactions contemplated hereby: (i) have been duly authorized by all necessary limited partnership or corporate action, as applicable, and will not result in any Default (as defined below) under the certificate of limited partnership of the Operating Partnership or the Partnership Agreement, the Charter or bylaws of the Company or any organizational document of any Subsidiary; (ii) will not conflict with or constitute a breach of, or default (or, with the giving of notice or lapse of time, would be in default) (“Default”) or a Debt Repayment Triggering Event (as defined below) under, or result in the creation or imposition of any Lien upon any property or assets of the Operating Partnership, the Company, or the Subsidiaries pursuant to, or require the consent of any other party to, any indenture, mortgage, loan, or credit agreement, deed of trust, note, contract, franchise, lease, or other agreement, obligation, condition, covenant, or instrument to which the Operating Partnership, the Company or any Subsidiary is a party or by which it or any of its respective properties or assets may be bound (collectively, “Agreements or Instruments”), and provided, that none of the Operating Partnership, the Company, or any Subsidiary shall enter into any Agreement or Instrument that would restrict or limit in any respect the rights of the Purchaser as set forth in this Agreement; and (iii) will not result in any violation of any statute, law, rule, regulation, judgment, order, or decree applicable to the Operating Partnership, the Company, or the Subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator, or other authority having jurisdiction over the Operating Partnership, the Company, or the Subsidiaries or any of their respective properties or assets. No consent, approval, authorization, or other order of, or registration or filing with, any Governmental Authority is required for the execution, delivery, and performance by each of the Operating Partnership and the Company of this Agreement or the transactions contemplated hereby, except such as have been obtained or made by the Operating Partnership or the Company and are in full force and effect or as may be required under the 1933 Act, the 1934 Act or applicable state securities or blue sky laws. As used herein, a “Debt Repayment Triggering Event” means any event or condition which gives, or with the giving of notice or lapse of time would give, the holder of any note, debenture, or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption, or repayment of all or a portion of such indebtedness.
(l) The Operating Partnership, the Company, and the Subsidiaries have complied in all respects with all laws, regulations, and orders applicable to them or their respective businesses, except as would not have a Material Adverse Effect; none of the Operating Partnership, the Company, or the Subsidiaries is in default under any indenture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement, or evidence of indebtedness, lease, contract, or other agreement or instrument to which it is a party or by which it or any of its respective properties or assets are bound, violation of which would individually or in the aggregate have a Material Adverse Effect, and no other party under any such agreement or instrument to which the Operating Partnership, the Company, or the Subsidiaries are a party is, to the knowledge
of the Operating Partnership or the Company, in default in any material respect thereunder; and the Operating Partnership, the Company, and the Subsidiaries are not in violation of their respective certificate of limited partnership, Partnership Agreement, Charter, bylaws, or other organizational documents, as the case may be.
(m) There is not pending or, to the knowledge of the Operating Partnership or the Company, threatened any action, suit, or proceeding to which the Operating Partnership, the Company, and the Subsidiaries or any of their respective officers, directors, partners, members, or managers is a party, or of which any of their properties or other assets is the subject, before or by any Governmental Authority, that is reasonably likely, individually or in the aggregate, to result in any Material Adverse Effect or to have a material adverse effect on the ability of the Operating Partnership or the Company to perform its obligations under this Agreement or to consummate the transactions contemplated hereby.
(n) Each of the Operating Partnership, the Company, and the Subsidiaries holds all material licenses, certificates, and permits from Governmental Authorities that are necessary to the conduct of its business and is in compliance with the terms and conditions of such licenses, certificates and permits; and none of the Operating Partnership, the Company or the Subsidiaries has received any notice of proceedings relating to the revocation or modification of any such permits, licenses or certificates that, if determined adversely to the Operating Partnership, the Company, or any Subsidiary, would, individually or in the aggregate, have a Material Adverse Effect.
(o) There is no claim by any of the Operating Partnership, the Company, or the Subsidiaries pending under any insurance policies which (a) has been denied or disputed by the insurer other than denials and disputes in the ordinary course of business consistent with past practice or (b) if not paid, would have a Material Adverse Effect. With respect to each such insurance policy, except as would not, individually or in the aggregate, have a Material Adverse Effect, (a) the Operating Partnership, the Company, and the Subsidiaries have paid, or caused to be paid, all premiums due under the policy and have not received written notice that they are in default with respect to any obligations under the policy, and (b) to the knowledge of the Operating Partnership and the Company, as of the date hereof no insurer on the policy has been declared insolvent or placed in receivership, conservatorship or liquidation. None of the Operating Partnership, the Company, or the Subsidiaries have received any written notice of cancellation or termination with respect to any existing insurance policy that is held by, or for the benefit of, any of the Operating Partnership, the Company, or the Subsidiaries, other than as would not have, individually or in the aggregate, a Material Adverse Effect.
(p) There are no contracts, agreements or understandings between or among the Operating Partnership, the Company, or the Subsidiaries and any person that would give rise to a valid claim against the Operating Partnership, the Company, or the Subsidiaries, or the Purchaser for a brokerage commission, finder’s fee, or other like payment in connection with the offering, issuance and sale of the Preferred Units or as a result of any transactions contemplated by this Agreement.
(q) Each of the Operating Partnership, the Company, and the Subsidiaries has filed all federal, state, local, and foreign income tax returns which have been required to be filed by it, except in any case in which the failure so to file would not have a Material Adverse Effect, and has paid all taxes indicated by said returns and all assessments received by it to the extent that such
taxes have become due, except for any such assessment that is currently being contested in good faith or as would not have a Material Adverse Effect. No tax deficiency has been asserted against the Operating Partnership, the Company, or any Subsidiary, nor does the Operating Partnership or the Company know of any tax deficiency which is likely to be asserted against the Operating Partnership, the Company, or any Subsidiary, except for any such deficiency that would not have a Material Adverse Effect; all tax liabilities, if any, are adequately provided for on the respective books of the entities in all material respects.
(r) The Operating Partnership has been properly classified as a partnership for federal tax purposes throughout the period from its formation through the date hereof.
(s) The Company (i) for all taxable years commencing with the Company’s year ended December 31, 2021 has been subject to taxation as a real estate investment trust (a “REIT”) under Sections 856 through 860 of the Code and has satisfied all requirements to qualify as a REIT for such years; (ii) has operated since January 1, 2021 to the date hereof, in a manner consistent with the requirements for qualification and taxation as a REIT; (iii) intends to continue to operate in such a manner as to qualify as a REIT for its taxable year that will include the date of the initial Investment; and (iv) has not taken or omitted to take any action that could reasonably be expected to result in a challenge by the IRS or any other Governmental Authority to its status as a REIT, and no such challenge is pending or, to the knowledge of the Company, threatened. No Subsidiary is a corporation for United States federal income tax purposes, other than a corporation that qualifies as a “Qualified REIT Subsidiary” or as a “Taxable REIT Subsidiary” under the Code.
(t) None of the Operating Partnership, the Company or, any Subsidiary is and, after giving effect to the issuance of the Preferred Units and the application of the proceeds therefrom and the other transactions contemplated by this Agreement, none of the Operating Partnership, the Company, or any Subsidiary will be, regulated as an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”).
(u) Other than the Partnership Agreement and the Charter, there are no existing agreements among the Operating Partnership, the Company and any of their respective security holders that prohibit the sale, transfer, assignment, pledge, or hypothecation of any of the Operating Partnership’s or the Company’s securities.
Section 2. Representations and Warranties of the Purchaser. The Purchaser represents and warrants to and agrees with the Operating Partnership and the Company as of the date hereof and as of each Closing Date as follows:
(a) The Purchaser has been duly organized and is validly existing as a limited liability company in good standing under the laws of the State of Delaware. The Purchaser has full limited liability company power to execute and deliver this Agreement and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby.
(b) This Agreement has been duly authorized, executed, and delivered by the Purchaser, and constitutes the legal, valid, and binding obligation of the Purchaser, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally or by general principles of equity.
(c) The Amendment has been duly authorized by the Purchaser and, when executed and delivered by the Purchaser, will constitute the legal, valid, and binding obligation of the Purchaser, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally or by general principles of equity.
(d) The Purchaser need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any Governmental Authority in order to consummate the transactions contemplated by this Agreement, except for such as have been obtained and except for such as would not materially impede the transactions contemplated by this Agreement.
(e) Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge or other restriction of any Governmental Authority to which the Purchaser is subject or any provision of its organizational documents, except for such violations as would not materially impede the transactions contemplated by this Agreement.
(f) The Purchaser and its representatives have had an opportunity to ask questions and receive answers from the Operating Partnership and the Company regarding the terms and conditions of the sale of the Preferred Units to the Purchaser and the business, properties, prospects and financial condition of the Operating Partnership and the Company.
(g) The Purchaser is acquiring the Preferred Units for its own account for investment purposes and not with a view to the distribution thereof.
(h) The Purchaser acknowledges that it is able to fend for itself, can bear the economic risk of its investment and could afford a complete loss of such investment, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Preferred Units. The Purchaser acknowledges that in purchasing the Preferred Units it must be prepared to continue to bear the economic risk of such investment for an indefinite period of time because the Preferred Units have not been registered under the 1933 Act and cannot be sold unless they are subsequently registered under the 1933 Act and applicable state securities laws, or unless exemptions from such registration requirements are available, and then will be only transferable in accordance with the terms of the Partnership Agreement, as modified by the Amendment.
(i) The Purchaser is an “accredited investor” within the meaning of Rule 501(a) under the 1933 Act.
(j) There are no contracts, agreements, or understandings between the Purchaser and any person that would give rise to a valid claim against the Operating Partnership or the Company for a brokerage commission, finder’s fee, or other like payment in connection with the offering, issuance and sale of the Preferred Units to the Purchaser.
(k) It is understood that any certificate(s) evidencing the Preferred Units shall initially bear substantially the following legend (in addition to any legend otherwise required under applicable federal or state securities laws or by the Partnership Agreement):
“THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM OR NOT SUBJECT TO SUCH REGISTRATION REQUIREMENTS.”
Section 3. Sale and Delivery to the Purchaser.
(a) On the basis of the representations and warranties contained herein and subject to the terms and conditions herein set forth, the Operating Partnership agrees to sell to the Purchaser, and the Purchaser agrees to purchase from the Company, up to an aggregate of [ ] Preferred Units at one or more Closings, for the consideration specified in Section 3(b) below.
(b) At the closing of each Investment (a “Closing”), the Operating Partnership will deliver to the Purchaser a certificate or an entry on its books and records representing the number of Preferred Units equal to (i) the amount of the Investment being made at such Closing divided by (ii) $25.00, against payment of an amount equal to the Investment, in Federal (same day) funds by wire transfer to the account of the Operating Partnership, on such business day as the Operating Partnership and the Purchaser shall agree (each such date of such payment being herein referred to as a “Closing Date”). In the sole discretion of the Purchaser, the Purchaser may elect to receive the payment of the Expenses (defined in Section 5 below) attributable to such Investment and the payment of the Investment Fee (defined in Section 5 below) attributable to such Investment in either cash or Preferred Units. In the event the Purchaser elects to receive such payments in Preferred Units, the Operating Partnership will deliver to the Purchaser a certificate or an entry on its books and records representing the number of Preferred Units equal to (i) (A) the amount of all Expenses (defined in Section 5 below) attributable to such Investment plus (B) the amount of the Investment Fee (defined in Section 5 below) attributable to such Investment divided by (ii) $25.00.
(c) The certificate or book entry for the Preferred Units to be issued to the Purchaser shall be registered in such name as the Purchaser may request in writing at least one full business day before the applicable Closing Date. If a certificate for the Preferred Units is issued, the certificate will be made available for examination by the Purchaser in Ladera Ranch, California, not later than 8:00 a.m. (Pacific Time) on the business day prior to the applicable Closing Date.
Section 4. Covenants of the Operating Partnership and the Company. Each of the Operating Partnership and the Company, jointly and severally, covenants with the Purchaser as follows:
(a) Each of the Operating Partnership and the Company agrees that the proceeds received by the Operating Partnership from the sale of the Preferred Units shall be used solely to (i) finance self-storage acquisition, development, and improvement activities, and working capital or other general partnership purposes; and (ii) fund the payment of all reasonable out-of-pocket costs, expenses, and fees incurred or to be incurred in connection with its entry into this Agreement, and the transactions contemplated hereby (collectively, the “Approved Uses”).
(b) From the date of this Agreement until the final Closing Date, except as contemplated by this Agreement, the Operating Partnership and the Company shall, and shall cause each of the Subsidiaries to, (i) conduct its operations only in the ordinary course of business consistent with past practice and (ii) use its reasonable commercial efforts to conduct its operations
in compliance with applicable laws and to maintain and preserve intact its business organization, to retain the services of its current officers and key employees, to preserve its assets and properties in good repair and condition, and to preserve the good will of its customers, suppliers and other persons with whom it has business relationships.
(c) Without limiting the generality of Section 4(b), and except as otherwise contemplated by this Agreement, the Operating Partnership and the Company shall not, and shall not permit any of the Subsidiaries to, take any action that would constitute a breach of any Protective Provision (as such term is defined in the Amendment) from the date of this Agreement until the final Closing Date, without the prior written consent of the Purchaser, such consent not to be unreasonably withheld or delayed.
(d) The Operating Partnership and the Company shall do, or cause to be done with respect to themselves and the Subsidiaries, all things necessary to (i) preserve, renew, and keep in full force and effect the rights, licenses, permits and franchises necessary for the conduct of the business of each Property and comply in all respects with all applicable Legal Requirements applicable to each Property and (ii) comply, and cause the Subsidiaries to comply, in all material respects with all of the provisions of all of their respective organizational documents, and the laws of the state in which each such entity was formed. The Operating Partnership and the Company shall at all times, and shall cause the Subsidiaries to, maintain, preserve, and protect all applicable franchises and trade names and preserve all the remainder of their respective property necessary for the continued conduct of their respective businesses, as applicable.
(e) The Operating Partnership and the Company have taken and shall continue to take all steps and implement all policies which are necessary to ensure that the Operating Partnership, the Company, and the Subsidiaries are in compliance with all material Legal Requirements applicable to each entity’s business, including, without limitation, those Legal Requirements relating to anti-money laundering and anti-terrorism.
(f) To the extent the Operating Partnership or the Company forms, purchases, or otherwise acquires a subsidiary in the form of a corporation, the Operating Partnership and the Company shall notify the Purchaser of such formation, purchase, or acquisition within five (5) business days of such formation, purchase, or acquisition.
Section 5. Payment of Expenses. Each of the Operating Partnership and the Company, jointly and severally, agrees to pay all expenses arising in connection with the preparation of this Agreement and in connection with the transactions contemplated hereby, including, without limitation, (i) all expenses incident to the issuance and delivery of the Preferred Units; (ii) all fees and expenses of the Operating Partnership’s and the Company’s counsel and other advisors; (iii) all necessary issue, transfer, and other stamp taxes; and (iv) all reasonable out-of-pocket fees and expenses incurred by the Purchaser, including, without limitation, the fees and expenses of the Purchaser’s outside counsel, title report fees and costs, survey costs, and costs incurred in obtaining and/or reviewing due diligence materials, including, without limitation, appraisals, environmental and engineering reports, and travel costs of the Purchaser’s personnel or representatives (collectively, the “Expenses”). In addition to the payment of the Expenses, each of the Operating Partnership and the Company, jointly and severally, agrees to pay an amount equal to 1.00% of each Investment (the “Investment Fee”). The payment of the Expenses and the Investment Fee shall be carried out in the manner set forth in Section 3(b) above.
Section 6. Conditions of the Purchaser’s Obligations. The obligations of the Purchaser hereunder are subject to the accuracy of the representations and warranties of the Operating Partnership and the Company herein included, to the performance by the Operating Partnership and the Company of their respective obligations hereunder, and to the following further conditions:
(a) At each Closing Date, (i) no proceedings shall be pending or, to the knowledge of the Operating Partnership or the Company, threatened against the Operating Partnership, the Company or any Subsidiary before or by any Federal, state, or other commission, board, or administrative agency wherein an unfavorable decision, ruling, or finding would reasonably be expected to result in any Material Adverse Effect, (ii) the representations and warranties set forth in Section 1 hereof shall be accurate as though expressly made at and as of such Closing Date; and (iii) each of the Operating Partnership and the Company has complied in all material respects with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to such Closing Date.
(b) At each Closing Date, the Purchaser shall have received a certificate executed by the president or chief executive officer and the chief financial officer of the Company, dated as of such Closing Date, on behalf of the Company and as general partner of the Operating Partnership, certifying that the representations and warranties contained in Section 1 are accurate as if made at the applicable Closing Date and that the conditions precedent set forth in this Section 6 have been satisfied.
(c) At each Closing Date, the Purchaser shall have received a certificate executed by the secretary of the Company, dated as of the date hereof, on behalf of the Company and as general partner of the Operating Partnership, certifying as to the resolutions of the board of directors of the Company, on behalf of the Company and as general partner of the Operating Partnership, and other limited partnership and corporate proceedings relating to the authorization, execution, and delivery of this Agreement and the consummation of the transactions contemplated hereby.
(d) At the initial Closing Date, the Purchaser shall have received (i) the Amendment, substantially in the form attached hereto as Exhibit A-1, duly executed by the Company, in its capacity as general partner of the Operating Partnership, and the Purchaser; and (ii) a certificate or book entry registered in the name of the Purchaser representing the number of Preferred Units to be purchased by the Purchaser pursuant to Section 3 (the “Preferred Units Certificate”), duly executed by the Company, in its capacity as general partner of the Operating Partnership.
(e) At the initial Closing Date, counsel for the Purchaser shall have been furnished with such documents as it may reasonably require in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein included; and all proceedings taken by the Operating Partnership or the Company that are necessary in connection with the issuance and sale of the Preferred Units shall be satisfactory in form and substance to the Purchaser and its counsel.
If any condition specified in this Section 6 shall not have been fulfilled when and as required to be fulfilled, this Agreement may be terminated by the Purchaser by notice to the Operating Partnership and the Company at any time at or prior to the final Closing Date, and such termination shall be without liability of any party to any other party, except that the provisions concerning payment of expenses under Section 5 hereof, the provisions concerning
indemnification under Section 7 hereof, and the provisions relating to governing law shall remain in effect.
Section 7. Indemnification.
(a) Each of the Operating Partnership and the Company, jointly and severally, agrees to indemnify, defend, and hold harmless the Purchaser from and against all actual third party costs and expenses (including, without limitation, reasonable attorney’s fees and expenses) and any actual losses and damages (collectively, “Losses”) suffered or incurred by the Purchaser (whether or not due to third party claims) that arise out of or result from (i) any material inaccuracy in or any material breach of, as of the date hereof or as of any Closing Date, any representation and warranty made by the Operating Partnership and/or the Company in this Agreement; and (ii) any material failure by the Operating Partnership or the Company to duly and timely perform or fulfill any of their covenants or agreements required to be performed by them under this Agreement.
(b) The Purchaser shall indemnify and hold harmless the Operating Partnership and the Company from and against any and all Losses suffered or incurred by any of the Operating Partnership or the Company (whether or not due to third party claims) that arise out of or result from (i) any material inaccuracy in or any material breach of, as of the date hereof or as of any Closing Date, any representation or warranty made by the Purchaser in this Agreement, and (ii) any material failure by the Purchaser to duly and timely perform or fulfill any of its covenants or agreements required to be performed by the Purchaser under this Agreement.
(c) All claims for indemnification by a party seeking indemnification under this Section 7 shall be asserted and resolved as follows. If an indemnifying party intends to seek indemnification under this Section 7, it shall promptly notify the indemnifying party in writing of such claim. The failure to provide such notice will not affect any rights hereunder except to the extent the indemnifying party is materially prejudiced thereby. If such claim involves a claim by a third party against the indemnified party, the indemnifying party may, within ten (10) days after receipt of such notice and upon notice to the indemnified party, assume, with counsel reasonably satisfactory to the indemnified party, at the sole cost and expense of the indemnifying party, the settlement or defense thereof (in which case any Losses associated therewith shall be the sole responsibility of the indemnifying party), provided, that the indemnified party may participate in such settlement or defense through its own counsel and at its own cost and expense; provided, further, that, if the indemnified party reasonably determines that representation by the indemnifying party’s counsel of both the indemnifying party and the indemnified party may present such counsel with a material conflict of interest, then the indemnifying party shall pay the reasonable fees and expenses of the indemnified party’s counsel, which counsel will be approved in writing (including, without limitation, as to fee structure) by the indemnifying party, such approval not to be unreasonably withheld, delayed or conditioned. Notwithstanding the foregoing, (i) the indemnifying party may, at the sole cost and expense of the indemnifying party, at any time prior to the indemnifying party’s timely delivery of the notice referred to in the third sentence of this Section 7(c), file any motion, answer or other pleadings or take any other action that the indemnifying party reasonably believes to be necessary or appropriate to protect its interests, (ii) the indemnifying party may take over the control of the defense or settlement of a third-party claim at any time if it irrevocably waives its right to indemnity under this Section 7 with respect to such claim and (iii) the indemnifying party may not, without the consent of the indemnifying party, settle or compromise any action or consent to the entry of any judgment, such consent not to be
unreasonably withheld. So long as the indemnifying party is contesting any such claim in good faith, the indemnifying party shall not pay or settle any such claim without the indemnifying party’s consent, such consent not to be unreasonably withheld. If the indemnifying party is not entitled to assume the defense of the claim pursuant to the foregoing provisions or is entitled but does not contest such claim in good faith (including if it does not notify the indemnifying party of its assumption of the defense of such claim within the ten (10)-day period set forth above), then the indemnifying party may conduct and control, through counsel of its own choosing and at the expense of the indemnifying party, the settlement or defense thereof, and the indemnifying party shall cooperate with it in connection therewith. The failure of the indemnifying party to participate in, conduct or control such defense shall not relieve the indemnifying party of any obligation it may have hereunder. Any defense costs required to be paid by the indemnifying party shall be paid as incurred, promptly against delivery of invoices therefor.
(d) The parties hereto agree that any indemnification payments made with respect to this Agreement shall be “grossed up” such that the indemnifying party will pay an amount to the indemnifying party that reflects the hypothetical tax consequences of the receipt or accrual of such indemnification payment, using the maximum applicable statutory rate (or, in the case of an item that affects more than one tax, rates) of tax and reflecting, for example, the effect of deductions available for taxes such as state and local income taxes.
Section 8. Confidential Information. The Purchaser or the Operating Partnership, the Company or their respective affiliates, as the case may be, will maintain the confidentiality of Confidential Information in accordance with procedures adopted by such party in good faith to protect confidential information of third parties delivered to such party; provided, that the Purchaser or the Operating Partnership, the Company or their respective affiliates, as the case may be, may deliver or disclose Confidential Information to (i) its directors, officers, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by the Preferred Units); (ii) its financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 8; (iii) any other holder of Preferred Units; (iv) any accredited investor to which the Purchaser or the Operating Partnership, the Company or their respective affiliates, as the case may be, sells or offers to sell Preferred Units or any part thereof or any participation therein (if such person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 8); (v) any person from which the Purchaser or the Operating Partnership, the Company or their respective affiliates, as the case may be, offers to purchase any security of the Operating Partnership, the Company, or any of their respective Subsidiaries (if such person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 8); (vi) any federal or state regulatory authority having jurisdiction over the Purchaser or the Operating Partnership, the Company or their respective affiliates, as the case may be; and (vii) any other person to which such delivery or disclosure may be necessary or appropriate (v) to effect compliance with any law, rule, regulation or order applicable to the Purchaser or the Operating Partnership, the Company or their respective affiliates, as the case may be; (w) in response to any subpoena or other legal process; (x) in connection with any litigation to which the Purchaser or the Operating Partnership, the Company or their respective affiliates, as the case may be, is a party; (y) in connection with the assumption by the Company of any debt; or (z) if an Event of Default (as such term is defined in the Amendment) or other Optional Repurchase Event (as such term is defined in the Amendment)
has occurred and is continuing, to the extent the Purchaser or the Operating Partnership, the Company or their respective affiliates, as the case may be, may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under this Agreement. Without the prior written consent of the Operating Partnership and the Company, on the one hand, and the Purchaser, on the other hand, no party hereto may make an announcement, issue an advertisement or a press release, or otherwise make any publicly available statement concerning this Agreement or the transactions contemplated hereby, other than as required by or pursuant to U.S. federal or state securities laws. Each holder of Preferred Units, by its acceptance of such Preferred Units, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 8.
Section 9. Survival. Subject to the limitations and other provisions of this Agreement, the representations and warranties included in this Agreement, or included in certificates of officers of the Operating Partnership and the Company submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Purchaser or any person controlling the Purchaser, or by or on behalf of the Operating Partnership and the Company, and shall survive delivery of and payment for the Preferred Units until the date that is two (2) years after the final Closing Date; provided, that: (a) the representations and warranties in Section 1(b), Sections 1(f) through 1(i), Section 1(k), Sections 2(a) through 2(c) and Section 2(e) shall survive indefinitely; and (b) the representations and warranties in Section 1(c), Section 1(d), Section 1(p), and Section 1(q) shall survive for the full period of all applicable statutes of limitations (giving effect to any waiver, mitigation or extension thereof) plus sixty (60) days. All covenants, agreements (including as to confidentiality) and indemnities of the parties contained herein shall survive the final Closing Date indefinitely or for the period explicitly specified therein; provided, that, with respect to indemnities for inaccuracies in or breaches of representations, such indemnities shall survive for the period specified for the applicable representations.
Section 10. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Purchaser shall be directed to SSSR Preferred Investor, LLC, c/o SmartStop Self Storage REIT, Inc., 10 Terrace Road, Ladera Ranch, California 92694, Attention: H. Michael Schwartz; and notices to the Operating Partnership and the Company shall be directed to them at 10 Terrace Road, Ladera Ranch, California 92694, Attention: H. Michael Schwartz.
Section 11. Parties. This Agreement shall inure to the benefit of and be binding upon the Purchaser, the Operating Partnership and the Company and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the parties hereto and their respective successors, and for the benefit of no other person, firm or corporation.
Section 12. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements made and to be performed in said State.
Section 13. Counterparts. This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
Section 14. Certain Defined Terms. The terms that follow, when used in this Agreement, shall have the meanings indicated.
“Confidential Information” means information delivered either (i) to the Purchaser by or on behalf of the Operating Partnership, the Company or their respective affiliates or (ii) to the Operating Partnership, the Company or their respective affiliates by or on behalf of the Purchaser, as the context may require, in each case in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature; provided, that such term does not include information that (a) was publicly known prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by the Purchaser or the Operating Partnership, the Company or their respective affiliates, as the case may be, or any person acting on such party’s behalf or (c) otherwise becomes known to the Purchaser or the Operating Partnership, the Company or their respective affiliates, as the case may be, other than through the disclosure to such party by the Purchaser or the Operating Partnership, the Company or their respective affiliates, as the case may be.
“Governmental Authority” shall mean any court, board, agency, commission, office or other authority of any nature whatsoever for any governmental unit (federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence, including foreign Governmental Authorities.
“Improvements” shall mean the buildings, structures, fixtures, building equipment, additions, enlargements, extensions, modifications, repairs, replacements and improvements now or hereafter erected or located at any Property.
“Indebtedness” shall mean, without duplication, the sum of the (i) indebtedness for borrowed money (excluding any interest thereon), secured or unsecured (including but not limited to all senior financing facilities, senior mortgages and/or fixed-rate long term debt) (the “Senior Debt”), (ii) reimbursement obligations under any letters of credit or similar instruments with regard to the Senior Debt, (iii) capitalized lease obligations, (iv) obligations under interest rate cap, swap, collar or similar transactions or currency hedging transactions (valued at the termination value thereof) and (v) guarantees of any Indebtedness of the foregoing of any other person; provided, that Indebtedness shall not include “trade payables” incurred in the ordinary course of business and shall not include the Investments.
“Initial Closing Date” shall mean January 31, 2023.
“Legal Requirements” shall mean, collectively, all present and future laws, statutes, codes, ordinances, consents, approvals, certifications, orders, judgments, decrees, injunctions, rules, regulations and requirements, and irrespective of the nature of the work to be done, of every Governmental Authority (including, without limitation, applicable environmental laws and all covenants, restrictions and binding conditions now or hereafter of record) which may be applicable to (i) the Operating Partnership or the Company, (ii) all or any portion of any Property, including the Improvements thereon, and (iii) the use, manner of use, occupancy, possession, operation, maintenance, alteration, repair or reconstruction of all or any portion of any Property thereon
including, without limitation, building and zoning codes and any required variances, and ordinances and laws relating to handicapped accessibility.
“Lien” shall mean any liens, mortgages, pledges, security interests, claims, options, rights of first offer or refusal, charges, conditional or installment sale contracts, claims of third parties of any kind or other encumbrances.
“Material Adverse Effect” with respect to any person shall mean any event, occurrence, development, change or effect that is, or is reasonably likely to be, individually or in the aggregate, materially adverse to the business, prospects, properties, operating assets, financial condition or results of operations of such person and its Subsidiaries, taken as a whole; provided, that, in no event shall the following, either individually or in the aggregate, in and of itself be deemed to constitute a “Material Adverse Effect”: (i) the failure by the Company to meet independent, third party projections of earnings, revenue or other financial performance measures (provided, that the underlying facts, circumstances, operating results or prospects which cause the Company to fail to meet such projections may be considered in determining whether a “Material Adverse Effect” has occurred or is reasonably likely to occur); (ii) fluctuations in the price or net asset value of the Common Stock; and (iii) (A) any changes that affect the self-storage industry generally, (B) any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates, (C) any changes resulting from other major developments, including wars, natural disasters, epidemics and pandemics, including the outbreak of novel coronavirus (COVID-19), military actions, and terrorist attacks, or (D) any changes in the legal, regulatory or political conditions in the United States or in any other country or region of the world.
“Partnership Agreement” shall have the meaning set forth in the recitals hereto.
“Permitted Lien” shall mean, collectively (a) any Lien, encumbrances or other matters disclosed in a Title Insurance Policy, (b) any Lien, if any, for Taxes imposed by any Governmental Authority not yet due or delinquent and (c) such other title and survey exceptions as the Purchaser has approved or may approve in writing in the Purchaser’s sole discretion.
“Property” shall mean each individual property owned, directly or indirectly, by the Operating Partnership, including the Improvements thereon.
“Taxes” shall mean all real estate and personal property Taxes, assessments, water rates or sewer rents (excluding income Taxes), now or hereafter levied or assessed or imposed against any Property, together with all interest and penalties thereon.
“Title Insurance Policy” means a policy of title insurance or title commitments.
Section 15. Headings. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement.
[Signature Page Follows.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.
OPERATING PARTNERSHIP:
STRATEGIC STORAGE OPERATING PARTNERSHIP VI, L.P.
By: Strategic Storage Trust VI, Inc.,
its General Partner
By: /s/ H. Michael Schwartz Name: H. Michael Schwartz Title: Chief Executive Officer
COMPANY:
STRATEGIC STORAGE TRUST VI, INC.
By: /s/ H. Michael Schwartz Name: H. Michael Schwartz Title: Chief Executive Officer
PURCHASER:
SSSR PREFERRED INVESTOR, LLC
By: SmartStop Self Storage REIT, Inc.,
its Manager
By: /s/ H. Michael Schwartz________________ Name: H. Michael Schwartz Title: Chief Executive Officer
Signature Page to Series A Cumulative Redeemable Preferred Unit Purchase Agreement
EX-10.3
Exhibit 10.3
AMENDMENT NO. 1 TO THE SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
STRATEGIC STORAGE OPERATING PARTNERSHIP VI, L.P.
ESTABLISHING
SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS
OF
LIMITED PARTNERSHIP INTEREST
In accordance with Section 4.3(a)(i) and Article 11 of the Second Amended and Restated Limited Partnership Agreement, effective as of March 17, 2022 (the “Partnership Agreement”), of Strategic Storage Operating Partnership VI, L.P. (the “Partnership”), the Partnership Agreement is hereby amended by this Amendment No. 1 thereto (this “Amendment”) to establish a series of up to 600,000 preferred units of limited partnership interest of the Partnership which shall be designated the “Series A Cumulative Redeemable Preferred Units” (the “Preferred Units”), having the rights, preferences, powers, privileges and restrictions, qualifications and limitations set forth below and which shall be issued to SSSR Preferred Investor, LLC (the “Purchaser”). Certain terms used herein are defined in Section 11 of Exhibit I hereto. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Partnership Agreement.
WHEREAS, the Partnership, Strategic Storage Trust VI, Inc. (the “General Partner”), and the Purchaser executed that certain Series A Cumulative Redeemable Preferred Unit Purchase Agreement, dated January 30, 2023 (the “Purchase Agreement”), pursuant to which the Partnership agreed to issue, and the Purchaser agreed to purchase, up to an aggregate of 600,000 Preferred Units, at one or more closings, on the terms set forth therein and herein; and
WHEREAS, pursuant to Section 4.3(a)(i) of the Partnership Agreement, the Partnership is issuing up to an aggregate of 600,000 Preferred Units to the Purchaser, at one or more closings, with the rights, powers, privileges and restrictions, qualifications, and limitations as set forth below pursuant to the terms of the Purchase Agreement.
NOW THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Issuance of Preferred Units
Pursuant to Section 4.3(a)(i) of the Partnership Agreement, the Partnership hereby agrees to issue up to an aggregate of 600,000 Preferred Units to the Purchaser, at one or more closings. The Preferred Units will have the rights, powers, privileges, restrictions, qualifications, and limitations specified in Exhibit I hereto. In consideration for the issuance of the Preferred Units, the Purchaser agrees to make a Capital Contribution to the Partnership in an amount up to an aggregate of $15,000,000, at one or more closings, in accordance with the terms of the Purchase Agreement.
Signature Page to Amendment No. 1 to the Second Amended and Restated Limited Partnership Agreement of Strategic Storage Operating Partnership VI, L.P.
The admission of the Purchaser as an additional Limited Partner of the Partnership shall become effective as of the date of this Amendment, which shall also be the date upon which the name of the Purchaser is recorded on the books and records of the Partnership and Exhibit A to the Partnership Agreement is amended to reflect such admission.
Section 2. Amendment to Partnership Agreement
Pursuant to Article 11 of the Partnership Agreement, the General Partner, as general partner of the Partnership and as attorney-in-fact for its Limited Partners, hereby amends the Partnership Agreement to set forth the rights, powers, privileges, restrictions, qualifications, and limitations of the Preferred Units, as specified in Exhibit I hereto.
Section 3. Continuation of Partnership Agreement
The Partnership Agreement and this Amendment shall be read together and shall have the same force and effect as if the provisions of the Partnership Agreement and this Amendment (including Exhibit I hereto) were contained in one document. Any provisions of the Partnership Agreement not amended by this Amendment shall remain in full force and effect as provided in the Partnership Agreement immediately prior to the date hereof. In the event of a conflict between the provisions of this Amendment and the Partnership Agreement, the provisions of this Amendment shall control.
[Signature Page Follows.]
Exhibit 10.3
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 to the Partnership Agreement as of the 30th day of January, 2023.
STRATEGIC STORAGE OPERATING PARTNERSHIP VI, L.P.
By: Strategic Storage Trust VI, Inc., its sole general partner
By: /s/ H. Michael Schwartz Name: H. Michael Schwartz Title: Chief Executive Officer
STRATEGIC STORAGE TRUST VI, INC.
By: /s/ H. Michael Schwartz Name: H. Michael Schwartz Title: Chief Executive Officer
SSSR preferred investor, llc
By: SmartStop Self Storage REIT, Inc., its Manager
By: /s/ H. Michael Schwartz
Name: H. Michael Schwartz
Title: Chief Executive Officer
Signature Page to Amendment No. 1 to the Second Amended and Restated Limited Partnership Agreement of Strategic Storage Operating Partnership VI, L.P.
EXHIBIT I
STRATEGIC STORAGE OPERATING PARTNERSHIP VI, L.P.
DESIGNATION OF THE RIGHTS, POWERS, PRIVILEGES, RESTRICTIONS, QUALIFICATIONS, AND LIMITATIONS OF THE SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS
The following are the terms of the Series A Cumulative Redeemable Preferred Units (the “Preferred Units”) established pursuant to this Amendment:
(1) Number. The maximum number of authorized Preferred Units shall be 600,000.
(2) Rank. The Preferred Units will, with respect to distribution rights (to the extent set forth herein) and rights upon liquidation, dissolution, or winding up of the Partnership, rank: (a) senior to all classes or series of Partnership Units not designated as Preferred Units (“Common Units”) and to all equity securities issued by the Partnership the terms of which provide that such equity securities shall rank junior to such Preferred Units; (b) on a parity with all equity securities issued by the Partnership other than those referred to in clauses (a) and (c); and (c) junior to all equity securities issued by the Partnership that rank senior to the Preferred Units. The term “equity securities” shall not include convertible debt securities.
(3) Distributions.
(a) Distribution Terms.
(i) Commencing from and including the applicable date of issuance of Preferred Units, which may be issued in one or more tranches (each such date, a “Date of Issuance”), distributions (the “Distributions”) on each Preferred Unit shall be payable monthly in arrears, in an amount equal to the applicable Pay Rate on the Liquidation Amount, until the redemption or repurchase of such Preferred Units in accordance with Sections 5 or 6, as the case may be (each such period a “Distribution Period”).
(ii) Distributions on the Preferred Units shall be cumulative from the applicable Date of Issuance at the Pay Rate, and shall be payable monthly in arrears on the 1st day of each month of each year or, if not a business day, the next succeeding business day, commencing on February 1, 2023 (each, a “Distribution Payment Date”), and will be computed on the basis of a 360‑day year and the actual number of days in the applicable period. Distributions will be payable to holders of record as they appear in the records of the Partnership at the close of business on the applicable record date by wire transfer pursuant to wire instructions provided by such holders. The record date shall be the last calendar day of the month immediately preceding each Distribution Payment Date (each, a “Distribution Payment Record Date”).
(iii) Distributions on the Preferred Units shall accumulate at the Pay Rate, whether or not, in any Distribution Period, the Partnership has earnings, whether or not such Distribution shall be authorized and whether or not there shall be funds of the Partnership legally available for payment of such Distributions. If on any Distribution Payment Date the Partnership shall not be permitted under Delaware law to pay all or a portion of any such Distributions, the Partnership shall take such action as may be lawfully permitted in order to enable the Partnership, to the extent permitted by Delaware law, to lawfully to pay such Distributions. Accumulated but unpaid Distributions, if any, on the Preferred Units, will accrue at the applicable Pay Rate.
(iv) During the continuance of an Event of Default, Distributions on the Preferred Units, including any accumulated but unpaid Distributions, shall accrue at the applicable Pay Rate plus 5% per annum.
(b) Distribution Payments. Any Distribution payment made on Preferred Units shall first be credited against the earliest accumulated but unpaid Distribution due with respect to such Preferred Units which remains payable. The Distributions will be treated as guaranteed payments for the use of capital under Section 707 of the Code as such Distributions accrue pursuant to Section 3(a).
(4) Liquidation Amount.
(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Partnership (referred to herein as a “liquidation”), the holders of the Preferred Units will be entitled to be paid out of the assets of the Partnership legally available for distribution to its unitholders liquidating distributions, in cash, in the amount of $25.00 per unit multiplied by the number of outstanding Preferred Units (the “Liquidation Amount”), plus an amount equal to any accumulated and unpaid Distributions to the date of such liquidation, before any distribution or payment is made to holders of Common Units or any other equity securities of the Partnership ranking junior to the Preferred Units as to the distribution of assets upon a liquidation. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Preferred Units will have no right or claim to any of the remaining assets of the Partnership.
(b) In the event that, upon any liquidation of the Partnership, the available assets of the Partnership are insufficient to pay the amount of the liquidating distributions on all outstanding Preferred Units, plus an amount equal to any accumulated and unpaid Distributions to the date of such liquidation and the corresponding amounts payable on all other equity securities of the Partnership ranking on a parity with Preferred Units in the distribution of assets upon a liquidation, then the holders of Preferred Units and all other such equity securities of the Partnership ranking on a parity with Preferred Units shall share ratably in any such distribution of assets in proportion to the full liquidating distributions per unit to which they would otherwise be respectively entitled.
(c) The consolidation or merger of the Partnership with or into any other entity, or the merger of another entity with or into the Partnership, or a statutory unit exchange by the Partnership, or the sale, lease or conveyance of all or substantially all of the property or business
of the Partnership, shall be deemed to constitute a liquidation of the Partnership.
(d) The Liquidation Amount of the outstanding Preferred Units will not be added to the liabilities of the Partnership for the purpose of determining whether under the Delaware Revised Uniform Limited Partnership Act a distribution may be made to unitholders of the Partnership whose preferential rights upon dissolution of the Partnership are junior to those of holders of Preferred Units. This Section 4(d) shall be without prejudice to the provisions of Sections 3(a) and 4(a) hereof.
(5) Redemption.
(a) The Partnership may redeem the Preferred Units, in whole or in part at the option of the Partnership at any time or from time to time following the second anniversary of the Initial Date of Issuance, at a redemption price per unit in cash in an amount equal to the sum of the Liquidation Amount plus, in accordance with Section 5(f) hereof, all accumulated and unpaid Distributions thereon to the date of redemption (the “Redemption Price”). If fewer than all of the outstanding Preferred Units are to be redeemed at the option of the Partnership, the Preferred Units to be redeemed shall be determined pro rata or by lot or in such other manner as determined by the General Partner to be fair and equitable to holders of Preferred Units.
(b) Notice of a redemption pursuant to Section 5(a) will be delivered by the Partnership via telecopy, email, hand delivery or other mail or messenger service not less than three (3) nor more than thirty (30) days prior to the redemption date, addressed to the respective holders of the Preferred Units to be redeemed at their respective addresses or email addresses as they appear on the books of the Partnership. Each notice shall state: (i) the redemption date; (ii) the number of Preferred Units to be redeemed; (iii) the Redemption Price; (iv) the place or places where certificates representing such Preferred Units, if any, are to be surrendered for payment of the Redemption Price; and (v) that Distributions on the Preferred Units to be redeemed will cease to accumulate on such redemption date. If fewer than all the Preferred Units are to be redeemed, the notice delivered to each such holder thereof shall also specify the number of Preferred Units to be redeemed from each such holder.
(c) On or after a redemption date, each holder of Preferred Units to be redeemed must present and surrender any certificates representing the Preferred Units to the Partnership at the place designated in the notice of redemption and thereupon the Redemption Price of such Preferred Units will be paid to or on the order of the Person whose name appears on such certificates, if any, as the owner thereof by wire transfer pursuant to wire instructions provided by such Person and each surrendered certificate will be canceled. In the event that fewer than all the Preferred Units are to be redeemed, and if a certificate has been issued representing the Preferred Units, a new certificate will be issued representing the unredeemed Preferred Units.
(d) From and after a partial redemption date (unless the Partnership defaults in payment of the Redemption Price), all Distributions on the Preferred Units subject to such redemption will cease to accumulate and all rights of the holders thereof, except the right to receive the Redemption Price thereof (including all accumulated and unpaid Distributions to the redemption date) will cease and terminate and such Preferred Units will not thereafter be transferred (except with the consent of the Partnership) on the Partnership’s records, and such
Preferred Units shall not be deemed to be outstanding for any purpose whatsoever. In the event that the Partnership defaults in the payment of the Redemption Price for any Preferred Units surrendered for redemption, such Preferred Units shall continue to be deemed to be outstanding for all purposes and to be owned by the respective holders that surrendered such Preferred Units, and the Partnership shall promptly return the surrendered certificates representing such Preferred Units, if any, to such holders (although the failure of the Partnership to return any such certificates to such holders shall in no way affect the ownership of such Preferred Units by such holders or their rights thereunder).
(e) From and after the date of the Final Redemption (unless the Partnership defaults in payment of the Redemption Price), all Distributions on the Preferred Units will cease to accumulate and all rights of the holders thereof, except the right to receive the Redemption Price thereof (including all accumulated and unpaid Distributions to the date of the Final Redemption), will cease and terminate and such Preferred Units will not thereafter be transferred (except with the consent of the Partnership) on the Partnership’s records, and such Preferred Units shall not be deemed to be outstanding for any purpose whatsoever. In the event that the Partnership defaults in the payment of the Redemption Price (including all accumulated and unpaid Distributions to the date of the Final Redemption) for any Preferred Units surrendered for Final Redemption, such Preferred Units shall continue to be deemed to be outstanding for all purposes and to be owned by the respective holders that surrendered such Preferred Units, and the Partnership shall promptly return the surrendered certificates representing such Preferred Units, if any, to such holders (although the failure of the Partnership to return any such certificates to such holders shall in no way affect the ownership of such Preferred Units by such holders or their rights thereunder).
(f) Immediately prior to any redemption of Preferred Units in part or in full, the Partnership shall pay, in cash, all accumulated and unpaid Distributions with respect to all then-outstanding Preferred Units to the redemption date, unless such redemption date falls after a Distribution Payment Record Date and on or prior to the corresponding Distribution Payment Date, in which case each holder of Preferred Units at the close of business on such Distribution Payment Record Date shall be entitled to the Distribution payable on such Preferred Units on the corresponding Distribution Payment Date notwithstanding the redemption of such Preferred Units on or prior to such Distribution Payment Date.
(g) Any Preferred Units that have been redeemed shall, after such redemption, have the status of authorized but unissued Partnership Units, without designation as to series, until such units are once more designated as part of a particular series by the General Partner.
(h) The Preferred Units will not have a stated maturity date and will not be subject to any sinking fund.
(6) Repurchase at the Election of Holders.
(a) Following the occurrence of an Optional Repurchase Event and for a period of ninety (90) days thereafter (the expiration of each such period, an “Optional Repurchase Event Expiration Date”), a holder of Preferred Units, at its election, may require the Partnership to repurchase all or any portion of such holder’s Preferred Units, at a repurchase price per unit in cash equal to the sum of the Liquidation Amount plus, in accordance with Section 6(f) hereof, all
accumulated and unpaid Distributions thereon to the date of repurchase (the “Repurchase Price”). If a holder of Preferred Units has not delivered a Holder Repurchase Notice as of the Optional Repurchase Event Expiration Date, such holder will be deemed to have waived the right to have his or her Preferred Units repurchased by the Partnership with respect to such Optional Repurchase Event.
(b) Holders may exercise the rights specified in this Section 6 upon delivery to the Partnership of a written notice of repurchase in the form attached as Schedule A hereto (a “Holder Repurchase Notice”) via telecopy, email, hand delivery or other mail or messenger service. If certificates were issued to the holders, such certificates representing the Preferred Units for which repurchase is elected shall be delivered to the Partnership by hand delivery or other mail or messenger service, duly endorsed. The date upon which a Holder Repurchase Notice is initially received by the Partnership shall be a “Holder Repurchase Notice Date.”
(c) The Partnership shall pay within ten (10) business days after the Holder Repurchase Notice Date, to or on the order of the Person whose name appears on such certificates or book entry as the owner thereof by wire transfer pursuant to wire instructions provided by such Person, the Repurchase Price for the Preferred Units being repurchased and each surrendered certificate, if any, will be canceled. In the event that fewer than all the Preferred Units are to be repurchased, and if a certificate has been issued representing the Preferred Units, a new certificate will be issued representing the Preferred Units that were not repurchased.
(d) From and after a partial repurchase date (unless the Partnership defaults in payment of the Repurchase Price), all Distributions on the Preferred Units tendered for repurchase will cease to accumulate and all rights of the holders thereof, except the right to receive the Repurchase Price thereof (including all accumulated and unpaid Distributions to the repurchase date) will cease and terminate and such Preferred Units will not thereafter be transferred (except with the consent of the Partnership) on the Partnership’s records, and such Preferred Units shall not be deemed to be outstanding for any purpose whatsoever other than with respect to the accumulation of Distributions on such Preferred Units. In the event that the Partnership defaults in the payment of the Repurchase Price for any Preferred Units tendered for repurchase, such Preferred Units shall continue to be deemed to be outstanding for all purposes and to be owned by the respective holders that tendered such Preferred Units, and the Partnership shall promptly return the tendered certificates representing such Preferred Units, if any, to such holders (although the failure of the Partnership to return any such certificates to such holders shall in no way affect the ownership of such Preferred Units by such holders or their rights thereunder).
(e) From and after the date of the Final Repurchase (unless the Partnership defaults in payment of the Repurchase Price), all Distributions on the Preferred Units will cease to accumulate and all rights of the holders thereof, except the right to receive the Repurchase Price thereof (including all accumulated and unpaid Distributions to the date of the Final Repurchase), will cease and terminate and such Preferred Units will not thereafter be transferred (except with the consent of the Partnership) on the Partnership’s records, and such Preferred Units shall not be deemed to be outstanding for any purpose whatsoever. In the event that the Partnership defaults in the payment of the Repurchase Price (including all accumulated and unpaid Distributions to the date of the Final Repurchase) for any Preferred Units tendered for Final Repurchase, such Preferred Units shall continue to be deemed to be outstanding for all purposes and to be owned by
the respective holders that tendered such Preferred Units, and the Partnership shall promptly return the tendered certificates representing such Preferred Units, if any, to such holders (although the failure of the Partnership to return any such certificates to such holders shall in no way affect the ownership of such Preferred Units by such holders or their rights thereunder).
(f) Immediately prior to any repurchase of Preferred Units, the Partnership shall pay, in cash, all accumulated and unpaid Distributions with respect to all then-outstanding Preferred Units to the repurchase date, unless such repurchase date falls after a Distribution Payment Record Date and on or prior to the corresponding Distribution Payment Date, in which case each holder of Preferred Units at the close of business on such Distribution Payment Record Date shall be entitled to the Distribution payable on such Preferred Units on the corresponding Distribution Payment Date notwithstanding the repurchase of such Preferred Units on or prior to such Distribution Payment Date.
(g) From and after the occurrence of an Optional Repurchase Event until such date as the Preferred Units tendered by a holder of Preferred Units in connection with such Optional Repurchase Event have been repurchased or redeemed pursuant to this Section 6 or Section 5, none of the Partnership, the General Partner or their respective Subsidiaries may undertake (and the Partnership and the General Partner shall cause each of their respective Subsidiaries not to undertake) any of the following actions, directly or indirectly, without the prior written consent of the holders of record of at least a majority of the Preferred Units then outstanding:
(i) authorize, declare or pay, or set apart for payment, any distributions on any equity securities of the Partnership, the General Partner or any of their respective Subsidiaries, other than (1) in the case of the Partnership (y) distributions made on a regular monthly basis consistent with past practice on Common Units or other equity securities that rank, as to distributions and upon liquidation, junior to the Preferred Units, and (z) Distributions on the Preferred Units; and (2) in the case of the General Partner, any Subsidiary of the General Partner or any Subsidiary of the Partnership, distributions made on a regular monthly basis consistent with past practice on shares of common stock or common equity securities or other equity securities that rank, as to distributions and upon liquidation, junior to such entity’s shares of preferred stock or preferred equity securities; provided, that the foregoing shall not prohibit distributions that are necessary to preserve the General Partner’s status as a REIT under the Code;
(ii) redeem or repurchase any equity securities of the Partnership, the General Partner or any of their respective Subsidiaries, other than, with respect to the Partnership, redemptions or repurchases of the Preferred Units and, with respect to the General Partner, redemptions pursuant to, and subject to the limitations under, the General Partner’s Share Redemption Program as in effect on the Initial Date of Issuance, as the same may be amended from time to time;
(iii) purchase or otherwise acquire any asset from another party, including real property or interests therein, enter into any contract or agreement or option to do so or make any non-refundable deposit in connection with any such proposed
acquisition;
(iv) sell, transfer, assign, hypothecate, pledge or dispose of all or any portion of any Property or other asset of the Partnership, the General Partner or any of their respective Subsidiaries, or any interest, whether legal or beneficial, in any of the foregoing or enter into any contract or agreement or option to do so; or
(v) (a) incur, renew, refinance, modify or otherwise discharge any Indebtedness of the Partnership, the General Partner or any of their respective Subsidiaries, or extend credit, make a loan or become a guarantor or surety for debt of another party, or (b) create, suffer or permit to exist any Lien on, of or against, or otherwise affecting, all or any portion of any Property (including, without limitation, fixtures and other personal property) in each instance, other than the Permitted Liens or other than in connection with a transaction approved pursuant to clause (iii) of this subsection.
Neither the Partnership nor the General Partner shall take, and shall cause their respective Subsidiaries not to take, any action in furtherance of any of the foregoing actions without obtaining the required consent therefor, as specified in this Section 6(g).
(h) Any Preferred Units that have been repurchased shall, after such repurchase, have the status of authorized but unissued Partnership Units, without designation as to series, until such units are once more designated as part of a particular series by the General Partner.
(7) Covenants of the Partnership and the General Partner.
(a) Protective Provisions. The Partnership and the General Partner hereby covenant and agree that, for as long as any Preferred Units are outstanding, neither the Partnership nor the General Partner shall, and the Partnership and the General Partner shall cause their respective Subsidiaries not to, undertake or permit any of the following actions, directly or indirectly, without the prior written consent of the holders of record of at least a majority of the Preferred Units then outstanding:
(i) (1) in the case of the Partnership, authorize or issue, or increase the authorized or issued amount of, (A) equity securities ranking, as to distributions and upon liquidation, on a parity with or senior to the Preferred Units or (B) Common Units or other equity securities ranking, as to distributions and upon liquidation, junior to the Preferred Units, to the extent that such Common Units or other junior equity securities contain any rights that restrict in any way management of the Partnership, the General Partner or their respective Subsidiaries or would reasonably be expected to interfere with the Preferred Units or the rights of the holders thereof; and (2) in the case of the General Partner, any Subsidiary of the General Partner or any Subsidiary of the Partnership, authorize or issue additional (A) shares of preferred stock or preferred equity securities or (B) shares of common stock or common equity securities or other equity securities ranking, as to distributions and upon liquidation, junior to shares of such entity’s preferred stock or preferred equity securities, to the extent that such shares of common stock,
common equity securities or other junior equity securities contain any rights that restrict in any way management of the General Partner, the Partnership or their respective Subsidiaries or would reasonably be expected to interfere with the Preferred Units or the rights of the holders thereof;
(ii) amend, alter, repeal or waive any of the provisions of (1) this Amendment or the Purchase Agreement or (2) the certificate of limited partnership of the Partnership, the Partnership Agreement, the Articles of Incorporation or bylaws of the General Partner or the organizational documents of any of their respective Subsidiaries, in the case of clause (2) only, to the extent that such amendment would reasonably be expected to adversely affect the Preferred Units or the rights of the holders thereof;
(iii) redeem, purchase or otherwise acquire for any consideration (1) in the case of the Partnership, equity securities of the Partnership that rank, as to distributions and upon liquidation, junior to the Preferred Units, including Common Units, and (2) in the case of the General Partner, any Subsidiary of the General Partner or any Subsidiary of the Partnership, any class or series of capital stock or equity securities; provided, that the foregoing shall not prohibit the following: (A) redemptions pursuant to the Share Redemption Program; and (B) redemptions of Common Units in exchange for which the General Partner issues REIT Shares to the holders of such Common Units as the sole consideration therefor pursuant to the terms of the Partnership Agreement;
(iv) engage in a Change of Control;
(v) commence or suffer to exist an Event of Bankruptcy as to the Partnership, the General Partner or any of their respective Subsidiaries;
(vi) pay any special distributions (which, for purposes hereof, shall mean any distribution other than a distribution made on a regular monthly basis consistent with past practice) on (1) in the case of the Partnership, Common Units or other equity securities that rank, as to distributions and upon liquidation, junior to the Preferred Units and (2) in the case of the General Partner, any Subsidiary of the General Partner or any Subsidiary of the Partnership, shares of common stock or common equity securities or other equity securities that rank, as to distributions and upon liquidation, junior to such entity’s shares of preferred stock or preferred equity securities; provided, that the foregoing shall not prohibit special distributions that are necessary to preserve the General Partner’s status as a REIT under the Code; or
(vii) engage in a recapitalization, reorganization, merger, unit or stock split, statutory unit or stock exchange, sale of all or substantially all of such entity’s assets, tender offer for all or substantially all of its Common Units, shares of common stock or other common equity securities, as the case may be, or other similar transaction.
Neither the Partnership nor the General Partner shall take, and shall cause their respective Subsidiaries not to take, any action in furtherance of any of the foregoing actions without obtaining the required consent therefor, as specified in this Section 7(a). Notwithstanding any provision in this Section 7(a) to the contrary, the Partnership shall be able to enter into tax protection agreements in the ordinary course of its business.
(b) Investment Company Act. The Partnership and the General Partner hereby covenant and agree that, for as long as any Preferred Units are outstanding, each of the Partnership and the General Partner shall take such steps as shall be necessary to ensure that none of the Partnership, the General Partner or any of their respective Subsidiaries shall become regulated as an “investment company” within the meaning of such term under the Investment Company Act of 1940, as amended.
(c) REIT Status and Partnership Operations. The Partnership and the General Partner hereby covenant and agree that, for as long as any Preferred Units are outstanding, the General Partner shall use its best efforts to qualify and continue to maintain its qualification as a REIT under the Code unless and until the Board of Directors of the General Partner determines that it is in the best interest of the General Partner’s stockholders for the General Partner not to maintain such qualification. So long as any Preferred Units are outstanding and held, directly or indirectly, by a REIT, the General Partner shall operate the Partnership in compliance with the income and asset requirements of Code Sections 856(c)(2), (c)(3) and (c)(4) and so as to avoid the imposition of the tax on prohibited transactions imposed under Code Section 857(b)(6), as if the Partnership were a REIT, unless all REITs holding Preferred Units voluntarily terminate their status as a REIT and deliver a notice to that effect to the General Partner.
(d) Notices. The Partnership and the General Partner hereby covenant and agree that, for as long as any Preferred Units are outstanding, the Partnership and the General Partner shall give to each holder of Preferred Units written notice, within three (3) days of the Partnership or the General Partner having actual knowledge thereof, of:
(i) the issuance by any Governmental Authority of any injunction, order, decision or other restraint or the initiation of any litigation or similar proceeding seeking any such injunction, order or other restraint that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;
(ii) the existence of an Event of Default (or an event which, upon notice, lapse of time or both would, unless cured or waived, become an Event of Default) or other Optional Repurchase Event;
(iii) the occurrence of a default under any instrument, agreement or indenture pertaining to any Indebtedness of the Partnership, the General Partner or any of their respective Subsidiaries;
(iv) any default or event of default under any Material Contract of any of the Partnership, the General Partner or their respective Subsidiaries that could reasonably be expected to have a Material Adverse Effect;
(v) the occurrence of an event or series of events relating to or affecting the
(vi) the damage or destruction of any Property, in whole or in part;
(vii) the occurrence of a Capital Event; or
(viii) any actual or threatened commencement of any proceedings in respect of any Taking of any Property.
The written notice provided in connection with any of the foregoing events shall specify the nature of the event prompting such notice and the action (if any) that is proposed to be taken with respect thereto.
(8) Transfers.
(a) Notwithstanding Section 9.2 of the Partnership Agreement, other than the provisions of Section 9.2(d) and (e) thereof, a holder of Preferred Units may Transfer all or any portion of such holder’s Preferred Units without the consent of the General Partner, and the provisions of Section 9.2(f) of the Partnership Agreement shall not apply to the Preferred Units.
(b) In connection with any such Transfer pursuant to Section 8(a), the General Partner shall consent to the admission of the transferee as a substitute Limited Partner as long as such admission does not cause the Partnership to be treated as a “publicly traded partnership” within the meaning of Section 7704 of the Code and the Treasury Regulations thereunder.
(9) Power of Attorney. Notwithstanding Section 8.2 of the Partnership Agreement, no holder of Preferred Units appoints the General Partner as its attorney-in-fact, and the General Partner shall not execute any document as attorney-in-fact or otherwise on behalf of the holders of Preferred Units pursuant to the power of attorney set forth in Section 8.2 of the Partnership Agreement.
(10) Investment Fee. The Partnership shall pay the Purchaser an amount equal to 1% of the Liquidation Amount on each applicable Date of Issuance (the “Investment Fee”). The Investment Fee will be treated as guaranteed payments for the use of capital under Section 707 of the Code.
(11) Definitions.
“Advisor” or “Advisors” means the Person or Persons, if any, appointed, employed or contracted with by the General Partner and responsible for directing or performing the day-to-day business affairs of the General Partner, including any Person to whom the Advisor subcontracts substantially all of such functions.
“Advisory Agreement” means the agreement among the Partnership, the General Partner and the Advisor pursuant to which the Advisor will direct or perform the day-to-day business affairs of the General Partner and the Partnership.
“Capital Event” means a sale or other disposition, directly or indirectly, of any Property or any portion thereof or an interest therein, a financing, refinancing, insurance award (excluding rent loss insurance), condemnation (or conveyance in lieu thereof), easement sale or other transaction which, in accordance with GAAP, consistently applied, is treated as a capital transaction.
A “Change of Control” will be deemed to have occurred with respect to the Partnership on any date after the Initial Date of Issuance on which neither the General Partner nor any of its Subsidiaries or Affiliates is the Controlling general partner, managing member or equivalent thereof of the Partnership. A “Change of Control” will be deemed to have occurred with respect to the General Partner on any date after the Initial Date of Issuance if:
(a) any “person,” including a “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding the General Partner, any entity Controlling, Controlled by or under common Control with the General Partner, any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the General Partner or any such entity), is or becomes the “beneficial owner” (as defined in Rule 13(d)(3) under the Exchange Act), directly or indirectly, of shares of stock of the General Partner representing thirty-five percent (35%) or more of either (A) the combined voting power of the General Partner’s then-outstanding securities or (B) the then-outstanding shares of all classes of stock of the General Partner (other than as a result of an issuance of securities by the General Partner);
(b) any consolidation or merger of the General Partner where the stockholders of the General Partner immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, shares of stock representing in the aggregate 50% or more of the combined voting power of the securities of the surviving or resulting entity in the consolidation or merger (or of its ultimate parent entity, if any);
(c) there shall occur (A) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the General Partner, other than a sale or transfer by the General Partner of all or substantially all of the General Partner’s assets to an entity at least fifty percent (50%) of the combined voting power of the securities of which are owned by “persons” (as defined above) in substantially the same proportion as their ownership of the General Partner immediately prior to such sale or transfer or (B) the approval by stockholders of the General Partner of any plan or proposal for the liquidation or dissolution of the General Partner;
(d) the members of the Board of Directors of the General Partner at the beginning of any consecutive 24-calendar-month period (the “Incumbent Directors”) cease for any reason other than due to death to constitute at least a majority of the members of the Board of Directors of the General Partner; provided, that any director whose election, or nomination for election by the General Partner’s stockholders, was approved or ratified by a vote of a majority of the members of the Board of Directors then still in office who were Incumbent Directors at the beginning of such 24-calendar-month period shall be deemed to be an Incumbent Director for purposes of the foregoing; or
(e) the Advisory Agreement is terminated.
“Common Units” has the meaning set forth in Section 2.
“Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise and “Controlling,” “Controlled” and “under common Control” shall have meanings correlative thereto. For purposes of this definition, debt securities that are convertible into common stock will be treated as voting securities only when converted.
“Date of Issuance” has the meaning set forth in Section 3(a)(i).
“Distribution” has the meaning set forth in Section 3(a)(i).
“Distribution Payment Date” has the meaning set forth in Section 3(a)(ii).
“Distribution Payment Record Date” has the meaning set forth in Section 3(a)(ii).
“Distribution Period” has the meaning set forth in Section 3(a)(i).
“Event of Default” means the occurrence of one or more of the following events:
(a) a material default in the performance of, or material breach of any covenant, warranty or other agreement contained in, the Partnership Agreement, including this Amendment (including, without limitation, any of the Protective Provisions), or the Purchase Agreement by the Partnership or the General Partner, as applicable, and the continuance of such default or breach for a period of 10 business days after written notice thereof shall have been given to the Partnership and the General Partner;
(b) an Event of Bankruptcy as to the Partnership, the General Partner or any of their respective Subsidiaries that has not been consented to in advance by the holders of the Preferred Units pursuant to Section 7(a);
(c) any breach, default or event of default shall occur and be continuing under any instrument, agreement or indenture pertaining to any Indebtedness of the Partnership, the General Partner or any of their respective Subsidiaries aggregating more than $5 million, the effect of which is to cause an acceleration, mandatory redemption or other required repurchase of such Indebtedness, or any such Indebtedness shall be otherwise declared to be due and payable (by acceleration or otherwise) or required to be prepaid, redeemed or otherwise repurchased by the Partnership, the General Partner or any such Subsidiary (other than by a regularly scheduled required prepayment) prior to the stated maturity thereof;
(d) the failure of the General Partner to qualify as a REIT under the Code.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Final Redemption” shall mean the date of the redemption of all remaining outstanding Preferred Units.
“Final Repurchase” shall mean the date of the repurchase of all remaining outstanding Preferred Units.
“GAAP” means generally accepted accounting principles in the United States of America in effect from time to time.
“Governmental Authority” means any court, board, agency, commission, office or other authority of any nature whatsoever for any governmental unit (federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence, including foreign Governmental Authorities.
“Holder Repurchase Notice” has the meaning set forth in Section 6(b).
“Holder Repurchase Notice Date” has the meaning set forth in Section 6(b).
“Improvements” means the buildings, structures, fixtures, building equipment, additions, enlargements, extensions, modifications, repairs, replacements and improvements now or hereafter erected or located at any Property.
“Incumbent Directors” has the meaning set forth in the definition of “Change of Control.”
“Indebtedness” means, without duplication, the sum of the (i) indebtedness for borrowed money (excluding any interest thereon), secured or unsecured (including but not limited to all senior financing facilities, senior mortgages and/or fixed-rate long term debt) (the “Senior Debt”), (ii) reimbursement obligations under any letters of credit or similar instruments with regard to the Senior Debt, (iii) capitalized lease obligations, (iv) obligations under interest rate cap, swap, collar or similar transactions or currency hedging transactions (valued at the termination value thereof) and (v) guarantees of any Indebtedness of the foregoing of any other Person; provided, that Indebtedness shall not include “trade payables” incurred in the ordinary course of business and, in the case of the Partnership, shall not include the Preferred Units.
“Initial Date of Issuance” means January 30, 2023.
“Investment Fee” has the meaning set forth in Section 10.
“Lien” means any liens, mortgages, pledges, security interests, claims, options, rights of first offer or refusal, charges, conditional or installment sale contracts, claims of third parties of any kind or other encumbrances.
“Liquidation” has the meaning set forth in Section 4(a).
“Liquidation Amount” has the meaning set forth in Section 4(a).
“Material Adverse Effect” with respect to any Person means any event, occurrence, development, change or effect that is, or is reasonably likely to be, individually or in the aggregate, materially adverse to the business, prospects, properties, operating assets, financial condition or results of operations of such Person and its Subsidiaries, taken as a whole; provided, that, in no event shall the following, either individually or in the aggregate, in and of itself be deemed to
constitute a “Material Adverse Effect”: (i) the failure by the General Partner to meet independent, third party projections of earnings, revenue or other financial performance measures (provided, that the underlying facts, circumstances, operating results or prospects which cause the General Partner to fail to meet such projections may be considered in determining whether a “Material Adverse Effect” has occurred or is reasonably likely to occur); (ii) fluctuations in the price or net asset value of the REIT Shares; and (iii) (A) any changes that affect the self-storage industry generally, (B) any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates, (C) any changes resulting from other major developments, including wars, natural disasters, epidemics and pandemics, including the outbreak of novel coronavirus (COVID-19), military actions, and terrorist attacks, or (D) any changes in the legal, regulatory or political conditions in the United States or in any other country or region of the world.
“Material Contract” means each of the following contracts (and all amendments, modifications and supplements thereto and all side letters to which the Partnership, the General Partner or their respective Subsidiaries are a party affecting the obligations of any party thereunder) to which the Partnership, the General Partner or their respective Subsidiaries are a party or by which any of their respective Properties or assets are bound (notwithstanding anything below, “Material Contract” shall not include any contract that (1) is terminable upon thirty (30) days’ notice without a penalty or premium, (2) will be fully performed and satisfied as of or prior to the Initial Date of Issuance, (3) is a lease, or (4) is an organizational document):
(f) all agreements that call for aggregate payments by, or other consideration from, the Partnership, the General Partner or their respective Subsidiaries under such contract of more than $1 million over the remaining term of such contract;
(g) all agreements that call for annual aggregate payments by, or other consideration from, the Partnership, the General Partner or their respective Subsidiaries under such contract of more than $1 million over the remaining term of such contract;
(h) any agreement that contains any non-compete or exclusivity provisions with respect to any line of business in which the Partnership, the General Partner or their respective Subsidiaries is currently engaged or geographic area with respect to the Partnership, the General Partner or their respective Subsidiaries, or that purports to restrict in any material respect the right of the Partnership, the General Partner or their respective Subsidiaries to conduct any line of business in which the Partnership, the General Partner or their respective Subsidiaries are currently engaged or to compete with any Person or operate in any geographic area or location in which the Partnership, the General Partner or their respective Subsidiaries may conduct business;
(i) any partnership, limited liability company agreement, joint venture or other similar agreement entered into by the Partnership, the General Partner or their respective Subsidiaries with any third party;
(j) any contract more than $2 million for the pending purchase or sale, option to purchase or sell, right of first refusal, right of first offer or any other contractual right to purchase, sell, dispose of, or master lease, by merger, purchase or sale of assets or stock or otherwise, any real property including any Property;
(k) any contract pursuant to which the Partnership, the General Partner or their respective Subsidiaries agrees to indemnify or hold harmless any director or executive officer of the Partnership, the General Partner or their respective Subsidiaries (other than their organizational documents);
(l) any (A) loan agreement, letter of credit, indenture, note, bond, debenture, mortgage or any other document, agreement or instrument evidencing a capitalized leased obligation or other Indebtedness (secured or unsecured, direct or indirect, absolute or contingent (including guaranties of any obligation)) of, for the benefit of or payable to any of the Partnership, the General Partner or their respective Subsidiaries (other than among the Partnership, the General Partner and their respective Subsidiaries) in excess of $5 million, or (B) contract (other than any organizational document) to provide any funds to or make any investment in (whether in the form of a loan, capital contribution or otherwise) any Subsidiary or other Person;
(m) any employment agreements, severance, change in control or termination agreements with officers of any of the Partnership, the General Partner or their respective Subsidiaries;
(n) any contract pursuant to which any of the Partnership, the General Partner or their respective Subsidiaries has potential liability in respect of any purchase price adjustment, earn-out or contingent purchase price that, in each case, could reasonably be expected to result in future payments of more than $2 million; or any contract relating to the settlement or proposed settlement of any action, which involves the issuance of equity securities or the payment of an amount in excess of $2 million; and
(o) any “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K under the Securities Act).
An “Optional Repurchase Event” means the occurrence of any one or more of the following events:
(i) a breach of any of the Protective Provisions;
(ii) an Event of Default;
(iii) a Change of Control that has not been consented to pursuant to Section 7(a); or
(iv) the failure of the General Partner to qualify as a REIT under the Code.
“Optional Repurchase Event Expiration Date” has the meaning set forth in Section 6(a).
“Pay Rate” means (a) 7% per annum from the Date of Issuance until the second anniversary after the Date of Issuance; (b) 8% per annum commencing the day following the second anniversary after the Date of Issuance until the third anniversary after the Date of Issuance; (c) 9% per annum commencing the day following the third anniversary after the Date of Issuance until the fourth anniversary after the Date of Issuance; and (d) 10% per annum thereafter.
“Permitted Lien” means, collectively (a) any Lien, encumbrances or other matters disclosed in a Title Insurance Policy, (b) any Lien, if any, for Taxes imposed by any Governmental Authority not yet due or delinquent and (c) such other title and survey exceptions as the holders of record of at least a majority of the Preferred Units then outstanding have approved or may approve in writing in such holders’ discretion.
“Person” means any individual, partnership, limited liability company, corporation, joint venture, trust or other entity.
“Preferred Units” has the meaning set forth in the opening paragraph of this Amendment.
“Property” means each individual property owned, directly or indirectly, by the Partnership, including the Improvements thereon.
“Protective Provisions” means those protective provisions set forth in Section 7(a).
“Purchase Agreement” means that certain Series A Cumulative Redeemable Preferred Unit Purchase Agreement, dated January 30, 2023 among Strategic Storage Operating Partnership VI, L.P., Strategic Storage Trust VI, Inc., and SSSR Preferred Investor, LLC.
“Redemption Price” has the meaning set forth in Section 5(a).
“REIT Shares” means shares of common stock of the General Partner, par value $0.001 per share.
“Repurchase Price” has the meaning set forth in Section 6(a).
“Senior Debt” has the meaning set forth in the definition of “Indebtedness”.
“Set apart for payment” means the recording by the Partnership in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to an authorization of a distribution by the General Partner, the allocation of funds to be so paid on any series or class of Partnership Units.
“Share Redemption Program” means the General Partner’s program pursuant to which the General Partner’s stockholders who have held REIT Shares for at least one year may, under certain circumstances, be able to cause all or any portion of such REIT Shares to be redeemed by the General Partner.
“Taking” means a temporary or permanent taking by any Governmental Authority as the result or in lieu or in anticipation of the exercise of the right of condemnation or eminent domain, of all or any part of any Property, or any interest therein or right accruing thereto, including any right of access thereto or any change of grade affecting any Property or any part thereof.
“Taxes” means all real estate and personal property Taxes, assessments, water rates or sewer rents (excluding income Taxes), now or hereafter levied or assessed or imposed against any Property, together with all interest and penalties thereon.
“Title Insurance Policy” means a policy of title insurance or title commitments.
Schedule A
Notice of Repurchase
The undersigned holder of Preferred Units hereby irrevocably requests Strategic Storage Operating Partnership VI, L.P., a Delaware limited partnership (the “Partnership”), to repurchase Preferred Units in accordance with the terms of the Second Amended and Restated Limited Partnership Agreement of the Partnership and the Amendment thereto establishing the Preferred Units; and the undersigned irrevocably (i) surrenders such Preferred Units and all right, title and interest therein; and (ii) directs that the Redemption Price for such Preferred Units be delivered to the Person specified below at the address specified below. The undersigned hereby represents, warrants, and certifies that the undersigned (a) has good and unencumbered title to the Preferred Units that are the subject of this Notice, free and clear of the rights or interests of any other Person; (b) has the full right, power, and authority to request the repurchase requested herein; and (c) has obtained the consent or approval of all Persons, if any, having the right to consent or approve such repurchase of Preferred Units.
Dated:________________________
Name:
(Please Print)
(Signature)
(If holder is an entity, name and title of signatory)
(Mailing Address)
(City) (State) (Zip Code)
A-1
EX-10.4
Exhibit 10.4
NON-REVOLVING TERM FACILITY CREDIT AGREEMENT
BETWEEN
SST VI 1450 DON MILLS RD, ULC AND SST VI 1450 DON MILLS RD, LLC
AND
NATIONAL BANK OF CANADA
AND
STRATEGIC STORAGE TRUST VI, INC. as Guarantor
MADE AS OF
January 31, 2023
McCarthy Tétrault LLP
Exhibit 10.4
TABLE OF CONTENTS
Article 1 – INTERPRETATION 2
1.01 Definitions 2
1.02 Extended Meanings and References 23
1.03 Knowledge 23
1.04 Accounting Principles 23
1.05 Interest Calculations and Payments 24
1.06 Permitted Encumbrances 25
1.07 Currency 25
1.08 Entire Agreement and Conflicts 25
1.09 Severability 25
1.10 Further Assurances 25
1.11 Schedules 26
Article 2 – THE CREDIT FACILITY 26
2.01 Credit Facility 26
2.02 Purpose of Credit Facility 26
2.03 Manner of Borrowing 26
2.04 Non-Revolving Nature of Credit Facility 26
2.05 Drawdowns, Conversions and Rollovers 27
2.06 Lender’s Obligations with Respect to Loans 27
2.07 Irrevocability 27
2.08 Market Disruption 28
Article 3 – DRAWDOWN CONDITIONS 28
3.01 Conditions Precedent to Drawdown under the Credit Facility 28
3.02 Waiver 32
Article 4 – PAYMENTS OF INTEREST AND FEES 32
4.01 Interest on Prime Rate Loans 32
4.02 Upfront Fee 33
4.03 Default Interest 33
Article 5 – BANKERS’ ACCEPTANCES 33
5.01 Bankers’ Acceptances 33
5.02 General Mechanics 33
5.03 Purchase of Bankers’ Acceptances 33
5.04 Drawdowns 34
5.05 Rollovers 34
5.06 Conversions 34
5.07 Maturity 34
5.08 Bankers’ Acceptances Stamping Fees 35
5.09 General re Bankers’ Acceptances 35
5.10 Cash Collateralization 36
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Article 6 – REPAYMENT 36
6.01 Mandatory Repayment – Credit Facility 36
6.02 Voluntary Repayments 37
6.03 Repayment Compensation 37
Article 7 – PLACE AND APPLICATION OF PAYMENTS 37
7.01 Place of Payment of Principal, Interest and Fees 37
Article 8 – SECURITY 38
8.01 Security 38
8.02 Registration and Protection of Security. 39
8.03 Further Assurances 39
8.04 Form of Security 39
8.05 Qualifying Hedge Arrangements 39
Article 9 – REPRESENTATIONS AND WARRANTIES 39
9.01 Representations and Warranties 39
9.02 Survival and Repetition of Representations and Warranties 47
Article 10 – COVENANTS 48
10.01 Positive Covenants 48
10.02 Financial Covenants 56
10.03 Reporting Requirements 56
10.04 Negative Covenants 58
10.05 SmartStop Transaction 62
Article 11 – DEFAULT 63
11.01 Events of Default 63
11.02 Acceleration and Enforcement 66
11.03 Remedies Cumulative 67
11.04 Perform Obligations 67
11.05 Third Parties 67
11.06 Application of Payments 67
Article 12 – guarantee 68
12.01 Guarantees and Indemnity 68
12.02 Obligations Absolute 68
12.03 No Release 69
12.04 No Exhaustion of Remedies 70
12.05 Prima Facie Evidence 70
12.06 Guarantor Rights 71
12.07 Continuing Guarantee 71
12.08 Waivers by Guarantors 71
12.09 Demand 71
12.10 Interest 71
12.11 Limitation 71
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Article 13 – COMPENSATION and set-off 72
13.01 Increased Costs 72
13.02 Taxes 73
13.03 Illegality 74
Article 14 – RIGHT OF SETOFF 74
14.01 Right of Setoff 74
Article 15 – NOTICES: EFFECTIVENESS; ELECTRONIC COMMUNICATION 75
15.01 Notices, etc. 75
Article 16 – EXPENSES; INDEMNITY: DAMAGE WAIVER 76
16.01 Expenses; Indemnity: Damage Waiver 76
Article 17 – SUCCESSORS AND ASSIGNS 78
17.01 Successors and Assigns 78
Article 18 – amendments and waivers 78
18.01 Amendments and Waivers 78
Article 19 – GOVERNING LAW; JURISDICTION; ETC. 78
19.01 Governing Law; Jurisdiction; Etc. 78
Article 20 – WAIVER OF JURY TRIAL 79
20.01 Waiver of Jury Trial 79
Article 21 – COUNTERPARTS; INTEGRATION; EFFECTIVENESS; ELECTRONIC EXECUTION 79
21.01 Counterparts; Integration; Effectiveness; Electronic Execution 79
Article 22 – TREATMENT OF CERTAIN INFORMATION: CONFIDENTIALITY 80
22.01 Treatment of Certain Information: Confidentiality 80
Article 23 – language 81
23.01 Language 81
Article 24 – Nature of Obligations, Recourse and direction 81
24.01 Nature of Obligations under this Agreement and Recourse 81
Exhibit 10.4
NON-REVOLVING TERM FACILITY CREDIT AGREEMENT
THIS AGREEMENT is made as of January 31, 2023
BETWEEN
SST VI 1450 DON MILLS RD, LLC (the “Beneficial Owner”)
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SST VI 1450 DON MILLS RD, ULC (the “Nominee” and, together with the Beneficial Owner, collectively, the “Borrowers” and individually, a “Borrower”)
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NATIONAL BANK OF CANADA (the “Lender”)
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STRATEGIC STORAGE TRUST VI, INC. (the “Guarantor”)
WHEREAS the Borrowers have requested the Credit Facility and the Lender has agreed to provide the Credit Facility to the Borrowers for the purposes set out in Section 2.02 and upon and subject to the terms and conditions set out in this Agreement;
AND WHEREAS it is a condition of providing the Credit Facility that the Guarantor guarantee the obligations of the Borrowers on the terms and conditions herein set forth;
AND WHEREAS the Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by this Agreement and the Loan Documents and each of the Credit Parties acknowledges that they are jointly and severally liable for the Obligations; and
AND WHEREAS the Lender confirms and acknowledges that the Nominee holds legal title to the Secured Property (as defined below), for the benefit and on behalf of the Beneficial Owner, and that the Credit Facility has been established in accordance with the provisions of this Agreement, for the sole use and benefit of the Beneficial Owner.
NOW THEREFORE, in consideration of the covenants and agreements herein contained, the parties agree as follows:
Article 1 – INTERPRETATION
1.01 Definitions
In this Agreement, unless something in the subject matter or context is inconsistent therewith:
“Acceptable Appraisal” means a “market value” appraisal of the Secured Property prepared in accordance with the requirements of the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Institute of Canada and conducted in accordance with the standards of the Appraisal Institute of Canada by an Independent Appraiser, which is approved by the Lender in form, substance and which is addressed to the Lender.
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“Acquisition” means the acquisition by the Beneficial Owner of the Secured Property pursuant to the terms of the Purchase Agreement.
“Additional Compensation” has the meaning set out in Section 13.01(2).
“Adjusted Net Operating Income” means, for a given period, the sum of the following (without duplication but as adjusted pursuant to the provisions of the definition of Calculation Period): (i) rents and other revenues received in the ordinary course from the leasing or operating of such assets (including proceeds of rent loss insurance but excluding prepaid rents and revenues and security deposits except to the extent applied in satisfaction of tenants’ obligations for rent) determined in accordance with GAAP, minus (ii) all expenses paid or accrued by the relevant owner related to the ownership, operation or maintenance of such assets, including but not limited to realty taxes, assessments and other similar charges, insurance, utilities, payroll costs, maintenance, repair and landscaping expenses and on site marketing expenses, but in any event excluding amortization and depreciation and general administrative expenses of the relevant owner, determined in accordance with GAAP, minus (iii) non-recoverable expenses. For certainty, paragraphs (ii) and (iii) of this definition of Adjusted Net Operating Income shall exclude any extraordinary or non-recurring expenses, any asset management fees, any payments on account of interest, fees and amortization of principal in respect of any Indebtedness, income tax expense and cash reserves.
“Advance” means an advance of funds made hereunder to any Borrower by the Lender by way of a Loan.
“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled By or is Under Common Control With the Person specified.
“Aggregate Hedge Exposure” means, at any time, the negative net marked to market amount, if any, that would be carried in the accounts of the Borrower on a Consolidated basis at such time with respect to Qualifying Hedge Arrangements as a liability.
“Agreement” means this credit agreement, including its recitals and schedules, as refinanced, amended, restated, supplemented and otherwise modified from time to time.
“AML Laws” has the meaning set out in Section 9.01(37)(a).
“Anti-Corruption Laws” has the meaning set out in Section 9.01(37)(d).
“Applicable Canadian Pension Laws” means any law (statutory or common), rule, regulation, guideline, directive, order or notice of any Canadian federal or provincial (or other political subdivision thereof) Governmental Authority or any entity exercising executive, legislative, quasi-judicial, regulatory or administrative functions pertaining to, having jurisdiction over or affecting any Canadian Pension Plan or Canadian Plan in each case to the extent having the force of law.
“Applicable Law” means, at any time, in respect of any Person, property, transaction, event or other matter, as applicable, all then current laws, rules, statutes, regulations, treaties, orders, judgments and decrees and all official directives, rules, guidelines, orders, policies, decisions and other requirements of any Governmental Authority (collectively, the “Law”) relating or applicable to such Person, property, transaction, event or other matters and shall also include any interpretation of the Law, or any part of the Law, by any person having jurisdiction over it or charged with its administration or interpretation.
“Applicable Margin” means on any date for any period, the percentage rate per annum determined in accordance with the applicable table below:
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| Prime Rate Margin | BA Stamping Fee Rate |
|---|---|
| 1.40 | 2.40 |
“Applicable Market Capitalization Rate” means, for each relevant property, the proposed capitalization rate by the Guarantor for such property (and the Guarantor shall provide evidence in support thereof) for review and consideration by the Lender, in its discretion.
“Appraised Market Value” means the appraised value of the Secured Property as set forth in the most recent Acceptable Appraisal.
“Availability Period” means the period commencing on the Closing Date and ending on the Maturity Date.
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (a) if the then-current Benchmark is a term rate, any tenor for such Benchmark that is or may be used for determining the length of a Contract Period or (b) otherwise, any payment period for interest calculated with reference to such Benchmark, as applicable, pursuant to this Agreement as of such date.
“BA Cessation Effective Date” has the meaning ascribed thereto in Section 2.09(7).
“BA Cessation Notice” has the meaning ascribed thereto in Section 2.09(7).
“BA Discount Proceeds” means, with respect to a particular Bankers’ Acceptance, the following amount:
| ( | 1 | ) | x BA |
|---|---|---|---|
| 1 + (DR*(IP/365)) |
Where:
(a) BA = the face amount of the Bankers’ Acceptance;
(b) DR = the BA Discount Rate applicable to the Bankers’ Acceptance expressed as a decimal;
(c) IP = the applicable Interest Period in days; and
(d) the product of (DR*(IP/365) is rounded up or down to the fifth (5th) decimal place and .000005 is rounded up,
with the amount as so determined being rounded to the nearest whole cent, with one half of one cent being rounded up.
“BA Discount Rate” means, for any Drawdown Date in respect of Bankers’ Acceptances to be purchased pursuant to Article 5, CDOR.
“BA Market Disruption Notice” has the meaning set out in Section 2.08.
“BA Resumption Notice” has the meaning set out in Section 2.08.
“BA Stamping Fee” means the amount calculated by multiplying the face amount of a Bankers’ Acceptance by the BA Stamping Fee Rate and then multiplying the result by a fraction, the numerator of which is the number of days to
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elapse from and including the date of acceptance of such Bankers’ Acceptance by a Lender up to but excluding the maturity date of such Bankers’ Acceptance, and the denominator of which is the number of days in the calendar year in question.
“BA Stamping Fee Rate” means, with respect to a Bankers’ Acceptance, the applicable percentage rate per annum indicated below the reference to “BA Stamping Fee Rate in the definition of “Applicable Margin”.
“Bankers’ Acceptance” means a depository bill, as defined in the Depository Bills and Notes Act (Canada), in Canadian Dollars that is in the form of a Draft signed by the Borrower and accepted by the Lender as contemplated under Section 5.09(1).
“Benchmark” means, initially, CDOR; provided that if a replacement of the Benchmark has occurred pursuant to Section 2.09, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate. Any reference to “Benchmark” shall include, as applicable, the published component used in the calculation thereof.
“Benchmark Replacement” means, for any Available Tenor:
(a) For purposes of Section 2.09(1), the first alternative set forth below that can be determined by the Lender:
(i) the sum of: (1) Term CORRA, and (2) 0.29547% (29.547 basis points) for an Available Tenor of one-month’s duration, and 0.32138% (32.138 basis points) for an Available Tenor of three-months’ duration; or
(ii) the sum of: (1) Daily Compounded CORRA, and (2) 0.29547% (29.547 basis points) for an Available Tenor of one-month’s duration, and 0.32138% (32.138 basis points) for an Available Tenor of three-months’ duration; and
(b) For purposes of Section 2.09(2), the sum of (i) the alternate benchmark rate, and (ii) an adjustment (which may be a positive or negative value or zero), in each case, that has been selected by the Lender and the Borrower as the replacement for such Available Tenor of such Benchmark giving due consideration to any evolving or then-prevailing market convention, including any applicable recommendations made by the Relevant Governmental Body, for Canadian dollar-denominated syndicated credit facilities at such time,
provided that, if the Benchmark Replacement as determined pursuant to clause (a) or (b) above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Prime Rate,” the definition of “Business Day,” the definition of “Contract Period,” the definition of “Bankers’ Acceptance”, the definition of “BA Equivalent Advance,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters, including with respect to the obligation of the Lender to create, maintain or issue Bankers’ Acceptance) that the Lender decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Lender in a manner substantially consistent with market practice (or, if the Lender decides that adoption of any portion of such market practice is not administratively feasible or if the Lender determines that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as the Lender decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents). Without limiting the foregoing, Benchmark Replacement Conforming Changes made in connection with the replacement of CDOR with a Benchmark Replacement may include the implementation of mechanics for borrowing loans that bear interest by reference to the Benchmark Replacement, to replace the creation or purchase of drafts or Bankers’ Acceptances.
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“Benchmark Transition Event” means, with respect to any then-current Benchmark other than CDOR, the occurrence of a public statement or publication of information by or on behalf of the administrator of the then-current Benchmark, the regulatory supervisor for the administrator of such Benchmark, the Bank of Canada, an insolvency official with jurisdiction over the administrator for such Benchmark, a resolution authority with jurisdiction over the administrator for such Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark, announcing or stating that (a) such administrator has ceased or will cease on a specified date to provide all Available Tenors of such Benchmark, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark or (b) all Available Tenors of such Benchmark are or will no longer be representative of the underlying market and economic reality that such Benchmark is intended to measure and that representativeness will not be restored.
“Beneficial Owner” means SST VI 1450 Don Mills Rd, LLC, and its successors and assigns permitted by this Agreement.
“Borrowers” means collectively, the Nominee and the Beneficial Owner, and “Borrower” means either one of them, in each case, and their respective successors and assigns permitted by this Agreement.
“Borrower’s Account” means the account maintained by the Beneficial Owner and designated by the Beneficial Owner from time to time as the Borrowers’ Account hereunder.
“Borrowers’ Counsel” means Norton Rose Fulbright Canada LLP, or such other firm of legal counsel as the Borrowers may from time to time designate and that is acceptable to the Lender, acting reasonably.
“Business Day” means a day on which chartered banks are open for over-the-counter business in the Province of Ontario and excludes Saturday, Sunday and any other day which is a statutory holiday in the Province of Ontario.
“Calculation Period” means the trailing twelve month period, provided that for the purposes of such calculations, in respect of the Secured Property, historical calculations for the period prior to the acquisition thereof by the Borrowers until such time as twelve months have elapsed since the acquisition date thereof (such calculation to be acceptable to the Lender, acting reasonably), after which, the Calculation Period as of any time shall be deemed to be the trailing twelve month period.
“Canadian Dollars”, “Cdn. Dollar” and “Cdn. $” mean the lawful money of Canada.
“Canadian Pension Plan” means each and every registered pension plan established under Canadian federal or provincial law and sponsored, maintained or contributed to, by or on behalf of the Borrowers or the Guarantor for the benefit of any of their respective employees.
“Canadian Plan” shall mean any employee benefit plan (other than a Canadian Pension Plan) established or maintained by, or on behalf of the Borrowers or the Guarantor for the benefit of its employees.
“Capital Expenditures” means any capital expenditure made by a Credit Party for the construction, maintenance, repair, replacement, addition, alteration or refurbishment of the Secured Property.
“Capital Lease Obligation” of any Person means the obligation of such Person, as lessee, to pay rent or other payment amounts under a lease of real or personal property which is required to be classified and accounted for as a capital lease or a liability on a Consolidated balance sheet of such Person in accordance with GAAP.
“CDOR” means the Canadian Dollar rate for bankers’ acceptance borrowings, including the rate known as the Canadian Dollar Offered Rate provided by RBSL, as the administrator of the benchmark (or a successor administrator).
“Change in Laws” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any Applicable Laws, (b) any change in any Applicable Laws or in the administration, interpretation,
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implementation or application thereof by any Governmental Authority or (c) the making or issuance of any Applicable Laws by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or Canada, the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Laws”, regardless of the date enacted, adopted or issued.
“Claims” means, in respect of any event, circumstance, matter or thing, all actions, proceedings, losses, damages, liabilities, taxes, claims, demands, judgments, rights (including set-off), remedies, costs and expenses of any nature or kind, including legal fees and disbursements on a full indemnity basis, and “Claim” means any one of them.
“Closing Date” means January 31, 2023.
“Collateral” means the Secured Property and all real and personal property (and the revenues, insurance proceeds, issues, profits, proceeds and products of the foregoing) which are subject, or are intended or required to become subject, to the security or Encumbrance granted under any of the Loan Documents.
“Commitment” means Cdn $25,000,000.
“Compliance Certificate” means the certificate required pursuant to Section 10.03(3), which for the Borrowers shall be substantially in the form attached as Schedule 1.01(B), signed by any one of the Chief Executive Officer or the Chief Financial Officer of the Borrower, or such other senior financial officer of the Borrowers approved by the Lender, and which for the Guarantor, shall be substantially in the form attached as Schedule 1.01(B-1), signed by any one of the Chief Executive Officer or the Chief Financial Officer of the Guarantor, or such other senior financial officer of the Guarantor approved by the Lender.
“Consolidated” means consolidated financial calculations of the relevant Person and its Subsidiaries in accordance with GAAP.
“Consolidated Indebtedness” means, with respect to the Guarantor, as at any date, the Indebtedness (without duplication), calculated on a Consolidated basis, as at such date determined in accordance with GAAP.
“Construction Lien Legislation” has the meaning ascribed thereto in Section 10.01(21).
“Contingent Obligation” means, with respect to any Person, any obligation, whether secured or unsecured, of such Person guaranteeing or indemnifying, or in effect guaranteeing or indemnifying, any indebtedness, leases, dividends, letters of credit or other monetary obligations (the “primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including any obligation of such Person as an account party in respect of a letter of credit or letter of guarantee issued to assure payment by the primary obligor of any such primary obligation and any obligations of such Person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds for the purchase or payment of any such primary obligation or to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the obligee under any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) otherwise to assure or hold harmless the obligee under such primary obligation against loss in respect of such primary obligation; provided, however, that the term Contingent Obligation does not include endorsements of instruments for deposit or collection in the ordinary course of business.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlled By”, “Controls” and “Under Common Control With” have meanings correlative thereto.
“Conversion” means a conversion of one type of Loan into another type of Loan pursuant to Section 2.05 or Section 5.06.
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“Conversion Date” means the Business Day specified by the Borrowers in a Conversion Notice as being the date on which the Borrowers have elected to convert one type of Loan into another type of Loan.
“Conversion Notice” means a Notice, substantially in the form set out in Schedule 1.01(C), to be given to the Lender by the Borrowers pursuant to Section 2.05.
“CORRA” means the Canadian Overnight Repo Rate Average administered and published by the Bank of Canada (or any successor administrator).
“Credit Facility” has the meaning set out in Section 2.01.
“Credit Parties” means the Borrowers and the Guarantor, and their respective successors and assigns permitted by this Agreement, and “Credit Party” means any one of them. For the purposes of Article 9, Article 10, Article 11 and Article 13 of this Agreement, reference to “Credit Party” or “Credit Parties” therein shall include each general partner of such Credit Parties, if any.
“Cure Right” has the meaning ascribed thereto pursuant to Section 10.03(6)(a) and 10.03(7)(a), as applicable.
“Daily Compounded CORRA” means, for any day, CORRA with interest accruing on a compounded daily basis, with the methodology and conventions for this rate (which will include compounding in arrears with a lookback) being established by the Lender in accordance with the methodology and conventions for this rate selected or recommended by the Relevant Governmental Body for determining compounded CORRA for business loans; provided that if the Lender decides that any such convention is not administratively feasible for the Lender, then the Lender may establish another convention in its reasonable discretion; and provided that if the administrator has not provided or published CORRA and a Benchmark Transition Event with respect to CORRA has not occurred, then, in respect of any day for which CORRA is required, references to CORRA will be deemed to be references to the last provided or published CORRA
“Debt Service Reserve Account” has the meaning ascribed thereto in Section 10.07(1).
“Debtor Relief Laws” means the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada) and any similar federal, provincial state or foreign law (including all liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization or similar laws of any applicable jurisdictions and affecting the rights of creditors generally) for the relief of debtors.
“Default” means any event or condition, the occurrence of which would, with the lapse of time or giving of notice, or both, becomes an Event of Default.
“discretion” means the discretion of the Lender, acting reasonably.
Disposition” means, with respect to a Person, any sale, assignment, transfer, conveyance, lease, licence or other disposition of any nature or kind whatsoever of any property, asset or of any right, title or interest in or to any property or asset, and the verb “Dispose” has a corresponding meaning.
“Distribution” means (i) any payment, declaration of dividend or other distribution, whether in cash or property to any holder of Equity Interests of any class of any of the Credit Parties, (ii) any repurchase, redemption, retraction or other retirement or purchase for cancellation of Equity Interests of any Credit Party or of any options, warrants or other rights to acquire any of such Equity Interests; (iii) any issuance of Equity Interests of a Credit Party pursuant to a distribution re-investment plan, (iv) the payment by any Credit Party of any royalty, consulting fee, management fee, bonus or other fee to any Credit Party, any Affiliate of any Credit Party or to any director, officer or other management personnel; (iv) making of any payment on account of any fees, principal, interest or otherwise on any subordinated debt (including the Intercompany Indebtedness) to any Affiliates, or (v) making of any payment on account of any fees and re-imbursements relating to any advisory agreements or property management agreements entered into by a Credit Party.
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“Draft” has the meaning set out in Section 5.09(1).
“Drawdown” means:
(e) the advance of a Prime Rate Loan; and/or
(f) the issue of one or more Bankers’ Acceptances.
“Drawdown Date” means the date on which a Drawdown is made by the Borrower pursuant to the provisions hereof.
“Drawdown Notice” means a notice, substantially in the form set out in Schedule 1.01(D), to be given to the Lender by the Borrowers pursuant to Section 2.05.
“Encumbrance” means, with respect to any Person, any mortgage, debenture, pledge, hypothec, lien, charge, lease, sublease, easement, preference, priority, assignment by way of security, hypothecation or security interest granted or permitted by such Person or arising by operation of law, in respect of any of such Person’s property or assets, or any consignment by way of security or Capital Lease Obligations by such Person as consignee or lessee, as the case may be, or any other security agreement, trust or arrangement having the effect of security for the payment of any debt, liability or other obligation, including title reservations, limitations, provisos or conditions, and “Encumbrances”, “Encumbrancer”, “Encumber” and “Encumbered” have corresponding meanings.
“Environmental Law” means any Applicable Law in the jurisdiction where the Secured Property is located relating to the natural environment including those pertaining to:
(g) reporting, licensing, permitting, investigating, remediating and cleaning up in connection with any presence or Release, or the threat of the same, of Hazardous Substances, and
(h) the manufacture, processing, distribution, use, treatment, storage, disposal, transport, handling and the like of Hazardous Substances, including those pertaining to occupational health and safety.
“Equity Interests” means, with respect to any Person, shares of capital stock of (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or other acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or other acquisition from such Person of such shares (or such other interests), and other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized on any date of determination.
“Event of Default” has the meaning set out in Section 11.01.
“Excluded Taxes” means (a) taxes imposed on or measured by its net income, capital gains, or capital, and franchise taxes imposed on it by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of the Lender, in which its applicable Lending Office is located, (b) any branch tax, branch profits tax or any similar tax imposed by any jurisdiction, or (c) any taxes imposed under FATCA.
“Fair Market Value” means, at a specified date, the aggregate amount of the fair market values of all real properties 100% owned or leased by the Guarantor, as tenant, under long term ground leases (directly or indirectly), being determined on a property by property basis based on Adjusted Net Operating Income for the most recently completed Calculation Period for each such property divided by the percentage of the Applicable Market Capitalization Rate plus the total book value of all other real property assets of the Guarantor plus accumulated amortization and depreciation of such other assets, on a Consolidated basis, as shown on the Consolidated financial statements of the Guarantor prepared in accordance with GAAP, such calculations to be satisfactory to the Lender, in its discretion.
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“FATCA” means Sections 1471 through 1474 of the IRC, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), and any current or future regulations or official interpretations thereof.
“Financial Assistance” means, without duplication and with respect to any Person, all loans granted by that Person and guarantees or Contingent Obligations incurred by that Person for the purpose of or having the effect of providing financial assistance to another Person or Persons, including letters of guarantee, letters of credit, legally binding comfort letters or indemnities issued in connection therewith, endorsements of bills of exchange (other than for collection or deposit in the ordinary course of business), obligations to purchase assets regardless of the delivery or non-delivery thereof and obligations to make advances or otherwise provide financial assistance to any other Person.
“Fiscal Quarter” means each successive three-month period of each Credit Party’s and the Secured Property’s Fiscal Year ending on or about March 31, June 30, September 30 and December 31.
“Floor” means zero percent (0%).
“Fiscal Year” means, in respect of each Credit Party and the Secured Property, the twelve month period ending on or about the last day of December in any year.
“GAAP” means those generally accepted accounting principles in the United States of America.
“Government of Canada Rate” means, at any particular date, that rate of interest and referred to as the “benchmark bond yield” (expressed as a percentage rate per annum) published by the Bank of Canada correlating to the Government of Canada bond having a term of five years.
“Governmental Authority” means the government of Canada, the United States or any other nation, or of any political subdivision thereof, whether state, provincial, territorial or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government, including a Minister of the Crown, Superintendent of Financial Institutions or other comparable authority or agency.
“Guarantor” means Strategic Storage Trust VI, Inc., and its successors and assigns permitted by this Agreement.
“Hazardous Substance” means any substance or material that is prohibited, controlled or regulated by any Governmental Authority pursuant to Environmental Laws, including pollutants, contaminants, dangerous goods or substances, toxic or hazardous substances or materials, wastes (including solid non-hazardous wastes and subject wastes), petroleum and its derivatives and by‑products and other hydrocarbons, all as defined in or pursuant to any Environmental Law.
“Hedge Arrangement” means, with respect to any Person, any arrangement or transaction between such Person and any other Person that is a rate swap transaction, basis swap, forward rate transaction, commodity swap, interest rate option, forward foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of such transactions or arrangements) designed to protect or mitigate against risks in interest, currency exchange or commodity price fluctuations.
“IFRS” mean International Financial Reporting Standards for public companies, as adopted by the Canadian Accounting Standards Board, in effect from time to time.
“Impermissible Qualification” means relative to the financial statements (including notes thereto) of any Person or report or opinion of any independent auditor in respect thereof, any qualification or exemption to such financial statements (or notes thereto) or report or opinion thereon which is of a “going concern” or similar nature.
“Indebtedness” of any Person means (without duplication), on a Consolidated basis and in accordance with GAAP:
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(i) any obligation of such Person for money borrowed and any interest thereon, or any financial accommodation (including the amount of any money raised from the sale or securitization of any receipts or receivables) (including, for greater certainty, the full principal amount of convertible debt, notwithstanding its presentation under GAAP),
(j) a transfer with recourse or with an obligation to repurchase, to the extent of the liability of such Person with respect thereto,
(k) any obligation of such Person issued or assumed as the deferred purchase price of property or any obligation under conditional sale or other title retention agreements relating to property acquired by such person,
(l) any Capital Lease Obligation of such Person,
(m) any reimbursement obligation or other obligation in connection with a bankers’ acceptance or any similar instrument, or letter of credit or letter of guarantee issued by or for the account of such Person,
(n) the aggregate amount at which any securities of such Person that are redeemable or retractable at the option of the holder of such shares (except where the holder is such Person) may be redeemed or retracted prior to the Maturity Date for cash or obligations constituting Indebtedness or any combination thereof,
(o) any Contingent Obligations or any Financial Assistance,
(p) Aggregate Hedge Exposure relating to Hedge Arrangements, and
(q) any other obligation arising under arrangements or agreements that, in substance, provide financing to such Person and which, in accordance with GAAP, would be classified upon a balance sheet as a liability (absolute or contingent) of such Person including an obligation to accept or deliver goods or services designed to provide credit support or a take or pay arrangement,
Obligations referred to in clauses (a) through (c) exclude (A) trade accounts payable, (B) distributions payable to holders of securities, (C) accrued liabilities arising in the ordinary course of business which are not overdue or which are being contested in good faith, (D) intangible liabilities and (E) deferred revenues, all of which will be deemed not to be Indebtedness for the purposes of this definition. In calculating the amount of any Indebtedness under (i) any securitization of any receipts or receivables, the amount shall be the discounted amount of proceeds paid in exchange for the receipts or receivables, (ii) any Capital Lease Obligations, the amount shall be the aggregate portion of all rent in the nature of principal, and (iii) any Hedge Arrangements, the amount shall be the net amount owing calculated on a mark to market basis.
“Indemnified Taxes” means Taxes, other than Excluded Taxes.
“Indemnitee” has the meaning set out in Section 16.01(2).
“Independent Appraiser” means a professional real estate appraiser who is a member in good standing of the Appraisal Institute of Canada (and its successors), who is independent of the Borrowers, who is certified and licensed in the jurisdiction of the Secured Property, who has a minimum of five years’ experience in the subject property type and market, and who is approved by the Lender, acting reasonably, provided that each of the parties hereto acknowledges and agrees that Colliers International shall be deemed to be an Independent Appraiser hereunder.
“Independent Insurance Consultant” means InTech Risk Management Inc. or such other insurance consultant appointed by the Lender.
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“Intellectual Property” means any and all intellectual and industrial property, whether recorded or not and regardless of form or method of recording, including all works in which copyright subsists or may subsist (such as computer software), data bases (whether or not protected by copyright), designs, documentation, manuals, specifications, industrial designs, trade secrets, confidential information, ideas, concepts, know-how, trade marks, service marks, trade names, domain names, discoveries, inventions, formulae, recipes, product formulations, processes and processing methods, technology and techniques, improvements and modifications, integrated circuit topographies and mask works.
“Intellectual Property Rights” includes all intellectual and industrial and other proprietary rights in any Intellectual Property.
“Interbank Reference Rate” means the interest rate expressed as a percentage per annum that is customarily used by the Lender when calculating interest due by it or owing to it arising from the correction of errors and other adjustments between the Lender and other Canadian chartered banks.
“Intercompany Indebtedness” means all unsecured, subordinated and postponed indebtedness, liabilities and obligations, of any nature or kind, present or future, direct or indirect, absolute or contingent, whether as primary debtor or surety, matured or not and at any time owing by each Credit Party to each other Credit Party.
“Interest Payment Date” means, with respect to each Prime Rate Loan, the first Business Day of each calendar month.
“Interest Only Period” means the period of time beginning on the Closing Date and ending on January 31, 2024.
“Interest Period” means:
(r) with respect to each Prime Rate Loan, the period commencing on the applicable Drawdown Date or Conversion Date, as the case may be, and ending on the date selected by the Borrowers for the Conversion of such Loan into another type of Loan or for the repayment of such Loan; and
(s) with respect to each Bankers’ Acceptance, the period selected by the Borrowers hereunder, and being of one, two or three months duration, commencing on the Drawdown Date, Rollover Date or Conversion Date of such Loan.
provided that in any case the last day of each Interest Period will be also the first day of the next Interest Period and further provided that the last day of each Interest Period will be a Business Day. If the last day of an Interest Period selected by the Borrowers is not a Business Day the Borrowers will be deemed to have selected an Interest Period the last day of which is the Business Day next following the last day of the Interest Period otherwise selected unless such next following Business Day falls in the next calendar month in which event the Borrowers will be deemed to have selected an Interest Period the last day of which is the Business Day next preceding the last day of the Interest Period otherwise selected and further provided that the last Interest Period hereunder must expire on or prior to the Maturity Date.
“Investment” means any direct or indirect (i) acquisition of any shares, partnership interests, participation interests in any arrangement, options or warrants, or any indebtedness, whether or not evidenced by any bond, debenture or other written evidence of a Person, (ii) an investment (including, without limitation, by way of loan) made or held by a Person, directly or indirectly, in another Person (whether such investment was made by the first-mentioned Person in such other Person or acquired from a third party), (iii) acquisition, by purchase or otherwise, of all or substantially all of the business, assets or stock or other evidence of beneficial ownership of a Person, or (iv) acquisition by purchase or otherwise of any real property and related personal property of a Person. Any binding commitment to make an Investment in any Person or property and assets, as well as any option of another Person to require an Investment in such Person or property and assets, shall constitute an Investment. The amount of any Investment will be the original cost of such Investment, plus the cost of all additions thereto and minus the amount of any portion of such Investment repaid to such Person in cash as a return of capital, but without any other adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. In determining the amount of any
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Investment involving a transfer of any property other than cash, such property will be valued at its fair market value at the time of such transfer.
“IRC” means the Internal Revenue Code of 1986 of the United States of America.
“Leases” means any leases, subleases, agreements to lease, licences or grants of rights of occupation (including storage unit agreements) (other than an easement, servitude or a right in the nature of an easement or servitude) granted, from time to time, by any Person entitling the lessee, sublessee, licensee or grantee thereunder to use or occupy any part of the Secured Property, and “Lease” means any one of them.
“Lender” means National Bank of Canada and such Persons who signs a joinder agreement in a form satisfactory to the Lender agreeing to be bound as “Lender”
“Lender’s Counsel” means the firm of McCarthy Tétrault LLP or such other firm of legal counsel as the Lender may from time to time designate.
“Lending Office” means, with respect to the Lender, the branch or office specified signature pages of this Agreement from which the Lender makes advances and to which the Lender disburses payments received for the benefit of the Lender.
“Loan” means any extension of credit by a Lender under this Agreement, including by way of Bankers’ Acceptance or Prime Rate Loan.
“Loan Documents” means (a) this Agreement, (b) the Security, (c) Qualifying Hedge Arrangements; (d) Qualifying Cash Management Arrangements and (e) all present and future agreements, documents, certificates and instruments delivered by any Credit Party to the Lender pursuant to or in respect of this Agreement or the Security, in each case as the same may from time to time be amended, restated, supplemented and otherwise modified, and “Loan Document” means any one of the Loan Documents.
“Material Adverse Change” means:
(t) with respect to any Credit Party or the Secured Property, any change, event or circumstance having a material adverse effect on the:
(i) business, assets (including the Secured Property), liabilities, operations, results of operations, condition (financial or other); or
(ii) prospects or ability of such Credit Party to carry on its business or a significant part of its business;
which, individually or in the aggregate, would reasonably be expected to result in, or has resulted in, an impairment of the ability of such Credit Party to perform any of its Obligations;
(u) any change, event or circumstance having an adverse effect on the legality, validity or enforceability of any of the Loan Documents which could reasonably be considered material having regard to any Loan Document, including the validity, enforceability, perfection or priority of any Encumbrance created under any of the Security which could reasonably be considered material having regard to the Security considered as a whole;
(v) any change, event or circumstance having a material adverse effect on the ability of any Credit Party, to pay or perform any of its debts, liabilities or obligations under any of the Loan Documents, which could reasonably be considered material having regard to such Credit Party, or
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(w) any change, event or circumstance having an adverse effect on the right, entitlement or ability of the Lender to enforce its rights or remedies under any of the Loan Documents which could reasonably be considered material.
“Material Agreements” means, with respect to a particular Credit Party, the contracts set out in Schedule 1.01(F) and all other contracts to which such Person is a party or by which it is bound or may hereafter become a party or be bound, which are material and which relate to the operation or ownership of the Secured Property (or its business, where such agreement is designated by the Lender, acting reasonably, as a “Material Agreement” provided the Lender has notified the Borrower of such designation), in each case as amended, restated, supplemented and otherwise modified from time to time in accordance with the terms of this Agreement and the other Loan Documents, and “Material Agreement” means any one thereof.
“Material Licences” means all licences, permits or approvals issued by any Governmental Authority, or any applicable stock exchange or securities commission, to any Credit Party, and which are at any time on or after the date of this Agreement,
(x) necessary or material to the business and operations of such Credit Party or to the listing of its securities, or
(y) designated by the Lender, in the sole discretion of the Lender, as a Material Licence, provided that the Lender has notified the Borrower of such designation.
“Maturity Date” means January 31, 2025.
“Modified Total Property Debt Service Coverage Ratio” means the ratio obtained by dividing: (a) the sum of (i) Property Net Operating Income for the most recently completed Calculation Period and (ii) the balance of the Debt Service Reserve Account as of the date of such calculation by (b) implied interest and principal payments due, or which would have been due in the absence of the Interest Only Period, in respect of all debt secured by the Borrowers’ interest in the Secured Property, including without limitation the Loan, payable for the same period, such calculation to be satisfactory to the Lender, such calculations as of the date hereof being shown in the most recent Compliance Certificate delivered pursuant to the provision of Section 3.01(l) and Section 10.03(3) of this Agreement.
“New Borrower” has the meaning set out in Section 10.05(2)(b).
“Nominee” means SST VI 1450 Don Mills Rd, ULC, and its successors and assigns permitted by this Agreement.
“Nominee Agreement” means the nominee agreement in respect of the Secured Property dated January 31, 2023, between the Beneficial Owner and the Nominee.
“Obligations” means all obligations of the Credit Parties to the Lender under or in connection with this Agreement and the other Loan Documents and the Qualifying Hedge Arrangements and the Qualifying Cash Management Arrangements including all debts and liabilities, present or future, direct or indirect, absolute or contingent, matured or not, and obligations of performance, at any time and howsoever arising, owing by the Credit Parties to the Lender in any currency or remaining unpaid by the Credit Parties to the Lender under or in connection with this Agreement, the other Loan Documents, the Qualifying Hedge Arrangements or the Qualifying Cash Management Arrangements or from any other dealings or proceedings by which the Lender may be or become in any manner whatever a creditor or obligee of the Credit Parties pursuant to this Agreement, the other Loan Documents, the Qualifying Hedge Arrangements and the Qualifying Cash Management Arrangements, and wherever incurred, and whether incurred by any Credit Party alone or with another or others and whether as principal or surety, and all principal, interest, Termination Amount, fees, legal and other costs, charges and expenses relating thereto.
“Officer’s Certificate” means a certificate in writing signed by any one of the Chief Executive Officer, the President, the Chief Financial Officer, an Executive Vice-President, a Senior Vice-President, a Vice-President, an Assistant Vice-President, the Treasurer, the Secretary, an Assistant Treasurer or an Assistant Secretary or any other duly authorized
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signing officer of the applicable Credit Party, which certificate shall be to the such person’s knowledge, on behalf of such Credit Party, and not in his or her personal capacity.
“Opinion of Counsel” means an opinion or opinions in writing in form and subject to qualifications satisfactory to the Lender, acting reasonably, signed by Borrowers’ Counsel.
“Organizational Documents” means, with respect to any Person, such Person’s articles, memorandum or other charter documents, partnership agreement, joint venture agreement, declaration of trust, trust agreement, by-laws, unanimous shareholder agreement, or any and all other similar agreements, documents and instruments pursuant to which such Person is constituted, organized or governed.
“Other Taxes” means all present or future stamp or documentary taxes or any other similar excise or property taxes, charges or levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of this Agreement or any other Loan Document, but does not include Excluded Taxes.
“Pension Plan” means (i) a “pension plan” or “plan” which is a “registered pension plan” as defined in the Income Tax Act (Canada) or is subject to the funding requirements of applicable pension benefits legislation in any Canadian jurisdiction and is applicable to employees resident in Canada of a Credit Party, or (ii) any other pension benefit plan or similar arrangement applicable to employees of a Credit Party.
“Permitted Distributions” means:
(z) all cash amounts and dividends paid by any Subsidiary of the Borrowers;
(aa) all cash amounts and dividends paid by the Borrowers to the holders of the Equity Interests of the Borrowers; and
(bb) payments to directors, officers or other management personnel as director, executive or employment compensation, in each case in the normal course of business,
provided that in each case, no Default or Event of Default then exists, and that the making of such Distribution does not cause or will result in a Default or Event of Default.
“Permitted Encumbrances” means, the following (for greater certainty the term “property” includes, without limitation, the Secured Property):
(cc) privileges or liens for Taxes and/or, utilities (including levies or imposts for sewers and other municipal utility services), not yet due or, if due, the validity or amount of which is being contested at the time by the appropriate proceeding in good faith;
(dd) unregistered, undetermined or inchoate construction or mechanic’s liens or legal hypothec, pursuant to the applicable legislation in the Province in which such property is situated incidental to construction of improvements on any property or operation of any property, a claim for which shall not at the time have been registered against the Secured Property and of which notice in writing shall not at the time have been given to any Credit Party pursuant to the applicable builders, construction or mechanic’s lien legislation in the province in which the Secured Property is situated (a “Borrower Lien”) provided that no such Borrower Lien shall have priority at any time, in whole or in part, over the Security and where such notice has been given the applicable Credit Party shall have either: (i) where relevant Construction Lien Legislation permits, deposited with the Lender cash or indemnity bonds in an amount satisfactory to the Lender to secure the payment of such Borrower Lien and any other amounts relating thereto (including, without limitation, security for costs as required under applicable Construction Lien Legislation), and the Lender shall be satisfied, acting reasonably, that Drawdowns may continue to be made and the priority of the Security relating to same shall enjoy priority over any such Borrower Lien, or (ii) posted a payment bond of such amount, or by payment into court of such amount, as is necessary to remove such Borrower Lien;
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(ee) any Encumbrance against any property for any judgment rendered or claim filed against any of the Borrowers which is being contested in good faith, provided that no such Encumbrance may be registered on title to the Secured Property at the time of a Drawdown;
(ff) permits, reservations, covenants, servitudes, watercourse, rights of water, rights of access or user licenses, easements, rights-of-way and rights in the nature of easements (including, without in any way limiting the generality of the foregoing, licenses, easements, rights-of-way and rights in the nature of easements for railways, sidewalks, public ways, sewers, drains, gas and oil pipelines, steam and water mains or electric light and power, or telephone and telegraph conduits, poles, wires and cables) in favour of any Governmental Authority or utility company in connection with the development, servicing, use or operation of a property, so long as same, in the case of the Secured Property, do not materially adversely affect the value or use of the Secured Property for its current use and so long as same have been complied with by the Borrowers in all material respects;
(gg) permits, reservations, restrictions, covenants, servitudes, rights of access or user licenses, easements, rights-of-way and rights in the nature of easements and other similar rights and agreements in favour of any Person which do not in the aggregate materially and adversely affect the value or the use of a property for its current use, so long as same have been complied with by the Borrowers in all material respects, provided, in the case of the Secured Property, any such rights and agreements between any Credit Party and any other Credit Party or Affiliate of any Credit Party must be approved by the Lender in its discretion;
(hh) any encroachments, title defects or irregularities which do not in the aggregate materially and adversely affect the use or value of any property affected thereby for the use of such property as contemplated by the Borrowers, provided that, in the case of the Secured Property, the Lender shall have consented to same, in writing, which consent shall not be unreasonably withheld, conditioned or delayed;
(ii) any matters disclosed by any survey relating to the Secured Property delivered to the Lender (and any errors or omissions in respect of any such survey) provided survey coverage reasonably acceptable to the Lender is included under the title insurance policy delivered to the Lender in respect of the Loans, or where no survey is delivered, any matters which would have been disclosed by an up to date survey of the Secured Property, provided such matters are fully covered by the survey coverage included in such title insurance policy;
(jj) development agreements, subdivision agreements, site plan control agreements, servicing agreements and other similar agreements with any Governmental Authority or utility company in effect as of the Closing Date affecting the development, servicing, use or operation of a property, provided in respect of the Secured Property, so long as same do not materially adversely affect the value or use of the Secured Property as contemplated by the Borrowers, and so long as same have been complied with by the Borrowers in all material respects;
(kk) cost sharing, servicing, reciprocal or other similar agreements in effect as of the Closing Date which are necessary or of advantage to the use and/or operation of such property, provided, in the case of the Secured Property, so long as same do not materially adversely affect the value or use of the Secured Property for its current use and so long as same have been complied with by the Borrowers in all material respects, provided any such rights and agreements between any Credit Party and any other Credit Party or Affiliate must be approved by the Lender, in its discretion;
(ll) municipal zoning, land use and building restrictions, by-laws, regulations and ordinances of federal, provincial, municipal or other Governmental Authority, including municipal by-laws and regulations, airport zoning regulations, restrictive covenants, building schemes and other land use limitations, public or private, by-laws and regulations and other restrictions as to the use of a property, provided in the case of the Secured Property, so long as same do not materially adversely
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affect the value or use of the Secured Property for its current use and so long as same have been complied with by the Borrowers in all material respects provided any such rights and agreements between any Credit Party and any other Credit Party or Affiliate must be approved by the Lender in its discretion;
(mm) Leases of any property, and, in the case of the Secured Property, those existing as at the Drawdown Date and all new Leases and Lease renewals, extensions, modifications, restatements and replacements entered into subsequent to the Closing Date in compliance with the Loan Documents, and any notices, caveats or encumbrances registered in respect of the foregoing;
(nn) Purchase Money Security Interests (as defined below), subject to the limitations set out in Section 10.04(4) below;
(oo) any covenants limiting claims against the Crown or restricting or prohibiting access to or from lands abutting on controlled access highways;
(pp) Encumbrances relating to bona fide debt financing relating to properties other than the Secured Property;
(qq) the Security;
(rr) any Encumbrance described in Schedule 1.01(J) relating to the Secured Property, provided each such Encumbrance at all times qualifies as a Permitted Encumbrance described in paragraphs (a) to (m) of this definition of Permitted Encumbrance;
(ss) any subsisting restrictions, exceptions, reservations, limitations, provisos and conditions (including, without limitation, royalties, reservation of mines, mineral rights and timber rights, access to navigable waters and similar rights) expressed in any original grants from the Crown and any statutory limitations, exceptions, reservations and qualifications to title; and
(tt) such other Encumbrances as are agreed to in writing by the Lender, in its discretion.
“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, limited partnership, Governmental Authority or other entity.
“Prime Rate” means the greater of (i) the variable per annum reference rate of interest announced and adjusted by the Lender from time to time for Canadian Dollar loans in Canada, and (ii) the rate of interest per annum that is equal to the sum of (A) CDOR on the particular day for one-month Bankers’ Acceptances, and (B) 1.00% per annum.
“Prime Rate Loan” means a Loan in or a Conversion into Canadian Dollars made by the Lender to the Borrowers with respect to which the Borrowers has specified that interest is to be calculated by reference to the Prime Rate.
“Prime Rate Margin” means, for any period, the applicable percentage rate per annum applicable to that period as set out below the heading “Prime Rate Margin” in the definition of “Applicable Margin”.
“Principal Payment Date” has the meaning set out in Section 6.01(2) or Section 6.01(3), as applicable.
“Property Manager” means Strategic Storage Property Management VI, LLC, a Delaware limited liability company, or any other manager for the Property approved by the Lender from time to time.
“Property Net Operating Income” means, with respect to the Secured Property, determined for any period on an aggregate basis means, for any period, actual total revenue generated by the Secured Property, (but excluding asset management fees and straight-line rent accruals) during such period less operating expenses incurred for the Secured Property, (for greater certainty excluding depreciation and capital expenditures) for the same period.
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“Purchase Agreement” means the purchase and sale agreement made between NYX Don Mills Storage LP, as seller, Don Mills Storage Inc., as nominee, and SST Acquisitions, LLC, as buyer, dated December 22, 2023, as such agreement may, from time to time, be amended, modified, restated or assigned as permitted hereunder.
“Purchase Money Security Interest” means an Encumbrance created or incurred by the Borrowers securing Indebtedness incurred to finance the acquisition of property (including the cost of installation thereof), provided that (i) such Encumbrance is created substantially simultaneously with the acquisition of such property, (ii) such Encumbrance does not at any time encumber any property other than the property financed by such Indebtedness, (iii) the amount of Indebtedness secured thereby is not increased subsequent to such acquisition, and (iv) the principal amount of Indebtedness secured by any such Encumbrance at no time exceeds 100% of the original purchase price of such property and the cost of installation thereof, and for the purposes of this definition the term “acquisition” includes Capital Lease Obligations.
“Qualifying Cash Management Arrangements” means all agreements entered into by the Borrowers or its Subsidiaries with the Lender from time to time with respect to cash management arrangements which is collaterally secured by the Security, as such agreements are amended, modified, supplemented or replaced from time to time.
“Qualifying Hedge Arrangements” means a Hedge Arrangement that is entered into (except in the case of (g) below) on or after the Closing Date and meets each of the following requirements:
(uu) such Hedge Arrangement is an interest rate swap, interest rate option, forward interest rate transaction, or other transaction related to the hedging of interest rate risk in connection with the Credit Facility;
(vv) the counterparty under such Hedge Arrangement is at all times the Lender and such Hedge Arrangements is contained in and evidenced by an ISDA Master Agreement;
(ww) such Hedge Arrangement is designed to protect the Borrowers against fluctuations in interest rates;
(xx) such Hedge Arrangement has been entered into by the Borrowers bona fide and in good faith in the ordinary course of its business for the purpose of carrying on the same and not for speculative purposes; and
(yy) the aggregate amount of such Qualifying Hedge Arrangements and all other outstanding Qualifying Hedge Arrangements shall not at any time exceed a notional or face amount equal to the Commitment.
“Related Persons” means, with respect to any Person, such Person’s Affiliates and the directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates and “Related Person” means any one of them.
“Release” means any release or discharge of any Hazardous Substance including any discharge, spray, injection, inoculation, abandonment, deposit, spillage, leakage, seepage, pouring, emission, emptying, throwing, dumping, placing, exhausting, escape, leaching, migration, dispersal, dispensing or disposal.
“Relevant Governmental Body” means the Bank of Canada, or a committee officially endorsed or convened by the Bank of Canada, or any successor thereto.
“Relevant Jurisdiction” means, from time to time, with respect to a Person that is granting Security hereunder, any province or territory of Canada or other relevant jurisdiction in which such Person has its chief executive office or chief place of business or has Collateral and, for greater certainty, includes the provinces and jurisdictions set out in Schedule 1.01(G).
“Rents” means all revenues, receipts, income, credits, deposits, profits, royalties, rents, additional rents, recoveries, accounts receivable and other receivables of any kind and nature whatsoever arising from or relating to each of the Secured Property or any part thereof (including all amounts payable to the Beneficial Owner under any Lease).
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“Repayment Notice” means the notice substantially in the form set out in Schedule 1.01(H).
“Requirements of Law” means, with respect to any Person, the Organizational Documents of such Person and any Applicable Law or any determination of a Governmental Authority, in each case applicable to or binding upon such Person or any of its business or property or to which such Person or any of its business or property is subject.
“Rollover” means the acceptance of a Bankers’ Acceptance in like face amount upon the maturity of a Bankers’ Acceptance for an additional Interest Period.
“Rollover Date” means the date of commencement of a new Interest Period applicable to a Bankers’ Acceptance that is being rolled over.
“Rollover Notice” means the notice, substantially in the form set out in Schedule 1.01(I), to be given to the Lender by the Borrowers in connection with the Rollover of a Bankers’ Acceptance.
“Sanctioned Person” has the meaning set out in Section 9.01(37)(b).
“Sanctions” has the meaning set out in Section 9.01(37)(b).
“Secured Property” means the real property described on Schedule 1.01(E) and the undertaking and personal property relating thereto which are security for the Obligations of the Borrowers hereunder and the property subject to the Security, on terms satisfactory to the Lender and the Lender; and includes the lands, premises, buildings, improvements, structures, lease rights and rights of superficies and personal property and appurtenant rights relating thereto owned or leased by the Borrowers from time to time.
“Security” means the documents creating an Encumbrance in favour of, or any collateral held from time to time by, the Lender or on behalf of the Lender by the Lender, in each case securing or intended to secure repayment of the Obligations, including all security described in Article 8.
“Sellers Leases” has the meaning set out in Section 9.01(36)(b).
“Shareholders Equity” means, with respect to any Person, at any time, the shareholders’ equity, as shown on the most recent Consolidated balance sheet of the Borrowers, calculated in accordance with GAAP.
“Shares” means common shares of the Borrowers issued and outstanding from time to time.
“SmartStop REIT” means SmartStop Self Storage REIT, Inc., a Maryland corporation.
“SmartStop Transaction” has the meaning set out in Section 10.05.
“Subsidiary” means, at any time, with respect to any Person, any other Person, if at such time the first mentioned Person (i) owns, directly or indirectly, securities or other ownership interests in such other Person, having ordinary voting power to elect a majority of the board of directors or persons performing similar functions for such other Person, and (ii) directly or indirectly, through the operation of any agreement or otherwise, the ability to elect or cause the election of a majority of the board of directors or other persons performing similar functions for such other Person or otherwise exercise Control over the management and policies of such other Person, and in either case will include any other Person in like relationship to a Subsidiary of such first mentioned Person.
“Tangible Net Worth” shall mean, as of any date of calculation, with respect to any Person, total assets (without deduction for accumulated depreciation and accumulated amortization of lease intangibles, including accumulated depreciation and accumulated amortization of lease intangibles of non-wholly owned Subsidiaries, Affiliates and other Persons (other than a Person whose stock is traded on a national trading exchange) in whom such Person holds a voting equity or ownership interest) less (i) intangible assets and (ii) all liabilities (including contingent and indirect liabilities), in each case, of such Person as of such date, all determined in accordance with GAAP, unless otherwise indicated in this definition. The term “intangible assets” shall include, without limitation, (x) deferred charges, and
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(y) the aggregate of all amounts appearing on the assets side of any such balance sheet for franchises, licenses, permits, patents, patent applications, copyrights, trademarks, trade names, goodwill, treasury stock, experimental or organizational expenses and other like intangibles (other than amounts related to the purchase price of a real property which are allocated to lease intangibles). The term “liabilities” shall include, without limitation, (i) Indebtedness secured by Encumbrances on property or assets of the Person with respect to which Tangible Net Worth is being computed whether or not such Person is liable for the payment thereof, (ii) deferred liabilities, and (iii) Capital Lease Obligations. Tangible Net Worth shall be calculated on a consolidated basis in accordance with GAAP, unless otherwise indicated in this definition, such calculations as of the date hereof being shown in the most recent Compliance Certificate delivered pursuant to the provision of Section 3.01(l) and Section 10.03(3) of this Agreement.
“Tax” and “Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto, and including any realty taxes, duties, rates, imposts, levies, assessments and other similar charges, whether general or special, ordinary or extraordinary, or foreseen or unforeseen including municipal taxes, school taxes and local improvement charges and all related interest, penalties and fines which at any time may be levied, assessed, imposed or form an Encumbrances upon real property.
“Term CORRA Notice” means the notification by the Lender to the Borrower of the occurrence of a Term CORRA Transition Event.
“Term CORRA Transition Date” means, in the case of a Term CORRA Transition Event, the date that is set forth in the Term CORRA Notice provided to the Borrower, for the replacement of the then-current Benchmark with the Benchmark Replacement described in clause 1(a) of the definition of “Benchmark Replacement”, which date shall be at least thirty (30) Business Days from the date of the Term CORRA Notice.
“Term CORRA Transition Event” means the determination by the Lender that (a) Term CORRA has been recommended for use by the Relevant Governmental Body, and is determinable for any Available Tenor, (b) the administration of Term CORRA is administratively feasible for the Lender and (c) a Benchmark Replacement, other than Term CORRA, has replaced CDOR in accordance with Section 2.09(1).
“Termination Amount” means, with respect to any Qualifying Hedge Arrangement all amounts due to a Lender party to a Qualifying Hedge Arrangement under the relevant ISDA Master Agreement related thereto as a result of a Termination Event.
“Termination Event” means any event that causes a Qualifying Hedge Arrangement to terminate prior to its maturity date.
“Total Debt to Assets Ratio” means the ratio of Consolidated Indebtedness of the Guarantor (determined on a Consolidated basis) to Fair Market Value, such calculation to be satisfactory to the Lender, such calculations as of the date hereof being shown in the most recent Compliance Certificate delivered pursuant to the provision of Section 3.01(l) and Section 10.03(3) of this Agreement.
“Total Property Debt Service Coverage Ratio” means the ratio obtained by dividing: (a) Property Net Operating Income for the most recently completed Calculation Period by (b) scheduled interest and principal payments due in respect of all debt secured by the Borrowers’ interest in the Secured Property, including without limitation the Loan, payable for the same period, such calculation to be satisfactory to the Lender, such calculations as of the date hereof being shown in the most recent Compliance Certificate delivered pursuant to the provision of Section 3.01(l) and Section 10.03(3) of this Agreement.
1.02 Extended Meanings and References
In this Agreement words importing the singular number include the plural and vice versa, words importing any gender include all genders and words importing persons include individuals, corporations, limited and unlimited liability companies, general and limited partnerships, associations, trusts, unincorporated organizations, joint ventures and Governmental Authorities. The term “including” means “including without limiting the generality
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of the foregoing” and the term “third party” means any person other than a person who is a party to this Agreement and any of its Affiliates. The term "References to any document, instrument or agreement (a) shall include all exhibits, schedules and other attachments thereto, (b) shall include all documents, instruments or agreements issued or executed in replacement thereof, and (c) shall mean such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented from time to time in accordance with the terms of this Agreement and in effect at any given time. Any reference to any Person shall include its successors and permitted assigns in the capacity indicated, and in the case of any Governmental Authority, any Person succeeding to its functions and capacities. Any reference to Requirements of Law and Applicable Laws shall include all references to such Requirements of Law and Applicable Laws as amended, supplemented or replaced. The Loan Documents are the result of negotiations between, and have been reviewed by each Credit Party, the Lender and their respective counsel. Accordingly, the Loan Documents shall be deemed to be the product of all parties thereto, and no ambiguity shall be construed in favour of or against any Credit Party, the Lender except as expressly provided under the Loan Documents. Upon an acceleration of the Loans following the occurrence of an Event of Default pursuant to Section 11.02, any reference in this Agreement or any Loan Document to an Event of Default that has occurred and is “continuing” shall be deemed to be an Event of Default that has occurred and is continuing for all times thereafter unless otherwise agreed in writing by the Lender in its discretion; and the terms “continued”, “continuation” and “discontinuation” shall have corresponding meanings.
1.03 Knowledge
Where this Agreement references “to the knowledge of”: (a) the Credit Parties, and/or (b) the Borrowers, in each case, shall mean the actual knowledge of each of H. Michael Schwartz and Matt Lopez, after due inquiry and all reasonable investigation.
1.04 Accounting Principles
(1) Where the character or amount of any asset or liability or item of revenue or expense is required to be determined, or any consolidation or other accounting computation is required to be made, for the purpose of this Agreement or any Loan Document, such determination or calculation will, to the extent applicable and except as otherwise specified herein or as otherwise agreed in writing by the parties, be made in accordance with GAAP applied on a consistent basis.
(2) Each of the parties hereto acknowledges that the financial covenants and financial ratios contained in this Agreement have been established and agreed upon on the basis of the current accounting policies, practises and calculation methods or components thereof adopted by the Credit Parties on a Consolidated basis and made on a basis consistent with GAAP, and as reflected in the audited consolidated financial statements of the Guarantor as at December 31, 2021. If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in this Agreement, and the Credit Party(s) or the Lender shall so require, the Lender and the Borrowers shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP; provided that, until so amended, (a) such ratio or replacement shall continue to be computed in accordance with GAAP prior to such change therein, and (b) the Borrowers shall provide to the Lender financial statements and other documents required under this Agreement setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.
1.05 Interest Calculations and Payments
(1) All interest payments to be made under this Agreement will be paid without allowance or deduction for deemed re-investment or otherwise, both before and after maturity and before and after default and/or judgment, if any, until payment of the amount on which such interest is accruing, and interest will accrue on overdue interest, if any.
(2) Unless otherwise stated, wherever in this Agreement reference is made to a rate of interest or rate of fees “per annum” or a similar expression is used, such interest or fees will be calculated on the basis of a calendar year of 365 days or 366 days, as the case may be, and using the nominal rate method of calculation, and will not be
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calculated using the effective rate method of calculation or on any other basis that gives effect to the principle of deemed re-investment of interest.
(3) For the purposes of the Interest Act (Canada) and disclosure under such act, whenever interest to be paid under this Agreement is to be calculated on the basis of a year of 365 days or 366 days or any other period of time that is less than a calendar year, the yearly rate of interest to which the rate determined pursuant to such calculation is equivalent is the rate so determined multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by either 365, 366 or such other period of time, as the case may be.
(4) Notwithstanding anything herein to the contrary, the Lender shall calculate all fees and interest according to the terms of this Agreement and any other agreement entered into between the Borrowers and the Lender in connection with the Credit Facility. For greater certainty all such calculations shall be without duplication of any day such that neither interest nor fees shall be calculated in respect of the same day twice.
(5) Notwithstanding any other provisions of this Agreement or the Loan Documents, if the amount of any interest, premium, fees or other monies or any rate of interest stipulated for, taken, reserved or extracted under any Loan Document would otherwise contravene the provisions of section 347 of the Criminal Code (Canada), section 8 of the Interest Act (Canada) or any successor or similar legislation, or would exceed the amounts which the Lender is legally entitled to charge and receive under any law to which such compensation is subject, then such amount or rate of interest shall be reduced to such maximum amount as would not contravene such provision; and to the extent that any excess has been charged or received the Lender shall determine the amount of any such excess and apply such excess against the Obligations and refund any further excess amount.
1.06 Permitted Encumbrances
The inclusion of reference to Permitted Encumbrances in any Loan Document is not intended to, de facto, subordinate any Encumbrance created by any of the Security to any Permitted Encumbrance.
1.07 Currency
Unless otherwise specified in this Agreement, all references to currency (without further description) are to lawful money of Canada.
1.08 Entire Agreement and Conflicts
This Agreement and the other Loan Documents constitute the whole and entire agreement between the Credit Parties and the Lender and cancels and supersedes any prior agreements, undertakings, declarations, commitments, representations, written or oral, in respect thereof. In the event of a conflict between the provisions of this Agreement and the provisions of any other Loan Document, then, unless such Loan Document or an acknowledgement from the Credit Party and the Lender relative to such Loan Document expressly states that this Section 1.08 is not applicable to such Loan Document, notwithstanding anything else contained in such other Loan Document, the provisions of this Agreement will prevail and the provisions of such other Loan Document will be deemed to be amended to the extent necessary to eliminate such conflict.
1.09 Severability
If any provision of this Agreement is determined by any court of competent jurisdiction to be illegal or unenforceable, that provision will be severed from this Agreement and the remaining provisions will continue in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any of the parties
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1.10 Further Assurances
Each Credit Party will promptly cure any Default by it in the execution and delivery of this Agreement, the Loan Documents or of any of the agreements provided for hereunder to which it is a party. Each Credit Party, at its expense, will promptly execute and deliver to the Lender, upon request by the Lender, all such other and further documents, agreements, opinions, certificates and instruments in compliance with, or for the accomplishment of the covenants and agreements of such Credit Party hereunder or more fully to state the obligations of such Credit Party as set forth herein or to make any recording, file any notice or obtain any consent, all as may be reasonably necessary or appropriate in connection therewith.
1.11 Schedules
| Schedule 1.01(B) | - | Compliance Certificate |
|---|---|---|
| Schedule 1.01(C) | - | Conversion Notice |
| Schedule 1.01(D) | - | Drawdown Notice |
| Schedule 1.01(E) | - | Secured Property |
| Schedule 1.01(F) | - | Material Agreements |
| Schedule 1.01(G) | - | Relevant Jurisdictions |
| Schedule 1.01(H) | - | Repayment Notice |
| Schedule 1.01(I) | - | Rollover Notice |
| Schedule 1.01(J) | - | Specific Permitted Encumbrances |
| Schedule 9.01(14) | - | Ownership Structure |
Article 2 – THE CREDIT FACILITY
2.01 Credit Facility
Subject to the terms and conditions of this Agreement, the Lender hereby establishes in favour of the Borrowers a non-revolving senior secured term credit facility in the maximum principal amount of the Commitment or such lesser amount pursuant to this Agreement, which facility will be made available only during the Availability Period (the “Credit Facility”).
2.02 Purpose of Credit Facility
Loans under the Credit Facility will only be used to assist in completing the Acquisition and to pay fees and transaction expenses relating to the Acquisition and following the completion of the Acquisition, for operating expenditures relating to the Secured Property. The Borrowers may not use the proceeds of any Loans under the Credit Facility to make a hostile take-over bid for any other Person.
2.03 Manner of Borrowing
The Borrowers may, during the Availability Period, in Canadian Dollars, make a single Drawdown, and thereafter Conversions and Rollovers under the Credit Facility of Prime Rate Loans and Bankers’ Acceptances.
2.04 Non-Revolving Nature of Credit Facility
The Credit Facility is non-revolving and amounts repaid may not be re-borrowed.
2.05 Drawdowns, Conversions and Rollovers
(1) Subject to the provisions of this Agreement, the Borrowers may, in Canadian Dollars, make a single Drawdown on the Closing Date, and there after, Conversions and Rollovers of Prime Rate Loans and Bankers’ Acceptances.
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(2) The Borrowers must give the Lender a Drawdown Notice, Conversion Notice or Rollover Notice, as the case may be, at the times and stipulating the information specified below:
(a) for a Prime Rate Loan, before 10:00 am (Toronto Time) on the Business Day before the Drawdown Date or Conversion Date, as the case may be; and
(b) for a Bankers’ Acceptance, before 10:00 am (Toronto time) on the second Business Day before the Drawdown Date, Conversion Date or Rollover Date, as the case may be.
If the Borrowers fail to deliver a Conversion Notice or Rollover Notice to the Lender as set out above in respect of Bankers’ Acceptance prior to such Loan’s applicable maturity date, the Lender shall effect a Conversion of any maturing Bankers’ Acceptance into a Prime Rate Loan. The Borrower’s right to make a Drawdown under the Credit Facility shall be subject to the satisfaction of the conditions in Section 3.01. A Drawdown Date, Conversion Date and Rollover Date must be a Business Day and each Drawdown Notice, Conversion Notice or Rollover Notice, as the case may be, must be delivered to the Lender on a Business Day.
(3) Each Drawdown, Conversion or Rollover must:
(a) in the case of Prime Rate Loans, be in a minimum principal amount of Cdn. $500,000 and increments of Cdn. $100,000; and
(b) in the case of Bankers’ Acceptances, be in a minimum face amount of Cdn. $1,000,000 and increments of Cdn. $100,000.
2.06 Lender’s Obligations with Respect to Loans
The proceeds of the Drawdown shall, subject to Article 3, be advanced by the Lender to the Beneficial Owner by bank transfer to the credit of the account designated in the Drawdown Notice for the Drawdown.
2.07 Irrevocability
Each Drawdown Notice, Conversion Notice and Rollover Notice given by the Borrowers hereunder is irrevocable and will oblige the Borrowers to take the action contemplated on the date specified therein.
2.08 Market Disruption
If the Lender determines that a market for Bankers’ Acceptances does not exist at any time or the Lender cannot for other reasons, after reasonable commercial efforts, readily sell Bankers’ Acceptances or perform its other obligations under this Agreement with respect to Bankers’ Acceptances, the Lender will promptly so notify the Borrowers (such notification, a “BA Market Disruption Notice”). From and after the receipt of the BA Market Disruption Notice by the Borrowers from the Lender, the Lender shall not be obliged to accept, and the Borrower shall not be entitled to issue, Bankers’ Acceptances until the Lender determines in good faith that such market (or a comparable or replacement market, including to the extent instruments or loans equivalent to Bankers’ Acceptances are issued at a rate other than the BA Equivalent Rate) does exist and gives notice thereof to the Borrowers (such notification, a “BA Resumption Notice”). Following issuance of a BA Market Disruption Notice and until issuance of a BA Resumption Notice any Drawdown Notice, Conversion Notice or Rollover Notice requesting Bankers’ Acceptances shall be deemed to be a Drawdown Notice, Conversion Notice or Rollover Notice, as applicable, requesting Prime Loans in a similar aggregate principal amount.
2.09 Benchmark Replacement Setting
Notwithstanding anything to the contrary herein or in any other Loan Document (and any Qualifying Hedge Arrangements shall be deemed not to be a “Loan Document” for purposes of this Section 2.09):
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(1) Replacing CDOR Rate. On May 16, 2022 Refinitiv Benchmark Services (UK) Limited (“RBSL”), the administrator of CDOR, announced in a public statement that the calculation and publication of all tenors of CDOR will permanently cease immediately following a final publication on Friday, June 28, 2024. On the date that all Available Tenors of CDOR have either permanently or indefinitely ceased to be provided by RBSL (the “CDOR Cessation Date”), if the then-current Benchmark is CDOR, the Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in respect of any setting of such Benchmark on such day and all subsequent settings without any amendment to, or further action or consent of any other party to this Agreement or any other Loan Document. If the Benchmark Replacement is Daily Compounded CORRA, all interest payments will be payable on a monthly basis.
(2) Replacing Future Benchmarks. Upon the occurrence of a Benchmark Transition Event, the Benchmark Replacement will replace the then-current Benchmark for all purposes hereunder and under any Loan Document in respect of any Benchmark setting at or after 5:00 p.m. (Toronto time) on the fifth (5th) Business Day after the date notice of such Benchmark Replacement is provided to the Lender without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document. At any time that the administrator of the then-current Benchmark has permanently or indefinitely ceased to provide such Benchmark or such Benchmark has been announced by the administrator or the regulatory supervisor for the administrator of such Benchmark pursuant to public statement or publication of information to be no longer representative of the underlying market and economic reality that such Benchmark is intended to measure and that representativeness will not be restored, the Borrower may revoke any request for a Loan to be made, converted or continued that would bear interest by reference to such Benchmark until the Borrower’s receipt of notice from the Lender that a Benchmark Replacement has replaced such Benchmark, and, failing that, the Borrower will be deemed to have converted any such request into a request for a Prime Rate Loan. During the period referenced in the foregoing sentence, the component of the Prime Rate Loan based upon the Benchmark will not be used in any determination of the Prime Rate.
(3) Benchmark Replacement Conforming Changes. In connection with the implementation and administration of a Benchmark Replacement, the Lender will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement.
(4) Notices; Standards for Decisions and Determinations. The Lender will promptly notify the Borrower of (i) the implementation of any Benchmark Replacement, (ii) any occurrence of a Term CORRA Transition Event, (iii) the effectiveness of any Benchmark Replacement Conforming Changes, and (iv) by delivering a BA Cessation Notice pursuant to Section 2.09(7), its intention to terminate the obligation to make or maintain Bankers’ Acceptances. Any determination, decision or election that may be made by the Lender pursuant to this Section, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section.
(5) Unavailability of Tenor of Benchmark. At any time (including in connection with the implementation of a Benchmark Replacement), if the then-current Benchmark is a term rate (including Term CORRA or CDOR), then (i) the Lender may remove any tenor of such Benchmark that is unavailable or non-representative for Benchmark (including Benchmark Replacement) settings, and (ii) the Lender may reinstate any such previously removed tenor for Benchmark (including Benchmark Replacement) settings.
(6) Secondary Term CORRA Conversion. Notwithstanding anything to the contrary herein or in any Loan Document and subject to the proviso below in this clause, if a Term CORRA Transition Event and its related Term CORRA Transition Date have occurred, then on and after such Term CORRA Transition Date (i) the Benchmark Replacement described in clause (1)(a) of the definition of “Benchmark Replacement” will replace the then-current Benchmark for all purposes hereunder or under any Loan Document in respect of any setting of such Benchmark on such day and all subsequent settings, without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document; and (ii) each Loan outstanding on the Term CORRA Transition Date bearing interest based on the then-current Benchmark shall convert, at the start of the next interest payment period, into a Loan bearing interest at the Benchmark Replacement described in clause (1)(a) of the definition of “Benchmark
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Replacement” having a tenor approximately the same length as the interest payment period applicable to such Loan immediately prior to the conversion or such other Available Tenor as may be selected by the Borrower and agreed by the Lender; provided that, this Section 2.09(6) shall not be effective unless the Lender has delivered to the Borrower a Term CORRA Notice and so long as the Lender has not received, by 5.00 p.m. (Toronto time) on the fifth (5th) Business Day after the date of the Term CORRA Notice, written notice of objection to such conversion to Term CORRA from the Borrower.
(7) B/A Borrowings. The Lender shall have the option to, effective as of the date set out in the BA Cessation Notice, which shall be a date on or after the CDOR Cessation Date (the “BA Cessation Effective Date”), terminate its obligation to make or maintain Bankers’ Acceptances, provided that the Lender shall give notice to the Borrower at least thirty (30) Business Days prior to the BA Cessation Effective Date (“BA Cessation Notice”). If the BA Cessation Notice is provided, then as of the BA Cessation Effective Date, so long as the Lender has not received, by 5:00 p.m. (Toronto time) on the fifth (5th) Business Day after the date of the BA Cessation Notice (i) any Conversion Notice or Rollover Notice that requests the conversion of any Loan to, or rollover of any Loans as, a Bankers’ Acceptance shall be ineffective, and (ii) if any Drawdown Notice requests a Bankers’ Acceptance, such Loan shall be made as a Prime Rate Loan. For the avoidance of doubt, any outstanding Bankers’ Acceptances shall remain in effect following the CDOR Cessation Date until the stated maturity date of such Bankers’ Acceptance.
Article 3 – DRAWDOWN CONDITIONS
3.01 Conditions Precedent to Drawdown under the Credit Facility
The obligation of the Lender under this Agreement to make the advance hereunder is subject to and conditional upon the prior satisfaction of the conditions precedent as set out below:
(a) the Lender will have received a Drawdown Notice by the time required under Section 2.05;
(b) the representations and warranties deemed to be repeated pursuant to Section 9.02 will continue to be true and correct as if made on and as of the Drawdown Date;
(c) no Default or Event of Default will have occurred and be continuing on the Drawdown Date, or would result from making the requested advance;
(d) a Material Adverse Change will not have occurred and be existing;
(e) the Lender shall have completed such investigations with respect to the Credit Parties, the Acquisition and the Secured Property as it determines to be appropriate (including, without limitation, review of existing operations, historical financial statements, reasonableness of financial projections, environmental matters, tax matters, confirmation as to no material litigation, market and industry analysis, state of repair of the Secured Property, evidence of compliance with legal and regulatory matters), each acting reasonably, and shall have received all financial, corporate and other information requested by the Lender and shall be satisfied, in its discretion, with the results of such investigations, including, without limitation, a review of:
(i) the Purchase Agreement and all schedules thereto, and principal documents referred to therein, as requested by the Lender;
(ii) annual final financial statements of the Guarantor for its 2021 Fiscal Year, if applicable, reviewed by an independent certified public accountant acceptable to the Lender;
(iii) schedule outlining annual current and projected future occupancy rates, revenue, expenses and net operating income for the Secured Property for 2022, 2023 and 2024;
(iv) if requested by the Lender, a site inspection of the Secured Property;
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(v) all Material Agreements, Material Licences and Permitted Encumbrances;
(vi) all legal, tax, accounting and regulatory matters (including without limitation the organizational and legal structure of the Acquisition (including, without limitation, tax structuring and a “steps memorandum”, if any), the Secured Property and the Credit Parties;
(vii) the Beneficial Owner’s standard form Lease;
(viii) a list of all material litigation relating to the Credit Parties and their respective Subsidiaries and such information relating thereto as requested by the Lender; and
(ix) the Debt Service Reserve Account has been established and funded in the amount of $4,000,000,
and the results of such due diligence will be satisfactory to the Lender, in its discretion;
(f) an Acceptable Appraisal for the Secured Property, together with reliance letters permitting the Lender to rely on same, each of which are to be satisfactory to the Lender, acting reasonably, will have been delivered to the Lender;
(g) a Phase 1 environmental audit, and to the extent recommended by such Phase 1 environmental audit, a Phase 2 environmental audit, with respect to the Secured Property, together with reliance letters permitting the Lender to rely on same, each of which are to be satisfactory to the Lender, acting reasonably, will have been delivered to the Lender;
(h) building condition report with respect to the Secured Property together with a letter permitting the Lender to rely on such report, each of which are to be satisfactory to the Lender, acting reasonably, will have been delivered to the Lender;
(i) the Lender shall have received evidence satisfactory to the Lender and the Independent Insurance Consultant that the Borrowers’ insurance with respect to the Secured Property is satisfactory and complies with this Agreement, together with a report from Independent Insurance Consultant addressed to the Lender and the certificates of insurance showing the Lender as a loss payee and additional insured as its interest may appear on all insurance policies that insure the assets to be secured by the Loan Documents;
(j) the Lender shall have received a survey with respect to the Secured Property prepared by an accredited land surveyor (or where title insurance will be obtained, survey coverage to the satisfaction of the Lender, acting reasonably), such survey to be satisfactory to the Lender, acting reasonably;
(k) the Lender shall have received evidence confirming that the Secured Property has all necessary development and zoning approvals (or where title insurance will be obtained, zoning coverage to the satisfaction of the Lender, acting reasonably) and is in compliance, in all materials respects, with all Applicable Laws;
(l) Compliance Certificates (based on pro forma calculations), together with evidence of compliance with the financial covenants set out in Section 10.02;
(m) except as otherwise agreed by the Lender in writing, the Lender will have received certified copies of all shareholder, regulatory, governmental, third party and other approvals, if any, required in order for the Credit Parties to enter into this Agreement and the other Loan Documents and to perform their obligations hereunder and thereunder;
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(n) duly executed copies of the Loan Documents will have been delivered to the Lender and all such Security will have been duly registered, filed and recorded in all Relevant Jurisdictions where required by Applicable Law;
(o) releases, discharges and postponements that are required with respect to all Encumbrances affecting the Collateral that are not Permitted Encumbrances (including, as applicable, repayment of existing Indebtedness relating to the Secured Property), if any, or a solicitors’ undertaking to discharge such Encumbrance in accordance with the applicable guidelines of the Law Society governing the Lender’s counsel, will have been delivered to the Lender and in a form acceptable to the Lender, acting reasonably;
(p) the Lender will have received certified copies of the Organizational Documents or applicable extracts thereof of each Credit Party, the resolutions authorizing the execution and delivery of, and performance of each Credit Party’s respective obligations under, the Loan Documents and the transactions contemplated herein, and a certificate as to the incumbency of the officers of the Credit Parties executing the Loan Documents and any other documents to be provided pursuant to the provisions hereof;
(q) except as otherwise agreed by the Lender, certificates of status or comparable certificates for all Relevant Jurisdictions of each Credit Party will have been delivered to the Lender;
(r) if requested by the Lender, the Lender will have received a solvency certificate from each applicable Credit Party which is located in a Relevant Jurisdiction where Applicable Laws limit the ability of such Credit Party to provide Financial Assistance, such certificate to be in a form satisfactory to the Lender;
(s) a currently dated Opinion of Counsel as to such matters and in such form as Lender’s Counsel deems appropriate, acting reasonably, addressed to the Lender and to Lender’s Counsel will have been delivered to the Lender, including, without limitation, enforceability, creation and perfection of security interest, and non-contravention of the Organizational Documents and Applicable Laws;
(t) currently dated letters of opinion of local counsel for the Credit Parties as to such matters and in such form as Lender’s Counsel deems appropriate, in its discretion, addressed to the Lender and to Lender’s Counsel will have been delivered to the Lender, including, without limitation, enforceability, creation and perfection of security interest, and non-contravention of Organizational Documents and Applicable Laws;
(u) a title insurance policy in form, and containing endorsements and first priority of the Security for the Secured Property, satisfactory to the Lender, acting reasonably, issued by an insurer acceptable to the Lender, acting reasonably;
(v) the Lender shall have received evidence confirming that realty taxes levied against the Secured Property are current (or where title insurance will be obtained, realty tax coverage to the satisfaction of the Lender, acting reasonably);
(w) the Lender will have received on its own behalf payment of all fees and expenses payable to the Lender pursuant to this Agreement that are due and payable at such time;
(x) the Lender shall have received and be satisfied, in its discretion, with evidence confirming the current debt maintained on the Guarantor’s balance sheet including a breakdown of applicable lenders, principal amount, type of debt and maturity dates;
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(y) the Lender shall have received and be satisfied, in its discretion, with evidence confirming the properties currently owned by the Guarantor and their current and projected net operating income;
(z) all other terms and conditions of this Agreement and the other Loan Documents upon which the Borrowers may obtain a Loan that have not been waived will have been fulfilled;
(aa) the Borrowers shall have provided all documentation and other information to the Lender and the Lender required by any applicable “know your customer” or “know your client” requirements and anti-money laundering and anti-terrorism laws, rules and regulations;
(bb) confirmation or evidence satisfactory to the Lender that the Secured Property is not subject to any purchase or option rights to any Person;
(cc) evidence that the Borrowers have sufficient funds on hand, together with the proceeds available under the Credit Facility, to close the Acquisition, in accordance with the “sources and uses” information provided to the Lender or as otherwise approved by all of the Lender;
(dd) the Borrowers shall have successfully completed the Acquisition in accordance with the transactions described in the Purchase Agreement (and further that the Purchase Agreement shall not have been amended, nor shall any approval or waiver have been made by the Borrower, of any terms or conditions therein without the consent of the Lender, not to be unreasonably withheld);
(ee) the Lender shall be satisfied, in its discretion, that no Material Adverse Change then exists, or would exist upon the closing of the Acquisition; and
(ff) such other matters as the Lender determines, in its discretion, to be necessary to first advance the Loan,
provided that all documents delivered pursuant to this Section 3.01 must be in full force and effect, and in form and substance satisfactory to the Lender, acting reasonably.
3.02 Waiver
The conditions set forth in Section 3.01 are inserted for the sole benefit of the Lender and may be waived by the Lender, in whole or in part (with or without terms or conditions), in respect of any Drawdown without prejudicing the right of the Lender at any time to assert such conditions in respect of any subsequent Drawdown.
Article 4 – PAYMENTS OF INTEREST AND FEES
4.01 Interest on Prime Rate Loans
The Borrowers will pay interest on each Prime Rate Loan during each Interest Period applicable thereto in Canadian Dollars at a rate per annum equal to the sum of (i) the Prime Rate in effect from time to time during such Interest Period, plus (ii) the Prime Rate Margin. Each determination by the Lender of the Prime Rate and the Prime Rate Margin applicable from time to time during an Interest Period will, in the absence of manifest error, be binding upon the Borrowers. Such interest will be payable in arrears on each Interest Payment Date for such Loan for the period from and including the Drawdown Date, Conversion Date or preceding Interest Payment Date, as the case may be, for such Loan to but excluding such Interest Payment Date (or, if such Interest Payment Date follows the repayment of such Loan or the Conversion of such Loan, to but excluding the date of such repayment or Conversion) and will be calculated on the principal amount of the Prime Rate Loan outstanding during such period and on the basis of the actual number of days elapsed in a year of 365 days or 366 days, as the case may be. Changes in the Prime Rate will cause an immediate adjustment of the interest rate applicable to such Loan without the necessity of any notice to the Borrowers.
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4.02 Upfront Fee
In consideration of the Lender providing the Credit Facility, the Borrowers shall pay to the Lender, for the account of the Lender an upfront fee equal to $50,000, with such fee being payable and fully earned on the first date of the first Drawdown hereunder.
4.03 Default Interest
Unless the payment of interest is otherwise specifically provided for herein, where the Credit Parties fail to pay any amount required to be paid by them hereunder when due having received notice that such amount is due, the Credit Parties shall pay interest or fees on such unpaid amount from the time such amount is due until paid at the rates otherwise applicable plus 2% per annum in order to compensate the Lender for the additional risk.
4.04 Interest Only Period
The Lender acknowledges that the Borrower shall only be required to make monthly interest only payments, beginning on first day of the month following closing and continuing on the first day of each successive month during the Interest Only Period.
Article 5 – BANKERS’ ACCEPTANCES
5.01 Bankers’ Acceptances
All Bankers’ Acceptances hereunder shall be issued in accordance with the provisions of this Article 5.
5.02 General Mechanics
(1) At no time will there be Bankers’ Acceptances outstanding with more than five (5) different maturity dates.
(2) The term of a Bankers’ Acceptance shall be selected by the Borrowers and may be one, two, or three months in duration provided that the term of a Bankers’ Acceptance shall not, in any event, exceed either (i) Maturity Date or (ii) the next scheduled Principal Payment Date.
5.03 Purchase of Bankers’ Acceptances
The Lender shall purchase each Bankers’ Acceptance accepted by it for a price equal to the face amount thereof less the discount to the face amount thereof required to yield an interest rate per annum equal to the BA Discount Rate in effect on the applicable Drawdown Date, Rollover Date or Conversion Date. The Lender may at any time and from time to time hold, rediscount or Dispose of any Bankers’ Acceptance purchased by it.
5.04 Drawdowns
The Lender shall make available to the Borrowers by depositing the amount set forth in the Drawdown Notice in immediately available funds on the applicable Drawdown Date according to the instructions in the Drawdown Notice.
5.05 Rollovers
In the case of a Rollover of a Bankers’ Acceptance, in order to satisfy the continuing liability of the Borrowers to the Lender for the face amount of the maturing Bankers’ Acceptance, the Lender shall determine and retain the BA Discount Proceeds of the new Bankers’ Acceptance and the Borrowers shall, on the maturity date of the maturing Bankers’ Acceptance, pay to the Lender’s account at the Lender’s Office (i) the difference between the principal amount of the maturing Bankers’ Acceptance and the BA Discount Proceeds from the new Bankers’ Acceptance, and (ii) the BA Stamping Fee in respect of the new Bankers’ Acceptance.
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5.06 Conversions
(1) In the case of a Conversion into a Bankers’ Acceptance, in order to satisfy the continuing liability of the Borrowers to the Lender for the amount of the converted Loan, the Lender shall determine and retain for its own account the BA Discount Proceeds of the Bankers’ Acceptance and the Borrowers shall on the Conversion Date pay to the Lender’s Account at the Lender’s Office (i) the difference between the principal amount of the converted Loan and the BA Discount Proceeds from the Bankers’ Acceptance, and (ii) the BA Stamping Fee in respect of the Bankers’ Acceptance.
(2) In the case of a Conversion of a Bankers’ Acceptance into another type of Loan, in order to satisfy the continuing liability of the Borrowers to the Lender for an amount equal to the face amount of the Bankers’ Acceptance, the Lender shall record the obligation of the Borrowers to the Lender as a Loan of the type into which the obligation has been converted.
5.07 Maturity
Prior to the maturity date of a Bankers’ Acceptance, the Borrowers shall deliver to the Lender one of the following:
(a) by the deadline set forth in Section 2.05, a Rollover Notice stating that the Borrowers intend to draw and present for acceptance on the maturity date a new Bankers’ Acceptance in the same face amount as the maturing Bankers’ Acceptance; or
(b) by 11:00 a.m. (Toronto time) one (1) Business Day prior to the maturity date of such Bankers’ Acceptance, a Repayment Notice in respect of such Bankers’ Acceptance and on the maturity date of the maturing Bankers’ Acceptance, pay to the Lender an amount equal to the face amount of the maturing Bankers’ Acceptance; or
(c) by the deadline set forth in Section 2.05, a Conversion Notice in respect of such Bankers’ Acceptance and on the maturity date of the maturing Bankers’ Acceptance, the Lender shall record the obligation of the Borrowers as a Prime Rate Loan in an amount equal to the face amount of the maturing Bankers’ Acceptance.
If the Borrowers fail to so notify the Lender, the Lender shall effect a Conversion into a Prime Rate Loan as if a Conversion Notice pursuant to paragraph (c) above had been given by the Borrowers to the Lender electing to convert such maturing Bankers’ Acceptance into a Prime Rate Loan.
5.08 Bankers’ Acceptances Stamping Fees
Upon the acceptance by the Lender of any Draft of the Borrowers pursuant to this Agreement, the Borrowers shall be obliged to the Lender’s account, for the account of the Lender, a fee in Canadian Dollars equal to the BA Stamping Fee on the face amount at maturity of the Bankers’ Acceptance for its term, being the actual number of days in the period from and including the date of acceptance of the Bankers’ Acceptance to but excluding the maturity date of the Bankers’ Acceptance and, for purposes of calculation, calculated on the basis of a 365 day year.
5.09 General re Bankers’ Acceptances
(1) In order to facilitate the issuance of Bankers’ Acceptances pursuant to this Section 5.09, upon the delivery of a Drawdown Notice, Conversion Notice or Rollover Notice with respect to a Bankers’ Acceptance, the Borrowers authorize the Lender and appoints the Lender as its attorney to complete drafts in the form prescribed by the Lender (each such draft that has not yet been accepted by a Lender being referred to as a “Draft”), sign and endorse same on its behalf in handwritten form or by facsimile or mechanical signature or otherwise and, once so completed, signed and endorsed to accept them as a Bankers’ Acceptance under this Section 5.09 and then purchase, discount or negotiate such a Bankers’ Acceptance in accordance with the provisions of this Section 5.09. Drafts so completed, signed,
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endorsed and negotiated on behalf of the Borrowers by the Lender shall bind the Borrowers as fully and effectively as if so performed by an authorized officer of the Borrowers. Each Draft of a Bankers’ Acceptance completed, signed or endorsed by the Lender shall mature on the last day of the Interest Period with respect thereto.
(2) Any executed Drafts to be used for Bankers’ Acceptances which are held by the Lender shall be held in safekeeping with the same degree of care as if they were the Lender’s own property and the Lender was keeping them at the place at which they are to be held. The Borrowers shall, by written notice to the Lender, designate the Persons authorized to give the Lender instructions regarding the manner in which the Drafts are to be completed and the times at which they are to be issued. Neither the Lender nor any of their respective directors, officers, employees or representatives shall be liable for any action taken or omitted to be taken by any of them under this Section 5.09, except for its own negligence or wilful misconduct.
(3) The Lender shall maintain a record with respect to Bankers’ Acceptances (a) accepted by it hereunder; (b) cancelled at their respective maturities; or (c) voided by it for any reason. The Lender further agrees to retain such records in the manner and for the statutory periods provided in the various provincial or federal statutes and regulations which apply to the Lender.
(4) The Borrowers shall not claim any days of grace for the payment at maturity of any Bankers’ Acceptance. The obligations of the Borrowers to make payments in respect of Bankers’ Acceptances shall not be prejudiced by the fact that the holder of such Bankers’ Acceptance is the Lender that accepted such Bankers’ Acceptance. The obligations of the Borrowers with respect to Bankers’ Acceptances under this Agreement shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including, without limitation, the following circumstances:
(a) any lack of validity or enforceability of any bill of exchange accepted by a Lender as a Bankers’ Acceptance; or
(b) the existence of any claim, set off, defence or other right which the Borrowers may have at any time against the holder of a Bankers’ Acceptance, or any other Person, whether in connection with this Agreement or otherwise.
5.10 Cash Collateralization
The Borrowers acknowledge that Advances made by a Lender by way of Bankers’ Acceptances may not, save and except as expressly provided otherwise in this Agreement, be repaid prior to the maturity thereof. In connection with each voluntary or mandatory repayment hereunder in connection with Bankers’ Acceptances which are to be repaid prior to their respective maturity or expiry dates, the Borrowers shall deposit cash (to be held in a non-interest bearing account) with the Lender equal to the full face amount at maturity of such Bankers’ Acceptance and shall concurrently deliver to the Lender a cash collateral agreement, supporting resolutions, certificates and opinions in form and substance satisfactory to the Lender.
Article 6 – REPAYMENT
6.01 Mandatory Repayment – Credit Facility
(1) Subject to Section 11.02, the Borrowers will repay in full the outstanding principal amount of all Loans and other Obligations under the Credit Facility on or before the Maturity Date.
(2) Subject to Section 11.02 and following the Interest Only Period, the Borrowers shall, until such time as the Borrower enters into a Qualifying Hedge Agreement, as a permanent repayment in respect of Loans outstanding under the Credit Facility, pay to the Lender monthly principal payments, beginning at the first day of February, 2024 (each a “Principal Payment Date”) in the amount of $83,333.33, which payments will be calculated using a 25 year amortization.
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(3) Subject to Section 11.02 and following the Interest Only Period, in the event the Borrowers enter into a Qualifying Hedge Agreement, the Borrowers will provide the Lender with a Repayment Notice and, as a permanent repayment in respect of Loans outstanding under the Credit Facility, pay to the Lender monthly payments according to an interest rate swap schedule, beginning at the first day of February, 2024 (each a “Principal Payment Date”), replicating equal monthly blended payments of principal and interest which payments will be calculated using a 25 year amortization.
(4) Subject to Section 11.02, the Borrowers shall, as a permanent repayment in respect of Loans outstanding under the Credit Facility, pay to the Lender an amount equal to 100% of the net proceeds from any property insurance proceeds received in respect of the Secured Property (unless such insurance proceeds are expended or committed for the repair or replacement of the Secured Property, subject to the provisions of Section 10.01(12)).
6.02 Voluntary Repayments
The Borrowers may at any time, from time to time, repay without penalty, the whole or any part of any Loan provided that the Borrower shall give a Repayment Notice to the Lender at least two (2) Business Days prior to the repayment date, provided that (a) each such repayment must be in increments of Cdn. $100,000 and (b) other than as contemplated in Section 6.03, a Bankers' Acceptance may only be repaid on the last day of its Interest Period.
6.03 Repayment Compensation
If the Borrowers by reason of any repayment hereunder, whether mandatory or voluntary, pay any Bankers’ Acceptances prior to their respective maturity dates, the Borrowers will deposit with the Lender cash collateral equal to the full face amount at maturity of such Bankers’ Acceptance such collateral to be held by the Lender in an interest bearing cash collateral account as security (and subject to the security interests created by the Security) and applied in payment of same as they mature, with the interest thereon paid to the Borrowers unless an Event of Default is then continuing, in which case such interest shall be applied by the Lender in accordance with the terms hereof.
Article 7 – PLACE AND APPLICATION OF PAYMENTS
7.01 Place of Payment of Principal, Interest and Fees
(1) Subject to the provisions of Section 10.07 below, all payments of principal, interest, fees and other amounts to be made by the Borrowers to the Lender pursuant to this Agreement shall be made in immediately available funds at the Lender’s Office in Toronto or to such other address as the Lender may direct in writing from time to time. All such payments received by the Lender on a Business Day before 2:00 p.m. (Toronto time) shall be treated as having been received by the Lender on that day; payments made after such time on a Business Day shall be treated as having been received by the Lender on the next Business Day.
(2) Whenever any payment shall be due on a day which is not a Business Day, the date for payment thereof shall be extended to the next succeeding Business Day. Interest shall continue to accrue and be payable thereon as provided herein, until the date on which such payment is received by the Lender.
Article 8 – SECURITY
8.01 Security
As general and continuing security for the payment and performance of the Obligations the security described below will be granted to the Lender, in each case in a form acceptable to the Lender:
(a) a demand debenture from the Nominee in the principal amount of $27,000,000, which demand debenture shall constitute a first priority fixed and specific mortgage and charge of the Secured Property (including, without limitation, any accounts pertaining to the Secured Property), in each
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case, subject to Permitted Encumbrances and which will include a first priority ranking security interest (subject only to Permitted Encumbrances) over all of the Borrower’s personal property located at or used solely in connection with the Secured Property and owned by the Borrower;
(b) a first priority general assignment of leases and rents from the Nominee constituting a first priority assignment and security in all Leases and Rents in respect of the Secured Property;
(c) a beneficial owners charge and direction whereby the Beneficial Owner directs the Nominee to charge legal title to the Secured Property, for and on behalf of the Beneficial Owner, in favour of the Lender;
(d) an assignment by the Beneficial Owner of all policies of insurance and all proceeds thereunder with respect to the Secured Property that are subject to the foregoing security and all other security hereafter granted by the Borrowers pursuant to this Agreement, including any policies providing business interruption insurance, with the Lender named as first loss payee and additional insured as its interest may appear, with a standard mortgage clause endorsement, and certificates evidencing all such insurance;
(e) a blocked account agreement in respect of the Debt Service Reserve Account; and
(f) such other security relating to the Secured Property as the Lender may reasonably require.
8.02 Registration and Protection of Security.
The Borrowers shall provide the Security perfected and protected to the proper satisfaction of the Lender and shall, at the Borrowers’ expense, register, file or record or cause the registration, filing or recording of the Security granted by it in all offices in each jurisdiction where such registration, filing or recording is necessary or of advantage to the creation, perfection and preserving of the Security applicable to it. The Borrowers shall provide the Lender with such assistance and do such acts as the Lender may from time to time request and to provide such other materials of conveyance, assignment, transfer or charge to properly effect the Lender’s Security as contemplated and shall renew and maintain such registrations, filings and recordings from time to time as and when required to keep them in full force and effect and to maintain the required priority of such Security.
8.03 Further Assurances
The Borrowers will from time to time execute and deliver all such further deeds or other instruments of conveyance, assignment, transfer, mortgage, hypothec, pledge or charge in connection with the Secured Property as may be required to properly perfect the security interest of the Lender in the Secured Property and collateral subject to the Security.
8.04 Form of Security
The Security will be in form satisfactory to the Lender, acting reasonably.
8.05 Qualifying Hedge Arrangements
(a) The Security shall also secure all Obligations owing under or in respect of Qualifying Hedge Arrangements and the Qualifying Cash Management Arrangements.
(b) Notwithstanding payment and performance in full of all of the Obligations (other than the obligations under the Qualifying Hedge Arrangement and the Qualifying Cash Management Arrangements), the Security shall continue to secure the Obligations of the Borrowers under all outstanding Qualifying Hedge Arrangements and all outstanding Qualifying Cash Management
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Arrangements and the Borrowers shall not be entitled to a discharge of the Security until all Qualifying Hedge Arrangements and all Qualifying Cash Management Arrangements have been terminated and all amounts, if any, owing by the Borrowers in respect thereof have been paid to the Lender.
Article 9 – REPRESENTATIONS AND WARRANTIES
9.01 Representations and Warranties
Each Credit Party, in respect of Sections 9.01(1), (2), (3), (4), (5), (6), (7), (8), (9), (12), (18), (19), (20), (22), (23) and (37), on a joint and several basis, and the Borrowers, in respect of Sections 9.01(10), (11), (13), (14), (15), (16), (17), (21), (24), (25), (26), (27), (28), (29), (30), (31), (32), (33), (34), (35) and (36), on a joint and several basis, and acknowledges and confirms that the Lender is relying upon such representations and warranties:
(1) Existence and Qualification. Each Credit Party has been (a) duly constituted, incorporated, amalgamated or continued, as the case may be, and is validly subsisting as a corporation or company, as the case may be, under the laws of its jurisdiction of incorporation, amalgamation or continuance, as the case may be, (b) is duly qualified to carry on business in its applicable Relevant Jurisdiction and has all Material Licences, and (c) except as disclosed to the Lender in an officer’s certificate delivered pursuant to Section 3.01, has not adopted or designated any name (including any French name) for any Credit Party other than the English form of such names as set out herein.
(2) Power and Authority. Each Credit Party has the power, authority and right (a) to enter into and deliver, and to exercise its rights and perform its obligations under, the Loan Documents to which it is a party and all other instruments and agreements delivered by it pursuant to any of the Loan Documents, and (b) to own its assets (including the Secured Property, as applicable) and carry on its business as currently conducted and as currently proposed to be conducted by it.
(3) Duly Licensed. Each Credit Party: (a) is, in all material respects, duly licensed, registered or qualified to carry on business in all jurisdictions where the character of its assets and property owned or leased or the nature of the activities conducted by it make such licensing, registration or qualification necessary or desirable under Applicable Law, and (b) holds all licences, permits, orders, approvals, notices, registrations and all other prerequisites for conducting its business under Applicable Law, in all material respects.
(4) Execution, Delivery, Performance and Enforceability of Documents. The execution, delivery and performance of each of the Loan Documents to which any Credit Party is a party, and every other instrument or agreement delivered by it pursuant to any Loan Document, has been duly authorized by all actions, if any, required on its part and by its shareholders and directors (or, where applicable, shareholders, trustees, partners, members or managers), and each of such documents has been duly executed and delivered and constitutes a valid and legally binding obligation of the particular Credit Party enforceable against it in accordance with its terms, subject to the qualifications (including enforceability qualifications) contained in Opinions of Counsel.
(5) Loan Documents Comply with Applicable Laws, Organizational Documents and Contractual Obligations. Neither the entering into nor the delivery of, and neither the consummation of the transactions contemplated in nor compliance with the terms, conditions and provisions of, the Loan Documents by any Credit Party conflicts with or will conflict with, or results or will result in any breach of, or constitutes a default under or contravention of, (i) any Requirement of Law applicable to it, (ii) any of its Organizational Documents, (iii) any Material Agreement, (iv) any Permitted Encumbrances, or (v) any Indebtedness outstanding by any of the Borrower or its Subsidiaries, or results or will result in, the creation or imposition of any Encumbrance upon any of the Secured Property that is not a Permitted Encumbrance.
(6) Consents Respecting Loan Documents. Each of the Credit Parties has obtained, made or taken all consents, approvals, authorizations, declarations, registrations, filings, notices and other actions whatsoever required from all applicable Governmental Authority and all other Persons as of the date hereof in connection with the execution and delivery by it of each of the Loan Documents to which it is a party, and the consummation of the transactions contemplated in the Loan Documents.
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(7) Taxes. Each of the Credit Parties have paid or made adequate provision for the payment of all Taxes levied on it or on its property or income that are due and payable, including interest and penalties, or has accrued such amounts in its financial statements for the payment of such Taxes except Taxes that are not material in amount, that are not delinquent or if delinquent are being contested, and there is no material action, suit, proceeding, investigation, audit or claim now pending, or to its knowledge threatened, by any Governmental Authority regarding any Taxes nor has it agreed to waive or extend any statute of limitations with respect to the payment or collection of Taxes.
(8) Judgments, Etc. Neither of the Borrowers nor any of their respective Subsidiaries or any other Credit Party is subject to any judgment, order, writ, injunction, decree or award, or to any restriction, rule or regulation (other than customary or ordinary course restrictions, rules and regulations consistent or similar with those imposed on other Persons engaged in similar businesses) that has not been stayed or of which enforcement has not been suspended, which would reasonably be expected to exceed $1,000,000 in the aggregate.
(9) Absence of Litigation. There are no actions, suits or proceedings pending or, to the Credit Parties’ knowledge, threatened against or affecting the Borrowers or any of its Subsidiaries or any other Credit Party that are reasonably likely to cause, either separately or in the aggregate, a Material Adverse Change. To the Credit Parties’ knowledge, none of the Credit Parties is in default in any material respects with respect to any Applicable Law.
(10) Title. (i) The Nominee is the sole registered owner, and the Beneficial Owner is the sole beneficial owner, of the Secured Property, with good and marketable title to each of their respective interests Secured Property, free and clear of all Encumbrances except Permitted Encumbrances, and no Person has any agreement, option or right to acquire an interest in the Secured Property; (ii) the Beneficial Owner good and marketable ownership of its personal undertakings and property, free and clear of all Encumbrances except Permitted Encumbrances, and no Person has any agreement, option or right to acquire an interest in such property; and (iii) the Nominee has no interest in the Secured Property except as registered owner and none of the rights to the rents, income or profits of the Secured Property is owned by the Nominee; and (iv) the Nominee has no authority to deal with the Secured Property except as specifically authorized and directed by the Beneficial Owners pursuant to and in accordance with the Nominee Agreement.
(11) Zoning. Except as disclosed to the Lender in writing, the Borrowers have not received notice of any proposed rezoning of all or any part of the Secured Property that is likely to have a material adverse effect in respect of the Secured Property.
(12) Compliance with Laws. None of the Credit Parties is in default under any Applicable Law where such default could reasonably be expected to cause a Material Adverse Change, and all its undertakings and property, both real and personal, and the operation and use thereof are in compliance with all Applicable Law, except to the extent that a failure to comply would not be reasonably likely to result in a Material Adverse Change.
(13) No Default. No Default or Event of Default has occurred and is continuing.
(14) Ownership Structure. The ownership structure set out in Schedule 9.01(14) accurately reflects the organizational and ownership structure of each Credit Party and the Secured Property.
(15) Relevant Jurisdictions. The Relevant Jurisdictions for each Credit Party is as set forth on Schedule 1.01(G).
(16) Security. The Security is effective to create in favour of the Lender, as security for the Obligations described therein, a legal, valid, binding and enforceable security interest in the collateral described therein and proceeds thereof, and constitutes a first priority security interest (subject to Permitted Encumbrances) against the Secured Property, in each case, subject to the qualifications (including enforceability qualifications) contained in Opinions of Counsel.
(17) Intellectual Property Rights. The Beneficial Owner has sufficient Intellectual Property Rights reasonably necessary for the conduct of its businesses. To the Borrowers’ knowledge, they are not infringing or is alleged to be infringing the Intellectual Property Rights of any other Person.
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(18) Material Agreements and Material Licences. No event has occurred and is continuing that would constitute a material breach of, or a material default by a Credit Party under, any Material Agreement or Material Licence and each Material Agreement to which a Credit Party is a party is binding upon it.
(19) Financial Statements. All of the quarterly and annual financial statements that have been furnished to the Lender in connection with this Agreement are accurate and complete in all material respects and such financial statements fairly present the financial position of the Borrowers or Guarantor, as the case may be, as of the dates referred to therein and have been prepared in accordance with GAAP. None of the Credit Parties have any liabilities (contingent or other) or other obligations of the type required to be disclosed in accordance with GAAP that are not fully disclosed on the most recent Consolidated financial statements of the Borrower furnished to the Lender.
(20) No Material Adverse Change. Since the date of the Guarantor’s most recent annual audited financial statements provided to the Lender, there has been no condition (financial or otherwise), event or change in its business, liabilities, operations, results of operations, assets or prospects which constitutes, or could reasonably be expected to constitute, or cause, a Material Adverse Change.
(21) Environmental Matters.
(a) To the Borrowers’ knowledge, and except as disclosed pursuant to the reports delivered pursuant to Section 3.01(g), the Secured Property and the operations of the Beneficial Owner are in material compliance in all respects with all Environmental Laws; the Borrowers are not aware of, nor has it received notice of, any past, present or future condition, event, activity, practice or incident that may interfere with or prevent the compliance or continued compliance of it or any other Credit Party in respect of the Secured Property under all Environmental Laws; and the Borrowers have obtained all licences, permits and approvals that are currently required in respect of the Secured Property under all Environmental Laws and are in material compliance with the provisions of such licences, permits and approvals.
(b) Except as disclosed pursuant to the reports delivered pursuant to Section 3.01(g), the Borrowers are not aware that any Hazardous Substances exist on, about or within or have been used, generated, stored, transported, disposed of on, or released from any of the Secured Property, other than in material accordance and compliance with all Environmental Law.
(c) The use which the Beneficial Owner has made and intends to make of the Secured Property will not result in the use, generation, storage, transportation, accumulation, disposal, or release of any Hazardous Substances on, in or from such Secured Property, except in accordance and material compliance with all Environmental Laws.
(d) There is no action, suit or proceeding, or any investigation or inquiry, before any Governmental Authority pending, or, to the Borrowers’ knowledge, threatened against any Credit Party relating to the Secured Property and in any way relating to any Environmental Law.
(e) No Credit Party has (i) incurred any current and outstanding liability for any clean-up or remedial action under any Environmental Law with respect to current or past operations, events, activities, practices, incidents conducted on the Secured Property, or the condition or use of the Secured Property, (ii) received any outstanding written request for information (other than information to be provided in the normal course in connection with applications for licences, permits or approvals) by any Person under any Environmental Law with respect to the condition, use or operation of the Secured Property, or (iii) received any outstanding written notice or claim under any Environmental Law with respect to any material violation of or liability under any Environmental Law or relating to the presence of Hazardous Substance on or originating from the Secured Property, the presence of which could result in a material violation of or liability under any Environmental Law.
(22) No Pension Plans. No Credit Party is required to establish, operate or maintain Canadian Pension Plans or Canadian Plans pursuant to Applicable Canadian Pension Laws and it has not established, operated or
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maintained any Canadian Pension Plans and Canadian Plans, and (ii) there are no corporately funded defined benefits or Canadian Plans.
(23) Labour Dispute and Casualties. Neither the Secured Property nor the business of the Credit Parties are affected in any material respect by any strike, lockout or other labour dispute, or by any fire, accident or other casualty, in each case, which has not been advised to the Lender in writing.
(24) Solvency. Each of the Borrowers and its respective Subsidiaries are solvent, able to pay its debts as they mature, has sufficient capital to carry on its business and has assets the fair market value of which exceeds its liabilities, and it will not be rendered insolvent, under-capitalized or unable to pay debts generally as they become due by the execution or performance of this Agreement or any other Loan Document to which it is a party.
(25) Full Disclosure. To the Borrowers’ knowledge: (a) all information provided to the Lender in connection with the Credit Facility is true and correct, and (b) none of the documentation furnished to the Lender, by or on behalf of the Borrowers, omits or will omit as of such time, a material fact necessary to make the statements contained therein not misleading in any material way. For greater certainty, no Credit Party shall have any liability to the Lender in respect of any third party reports provided by a Credit Party to the Lender pursuant to this Agreement, each of which has been provided by such Credit Party without representation or warranty and the Lender shall rely entirely and solely upon its own review, investigations and inspections thereof.
Any projections from time to time delivered hereunder or in connection herewith by the Borrowers to the Lender are or will be based upon the estimates and assumptions stated therein, all of which the Borrowers believed at the time of delivery to be reasonable and fair in light of current conditions and current facts known to the Borrowers as of such delivery date, and reflect the Borrower’s good faith and reasonable estimates of the future financial performance of the Borrowers and of the other information projected therein for the period set forth therein. Such projections are not a guarantee of future performance and actual results may differ from those set forth in such projections.
(26) Material Agreements and Permitted Encumbrances. True copies of each of the Material Agreements have been delivered or made available to the Lender or the Lender’s Counsel. With respect to each of the Material Agreements: (a) it is in full force and effect and has not, except as has been disclosed to the Lender, been amended; (b) it has been duly executed and delivered and constitutes a valid and binding obligation of the Borrowers; and (c) the Borrowers have not received any notice or claim of a default under any Material Agreement (except as disclosed in writing to and accepted in writing by the Lender). With respect to each of the Material Agreements and each of the Permitted Encumbrances: (d) to the Borrowers’ knowledge (i) all obligations and covenants required to be met or complied with on the part of the Borrowers have been complied in all material respects; and (ii) no Default or Event or Event of Default on the part of the Credit Parties exists with respect thereto, and (iii) the Material Agreements and Permitted Encumbrances constitute the only agreements which are material to the ownership or operation of the Secured Property.
(27) Zoning and Uses.
(i) To the Borrowers’ knowledge, the existing use of the Secured Property by the Beneficial Owner complies in all material respects with all Applicable Laws.
(ii) To the Borrowers’ knowledge, the Secured Property complies with all municipal, zoning and parking requirements under Applicable Laws.
(iii) No Credit Party has received notice of any proposed rezoning of all or any part of the Secured Property.
(iv) No Credit Party has received notice of any expropriation of all or any part of the Secured Property.
(28) Work Orders. There are no outstanding judgments, writs of execution, seizures, injunctions or directives against the Borrowers, nor any work orders or directives or notices of deficiency capable of resulting in
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work orders or directives with respect to the Secured Property that could result in, or that are reasonably likely to result in, a Material Adverse Change on the Secured Property.
(29) Condition of the Secured Property. To the Borrowers’ knowledge, except as set out in the building condition reports delivered pursuant to Section 3.01(h), all buildings and improvements comprising part of the Secured Property are in good physical condition, and there are no material defects or extraordinary repairs required in connection therewith, except as disclosed in writing to, and approved by, the Lender.
(30) Real Property. The only real property interests necessary for the operation of the Secured Property in the manner in which it is currently operated are the real property interests comprising the Secured Property. All easements, licences, servitude and other agreements necessary for the operation and maintenance of the Secured Property in the manner in which it is currently being operated, if any, have been obtained and, to the Borrowers’ knowledge, are in good standing.
(31) Rent Roll. The current rent rolls for the Secured Property delivered to the Lender are true and accurate in all material respects as at the date thereof.
(32) Use of Proceeds. The Borrowers confirm and agree that the Credit Facility will only be used by the Borrowers for the purposes set out in Section 2.02 and shall not be used by, or on behalf of, any other Person.
(33) Insurance. The insurance policies required pursuant to Section 10.01(12) are in place and maintained in respect of the Secured Property.
(34) Residency. The Beneficial owner is a non-resident for the purposes of Section 116 of the Income Tax Act (Canada). The Nominee is a resident for the purposes of Section 116 of the Income Tax Act (Canada).
(35) No Construction Liens. To the Borrowers’ knowledge, all accounts for work and services performed or materials placed or furnished upon or in respect of construction at the Secured Property have been fully paid as of the date hereof and no one shall be entitled on the date hereof to claim a lien under any applicable construction lien legislation for work performed by or on behalf of any Credit Party or, to the Credit Parties’ knowledge, its predecessor in title.
(36) Leases. Except as set out in the Leases, or any amendments thereto, or otherwise disclosed to the Lender or for any non-compliance which would not likely have a Material Adverse Change in respect of the Secured Property:
(a) the only Leases affecting the Secured Property are those in connection with the tenancies set out in the rent rolls delivered to the Lender. The particulars of the rent rolls are full, complete and accurate in all material respects as at the date noted therein;
(b) other than the Leases identified in the rent rolls, and the two (2) storage units licenced for nominal consideration to the previous owner of the Secured Property (the “Sellers Leases”), there are no offers to lease, licences or other occupancy rights affecting the occupancy of the Secured Property, tenants are occupying their portion of the Secured Property subject to the provisions of the Leases and paying full rent as required under the Leases, and subject to such defaults by, and enforcement proceedings in respect of, tenants that may arise in the normal course of operating the business being conducted by the Borrower on the Secured Property, and which in the aggregate, will not result in a Material Adverse Change in respect of the Secured Property; and
(c) other than as identified in the rent rolls, no Tenant has prepaid rent or deposited security in excess of one month’s rent and there are no rent-free period; and
(d) to the Credit Parties’ knowledge, the Beneficial Owner, as landlord under the Leases, has performed all of its material obligations and observed all of the material conditions required of it under all Leases.
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(37) Anti-Money Laundering Laws; Sanctions and Anti-Corruption Laws.
(a) No Credit Party and, to the knowledge of the Credit Parties, none of its Affiliates are in violation of, or intends to use any proceeds of the Loans in violation of, any Applicable Laws relating to (i) terrorism or money laundering, including the Criminal Code (Canada) and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) and United States Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107‑56 and, in each case, the regulations promulgated thereunder (collectively, “AML Laws”), or (ii) Sanctions.
(b) No Credit Party is, and to the knowledge of the Credit Parties, no Affiliate or agent of any Credit Party acting or benefiting in any capacity in connection with the making of any Loan is (i) currently subject to any economic, trade or financial sanctions or trade embargoes imposed, administered or enforced from time to time under laws and executive orders of the Canadian government (including without limitation including under the Special Economic Measures Act (Canada), the United Nations Act (Canada), the Freezing Assets of Corrupt Foreign Officials Act (Canada), the Criminal Code (Canada), the Export and Import Permits Act (Canada), the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law) (Canada) and, in each case, the regulations promulgated thereunder), the United States government, the United Nations Security Council, the European Union, any European Union member state, Her Majesty’s Treasury of the United Kingdom, the Office of Foreign Assets Control, or any other relevant sanctions authority (collectively, “Sanctions”), or (ii) located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions broadly prohibiting dealings with such government, country, or territory (a “Sanctioned Country”), including Iran, Burma, North Korea, Sudan and Syria.
(c) No Credit Party is, and to the knowledge of the Credit Parties, no Affiliate or agent of any Credit Party acting or benefiting in any capacity in connection with the making of any Loan (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Person described in Section 9.01(37)(b), (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked or frozen pursuant to any AML Law or any Sanctions, or (iii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any AML Law or any Sanctions.
(d) No Credit Party is, nor, to the knowledge of the Credit Parties, has any director, officer, agent, employee or other Person acting, directly or indirectly, on behalf of any Credit Party, in the course of its actions for, or on behalf of any Credit Party, directly or indirectly (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any official or employee of any foreign or domestic government or government owned or controlled entity from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, the Corruption of Foreign Public Officials Act (Canada), (collectively, “Anti‑Corruption Laws”); (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any official or employee of any foreign or domestic government or government owned or controlled entity; or otherwise (v) engaged in any activity or conduct which would violate any applicable anti-bribery laws, Anti-Corruption or AML law, or any regulations or rules in any applicable jurisdiction applicable to the foregoing.
(e) The Borrower maintains reasonable policies and internal controls intended to detect and prevent any violations of AML Laws, Sanctions, Anti‑Corruption Laws, and the representations and warranties set out in Section 9.01(37)(a) through 9.01(37)(d).
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9.02 Survival and Repetition of Representations and Warranties
The representations and warranties set out in Section 9.01 survive the execution and delivery of this Agreement and all other Loan Documents and will be deemed to be repeated by the Borrowers so long as any Obligations remain outstanding.
Article 10 – COVENANTS
10.01 Positive Covenants
So long as this Agreement is in force, each Credit Party, in respect of Sections 10.01(1),(2)(a),(3), (4), (16), (17), (18), (23), and (24) on a joint and several basis, and the Borrowers, in respect of Sections 10.01(2)(b), (5), (6), (7), (8), (9), (10), (11), (12), (13), (14), (15), (19), (20) (21) and (22) on a joint and several basis, will:
(1) Timely Payment. Make due and timely payment of the Obligations required to be paid by it hereunder and punctually perform its other Obligations hereunder and under the other Loan Documents to which it is a party at the time and place and in the manner provided hereunder and under the other Loan Documents.
(2) Conduct of Business, Maintenance of Existence, Compliance with Laws. (a) Engage in business of the same general type as now conducted by it; carry on and conduct its business and operations in a proper, efficient and businesslike manner, in accordance with good business practice and Requirements of Law; preserve, renew and keep in full force and effect its existence; and take all reasonable action to maintain all rights, privileges and franchises necessary in the normal conduct of its business, and (b) comply in all material respects with all Material Agreements, Material Licences and Permitted Encumbrances.
(3) Further Assurances. Use reasonable efforts to provide the Lender with such other documents, opinions, consents, acknowledgments and agreements as are reasonably necessary to implement this Agreement and the other Loan Documents, from time to time.
(4) Obligations and Taxes. Pay or discharge, or cause to be paid or discharged, when the same become due and payable (i) all Taxes imposed upon it or upon its income or profits or in respect of its business or assets (including the Secured Property) and file all tax returns in respect thereof, (ii) all lawful claims for labour, materials and supplies, (iii) all required payments under any of its Indebtedness, and (iv) all other obligations; provided, however that it will not be required to pay or discharge or to cause to be paid or discharged any such amount so long as the validity or amount thereof is being contested in good faith by appropriate proceedings and an appropriate financial reserve in accordance with GAAP has been established.
(5) Use of Credit Facility. Use the proceeds of the Credit Facility only for the purposes specified in Section 2.02 and not for any other purpose or for any other Person.
(6) Security. Provide the Security contemplated hereunder perfected in accordance with Applicable Law, in a first priority against the Secured Property, subject to Permitted Encumbrances.
(7) Compliance with Environmental Laws. (a) Comply and use its reasonable efforts to require tenants and other occupants of the Secured Property to comply, in each case, in all material respects with any and all Environmental Laws. (b) Receive, handle, use, store, treat, ship and dispose of all Hazardous Substances located on or under the Secured Property and over which the Beneficial Owner has control in compliance in all material respects with all Environmental Laws and in accordance with all Material Agreements, Permitted Encumbrances and all Leases and the Beneficial Owner shall remove from the Secured Property any Hazardous Substances. (c) Take all commercially reasonable efforts to ensure that there are no orders, injunctions, judgements or directions or any notice of any of the same issued by a Governmental Authority or court relating to environmental matters in respect of the Secured Property requiring any work, repairs, construction or capital expenditures with respect to the Secured Property. (d) At the Borrowers’ sole cost and expense, remove or take remedial action or cause to be removed or cause remedial action to be taken with regard to any materials released to the environment at, on or near the Secured
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Property for which any removal or remedial action is required pursuant to law, regulation, order or approval or pursuant to the Material Agreements and Permitted Encumbrances.
(8) Environmental Audits. Commission an environmental site assessment/audit report addressed to Borrowers’ Counsel and Lender’s Counsel of the Secured Property or an update of such assessment/audit report (i) upon the written request of the Lender if, in its reasonable opinion, there is a material concern about its or the Credit Parties’ compliance with Environmental Laws, all in scope, form and content satisfactory to the Lender, acting reasonably, (ii) if such assessment/audit report has been prepared at the request of or on behalf of any Governmental Authority, or (iii) if a Default relating to an environmental matter has occurred, and the Lender has made a written request to it for such an assessment/audit report or update, within 60 days after such request, and all such assessments/audits reports or updates thereof shall be at the Borrowers’ expense and risk. An environmental site assessment/audit includes, for purposes of this Section, without limitation, any inspection, investigation, test, sampling, analysis or monitoring pertaining to air, land or water relating to the Secured Property.
(9) Operation. Diligently manage or caused to be managed, lease, use and operate the Secured Property in material compliance with all Applicable Laws and as would a prudent owner of comparable property in a proper and efficient manner with a view to preserving and protecting the Secured Property at the same or higher standard as at the date hereof, and the earnings, incomes, rents, and profits thereof.
(10) Copies. Deliver or cause to be delivered to the Lender, upon the request of the Lender, a true copy of any new Material Agreement.
(11) Access to Information and Rights of Inspection. Permit the Lender, and its agents, consultants, officers and employees, at its expense, provided such expenses are reasonably incurred, and upon reasonable prior notice during normal business hours, from time to time to visit and inspect the Secured Property, subject always to the rights of occupants under the Leases, and to examine and make abstracts from and copies of its physical and computer books of account and records as they pertain to the Secured Property (and where such information is not kept at the Secured Property, at such other locations where such information is kept) as well as all data and computer data relating to the managing, servicing, developing and marketing of the Secured Property, which are in its possession and discuss their affairs, finances and accounts as they pertain to the Secured Property, and be advised as to the same by their officers, consultants and legal counsel (with, prior to an Event of Default which is continuing, representatives of the Borrowers present), all at such reasonable times as the Lender may desire. The Borrowers shall maintain, or cause to be maintained adequate books, accounts and records in relation to the Secured Property.
(12) Insurance. For so long as any amounts are due hereunder, the Borrowers shall:
(A) Maintain or cause to be maintained:
(I) all risks property insurance (including boiler and machinery) on property of every description located in or at or incidental to the Secured Property (or property for which they are obliged to insure pursuant to Leases or other agreements relating to the Secured Property) on a replacement cost, stated amount (or no co-insurance) basis, and including coverage for sewer back-up, windstorm, flood, earthquake, debris removal and by-laws, in amounts satisfactory to the Lender;
(II) business interruption insurance on a gross profits or gross rents basis under the property and boiler and machinery insurance policies referred to in Section 10.01(12)(A)(I), adequate to reimburse all lost revenues relating to the Secured Property for a term of not less than 12 months;
(III) commercial general and umbrella liability insurance, including insurance against claims for bodily injury, personal injury, death, property damage or other loss arising out of the operation of the Secured Property and extended to include coverage for contractual liability, contingent employer’s liability, and liability in
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respect of collapse and explosion with a minimum limit of liability for any one occurrence of $10,000,000;
(IV) such other insurance as may be required to meet the obligations of the Borrowers under any of the Material Agreements; and
(V) such other insurance as the Lender upon consultation with the Independent Insurance Consultant may reasonably require from time to time and which is available upon commercially reasonable terms;
all with insurance companies having a Best’s A-VII rating at time of placement and at all times thereafter with such insurance companies having comparable claims paying ability as approved by the Lender in its discretion. Such insurance is to be in such form and amounts and with such deductibles as are customary in the case of owners of projects similar to the Secured Property and in any event as are acceptable to the Lender.
(B) The all risk, boiler and machinery and business interruption insurance policies referred to in Section 10.01(12)(A) shall:
(1) name the Borrowers as insureds thereunder and as additional insureds all those required to be named as additional insureds under any of the Material Agreements,
(2) name the Lender as first mortgagee and loss payee and have attached the standard Insurance Bureau of Canada mortgage clause with respect to the all risk, property, boiler and machinery and business interruption insurance;
(3) provide that no cancellation or termination thereof, for any reason whatsoever, shall take effect unless the insurer concerned has given the Lender not less than 30 days’ prior written notice of such proposed action (except for cancellation due to non-payment of premium for which statutory 15 days’ notice may apply);
(4) contain a waiver by the insurer or insurers of all rights of subrogation or indemnity or any other claim to which such insurer or insurers might otherwise be entitled against the Lender; and
(5) otherwise be in such form as the Lender shall reasonably require;
and such insurance policies may contain reasonable deductibles per occurrence as approved by the Lender in consultation with the Independent Insurance Consultant;
(C) The third party liability insurance policies referred to in Section 10.01(12)(A) shall:
(1) name the Borrowers as additional insureds and all those required to be included as additional insureds under any of the Material Agreements;
(2) name the Lender as an additional insured to the extent that such policies relate to the Secured Property or the operation thereof;
(3) provide that no cancellation or termination thereof for any reason whatsoever, shall take effect unless the insurer concerned has given the Lender not less than 30 days’ prior written notice of such proposed action (except for cancellation due to non-payment of premium for which statutory 15 days’ notice may apply);
(4) contain a waiver by the insurer of all rights of subrogation or indemnity or any other claim to which the insurer might otherwise be entitled against the Lender;
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(5) contain a cross-liability clause and a severability of interests clause; and
(6) otherwise be in such form as the Lender shall reasonably require.
(D) Subject to the rights of the tenants under Leases, so long as no Default or Event of Default has occurred and is continuing, the proceeds of all insurance referred to in Section 10.01(12)(A) (other than third party liability insurance, which may be remitted to the Borrower without condition or further action by the Lender) shall:
(1) if the total amount of such proceeds in respect of the Secured Property is less than $500,000 be payable to the Beneficial Owner;
(2) if the total amount of such proceeds in respect of the Secured Property equals or exceeds $500,000, such amount shall be payable to the Lender to be held as additional security for the payment of all amounts payable hereunder, to be released on a cost-in-place and cost to complete basis by it to the Beneficial Owner upon receipt of, in form and substance satisfactory to the Lender in its discretion:
(i) an Officer’s Certificate of the Beneficial Owner stating that the proceeds of such insurance together with other funds held or arranged by the Beneficial Owner is sufficient to fully repair, rebuild or replace the damage or destruction in respect of which the insurance proceeds are payable;
(ii) a letter of undertaking of the Beneficial Owner to fully repair, rebuild and replace the damage or destruction in respect of which the insurance proceeds are payable; and
(iii) in the case of damage to any of the buildings on the Secured Property, an opinion of an independent construction consultant that the funds requested for the costs in place, from time to time, together with the funds that continue to be held by the Lender hereunder, will be sufficient to repair, replace or rebuild the damage or destruction in respect of which the insurance proceeds are payable, provided that such opinion and the amounts so requested must be approved by the Lender in its discretion.
(3) the proceeds of business interruption insurance shall be paid to the Beneficial Owner;
(E) Subject to the rights of the tenants under the Leases, if an Event of Default has occurred and is continuing:
(1) the proceeds of all insurance other than workers’ compensation insurance, third party liability and business interruption insurance shall be payable to the Lender to be held by the Lender as additional security for the payment of all amounts payable hereunder, to be applied by it, at the option of the Lender, in reduction of the amounts outstanding hereunder or released to the Borrower in accordance with the provisions of Section 10.01(12)(D)(1) or (2)(i), (ii) and (iii), and;
(2) the proceeds of business interruption insurance shall be payable to the Lender to be held by the Lender as additional security for the payment of all amounts payable hereunder, to be applied on account of ongoing Obligations of the Borrowers hereunder or in respect of the Secured Property as the same fall due from time to time and, to the extent of any surplus, firstly to arrears of such payments and thereafter, if the Lender has opted to release proceeds of insurance
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pursuant to Section 10.01(12)(E)(1) in accordance with Section 10.01(12)(D), then the balance of the proceeds of business interruption insurance shall be payable to Beneficial Owner failing which the balance, if any, remaining after application of such proceeds as aforesaid shall be paid to the Lender as a partial prepayment of the Loans.
(3) The proceeds of all insurance held by the Lender shall, unless and until the same are applied or released to the Beneficial Owner as aforesaid, constitute continuing collateral security for the Borrowers’ obligations and liabilities in respect of amounts outstanding hereunder. The Lender shall place such funds in an interest-bearing account with the interest thereon to accrue to the benefit of the Borrowers.
(13) Insurance Information. Provide to the Lender and the Independent Insurance Consultant such information relating to the Secured Property or the Loan Documents, as may be reasonably requested and which is within its possession or control. The reasonable fees and costs of the Independent Insurance Consultant shall be paid for by the Borrowers.
(14) Condition of Secured Property. Keep the Secured Property in such good operating condition and repair (subject to reasonable wear and tear) as would a prudent owner of comparable property, having regard however to any renovations, expansions or improvements under construction from time to time as permitted pursuant to the terms of this Agreement.
(15) Title. Defend its title to the Secured Property and every part thereof reasonably necessary against the claims of all persons whomsoever and do, observe and perform all of its obligations and all things necessary or expedient to be done, observed or performed by virtue of any Applicable Law for the purpose of creating, maintaining and keeping maintained the Security constituted by the Loan Documents as valid and effective security with the priority required hereunder.
(16) KYC Documentation and Anti-Money Laundering. The Credit Parties acknowledge that the Lender has certain anti-money laundering and anti-terrorism responsibilities under various laws and regulations and that from time to time the Lender may request information in order to comply with Applicable Laws and internal requirements (including any applicable “know your customer” or “know your client” requirements). The Credit Parties covenant and agree, upon request, to promptly provide the Lender such additional information as may be requested in order to comply with such obligations. Each Credit Party shall also provide the Lender with prompt written notice of any change in beneficial ownership of any Credit Party, the signing officers and directors of such Credit Party after the date of this Agreement. Upon request by the Lender, the Credit Parties shall promptly provide a list of its key officers and directors.
(17) Notices of Material Changes. Give written notice to the Lender promptly after becoming aware, using reasonable diligence, thereof of:
(i) any litigation, dispute, arbitration or other proceeding to which a Credit Party is a party, the result of which if determined adversely would be a judgement or award against it in excess of: (A) $1,000,000, in the case of a single matter, or (B) $2,000,000, when aggregated with all other matters relating to the Credit Parties during a twelve month period, and, in any case, that could result in a Material Adverse Change to such Credit Party, and from time to time provide the Lender with all reasonable information requested by the Lender concerning the status of any such proceeding;
(ii) any Default or an Event of Default, together with an Officer’s Certificate specifying such Default or such Event of Default and detailing the steps being taken, if any, to cure same;
(iii) any dispute which may exist between Credit Parties and any Governmental Authority or any other proceeding;
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(iv) any written communication received by the Credit Parties alleging default under any of the Material Agreements or the Permitted Encumbrances which could result in a Material Adverse Change;
(v) any default under any of the Material Agreements or the Permitted Encumbrances which could result in a Material Adverse Change;
(vi) any notices of expropriation, judgments, writs of execution, seizures, injunctions, work orders or directives or notices of deficiency capable of resulting in work orders or directives;
(vii) any event or occurrence relating to the Secured Property which, in its opinion, acting reasonably, is likely to give rise to a notice of a material non-compliance with any Environmental Laws and of any notice of non-compliance actually received by a Borrower or, to the Borrowers’ knowledge, threatened, including any investigation, non-routine inspection or material inquiry by any Governmental Authority, in connection with any Environmental Laws;
(viii) any proposed change of Control (subject to the provisions of Section 10.05(2)(a); and
(ix) any other matter which has had or is reasonably likely to result in a Material Adverse Change.
(18) Necessary Acts to Protect Security. At its expense, take such steps as may be necessary or advisable to perfect the Security (or any part thereof) or to carry out the intent of this Agreement from time to time.
(19) Material Agreements, etc. At all times be and remain in full compliance in all material respects with all of its covenants, agreements and obligations in and diligently enforce all its material rights under all Material Agreements, advise the Lender in writing of all new Material Agreements (or any material amendments of existing Material Agreements) entered into forthwith following the entering into thereof and shall deliver forthwith a copy thereof to the Lender. The Borrowers shall provide written notice to the Lender of any assignment made by a contracting party to a Material Agreement.
(20) Other Encumbrances. Subject to Section 10.01(21), unless the same shall constitute a Permitted Encumbrance, promptly pay and discharge all Encumbrances against the Secured Property from time to time.
(21) Construction Liens. Comply with the provisions of the Construction Act (Ontario) (“Construction Lien Legislation”) where the Secured Property are located and shall pay or cause to be paid from time to time when the same shall be due all claims and demands of contractors, subcontractors, labourers, suppliers of materials or services, builders, workmen, architects, engineers and others, which if unpaid, might result in, or permit the creation of, a privilege or Encumbrances arising pursuant to Construction Lien Legislation on the Secured Property or any part thereof or on the revenues, income and profits arising therefrom. If such Encumbrance is registered against title to the Secured Property (or any portion thereof), the Borrower agrees to promptly pay and discharge same. If the Borrowers bona fide dispute the validity or correctness of such registered Encumbrance it may contest such Encumbrance in any manner properly contemplated by Applicable Law, provided it promptly discharges or vacates, or causes to be discharged or vacated, the Encumbrance from the title to the Secured Property by posting of a payment bond in such amount, or by payment into court of such amount or as may otherwise be provided under applicable Construction Lien Legislation, as is necessary to obtain such removal or otherwise posting such security as may be acceptable to the Lender in its discretion.
(22) Assignment and Postponement. All Intercompany Indebtedness and all other obligations and liabilities of each Credit Party to each other Credit Party (including such obligations and liabilities under the Material Agreements) are hereby assigned to the Lender and are hereby unconditionally and irrevocably subordinated, and following the occurrence of an Event of Default which is continuing, postponed, in all respects to the prior indefeasible repayment in full by the Borrowers and the other Credit Parties to the Obligations, and all money received by such
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Credit Party in respect thereof will be held in trust for the Lender and forthwith upon receipt will be paid over to the Lender, the whole without in any way lessening or limiting the liability of any of the Credit Parties. This assignment and postponement is independent of the Guarantee herein and will remain in full force and effect until, in the case of the assignment, the liability of the Guarantor under this Guarantee has been discharged or terminated and, in the case of the postponement, until all Obligations are performed and paid in full. Without limiting the generality of the foregoing, this assignment and postponement of the Intercompany Indebtedness contained herein shall be effective notwithstanding the dates of the Drawdown, Conversion or Rollover secured by the Loan Documents, the dates of Default or the date under the Loan Documents; and the rules of priority established under Applicable Law.
(23) Anti-Bribery Laws; Anti‑Money Laundering Laws; Sanctions and Anti‑Corruption Laws. Maintain and ensure that its Affiliates institute and maintain policies and procedures designed to promote and achieve compliance with, and prevent violation of, any applicable anti-bribery laws, Anti-Corruption Laws or AML Law, and any regulations or rules promulgated thereunder, in any applicable jurisdiction.
(24) Debt Service Reserve Account. Until the Debt Service Reserve Account is closed in accordance with the provisions herein, ensure that the balance of the Debt Service Reserve Account is sufficient such that the Modified Total Property Level Debt Service Coverage Ratio is not less than 1:30:1:00.
10.02 Financial Covenants
(A) So long as this Agreement is in force, the Borrowers will ensure that:
(ii) Modified Total Property Debt Service Coverage Ratio The Modified Total Property Debt Service Coverage Ratio, to be tested following the Closing Date as set out below:
(I) not less than 1.30:1.00 for each Fiscal Quarter following the Closing Date.
Notwithstanding the above, in the event that the Debt Service Reserve Account is closed in accordance with the provisions herein, beginning in the next Fiscal Quarter the financial covenant set out in Section 10.02(A) shall be replaced with the following
(iii) Total Property Debt Service Coverage Ratio The Total Property Debt Service Coverage Ratio, to be tested following the Closing Date as set out below:
(I) not less than 1.25:1.00 for each Fiscal Quarter following the Closing Date.
(B) So long as this Agreement is in force, the Guarantor will ensure that:
(iv) Tangible Net Worth Tangible Net Worth shall remain at all times greater than the aggregate of (i) USD $91,600,000, plus (ii) 80% of net proceeds in connection with any equity offering by the Borrower after the Closing Date; and
(v) Total Debt to Assets Ratio The Total Debt to Assets Ratio is at all times not greater than 65%, to be tested quarterly as at the end of each Fiscal Quarter.
10.03 Reporting Requirements
So long as this Agreement is in force, the Borrowers will deliver to the Lender (in sufficient quantities for the Lender in form acceptable to the Lender):
(1) Quarterly Reports As soon as available and in any event within 60 days of the end of its Fiscal Quarters (excluding the fourth Fiscal Quarter) (a) the internally consolidated financial statements of the Borrowers (including balance sheet and statement of income, which will be prepared in accordance with GAAP, and certified by an officer
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of the Beneficial Owner, (b) the internally consolidated financial statements of the Guarantor (including balance sheet, statement of income and retained earnings, statement of changes in financial position and cash flow statement), which will be prepared in accordance with GAAP, and certified by an officer of the Guarantor, and shall include management discussion and analysis, and (c) internally prepared property level income statements and occupancy percentages for each of the Secured Property both on a standalone and consolidated basis.
(2) Annual Reports and Annual Business Plan As soon as available and in any event within 120 days after the end of its Fiscal Year, (a) the annual internally prepared financial statements of the Borrowers prepared on a Consolidated basis, including balance sheet and statement of income, which will be prepared in accordance with GAAP and certified by an officer of the Beneficial Owner, (b) the annual audited financial statements of the Guarantor prepared on a Consolidated basis, including balance sheet, statement of income and retained earnings, statement of changes in financial position and source and application of funds for such Fiscal Year, which will be reviewed by an internationally recognized accounting firm, and will be prepared in accordance with GAAP and certified by an officer of the Guarantor, together with management discussion and analysis, (c) the calculation of Fair Market Value as at the end of its Fiscal Year, (d) an income statement and occupancy percentages in respect of the Secured Property and on a consolidated basis in respect of the Secured Property, (e) evidence of the payment of realty taxes relating to the Secured Property, and (f) financial forecasts in respect of the Borrower for the following Fiscal Year including an income statement, capital expenditure budget, together with a detailed list of assumptions of each such projection.
(3) Compliance Certificate. A Compliance Certificate from each of the Borrowers and the Guarantor concurrently with the delivery of the financial statements referred to in Sections 10.03(1) and (2), respectively.
(4) Realty Taxes. Evidence of the payment of realty taxes to the Secured Property shall be provided on a no less than annual basis.
(5) Other Information. Such other information as it may reasonably request respecting the Credit Parties and the Secured Property.
(6) Cure Rights - Modified Total Property Debt Service Coverage Ratio.
(a) If the Borrowers fail to maintain the Modified Total Property Debt Service Coverage Ratio as required pursuant to Section 10.02(A)(i), the Borrowers may at their option within 30 days of delivering such Compliance Certificate pursuant to Section 10.03(3) evidencing a breach of the Modified Total Property Debt Service Coverage Ratio (the “Cure Right”):
(i) make an equity injection such that when included in the Property Net Operating Income allows the Borrowers to meet the Modified Total Property Debt Service Coverage Ratio and the Modified Total Property Debt Service Coverage Ratio shall be recalculated with the Property Net Operating Income from such equity injection being included in the Property Net Operating Income for the purposes of the Modified Total Property Debt Service Coverage Ratio test set forth in Section 10.02(A)(i).
(b) In the event the Borrowers intend to exercise such Cure Right, it shall within 5 days of delivering such Compliance Certificate pursuant to Section 10.03(3) evidencing such breach of the Modified Total Property Debt Service Coverage Ratio, provide written notice to the Lender of such intention to exercise such Cure Right.
(c) If, after giving effect to the foregoing recalculation, the Borrowers shall then be in compliance with the Modified Total Property Debt Service Coverage Ratio, the Borrowers shall be deemed to have satisfied the requirements of such covenant as of the relevant date of determination with the same effect as though there had been no failure to comply with the covenant, and the applicable breach or default of such covenant that had occurred shall be deemed cured for the purposes of the Loan Documents.
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(d) Notwithstanding anything herein to the contrary, the Borrowers shall not be entitled to exercise such Cure Right in the event any other Default (other than the failure to maintain the requisite Modified Total Property Debt Service Coverage Ratio) has occurred.
(7) Cure Rights - Total Property Debt Service Coverage Ratio
(a) If the Borrowers fail to maintain the Total Property Debt Service Coverage Ratio as required pursuant to 10.02(A)(ii), the Borrowers may at their option within 30 days of delivering such Compliance Certificate pursuant to Section 10.03(3) evidencing the breach Total Property Debt Service Coverage Ratio (the “Cure Right”):
(i) make an equity injection such that when included in the Property Net Operating Income allows the Borrowers to meet the Total Property Debt Service Coverage Ratio and the Total Property Debt Service Coverage Ratio shall be recalculated with the Property Net Operating Income from such equity injection being included in the Property Net Operating Income for the purposes of the Total Property Debt Service Coverage Ratio test set forth in Section 10.02(A(ii).
(b) In the event the Borrowers intend to exercise such Cure Right, it shall within 5 days of delivering such Compliance Certificate pursuant to Section 10.03(3) evidencing such breach of the Total Property Debt Service Coverage Ratio, provide written notice to the Lender of such intention to exercise such Cure Right.
(c) If, after giving effect to the foregoing recalculation, the Borrowers shall then be in compliance with the Total Property Debt Service Coverage Ratio, the Borrowers shall be deemed to have satisfied the requirements of such covenant as of the relevant date of determination with the same effect as though there had been no failure to comply with the covenant, and the applicable breach or default of such covenant that had occurred shall be deemed cured for the purposes of the Loan Documents.
(d) Notwithstanding anything herein to the contrary, the Borrowers shall not be entitled to exercise such Cure Right in the event any other Default (other than the failure to maintain the requisite Total Property Debt Service Coverage Ratio) has occurred.
(e) In the event the Borrowers exercise such Cure Right, any such equity injection shall be deemed to be a permanent repayment of the Loan and made in accordance with the provisions of Article 6 hereof.
10.04 Negative Covenants
So long as this Agreement is in force, each Credit Party, on a joint and several basis, in respect of Sections 10.04 (2), (3), (8), (9), (13) and (23), and the Borrowers, jointly and severally, in respect of Sections 10.04 (1), (4), (5), (6), (7), (10), (11), (12), (14), (15), (16), (17), (18), (19), (20), (21) and (22) will not:
(1) Charge or Disposition of Secured Property. Dispose of, in one transaction or a series of transactions, all or any part of its interest in the Collateral, with the exception of (a) Leases in accordance with Section 10.04(17), (b) a Smart Transaction in accordance with Section 10.05 or a Permitted Sale in accordance with Section 10.06.
(2) No Consolidation, Amalgamation, etc. Other than pursuant to a SmartStop Transaction in accordance with Section 10.05 below (a) consolidate, amalgamate or merge with any other Person, (b) enter into any corporate reorganization or other transaction intended to effect or otherwise permit a change in its existing corporate or capital structure, or (c) liquidate, wind-up or dissolve itself, or permit any liquidation, winding-up or dissolution.
(3) No Change of Name. Change its name without providing the Lender with fifteen (15) days’ prior written notice thereof.
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(4) No Indebtedness or Financial Assistance. Create, incur, assume, grant or suffer to exist, or permit any Subsidiary to create, incur, assume, grant or suffer to exist (a) any Purchase Money Security Interests granted by the Borrowers and their respective Subsidiaries in an amount which exceeds $2,000,000 in the aggregate, (b) any Financial Assistance, or (c) any Indebtedness, except any Indebtedness (i) that would not contravene and is made in accordance with the Organizational Documents of the Borrowers or their respective Subsidiaries, and (ii) if after giving effect thereto, no Default or Event of Default has occurred and is continuing or would reasonably be expected to result therefrom, including without limitation, any Default or Event of Default resulting from a violation of Section 11.02.
(5) No Distributions. Make any Distribution, except Permitted Distributions.
(6) No Investments. Make, or permit any Subsidiary to make, any Investment, except for any Investment that would not contravene the Organizational Documents of the Borrowers or related to such Subsidiary provided (a) no Default or Event of Default then exists and that the making of such Investment does not cause or will result in a Default or Event of Default, and (b) such Investment is not made to an Affiliate that is not a Subsidiary of a Borrower or any other Credit Party.
(7) No Encumbrances. Create, incur, assume or permit to exist any Encumbrance upon any Collateral, except Permitted Encumbrances.
(8) No Change to Year End. Make any change to its Fiscal Year end from December 31 without the approval of the Lender, not to be unreasonably withheld.
(9) No Continuance. Continue into any other jurisdiction.
(10) Hedge Arrangements. Enter into or permit to be outstanding at any time (a) any Hedge Arrangement for speculative purposes (provided, for greater clarity, the Borrowers may enter into Hedge Arrangements in respect of interest rate swaps relating to Indebtedness in the normal course of business), or (b) a Qualifying Hedge Arrangement that would result in the aggregate amount of all Qualifying Hedge Arrangements exceeding a notional or face amount equal to the Commitment.
(11) Securitization. Securitize any rights to receive payment under any of the Material Agreements or in respect to any accounts receivable originating from any of the Secured Property.
(12) Capital Expenditures. In any Fiscal Year make, or enter into any agreements which would require it to make, any Capital Expenditures with respect to the Secured Property in excess of $1,000,000 (in the aggregate), unless such Capital Expenditure is: (a) approved by the Lender, (b) incurred or made in accordance with each of the following requirements: (i) such Capital Expenditure is not in contravention of the Material Agreements and the Permitted Encumbrances and is made in accordance with prudent industry practice; and (ii) such Capital Expenditure could not reasonably be expected to result in a Default or a Material Adverse Change, or (c) is incurred by Borrowers pursuant to the CCDC 14 Design-Build Stipulated Price Contract (2013) dated April 18, 2022 with Rossclair Contractors Inc. with respect to the expansion of the Secured Property and funded through equity funding available to the Borrowers.
(13) Fundamental Change. Except as permitted by this Agreement (including, for greater certainty, pursuant to a SmartStop Transaction in accordance with Section 10.05 below) (a) change its capital structure or amend, vary or alter in any material way its articles of incorporation or other Organizational Documents; or (b) materially change its senior management; or (c) change its business objectives, purposes or operations in any material way.
(14) Amendments to Documents. Except as permitted by this Agreement (including, for greater certainty, pursuant to a SmartStop Transaction in accordance with Section 10.05 below), amend, vary or alter in any material way, consent to any assignment or transfer of, or waive or surrender any of its rights or entitlements under, or terminate or permit any termination of, any Material Agreements, except for termination of any such Material Agreement in accordance with the terms thereof.
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(15) No Change to Business/Limitation on Acquisitions. Carry on any business other than the business carried on by it on the date hereof, which for greater certainty, is the acquisition, ownership, operation and management of the Secured Property and other properties located in Canada. The Borrowers and their respective Subsidiaries shall not effect any acquisition of properties where as a result thereof, a breach of the Total Debt to Assets Ratio then in effect would occur.
(16) Non-Arm’s Length Transactions. Enter into or, permit any Subsidiary to enter into, any transaction for the purchase, sale or exchange of any property or the rendering of any services, with any of its Affiliates, or with any Affiliate of any of its partners or shareholders, except a transaction which is upon fair and reasonable terms not less favourable to such Credit Party or any such Subsidiary than would be obtained in a comparable arms-length transaction for fair market value.
(17) Leasing. Enter into any Leases in respect of the Secured Property or materially amend, renew, terminate, forfeit or cancel any Leases in respect of the Secured Property unless:
(i) such Leases, amendments, renewals, terminations, forfeitures or cancellations are made on arm’s length terms and in good faith (the Lender acknowledging the existence of the Sellers Leases); and
(ii) such Leases, amendments, renewals, terminations, forfeitures or cancellations will not result in a Material Adverse Change and reflect good business practice and are on such terms as a prudent owner of a similar property as the Secured Property would accept having regard to prevailing market terms and conditions and otherwise in accordance with prudent leasing practices.
(18) Concerning Leases Generally. Accept or require payment of Rent in respect of the Secured Property that would result in, the aggregate of, more than $200,000 of such Rent being prepaid under the Leases (excluding, for purposes of such calculation, Lease surrender payments and security deposits made by tenants under the Leases, which are expressly permitted).
(19) Remove, Destroy or Redevelop. Destroy, remove, permit to be destroyed or removed any of the buildings, plant, machinery or equipment comprising part of the Secured Property, provided that:
(a) nothing herein shall prevent (i) the removal of any machinery or equipment from one part of the Secured Property to another or the temporary removal of any such machinery or equipment for the purposes of repair, or (ii) alterations to the Secured Property provided such alterations are permitted pursuant to Section 10.04(11); and
(b) the Borrowers may remove, dismantle, sell, exchange or otherwise dispose of any plant, machinery or equipment which has become obsolete, worn out, replaced or unserviceable if such plant, machinery or equipment is replaced by plant, machinery or equipment of at least equal performance or if such plant, machinery or equipment so dealt with is unnecessary for use in the conduct of its business at the Secured Property; provided that such removal or other disposal does not materially impair the normal operation of the Secured Property.
(20) Pension. Establish, operate or maintain any Canadian Pension Plans or Pension Plans under Applicable Canadian Pension Laws or any corporately funded defined benefits or Canadian Plans.
(21) Environmental Activity. Carry on any Environmental Activity contrary to any Environmental Law or cause or permit any Hazardous Material to be stored in or to be present in any form in or under the Secured Property contrary in any material respect to any Environmental Laws. Nothing in this Section or this Agreement shall impose any obligation or liability whatsoever on the Lender, the Lender or any of them.
(22) Restrictions on Intercompany Transfers. Except as expressly permitted under this Agreement, will not, and will not permit any Subsidiary of a Borrower to, create or otherwise cause or suffer to exist or become effective any consensual Encumbrance or restriction of any kind on the ability of any Subsidiary of a Borrower to: (i) make Distributions on any of such Subsidiary’s Equity Interests; (ii) pay any Indebtedness owed to any Borrower or
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any Subsidiary of a Borrower; (iii) make loans or advances to the Borrower or any Subsidiary of a Borrower; or (iv) transfer any of its property or assets to the Borrower or any Subsidiary of a Borrower.
(23) Anti-Bribery Laws; Anti‑Money Laundering Laws; Sanctions and Anti‑Corruption Laws. (a) Directly or indirectly, (i) conduct any business or engage in making or receiving any contribution of funds, goods or services to or for the benefit of any Person engaging in the activities, or violating the Applicable Laws described in Section 9.01(37), (ii) deal in, or otherwise engage in any transaction relating to, the Secured Property or interests in the Secured Property blocked pursuant to any AML Law, Sanction or Anti‑Corruption Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any AML Law, Sanction or Anti‑Corruption Law (and the Credit Parties shall deliver to the Lender any certification or other evidence requested from time to time by the Lender in its reasonable discretion, confirming the Credit Parties’ compliance with this Section 10.4(24); (b) use the proceeds of any Loan or otherwise make available such proceeds (i) to any Person or entity, for the purpose of financing the activities of any Person or entity currently subject to Sanctions, or in any country or territory which is currently a Sanctioned Country, or (ii) in any other manner that would result in a violation of Sanctioned by any Person; or (c) cause or permit any of the funds of such Credit Party that are used to repay any Loan to be derived from any unlawful activity with the result that the making of the Loan would be in violation of Applicable Laws.
10.05 SmartStop Transaction
(1) Notwithstanding anything to the contrary contained in this Agreement, and subject to the Lender’s sole and absolute discretion in respect of an assumption by a New Borrower pursuant to Section 10.5(1)(b) below, the Lender confirms, acknowledges and agrees that the following transfers and assumptions shall be permitted under this Agreement and under the other Loan Documents subject to compliance with Section 10.05(2) below (each, a “SmartStop Transaction”):
(a) any change in Control in any of the Borrowers, Guarantor or Property Manager that results in such entity being Controlled by SmartStop REIT or any of its Controlled Subsidiaries; or
(b) an assumption of the Loan by SmartStop REIT or any of its Controlled Subsidiaries (the “New Borrower”).
(2) The Lender hereby consents to any SmartStop Transaction provided that:
(a) the Lender receives at least thirty (30) days prior written notice of such transfer;
(b) the Borrowers shall provide the Lender with such information as the Lender shall reasonably request for the Lender to conduct such “know your customer,” and other searches as are necessary to satisfy internal organizational requirements regarding “know your customer” and similar requirements (to be applied on a non-discriminatory basis), as the Lender shall require, and such SmartStop Transaction shall not be permitted if the Lender in good faith determines that such SmartStop Transaction would result in noncompliance with any of the foregoing requirements;
(c) no Event of Default has occurred and is continuing both at the time such notice is given and as of the closing date of such SmartStop Transaction;
(d) the organizational documents of the Borrowers, New Borrower, Guarantor, Property Manager, and/or SmartStop REIT, as applicable, and their respective sponsor(s) or principal(s) shall be in form and substance reasonably satisfactory to the Lender;
(e) the Borrowers, New Borrower, Guarantor, Property Manager, and/or SmartStop REIT, as applicable, shall pay any and all reasonable out-of-pocket costs incurred by the Lender in connection with the transfer (including, without limitation, the Lender’s reasonable attorneys’ fees and disbursements and all recording fees, transfer taxes and title insurance premiums), it being
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acknowledged and agreed that Borrower shall have this obligation if the transaction is not consummated;
(f) in connection with any assumption of the Loan, New Borrower shall assume all of the obligations of Borrowers under this Agreement and the other Loan Documents by entering into an assumption agreement in form and substance reasonably satisfactory to the Lender and delivering such legal opinions as the Lender may reasonably require;
(g) in connection with any assumption of the Loan, the New Borrower shall deliver an endorsement to the existing title insurance policy in form and substance reasonably acceptable to the Lender insuring the Security as modified by the assumption agreement, as a valid first lien on the Secured Property and naming New Borrower as owner of the Secured Property, naming the Lender as the insured, bringing forward the date and time of the title insurance policy to the date and time of the recording of the assumption agreement or a memorandum thereof, and addressing such other matters as the Lender shall reasonably require, and which endorsement shall insure that as of the recording of the assumption agreement, the Secured Property shall not be subject to any additional exceptions or liens other than those contained in the title insurance policy; and
(h) the Lender shall reasonably cooperate with Borrowers, Guarantor, Property Manager, the New Borrower and SmartStop REIT, as applicable, in order to make reasonable and necessary amendments to the Loan Documents to effectuate such SmartStop Transaction.
10.06 Permitted Sale
Notwithstanding anything set out in this Agreement, the Borrowers shall be entitled to a partial discharge of a portion of the Secured Property in connection with the sale thereof, subject to the Borrowers completing a subdivision of the Secured Property, in accordance with all Applicable Law, the result of which creates a standalone parcel capable of being transferred to a third party. In addition, any such sale of vacant land shall not result in a Material Adverse Change in respect of the retained portion of the Secured Property and the operation of the Borrower’s business thereon, and shall require the Borrowers repay the Loan by an amount which reduces the Loan to value ratio on the retained Secured Property to 50% using the then outstanding Commitment and the fair market value of the retained portion of the Secured Property as set out in an updated Acceptable Appraisal delivered to the Lender in connection with such prepayment. Any such prepayment made pursuant to this Section shall be subject to the repayment provisions set out herein, including without limitation those in Section 6.03. It shall be a condition to any discharge request that, following repayment, the Modified Total Property Level Debt Service Coverage Ratio, or the Total Property Level Debt Service Coverage Ratio shall not be less than 1.30:1:00 or 1.25:1:00, as applicable, in each case as determined in accordance with the terms hereof.
10.07 Debt Service Reserve Account
(1) Prior to the Advance, the Borrowers shall establish a Canadian Dollar deposit account in the name of the Beneficial Owner with the Lender (the “Debt Service Reserve Account”) in an amount equal to $4,000,000.
(2) During the operation of the Debt Service Reserve Account,
(a) the Lender shall utilize the proceeds on deposit in the Debt Service Reserve Account to fund the payment of any interest and principal under any Loan that is due and payable by the Borrowers. The Lender shall withdraw funds from the Debt Service Reserve Account in order to effect such unpaid payment without notice to the Borrowers; or
(b) the Modified Total Property Level Debt Service Coverage Ratio is less than 1.30:1:00 at any Fiscal Quarter, then, the Credit Parties will deposit an amount to the Debt Service Reserve Account such that, when such deposit is made, the Modified Total Property Level Debt Service Coverage Ratio is not less than 1.30:1:00.
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(3) The Credit Parties shall make any required contribution to the Debt Service Reserve Account within thirty (30) days of any such Fiscal Quarter and shall provide the Lender an updated Compliance Certificate evidencing that the Debt Service Coverage Ratio is not less than 1:30:1:00.
(4) So long as there is no Event of Default and no Event of Default will occur, the Debt Service Reserve Account shall be closed and the funds therein returned to the Borrowers (or as directed) following the third consecutive quarter in which the Total Property Level Debt Service Coverage Ratio is not less than 1:30:1:00 as evidenced by a Compliance Certificate which has been provided to the Lender.
(5) The Debt Service Reserve Account shall be subject to a blocked account agreement in favour of the Lender.
Article 11 – DEFAULT
11.01 Events of Default
The occurrence of any one or more of the following events (each such event being referred to as an “Event of Default”) will constitute a default under this Agreement:
(a) if the Borrowers fail to pay any amount of principal of any Loan when due;
(b) if the Borrowers fail to pay any interest, fees or other Obligations (other than any principal amount of any Loan) within three (3) days of such amount becoming due hereunder;
(c) if any Credit Party breaches any of the covenants in Sections 10.01(5), 10.01(12)(A), 10.01(22), 10.02, 10.04(1) or 10.04(5);
(d) if any Credit Party neglects to observe or perform any covenant or obligation in this Agreement or in any other Loan Document on its part to be observed or performed (other than a covenant or condition whose breach or default in performance is specifically dealt with elsewhere in this Section 11.01) and such Credit Party fails to remedy such default within thirty (30) days from the earlier of (i) the date such Credit Party becomes aware of such default, and (ii) the date the Lender delivers written notice of the default to such Credit Party; it being understood that the Lender may, in its discretion, provide an extension to such thirty (30) day period;
(e) if any representation or warranty made by any Credit Party in this Agreement, any other Loan Document or in any certificate or other document at any time delivered hereunder or thereunder to the Lender proves to have been untrue, incorrect or misleading in any respect if the representation or warranty contains a materiality qualification, and otherwise in all material respect on and as of the date that it was made or was deemed to have been made and such Credit Party fails to remedy such default within thirty (30) days of becoming aware of such event;
(f) if a Borrower or any of its Subsidiaries or any other Credit Party ceases or threatens to cease to carry on business generally or admits its inability or fails to pay its Indebtedness generally;
(g) if a Credit Party fails to make any payment when such payment is due and payable to any Person or defaults in the observance or performance of any other agreement or condition in relation to any Indebtedness (other than Obligations) to any Person or Persons that in the aggregate principal amount then outstanding is, in either or both cases, provided that (i) in respect of a Borrower, such principal amount then outstanding is in excess of USD $1,000,000, and (ii) in respect of the Guarantor, such principal amount then outstanding is in excess of USD $5,000,000 (and, for greater certainty, in each case, such calculation shall be made on aggregate, as opposed to individual, basis of all affected Credit Parties) or contained in any instrument or agreement evidencing, securing or
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relating thereto and such default or other condition has not been remedied within any applicable grace period;
(h) if any Credit Party denies, to any material extent, its Obligations under any Loan Document or claims any of the Loan Documents to be invalid or withdrawn in whole or in part;
(i) any of the Loan Documents or any material provision of any of them becomes unlawful or is changed by virtue of legislation or by a Governmental Authority, if any Credit Party does not, within thirty (30) days of receipt of notice of such Loan Document or material provision becoming unlawful or being changed, replace such Loan Document with a new agreement that is in form and substance satisfactory to the Lender acting reasonably, or amend such Loan Document to the satisfaction of the Lender acting reasonably;
(j) if a decree or order of a court of competent jurisdiction is entered adjudging a Borrower or any of their respective Subsidiaries a bankrupt or insolvent or approving as properly filed a petition seeking the winding-up of a Credit Party under the Companies’ Creditors Arrangement Act (Canada), the Bankruptcy and Insolvency Act (Canada), the United States Bankruptcy Code or the Winding-up and Restructuring Act (Canada) or any other bankruptcy, insolvency or analogous laws or issuing sequestration or process of execution against any substantial part of the assets of any Credit Party or ordering the winding-up or liquidation of its affairs, and any such decree or order continues unstayed and in effect for a period of 10 Business Days;
(k) if a Borrower or any of its Subsidiaries becomes insolvent, makes any assignment in bankruptcy or makes any other assignment for the benefit of creditors, makes any proposal under the Bankruptcy and Insolvency Act (Canada) or any comparable law, seeks relief under the Companies’ Creditors Arrangement Act (Canada), the United States Bankruptcy Code, the Winding-up and Restructuring Act (Canada) or any other bankruptcy, insolvency or analogous law, is adjudged bankrupt, files a petition or proposal to take advantage of any act of insolvency, consents to or acquiesces in the appointment of a trustee, receiver, receiver and manager, interim receiver, custodian, sequestrator or other Person with similar powers of itself or of all or any substantial portion of its assets, or files a petition or otherwise commences any proceeding seeking any reorganization, arrangement, composition or readjustment under any applicable bankruptcy, insolvency, moratorium, reorganization or other similar law affecting creditors’ rights or consents to, or acquiesces in, the filing of such a petition;
(l) if an Encumbrancer takes possession, by appointment of a receiver, receiver and manager or otherwise, of all or a substantial portion of the Secured Property or a substantial portion of the property of any Credit Party, including without limitation, distress, execution or any other proceedings with similar effect and the same is not released, bonded, satisfied, discharged, vacated or stayed within the shorter of thirty (30) days or such shorter period as would permit the Secured Property or any part thereof to be sold thereunder;
(m) if proceedings are commenced for the dissolution, liquidation or voluntary winding-up of any Credit Party, or for the suspension of the operations of any Credit Party unless such proceedings are being actively and diligently contested in good faith;
(n) if a final unappealable judgment or decree for the payment of money due has been obtained or entered against a Borrower in an amount in excess of USD $500,000 or against the Guarantor in amount in excess of USD $5,000,000;
(o) if any Security ceases to constitute a valid and perfected first priority security interest (subject only to Permitted Encumbrances) and the Borrowers have failed to remedy such default within thirty (30) days of becoming aware of such fact;
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(p) if a Material Agreement is terminated, repudiated or ceases to be legal, binding and enforceable or if an event of default occurs under any Material Agreement (other than an event of default specifically dealt with in this Section 11.01) resulting in, or which may result in a Material Adverse Change, to a Credit Party or Secured Property and such event of default is not remedied within the time available to cure such default or is being contested in good faith by appropriate proceedings and the Lender is satisfied that neither the position of the Lender, nor the Security is being adversely affected in any material way;
(q) if any Governmental Authority shall condemn, expropriate, seize or appropriate a material portion of the Secured Property;
(r) if there is any change or Disposition in the legal or beneficial ownership of all or any part of the Secured Property except as permitted by this Agreement (including, without limitation, as permitted pursuant to Section 10.04(1));
(s) if a Material Adverse Change has occurred with respect to a Borrower or the Secured Property;
(t) except as permitted by this Agreement, if any Credit Party enters into or becomes subject to any transaction or agreement which results or could result in a change of Control or if any change of Control occurs; or
(u) if an Impermissible Qualification is included in the financial statements delivered to the Lender pursuant to Section 10.03;
11.02 Acceleration and Enforcement
(1) If any Event of Default occurs and is continuing, (i) the Lender will have no further obligation to make Loans hereunder, and the outstanding principal amount or face amount, as the case may be, of all Loans and all other Obligations will, at the option of the Lender, become immediately due and payable with interest thereon, at the rate or rates determined as herein provided, to the date of actual payment thereof, all without notice, presentment, protest, demand, notice of dishonour or any other demand or notice whatsoever, all of which are hereby expressly waived by each Credit Party; provided, if any Event of Default described in 11.01(j) or (k) with respect to the Credit Parties occurs, the Commitments (if not theretofore terminated) will automatically terminate and the outstanding principal amount or face amount, as the case may be, of all Loans and all other Obligations will automatically be and become immediately due and payable; (ii) the Lender may, in its discretion, exercise any right or recourse and proceed by any action, suit, remedy or proceeding against any Credit Party authorized or permitted by law for the recovery of all the Obligations of the Credit Parties to the Lender and, notwithstanding that the Lender has not exercised every right under the foregoing clause (i), proceed to exercise any and all rights hereunder and under the Loan Documents.
(2) The Lender is not under any obligation to the Credit Parties or any other Person to realize upon any collateral or enforce the Security or any part thereof or to allow any of the collateral to be sold, dealt with or otherwise disposed of. The Lender is not responsible nor liable to the Credit Parties or any other Person for any loss or damage arising from such realization or enforcement or the failure to do so or for any act or omission on their respective parts or on the part of any director, officer, employee, agent or adviser of any of them in connection with any of the foregoing.
11.03 Remedies Cumulative
For greater certainty, it is expressly understood that the respective rights and remedies of the Lender and the Lender hereunder or under any other Loan Document or instrument executed pursuant to this Agreement are cumulative and are in addition to and not in substitution for any rights or remedies provided by law or by equity; and any single or partial exercise by the Lender and the Lender of any right or remedy for a default or breach of any term, covenant, condition or agreement contained in this Agreement or any other Loan Document will not be deemed to be
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a waiver of or to alter, affect or prejudice any other right or remedy or other rights or remedies to which any one or more of the Lender and the Lender may be lawfully entitled in connection with such default or breach.
11.04 Perform Obligations
If an Event of Default has occurred and is continuing and if any Credit Party has failed to perform any of its covenants or agreements in the Loan Documents, the Lender, may, but will be under no obligation to perform any such covenants or agreements in any manner deemed fit by the Lender without thereby waiving any rights to enforce the Loan Documents. The reasonable expenses (including any legal costs) paid by the Lender in respect of the foregoing will be an Obligation and will be secured by the Security.
11.05 Third Parties
It is not necessary for any Person dealing with the Lender, the Lender or any other agent of the Lender to inquire whether the Security has become enforceable, or whether the powers that the Lender are purporting to exercise may be exercised, or whether any Obligations remain outstanding upon the security thereof, or as to the necessity or expediency of the stipulations and conditions subject to which any sale is to be made, or otherwise as to the propriety or regularity of any sale or other disposition or any other dealing with the collateral charged by such Security or any part thereof.
11.06 Application of Payments
All proceeds received by the Lender from or in respect of any realization of Security, any judgment against a Borrower or any Guarantor obtained by the Lender, any other realization of a Borrower’s or any Guarantor’s assets, any set-off or combination of accounts in respect of any credit balance, any recovery, distribution or payment arising out of any bankruptcy of a Borrower or any Guarantor or any proposal or re-organization, plan of arrangement, liquidation or winding-up of a Borrower or any Guarantor, shall be paid to the Lender and, upon receipt by the Lender shall, subject to the provisions hereof, be allocated from time to time by the Lender as follows:
(a) Firstly, to pay amounts due hereunder as costs and expenses incurred by the Lender in connection with the realization of the Security and the enforcement of the Lender’s rights hereunder including any legal, consultant, advisor, property manager and other professional fees incurred by the Lender and including interest and such costs and expenses from the date incurred until paid at the rate applicable to overdue interest;
(b) secondly, in payment of any other unpaid fees payable hereunder and the other Loan Documents to the Lender;
(c) thirdly, in payment of amounts due hereunder to the Lender as overdue interest in respect of Loans;
(d) fourthly, in payment of amounts due hereunder to the Lender as interest on Loans;
(e) fifthly, in payment or prepayment of all Obligations due to the Lender until all Obligations are paid in full to the Lender; and
(f) sixthly, in payment of the balance, if any, to the Borrowers or such other Person or Persons who may be entitled thereto at law, or as a court of competent jurisdiction may otherwise direct.
Article 12 – guarantee
12.01 Guarantees and Indemnity
(1) The Guarantor hereby unconditionally and irrevocably, guarantees payment and performance of the Obligations of the Borrowers.
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(2) If any or all of the Obligations of the Borrowers are not duly paid and are not recoverable under Section 12.01(1) for any reason whatsoever, the Guarantor hereby jointly and severally, unconditionally and irrevocably, will, as a separate and distinct obligation, indemnify and save harmless the Lender from and against any losses resulting from the failure of any Credit Party to pay the Obligations.
(3) If any or all of the Obligations of the Borrowers are not duly paid and are not recoverable under Section 12.01(1) or remain unperformed or the Lender is not indemnified under Section 12.01(2), in each case, for any reason whatsoever, the Obligations will, unconditionally and irrevocably, as a separate and distinct obligation, be recoverable jointly and severally from each of the Guarantors as primary obligor.
12.02 Obligations Absolute
The liability of the Guarantor hereunder is absolute and unconditional and is not affected by:
(a) any lack of validity or enforceability of this Agreement or any other Loan Document;
(b) any impossibility, impracticability, frustration of purpose, illegality, force majeure or act of Governmental Authority;
(c) the bankruptcy, winding-up, liquidation, dissolution, moratorium, readjustment of debt, arrangement, insolvency or other similar proceeding affecting any Credit Party or any other Person, including any discharge or bar against collection of any of the Obligations, the amalgamation of or any change in the existence, status, function, control, constitution or ownership of any Credit Party, the Lender or any other Person;
(d) any lack or limitation of power, incapacity or disability on the part of any Credit Party or of the directors, partners or agents thereof or any other irregularity, defect or informality on the part of any Credit Party in its Obligations;
(e) any limitation, postponement, prohibition, subordination or other restriction on the rights of the Lender to payment of the Obligations;
(f) any interest of the Lender in any Security whether as owner thereof or as holder of a security interest therein or thereon, being invalidated, voided, declared fraudulent or preferential or otherwise set aside, or by reason of any impairment of any right or recourse to any Security; or
(g) any other law, regulation, event, condition or other circumstance or any other act, delay, abstention or omission to act of any kind by any Credit Party or another Person that might otherwise constitute a legal or equitable defence available to any Credit Party, or a discharge, limitation or reduction of the Obligations hereunder,
Each of the foregoing is hereby waived by the Guarantor to the fullest extent permitted under Applicable Law. The foregoing provisions apply and the foregoing waivers will be effective to the fullest extent permitted under Applicable Law even if the effect of any action or failure to take action by the Lender is to destroy or diminish the Guarantor’s subrogation rights, the Guarantor’s right to proceed against any Credit Party for reimbursement, the Guarantor’s right to recover contribution from any other Person or any other right or remedy of the Guarantor.
12.03 No Release
Save and except as expressly provide in Section 12.02 above, the liability of the Guarantor hereunder is not released, discharged, limited or in any way affected by anything done, suffered or permitted by the Lender or any other Person in connection with any duties or liabilities of any Credit Party to the Lender or any Security including any loss of or in respect of any Security. Without limiting the generality of the foregoing and without releasing,
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discharging, limiting or otherwise affecting in whole or in part the liability of the Guarantor hereunder, without obtaining the consent of or giving notice to the Guarantor, the Lender may, subject to the terms of this Agreement:
(a) discontinue, reduce, increase or otherwise vary the credit of each Credit Party in any manner whatsoever;
(b) make any change in the time, manner or place of payment under, or in any other term of, any Loan Document or the failure on the part of any Credit Party to carry out any of its obligations under any Loan Document;
(c) grant time, renewals, extensions, indulgences, releases and discharges to any Credit Party or any other Person;
(d) subordinate, release, take or enforce, refrain from taking or enforcing or omit to take or enforce the Loan Documents or perfect, refrain from perfecting or omit to perfect the Loan Documents, whether occasioned by the fault of the Lender or otherwise;
(e) to the extent permitted under Applicable Law, give or refrain from giving to any Credit Party or any other Person notice of any sale or other disposition of any Collateral securing any of the Obligations or any other guarantee thereof, or any notice that may be given in connection with any sale or other disposition of any such property;
(f) accept compromises from any Credit Party or any other Person;
(g) marshal, refrain from marshalling or omit to marshal assets;
(h) apply all money or other property at any time received from any Credit Party or from the Security upon such part of the Obligations as the Lender may see fit or change any such application in whole or in part from time to time as each of them may see fit; and
(i) otherwise deal, delay or refrain from dealing or omit to deal with any Credit Party and all other Persons and the Security as the Lender may see fit, delay or refrain from doing or omit to do any other act or thing that under Applicable Law might otherwise have the effect, directly or indirectly, of releasing, discharging, limiting or otherwise affecting in whole or in part the Guarantor’s liability hereunder.
12.04 No Exhaustion of Remedies
The Lender is not bound or obligated to exhaust its recourse against any Credit Party or other Person or any Security it or they may hold, or take any other action before being entitled to demand payment from the Guarantor hereunder. The Guarantor agrees that the Lender may seek payment or performance of any of the Obligations from the Guarantor in accordance with the terms set out in this Agreement, whether or not the Lender shall have realized the value of the Secured Property secured under the Security or shall have proceeded against any of the Credit Parties principally or secondarily obligated for any of the Obligations.
12.05 Prima Facie Evidence
Any account settled or stated in writing by or between the Lender and each Credit Party will, absent manifest error, be prima facie evidence that the balance or amount thereof appearing due to the Lender is so due.
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12.06 Guarantor Rights
Notwithstanding anything to the contrary contained in this Article 12, in any claim by the Lender against the Guarantor, nothing shall impair or prevent the Guarantor from asserting any set-off or counterclaim, claim or other right that the Borrowers may have against the Lender and arising in respect of this Agreement.
12.07 Continuing Guarantee
The Obligations of the Guarantor hereunder will constitute and be continuing obligations and will apply to and secure any ultimate balance due or remaining due to the Lender and will not be considered as wholly or partially satisfied by the payment or liquidation at any time of any sum of money for the time being due or remaining unpaid to any such Person. The Obligations of the Guarantor hereunder will continue to be effective even if at any time any payment of any of the Obligations is rendered unenforceable or is rescinded or must otherwise be returned by the recipient of such payment upon the occurrence of any action or event including the insolvency, bankruptcy or reorganization of any Credit Party or otherwise, all as though such payment had not been made.
12.08 Waivers by Guarantors
The Guarantor hereby irrevocably waives acceptance hereof, presentation, demand, protest and any notice, as well as any requirement that at any time any action be taken by any Person against the Guarantor, any other Credit Party or any other Person.
12.09 Demand
The Guarantor will make payment to the Lender of the full amount of the Obligations and all other amounts payable by it hereunder forthwith after demand therefor is made to it. The Guarantor will also make payment to the Lender of all costs and expenses incurred by the Lender in enforcing the provisions of this Article 13.
12.10 Interest
The Guarantor will pay interest to the Lender and each of them at the interest rate of Prime Rate (i) plus the Applicable Margin, and (ii) plus 2.00%, on all amounts payable by the Guarantor hereunder, such interest to accrue from and including the date of demand on the Guarantor, and will be compounded monthly.
12.11 Limitation
Notwithstanding anything contained to the contrary in this Agreement, the recourse of the Lender under this guarantee against the Guarantor shall not exceed Twenty Seven Million Dollars ($27,000,000).
Article 13 – COMPENSATION and set-off
13.01 Increased Costs
(1) Increased Costs Generally. If any Change in Laws shall:
(a) impose, modify or deem applicable any reserve, assessment, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by the Lender;
(b) subject the Lender to any Tax of any kind whatsoever with respect to the Loan Documents or any Loans made by it, or change the basis of taxation of payments to the Lender in respect thereof, except for (x) Indemnified Taxes or Other Taxes covered by Section 13.02 and (y) the imposition, or any change in the rate, of any Excluded Tax payable by the Lender; or
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(c) impose on the Lender or any applicable interbank market any other condition, cost or expense affecting this Agreement or Loans made by the Lender;
and the result of any of the foregoing shall be to increase the cost to the Lender of making converting to, continuing or maintaining any Loans (or of maintaining its obligation to make any such Loans), or to increase the cost to the Lender, or to reduce the amount of any sum received or receivable by the Lender hereunder (whether of principal, interest or any other amount), then upon request of the Lender and subject to the Lender providing the certificate referred to in Subsection (2), the Credit Parties will pay to the Lender such additional amount or amounts as will compensate the Lender for such additional costs incurred or reduction suffered.
(2) Certificates for Reimbursement. A certificate of the Lender delivered to the Borrowers setting forth the amount or amounts necessary to compensate the Lender or its holding company, as the case may be, as specified in Subsection 13.01(1) (“Additional Compensation”), including a description of the event by reason of which it believes it is entitled to such compensation, and supplying reasonable supporting evidence (including, in the event of a Change of Applicable Laws, a photocopy of the Applicable Laws evidencing such change) and reasonable detail of the basis of calculation of the amount or amounts, shall be conclusive evidence of the Lender’s entitlement to such compensation and the amount thereof absent manifest error. The Borrowers shall pay the Lender the amount shown as due on any such certificate within 15 days after receipt thereof.
(3) Delay in Requests. Failure or delay on the part of the Lender to demand compensation pursuant to this Section shall not constitute a waiver of the Lender’s right to demand such compensation, except that the Borrowers shall not be required to compensate the Lender pursuant to this Section for any increased costs incurred or reductions suffered more than twelve months prior to the date that the Lender notifies the Borrowers of the Change in Laws giving rise to such increased costs or reductions and of the Lender’s intention to claim compensation therefor, unless the Change in Laws giving rise to such increased costs or reductions is retroactive, in which case the twelve-month period referred to above shall be extended to include the period of retroactive effect thereof.
13.02 Taxes
(1) Payments Subject to Taxes. If any Borrower or the Lender is required by Applicable Laws to deduct or pay any Indemnified Taxes (including any Other Taxes) in respect of any payment by or on account of any obligation of the Borrower hereunder or under any other Loan Document, then (i) the sum payable shall be increased by the Borrowers when payable as necessary so that after making or allowing for all required deductions and payments (including deductions and payments applicable to additional sums payable under this Section) the Lender receives an amount equal to the sum it would have received had no such deductions or payments been required, (ii) the Borrowers shall make any such deductions required to be made by it under Applicable Laws and (iii) the Borrowers shall timely pay the full amount required to be deducted to the relevant Governmental Authority in accordance with Applicable Laws.
(2) Payment of Other Taxes by Borrowers. Without limiting the provisions of Subsection 13.02(1) above, the Borrowers shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with Applicable Laws.
(3) Indemnification by Credit Parties. The Credit Parties shall indemnify the Lender, within 15 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Lender and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Lender), or by the Lender on its own behalf or on behalf of a Lender shall be conclusive absent manifest error.
(4) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by any Borrower to a Governmental Authority, the Borrowers shall deliver to the Lender the original or a certified
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copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Lender.
(5) Treatment of Certain Refunds and Tax Reductions. If the Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by Credit Parties or with respect to which any Credit Party has paid additional amounts pursuant to this Section or that, because of the payment of such Taxes or Other Taxes, it has benefited from a reduction in Excluded Taxes otherwise payable by it, it shall pay to the Borrowers or any other Credit Party, as applicable, an amount equal to such refund or reduction (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrowers or any other Credit Party as applicable under this Section with respect to the Taxes or Other Taxes giving rise to such refund or reduction), net of all out-of-pocket expenses of the Lender and without interest (other than any net after-Tax interest paid by the relevant Governmental Authority with respect to such refund). The Borrowers or any other Credit Party as applicable, upon the request of the Lender, agrees to repay the amount paid over to the Borrowers or any other Credit Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Lender if the Lender is required to repay such refund or reduction to such Governmental Authority. This paragraph shall not be construed to require the Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Credit Parties or any other Person, to arrange its affairs in any particular manner or to claim any available refund or reduction.
(6) FATCA. If a payment made to the Lender under this Agreement would be subject to U.S. federal withholding tax imposed by FATCA if the Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the IRC, as applicable), the Lender shall deliver to the Borrowers at the time or times prescribed by law and at such time or times reasonably requested by the Borrower such documentation prescribed by Applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the IRC) and such additional documentation reasonably requested by the Borrowers as may be necessary for the Borrowers to comply with its obligations under FATCA and to determine that the Lender has complied with the Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. The Borrowers shall provide such information as the Lender may reasonably require in order for the Lender to satisfy its obligations, if any, relating to FATCA.
13.03 Illegality
If the Lender determines that any Applicable Laws has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for the Lender or its applicable Lending Office to make or maintain any Loans (or to maintain its obligations to make any Loan) or to determine or charge interest rates based upon any particular rate, then, on notice thereof by the Lender to the Borrower through the Lender, any obligation of the Lender with respect to the activity that is unlawful shall be suspended until the Lender notifies the Lender and the Borrowers that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from the Lender (with a copy to the Lender), prepay or, if conversion would avoid the activity that is unlawful, convert any Loans. Upon any such prepayment or conversion, the Borrowers shall also pay accrued interest on the amount so prepaid or converted. The Lender agrees to designate a different Lending Office if such designation will avoid the need for such notice and will not, in the good faith judgment of the Lender, otherwise be materially disadvantageous to the Lender.
Article 14 – RIGHT OF SETOFF
14.01 Right of Setoff
If an Event of Default has occurred and is continuing, the Lender and each of its Affiliates is hereby authorized at any time and from time to time in its sole discretion to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by the Lender or any such Affiliate to or for the credit or the account of the Borrowers against any and all of the Obligations of the Borrowers now or hereafter existing under this Agreement or any other Loan Document to the Lender, irrespective of whether or not the Lender has made any demand under this Agreement or any other Loan Document and although such Obligations of the Credit Parties may be contingent or unmatured or
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are owed to a branch or office of the Lender different from the branch or office holding such deposit or obligated on such indebtedness.
The rights of the Lender and its Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff, consolidation of accounts and bankers’ lien) that the Lender or their respective Affiliates may have. The Lender agrees to promptly notify the Borrowers and the Lender after any such setoff and application, but the failure to give such notice shall not affect the validity of such setoff and application.
Article 15 – NOTICES: EFFECTIVENESS; ELECTRONIC COMMUNICATION
15.01 Notices, etc.
(1) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in Subsections 15.01(3) or (4)) all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier or electronic mail to the addresses, telecopier numbers or e-mail addresses specified elsewhere in this Agreement or, if to the Lender, to it at its address or telecopier number specified the signature pages of this Agreement.
(2) Delivery. Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given on a Business Day between 9:00 a.m. and 5:00 p.m. local time where the recipient is located, shall be deemed to have been given at 9:00 a.m. on the next Business Day for the recipient). Notices delivered through electronic communications to the extent provided in Subsections 15.01(3) or (4) below, shall be effective as provided therein.
(3) Electronic Communications. Notices and other communications to the Lender hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Lender. The Lender may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications. Notices and other communications to the Borrowers may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites).
(4) Delivery by Electronic Communication. Unless the Lender otherwise prescribes, (a) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (b) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (a) of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (a) and (b) above, if such notice, e-mail or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.
(5) Notice. The mailing addresses and address for electronic communications for the purposes of notices and other communications to the Credit Parties and the Lender are set out on the signature pages of this Agreement.
(6) Change of Address, Etc. Any party hereto may change its address or telecopier number for notices and other communications hereunder by notice to the other parties hereto in accordance with the terms of this Agreement.
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Article 16 – EXPENSES; INDEMNITY: DAMAGE WAIVER
16.01 Expenses; Indemnity: Damage Waiver
(1) Costs and Expenses. Each Credit Party shall pay all reasonable out-of-pocket expenses incurred by the Lender including the reasonable fees, charges and disbursements of counsel, in connection with the enforcement or protection of its rights in connection with this Agreement and the other Loan Documents, including its rights under this Section, or in connection with all Loans made hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans.
(2) Indemnification by Credit Parties. The Credit Parties shall indemnify the Lender and each Related Person of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all Claims suffered or incurred by any Indemnitee or asserted against any Indemnitee by any third party or by any Credit Party arising out of, in connection with, or as a result of (a) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance or non-performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation or non-consummation of the transactions contemplated hereby or thereby, (b) any Loan, or the use or proposed use of the proceeds therefrom, (c) any environmental matters arising during or prior to Borrower’s ownership, possession, operation of control of the Secured Property owned or operated by any Credit Party, any actual or alleged use, generation, storage, escape, seepage, leakage, spillage, disposal, presence or release on, from or under the Secured Property of any Hazardous Substance on or from any property owned or operated by the Beneficial Owner, any breach of Environmental Laws by the Borrowers or any environmental liability related in any way to the Borrowers (notwithstanding any provision of the Loan Documents to the contrary, the indemnification under this Section 16.01(2)(c) shall survive the repayment of the Loans and the discharge and/or release of any Security), or (d) any actual or prospective Claim relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by any Credit Party and regardless of whether any Indemnitee is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such Claims (i) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence, criminal acts or omissions or wilful misconduct of such Indemnitee or (ii) result from a claim brought by the Credit Parties against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if the Borrower have obtained a final and nonappealable judgment in its favour on such claim as determined by a court of competent jurisdiction, nor shall it be available in respect of matters specifically addressed in Section 13.01, Section 13.02 and Section 16.01(1), or (iii) are ordinary administrative expenses incurred by the Indemnitee in the ordinary course of business.
(3) Waiver of Consequential Damages, Etc. To the fullest extent permitted by Applicable Laws, the Credit Parties shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for indirect, consequential, punitive, aggravated or exemplary damages (as opposed to direct damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby (or any breach thereof), the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby, provided such information or materials are distributed by such Indemnitee in accordance with the provisions of this Agreement or related term sheet or other agreement between the Lender and the Borrower in respect of the Credit Facility.
(4) Payments. All amounts due under this Section shall be payable promptly after demand therefor. A certificate of the Lender setting forth the amount or amounts owing to the Lender or Related Person, as the case may be, as specified in this Section, including reasonable detail of the basis of calculation of the amount or amounts, and delivered to the Borrowers shall be conclusive absent manifest error.
(5) Specific Environmental Indemnity. The Credit Parties shall indemnify each Indemnitee and hold each Indemnitee harmless at all times from and against any and all losses, damages and costs (including reasonable counsel fees and out-of-pocket expenses) resulting from any legal action commenced or claim made by a third party against
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any Indemnitee related to or as a result of actions or omissions on the part of any Credit Party related to or as a consequence of environmental matters or any requirements of Environmental Laws concerning the Secured Property. The Credit Parties shall have the sole right, at their expense, to control any such legal action or claim and to settle on terms and conditions approved by the Credit Parties and approved by the party named in such legal action or claim, acting reasonably, provided that if, the interests of the Indemnitee are different from those of the Credit Parties in connection with such legal action or claim, any such Indemnitee shall have the sole right, at the each Indemnitee’s expense, to defend their own interests provided that any settlement of such legal action or claim shall be on terms and conditions approved by the Credit Parties, acting reasonably. If the Lender elects to defend such legal action or claim, they shall promptly notify the Borrowers of same and shall make reasonable efforts to consult with the Borrowers on an ongoing basis in connection with such matter. If the Credit Parties do not defend the legal action or claim, the Lender shall have the right to do so on its own behalf and on behalf of the Credit Parties at the expense of such Credit Parties.
(6) Survival. The provisions of this Article 16 will survive the repayment of all Loans, whether on account of principal, interest or fees, and the termination of this Agreement, unless a specific release of such provisions by the Lender, on behalf of the Lender, is delivered to the Borrower.
Article 17 – SUCCESSORS AND ASSIGNS
17.01 Successors and Assigns
The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the no Credit Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Lender and the Lender may assign or otherwise transfer any of its rights or obligations hereunder. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby) any legal or equitable right, remedy or claim under or by reason of this Agreement.
Article 18 – amendments and waivers
18.01 Amendments and Waivers
No amendment to this Agreement will be valid or binding unless set forth in writing and duly executed by the Borrowers and the Lender. No waiver of any breach of any provision of the Loan Documents and no consent required hereunder will be effective or binding unless made in writing and signed by the party purporting to give the same. Unless otherwise provided, any waiver or consent given hereunder will be limited to the specific breach waived or matter consented to, as the case may be, and may be subject to such conditions as the party giving such waiver or consent considers appropriate.
Article 19 – GOVERNING LAW; JURISDICTION; ETC.
19.01 Governing Law; Jurisdiction; Etc.
(1) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the Province of Ontario and the laws of Canada applicable in that Province.
(2) Submission to Jurisdiction. Each Credit Party irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the courts of the Province of Ontario, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such court. Each of the parties hereto agrees that a final, non-appealable judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or in any other Loan Document shall affect any right that the Lender may otherwise have to bring any
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action or proceeding relating to this Agreement or any other Loan Document against each Credit Party or its properties in the courts of any jurisdiction.
(3) Waiver of Venue. Each Credit Party irrevocably and unconditionally waives, to the fullest extent permitted by Applicable Laws, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court of the Province of Ontario. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by Applicable Laws, the defence of an inconvenient forum to the maintenance of such action or proceeding in any such court.
Article 20 – WAIVER OF JURY TRIAL
20.01 Waiver of Jury Trial
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAWS, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Article 21 – COUNTERPARTS; INTEGRATION; EFFECTIVENESS; ELECTRONIC EXECUTION
21.01 Counterparts; Integration; Effectiveness; Electronic Execution
(1) Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement shall become effective when it has been executed by the Lender and when the Lender has received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or by sending a scanned copy by electronic mail shall be effective as delivery of a manually executed counterpart of this Agreement.
(2) Electronic Execution of Assignments. The words “execution,” “signed,” “signature,” and words of like import shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any Applicable Laws, including Parts 2 and 3 of the Personal Information Protection and Electronic Documents Act (Canada), the Electronic Commerce Act, 2000 (Ontario) and other similar federal or provincial laws based on the Uniform Electronic Commerce Act of the Uniform Law Conference of Canada or its Uniform Electronic Evidence Act, as the case may be.
Article 22 – TREATMENT OF CERTAIN INFORMATION: CONFIDENTIALITY
22.01 Treatment of Certain Information: Confidentiality
(1) The Lender agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to it, its Affiliates and its Related Parties (to the extent necessary to administer or enforce this Agreement and the other Loan Documents) (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and will be bound and instructed to keep such
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Information confidential), (b) to the extent required or requested by any regulatory authority having jurisdiction over such Person or its Related Parties (including any self-regulatory authority), (c) to the extent required by Applicable Laws or other legal process, (d) to any other party hereto, (e) to the extent reasonable, in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to any actual or prospective counterparty (or its advisors) to any swap, derivative, credit-linked note or similar transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Lender on a non-confidential basis from a source other than the Borrower and provided such source has not, to the knowledge of the Lender, breached a duty of confidentiality owed to the Borrowers or, the Lender. If the Lender is requested or required to disclose any Information pursuant to or as required by Applicable Laws or by an subpoena or similar legal process, the Lender, shall use its reasonable commercial efforts to provide the Borrowers with notice of such requests or obligation in sufficient time so that the Borrowers may seek an appropriate protective order or waive the Lender’s compliance with the provisions of this Section, and the Lender shall co-operate with the Borrowers in obtaining any such protective order.
(2) For purposes of this Section, “Information” means all information relating to the Credit Parties or any of its Affiliates or any of their respective businesses, other than any such information that is available to the Lender on a non-confidential basis prior to such receipt. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. In addition, the Lender may disclose to any agency or organization that assigns standard identification numbers to loan facilities such basic information describing the facilities provided hereunder as is necessary to assign unique identifiers (and, if requested, supply a copy of this Agreement), it being understood that the Person to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to make available to the public only such Information as such person normally makes available in the course of its business of assigning identification numbers.
(3) In addition, and notwithstanding anything herein to the contrary, the Lender may provide information concerning the Borrower and the Credit Facility established herein to the Loan Pricing Corporation and/or recognized trade publishers of information for general circulation in the loan market.
(4) In addition, and notwithstanding anything herein to the contrary, the Credit Parties agree to maintain the confidentiality of, and shall not disclose, the contents of the definition of Applicable Margin, reference herein to any fees or, at the request of the Lender, the identity of the Lender and the Lender shall have the right to require the Credit Parties to redact the definition of Applicable Margin, reference herein to any fees and such other information that the Lender may wish to redact (including, without limitation, the identity of the Lender where requested by a Lender) with respect to this Agreement in accordance with National Instrument 51-102 and Applicable Law prior to any Credit Party or its agents posting this Agreement on EDGAR (www.edgar.com), provided that the proposed redactions are, according to such Credit Party (other than with respect to the redaction of the fees), in accordance with National Instrument 51-102 and Applicable Law. The Lender and each Credit Party shall each act reasonably in determining the extent of any redaction prior to any posting on EDGAR. The Credit Parties shall provide written notice to the Lender of any request by a securities commission to amend the redaction of the identity of the Lender.
Article 23 – language
23.01 Language
The parties acknowledge that they have required that this Agreement, as well as all documents, notices and legal proceedings executed, given or instituted pursuant or relating directly or indirectly hereto, be drawn up in English (except as the parties may otherwise agree in writing). Les parties reconnaissent avoir exigé la rédaction en anglais de ce contrat, ainsi que de tous documents exécutés, avis donnés et procédures judiciaires intentées, directement ou indirectement, à la suite de ou relativement au présent contrat.
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Article 24 – Nature of Obligations, Recourse and direction
24.01 Nature of Obligations under this Agreement and Recourse
(1) Save and except as expressly provided otherwise pursuant to this Agreement, the obligations of the Credit Parties under the Loan Documents (including the Obligations of the Borrowers) are joint and several and the Lender may pursue its remedies against one or more of the Credit Parties and/or the Secured Property and the Collateral (or any part thereof) at its sole, absolute and unfettered discretion without the requirement of pursuing their remedies against any of the other parties or the Secured Property or the Collateral (or any part thereof). For greater certainty, the Credit Parties acknowledge and agree that the Lender shall not be required to enforce against the Secured Property or the Collateral (or any part thereof) prior to demanding payment from a Credit Party and payment by the Borrower or the Guarantor shall not prevent the Lender from realizing upon the collective interest of the Credit Parties in the Secured Property or the Collateral (or any part thereof).
(2) Save and except as expressly provide otherwise pursuant to this Agreement, nothing in this Agreement or in any of the other Loan Documents shall mean, nor be construed to mean, that the recourse of the against each Credit Party and the Secured Property is anything other than full recourse with regard to the Obligations hereunder, the manner and order of realization or the exercise of remedies hereunder or under the Loan Documents.
(3) The Guarantor acknowledges and agrees that the Borrower may execute a Drawdown Notice or any Conversion Notice or Rollover Notice, any written request, Compliance Certificate, Officer’s Certificate or any document or agreement contemplated under the Loan Documents and that it shall be bound by any such notice, request, certificate, document or agreement executed and delivered by the Borrower and shall continue to be liable thereunder pursuant to Article 13.
[Signature pages follow]
IN WITNESS WHEREOF the parties have executed this Agreement.
| BORROWER: | SST VI 1450 DON MILLS RD, ULC | ||
|---|---|---|---|
| Address:<br><br><br><br>10 Terrace Road, Ladera Ranch,<br>California, USA, 92694 | By: | /s/ H. Michael Schwartz | |
| Attention:<br><br><br><br>H. Michael Schwartz and Matt Lopez | Name: H. Michael Schwartz<br>Title: Chief Executive Officer and President | ||
| Email:<br><br>hms@smartstop.com and<br><br>MLopez@smartstop.com | I have authority to bind the corporation | ||
| BORROWER: | SST VI 1450 DON MILLS RD, LLC<br><br>a Delaware limited liability company<br><br><br><br>By: Strategic Storage Trust VI, Inc.<br><br>a Maryland corporation<br><br>its Manager | ||
| --- | --- | --- | --- |
| Address:<br><br><br><br>10 Terrace Road, Ladera Ranch,<br><br>California, USA, 92694 | /s/ H. Michael Schwartz | ||
| Attention: H. Michael Schwartz and Matt Lopez | Name: H. Michael Schwartz<br>Title: Chief Executive Officer and President | ||
| Email: hms@smartstop.com and<br><br>MLopez@smartstop.com | I have authority to bind the LLC | ||
| GUARANTOR: | STRATEGIC STORAGE TRUST VI, INC. | ||
| --- | --- | --- | --- |
| Address:<br><br><br><br>10 Terrace Road, Ladera Ranch,<br><br>California, USA, 92694 | By: | /s/ H. Michael Schwartz | |
| Attention: H. Michael Schwartz and Matt Lopez | Name: H. Michael Schwartz<br>Title: Chief Executive Officer and President | ||
| Email: hms@smartstop.com and<br><br>MLopez@smartstop.com | Name: <br>Title: | ||
| I/We have authority to bind the corporation | |||
| LENDER: | NATIONAL BANK OF CANADA<br>as Lender | ||
| --- | --- | --- | --- |
| Address:<br><br><br><br>National Bank of Canada<br><br>130 King Street West, Suite 3200<br><br>Toronto, ON M5X 1J9<br><br>Attention: Suneel Puri<br><br>Email: suneel.puri@nbc.ca | By: | /s/ Jonathan Khan | |
| Name: Jonathan Khan<br>Title: Director, Origination<br><br><br><br>/s/ Suneel Puri | |||
| Name: Suneel Puri<br>Title: Director & Head of Execution |
DOCPROPERTY "DocsID" \* MERGEFORMAT CAN_DMS: \150234312\3 DOCPROPERTY "DocID" \* MERGEFORMAT 065093/568428 MT MTDOCS 46809437v6
EX-99.1
Exhibit 99.1
Strategic Storage Trust VI, Inc. Acquires Storage Facility in Toronto, Ontario, Canada
LADERA RANCH, CALIF – January 31, 2023 – Strategic Storage Trust VI, Inc. (“SST VI”), a publicly registered non-traded real estate investment trust sponsored by an affiliate of SmartStop Self Storage REIT, Inc. (“SmartStop”), announced today the acquisition of an approximately 104,750 square foot self-storage facility in Toronto, Ontario, Canada with approximately 1,020 interior climate-controlled units and approximately 275 parking spaces on nearly five acres of land.
Located at 1450 Don Mills Road, the property was converted from an office building to self storage in 2020. It is easily accessible from the Don Valley Parkway and Highway 401 and serves the York Mills, Don Mills and Parkwoods neighborhoods. There are more than a dozen new residential developments in construction or planning within two miles of the property.
“The area’s favorable demand dynamics, including high population growth, density and household income, are expected to provide a strong customer base and stable revenue stream for the long term,” said H. Michael Schwartz, CEO and President of SST VI. “This acquisition significantly increases our presence in Toronto and strengthens our position in the market.”
About Strategic Storage Trust VI, Inc. (SST VI):
SST VI is a Maryland corporation that elected to qualify as a REIT for federal income tax purposes. SST VI’s primary investment strategy is to invest in income-producing and growth self storage facilities and related self storage real estate investments in the United States and Canada. As of January 31, 2023, SST VI has a portfolio of 13 operating properties in the United States comprising approximately 8,660 units and 1,005,000 rentable square feet (including parking); four properties with approximately 3,900 units and 552,700 rentable square feet (including parking) in Canada; and joint venture interests in two development properties in Toronto, Ontario.
About SmartStop Self Storage REIT, Inc. (SmartStop):
SmartStop Self Storage REIT, Inc. (“SmartStop”) is a self-managed REIT with a fully integrated operations team of approximately 450 self storage professionals focused on growing the SmartStop® Self Storage brand. SmartStop, through its indirect subsidiary SmartStop REIT Advisors, LLC, also sponsors other self storage programs. As of January 31, 2023, SmartStop has an owned or managed portfolio of 181 operating properties in 22 states and Canada, comprising approximately 124,800 units and 14.1 million rentable square feet. SmartStop and its affiliates own or manage 24 operating self storage properties in Canada, which total approximately 20,400 units and 2.1 million rentable square feet. Additional information regarding SmartStop is available at www.smartstopselfstorage.com.
Contact:
David Corak
VP of Corporate Finance
SmartStop Self Storage REIT, Inc.
IR@smartstop.com
EX-99.2
Exhibit 99.2
Strategic Storage Trust VI, Inc. Acquires First Storage Facility in Edmonton, Alberta, Canada
LADERA RANCH, CALIF – January 31, 2023 – Strategic Storage Trust VI, Inc. (“SST VI”), a publicly registered non-traded real estate investment trust sponsored by an affiliate of SmartStop Self Storage REIT, Inc. (“SmartStop”), announced today the acquisition of an approximately 50,000 square foot self-storage facility in Edmonton, Alberta, Canada with approximately 490 units. This is SST VI’s first acquisition of a Canadian facility outside Ontario, Canada.
Located at 10820 119th Street NW, the property was converted from a warehouse to self storage in 2021-2022. It features more than 460 interior climate-controlled units and serves the North Glenora, Inglewood, Prince Rupert, Central McDougall and Westmount neighborhoods. In addition to strong population density and household income demographics, there are eight post-secondary institutions within a ten-minute drive of the property.
“Expansion is one of SST VI’s keys to growth, and Edmonton presents a new frontier for our portfolio to flourish,” said H. Michael Schwartz, CEO and President of SST VI. “We are excited to bring our proven success in the Greater Toronto Area to this dynamic market and be a part of Edmonton's thriving business community.”
About Strategic Storage Trust VI, Inc. (SST VI):
SST VI is a Maryland corporation that elected to qualify as a REIT for federal income tax purposes. SST VI’s primary investment strategy is to invest in income-producing and growth self storage facilities and related self storage real estate investments in the United States and Canada. As of January 31, 2023, SST VI has a portfolio of 13 operating properties in the United States comprising approximately 8,660 units and 1,005,000 rentable square feet (including parking); four properties with approximately 3,900 units and 552,700 rentable square feet (including parking) in Canada; and joint venture interests in two development properties in Toronto, Ontario.
About SmartStop Self Storage REIT, Inc. (SmartStop):
SmartStop Self Storage REIT, Inc. (“SmartStop”) is a self-managed REIT with a fully integrated operations team of approximately 450 self storage professionals focused on growing the SmartStop® Self Storage brand. SmartStop, through its indirect subsidiary SmartStop REIT Advisors, LLC, also sponsors other self storage programs. As of January 31, 2023, SmartStop has an owned or managed portfolio of 181 operating properties in 22 states and Canada, comprising approximately 124,800 units and 14.1 million rentable square feet. SmartStop and its affiliates own or manage 24 operating self-storage properties in Canada, which total approximately 20,400 units and 2.1 million rentable square feet. Additional information regarding SmartStop is available at www.smartstopselfstorage.com.
Contact:
David Corak
VP of Corporate Finance
SmartStop Self Storage REIT, Inc.
IR@smartstop.com