Exhibit 4.8
LIMITED PARTNERSHIP AGREEMENT
of
SCOTIABANK COVERED BOND GUARANTOR
LIMITED PARTNERSHIP
by and among
SCOTIABANK COVERED BOND GP INC.
as Managing GP
and
0000000
CANADA INC.
as Liquidation General Partner
and
THE BANK OF NOVA SCOTIA
as Limited Partner
and
Each Person who is admitted to the
Limited Partnership as a General Partner or Limited Partner hereafter
and
COMPUTERSHARE TRUST COMPANY OF CANADA
as Bond Trustee
July 19, 2013
TABLE OF CONTENTS
LIMITED PARTNERSHIP AGREEMENT
THIS LIMITED PARTNERSHIP AGREEMENT (this “Agreement”)
of Scotiabank Covered Bond Guarantor Limited Partnership (the “Partnership”) is made as of the 19th
day of July, 2013.
BY AND AMONG:
| (1) | Scotiabank Covered Bond GP Inc. (the “Managing
GP” or “Scotia GP”), a corporation incorporated under the laws of Canada; |
| (0) | 0000000
Canada Inc. (the “Liquidation GP”), a corporation incorporated under the laws of Canada; |
| (3) | The Bank of Nova Scotia (the “Limited
Partner” or the “Bank”), a bank named in Schedule I to the Bank Act (Canada); |
| (4) | Computershare Trust
Company of Canada (the “Bond Trustee”), a trust company formed under the laws of Canada; and |
| (5) | Each Person who is admitted to the Limited Partnership
as a General Partner or Limited Partner hereafter. |
RECITALS:
| (a) | The Managing GP, the Liquidation GP and the Limited Partner established the Partnership under the laws of the Province of
Ontario pursuant to a declaration dated May 28, 2013 (as the same may be amended, restated, varied or supplemented from time to
time) (the “Declaration”); and |
| (b) | The parties hereto are desirous of confirming their agreement respecting the Partnership on the terms and conditions set forth
in this Agreement. |
NOW THEREFORE, THIS AGREEMENT WITNESSETH that in consideration
of the foregoing and the mutual covenants and agreements contained in this Agreement (the receipt and adequacy of which are acknowledged),
the parties hereto agree as follows:
Article 1
INTERPRETATION
| Section 1.1 |
Definitions and Construction. |
The master definitions and construction
agreement made between the parties to the Transaction Documents on July 19,
2013 (as the same may be amended, restated, varied or supplemented from time to time with the consent of the parties thereto) (the
“Master Definitions and Construction Agreement”) is expressly and specifically incorporated into this Agreement
and, accordingly, the expressions defined in the Master Definitions and Construction Agreement
(as so amended, restated, varied or supplemented) shall,
except where the context otherwise requires and save where otherwise defined herein, have the same meanings in this Agreement,
including the recitals hereto and this Agreement shall be construed in accordance with the interpretation provisions set out in
Section 2 of the Master Definitions and Construction Agreement.
For the purposes hereof, “this
Agreement” has the same meaning as Guarantor Agreement in the Master Definitions and Construction Agreement.
Article 2
RELATIONSHIP AMONG PARTNERS
| Section 2.1 |
Formation of Partnership. |
The Managing GP, the Liquidation
GP and the Limited Partner agreed to and formed a limited partnership pursuant to the laws of the Province of Ontario on
May 28, 2013 pursuant to the Declaration. The parties hereto have agreed to confirm their agreements relating to the
Partnership on the terms and conditions set out in this Agreement. The Partnership will be effective as a limited partnership
from May 28, 2013, the date on which the Declaration was filed in accordance with the Limited Partnerships Act (Ontario)
(the “LP Act”), and the Partnership will file any documents necessary under applicable laws as a result of
the amendments reflected in this Agreement.
| Section 2.2 |
Name of Partnership. |
Subject to the provisions of the LP Act
and the Business Names Act (Ontario) and any other applicable legislation, the name of the Partnership will be Scotiabank
Covered Bond Guarantor Limited Partnership, or such other name as the Managing GP may, with the consent of the Limited Partner,
and while there are Covered Bonds outstanding, the Bond Trustee, from time to time determine in accordance with the terms of this
Agreement.
| Section 2.3 |
Business of the Partnership. |
| (1) | The Partners have agreed with effect from the date hereof
that the sole business of the Partnership shall be to provide services to the Bank in respect of the Program by (i) entering into
the Intercompany Loan Agreement and accepting Capital Contributions from the Partners; (ii) using the proceeds from the Intercompany
Loan and Capital Contributions (a) to purchase the Initial Portfolio consisting of Loans and their Related Security from the Seller
in accordance with the terms of the Mortgage Sale Agreement and additional Portfolios of New Loans and their Related Security
pursuant to the terms of the Mortgage Sale Agreement; and/or (b) to invest in Substitute Assets in an amount not exceeding
the prescribed limit; and/or (c) subject to complying with the Asset Coverage Test to from time to time make Capital Distributions
to the Limited Partner; and/or (d) to make deposits of the proceeds in the Guarantor Accounts (including to fund the Reserve
Fund and the Pre-Maturity Liquidity Ledger, in each case to an amount not exceeding the prescribed limit); (iii) arranging for
the servicing of the Portfolio by the Servicer; (iv) entering into the Trust Deed, giving the Covered Bond Guarantee in its |
capacity as Guarantor and entering into the Security
Agreement; (v) entering into the other Transaction Documents to which it is a party; and (vi) performing its obligations hereunder
and thereunder and in respect thereof and doing all things incidental or ancillary thereto.
| Section 2.4 |
Registered Office; Business Locations. |
| (1) | The registered office of the Partnership will be located
at Xxxxx 0000, 0 Xxxxx Xxxxxxxx Xxxxx, 000 Xxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx, X0X 0X0, and/or at such other place or places in
Canada as the Managing GP may from time to time determine. |
| (2) | The Partnership will be permitted to carry on business
in any jurisdiction, but the Managing GP will be required in all cases to use its reasonable best efforts to protect the limited
liability of the Limited Partner in any such jurisdiction, including by registering the Partnership in other jurisdictions where
the Managing GP considers it appropriate to do so. |
| Section 2.5 |
Financial Year. |
The Fiscal Year end for tax and financial
reporting purposes will be October 31 in each calendar year or such other date as the Managing GP may determine from time to time,
provided that the Managing GP has obtained any necessary consents from applicable taxation authorities.
The Partnership will exist until it is
dissolved in accordance with this Agreement.
| Section 2.7 |
Private Issuer Restrictions. |
Notwithstanding any other provisions
in this Agreement: (i) the number of Partners will be limited to no more than fifty (50), (ii) the right to Transfer any interest
in the Partnership is restricted as provided in this Agreement, and (iii) any invitation to the public to subscribe for any interest
in the Partnership is prohibited.
| Section 2.8 |
Representations, Warranties and Covenants of the Managing GP and the Liquidation GP. |
| (1) | The Managing GP represents and warrants to, and covenants
with, each other Partner and, while the Covered Bonds are outstanding, the Bond Trustee, that: |
| (a) | it is a corporation duly incorporated under the laws
of Canada and is validly subsisting under such laws and has made all filings under all applicable corporate, securities and taxation
laws to which the Managing GP is subject, for which the failure to file could have a material adverse affect on the Program or
the Partnership; |
| (b) | it has and will continue to have all necessary capacity
and corporate authority to act as the Managing GP of the Partnership and to enter into and perform its |
obligations under this Agreement and each of the other
Transaction Documents to which it is a party, and such obligations do not and will not conflict with nor do they or will they result
in a breach of any of its constating documents or by-laws or any agreement by which it is bound or any applicable law the breach
of which would have a material adverse effect on the Program or the Partnership;
| (c) | this Agreement constitutes a valid and binding obligation
of the Managing GP, enforceable against it in accordance with the terms of this Agreement, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or hereafter in effect, affecting
the enforcement of creditors’ rights in general and except as such enforceability may be limited by general principles of
equity (whether considered in a suit at law or in equity); |
| (d) | except pursuant to the obligations of the Partnership
under the Covered Bond Guarantee or any of the Transaction Documents, it will not, nor will it cause any of its Affiliates or
Associates, to borrow money from the Partnership, or cause the Partnership to lend money to any of its Affiliates or Associates; |
| (e) | it holds and shall maintain the registrations necessary
for the conduct of its business and has and shall continue to have all licences and permits necessary to carry on its business
as the Managing GP of the Partnership in all jurisdictions where the activities of the Partnership require such licensing or other
form of registration of the Managing GP; |
| (f) | it will make all filings in a timely manner respecting
the Partnership required pursuant to the applicable legislation; |
| (g) | it will exercise the powers conferred upon it hereunder
in pursuance of the business of the Partnership and will devote such time to the conduct of the affairs of the Partnership as
may be reasonably required for the proper management of the business affairs of the Partnership; |
| (h) | it is not a Non-Resident, and will retain such status
during the term of the Partnership; |
| (i) | it will at all times comply with the CMHC Guide; |
| (j) | it will at all times comply with, and perform its obligations
under, the provisions of this Agreement and each of the other Transaction Documents to which it is a party in any capacity; and |
| (k) | it will not transfer any interest it holds in the Partnership
to a Non-Resident. |
| (2) | The Liquidation GP represents and warrants to, and covenants
with, each other Partner, and, while the Covered Bonds are outstanding, the Bond Trustee, that: |
| (a) | it is a corporation duly incorporated under the laws
of Canada and is validly subsisting under such laws and has made all filings under all applicable corporate, securities and taxation
laws to which the Liquidation GP is subject, for which the failure to file could have a material adverse affect on the Program
or the Partnership; |
| (b) | it has and will continue to have all necessary capacity
and corporate authority to act as the liquidation general partner of the Partnership and to enter into and perform its obligations
under this Agreement and each of the other Transaction Documents to which it is a party, and such obligations do not and will
not conflict with nor do they or will they result in a breach of any of its constating documents or by-laws or any material agreement
by which it is bound or any applicable law the breach of which would have a material adverse effect on the Program or the Partnership; |
| (c) | except pursuant to the obligations of the Partnership
under the Covered Bond Guarantee or any of the Transaction Documents, it will not, nor will it cause any of its Affiliates or
Associates, to borrow money from the Partnership, or cause the Partnership to lend money to any of its Affiliates or Associates; |
| (d) | it holds and shall maintain the registrations necessary
for the conduct of its business and has and shall continue to have all licences and permits necessary to carry on its business
as the liquidation general partner of the Partnership in all jurisdictions where the activities of the Partnership require such
licensing or other form of registration of the liquidation general partner; |
| (e) | it is Independent of the Issuer; |
| (f) | it is not a Non-Resident, and will retain such status
during the term of the Partnership; |
| (g) | it will at all times comply with the CMHC Guide; |
| (h) | it will at all times comply with, and perform its obligations
under, the provisions of this Agreement and each of the other Transaction Documents to which it is a party in any capacity |
| (i) | it will not transfer any interest it holds in the Partnership
to a Non-Resident; and |
| (j) | it shall ensure that, if at any time it is appointed as the Managing GP, the Guarantor will be Independently Controlled
and Governed, and it shall take all such actions as may be necessary to ensure that the Guarantor will continue to be
Independently Controlled and Governed from
and after such time, unless and until such times as the Liquidation GP appoints a successor Managing GP contemplated in
Section 11.7(2). |
| (3) | The representations, warranties and covenants contained
in this Section 2.8 will survive the execution and delivery of this Agreement, and the Managing GP and the Liquidation GP will
be obliged to ensure the continuing accuracy of each of their respective representations and warranties contained in this Section
2.8 throughout the continuation of the Partnership. |
| Section 2.9 | Additional Representations and Warranties of the Liquidation
GP and the Managing GP. |
In addition to the representations and
warranties of the Managing GP and the Liquidation GP in Section 2.8, each of the Liquidation GP and the Managing GP further represents
and warrants to each other Partner and the Bond Trustee that the representations and warranties set out in Schedule 1 are true
as at the date hereof in respect of itself and will be obliged to ensure the continuing accuracy of the representations and warranties
in paragraphs (f) and (g) of Schedule 1 throughout the continuation of the Partnership.
| Section 2.10 | Representations,
Warranties and Covenants of the Limited Partner. |
| (1) | The Limited Partner represents and warrants to, and covenants
with, each other Partner that: |
| (a) | it is a validly created Canadian chartered bank under
the laws of Canada and is validly subsisting under such laws; |
| (b) | it has taken all necessary action to authorize the execution,
delivery and performance of this Agreement; |
| (c) | it has the capacity and corporate authority to enter
into and perform its obligations under this Agreement, and such obligations do not conflict with nor do they result in a breach
of any of its constating documents or by-laws or any material agreement by which it is bound or any applicable law the breach
of which would have a material effect; |
| (d) | no authorization, consent or approval of, or filing
with or notice to, any Person is required in connection with the execution, delivery or performance of this Agreement by the Limited
Partner, other than those which have been obtained; |
| (e) | it is not a Non-Resident and will retain such status
during the term of the Partnership; |
| (f) | it will at all times comply with the CMHC Guide; it
will at all times comply with, and perform its obligations under, the provisions of this Agreement and each of the other Transaction
Documents to which it is a party in any capacity; and |
| (g) | it will not transfer any interest it holds in the Partnership
to a Non-Resident. |
| (2) | The representations, warranties and covenants contained
in this Section 2.10 will survive the execution and delivery of this Agreement and the Limited Partner will be obliged to ensure
the continuing accuracy of such representations, warranties and covenants throughout the continuation of the Partnership. |
| Section 2.11 | Limitation on Authority
of Limited Partners. |
The Limited Partner in its capacity as
limited partner will not be entitled to:
| (a) | take part in the administration, control, management
or operation of the business of the Partnership or exercise any power in connection therewith; |
| (b) | transact any business on behalf of the Partnership or
make any commitment on behalf of or otherwise obligate or bind the Partnership; |
| (c) | other than by voting on a resolution of the Partners
(where the Limited Partner is entitled to so vote), execute any document that binds or purports to bind the Partnership or any
other Partner as such; |
| (d) | hold itself out as having the power or authority to
bind the Partnership or any other Partner as such; |
| (e) | have any authority to act for or undertake any obligation
or responsibility on behalf of the Partnership or any other Partner as such; |
| (f) | bring any action for partition or sale or otherwise
in connection with the Partnership, or any interest in any property of the Partnership, whether real or personal, tangible or
intangible, or file or register or permit to be filed, registered or remain undischarged any encumbrance in respect of any property
of the Partnership; |
| (g) | compel or seek a partition, judicial or otherwise, of
any of the assets of the Partnership distributed or to be distributed to the Partners in kind except in accordance with this Agreement;
or |
| (h) | take any action that will jeopardize or eliminate the
status of the Partnership as a limited partnership. |
| Section 2.12 | Power of Attorney. |
| (1) | The Limited Partner, by its execution of this Agreement,
irrevocably nominates, constitutes and appoints the Managing GP (and upon the occurrence of a Managing GP Default Event, the Liquidation
GP), with full power of substitution, as its agent and true and lawful attorney to act on its behalf with full power and authority
in its name, place and stead to execute, deliver, swear to, make, file and record when, as and where required in the opinion of
the Managing GP (and upon the occurrence of a Managing GP Default Event, the Liquidation GP): |
| (a) | the Declaration, the Partnership Record, any amendment
to this Agreement made in accordance with the terms of this Agreement and any other document or instrument required to form, qualify,
continue and keep in good standing the Partnership as a limited partnership in all jurisdictions in which the Partnership may
conduct its business or own property in order to maintain the limited liability of the Limited Partner and to comply with the
applicable laws of such jurisdiction; |
| (b) | each of the Transaction Documents to which the Partnership
is a party and any amendment thereto, to the extent such amendment is made and approved in accordance with the terms of this Agreement
and any other document on behalf of and in the name of the Partnership as may be necessary to give effect to the conduct of the
business of the Partnership; |
| (c) | any document or instrument, including without limitation
any amendments to the Declaration or the Partnership Record, necessary to reflect any amendment to this Agreement made in accordance
with the terms of this Agreement; |
| (d) | any document or instrument required in connection with
the winding up, dissolution or termination of the Partnership in accordance with the terms of this Agreement; |
| (e) | all elections, determinations, designations and returns
or similar documents or instruments under the Income Tax Act, the Excise Tax Act (Canada) or any other taxation or other
legislation or laws of like import of Canada or of any provinces or jurisdictions in respect of the affairs of the Partnership
or of a Partner’s interest in the Partnership; |
| (f) | any document or instrument required to be filed with
the appropriate governmental body, agency or authority in any jurisdiction in connection with the business, property, assets and
undertaking of the Partnership; |
| (g) | any document or instrument to give effect to any Transfer
of an interest in the Partnership or relating to the admission of additional Limited Partners made in accordance with and subject
to the terms and restrictions of this Agreement; |
| (h) | any other instrument or document on behalf of and in
the name of the Partnership, including, without limitation, all debt instruments as may be deemed necessary or desirable by the
Managing GP (and upon the occurrence of a Managing GP Default Event, the Liquidation GP) to carry out fully this Agreement in
accordance with its terms; and |
| (i) | all other instruments and documents on the Limited Partner’s
behalf and in the Limited Partner’s name or in the name of the Partnership as may be deemed necessary or desirable by the
Managing GP (and upon the occurrence of a Managing GP Default Event, the Liquidation GP) to carry out fully this Agreement in
accordance with its terms, |
and hereby ratifies such execution, delivery, swearing,
making, recording and filing.
| (2) | The Limited Partner by execution of this Agreement confirms
that the power of attorney granted herein is irrevocable during the continuation of the Partnership and is a power coupled with
an interest and will survive its insolvency, dissolution, winding up or bankruptcy and extend to bind its successors and assigns,
and may, subject to its terms, be exercised by the Managing GP (and upon the occurrence of a Managing GP Default Event, the Liquidation
GP) on behalf of the Limited Partner in executing any instrument. |
The Limited Partner agrees to be bound by any representations
and actions made or taken in good faith by the Managing GP (and upon the occurrence of a Managing GP Default Event, the Liquidation
GP) pursuant to such power of attorney and hereby waives any and all defences that may be available to contest, negate or disaffirm
the action of the Managing GP (and upon the occurrence of a Managing GP Default Event, the Liquidation GP) taken in good faith
under this power of attorney. This power of attorney will continue in respect of the Managing GP (and upon the occurrence of a
Managing GP Default Event, the Liquidation GP) so long as it is the Managing GP of the Partnership, and will terminate thereafter,
but will continue in respect of a New Managing GP as if such New Managing GP were the original attorney.
| Section 2.13 | Unlimited Liability
of the Managing GP and the Liquidation GP; Limitation of Liability. |
| (1) | The Managing GP and the Liquidation GP will each jointly
and severally have unlimited liability for the debts, liabilities and obligations of the Partnership. |
| (2) | Subject to Section 2.14, neither the Managing GP nor the
Liquidation GP will be liable to the Limited Partner for any act, omission or error in judgment taken or made hereunder by the
Managing GP or the Liquidation GP, as the case may be, honestly and in good faith in the conduct of the business of the Partnership.
The Managing GP and the Liquidation GP may rely and act upon and will be protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other document
or instrument believed by it to be genuine and to have been signed or presented by the proper party. The Managing GP and the Liquidation
GP may rely and act upon any statement, report or opinion prepared by, or any advice received from, the legal counsel, accountants,
investment bankers, experts or other professional advisors of it or the Partnership and, provided it exercised reasonable care
in selecting such advisors, neither the Managing GP nor the Liquidation GP will be responsible or held liable for any loss or
damage resulting from so relying or acting if it reasonably believed the advice to be within the area of professional competence
of the person from whom it was received and it acted honestly and in good faith in relying thereon. |
| Section 2.14 | Limited Liability
of Limited Partner. |
Subject to the provisions of the LP Act
and of such similar legislation in Canada and elsewhere as is applicable to the Partnership, the liability of the Limited Partner
for the debts, liabilities and obligations of the Partnership will be limited to its Capital Contribution Balance and solely to
the extent required by applicable law, the amount of any Capital Distributions received by it.
| Section 2.15 | Indemnity of Limited
Partner. |
| (1) | The Managing GP and the Liquidation GP (solely to the
extent of its authority under the terms of this Agreement) will operate the Partnership to ensure to the greatest extent possible
the limited liability of the Limited Partner and will (to the extent that the |
Guarantor is Independently Controlled and Governed)
jointly and severally indemnify and hold harmless the Limited Partner and its shareholders, directors, officers, employees and
agents from any costs, damages, liabilities or expenses suffered or incurred by the Limited Partner or its shareholders, directors,
officers, employees or agents (except to the extent such persons are directors, officers, employees or agents of the Managing GP),
as a result of negligence on the part of the Managing GP or the Liquidation GP, as the case may be, in performing its obligations
hereunder resulting in the liability of the Limited Partner not being limited in the manner provided in Section 2.14, unless such
liability arises out of any act or omission of the Limited Partner. Payments in respect of this Section 2.15 shall be made solely
in accordance with Article 6 (Priorities of Payments).
| (2) | The Limited Partner will hold the benefit of this indemnity
in trust and as agent for its shareholders, directors, officers, employees and agents. |
| Section 2.16 | Indemnity of Managing
GP and Liquidation GP. |
| (1) | To the fullest extent permitted by law, but subject to
the limitations expressly provided in this Agreement, the Partnership will indemnify and hold harmless the Managing GP and the
Liquidation GP, and their respective shareholders, directors, officers, employees and agents, from any costs, damages, liabilities
resulting from or arising out of any act or omission or error of judgment of the Managing GP or the Liquidation GP, or any of
their respective, shareholders, directors, officers, employees and agents, on behalf of the Partnership or in furtherance of the
business of the Partnership unless, in the case of any such person, such costs, damages, liabilities or expenses result from or
arise out of any act or omission or error of judgment as a result of which such person is adjudged to have been guilty of negligence
or wilful misconduct or to have failed to act honestly and in good faith or to have breached a fiduciary duty to the Partnership
or the Limited Partner. This indemnity is in addition to and not a limitation of any other obligation of the Partnership to the
Managing GP or the Liquidation GP including the obligation of the Partnership to reimburse or repay the Managing GP and the Liquidation
GP on account of costs, outlays, disbursements and expenditures incurred by or on their behalf but this indemnity will not be
in derogation of the provisions of Section 2.14. Payments in respect of this Section 2.16 shall be made solely in accordance with
Article 6 (Priorities of Payments). |
| (2) | Subject to complying with Article 6 (Priorities of
Payments), the Partnership may purchase and maintain (or reimburse the Managing GP or Liquidation GP) insurance on behalf of such
Persons in such amount as the Managing GP (or following a Managing GP Default Event, the Liquidation GP) may determine, and, while
there are Covered Bonds outstanding, with the consent of the Bond Trustee, against any liability that may be asserted against
or expense that may be incurred by such Person in connection with the Partnership’s activities, whether or not the Partnership
would have the power to indemnify those Persons against those liabilities under the provisions of this Agreement. |
| (3) | The Managing GP and the Liquidation GP will hold the benefit
of this indemnity in trust and as agent for their respective shareholders, directors, officers, employees and agents. |
| Section 2.17 | Compliance with Laws. |
The Limited Partner will, on the request
of the Managing GP from time to time, execute, without undue delay, any documents or instruments considered by the Managing GP
to be necessary to comply with any applicable law or regulation of the Province of Ontario or any other jurisdiction in which the
Partnership carries on business, for the continuation, operation and good standing of the Partnership.
| Section 2.18 | Other Activities
of Managing GP and Liquidation GP. |
Each of the Managing GP and the Liquidation
GP shall devote their efforts exclusively to or for the benefit of the Partnership and the business of the Partnership and shall
not engage in any business or activity, except the business of the Partnership or any activity ancillary or related thereto or
in furtherance thereof.
| Section 2.19 | Other Activities
of the Limited Partners and the Shareholders, Directors and Officers of the Partners. |
| (1) | For greater certainty, the Limited Partner may engage
in any business or any other activity and may engage in, or hold an interest in, any other business, venture, investment or activity
whether or not similar to or competitive with the business of the Partnership. |
| (2) | Without limiting the foregoing, neither the Limited Partner,
nor any shareholder, director, officer or Associate or Affiliate of any Partner shall by reason of its fiduciary position be in
any way precluded from: |
| (a) | entering into or being interested in any contract or
financial or other transaction or arrangement with the Partnership or any of its Associates or Affiliates (including without limitation
any contract, transaction or arrangement of a banking or insurance nature or any contract, transaction or arrangement in relation
to the making or assignment of loans or the provision of financial facilities or financial advice to, or the purchase, placing
or underwriting of or the subscribing or procuring subscriptions for or otherwise acquiring, holding or dealing with, or acting
in any capacity in relation to the Covered Bonds or any other covered bonds, bonds, stocks, shares, debenture stock, debentures
or other securities of any of the Partners or any of their respective Associates or Affiliates); |
| (b) | being a partner of any other partnership constituting
or securing any other securities issued by or guaranteed by, or relating to that partnership, or any other office of profit under
that partnership; or |
| (c) | in providing services to any other partnership or person
or entity or carrying on any business (including, without limitation, any business in competition with the Partnership) and including,
without limitation, the making or assigning of loans, the provision of financial facilities or financial advice to, or the issue,
purchase, placing or underwriting of or the subscribing or procuring subscriptions for or otherwise acquiring, holding or dealing
with, or acting in any capacity in relation |
to any other covered bonds, bonds, stocks, shares, debenture
stock, debentures or other securities of any type whatsoever.
Article 3
CAPITAL ACCOUNTS
| Section 3.1 |
Capital Contributions. |
The Partners may from time to time make
Capital Contributions to the Partnership.
| Section 3.2 |
Initial Capital Contributions. |
Contemporaneously with the execution
of this Agreement, the Partners made the following Cash Capital Contributions to the Partnership, which amounts shall be reflected
in such Partner’s Capital Account Ledger:
| Partner |
Cash Capital Contribution Amount |
| Managing GP |
$0.05 (in respect of a 0.0495% general partnership interest in the Partnership) |
| Liquidation GP |
$0.01 (in respect of a 0.0005% general partnership interest in the Partnership) |
| Limited Partner |
$99.95 (in respect of a 99.95% limited partnership interest in the Partnership) |
| Section 3.3 |
Capital Account Ledger. |
The Managing GP (or the Cash Manager
on its behalf), shall maintain the Capital Account Ledger or sub-ledgers in respect of each Partner. Any increase or decrease in
the Capital Contribution Balance of a Partner shall be credited or debited to such Partner’s Capital Account Ledger on each
Calculation Date. The Capital Contribution Balance of each Partner as recorded in the Capital Account Ledger from time to time,
shall represent such Partner’s interest in the capital of the Partnership, provided that at no time shall the Capital Contribution
Balance of the Liquidation GP be greater than, or the Liquidation GP be entitled to a return of capital from the Partnership of
greater than, $0.01 unless agreed to by each of the other Partners.
| Section 3.4 |
Additional Cash Capital Contributions. |
| (1) | Prior to making any additional Cash Capital Contribution
to the Partnership, the Limited Partner shall be deemed to have represented and warranted to the Managing GP, the Liquidation
GP and, while the Covered Bonds are outstanding, the Bond Trustee on behalf of the Covered Bondholders, that no Insolvency Event
has occurred or will result in respect of the Limited Partner from such Cash Capital Contribution. |
| (2) | The Partnership will from time to time make drawings on
the Intercompany Loan. For greater certainty, any amount advanced under the Intercompany Loan Agreement shall not constitute a
Capital Contribution on the part of the Limited Partner. |
| (a) | there is any increase in the True Loan Balance of a
Loan due to the Limited Partner making a Further Advance to a Borrower occurs, the difference, if any, between (i) such increase;
and (ii) the amount of any Advance in respect thereof pursuant to Section 5.3 of the Intercompany Loan Agreement, shall be deemed
to constitute a Cash Capital Contribution by the Limited Partner; or |
| (b) | on any Calculation Date, there is an increase in the
Outstanding Principal Balance of Loans in the immediately preceding Calculation Period (being the period between the last most
recent Calculation Date and the current Calculation Date) due to Capitalised Arrears accruing on a Loan the difference, if any,
between (i) such increase; and (ii) the amount of any Advance in respect thereof pursuant to Section 5.3 of the Intercompany Loan
Agreement, shall be deemed to constitute a Cash Capital Contribution by the Limited Partner. |
| Section 3.5 |
Capital Contributions in Kind. |
| (1) | From time to time the Limited Partner may sell Loans and
their Related Security to the Partnership pursuant to the terms of the Mortgage Sale Agreement for cash consideration or an interest
in the Partnership pursuant to the terms of the Mortgage Sale Agreement. |
| (2) | Each sale of Loans and their Related Security by the Limited
Partner to the Partnership shall, to the extent not paid for fully in cash, constitute a Capital Contribution in Kind equal to
(a) the aggregate of the Fair Market Value of those Loans and their Related Security sold by it as at the relevant Transfer Date,
minus (b) the cash consideration, if any, paid by or on behalf of the Partnership for the Loans and their Related Security on
the relevant Transfer Date. |
| (3) | Any Capital Contribution in Kind made by a Partner to
fund the Pre-Maturity Liquidity Ledger following a breach of the Pre-Maturity Test in respect of a Series of Hard Bullet Covered
Bonds shall only consist of Pre-Maturity Liquidity Eligible Assets. |
| Section 3.6 |
Capital Distributions. |
| (1) | The Managing GP may make Capital Distributions in cash
to the Partners, from time to time, as it may determine in its sole discretion, in accordance with and provided that such Capital
Distributions are permitted under, Article 6 (Priorities of Payments) and if applicable, under the terms of the Security
Agreement. |
| (2) | Without limiting the foregoing, Capital Distributions
made prior to a Covered Bond Guarantee Activation Event may only be made if, at the time of such Capital Distribution, the Partnership
meets, and following such Capital Distribution will meet, the Asset Coverage Test. |
| Section 3.7 | Capital Contribution Balance. |
| (1) | The Managing GP (or the Cash Manager on its behalf) shall
determine the Capital Contribution Balance of each of the Partners (which on the date hereof, in respect of each Partner, shall
be equal to the initial Cash Capital Contribution set out next to such Partner’s name in Section 3.2 above) (i) on or before
the Toronto Business Day that is at least two days prior to each Guarantor Payment Date (such amounts to be determined as of the
immediately preceding Calculation Date); (ii) on the date that the Partnership is wound up, and (iii) on such other date as the
Limited Partner may reasonably request. |
| (2) | Following the date hereof, the Capital Contribution Balance
of each Partner on any relevant date shall be equal to the sum of the last most recently determined Capital Contribution Balance
of the Partner, plus (i) the amount of any Capital Contribution made by the Partner in the period from the last date on which
the Capital Contribution Balance of the Partner was calculated to the date of the current calculation (the “Calculation
Period”); minus (ii) the amount of any Capital Distribution to be paid to the Partner on the next following Guarantor
Payment Date (provided such amount is payable in accordance with Article 6 (Priorities of Payments)). |
| Section 3.8 |
No Interest Payable on Accounts. |
No Partner has the right to receive interest
on any credit balance in its Capital Contribution Balance, and no Partner is liable to pay interest to the Partnership on any deficit
in its Capital Contribution Balance.
| Section 3.9 |
Deficit in Accounts. |
The interest of a Partner in the Partnership
will not terminate by reason of a negative or zero Capital Contribution Balance of the relevant Partner.
Article 4
PROFITS, LOSSES AND DISTRIBUTIONS
| Section 4.1 |
Allocation of Profits and Losses of the Partnership. |
| (1) | Subject to Section (2) and (3) below, the Net Income and
Net Loss for each Fiscal Year, including for income tax purposes, shall be allocated pro rata to the Partners in respect
of their respective Capital Contribution Balances. |
| (2) | Prior to an Issuer Event of Default or other circumstance
in which the Liquidation GP shall assume the duties of the Managing GP hereunder, the Liquidation GP’s share of the Net
Income shall be limited to the lesser of its pro rata share and $50,000 annually, payable in accordance with Article 6
(Priorities of Payments) and any amount in excess thereof shall be allocated to the Limited Partner and following any such event
the Liquidation GP (for so long as it assumes the duties and responsibilities of the Managing GP) shall be entitled to its pro
rata share of the Net Income. |
| (3) | The Managing GP shall make distributions of income to
the Partners in a manner consistent with this Section 4.1 and in accordance with Article 6 (Priorities of Payments) and applicable
law, provided that at the time of any such distribution, the Partnership is, and following such distribution, will remain in compliance
with the Asset Coverage Test and/or Amortization Test, as applicable. |
| Section 4.2 |
Restriction on Withdrawals and Receipts. |
| (1) | No Partner (whether in its capacity as such or otherwise)
will have any right to withdraw any amount or receive any distribution from the Partnership except in accordance with Article 6
(Priorities of Payments) and applicable law. |
| (2) | Each of the Partners agrees that, notwithstanding any
other provision contained herein or in any other Transaction Document: |
| (a) | it will not demand or receive payment of, or any distribution
in respect of or on account of, any amounts payable by the Partnership (or the Cash Manager on its behalf) or the Bond Trustee,
as applicable, to such Partner under the Transaction Documents, in cash or in kind, and will not apply any money or assets in
discharge of any such amounts payable to it (whether by set-off or by any other method), unless all amounts then due and payable
by the Partnership to all other creditors ranking higher in the relevant Priorities of Payments have been irrevocably paid in
full; |
| (b) | without prejudice to the foregoing, whether in the liquidation
of the Partnership or any other party to the Transaction Documents or otherwise, if any payment or distribution (or the proceeds
of any enforcement of any security) is received by a Partner in respect of any amount payable by the Partnership (or the Cash
Manager on its behalf) or the Bond Trustee, as applicable, to that Partner under the relevant Transaction Document at a time when,
by virtue of the provisions of Article 6 (Priorities of Payments), no payment or distribution should have been made, the
amount so received shall be held by such Partner in trust for the payor of such amount and shall be paid over to such payor forthwith
following receipt thereof (whereupon the relevant payment or distribution shall be deemed not to have been made or received);
and |
| (c) | it shall not claim, rank, prove or vote as creditor
of the Partnership or its estate in competition with any prior ranking creditors in the relevant Priorities of Payments in Article 6
(Priorities of Payments), or claim a right of set-off until all amounts then due and payable to creditors who rank higher in the
relevant Priorities of Payments in Article 6 (Priorities of Payments) have been irrevocably paid in full. |
| (3) | Without limiting this Section 4.2, each Limited Partner
for so long as such person is a Limited Partner, hereby waives any right it may have to receive or hold any property of the Partnership
as collateral security or to receive from the Managing GP, the Liquidation GP, in such capacity, or the Partnership, any payment,
conveyance, or release from liability, if at such time the assets of the Partnership are not sufficient to discharge |
partnership liabilities of the Partnership to persons
who are not general or limited partners of the Partnership, in each case, solely to the extent required by Section 12 of the LP
Act.
Subject to Section 4.2, the Partnership
may set-off any of its liabilities or obligations to any Partner against any liabilities or obligations of such Partner to the
Partnership under this Agreement or any other agreement, subject to the terms of any relevant agreements between the Partnership
and such Partner.
| Section 4.4 |
Compliance with Agreements. |
Notwithstanding anything in this Agreement,
no Partner will have the right to enforce any distribution that is contrary to any agreements binding on the Partnership or any
applicable law.
Article 5
ASSET COVERAGE TEST, AMORTIZATION TEST, pre-maturity test AND VALUATION CALCULATION
| Section 5.1 |
Asset Coverage Test. |
| (1) | For so long as the Covered Bonds remain outstanding, the
Partners (other than the Liquidation GP) shall use all reasonable efforts to ensure that, on each Calculation Date, the Partnership
is in compliance with the Asset Coverage Test as set out in Schedule 2. |
| (2) | If it is determined that the Partnership does not meet
the Asset Coverage Test as of any Calculation Date, the Managing GP (or the Cash Manager on its behalf) shall immediately (and
in any event no later than the Toronto Business Day that is at least two days prior to the next Guarantor Payment Date) notify
in writing the Partnership, the Partners, CMHC and the Bond Trustee thereof. |
| (3) | If the Asset Coverage Test is not met as of the next Calculation
Date following delivery of a notice pursuant to Section 5.1(3), the Managing GP (or the Cash Manager on its behalf) shall serve
an Asset Coverage Test Breach Notice on the Partnership and deliver a copy of such Asset Coverage Test Breach Notice to each of
the Partners and the Bond Trustee on the Toronto Business Day that is at least two days prior to the Guarantor Payment Date after
such Calculation Date. |
| (4) | If the Asset Coverage Test is met as of the next Calculation
Date following service of an Asset Coverage Test Breach Notice, the Managing GP (or the Cash Manager on its behalf) shall revoke
such Asset Coverage Test Breach Notice by serving notice on the Partnership that the Asset Coverage Test has been met and delivering
a copy of such notice to each of the Partners and the Bond Trustee on the Toronto Business Day that is at least two days prior
to the Guarantor Payment Date after such Calculation Date. |
| Section 5.2 | Asset Coverage Test Breach Notice. |
If at any time, the Managing GP or the
Limited Partner receives an Asset Coverage Test Breach Notice (but prior to the occurrence of an Issuer Event of Default), the
Managing GP shall use all reasonable efforts to ensure that the Partnership satisfies the Asset Coverage Test as of the next following
Calculation Date and the Limited Partner shall use all reasonable efforts to, as the Limited Partner may determine in its sole
discretion, (i) make a Cash Capital Contribution; (ii) make a Capital Contribution in Kind to the Partnership; (iii) sell
New Portfolios to the Partnership; or (iv) make advances under the Intercompany Loan, in any such case, in an amount or amounts
sufficient to ensure the Partnership is or will be, prior to the next Calculation Date following delivery of such Asset Coverage
Test Breach Notice, in compliance with the Asset Coverage Test.
| Section 5.3 |
Amortization Test. |
| (1) | Following the occurrence and during the continuance of
an Issuer Event of Default, for as long as there are Covered Bonds outstanding, the Partnership must ensure that, on each Calculation
Date following the occurrence and during the continuance of an Issuer Event of Default, the Partnership is in compliance with
the Amortization Test as set out in Schedule 3. |
| (2) | If as of any Calculation Date following the occurrence
and during the continuance of an Issuer Event of Default, the Partnership is not in compliance with the Amortization Test, the
Managing GP (or the Cash Manager on its behalf) shall immediately (and in any event no later than the Toronto Business Day that
is at least two days prior to the Guarantor Payment Date after such Calculation Date) notify in writing the Partners, CMHC and
the Bond Trustee thereof. |
| Section 5.4 |
Pre-Maturity Test |
| (1) | For so long as the Hard Bullet Covered Bonds remain outstanding,
the Partnership and the Partners (other than the Liquidation GP) shall use all commercially reasonable efforts to ensure that
on each Pre-Maturity Test Date the Partnership is in compliance with the Pre-Maturity Test as set out in Schedule 4. |
| (2) | If it is determined that the Partnership does not meet
the Pre-Maturity Test as of any Pre-Maturity Test Date, the Managing GP (or the Cash Manager on its behalf) shall immediately
notify in writing the Partnership, the Partners and the Bond Trustee. |
| (3) | If the Pre-Maturity Test is breached, and unless the Pre-Maturity
Liquidity Ledger is otherwise funded from other sources pursuant to Section 7.2(1)(a) through (c), the Partnership shall sell
Randomly Selected Loans if required pursuant to Section 7.2. |
| Section 5.5 |
Valuation Calculation |
For so long as the Covered Bonds remain
outstanding, the Partnership must ensure that, on each Calculation Date, the Partnership performs the Valuation Calculation as
set out in Schedule 10.
Article 6
PRIORITIES
OF PAYMENTS
| Section 6.1 |
Pre-Acceleration Priorities of Payment. |
| (1) | Subject to Section 6.1(2), at any time during which no
Asset Coverage Test Breach Notice is outstanding and no Covered Bond Guarantee Activation Event has occurred: |
| (a) | the Managing GP (or the Cash Manager on its behalf)
shall on or before the Toronto Business Day that is at least two days prior to any Guarantor Payment Date calculate the following
amounts as of the immediately preceding Calculation Date: |
| (i) | the amount of Available Revenue Receipts available for
distribution on the immediately following Guarantor Payment Date; |
| (ii) | the Reserve Fund Required Amount if applicable in accordance
with Section 6.1(2); |
| (iii) | where the Pre-Maturity Test has been breached in respect
of a Series of Hard Bullet Covered Bonds, on each Calculation Date falling in the twelve months prior to the Final Maturity Date
of the relevant Series of Hard Bullet Covered Bonds, whether or not the amount standing to the credit of the Pre-Maturity Liquidity
Ledger including the principal amount of any Substitute Assets standing to the credit of the Pre-Maturity Liquidity Ledger at
such date is less than the Pre-Maturity Liquidity Required Amount at such date; and |
| (iv) | the amount of Available Principal Receipts available for
distribution on the immediately following Guarantor Payment Date; |
| (b) | on each Guarantor Payment Date, the Managing GP or the
Cash Manager on its behalf will transfer Available Revenue Receipts from the Revenue Ledger to the Payment Ledger and Available
Principal Receipts from the Principal Ledger to the Payment Ledger, and use (or direct the Cash Manager to use) Available Revenue
Receipts and Available Principal Receipts held by the Cash Manager for and on behalf of the Guarantor and, as necessary, transfer
Available Revenue Receipts and Available Principal Receipts from the GDA Account to the Transaction Account (to the extent maintained),
or apply such Available Revenue Receipts and Available Principal Receipts directly from the GDA Account, in an amount equal to
the lower of (a) the amount required to make the payments set out in Schedule 5 (the “Pre-Acceleration Revenue Priority
of Payments”) in the case of Available Revenue Receipts and Schedule 6 (the “Pre-Acceleration Principal
Priority of Payments”) in the case of Available Principal Receipts, and (b) the aggregate amount of Available Revenue
Receipts and Available Principal Receipts standing to the credit of the GDA Account; and |
| (c) | on each Guarantor Payment Date (except for the amounts
due to third parties by the Partnership under Section (a) of Schedule 5 and any Third Party Amounts, which in each case shall
be paid when due), the Managing GP (or the Cash Manager on its behalf) will apply: |
| (i) | Available Revenue Receipts to make the payments and provisions
set forth in Schedule 5 in the order of priority set forth in Schedule 5 (in each case only if and to the extent that
payments or provisions of a higher priority have been made in full); and |
| (ii) | Available Principal Receipts to make the payments, provisions
or credits set forth in Schedule 6 in the order of priority set forth in Schedule 6 (in each case only if and to the
extent that payments or provisions of a higher priority have been made in full). |
| (2) | If, at any time prior to the occurrence of an Issuer Event of Default, one or more Rating
Agencies downgrades the unsecured, unsubordinated and unguaranteed debt obligations or issuer default rating of the Issuer below the
Reserve Fund Required Amount Ratings, the Guarantor (or the Cash Manager on its behalf): |
| (a) | shall establish the Reserve Fund on the GDA Account
in the books of account of the Partnership maintained pursuant to Section 9.3; and |
| (b) | provided that the Guarantor shall have paid all of its
obligations in respect of items ranking higher than the Reserve Ledger in the Pre-Acceleration Revenue Priority of Payments on
each subsequent Guarantor Payment Date, shall credit or cause to be credited to the Reserve Fund funds up to an amount equal to
the Reserve Fund Required Amount with Available Revenue Receipts. |
| (3) | At any time that no Asset Coverage Test Breach Notice
is outstanding and a Covered Bond Guarantee Activation Event has not occurred, any Cash Capital Contributions made by the Limited
Partner from time to time (excluding its initial Cash Capital Contribution) shall be distributed, if permitted in accordance with
Section 3.6, to the Limited Partner as a Capital Distribution on each Guarantor Payment Date unless otherwise agreed to by the
Limited Partner prior to such Guarantor Payment Date. |
| Section 6.2 |
Priority of Payments at any time an Asset Coverage Test Breach Notice is outstanding but no Covered Bond Guarantee Activation
Event has occurred. |
At any time an Asset Coverage Test Breach
Notice is outstanding but no Covered Bond Guarantee Activation Event has occurred, the Partnership shall continue to comply with
Section 6.1, except that, while any Covered Bonds remain outstanding, no monies will be applied under paragraphs (b), (e), (j)
(to the extent only that such amounts are payable to a Partner or the Intercompany Loan Provider), (k) or (l) of Schedule 5
or paragraphs (b), (c), (e) or (g) of Schedule 6 and for greater certainty, Capital Distributions shall not be distributed
to the Limited Partner and payments on the Intercompany Loan will not be made to the Intercompany Loan Provider.
| Section 6.3 | Termination Payments, Indemnities and Tax Credits received
in respect of the Swap Agreements, premiums received in respect of replacement Swap Agreements. |
| (1) | Notwithstanding anything else in this Article 6: |
| (a) | if the Partnership receives any termination payment
from a Swap Provider in respect of a Swap Agreement, such termination payment will first be used, to the extent necessary (prior
to service of a Guarantor Acceleration Notice) to pay a replacement Swap Provider to enter into a replacement Swap Agreement with
the Partnership, unless a replacement Swap Agreement has already been entered into on behalf of the Partnership. If the Partnership
receives any premium from a replacement Swap Provider in respect of a replacement Swap Agreement, such premium will first be used
to make any termination payment due and payable by the Partnership with respect to the previous Swap Agreement, unless such termination
payment has already been made on behalf of the Partnership; |
| (b) | if the Swap Provider breaches certain tax representations
in the relevant Swap Agreement and a Partner of the Partnership suffers a loss as a result thereof, the Partnership may receive
payment of indemnity amounts from the Swap Provider on the affected Partner's behalf. The Partnership shall account to the relevant
Partner for such amounts and shall pay amounts upon receipt to the relevant Partner. For the avoidance of doubt, amounts received
by the Partnership, in accordance with this Section 6.3(1)(b) shall not be funds of the Partnership and will not be construed
to be amounts received in respect of Available Revenue Receipts or Available Principal Receipts; and |
| (c) | any amounts received in the circumstances described
in this Section 6.3 other than pursuant to Section 6.3(1)(b) which are not applied to pay a replacement Swap Provider to enter
into a replacement Swap Agreement will be credited to the Revenue Ledger and applied as Available Revenue Receipts in accordance
with this Article 6 on the next succeeding Guarantor Payment Date. |
| Section 6.4 |
Guarantee Priority of Payments. |
| (1) | If a Notice to Pay is served on the Partnership, the Managing
GP will, on the Final Maturity Date for any Series of Hard Bullet Covered Bonds, apply all funds standing to the credit of the
Pre-Maturity Liquidity Ledger (and, if applicable, transferred to the Transaction Account on the relevant Guarantor Payment Date)
to repay such Series of Hard Bullet Covered Bonds. |
| (2) | Subject to Section 6.4(1), at any time after the service
of a Notice to Pay on the Partnership, but prior to service of a Guarantor Acceleration Notice: |
| (a) | on each Guarantor Payment Date, the Managing GP (or
the Cash Manager on its behalf) will transfer Available Revenue Receipts and Available Principal Receipts from the Revenue Ledger,
the Reserve Ledger, the Principal Ledger or the Capital |
Account Ledger, as the case may be, to the Payment Ledger,
in an amount equal to the lower of (a) the amount required to make the payments set out in Schedule 7 (the “Guarantee
Priority of Payments”); and (b) the amount of all Available Revenue Receipts and Available Principal Receipts standing
to the credit of such Ledgers;
| (b) | the Managing GP (or the Cash Manager on its behalf)
will create and maintain ledgers for each Series of Covered Bonds and record amounts allocated to such Series of Covered Bonds
in accordance with paragraph (g) of Schedule 7, and such amounts, once allocated, will only be available to pay amounts due
under the obligations of the Partnership in respect of the Covered Bond Guarantee and amounts due in respect of the relevant Series
of Covered Bonds under the Covered Bond Swap Agreement on the scheduled repayment dates thereof; and |
| (c) | on each Guarantor Payment Date after the service of
a Notice to Pay on the Partnership (but prior to the occurrence of a Guarantor Event of Default), the Partnership (or the Cash
Manager on its behalf) will apply Available Revenue Receipts and Available Principal Receipts to make the payments, provisions
or credits set forth in the Guarantee Priority of Payments in the order of priority set forth therein (in each case only if and
to the extent that payments or provisions of a higher priority have been made in full). |
| (3) | At any time after the service of a Guarantor Acceleration
Notice but prior to the Covered Bonds having been repaid, the terms of the Security Agreement provide that all monies received
or recovered by the Bond Trustee (or a receiver appointed on its behalf) (excluding all amounts due or to become due in respect
of any Third Party Amounts) will be applied following the enforcement of the Security in accordance with the Post-Enforcement
Priority of Payments set out in the Security Agreement. |
| Section 6.5 |
Priority of Payments when Covered Bonds Repaid. |
From the date when either (a) the Covered
Bonds have been irrevocably and fully repaid and the Security constituted by the Security Agreement has been released by the Bond
Trustee; or (b) the Bond Trustee is satisfied that the Partnership has cash standing to the credit of the GDA Account equal to
the Required Redemption Amount in respect of each Series of Covered Bonds outstanding, all remaining amounts standing to the credit
of the Guarantor Accounts (excluding all amounts required to repay higher ranking amounts in the relevant Priority of Payment pursuant
to this Article 6) shall be allocated and paid by the Managing GP (or the Cash Manager on its behalf) in accordance with Schedule 8.
Article 7
SALE OF SELECTED LOANS
| Section 7.1 |
Sale of Selected Loans. |
| (1) | Sales of Selected Loans shall at all times be subject
to the rights of pre-emption enjoyed by the Seller pursuant to the terms of the Mortgage Sale Agreement. |
| (2) | At any time that no Asset Coverage Test Breach Notice
is outstanding, the Pre-Maturity Test has not been breached and no Covered Bond Guarantee Activation Event has occurred, the Partnership
may sell Selected Loans provided it is in compliance with the Asset Coverage Test and the Pre-Maturity Test and will, following
such sale, remain in compliance with the Asset Coverage Test and the Pre-Maturity Test and for greater certainty, the proceeds
from such sale may be held by the Cash Manager on behalf of the Partnership prior to a downgrade by one or more of the Rating
Agencies of the unsecured, unsubordinated and unguaranteed debt obligations or issuer default rating of the Cash Manager
below the Cash Manager Deposit Ratings and following such a downgrade deposited in the GDA Account. Any such sale shall be made
in accordance with Schedule 9. |
| (3) | At any time an Asset Coverage Test Breach Notice is outstanding
or a Notice to Pay has been served on the Partnership, but prior to the service of a Guarantor Acceleration Notice, unless the
Asset Coverage Test breach is otherwise cured, the Partnership shall sell Selected Loans in accordance with Schedule 9, subject
to the rights of pre-emption enjoyed by the Seller to buy the Selected Loans pursuant to the terms of the Mortgage Sale Agreement
and subject to additional advances on the Intercompany Loan and any Cash Capital Contribution made by the Limited Partner, made
in accordance with this Agreement. |
| (4) | The Partnership will through a tender process appoint
a portfolio manager of recognized standing on a basis intended to incentivise the portfolio manager to achieve the best price
for the sale of the Selected Loans (if such terms are commercially available in the market) to advise it in relation to the sale
of the Selected Loans to Purchasers (except where the Sellers are buying the Selected Loans in accordance with their right of
pre-emption in the Mortgage Sale Agreement). The terms of the agreement giving effect to the appointment in accordance with such
tender shall be approved by the Bond Trustee. |
| (5) | Any sale of Selected Loans will not include any representations
or warranties from the Partnership or the Seller in respect of such Loans and their Related Security unless expressly agreed by
the Bond Trustee and unless otherwise agreed with the Seller. |
| (6) | The terms of any sale and purchase agreement with respect
to the sale of Selected Loans (which shall give effect to the recommendations of the portfolio manager) will be subject to the
prior written approval of the Bond Trustee. The Bond Trustee will not be required to release the Selected Loans from the Security
unless the conditions relating to the release of the Security as set out in the Security Agreement are satisfied. |
| (7) | The proceeds from any sale of Selected Loans shall be
credited to the GDA Account to be applied in accordance with Article 6 (Priorities of Payments). |
| Section 7.2 |
Sale of Selected Loans Following a Breach of the Pre-Maturity Test. |
| (1) | Following a breach of the Pre-Maturity Test in respect
of a Series of Hard Bullet Covered Bonds, and unless the Pre-Maturity Liquidity Ledger is otherwise funded from other sources
pursuant to subsections (a) through (c), the Partnership shall sell Selected Loans to Purchasers in accordance with Schedule 9,
subject to: |
| (a) | any right of pre-emption of the Seller pursuant to the
terms of the Mortgage Sale Agreement; |
| (b) | a Capital Contribution in Kind made by one or more of
the Partners (as recorded in the Capital Account Ledger for such Partners) of Pre-Maturity Liquidity Eligible Assets in accordance
with this Agreement with an aggregate principal amount up to the Pre-Maturity Liquidity Required Amount (which shall be a credit
to the Pre-Maturity Liquidity Ledger); or |
| (c) | Cash Capital Contributions made by one or more of the
Partners (as recorded in the Capital Account Ledger for each applicable Partner) or proceeds advanced under the Intercompany Loan
Agreement which have not been applied to acquire further Loans and their Related Security or otherwise applied in accordance with
this Agreement and/or the other Transaction Documents with an aggregate principal amount up to the Pre-Maturity Liquidity Required
Amount (which shall be a credit to the Pre-Maturity Liquidity Ledger). |
| (2) | If the Pre-Maturity Test in respect of any Series of Hard
Bullet Covered Bonds is breached less than six months prior to the Final Maturity Date of that Series of Hard Bullet Covered Bonds,
an Issuer Event of Default will occur if the Partnership has not taken the required action as described in Section 7.2(1) within
the earlier to occur of (i) 10 Toronto Business Days from the date that the Seller is notified of the breach of the Pre-Maturity
Test and (ii) the Final Maturity Date of that Series of Hard Bullet Covered Bonds. |
| (3) | To cure a Pre-Maturity Test breach within the period described
in (2) above, the Pre-Maturity Liquidity Ledger shall be funded so that by the end of such period, there will be an amount equal
to the Required Redemption Amount of that Series of Hard Bullet Covered Bonds standing to the credit of the Pre-Maturity Liquidity
Ledger (after taking into account the Required Redemption Amount of all other Series of Hard Bullet Covered Bonds which mature
within 12 months of the date of such calculation). |
| (4) | The proceeds of sale of Selected Loans in accordance with
this Section 7.2 shall be credited to the GDA Account with a corresponding credit to the Pre-Maturity Liquidity Ledger. |
| (5) | In certain circumstances, Revenue Receipts will also be
available to repay a Hard Bullet Covered Bond in accordance with Schedule 5. |
| (6) | Failure by the Issuer to pay the full amount due in respect
of a Series of Hard Bullet Covered Bonds on the Final Maturity Date thereof, subject to applicable cure periods, will constitute
an Issuer Event of Default. |
| (7) | If the Issuer and/or the Partnership fully repay the relevant
Series of Hard Bullet Covered Bonds on the Final Maturity Date thereof, cash standing to the credit of the Pre-Maturity Liquidity
Ledger on the GDA Account will be applied by the Partnership in accordance with the Pre-Acceleration Principal Priority of Payments,
unless: |
| (a) | the Issuer is failing the Pre-Maturity Test in respect
of any other Series of Hard Bullet Covered Bonds, in which case the cash will remain on the Pre-Maturity Liquidity Ledger in order
to provide liquidity for that other Series of Hard Bullet Covered Bonds; or |
| (b) | the Issuer is not failing the Pre-Maturity Test in respect
of any other Series of Hard Bullet Covered Bonds, but the Cash Manager elects to retain the cash on the Pre-Maturity Liquidity
Ledger in order to provide liquidity for any future Series of Hard Bullet Covered Bonds. |
| Section 7.3 |
Sale of Selected Loans After a Demand Loan Repayment Event has Occurred or the Issuer has Otherwise Demanded that the Demand
Loan be Repaid. |
If, prior to the service of an Asset
Coverage Test Breach Notice or a Notice to Pay, a Demand Loan Repayment Event has occurred or the Issuer has demanded that the
Demand Loan be repaid, the Partnership may (a) sell Selected Loans in accordance with Schedule 9, subject to the rights of pre-emption
enjoyed by the Seller to purchase the Selected Loans pursuant to the terms of the Mortgage Sale Agreement, or (b) make a Payment
in Kind in accordance with the terms of the Intercompany Loan Agreement. Any such sale or Payment in Kind will be subject to the
condition that the Asset Coverage Test is satisfied after the receipt of the proceeds of such sale or Payment in Kind and repayment,
after giving effect to such repayment.
| Section 7.4 |
Liquidity Options following an Issuer Event of Default |
In addition to the obligations of the
Partnership provided in this Article 7, if, following the service of a Notice to Pay on the Partnership, the Partnership has insufficient
cash to meet its obligations to pay any Guaranteed Amounts that are due, the Partnership may:
| (1) | borrow money and grant a Security Interest over the
Portfolio to and in favour of the lender thereof ranking pari passu with Covered Bondholders (provided the Guarantor has
provided at least 10 Canadian Business Days’ prior written notice of such borrowing and grant of security to DBRS); |
| (2) | issue additional securities which may be secured by
a Security Interest over the Portfolio ranking pari passu with Covered Bondholders; and |
| (3) | enter into repo arrangements in respect of the Covered
Bonds. |
| Section 7.5 |
Voluntary Overcollateralization |
From time to time, the Partnership may
hold Loans and Related Security, Substitute Assets and cash with a value in excess of the value required to satisfy the coverage
tests prescribed by this Agreement, the other Transaction Documents and the CMHC Guide, including the Asset Coverage Test and/or
the Amortization Test, as applicable. Such excess collateral is the “Voluntary Overcollateralization”. Subject
to compliance by the Partnership compliance with this Agreement, the other Transaction Documents, the Asset Coverage Test and/or
the Amortization Test, as applicable, and the CMHC Guide, the Partnership may from time to time:
| (a) | apply cash (in an amount up to the Voluntary Overcollateralization)
to the repayment of any loan advanced by the Issuer, including the Intercompany Loan; |
| (b) | distribute cash (in an amount up to the Voluntary Overcollateralization)
to the Partners; and |
| (c) | agree with the Seller to substitute assets owned by
the Partnership with other Loans and Related Security and/or Substitute Assets that in each case comply with the terms of the
Transaction Documents, the CMHC Guide and the Covered Bond Legislative Framework. |
Any Substitute Assets withdrawn from
the Portfolio in accordance with Section 7.5(c) will be selected in a manner that would not reasonably be expected to adversely
affect the interests of the Covered Bondholders and the consideration received by the Partnership therefor (whether in cash or
in kind) will not be less than the fair market value thereof.
Article 8
MANAGEMENT OF THE PARTNERSHIP
| Section 8.1 |
General Authority and Obligations of the Managing GP and the Liquidation GP. |
| (1) | Subject to Section 8.3, the Managing GP (i) has unlimited
liability for the debts, liabilities and obligations of the Partnership, (ii) except as expressly provided in this Agreement,
is authorized and obliged to manage, control, administer and operate the business and affairs of the Partnership and to make all
decisions regarding the business of the Partnership and to represent the Partnership, and (iii) has the full right, power and
authority to do any act, take any proceeding, make any decision and execute and deliver any instrument, deed, agreement or document
necessary for or incidental to carrying out the objects, purposes and business of the Partnership for and on behalf of the Partnership.
In so doing, the Managing GP has all of the rights and powers of a general partner as provided in the LP Act and as otherwise
provided by law and any action taken by the Managing GP will constitute the act of and shall serve to bind the Partnership. The
power of the Managing GP to represent the Partnership in dealings with third parties is unrestricted insofar as third parties
are concerned and no person dealing with the Partnership will be required to inquire into the authority of the Managing GP to
take any act or proceeding, to make any decision or to execute and deliver any instrument, deed, agreement or document for or
on behalf of or in the name of the Partnership. |
| (2) | Subject to Section 8.3, the Liquidation GP (i) has unlimited
liability for the debts, liabilities and obligations of the Partnership, (ii) following a Managing GP Default Event, is authorized
and obliged to manage, control, administer and operate the business and affairs of the Partnership and to make decisions regarding
the business of the Partnership and to represent the Partnership, and (iii) following a Managing GP Default Event, has the full
right, power and authority to do any act, take any proceeding, make any decision and execute and deliver any instrument, deed,
agreement or document necessary for or incidental to carrying out the objects, purposes and business of the Partnership for and
on |
behalf of the Partnership. In so doing, the Liquidation
GP has all of the rights and powers of a general partner as provided in the LP Act and as otherwise provided by law and any action
taken by the Liquidation GP will, subject to the provisions of this Agreement, constitute the act of and shall serve to bind the
Partnership. The power of the Liquidation GP to represent the Partnership in dealings with third parties is unrestricted insofar
as third parties are concerned and no person dealing with the Partnership will be required to inquire into the authority of the
Liquidation GP to take any act or proceeding, to make any decision or to execute and deliver any instrument, deed, agreement or
document for or on behalf of or in the name of the Partnership.
| Section 8.2 |
General Powers of the Managing GP and the Liquidation GP. |
| (1) | Subject to Section 8.3, and without limiting the generality
of Section 8.1, the Managing GP has full power and authority for and on behalf of and in the name of the Partnership: |
| (a) | to negotiate, enter into and to perform any agreement
in connection with the establishment, operation, conduct or expansion of the business of the Partnership; |
| (b) | to manage and control all of the activities of the Partnership
and take all measures necessary or appropriate for the business of the Partnership or ancillary thereto, including ensuring compliance
by the Partnership with the CMHC Guide; |
| (c) | to maintain the Partnership Records and accounts of
the Partnership including those required to be maintained pursuant to the terms of this Agreement, the CMHC Guide and applicable
law and provide reports to the Partners; |
| (d) | acquire any real or personal property required or desirable
for the business of the Partnership and to dispose of any property of the Partnership; |
| (e) | to borrow money from time to time without limit as to
the amount, cost or terms of payment thereof, to draw, make, execute and issue promissory notes, evidences of notes, evidences
of indebtedness and other negotiable or non-negotiable instruments and to secure the payment thereof by mortgage, charge, debenture,
hypothecation, pledge or by the creation of any other appropriate security interest; |
| (f) | to cause the Partnership to provide guarantees, indemnities
and other forms of assurance; |
| (g) | to cause the Partnership to provide security for any
of its obligations; |
| (h) | to cause the Partnership to acquire or maintain insurance
coverage of any type; |
| (i) | to employ, retain, engage or dismiss all Persons necessary
for the conduct of the business of the Partnership; |
| (j) | to delegate any of its duties to such other Persons
as it sees fit; |
| (k) | to retain such legal counsel, experts, advisors or consultants
as the Managing GP considers appropriate, including the retention of any of same as the Managing GP may, in its discretion, determine
to engage on behalf of the Limited Partner in the representation of the Limited Partner, and to rely upon the advice of such persons; |
| (l) | to open and operate any bank account; |
| (m) | to establish any required place of business of the Partnership; |
| (n) | to pay all costs and expenses of the Partnership; |
| (o) | to commence or defend any action or proceeding by, against
or in connection with the Partnership; |
| (p) | to collect, xxx for and receive all sums of money or
other property or items that are believed due to the Partnership; |
| (q) | to file returns required by any Governmental Authority; |
| (r) | to execute and file on behalf of the Partnership any
elections that are referred to in the Income Tax Act or other applicable tax legislation as are in its reasonable opinion appropriate
in the circumstances; |
| (s) | to invest funds of the Partnership not immediately required
for the business of the Partnership; |
| (t) | to enter into hedge contracts or similar arrangements
to permit the Partnership to mitigate or eliminate the Partnership’s exposure to interest rate fluctuations or foreign exchange
or other risks associated with the business; |
| (u) | to make distributions; and |
| (v) | to do anything that is provided for in this Agreement
or that is in furtherance of or is incidental to or is necessary or desirable in respect of the business of the Partnership, including,
without limitation, to do all such acts and things and execute all such agreements and other instruments as are necessary to give
effect to the transactions described or contemplated by the Prospectus whether or not specifically mentioned in this Agreement. |
| (2) | Subject to Section 8.3, and without limiting the generality
of Section 8.1, the Liquidation GP shall, following a Managing GP Default Event, have full power and authority for and on behalf
of and in the name of the Partnership to do any act that prior to the Managing GP Default Event was within the power and authority
of the Managing GP. |
| Section 8.3 |
Limitation on Authority of Managing GP and Liquidation GP. |
| (1) | Notwithstanding the general authority and powers granted
to the Managing GP or the Liquidation GP hereunder, unless contemplated in or required to comply with any of the |
Transaction Documents to which the Partnership is a
party, the Managing GP and the Liquidation GP will not, without the consent of the Limited Partner, and while there are any Covered
Bonds outstanding, the Bond Trustee (and in the case of Section 8.3(1)(i) below the Liquidation GP) and will not cause the Partnership
to:
| (a) | have an interest in any bank account, other than as
set out in the Transaction Documents; |
| (b) | have any employees or premises or subsidiaries; |
| (c) | acquire any material assets (including Substitute Assets)
other than pursuant to or in accordance with the terms of the Mortgage Sale Agreement, this Agreement and the other Transaction
Documents to which it is a party; |
| (d) | transfer, sell, exchange, lend, part with or otherwise
dispose of, or deal with, or grant any option or present or future right to acquire any of its assets or undertakings or any interest,
estate, right, title or benefit therein or thereto or agree or attempt or purport to do so except pursuant to and in accordance
with the terms of the Security Agreement or other Transaction Documents to which it is a party; |
| (e) | enter into any contracts, agreements or other undertakings
other than the Transaction Documents; |
| (f) | incur any indebtedness in respect of borrowed money
whatsoever or give any guarantee or indemnity in respect of any such indebtedness other than pursuant to the Transaction Documents; |
| (g) | create or permit to subsist any mortgage, security,
pledge, lien, charge, hypothec or other security interest whatsoever (unless arising by operation of law), upon the whole or any
part of its assets or its undertakings, present or future other than as created or permitted in the Security Agreement or the
other Transaction Documents to which it is a party; |
| (h) | change the name or business of the Partnership or do
any act in contravention of, or make any amendment to this Agreement, except in accordance with the terms of this Agreement; |
| (i) | do any act which makes it impossible to carry on the business of the Partnership, including dissolving, terminating, winding-up
or otherwise discontinuing the Partnership; |
| (j) | compromise, compound or release any debt due to it; |
| (k) | commence, defend, consent to a judgment, settle or compromise
any litigation or other claims relating to it or any of its assets; |
| (l) | permit a person to become a general or limited partner
(except in accordance with the terms of this Agreement); or |
| (m) | consolidate or merge with any other person or convey
or transfer its properties or assets substantially as an entirety to any other person. |
| (2) | Notwithstanding the general authority and powers granted
to the Managing GP and the Liquidation GP hereunder, all material transactions and agreements involving the Partnership (other
than the Transaction Documents) must be approved by the Managing GP’s board of directors and following a Managing GP Default
Event the Liquidation GP’s board of directors. |
| Section 8.4 |
Meetings of the Partners. |
| (1) | A meeting of the Partners will be held annually or more
frequently if a Partners’ meeting is called by the Managing GP in its discretion. |
| (2) | The Managing GP shall, upon a request from the Limited
Partner, call a meeting of the Partners. |
| (3) | The Managing GP shall deliver notice of the time, place
and business to be conducted at any meeting of the Partners at least 15 Toronto Business Days prior to any meeting of the Partners
unless such period of notice is waived by the Limited Partner. |
| Section 8.5 |
Title to Property. |
The Managing GP or the Liquidation GP
(if directed by the Managing GP or following a Managing GP Default Event) may hold legal title to any or all property of the Partnership
in its name for the benefit of the Partnership.
| Section 8.6 |
Discharge of Duties of Managing GP and Liquidation GP. |
Each of the Managing GP and the Liquidation
GP agrees to exercise its powers and discharge its duties under this Agreement honestly, in good faith and in the best interests
of the Partnership and in connection therewith shall exercise the standard and degree of care, diligence and skill that a reasonably
prudent Person would exercise in comparable circumstances.
| Section 8.7 |
Reimbursement. |
The Managing GP and the Liquidation GP
will, subject to the terms of Article 6 (Priorities of Payments), each be entitled to be reimbursed by the Partnership for
all out-of-pocket expenses incurred in the performance of its duties hereunder.
| Section 8.8 |
Commingling of Funds. |
The funds and assets of the Partnership
shall not (except in accordance with the terms of this Agreement, the other Transaction Documents and the CMHC Guide) be commingled
with the funds or assets of the Managing GP or the Liquidation GP or of any other Persons. For
greater certainty, subject to commingling as permitted in
accordance with the terms of this Agreement, the other Transaction Documents and the CMHC Guide, all cash and Substitute Assets
of the Guarantor shall be held in one or more Guarantor Accounts and all Substitute Assets shall be segregated from the assets
of the Account Bank.
| Section 8.9 |
Execution of Documents |
Any and all powers of the Managing GP
or of the Liquidation GP may be exercised by the execution and delivery by such person or an agent, director, officer or employee
of such person designated by such person for and on behalf of and in the name of the Partnership, and under seal or otherwise,
of agreements, instruments, deeds or other documents in such forms as the Managing GP or Liquidation GP, as the case may be, or
their respective agent, director, officer or employee designated for such purpose may deem sufficient.
Each of the Managing GP and the Liquidation
GP may contract with any other Person to carry out any of their respective duties and may delegate to such person any power and
authority of such person hereunder, but no such contract or delegation will relieve such person of any of its obligations hereunder,
including its obligations in connection with the control of the business, affairs and undertaking of the Partnership.
The Managing GP may, on behalf of the
Partnership, purchase and maintain, or cause to be purchased and maintained, for the benefit of the Partnership and the operation
of the business thereof, property, casualty and other insurance of such types and coverages as the Managing GP determines to be
appropriate in the circumstances.
| Section 8.12 | Ostensible Authority. |
Each of the Managing GP and the Liquidation
GP will, where it deems necessary and practicable, insert, and cause agents of the Partnership to insert, the following clause
in any contracts or agreements to which the Partnership is a party or by which it is bound:
“Scotiabank Covered Bond Guarantor Limited Partnership
is a limited partnership formed under the Limited Partnerships Act (Ontario), a limited partner of which is, except as expressly
required by law, only liable for any of its liabilities or any of its losses to the extent of the amount that the limited partner
has contributed or agreed to contribute to its capital.”
| Section 8.13 | Decisions by Partners
following the appointment of a liquidator or receiver to any Partner. |
Without limiting anything else contained
herein, at any time a liquidator or receiver is appointed in respect of a Partner, any decisions of the Partnership that are reserved
to that Partner or that requires the unanimous consent of the Partners will be made by the Partner(s) not
then in liquidation or receivership, as the case may be,
and such Partner shall be deemed to have consented to such decision.
Article 9
REGISTERED OFFICE, BOOKS AND RECORDS, FINANCIAL
INFORMATION and other general partner covenants
| Section 9.1 |
Registered Office. |
The Managing GP will maintain a registered
office at Xxxxx 0000, 0 Xxxxx Xxxxxxxx Xxxxx, 000 Xxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx, X0X 0X0 and/or at such other place or places
in Canada as the Managing GP may from time to time determine, and keep there a copy of this Agreement and any amendments hereto
and copies of any other documents required to be so kept pursuant to section 33 of the LP Act or any other laws of similar application
in any other jurisdiction in which the Partnership carries on business;
The Managing GP will:
| (a) | maintain a record (the “Record”)
and record therein the full names and addresses of the Partners; |
| (b) | maintain and update the Partnership Record and such
other records as may be required by law; and |
| (c) | from time to time make on behalf of the Partnership
all filings with any Governmental Authority that are required to be made by the Partnership. |
| Section 9.3 |
Books of Account. |
The Managing GP must keep and maintain,
or cause to be kept and maintained, at its principal place of business, separate from any records of the Managing GP or any other
Person, full, complete and accurate books of account, and records of the business of the Partnership, including:
| (a) | the Principal Ledger, which shall record all receipts
of Principal Receipts and distribution of Principal Receipts; |
| (b) | the Pre-Maturity Liquidity Ledger, which will record
the credits and debits of funds available to repay any Series of Hard Bullet Covered Bonds on the Final Maturity Date thereof
if the Pre-Maturity Test has been breached; |
| (c) | the Revenue Ledger, which shall record all receipts
of Revenue Receipts and distribution of Revenue Receipts; |
| (d) | the Reserve Ledger, which shall record all Revenue Receipts
credited to the Reserve Fund up to the Reserve Fund Required Amount and debits made to the Reserve Fund; |
| (e) | the Capital Account Ledger for each Partner which shall
record the balance of each Partner’s Capital Contributions and distribution of those Capital Contributions; and |
| (f) | the Payment Ledger, which shall record payments by or
on behalf of the Partnership. |
| Section 9.4 |
Inspection of Record and Books of Account. |
| (1) | Any Partner may, upon five (5) Toronto Business Days’
written notice to the Managing GP, inspect copies of the books and records of the Partnership including, without limitation, the
Partnership Record, any of the documents to which access is permitted pursuant to section 33(3) of the LP Act and any documents
referred to in Section 9.3, at the Limited Partner’s expense during normal business hours. |
| (2) | Without limitation of any audit rights the Limited Partner
may have pursuant to any other agreement among the parties hereto, the Limited Partner may, at its expense and upon reasonable
written notice to the Managing GP, audit the books of account and records of the business of the Partnership. |
| Section 9.5 |
Appointment of Guarantor Auditor. |
| (1) | The Managing GP, with the consent of the Limited Partner,
may retain the Guarantor Auditor to review and report to the Partners upon the financial statements of the Partnership for, and
as at the end of each Financial Year. |
| (2) | Following appointment, the Guarantor Auditor may be replaced
by the Managing GP, or a new Guarantor Auditor may be appointed by the Managing GP in each case with the consent of the Limited
Partner. |
| Section 9.6 |
Annual Report and Income Tax Information. |
Within 90 days after the end of each
Fiscal Year (or such shorter period of time as may be required by, or necessary in order to comply with, applicable law), the Managing
GP will forward or cause to be forwarded to each Partner and to each Person who was shown on the Partnership Record as a Partner
during such Fiscal Year:
| (a) | if requested by a Partner, financial statements of the
Partnership as at the end of, and for, such Fiscal Year (prepared in accordance with IFRS, consistently applied), together with
a report of the Guarantor Auditor if applicable; |
| (b) | a report of distributions to Partners in respect of
such Fiscal Year; |
| (c) | such other information as is required to be provided
to Partners pursuant to applicable legislation; and |
| (d) | information concerning the amount of Taxable Income
or Taxable Loss and credits and charges to capital allocated to such Person and such other information as may be necessary to
enable such Person to file applicable Canadian federal and provincial income tax returns with respect to such Person’s income
from the Partnership in respect of such Fiscal Year. |
| Section 9.7 |
Investing in Substitute Assets. |
| (1) | At any time that no Asset Coverage Test Breach Notice
is outstanding and prior to a Notice to Pay having been served on the Partnership, the Partnership may invest in and hold Substitute
Assets, provided that the aggregate value of the Substitute Assets held by the Partnership does not at any time exceed 10 per
cent of the aggregate value of (x) the aggregate loan balance of the Loans in the Portfolio; (y) the face value of any Substitute
Assets; and (z) the aggregate cash balances held by the Partnership (subject to the Prescribed Cash Limitation), and provided
that such investments are made in accordance with the terms of the Cash Management Agreement and subject to Article 6 (Priorities
of Payments). |
| (2) | At any time an Asset Coverage Test Breach Notice is outstanding
or a Covered Bond Guarantee Activation Event has occurred, the Managing GP must, or must cause the Cash Manager (on behalf of
the Partnership) to sell the Substitute Assets held by or on behalf of the Partnership as quickly as reasonably practicable, the
proceeds of which shall be credited to the GDA Account, subject at all times to the Prescribed Cash Limitation. |
| Section 9.8 |
Prescribed Cash Limitation |
| (1) | The maximum amount of cash which may be held by the Partnership
(the “Prescribed Cash Limitation”) being equal to (i) the amount necessary to meet its payment obligations
for the immediately succeeding six months pursuant to the terms of the Transaction Documents, or (ii) such greater amount of cash
as CMHC may at its discretion permit in accordance with the Covered Bond Legislative Framework and the CMHC Guide; provided that
to the extent that cash receipts of the Partnership cause it to hold cash in excess of the amount specified in clause (i), the
Partnership will not be in breach of this covenant if it uses such excess amount (x) to purchase New Loans and their Related Security
for the Covered Bond Portfolio pursuant to the terms of the Mortgage Sale Agreement; and/or (y) to invest in Substitute Assets
in an amount not exceeding the prescribed limit under the CMHC Guide; and/or (z) subject to complying with the Asset Coverage
Test and/or the Amortization Test, as applicable, to make Capital Distributions to the Limited Partner, in each case, within 31
days of receipt. |
| (2) | For greater certainty, amounts standing to the credit
of the Pre-Maturity Liquidity Ledger and the Reserve Fund (other than, in each case, those amounts that constitute Substitute
Assets) constitute cash and are subject to the Prescribed Cash Limitation. |
| (3) | In the event that the Partnership is required to fund
the Pre-Maturity Liquidity Ledger and/or the Reserve Fund in accordance with the Transaction Documents and such funding would
cause the Partnership to hold cash in excess of the Prescribed Cash Limitation, any cash held by the Partnership in excess of
such cash standing to the credit of the Pre-Maturity Liquidity Ledger and the Reserve Fund may be used in accordance with clauses
(x), (y) and (z) in paragraph (1) above. In the event that the Partnership is in breach of the Prescribed Cash Limitation and
either (i) it does not hold any cash other than the amounts it is required to hold in order to fund the Pre-Maturity Liquidity
Ledger and the Reserve Fund in accordance with the Transaction Documents, or (ii) a Notice to Pay has been served on the Partnership,
the Partnership may request that CMHC, in accordance with the discretion granted to it under the Covered Bond Legislative Framework
and the CMHC Guide, permit the Partnership to hold such amount of cash in excess of the Prescribed Cash Limitation as may be required
to allow it to comply with the Transaction Documents in the circumstances. |
| Section 9.9 |
Risk Mitigation |
| (1) | To the extent not already in place, the Managing GP shall
cause the Partnership to enter into a Covered Bond Swap Agreement at the time of issuance of each Series or Tranche of Covered
Bonds and an Interest Rate Swap Transaction at the time of each transfer of Loans and their Related Security to the Covered Bond
Portfolio, in each case, the purpose or effect of which is to materially mitigate the Partnership’s risk of financial loss
or exposure from fluctuations in interest rates or currency exchange rates affecting, or which may come to affect, its obligation
to make one or more payments, in accordance with Section 4.5 of the CMHC Guide. |
| (2) | Notwithstanding the foregoing, Swap Agreements entered
into as required pursuant to Section 9.9(a) may be structured to allow for the postponement of cash flows thereunder until the
Covered Bond Swap Effective Date or the Interest Rate Swap Effective Date, as applicable. |
| Section 9.10 | Notices to CMHC
re: Swap Agreements |
| (1) | The Partnership shall provide notice to CMHC of the termination
(or novation) of each Swap Agreement contemporaneously with the earlier of (i) notice of such termination (or novation) to a Rating
Agency, (ii) notice of such termination (or novation) being provided to or otherwise made available to Covered Bondholders and
(iii) five Toronto Business Days following such termination (or novation). Any such notice shall include the reasons for the termination
(or novation) and, if the applicable Swap Agreement has been novated, all information relating to the replacement Swap Provider
required by the CMHC Guide and the documentation governing such novated Swap Agreement. |
| (2) | In the event that a Ratings Trigger under a Swap Agreement
is breached and the obligations of the applicable Swap Provider are guaranteed by another entity, the Partnership shall forthwith
notify CMHC of the identity of such guarantor and the ratings by each of the Rating Agencies of the short-term, unsecured, unsubordinated
and unguaranteed debt obligations of such guarantor. |
Article 10
NEW
LIMITED PARTNERS
| (1) | No change of name or address of a Limited Partner, no
Transfer of an interest in the Partnership and no admission of a new Partner will be effective for the purposes of this Agreement
until: (a) prior written notice of the same has been delivered to CMHC, each of the Partners and the Bond Trustee and such Transfer
will not cause, or would not reasonably be expected to cause, a breach of the CMHC Guide, (b) each of the Partners and the Bond
Trustee pursuant to Section 10.1(2)(e) below has consented thereto (provided that such consent shall not be required for the Limited
Partner to Transfer all or a portion of its interest in the Partnership to a Subsidiary, provided such Subsidiary is not a Non-Resident),
(c) the transferee has in accordance with the requirements of this Agreement, delivered a form of transfer and power of attorney
satisfactory to the Managing GP, acting reasonably, and agreed to accede to and become bound by this Agreement and has delivered
such documents and other instruments as the Managing GP may reasonably request, (d) such change, transfer or addition is
duly reflected in the Partnership Record, and (e) the Rating Agency Condition has been satisfied in respect of such change, transfer
or addition. The names and addresses of the Limited Partner(s) as reflected from time to time in the Partnership Record, as from
time to time amended, will be conclusive as to such facts for all purposes of the Partnership. |
| (2) | In addition to the requirements set forth in Section 10.1(1),
any new Limited Partner (except a Subsidiary of the Limited Partner, provided such Subsidiary is not a Non-Resident) shall while
there are Covered Bonds outstanding: |
| (a) | accede to the terms of the Mortgage Sale Agreement (with
such subsequent amendments as may be agreed by the parties thereto) or enter into a new mortgage sale agreement with the Partnership
and the Bond Trustee, in each case so that it has, in relation to New Loans and their Related Security to be sold by such new
Limited Partner, substantially the same rights and obligations as the Limited Partner had in relation to those Loans and their
Related Security (as applicable) comprised in the Initial Portfolio under the Mortgage Sale Agreement; |
| (b) | accede to the Dealership Agreement and enter into such
other documents as may be required by the Bond Trustee and/or the Partnership to give effect to the addition of such new Limited
Partner to the transactions contemplated under the Program; |
| (c) | ensure that any New Loans and their Related Security
sold by such new Limited Partner to the Partnership comply with the Loan Representations and Warranties set out in the Mortgage
Sale Agreement; |
| (d) | procure that either the Servicer services the New Loans
and their Related Security sold by the new Limited Partner on the terms set out in the Servicing Agreement (with such subsequent
amendments as may be agreed by the parties thereto) or the |
new Limited Partner (or its nominee) enter into a servicing
agreement with the Partnership and the Bond Trustee which sets out the servicing obligations of the new Limited Partner (or its
nominee) in relation to the New Loans and their Related Security and which is on terms substantially similar to the terms set out
in the Servicing Agreement (the fees, if any, payable to the Servicer or the new Limited Partner (or its nominee) acting as servicer
of such New Loans and their Related Security would be determined on the date of the accession of such new Limited Partner to the
Program); and
| (e) | while there are Covered Bonds outstanding, procure written
confirmation from the Bond Trustee that it is satisfied that the accession of such new Limited Partner to the Partnership will
not prejudice the Asset Coverage Test and is not materially prejudicial to Covered Bondholders. |
| (3) | Upon receipt of any notice in writing from any Partner
complying with the terms of this Agreement and requiring the updating of the Partnership Record or any similar document or instrument
or other filing under the LP Act or legislation similar to the LP Act in other provinces and territories, the Managing GP shall
prepare, file and record such update in the Partnership Record or other document or instrument or other filing. |
Article 11
REMOVAL AND RESIGNATION OF THE MANAGING GP
AND THE LIQUIDATION GENERAL PARTNER
| Section 11.1 | Assignment of Interest
of Managing GP. |
Except with the prior approval of all
other Partners, or as otherwise expressly provided in this Agreement and provided that at least 10 Toronto Business Days’
prior written notice has been provided to DBRS, neither the Managing GP nor the Liquidation GP shall sell, assign, Transfer or
otherwise dispose (including by way of amalgamation, arrangement, merger or consolidation) of its interest in the Partnership.
| Section 11.2 | Removal of Managing
GP. |
| (1) | Upon the occurrence of any of the following events: |
| (i) | the passing of any resolution of the directors or the
shareholder of the Managing GP requiring or approving the bankruptcy, dissolution, liquidation or winding up of the Managing GP; |
| (ii) | the making of any assignment for the benefit of creditors
of the Managing GP, or upon the appointment of a receiver of the assets and undertaking of the Managing GP, |
| (iii) | the appointment of a receiver of the assets and undertaking
of the Managing GP, or |
| (iv) | the occurrence of an Issuer Event of Default, |
(each a “Managing GP Default Event”),
the Managing GP shall cease to be the
Managing GP of the Partnership.
| (2) | Forthwith following a Managing GP Default Event, the Liquidation
GP shall be automatically appointed the new Managing GP without the need for consent on the part of any Person or any further
act or formality and notice of such appointment shall be delivered forthwith to CMHC, each of the other Partners and the Bond
Trustee. |
| Section 11.3 | Resignation of
Managing GP or the Liquidation GP. |
The Managing GP or the Liquidation GP
may resign as the Managing GP or the liquidation general partner, as the case may be, on not less than 180 days’ prior written
notice to the other Partners, and such resignation will become effective upon the earlier of the appointment of a replacement by
unanimous consent of the remaining Partners (provided that the Rating Agency Condition has been satisfied in respect thereof),
and while any Covered Bonds are outstanding, the Bond Trustee, and the last day of such 180 day period, following which in the
case of the Managing GP resigning, the Liquidation GP shall be deemed to be appointed as the new Managing GP, provided, however,
that neither the Managing GP nor the Liquidation GP may resign if the effect thereof would be to dissolve the Partnership. In the
event the Liquidation GP resigns in accordance with this Section 11.3, the Managing GP shall forthwith use its best commercially
reasonable efforts to without delay locate a new liquidation general partner that meets the requirements of the CMHC Guide to be
appointed by the unanimous consent of the other Partners, and, while there are Covered Bonds outstanding, the Bond Trustee.
| Section 11.4 | Transfer to New
Managing GP. |
On the admission to the Partnership of
the new Managing GP of the Partnership (the “New Managing GP”) and the removal or resignation of the Managing
GP, the departing Managing GP (the “Departing Managing GP”) must do all things and take all steps necessary
or desirable to transfer to the New Managing GP the administration, management, control and operation of the business of the Partnership
and the books, records and accounts of the Partnership to the New Managing GP and must execute and deliver all deeds, certificates,
declarations and other documents necessary or desirable to effect such transfer in a timely fashion.
On the resignation or removal of the
Managing GP or of the Liquidation GP, the Partnership will release and hold harmless the resigning or removed Managing GP or Liquidation
GP, as the case may be, from all costs, damages, liabilities or expenses suffered or incurred by it as a result of or arising out
of events occurring after such resignation or removal, as the case may be, other than as a result of or arising out of any wilful
act by the Departing Managing GP or departing Liquidation GP, as the case may be, in relation to the Partnership occurring after
such resignation or removal, as the case may be.
| Section 11.6 | Transfer of Title to New Managing GP. |
On the removal or withdrawal of the Managing
GP and the admission of the New Managing GP, the Departing Managing GP, at the cost of the Partnership, must transfer title to
all of the Partnership’s property that is registered in the name of the Departing Managing GP to the name of the New Managing
GP or a nominee on its behalf. The Departing Managing GP must execute and deliver all deeds, certificates, declarations and other
documents necessary or desirable to effect such transfer in a timely fashion.
| Section 11.7 | New Managing GP. |
| (1) | The New Managing GP must not be a Non-Resident and must
become a party to this Agreement by signing a counterpart hereof and confirming that the representations, warranties and covenants
in Section 2.8(1) are true and correct in respect of the New Managing GP. The New Managing GP must agree to be bound by all of
the provisions of this Agreement and any other agreement respecting the Partnership to which the Departing Managing GP is bound
and must assume the obligations, duties and liabilities of the Managing GP under such agreements as of the date that the New Managing
GP becomes the Managing GP. |
| (2) | At any time the Liquidation GP becomes the Managing GP
pursuant to the terms of this Agreement, it may appoint a replacement Managing GP for itself, with the consent of the Limited
Partner and, while there are Covered Bonds outstanding, the Bond Trustee; provided, however, that if an Issuer Event of Default
has occurred and is continuing, the replacement Managing GP shall not be the Issuer or an Affiliate of the Issuer. Following the
appointment of a replacement Managing GP for the Liquidation GP, the Liquidation GP shall cease to be the Managing GP and resume
its rights and obligations hereunder as liquidation general partner, and shall be treated as a Departing Managing GP, provided
that it will not be released as the liquidation general partner pursuant to Section 11.5. |
Article 12
DISSOLUTION OF PARTNERSHIP
| Section 12.1 | Events of Dissolution. |
The Partnership will be dissolved on
the earliest to occur of:
| (a) | the authorization by a resolution of the Limited Partner
in writing of such dissolution, provided that the effective time of such resolution is at least two years after the Final Maturity
Date for the final Tranche or Series of Covered Bonds then outstanding; and |
| (b) | the date of a dissolution caused by operation of law. |
| Section 12.2 | Events Not Causing
Dissolution. |
Except as expressly provided in Section
12.1(a) above, the Partnership will not be dissolved or terminated by the amendment of this Agreement or the Partnership Record
or by the
resignation, removal, bankruptcy, insolvency, dissolution,
liquidation, winding up or receivership of, or the admission, resignation or withdrawal of any Partner.
Subject to the terms of the Security
Agreement, upon the occurrence of any of the events set out in Section 12.1, and while there are Covered Bonds outstanding, the
Liquidation GP, and when there are no Covered Bonds outstanding, the Managing GP will serve as the receiver of the Partnership,
provided that if such person is unable or unwilling to act in such capacity, such Person shall, with the consent of the Limited
Partner, and while there are no Covered Bonds outstanding, the Bond Trustee will appoint some other appropriate person or party
to act as the receiver of the Partnership.
| Section 12.4 | Liquidation of
Assets and Distribution of Proceeds of Liquidation. |
| (1) | The receiver appointed pursuant to Section 12.3 will prepare
or cause to be prepared a statement of financial position of the Partnership which will be reported upon by the Guarantor Auditors,
if applicable, and a copy of which will be forwarded to each Person who was shown on the Partnership Record as a Partner at the
date of dissolution. Subject to the terms of the Transaction Documents, the receiver will wind up the affairs of the Partnership
and all property of the Partnership will be liquidated in an orderly manner and will distribute the net proceeds of the liquidation
of the Partnership in accordance with Article 6 (Priorities of Payments). The receiver will manage and operate the assets
and undertaking of the Partnership and will have all powers and authority of the Managing GP under this Agreement. The receiver
will be paid its reasonable fees and disbursements incurred in carrying out its duties as such. |
| (2) | If the Partnership is required to make “in specie”
distributions of property in lieu of cash, then the fair market value (as determined by the receiver) thereof shall be used to
determine the amounts to be distributed under this Section 12.4, and in the event that “in specie” distributions
are required in a case where the Partnership has granted security on any of its assets, then such assets may be distributed directly
or indirectly (including via another entity) in such manner as is considered appropriate by the Managing GP and while there are
Covered Bonds outstanding, the Bond Trustee, so as to preserve such security interest while giving the Partners (except for the
Liquidation GP), directly or indirectly, the pro rata interests they are entitled to. |
| Section 12.5 | Termination of
Partnership. |
The Partnership will terminate when all
of its assets have been sold and the net proceeds therefrom, after payment of or due provision for the payment of all debts, liabilities
and obligations of the Partnership to creditors and all reserves, have been distributed as provided in this Article 12.
Article 13
AMENDMENTS
Subject to Section 13.2, this Agreement
may be amended only by an agreement in writing signed by each of the Partners and while there are Covered Bonds outstanding, with
the written consent of the Bond Trustee. Each proposed amendment to or waiver of this Agreement that is considered by the Managing
GP to be a material amendment or waiver shall be subject to satisfaction of the Rating Agency Condition.
Notwithstanding the foregoing, any amendment to this Agreement for the purposes of addressing changes to the CMHC Guide
shall not require the consent of any party nor shall it require satisfaction of the Rating Agency Condition. For certainty, any
amendment to (a) a Ratings Trigger provided for in this Agreement that lowers the ratings specified therein, or (b) the consequences
of breaching a Ratings Trigger provided for in this Agreement that makes such consequences less onerous, shall, with respect to
each affected Rating Agency only, be deemed to be a material amendment and shall be subject to satisfaction of the Rating Agency
Condition.
| Section 13.2 | Amendments by Managing
GP. |
| (1) | From time to time and without prior notice to, or the
consent of, any Partner, the Managing GP may amend any provision of this Agreement or add any provision hereto if such amendment
or addition is, in the opinion of counsel to the Partnership, necessary or desirable for the protection or benefit of the Limited
Partner or necessary or desirable to cure an ambiguity in, or to correct or supplement, any provision contained in this Agreement
which is defective or inconsistent with any other provision contained in this Agreement or any of the Transaction Documents, provided
that such cure, correction or supplemental provision does not and will not affect adversely the interests of the Limited Partner,
the Liquidation GP, or, while there are Covered Bonds outstanding, the Bond Trustee (on behalf of the holders of the Covered Bonds)
without such Person’s written consent. |
| (2) | For purposes of greater certainty and without limiting
Section 13.2(1), the Managing GP may make amendments to this Agreement (subject to the consent of the Limited Partner, the Liquidation
GP, or, while there are Covered Bonds outstanding the Bond Trustee if such party’s respective interests would be adversely
affected) to reflect: |
| (a) | a change in the name of the Partnership or the location
of the principal office of the Partnership or the registered office of the Partnership; |
| (b) | the admission, substitution, withdrawal or removal of
the Limited Partner in accordance with this Agreement; |
| (c) | a change that, as determined by the Managing GP, is
reasonable and necessary or appropriate to qualify or continue the qualification of the Partnership as a limited partnership in
which the Limited Partner has limited liability under the applicable laws; |
| (d) | a change that, as determined by the Managing GP, is
reasonable, necessary or appropriate to enable the Partnership to take advantage of, or not be detrimentally affected by, changes
in the Income Tax Act or other taxation laws; or |
| (e) | a change to amend or add any provision, or to cure any
ambiguity or to correct or supplement any provisions contained in this Agreement that may be defective or inconsistent with any
other provision contained in the Agreement or any of the Transaction Documents, or which should be made to make the Agreement
consistent with the disclosure set out in the Prospectus. |
| Section 13.3 | Notice of Amendment. |
The Managing GP shall notify or shall
cause notice to be delivered to each of the other Partners and, while there are Covered Bonds outstanding, the Bond Trustee and
the Rating Agencies, and if required pursuant to the CMHC Guide, CMHC, of the full details of any amendment, variation or waiver
to this Agreement or any other Transaction Document to which it is a party within five (5) Toronto Business Days of the effective
date of such amendment provided that failure to deliver such notice shall not constitute a breach of its obligations under this
Agreement or any other Transaction Document.
Article 14
CONFIDENTIALITY
| Section 14.1 | Confidentiality. |
| (1) | Subject to Section 14.1(2) below, each of the Partners
agrees not to disclose to any person any information relating to the business, finances or other matters of a confidential nature
of or relating to any other party to this Agreement or any of the Transaction Documents which it may have obtained as a result
of having entered into this Agreement or otherwise. |
| (2) | The provisions of Section 14.1(1) above shall not apply: |
| (a) | to the disclosure of any information to any person who
is a party to any of the Transaction Documents as expressly permitted by the Transaction Documents or to CMHC or any other Person
as may be required under the CMHC Guide and the Covered Bond Legislative Framework; |
| (b) | to the disclosure of any information which is or becomes
public knowledge otherwise than as a result of the wrongful conduct of the recipient; |
| (c) | to the extent that the recipient is required to disclose
the same pursuant to and in accordance with (i) any law or order of any court or pursuant to any direction or requirement (whether
or not having the force of law) of any central bank or any governmental or other regulatory, securities or taxation authority,
or (ii) the CMHC Guide and the Covered Bond Legislative Framework; |
| (d) | to the extent required to protect or enforce any of
its rights under any of the Transaction Documents or hereunder or for the purpose of discharging, in such manner as it thinks
fit, its duties under or in connection with such agreements in each case to such persons as require to be informed of such information
for such purposes; |
| (e) | to the disclosure of any information to professional
advisers who receive the same under a duty of confidentiality; |
| (f) | to the disclosure of any information with the consent
of the parties to this Agreement and, while there are Covered Bonds outstanding, the Bond Trustee; |
| (g) | to the disclosure to the Rating Agencies or any of them
of such information as may be requested by any of them for the purposes of setting or reviewing the rating assigned to the Covered
Bonds (or any of them), provided that no information which would disclose the identity of a Borrower shall be disclosed to the
Rating Agencies or any of them; or |
| (h) | to the disclosure of any information disclosed to a
prospective transferee of the Limited Partner (provided that it is disclosed on the basis that the recipient will hold it confidential). |
Article 15
MISCELLANEOUS
| Section 15.1 | Effective Time. |
This Agreement shall be effective at
12:00 a.m. (Toronto time) on the date first noted above.
| (1) | Any notice, direction or other communication given under
this Agreement shall be in writing and given by delivering it or sending it by prepaid first class mail to, in the case of the
Bond Trustee the address provided below and in the case of the Partners, to the registered office of such person set forth in
the Partnership Record, by facsimile transmission to facsimile number set forth below, or by e-mail to the e-mail address set
forth below, as applicable: |
| (a) | in the case of the Partnership to: |
Scotiabank Covered Bond Guarantor Limited Partnership
x/x Xxx Xxxx xx Xxxx Xxxxxx
Scotia Plaza, 00 Xxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
| Attention: | Managing
Director, Alternate Funding |
| E-mail: | xxxx.xxxxxxxx@xxxxxxxxxx.xxx |
| (b) | in the case of the Managing GP to: |
Scotiabank Covered Bond GP Inc.
x/x Xxx Xxxx xx Xxxx Xxxxxx
Scotia Plaza, 00 Xxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
| Attention: | Managing
Director, Alternate Funding |
| E-mail: | xxxx.xxxxxxxx@xxxxxxxxxx.xxx |
| (c) | in the case of the Liquidation GP to: |
0000000
Canada Inc.
c/o Computershare Trust Company of Canada
000 Xxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
| Attention: | Manager, Corporate Trust |
| E-mail: | xxxxxxxxxxxxxx.xxxxxxx@xxxxxxxxxxxxx.xxx |
| (d) | in the case of the Limited Partner to: |
The Bank of Nova Scotia
Scotia Plaza, 00 Xxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
| Attention: | Managing
Director, Alternate Funding |
| E-mail: | xxxx.xxxxxxxx@xxxxxxxxxx.xxx |
| (e) | in the case of the Bond Trustee to: |
Computershare
Trust Company of Canada
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
| Attention: | Manager, Corporate Trust |
| E-mail: | xxxxxxxxxxxxxx.xxxxxxx@xxxxxxxxxxxxx.xxx |
| (2) | Any such communication will be deemed to have been validly
and effectively given (i) if personally delivered, on the date of such delivery if such date is a Toronto Business Day and
such delivery was made prior to 4:00 p.m. (Toronto time) and otherwise on the next Toronto Business Day, (ii) in the case of first
class post, when it would be received in the ordinary course of the post, or (ii) if transmitted by e-mail or facsimile transmission
on the Toronto Business Day following the date of transmission provided the transmitter receives a confirmation of receipt. |
| (3) | Any party may change its physical or e-mail address for
notice, or facsimile contact information for service from time to time by notice given in accordance with the foregoing and any
subsequent notice shall be sent to such party at its changed physical or e-mail address, or facsimile contact information, as
applicable. |
| Section 15.3 | Time of the Essence. |
Time will be of the essence of this Agreement.
| Section 15.4 | Third Party Beneficiaries. |
Except as expressly otherwise provided
herein, the parties intend that this Agreement will not benefit or create any right or cause of action in, or on behalf of, any
Person other than the parties hereto and no Person, other than a party will be entitled to rely on the provisions of this Agreement
in any action, suit, proceeding, hearing or other forum.
| Section 15.5 | Bond Trustee. |
| (1) | It is hereby acknowledged and agreed that by its execution
of this Agreement the Bond Trustee shall not assume or have any of the obligations or liabilities of the Partnership or any of
the Partners under this Agreement and that the Bond Trustee has agreed to become a party to this Agreement for the purpose only
of taking the benefit of this Agreement, including the right of the Bond Trustee to agree to amendments to the terms hereof. For
greater certainty, the parties to this Agreement acknowledge that the rights and obligations of the Bond Trustee are governed
by the terms of the Trust Deed and the Security Agreement. Any liberty or right which may be exercised or determination which
may be made under this Agreement by the Bond Trustee may be exercised or made in the Bond Trustee’s absolute discretion
without any obligation to give reasons therefore and the Bond Trustee shall not be responsible for any liability occasioned by
so acting if acting in accordance with the terms of the Trust Deed and the Security Agreement, but without prejudice to the obligation
of the Bond Trustee to act reasonably. |
| (2) | In the event that there is any change in the identity
of the Bond Trustee, the Managing GP, and the Partners, if required, shall execute such documents with any other parties to this
Agreement and take such actions as such new Bond Trustee may reasonably require for the purposes of vesting in such new Bond Trustee
the rights of the Bond Trustee under this Agreement and under the Security Agreement and while any of the Covered Bonds remain
outstanding shall give notice thereof to the Rating Agencies. |
| Section 15.6 | Binding Effect. |
This Agreement will be binding upon and
enure to the benefit of the parties hereto and any partner who may from time to time be admitted to the Partnership in accordance
with the terms of this Agreement, their respective successors and, to the extent permitted hereunder, assigns.
| Section 15.7 | Further Assurances. |
The parties will perform and cause to
be performed any further and other acts and things and execute and deliver or cause to be executed and delivered any further and
other documents as may be reasonably necessary to carry out the terms and intent of this Agreement.
| Section 15.8 | Limited Partner
Not A GP. |
If any provision of this Agreement has
the effect of imposing upon the Limited Partner any of the liabilities or obligations of a general partner, such provision will
be of no force and effect but the remainder of this Agreement will continue in effect.
| (1) | No waiver of any of the provisions of this Agreement will
be deemed to constitute a waiver of any other provision (whether or not similar), nor will such waiver be binding unless executed
in writing by the party to be bound by the waiver. |
| (2) | No failure on the part of a party to exercise, and no
delay in exercising, any right under this Agreement will operate as a waiver of such right; nor will any single or partial exercise
of any such right preclude any other or further exercise of such right or the exercise of any other right. |
| Section 15.10 | Successors and Assigns. |
| (1) | This Agreement will be binding upon and enure to the benefit
of the parties and their respective successors and permitted assigns. |
| (2) | Neither this Agreement nor any of the rights or obligations
under this Agreement will be assignable or transferable by any party except in accordance with the terms of this Agreement. |
| Section 15.11 | Severability. |
If any provision of this Agreement is
determined by any court of competent jurisdiction to be illegal, invalid or unenforceable, that provision will be severed from
this Agreement and the remaining provisions will continue in full force and effect.
| Section 15.12 | Governing Law. |
This Agreement shall be governed by,
and construed in accordance with, the laws of the Province of Ontario and the federal laws of Canada applicable therein, without
regard to conflict of law principles.
| Section 15.13 | Counterparts. |
This Agreement may be executed in any
number of counterparts (including counterparts by facsimile) and all such counterparts taken together will be deemed to constitute
one and the same instrument.
| Section 15.14 | No Personal Liability for Limited Partners. |
No limited partner shall have any liability
as a general partner of the Partnership.
| Section 15.15 | Submission to Jurisdiction. |
Each of the parties hereto irrevocably
attorns and submits to the non-exclusive jurisdiction of the courts of the Province of Ontario in any action or proceeding arising
out of or relating to this Agreement, and hereby irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined by such courts. Each party to this Agreement hereby irrevocably waives, to the fullest extent it may possibly
do so, any defence or claim that the courts of the Province of Ontario are an inconvenient forum for the maintenance or hearing
of such action or proceeding.
[Remainder of this page is intentionally
left blank]
IN WITNESS WHEREOF the parties have entered into this
Limited Partnership Agreement as of the date first above written.
| |
SCOTIABANK COVERED BOND GP INC. |
| |
|
| |
Per: |
/s/ Xxxx Xxxxxxxx |
| |
|
Name: Xxxx Xxxxxxxx |
| |
|
Title: President and Secretary |
| |
|
|
| |
|
|
| |
8429057 CANADA INC. |
| |
|
| |
Per: |
/s/ Xxxxxx Xxxxxx |
| |
|
Name: Xxxxxx Xxxxxx |
| |
|
Title: President |
| |
|
|
| |
|
|
| |
Per: |
/s/ Xxxxxxx Xxxx Xxxxxxxx |
| |
|
Name: Xxxxxxx Xxxx Xxxxxxxx |
| |
|
Title: Vice-President |
| |
|
|
| |
|
|
| |
THE BANK OF NOVA SCOTIA |
| |
|
| |
Per: |
/s/ Xxx Xxxxx |
| |
|
Name: Xxx Xxxxx |
| |
|
Title: Managing Director and Head, Funding and Liquidity Management |
| |
|
|
| |
|
|
| |
COMPUTERSHARE TRUST COMPANY OF CANADA |
| |
|
| |
Per: |
/s/ Xxxx Xxxxxx |
| |
|
Name: Xxxx Xxxxxx |
| |
|
Title: Corporate Trust Officer |
| |
|
|
| |
Per: |
/s/ Xxxxxxx Xxxx |
| |
|
Name: Xxxxxxx Xxxx |
| |
|
Title: Associate Trust Officer |
Schedule 1
Additional Representations and Warranties
| (a) | No encumbrance exists over or in respect of any of its
assets. |
| (b) | It has not engaged in any activities since its incorporation
other than: |
| (i) | those incidental to its registration under the Canada
Business Corporations Act; |
| (ii) | other appropriate corporate steps; |
| (iii) | the authorisation and execution of the relevant Transaction
Documents; and |
| (iv) | the activities referred to or contemplated by the relevant
Transaction Documents as being performed by it in the Prospectus. |
| (c) | Since its date of incorporation there has been no material
adverse change in its financial position or prospects. |
| (d) | It is not the subject of any governmental or official
investigation or inquiry and to its knowledge, none is progressing or pending or has been threatened in writing against it, which
may have a material adverse effect on any of it, any relevant Transaction Document, and/or the issue and offering of Covered Bonds
under the Program. |
| (e) | No litigation, arbitration or administrative proceedings
of or before any court, tribunal or governmental body has been commenced or, so far as it is aware are pending or threatened against
it or any of its assets or revenues which may have a material adverse effect on it, any relevant Transaction Document and/or the
issue and offering of Covered Bonds under the Program. |
| (f) | It has at all times carried on and conducted its affairs
and business in its own name as a separate entity and in accordance with its constating documents and all laws and regulations
applicable to it and shall continue to do so throughout the continuation of the Partnership. |
| (g) | It has at all times kept or procured the keeping of proper
books of account and records separate from any person or entity. |
| (h) | All acts, conditions and things required to be done, fulfilled
and performed in order: |
| (i) | to enable it to lawfully enter into each relevant Transaction
Document; |
| (ii) | to enable it lawfully to exercise its rights under and
perform and comply with the obligations expressed to be assumed by it in the relevant Transaction Documents; and |
| (iii) | to ensure that the obligations expressed to be assumed
by it in the relevant Transaction Documents are legal, valid, binding and enforceable against it; |
have been, fulfilled and performed
and are in full force and effect or, as the case may be have been effected, and no steps have been taken to challenge, revoke or
cancel any such authorization obtained or effected.
| (i) | It has duly executed the relevant Transaction Documents. |
| (j) | Its entry into and the execution (and, where appropriate,
delivery) of the relevant Transaction Documents and the performance by it of its obligations under the relevant Transaction Documents
do not and will not conflict with or constitute a breach or infringement of: |
| (i) | its articles or by-laws; |
| (ii) | any law applicable to it; or |
| (iii) | any agreement, indenture, contract, mortgage, deed or
other instrument to which it is a party or which is binding on it or any of its assets. |
| (k) | The obligations expressed to be assumed by it under the
relevant Transaction Documents are legal and valid obligations, binding on it and enforceable against it in accordance with their
terms. |
| (l) | The Transaction Documents to which it is a party have
been entered into in good faith for its own benefit and on arm’s length commercial terms. |
| (m) | It is not in breach of or default under any agreement,
indenture, contract, mortgage, deed or other instrument to which it is a party or which is binding on it or any of its assets. |
| (n) | It is not necessary that any relevant Transaction Document
in relation to it be filed, recorded or enrolled with any court or other authority in any jurisdiction in which the assets of
the Partnership or the Liquidation GP are located. |
| (o) | It does not require the consent of any other party or
the consent, licence, approval or authorisation of any Governmental Authority in connection with the entering into or performance
of the relevant Transaction Documents. |
Schedule 2
Asset Coverage Test
The “Asset Coverage Test”
is met if the ACT Asset Value (as defined below) shall be in an amount at least equal to the ACT Liability Value (as defined below).
For greater certainty, references in this Schedule to “immediately preceding Calculation Date” and “previous
Calculation Date” are to the Calculation Period ending on the Calculation Date and references to Loans are to Loans in
the Portfolio.
Asset Coverage Test = ACT Asset Value
– ACT Liability Value
“ACT Asset Value”
= A + B + C + D + E – F
where:
| A. | the lower of (1) and (2): |
| (1) | the sum of the LTV Adjusted Loan Balance of each Loan in the Portfolio, net of Adjustments;
and |
| (2) | the sum of the Asset Percentage Adjusted Loan Balance of each Loan in the Portfolio, net
of Adjustments |
| B. | Principal Receipts up to Calculation Date not otherwise
applied |
| C. | Cash capital contributions made by Partners of the Partnership
(as recorded in capital account ledger for each Partner) or proceeds advanced under the Intercompany Loan Agreement or proceeds
from any sale of Eligible Loans or other cash exclusive of Revenue Receipts up to the Calculation Date |
| D. | Outstanding principal amount of any Substitute Assets |
| E. | Reserve Fund balance and/or amount credited to the Pre-Maturity
Liquidity Ledger, in either case if applicable |
| (1) | weighted average remaining maturity of all outstanding Covered Bonds (in years and, where less
than a year, deemed to be a year); |
| (2) | principal amount outstanding of all Covered Bonds; and |
“LTV Adjusted Loan Balance”
= lower of (1) and (2), where:
| (1) | the True Loan Balance of the relevant Loan; and |
| (2) | if such Loan is a Performing Eligible Loan, 80% of the Market Value of the
related Mortgaged Property, or if such Loan is not a Performing Eligible
Loan, zero |
“Asset Percentage Adjusted
Loan Balance” = Asset Percentage x lower of (1) and (2):
| (1) | the True Loan Balance of the relevant Loan; and |
| (2) | if such Loan is a Performing Eligible Loan, the Market Value of the
related Mortgaged Property, or if such Loan is not a Performing Eligible
Loan, zero |
“Performing Eligible Loans”
= Eligible Loans less than three months in arrears
“Adjustments” = sum
of:
| (1) | LTV Adjusted Loan Balance or Asset Percentage Adjusted Loan Balance (as the case may be) of any
Performing Eligible Loan in breach of the Loan Representations and Warranties or otherwise subject to the Seller’s repurchase
obligation (but yet to be repurchased) under the Mortgage Sale Agreement; and |
| (2) | financial losses (yet to be recompensed) resulting from any breach by the Seller of any other material
warranty in the Mortgage Sale Agreement or from any breach by a Servicer of a material term of the Servicing Agreement |
“True Loan Balance”
= sum of:
| (1) | outstanding loan balance of the relevant Loan; and |
| (2) | all Arrears of Interest and Accrued Interest with respect to the relevant Loan |
“Asset Percentage”
= As determined below
“Negative Carry Factor”
=
| (1) | if the weighted average margin of the interest rate payable on the outstanding Covered Bonds relative
to the interest rate receivable on the Portfolio is less than or equal to 0.1% per annum, then 0.5%; and |
| (2) | if the weighted average margin of the interest rate payable on the outstanding Covered Bonds relative
to the interest rate receivable on the Portfolio is greater than 0.1% per annum, then the sum of (x) 0.5% and (y) the weighted
average margin of the interest rate payable on the outstanding Covered Bonds less 0.1 %, |
unless the interest rate risk represented
by the weighted average margin of the interest rate payable on the outstanding Covered Bonds relative to the interest rate receivable
on the Portfolio is addressed or mitigated by the Interest Rate Swap and the “Effective Date” thereunder has occurred,
whereupon the Negative Carry Factor shall be nil
“ACT
Liability Value” = Nominal amount of Covered Bond liabilities in Canadian dollars (with currency transaction undertaken
using or at foreign exchange rates reflected in the related Covered Bond Swap Agreement)
The “Asset Percentage”
shall be determined as follows:
| (i) | On or prior to the Guarantor Payment Date immediately
following the Calculation Date falling in February, May, August and November of each year, and on such other date as the Limited
Partner may request following the date on which the Limited Partner is required to assign the Interest Rate Swap Agreement to
a third party (each such date a “Cash Flow Model Calculation Date”), the Managing GP (or the Cash Manager on
its behalf) will determine the percentage figure selected by it as the Asset Percentage based on such methodologies as the Rating
Agencies may prescribe from time to time (to ensure sufficient credit enhancement for the Covered Bond Guarantee will be maintained)
for the Portfolio based on the value of the Loans and their Related Security in the Portfolio as at the Calculation Date immediately
preceding the Cash Flow Model Calculation Date as a whole or on the basis of a sample of Randomly Selected Loans, such calculations
to be made on the same basis throughout unless the Rating Agency Condition has been satisfied in respect thereof. |
(1)
The Asset Percentage will from time to time be adjusted in accordance with the various methodologies of the Rating Agencies
to ensure that sufficient credit enhancement for the Covered Bond Guarantee will be maintained.
(2)
The Managing GP (or the Cash Manager on its behalf) will, or will use all reasonable efforts to cause the one or more Rating
Agencies to, determine the Asset Percentage at least two days prior to the Guarantor Payment Date following the Cash Flow Model
Calculation Date and the Asset Percentage so determined shall be the lowest percentage so determined by any of the Rating Agencies
in accordance with this Schedule 2 and shall apply to any calculations in respect of the Calculation Period ending on such Cash
Flow Model Calculation Date and each Calculation Period thereafter to but excluding the last day of the following Calculation Period
ending on a Cash Flow Model Calculation Date. To the extent a Rating Agency does not respond to a request for a newly-determined
Asset Percentage, the Asset Percentage last determined by such Rating Agency shall be applicable with respect to such Rating Agency.
(3)
Notwithstanding anything to the contrary in this Schedule 2, the Asset Percentage shall at all times be less than
or equal to 95%, as determined in accordance with this Schedule 2 and as provided by Section 15.1(z) of the Trust Deed, provided
that the Asset Percentage shall not be less than 80% unless otherwise agreed by the Issuer (and following an Issuer Event of Default,
the Partnership for the purposes of making certain determinations in respect of the Intercompany Loan).
Schedule 3
Amortization Test
| (a) | The “Amortization Test” is met if the
Amortization Asset Value (as defined below) is in an amount at least equal to the Amortization Liability Value (as defined below).
For greater certainty, references herein to “immediately preceding Calculation Date” and “previous
Calculation Date” are to the Calculation Period ending on the Calculation Date and references to Loans are to Loans
in the Portfolio. |
Amortization Test = Amortization Asset
Value – Amortization Liability Value
“Amortization Asset Value”
= A + B+ C – D
where:
| A | The aggregate Amortization True Loan Balance of each Loan in the Portfolio |
| B | The amount of any cash standing to the GDA Account (exclusive
of any Revenue Receipts up to the Calculation Date not otherwise applied) |
| C | Outstanding principal amount of any Substitute Assets |
| (1) | weighted average remaining maturity of all outstanding Covered Bonds (in years and, where less than a year, deemed to be a
year); |
| (2) | principal amount outstanding of all Covered Bonds; and |
“Amortization
True Loan Balance” = lower of (1) and (2):
| (1) | the True Loan Balance of the relevant Loan; and |
| (2) | if such Loan is a Performing Eligible Loan, 80% of the Market Value of the
related Mortgaged Property, or if such Loan is not a Performing Eligible
Loan, zero |
“True Loan Balance”
= sum of:
| (1) | outstanding loan balance of relevant Loan;
and |
| (2) | all Arrears of Interest and Accrued Interest with respect to the relevant Loan |
“Performing Eligible Loans”
= Eligible Loans less than three months in arrears
“Negative Carry Factor”
=
| (1) | if the weighted average margin of the interest rate payable
on the outstanding Covered Bonds relative to the interest rate receivable on the Portfolio is less than or equal to 0.1% per annum,
then 0.5%; and |
| (2) | if the weighted average margin of the interest rate payable
on the outstanding Covered Bonds relative to the interest rate receivable on the Portfolio is greater than 0.1% per annum, then
the sum of (x) 0.5% and (y) the weighted average margin of the interest rate payable on the outstanding Covered Bonds less 0.1%, |
unless the interest rate risk represented
by the weighted average margin of the interest rate payable on the outstanding Covered Bonds relative to the interest rate receivable
on the Portfolio is addressed or mitigated by the Interest Rate Swap and the “Effective Date” thereunder has occurred,
whereupon the Negative Carry Factor shall be nil
“Amortization Liability
Value” = Nominal amount of Covered Bond liabilities in Canadian dollars (with currency translations undertaken using
or at foregoing exchange rates reflected in the related Covered Bond Swap Agreement or, to the extent the foreign exchange risk
of a non-CAD denominated Covered Bond liability is not or no longer the subject of (or otherwise addressed or mitigated by) a Covered
Bond Swap Agreement (by reason of termination or otherwise) end of day spot foreign exchange rates)
Schedule 4
Pre-Maturity Test
| (a) | On each Toronto Business Day that falls within the Pre-Maturity
Test Interval (each, a “Pre-Maturity Test Date”) prior to the occurrence of an Issuer Event of Default or the
occurrence of a Guarantor Event of Default, the Partnership or the Cash Manager on its behalf will determine if the Pre-Maturity
Test has been breached. |
| (b) | “Pre-Maturity Test Interval” means,
with respect to a Toronto Business Day, such Toronto Business Day falls within 12 months of the Final Maturity Date of any Series
of Hard Bullet Covered Bonds. |
| (c) | If one or more Rating Agencies downgrades the Issuer’s
unsecured, unsubordinated and unguaranteed debt obligations, or issuer default rating, as applicable, below
the Pre-Maturity Required Ratings, then the Issuer will fail and be in breach of the “Pre-Maturity Test”. |
Schedule 5
Pre-Acceleration Revenue Priority
Of Payments
| (a) | first, in or towards satisfaction of any amounts
due and payable by the Partnership to third parties and incurred without breach by the Partnership of the Transaction Documents
to which it is a party (and for which payment has not been provided for elsewhere in the relevant Priorities of Payments) and
to provide for any such amounts expected to become due and payable by the Partnership in the immediately succeeding Guarantor
Payment Period and to pay and discharge any liability of the Partnership for taxes; |
| (b) | second, any amounts in respect of interest due
to the Intercompany Loan Provider in respect of the Demand Loan pursuant to the terms of the Intercompany Loan; |
| (c) | third, in or towards satisfaction pro rata
and pari passu according to the respective amounts thereof of: |
| (i) | any remuneration then due and payable to the Servicer
and any costs, charges, liabilities and expenses then due or to become due and payable to the Servicer under the provisions of
the Servicing Agreement in the immediately succeeding Guarantor Payment Period, together with applicable GST (or other similar
taxes) thereon to the extent provided therein; |
| (ii) | any remuneration then due and payable to the Cash Manager
and any costs, charges, liabilities and expenses then due or to become due and payable to the Cash Manager under the provisions
of the Cash Management Agreement in the immediately succeeding Guarantor Payment Period, together with applicable GST (or other
similar taxes) thereon to the extent provided therein; |
| (iii) | amounts (if any) due and payable to the Account Bank
(or, as applicable, the Standby Account Bank) (including costs) pursuant to the terms of the Bank Account Agreement (or, as applicable,
the Standby Bank Account Agreement), together with applicable GST (or other similar taxes) thereon to the extent provided therein; |
| (iv) | amounts due and payable to the Cover Pool Monitor pursuant
to the terms of the Cover Pool Monitor Agreement (other than the amounts referred to in paragraph (j) below), together with applicable
GST (or other similar taxes) thereon to the extent provided therein; and |
| (v) | amounts due and payable to the Custodian pursuant to
the terms of the Mortgage Sale Agreement, together with applicable GST (or other similar taxes) thereon to extent provided therein; |
| (d) | fourth, in or towards satisfaction pro rata
and pari passu according to the respective amounts thereof of: |
| (i) | payment due to the Interest Rate Swap Provider (including
any termination payment due and payable by the Partnership under the Interest Rate Swap Agreement (but excluding any Excluded
Swap Termination Amount)) pursuant to the terms of the Interest Rate Swap Agreement; and |
| (ii) | payment due to the Covered Bond Swap Provider (including
any termination payment due and payable by the Partnership under the Covered Bond Swap Agreement (but excluding any Excluded Swap
Termination Amount)) pursuant to the terms of the Covered Bond Swap Agreement; |
| (e) | fifth, in or towards payment on the Guarantor Payment
Date of, or to provide for payment on such date in the future of such proportion of the relevant payment falling due in the future
as the Cash Manager may reasonably determine (in the case of any such payment or provision, after taking into account any provisions
previously made and any amounts receivable from the Interest Rate Swap Provider under the Interest Rate Swap Agreement) any amounts
due or to become due and payable (excluding principal amounts) to the Intercompany Loan Provider in respect of the Guarantee Loan
pursuant to the terms of the Intercompany Loan Agreement; |
| (f) | sixth, if a Servicer Event of Default has occurred,
all remaining Available Revenue Receipts to be credited to the GDA Account (with a corresponding credit to the Revenue Ledger
maintained in respect of that account) until such Servicer Event of Default is either remedied by the Servicer or waived by the
Bond Trustee or a new servicer is appointed to service the Covered Bond Portfolio (or the relevant part thereof); |
| (g) | seventh, in or towards a credit to the GDA Account
(with a corresponding credit to the Reserve Ledger) of an amount up to but not exceeding the amount by which the Reserve Fund
Required Amount (if applicable) exceeds the existing balance on the Reserve Ledger as calculated on the immediately preceding
Calculation Date; |
| (h) | eighth, if the Partnership is required to make
a deposit to the Pre-Maturity Liquidity Ledger due to a breach of the Pre-Maturity Test in respect of any Series of Hard Bullet
Covered Bonds, towards a credit to the GDA Account (with a corresponding credit to the Pre-Maturity Liquidity Ledger) of an amount
up to but not exceeding the difference between: |
| (i) | the Pre-Maturity Liquidity Required Amount as calculated
on the immediately preceding Calculation Date; and |
| (ii) | any amounts standing to the credit of the Pre-Maturity
Liquidity Ledger on the immediately preceding Calculation Date; |
| (i) | ninth, in or towards satisfaction pro rata
and pari passu according to the respective amounts thereof of: |
| (i) | payment of any Excluded Swap Termination Amounts due
and payable by the Partnership under the Interest Rate Swap Agreement; and |
| (ii) | payment of any Excluded Swap Termination Amounts due
and payable by the Partnership under the Covered Bond Swap Agreement; |
| (j) | tenth, in or towards payment pro rata and
pari passu in accordance with the respective amounts thereof of any indemnity amount due to the Cover Pool Monitor pursuant
to the Cover Pool Monitor Agreement, and any indemnity amount due to any Partner pursuant to the terms of this Agreement; |
| (k) | eleventh, in or towards payment of the fee due
to the Corporate Services Provider by the Partnership pursuant to the terms of the Corporate Services Agreement; and |
| (l) | twelfth, towards such distributions of profit to
the Partners as may be payable in accordance with the terms of this Agreement. |
Any amounts received by the Partnership under the Interest
Rate Swap Agreement and the Covered Bond Swap Agreement (other than, in each case, amounts in respect of Swap Collateral Excluded
Amounts) on or after the Guarantor Payment Date but prior to the next following Guarantor Payment Date will be applied, together
with any provision for such payments made on any preceding Guarantor Payment Date, to make payments (other than in respect of principal)
due and payable in respect of the Intercompany Loan Agreement and then the expenses of the Partnership unless an Asset Coverage
Test Breach Notice is outstanding or otherwise to make provision for such payments on such date in the future of such proportion
of the relevant payment falling due in the future as the Cash Manager may reasonably determine.
Any amounts received under the Interest Rate Swap Agreement
and the Covered Bond Swap Agreement on the Guarantor Payment Date or on any date prior to the next succeeding Guarantor Payment
Date which are not applied towards a payment or provision in accordance with paragraph (d) above or the preceding paragraph will
be credited to the Revenue Ledger and applied as Available Revenue Receipts on the next succeeding Guarantor Payment Date.
Amounts (if any) held by the Cash Manager for and on behalf
of the Partnership or standing to the credit of the Transaction Account which are not required to be applied in accordance with
paragraphs (a) to (l) of Schedule 5 Pre-Acceleration Revenue Priority of Payments or paragraphs (a) to (f) of Schedule 6 Pre-Acceleration
Principal Priority of Payments will, if applicable, be deposited by the Cash Manager and, in each case be credited to the appropriate
ledger in the GDA Account on the Guarantor Payment Date.
If any Swap Collateral Available Amounts are received by
the Partnership on a Guarantor Payment Date, such amounts shall be applied by the Partnership (or by the Cash Manager on its behalf)
on that Guarantor Payment Date in the same manner as it would have applied the receipts which such Swap Collateral Available Amounts
replace.
Each Partner acknowledges that the distribution paid pursuant
to paragraph (l) above to such Partner represents a reasonable commercial return to the Partner from its involvement in the Partnership
and also agrees that such profits will not be paid to the Partners at a time when they know or ought to know that there was no
reasonable prospect of avoiding an insolvent liquidation of the Partnership as a result of such profit distribution.
Schedule 6
Pre-Acceleration Principal Priority
of Payments
| (a) | first, if the Pre-Maturity Test has been breached
by the Issuer in respect of any Series of Hard Bullet Covered Bonds, towards a credit to the Pre-Maturity Liquidity Ledger in
an amount up to but not exceeding the excess of: |
| (i) | the Pre-Maturity Liquidity Required Amounts calculated
on the immediately preceding Calculation Date; over |
| (ii) | the sum of any amounts standing to the credit of the Pre-Maturity
Liquidity Ledger on the immediately preceding Calculation Date; |
| (b) | second, to pay amounts in respect of principal
outstanding on the Demand Loan pursuant to the terms of the Intercompany Loan Agreement; |
| (c) | third, to acquire New Loans and their Related Security
offered to the Partnership, if necessary or prudent to ensure that, taking into account the other resources available to the Partnership,
the Asset Coverage Test is met and thereafter to acquire (in the discretion of the Managing GP or the Cash Manager on its behalf)
Substitute Assets up to the prescribed limit under the CMHC Guide; |
| (d) | fourth, to deposit in the GDA Account (with a corresponding
credit to the Principal Ledger) an amount sufficient to ensure that, taking into account the other resources available to the
Partnership, the Asset Coverage Test is met; |
| (e) | fifth, in or towards repayment on the Guarantor
Payment Date (or to provide for repayment on such date in the future of such proportion of the relevant payment falling due in
the future as the Cash Manager may reasonably determine) of amounts (in respect of principal) due or to become due and payable
to the Intercompany Loan Provider in respect of the Guarantee Loan; |
| (f) | sixth, in or towards a credit to the GDA Account
(with a corresponding credit to the Reserve Ledger) of an amount up to but not exceeding the amount by which the Reserve Fund
Required Amount (if applicable) exceeds the existing balance on the Reserve Ledger as calculated on the immediately preceding
Calculation Date; and |
| (g) | seventh, subject to complying with the Asset Coverage
Test, to make Capital Distributions in accordance with the terms of this Agreement. |
Schedule 7
Guarantee Priority of Payments
PART I
| (a) | first, to pay any amounts in respect of principal
and interest due to the Intercompany Loan Provider in respect of the Demand Loan pursuant to the terms of the Intercompany Loan
Agreement; |
| (b) | second, in or towards payment of all amounts due
and payable or to become due and payable to the Bond Trustee with respect to the performance of its obligations under the Trust
Deed and the Security Agreement in the immediately succeeding Guarantee Payment Period under the provisions of the Trust Deed
and the Security Agreement, respectively, together with interest and applicable GST (or other similar taxes) thereon as provided
therein; |
| (c) | third, in or towards satisfaction pro rata
and pari passu according to the respective amounts thereof of: |
| (i) | any remuneration then due and payable to the Agents
under the provisions of the Agency Agreement together with applicable GST (or other similar taxes) thereon as provided therein,
other than any Indemnity Amounts payable to the Agents in excess of $150,000; and |
| (ii) | any amounts then due and payable by the Partnership
to third parties, including the Corporate Services Provider, and incurred without breach by the Partnership of the Transaction
Documents to which it is a party (and for which payment has not been provided for elsewhere) and to provide for any such amounts
expected to become due and payable by the Partnership in the immediately succeeding Guarantor Payment Period and to pay or discharge
any liability of the Partnership for taxes; |
| (d) | fourth, in or towards satisfaction pro rata
and pari passu according to the respective amounts thereof of: |
| (i) | any remuneration then due and payable to the Servicer
and any costs, charges, liabilities and expenses then due or to become due and payable to the Servicer in the immediately succeeding
Guarantor Payment Period under the provisions of the Servicing Agreement together with applicable GST (or other similar taxes)
thereon to the extent provided therein, other than any Indemnity Amounts payable to the Servicer in excess of $150,000; |
| (ii) | any remuneration then due and payable to the Cash Manager
and any costs, charges, liabilities and expenses then due or to become due and payable to the Cash Manager in the immediately
succeeding Guarantor Payment Period under the provisions of the Cash Management Agreement, together with applicable GST |
(or other similar taxes) thereon to the extent provided
therein, other than any Indemnity Amounts payable to the Cash Manager in excess of $150,000;
| (iii) | amounts (if any) due and payable to the Account Bank
(or, as applicable, the Standby Account Bank) (including costs) pursuant to the terms of the Bank Account Agreement (or, as applicable,
the Standby Bank Account Agreement), together with applicable GST (or other similar taxes) thereon to the extent provided therein,
, other than any Indemnity Amounts payable to the Account Bank in excess of $150,000; |
| (iv) | amounts due and payable to the Cover Pool Monitor (other
than the amounts referred to in paragraph (k) below) pursuant to the terms of the Cover Pool Monitor Agreement, together with
applicable GST (or other similar taxes) thereon as provided therein, other than any Indemnity Amounts payable to the Cover Pool
Monitor in excess of $150,000; |
| (v) | amounts due and payable to the Custodian pursuant to
the terms of the Custodial Agreement, together with applicable GST (or other similar taxes) thereon as provided thereon, other
than any Indemnity Amounts payable to the Custodian in excess of $150,000; |
| (e) | fifth, to pay pro rata and pari passu
according to the respective amounts thereof: |
| (i) | the amounts due and payable to the Interest Rate Swap
Provider pro rata and pari passu according to the respective amounts thereof (including any termination payment
due and payable by the Partnership under the Interest Rate Swap Agreement but excluding any Excluded Swap Termination Amount)
in accordance with the terms of the Interest Rate Swap Agreement; |
| (ii) | the amounts due and payable to the Covered Bond Swap
Provider (other than in respect of principal) pro rata and pari passu in respect of each relevant Series of Covered
Bonds (including any termination payment (other than in respect of principal) due and payable by the Partnership to the Covered
Bond Swap Provider but excluding any Excluded Swap Termination Amount) in accordance with the terms of the Covered Bond Swap Agreement;
and |
| (iii) | to the Bond Trustee or (if so directed by the Bond Trustee)
the Paying Agent on behalf of the holders of the Covered Bonds pro rata and pari passu Scheduled Interest that is
Due for Payment (or will become Due for Payment in the immediately succeeding Guarantor Payment Period) under the Covered Bond
Guarantee in respect of each Series of Covered Bonds, |
provided that if the amount available for distribution
under this paragraph (e) (excluding any amounts received from the Covered Bond Swap Provider) would be insufficient to pay the
Canadian Dollar Equivalent of the Scheduled Interest that is Due for Payment in respect of each Series of Covered Bonds under (e)(iii)
above, the shortfall will be divided amongst all such Series of Covered Bonds on a pro rata basis and the amount payable
by
the Partnership in respect of each relevant Series
of Covered Bonds to the Covered Bond Swap Provider under (e)(ii) above will be reduced by the amount of the shortfall applicable
to the Covered Bonds in respect of which such payment is to be made;
| (f) | sixth, to pay or provide for pro rata and
pari passu according to the respective amounts thereof, of: |
| (i) | the amounts (in respect of principal) due and payable
pro rata and pari passu in respect of each relevant Series of Covered Bonds (including any termination payment (relating
solely to principal) due and payable by the Partnership under the Covered Bond Swap Agreement but excluding any Excluded Swap
Termination Amount) to the Covered Bond Swap Provider in accordance with the terms of the relevant Covered Bond Swap Agreement;
and |
| (ii) | to the Bond Trustee or (if so directed by the Bond Trustee)
the Issuing and Paying Agent on behalf of the holders of the Covered Bonds pro rata, and pari passu Scheduled Principal
that is Due for Payment (or will become Due for Payment in the immediately succeeding Guarantor Payment Period) under the Covered
Bond Guarantee in respect of each Series of Covered Bonds, provided that if the amount available for distribution under this paragraph
(f) (excluding any amounts received from the Covered Bond Swap Provider) in respect of the amounts referred to in (f)(i) above
would be insufficient to pay the Canadian Dollar Equivalent of the Scheduled Principal that is Due for Payment in respect of the
relevant Series of Covered Bonds under this (f)(ii), the shortfall will be divided amongst all such Series of Covered Bonds on
a pro rata basis and the amount payable by the Partnership in respect of each relevant Series of Covered Bonds under (f)(i)
to the Covered Bond Swap Provider above will be reduced by the amount of the shortfall applicable to the Covered Bonds in respect
of which such payment is to be made; |
| (g) | seventh, to deposit the remaining monies into the
GDA Account for application on the next following Guarantor Payment Date in accordance with the Priorities of Payment described
in paragraphs (a) to (f) (inclusive) above, until the Covered Bonds have been fully repaid or provided for (such that the Required
Redemption Amount has been accumulated in respect of each outstanding Series of Covered Bonds); |
| (h) | eighth, in or towards satisfaction pro rata
and pari passu according to the respective amounts thereof of any Excluded Swap Termination Amount due and payable
by the Partnership to the relevant Swap Provider under the relevant Swap Agreement; |
| (i) | ninth, to pay or provide for pro rata and
pari passu according to the respective amounts thereof, any Indemnity Amounts payable to the Agents, the Servicer, the
Cash Manager, the Account Bank, the Cover Pool Monitor and the Custodian, to the extent not paid pursuant to paragraph (c) or
(f) above; |
| (j) | tenth, in and towards repayment in full of amounts
outstanding under the Intercompany Loan Agreement; |
| (k) | eleventh, in or towards satisfaction pro rata
and pari passu according to the respective amounts thereof of any indemnity amount due to the Partners pursuant to
the Guarantor Agreement; and |
| (l) | twelfth, thereafter any remaining monies will be
applied in accordance with this Agreement. |
PART II
Any amounts received by the Partnership under the Interest
Rate Swap Agreement after the Guarantor Payment Date but prior to the next following Guarantor Payment Date will be applied, together
with any provision for such payment made on any preceding Guarantor Payment Date, to make payments (other than in respect of principal)
due and payable pro rata and pari passu in respect of the Covered Bond Swap Agreement or, as the case may be, in
respect of interest due under the Covered Bond Guarantee pro rata and pari passu in respect of each relevant Series
of Covered Bonds.
Any amounts received by the Partnership under the Covered
Bond Swap Agreement (whether or not in respect of principal) after the Guarantor Payment Date but prior to the next following Guarantor
Payment Date will be applied, together with any provision for such payment made on any preceding Guarantor Payment Date, to make
payments of interest or principal, as the case may be, in respect of the Covered Bond Guarantee pro rata and pari passu
in respect of each relevant Series of Covered Bonds.
Any amounts received under the Interest Rate Swap Agreement
or any Covered Bond Swap Agreement on the Guarantor Payment Date or any date prior to the next succeeding Guarantor Payment Date
which are not put towards a payment or provision in accordance with paragraphs (e) or (f) of Part I of this Schedule 7
or the preceding paragraphs of Part II of this Schedule 7 will be credited to the Revenue Ledger or the Principal Ledger
on the GDA Account (as appropriate) and applied as Available Revenue Receipts or Available Principal Receipts, as the case may
be, on the next succeeding Guarantor Payment Date.
If the Partnership requires any available funds to be exchanged
into a currency other than Canadian Dollars, and such exchange would not be subject to or covered by the terms of the Covered Bond
Swap Agreement, then the Partnership (or the Cash Manager on its behalf) shall perform all necessary currency conversions at the
then prevailing spot rate of exchange.
If any Swap Collateral Available Amounts are received by
the Partnership on a Guarantor Payment Date, such amounts shall be applied by the Partnership (or by the Cash Manager on its behalf)
on that Guarantor Payment Date in the same manner as it would have applied the receipts which such Swap Collateral Available Amounts
replace.
Schedule 8
Priority of Payments when Covered
Bonds Repaid
| (a) | first, to apply any such monies which constitute
Available Revenue Receipts in or towards payment of the fee due to the Corporate Services Provider by the Partnership pursuant
to the terms of the Corporate Services Agreement; |
| (b) | second, to apply any such monies which constitute
Available Revenue Receipts towards payment of any amount outstanding with respect to the Intercompany Loan; |
| (c) | third, to apply any such monies which constitute
Available Revenue Receipts towards payment pro rata and pari passu of distributions to the Partners in accordance
with the terms of this Agreement; and |
| (d) | fourth, to make Capital Distributions of all remaining
monies to the Partners pro rata and pari passu to their respective Capital Contribution Balances as calculated on
the immediately preceding Calculation Date in accordance with the terms of this Agreement. |
Schedule 9
Method for Sale of Selected Loans
| (1) | Before offering Selected Loans for sale in accordance with this Schedule 9, the Partnership shall ensure that: |
| (a) | Loans and their Related Security are Randomly Selected Loans; |
| (b) | the Selected Loans have an aggregate True Loan Balance in an amount (the “Required True Loan Balance Amount”)
which is as close as possible to the amount calculated as follows: |
| (i) | following a Demand Loan Repayment Event or the Demand Loan being demanded by the Intercompany Loan Provider but prior to the
service of an Asset Coverage Test Breach Notice, such amount that would ensure that, if the Selected Loans were sold at their True
Loan Balance, the Demand Loan as calculated on the date of the demand
could be repaid, subject to the satisfaction of the Asset Coverage Test; or |
| (ii) | following the service of an Asset Coverage Test Breach Notice (but prior to service of a Notice to Pay), such amount that would
ensure that, if the Selected Loans were sold at their True Loan Balance, the Asset Coverage Test would be satisfied on the next
Calculation Date taking into account the payment obligations of the Partnership on the Payment Date following that Calculation
Date (assuming for this purpose that the Asset Coverage Test Breach Notice is not revoked on the next Calculation Date); or |
| (iii) | following a breach of the Pre-Maturity Test or service of a Notice to Pay on the Partnership: |
N x A/B
where:
“N” is an amount equal to:
| (x) | in respect of Selected Loans being sold following a breach of the Pre-Maturity Test, the Pre-Maturity Liquidity Required Amount
less amounts standing to the credit of the Pre-Maturity Liquidity Ledger; or |
| (y) | in respect of Selected Loans being sold following service of a Notice to Pay, the Canadian Dollar Equivalent of the Required
Redemption Amount of the Earliest Maturing Covered Bonds less amounts standing to the credit of the Guarantor Accounts and the
principal amount of any Substitute Assets (excluding all amounts to be applied on the next following Guarantor Payment Date to
repay higher ranking amounts in the |
Guarantee Priority of Payments and those amounts that
are required to repay any Series of Covered Bonds which mature prior to or on the same date as the relevant Series of Covered Bonds),
“A” is an amount equal to the True Loan Balance
of all the Loans and their Related Security in the Portfolio; and
“B” is an amount equal to the Canadian Dollar
Equivalent of the Required Redemption Amount in respect of each Series of Covered Bonds then outstanding less the Canadian Dollar
Equivalent of the Required Redemption Amount in respect of each Series of Covered Bonds then outstanding which has been provided
for in cash.
| (2) | The Partnership will offer the Selected Loans for sale to Purchasers for the best price reasonably available but in any event: |
| (a) | following (i) a Demand Loan Repayment Event, the Demand Loan being demanded by the Intercompany Loan Provider or (ii) the service
of an Asset Coverage Test Breach Notice (but prior to the service of a Notice to Pay), in each case, for an amount not less than
the True Loan Balance of the Loans and their Related Security; |
| (b) | following a breach of the Pre-Maturity Test or service of a Notice to Pay, for an amount not less than the Adjusted Required
Redemption Amount; and |
| (c) | if such sale is being conducted pursuant to Section 7.1(2), for an amount not less than the Fair Market Value of the Loans
and their Related Security. |
| (3) | For purposes of the foregoing: |
“Adjusted Required Redemption Amount”
means, the Canadian Dollar Equivalent of the Required Redemption Amount, plus or minus the Canadian Dollar Equivalent of any swap
termination amounts payable under the Covered Bond Swap Agreement to or by the Partnership in respect of the relevant Series of
Covered Bonds less (where applicable) amounts held by the Cash Manager for and on behalf of the Partnership and amounts standing
to the credit of the Guarantor Accounts and the Canadian Dollar Equivalent of the principal balance of any Substitute Assets (excluding
all amounts to be applied on the next following Guarantor Payment Date to repay higher ranking amounts in the Guarantee Priority
of Payments and those amounts that are required to repay any Series of Covered Bonds which mature prior to or on the same date
as the relevant Series of Covered Bonds) plus or minus any swap termination amounts payable to or by the Partnership under the
Interest Rate Swap Agreement in respect of the relevant Series of Covered Bonds, determined on a pro rata basis amongst
all Series of Covered Bonds according to the respective Principal Amount Outstanding thereof, minus amounts standing to the credit
of the Pre-Maturity Liquidity Ledger that are not otherwise required to provide liquidity for any Series of Hard Bullet Covered
Bonds which mature within 12 months of the date of such calculation; and
“Required Redemption Amount” means,
in respect of a Series of Covered Bonds, the amount calculated as follows:
| |
the Principal Amount Outstanding of the relevant Series of Covered Bonds |
x |
(1+ Negative Carry Factor) x (days to maturity of the relevant Series of Covered Bonds/365) |
| (4) | Following service of a Notice to Pay on the Partnership, if the Selected Loans have not been sold (in whole or in part) in
an amount equal to the Adjusted Required Redemption Amount by the date which is six months prior to, as applicable: |
| (a) | the Final Maturity Date (where the Covered Bonds are not subject to an Extended Due for Payment Date in respect of the Covered
Bond Guarantee); |
| (b) | the Extended Due for Payment Date in respect of the Earliest Maturing Covered Bonds (after taking into account all payments,
provisions and credits to be made in priority thereto) (where the Covered Bonds are subject to an Extended Due for Payment Date
in respect of the Covered Bond Guarantee); or |
| (c) | the Final Maturity Date of the relevant Series of Hard Bullet Covered Bonds (where the sale is in connection with the Pre-Maturity
Test), |
then the Partnership will offer the Selected
Loans for sale for the best price reasonably available notwithstanding that such amount may be less than the Adjusted Required
Redemption Amount.
| (5) | In respect of any sale or refinancing (as applicable) of Selected Loans at any time an Asset Coverage Test Breach Notice is
outstanding, there has been a breach of the Pre-Maturity Test, or a Notice to Pay has been served, the Partnership will instruct
the portfolio manager to use all reasonable endeavours to procure that Selected Loans are sold or refinanced (as applicable) as
quickly as reasonably practicable (in accordance with the recommendations of the portfolio manager), taking into account the market
conditions at that time and the scheduled repayment dates of the Covered Bonds and the terms of this Agreement. |
| (6) | Following the service of a Notice to Pay, if Purchasers accept the offer or offers from the Partnership so that some or all
of the Selected Loans shall be sold prior to the next following Final Maturity Date or, if the Covered Bonds are subject to an
Extended Due for Payment Date in respect of the Covered Bond Guarantee, the next following Extended Due for Payment Date in respect
of the Earliest Maturing Covered Bonds, then the Partnership will, subject to paragraph (4) of this Schedule 9, enter into
a sale and purchase agreement with the relevant Purchasers, which will require, inter alia, a cash payment from the relevant
Purchasers. |
Schedule 10
Valuation Calculation
| a) | The “Valuation Calculation” is equal to the VC Asset Value (as defined below) minus the Canadian Dollar
Equivalent of the Trading Value of the aggregate Principal Amount Outstanding of the Covered Bonds as calculated on the relevant
Calculation Date. For greater certainty, references in this Schedule to “immediately preceding Calculation Date” and
“previous Calculation Date” are to the Calculation Period ending on the Calculation Date. |
| b) | For the purposes of the Valuation Calculation, the “VC Asset Value” means the amount calculated as at each
Calculation Date as follows: |
A+B+C+D+E+F
where,
A = the aggregate “LTV Adjusted Loan Present
Value” of (i) each Performing Eligible Loan which shall be the lower of (1) the Present Value of the relevant Loan on
such Calculation Date, and (2) 80% multiplied by the Latest Valuation relating to that Loan, and (ii) each Non-Performing Eligible Loan,
which shall be equal to zero
minus
the aggregate sum of the following deemed reductions to the
aggregate LTV Adjusted Loan Present Value of the Performing Eligible Loans in the Covered Bond Portfolio if any of the following
occurred during the previous Calculation Period:
(1) a Loan or its Related Security was, in the immediately
preceding Calculation Period, in breach of the Loan Representations and Warranties contained in the Mortgage Loan Sale Agreement
or subject to any other obligation of the Seller to repurchase the relevant Loan and its Related Security, and in each case the
applicable Seller has not repurchased the Loan or Loans of the relevant Borrower and its or their Related Security to the extent
required by the terms of the Mortgage Loan Sale Agreement. In this event, the aggregate LTV Adjusted Loan Present Value of the
Loans in the Covered Bond Portfolio on such Calculation Date will be deemed to be reduced by an amount equal to the LTV Adjusted
Loan Present Value of the relevant Loan or Loans on such Calculation Date of the relevant Borrower; and/or
(2) a Seller, in any preceding Calculation Period,
was in breach of any other material warranty under the Mortgage Loan Sale Agreement and/or the Servicer was, in any preceding Calculation
Period, in breach of a material term of the Servicing Agreement. In this event, the aggregate LTV Adjusted Loan Present Value of
the Loans in the Covered Bond Portfolio on such Calculation Date will be deemed to be reduced by an amount equal to the resulting
financial loss incurred by the Partnership in the immediately preceding Calculation Period (such financial loss to be calculated
by the Cash Manager
without double counting and to be reduced by any amount
paid (in cash or in kind) to the Partnership by the applicable Seller to indemnify the Partnership for such financial loss);
B = the aggregate amount of any Principal Receipts
on the Loans and their Related Security up to such Calculation Date (as recorded in the Principal Ledger) which have not been applied
as at such Calculation Date to acquire further Loans and their Related Security or otherwise applied in accordance with Article
6 (Priorities of Payments) and/or the other Transaction Documents;
C = the aggregate amount of (i) any Cash Capital Contributions
made by the Partners (as recorded in the Capital Account Ledger for each Partner of the Partnership), (ii) proceeds advanced under
the Intercompany Loan Agreement or (iii) proceeds from any sale of Selected Loans which, in each case, have not been applied as
at such Calculation Date to acquire further Loans and their Related Security or otherwise applied in accordance with Article 6
(Priorities of Payments) and/or the other Transaction Documents;
D = the Trading Value of any Substitute Assets;
E = the balance, if any, of the Reserve Fund and the
Pre-Maturity Liquidity Ledger; and
F = the Trading Value of the Swap Collateral, if applicable.
