EX-10.12 4 vff-ex1012_16.htm EX-10.12 vff-ex1012_16.htm

Execution Version

 

 

Exhibit 10.12

 

 

 

PURE SUNFARMS CORP.

as Borrower

 

 

 

-

and -

 

 

THE LENDERS FROM TIME TO TIME PARTY TO THIS AGREEMENT

as Lenders

 

 

 

-

and -

 

 

BANK OF MONTREAL

as Administrative Agent

 

 

 

-

and -

 

 

BANK OF MONTREAL

as Lead Arranger and Sole Bookrunner

 

 

 

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT June 30, 2020

 

 


Execution Version

 

 

 

TABLE OF CONTENTS

 

Page

 

ARTICLE I - INTERPRETATION

 

 

1.01

Definitions1

ARTICLE II - FACILITY A

 

2.03

Repayment24

 

2.07

Swingline27

ARTICLE III - NON-REVOLVING FACILITIES

 

3.03

Purpose30

 

3.05

Repayment30

ARTICLE IV - ANCILLARY CREDIT PRODUCTS

ARTICLE V - GENERAL CONDITIONS

 


Execution Version

 

5.03Minimum Amounts, Multiples and Procedures re Draws, Substitutions and Repayments36

 

5.10

CDOR Loans41

 

5.12

Illegality43

ARTICLE VI - REPRESENTATIONS AND WARRANTIES

ARTICLE VII - COVENANTS

ARTICLE VIII - SECURITY

ARTICLE IX - CONDITIONS PRECEDENT

 


Execution Version

 

ARTICLE X - DEFAULT AND REMEDIES

ARTICLE XI - THE AGENT AND THE LENDERS

 

11.02

Security68

 

11.12

Agency Fee73

ARTICLE XII - CBA MODEL PROVISIONS

ARTICLE XIII - GENERAL

 

13.01

Waiver75

 

13.08

Notice76

 

13.09

Severability77

 


Execution Version

 

 

13.16

Governing Law78

 

Exhibits

 

“A”-Lenders and Lenders' Commitments “B”-Draw Request

“C”-Rollover Notice

“D”-Substitution Notice

“E”-Repayment Notice

“F”-Monthly Information Certificate “G”-Compliance Certificate

“H”-Excess Cash Flow Certificate “I”-Form of BA Equivalent Note “J”-CBA Model Provisions

 

Schedules

 

6.01(b)-Credit Parties Information 6.01(h)-Material Permits

6.01(i)-Specific Permitted Liens 6.01(m)-Intellectual Property 6.01(o)-Material Agreements 6.01(p)-Labour Agreements 6.01(q)-Environmental Matters 6.01(r)-Litigation

6.01(s)-Pension Plans

 

 


Execution Version

 

 

 

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

 

This Agreement dated __, 2020 is made among:

 

 

PURE SUNFARMS CORP.

as Borrower

 

 

-

and -

 

THE LENDERS FROM TIME TO TIME PARTY TO THIS AGREEMENT

as Lenders

 

 

-

and -

 

BANK OF MONTREAL

as Administrative Agent

 

 

-

and -

 

BANK OF MONTREAL

as Lead Arranger and Sole Bookrunner

 

 

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party, the parties agree as follows:

 

 

ARTICLE I - INTERPRETATION

 

 

1.01

Definitions

 

In this Agreement, the words and phrases set out in the CBA Model Provisions (as hereinafter defined) shall have the respective meanings set forth therein (subject to Section 12.01 herein). In addition, the following words and phrases shall have the respective meanings set forth below:

 

Acceleration Date” means the earlier of (i) the date of the occurrence of an Insolvency Event in respect of any Credit Party; and (ii) the date on which the Borrower fails to repay the Obligations in full pursuant to an Acceleration Notice issued by the Agent.

 

Acceleration Notice is defined in Section 10.02.

 

Adjusted GAAP” at any time means GAAP in effect at such time as if IFRS 16 had not been implemented.

 

Advance” means an extension of credit by one or more of the Lenders to the Borrower pursuant to this Agreement, including for greater certainty an extension of credit in the form of a Prime-Based Loan, a Bankers' Acceptance, a BA Equivalent Loan, a CDOR Loan or the issuance of a Letter of Credit, but for greater certainty does not include a Conversion or Rollover.

 

Affiliate is defined in the CBA Model Provisions.

 

 


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Agent” means BMO in its capacity as the administrative agent hereunder, and its successors in such capacity.

 

Aggregate Net Hedge Liability means, on any date of determination, the net aggregate amount of the Borrower's liability under all Hedge Transactions outstanding on such date in the event of a default or termination thereunder, calculated in accordance with the terms thereof (and for greater certainty, determined after netting any amounts payable to the Borrower thereunder against amounts payable by the Borrower thereunder).

 

Agreement” means this credit agreement (including the Exhibits and Schedules) as it may be amended, supplemented, replaced or restated from time to time; and each reference herein to “this Agreement” , “the date hereof”, “the date of this Agreement” and similar references are references to this amended and restated credit agreement and not to the Existing Credit Agreement.

 

"Amendment Closing Date" means the date on which all conditions precedent listed in Section

9.01 herein have been satisfied, as confirmed by the Agent to the Borrower in writing.

 

AML Legislation” means all anti-money laundering, anti-terrorist financing, government sanction and “know your client” Laws in effect in any jurisdiction in which any Company carries on business or owns assets, including any guidelines or orders thereunder, specifically including the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada).

 

Applicable Law is defined in the CBA Model Provisions.

 

Applicable Margin” means, in respect of any Availment Option and in respect of any Fiscal Quarter, the percentage in the column relating to such Availment Option in the following table which corresponds to the applicable Senior Funded Debt to EBITDA Ratio in respect of such Fiscal Quarter, which percentage shall be subject to adjustment from time to time as provided in Section 5.01(d):

 

Pricing Level

Senior Funded Debt to EBITDA

Prime-Based Loans

Bankers’ Acceptances / BA Equivalent Loans / CDOR Loans / Letters of Credit

Standby Fee as a percentage of Applicable Margin in respect of Bankers’ Acceptances

1

< 1.00:1

1.50%

2.75%

0.55%

2

> 1.00:1 < 1.25:1

1.75%

3.00%

0.60%

3

> 1.25:1 < 1.50:1

2.00%

3.25%

0.65%

4

> 1.50:1 < 2.50: 1

2.25%

3.50%

0.70%

 

Approved Jurisdiction” means an Approved Medical Cannabis Jurisdiction or an Approved Non-Medical Cannabis Jurisdiction.

 

Approved Medical Cannabis Jurisdiction means:

 

 

(a)

in the case Emerald or Village, a Medical Cannabis Jurisdiction; and

 

 

(b)

in the case of any Company, a Medical Cannabis Jurisdiction (i) which is approved in writing by the Required Lenders in their discretion and (ii) is confirmed as a Medical

 

 

 


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Cannabis Jurisdiction by a legal opinion provided by the Borrower's counsel in such jurisdiction in form and substance satisfactory to the Agent and the Lenders.

 

The Required Lenders may in their discretion from time to time (x) upon receipt of a written request by the Borrower, designate any jurisdiction an Approved Medical Cannabis Jurisdiction provided that all above criteria have been satisfied; and (y) revoke the designation of any jurisdiction as an Approved Medical Cannabis Jurisdiction by written notice to the Borrower if such jurisdiction is no longer a Medical Cannabis Jurisdiction. Canada is an Approved Medical Cannabis Jurisdiction as at the date of this Agreement. Notwithstanding the foregoing, the United States shall not be designated an Approved Medical Cannabis Jurisdiction except with the written consent of all Lenders in their discretion.

 

Approved Non-Medical Cannabis Jurisdiction means:

 

 

(a)

in the case Emerald or Village, a Non-Medical Cannabis Jurisdiction; and

 

 

(b)

in the case of any Company, a Non-Medical Cannabis Jurisdiction (i) which is approved in writing by the Required Lenders in their discretion and (ii) is confirmed as a Non-Medical Cannabis Jurisdiction by a legal opinion provided by the Borrower's counsel in such jurisdiction in form and substance satisfactory to the Agent and the Lenders.

 

 

The Required Lenders may in their discretion from time to time (x) upon receipt of a written request by the Borrower, designate any jurisdiction an Approved Non-Medical Cannabis Jurisdiction provided that all above criteria have been satisfied; and (y) revoke the designation of any jurisdiction as an Approved Non-Medical Cannabis Jurisdiction by written notice to the Borrower if such jurisdiction is no longer a Non-Medical Cannabis Jurisdiction. Canada is an Approved Non-Medical Cannabis Jurisdiction as at the date of this Agreement. Notwithstanding the foregoing, the United States shall not be designated an Approved Non-Medical Cannabis Jurisdiction except with the written consent of all Lenders in their discretion.

 

Associate has the meaning ascribed thereto in the Canada Business Corporations Act.

 

Availment Option” means a method of borrowing which is available to the Borrower as provided herein.

 

BA Equivalent Loan” means an Advance in Canadian Dollars made by a Non-BA Lender to the Borrower in respect of which the Borrower has issued a BA Equivalent Note.

 

BA Equivalent Note” means a promissory note payable by the Borrower to a Non-BA Lender in the form of Exhibit “I” attached hereto.

 

BA Lender means a Lender identified in Exhibit “A” attached hereto as a Lender which will accept Bankers' Acceptances hereunder.

 

Bankers' Acceptance means a bill of exchange or a blank non-interest bearing depository bill as defined in the Depository Bills and Notes Act (Canada) drawn by the Borrower and accepted by a BA Lender in respect of which the Borrower becomes obligated to pay the face amount thereof to the holder (which may be a third party or such BA Lender) upon maturity.

 

BDC Participation Loan” means the loan advanced or to be advanced by BMO to the Borrower in the principal amount of six million two hundred fifty thousand Canadian Dollars (CDN$6,250,000) bearing interest at a rate not in excess of three and three-quarters percent (3.75%) above Prime Rate, per annum.

 

 


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BDC Participation Loan Agreement means the BDC Loan Agreement (Non-Revolving) between the Borrower and BMO establishing the BDC Participation Loan.

 

BMO means Bank of Montreal and its successors and permitted assigns.

 

Borrower” means Pure Sunfarms Corp., a corporation subsisting under the laws of British Columbia.

 

Borrowing Base Certificate” means a certificate delivered by the Borrower to the Agent in the form of Exhibit “F”.

 

Business Day” means any day on which the Agent is open for over-the-counter business in Vancouver, British Columbia and Toronto, Ontario, excluding Saturday, Sunday and any other day that is a statutory holiday in Vancouver, British Columbia or Toronto, Ontario.

 

Canadian Dollars or CDN$ means the lawful money of Canada.

 

Cannabis has the meaning given to the term cannabis under the Cannabis Act.

 

Cannabis Act” means An Act respecting cannabis and to amend the Controlled Drugs and Substances Act, the Criminal Code and other Acts, S.C. 2018, c. 16, as amended from time to time.

 

Cannabis-Related Activities means any activities, including advertising or promotional activities, relating to or in connection with the importation, exportation, cultivation, production, purchase, distribution or sale of Cannabis or Cannabis-related products, including for greater certainty paraphernalia.

 

Cannabis Regulations means Cannabis Regulations under the Cannabis Act, as amended from time to time and all other regulations made from time to time under the Cannabis Act or any other statute with respect to Cannabis-Related Activities.

 

Capital Expenditures” means expenditures made directly or indirectly which are considered to be in respect of the acquisition or leasing of capital assets in accordance with GAAP, including the acquisition or improvement of Real Property, plant, machinery or equipment, whether fixed or removable.

 

Capital Lease” means any lease of assets which in accordance with Adjusted GAAP is required to be capitalized on the balance sheet of the lessee.

 

Cash Taxes” in respect of any fiscal period means amounts actually paid by the Companies in such fiscal period in respect of income and capital Taxes (whether relating to such fiscal period or any other fiscal period).

 

CBA Model Provisions” means the model credit agreement provisions attached hereto as Exhibit “J”, which have been revised under the direction of the Canadian Bankers' Association Secondary Loan Market Specialist Group from provisions prepared by The Loan Syndications and Trading Association, Inc.

 

CDOR Loan” means a loan made by the Lenders to the Borrower in Canadian Dollars in respect of which Interest is determined by reference to the CDOR Rate.

 

CDOR Period means, with respect to any CDOR Loan, the period commencing on the Business Day on which such CDOR Loan is advanced or continued or another Loan is converted into such CDOR Loan, as applicable, and ending on a Business Day that is one (1), three (3) or six (6)

 

 


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months thereafter (subject to availability) or such other period as may be agreed to by the Lenders in their absolute discretion as selected by the Borrower in a Draw Request.

 

CDOR Rate” means on any day the annual rate of interest which is the rate determined as being the arithmetic average of the quotations of all institutions listed in respect of the rate for Canadian Dollar denominated bankers’ acceptances for the relevant period displayed and identified as such on the display referred to as the "CDOR Page" (or any substitute therefor) of Refinitiv Benchmark Services (UK) Limited (or any successor thereto or Affiliate thereof) as of 10:00 a.m. on such day and, if such day is not a Business Day, then on the immediately preceding Business Day (as adjusted by the Agent after 10:00 a.m. to reflect any error in a posted rate of interest or in the posted average annual rate of interest with notice of such adjustment in reasonable detail evidencing the basis for such determination being concurrently provided to the Borrower); provided that if such rates are not available on the CDOR Page on any particular day, then the CDOR Rate on that day shall be the average of the rates applicable to Canadian Dollar bankers’ acceptances for the relevant period quoted for customers in Canada by the Agent as of 10:00 a.m. on such day; or if such day is not a Business Day, then on the immediately preceding Business Day; and provided further that the CDOR Rate shall not be less than zero.

 

Collateral” means all property, assets and undertaking of the Companies encumbered by the Security, together with all proceeds of the foregoing.

 

Commitment means, in respect of any Lender, such Lender's commitment to make Advances to the Borrower under any the Facilities (or a Facility or a Tranche thereof, if required by the context).

 

Companies” means the Borrower and all of its Subsidiaries from time to time; and “Company means any of them as the context requires.

 

Compliance Certificate” means a certificate delivered by the Borrower to the Agent in the form of Exhibit “G”.

 

Control is defined in the CBA Model Provisions.

 

“Copyrights” means all rights, title and interests (and all related IP Ancillary Rights) arising under any requirement of Law in copyrights and all mask work, database and design rights, whether or not registered or published, all registrations and recordations thereof and all applications in connection therewith.

 

Credit Parties” means the Companies and, for so long as the Emerald Guarantee or the Village Guarantee remains outstanding, Emerald or Village (as applicable); and Credit Party means any one of them as the context requires.

 

Currency Hedge Transaction” mean an agreement made between the Borrower and a Lender for the purpose of hedging currency risk, including a currency exchange agreement or a foreign exchange forward contract.

 

D2 Lease” means the lease dated March 29, 2019 and entered into between Village and Village LP as the landlord of the Borrower as the tenant, a short form of which is to be registered (on or around the date of this Agreement) in the New Westminster Land Title Office against title to the real property municipally known as 4526 80th Street, Delta, BC, and legally described as:

 

PID: 024-579-254 PARCEL 1 SECTION 32 TOWNSHIP 3 NEW WESTMINSTER DISTRICT PLAN LMP42884 EXCEPT PLANS LMP50211, BCP25716, BCP44198 AND EPP76249.

 

 


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D2 Project” means the upgrade and retrofit of the existing greenhouse on the D2 Property to render it suitable for Cannabis cultivation.

 

D2 Property means the leasehold interest of the Borrower created by the D2 Lease.

 

D2 Property Appraisal” means a satisfactory appraisal in respect of the D2 Property completed no more than six (6) months prior to the Amendment Closing Date by an AACI appraiser satisfactory to the Lenders, in form and substance satisfactory to the Lenders confirming “as is”, “as complete and fully licenced” values for the D2 Property based on the following approaches: fair market, cost, comparable and alternate use on a hypothetical best use facility.

 

D3 Project” means capital expenditure relating to the processing facility at the D3 Property, located in the area known as “Area 51”.

 

D3 Property” means the Real Property municipally known as 4431 80th Street, Delta, BC, and legally described as:

 

PID: 001-402-064 THE SOUTH HALF OF THE NORTH EAST QUARTER OF SECTION 31 TOWNSHIP 3 NEW WESTMINSTER DISTRICT EXCEPT: PART INCLUDED IN A 5.16 ACRE PORTION SHOWN ON REFERENCE PLAN 8317; PORTION INCLUDED IN THAT PART OF THE NORTH HALF OF SECTION 31 SHOWN ON EXPROPRIATION PLAN 7066; PARCEL "D" REFERENCE PLAN 38003; PART DEDICATED ROAD ON PLAN BCP19927 AND PART ON PLAN BCP47239.

 

Deeply Subordinated Debt” means indebtedness of any Company to any Person in respect of which such Person has provided a subordination, postponement and standstill agreement in favour of the Agent which includes an assignment of such Subordinated Debt as security for the Obligations.

 

Default is defined in the CBA Model Provisions.

 

Defined Benefit Pension Plan” means any Pension Plan which contains a “defined benefit provision” as defined in subsection 147.1(1) of the Income Tax Act (Canada).

 

Distribution” in respect of any Person means any amount paid, directly or indirectly, to a shareholder, partner, director, officer or employee of such Person or a Related Person thereto, including any amount paid by way of dividends, distribution of partnership profits, withdrawal of capital, redemption of shares or partnership units, payments of principal, interest or other amounts on account of indebtedness, salary, bonus, commission, management fees, directors’ fees or otherwise, or any other direct or indirect payment in respect of earnings or capital of such Person; except that the payment of commercially reasonable salaries, bonuses, commissions, stock-based compensation and directors’ fees from time to time to the officers, employees and directors of such Person in the ordinary course of business shall not be considered Distributions.

 

Draw Request” means a notice in the form of Exhibit “B” given by the Borrower to the Agent for the purpose of requesting an Advance.

 

EBITDA” means, in respect of any fiscal period, the consolidated net income of the Borrower in such fiscal period determined in accordance with GAAP (but excluding the following: extraordinary or non-recurring income and gains, non-cash gains (such as unrealized foreign exchange gains); plus the following amounts (to the extent such amounts were deducted in determining such consolidated net income, and without duplication):

 

 

(a)

Interest, fees and expenses paid in connection with Permitted Funded Debt;

 

 


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(b)

income and capital taxes;

 

 

(c)

depreciation and amortization;

 

 

(d)

non-cash charges and expenses such as unrealized foreign exchange losses and charges relating to the impairment of goodwill and other intangible assets;

 

 

 

(e)

non-cash share-based compensation;

 

 

(f)

extraordinary non-recurring expenses or losses to the extent approved by the Required Lenders in writing, including transaction costs related to this Agreement to a limit of CDN$500,000; and

 

 

 

(g)

any other expenses approved in writing by the Required Lenders in their discretion; and provided further that:

 

 

(h)

in respect of each Company which became a Subsidiary of the Borrower in any fiscal period, EBITDA for such fiscal period shall be determined as if such Company had been a Subsidiary of the Borrower throughout the entire said fiscal period; and

 

 

 

(i)

in respect of each Company which ceased to be a Subsidiary of the Borrower in any fiscal period, EBITDA for such fiscal period shall be determined as if such Company had not been a Subsidiary of the Borrower during such fiscal period.

 

 

"Eligible Receivable" in respect of the Borrower means an account receivable of the Borrower (in this definition, individually called an "account") which satisfies all of the following eligibility criteria:

 

 

(a)

the account arises from a bona fide, fully-completed transaction consisting of the sale of goods or the provision of services by the Borrower to an account debtor;

 

 

 

(b)

the account is subject to a First-Ranking Security Interest held by the Agent pursuant to the Security and is not subject to any other Lien except Permitted Liens;

 

 

 

(c)

if the account arises from the sale of Cannabis or any other Cannabis-Related Activity, the account debtor is located in an Approved Jurisdiction;

 

 

 

(d)

the account debtor is not a Company or a Related Person thereto;

 

 

(e)

the account is not in dispute or subject to any defence, counterclaim or claim by the account debtor for credit, set-off, allowance or adjustment;

 

 

 

(f)

the account is not a contra account relating to progress billings;

 

 

(g)

the Borrower does not have an obligation to hold any portion of the account in trust or as agent for any other Person (except pursuant to a Statutory Lien securing obligations which are not overdue);

 

 

 

(h)

an invoice relating to the account has been issued by the Borrower and sent to the account debtor;

 

 

 

(i)

the account is not outstanding for more than:

 

 

(A)

one hundred and twenty-one (121) days (where the account debtor is a Governmental Authority); or

 

 

 


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(B)

ninety-one (91) days (where the account debtor is not a Governmental Authority),

 

from the date of the invoice relating thereto (regardless of the due date specified in such invoice for payment);

 

 

(j)

the account debtor is not insolvent or subject to any proceeding under Insolvency Legislation; and

 

 

 

(k)

the account is not subject to undue credit risk in the opinion of the Required Lenders.

 

Emerald” means Emerald Health Therapeutics, Inc., a corporation subsisting under the laws of British Columbia.

 

Emerald Canada” means Emerald Health Therapeutics Canada Inc., a corporation subsisting under the laws of British Columbia and a wholly-owned subsidiary of Emerald.

 

Emerald Guarantee is defined in Section 8.02(a).

 

Emerald Note” means the promissory note in the face amount of nine hundred and fifty-two thousand, two hundred and thirty-seven Canadian Dollars (CDN$952,237) issued by Emerald Canada to the Borrower in accordance with the Settlement Agreement.

 

Equity Issuance means an issuance or sale by any Company of shares, partnership interests or other equity interests, except any such issuance or sale (i) to any other Company, or (ii) to management or employees of any Company under any employee stock option or stock purchase plan stock appreciation rights plan, phantom stock plan or other employee benefit plan or arrangement in existence from time to time.

 

Equivalent Amount” means, in relation to an amount in one currency, the amount in another currency that could be purchased by the amount in the first currency, determined by reference to the applicable Exchange Rate at the time of such determination.

 

Event of Default is defined in Section 10.01.

 

Excess Cash Flow” in respect of any Fiscal Year means EBITDA in such Fiscal Year, less the aggregate of the following amounts (without duplication):

 

 

(a)

Cash Taxes in respect of such Fiscal Year;

 

 

(b)

Unfunded Capital Expenditures paid during such Fiscal Year;

 

 

(c)

Interest paid in cash during such Fiscal Year in respect of Permitted Funded Debt, except any portion thereof which constitutes a Distribution and was not permitted under a subordination/postponement agreement with the Agent; and

 

 

 

(d)

scheduled principal payments paid during such Fiscal Year in respect of Permitted Funded Debt, except any portion thereof which constitutes a Distribution and was not permitted under a subordination/postponement agreement with the Agent;

 

 

Excess Cash Flow Certificate means a certificate delivered by a Senior Officer of the Borrower to the Agent in the form of Exhibit “H”.

 

Exchange Rate” means, on the date of determination of any amount of Canadian Dollars to be converted into another currency pursuant to this Agreement for any reason, or vice-versa, the spot rate of exchange for converting Canadian Dollars into such other currency or vice-versa, as the

 

 


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case may be, established by the Bank of Canada at approximately 4:30 p.m. on the date of such determination (or such other date as may be specified herein).

 

Existing Credit Agreement” means the first amended and restated credit agreement among the parties hereto, other than Canadian Imperial Bank of Commerce, dated March 30, 2020, as amended, supplemented or modified prior to the date hereof.

 

Facilities” means Facility A, Facility B and Facility C, and “Facility” means any of them, as the context requires.

 

Facility A is defined in Section 2.01.

 

Facility A Available Commitment” means, at any time, the amount (if any) by which the Facility A Margin Limit applicable at that time exceeds the aggregate of (a) the Outstanding Principal Amount under Facility A at that time, and (b) the amount of any Advances requested under Facility A as at that time, but as yet unfunded.

 

Facility A Lenders” means those Lenders which have issued Commitments under Facility A. "Facility A Margin Limit" is defined in Section 2.06(a).

"Facility A Maximum Amount" means fifteen million Canadian Dollars (CDN$15,000,000). "Facility B" is defined in Section 3.01.

"Facility B Lenders" means those Lenders which have issued Commitments under Facility B. "Facility C" is defined in Section 3.02.

"Facility C Lenders" means those Lenders which have issued Commitments under Facility C. "Facility C Limit" means twenty-five million Canadian Dollars (CDN$25,000,000).

Final Advance Date means March 31, 2021.

 

First-Ranking Security Interest” in respect of any Collateral means a Lien in such Collateral which is registered as required under this Agreement to record and perfect the charges contained therein and which ranks in priority to all other Liens in such Collateral, except for any Permitted Liens which may have priority in accordance with Applicable Law.

 

Fiscal Quarter” means a fiscal quarter of the Borrower (or any other Credit Party if required by the context), ending on the last days of March, June, September and December in each year.

 

Fiscal Year” means a fiscal year of the Borrower (or any other Credit Party if required by the context), ending on the last day of December in each year.

 

Fixed Charge Coverage Ratio” means, in respect of any fiscal period, the ratio of: (i) EBITDA in such fiscal period less the aggregate of the following amounts in respect of such fiscal period (without duplication): (A) Cash Taxes, (B) Distributions paid in cash; and (C) Capital Expenditures to the extent not financed by Permitted Funded Debt; to (ii) Funded Debt Service in respect of such fiscal period; provided that, for the purposes of determining the Fixed Charge Coverage Ratio in respect of any fiscal period identified in the table set out below, Funded Debt Service for that fiscal period will be deemed to be the aggregate of (A) the “Term Debt Service” amount set out opposite that fiscal period in the table below, and (B) an amount representing annualized interest accrued on Advances under Facility A drawn during that fiscal period, calculated by multiplying (x) the

 

 


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aggregate amount of the Advances outstanding under Facility A on the last day of that fiscal period, by (y) the interest rate applicable to those Advances under this Agreement (incorporating the Applicable Margin) on the last day of that fiscal period.

 

Fiscal period

Term Debt Service (CDN$)

12 months ending March 31, 2020

7,245,405

12 months ending June 30, 2020

7,192,675

12 months ending September 30, 2020

7,139,365

12 months ending December 31, 2020

7,086,055

12 months ending March 31, 2021

7,033,905

 

Funded Debt” in respect of any Person means obligations of such Person which are considered to constitute debt in accordance with Adjusted GAAP, including indebtedness for borrowed money (in the case of the Borrower, specifically including the Outstanding Principal Amount, Subordinated Debt, obligations secured by Purchase-Money Security Interests and obligations under Capital Leases), capitalized interest, and the redemption price of any securities issued by such Person having attributes substantially similar to debt (such as securities which are redeemable at the option of the holder), plus the Aggregate Net Hedge Liability at the time of determination; but excluding the following: accounts payable, payroll accruals, accruals in respect of normal business expenses and future income Taxes (both current and long-term).

 

Funded Debt Service means, in respect of any fiscal period, without duplication: (i) the aggregate amount of Interest paid or payable in respect of the Funded Debt of the Borrower on a consolidated basis in respect of such fiscal period (but for greater certainty, excluding any Interest which is capitalized and not paid or payable during such fiscal period); plus (ii) the aggregate amount of scheduled principal payments and scheduled Capital Lease payments paid or payable in respect of the Funded Debt of the Borrower on a consolidated basis in respect of such fiscal period (except the portion of any final payment due in respect of such Funded Debt which constitutes a “balloon payment” and any amount paid in connection with the exercise of an option to purchase equipment under a Capital Lease).

 

GAAP” means generally accepted accounting principles in Canada as in effect from time to time as set forth in the opinions and pronouncements of the relevant Canadian public and private accounting boards and institutes which are applicable to the relevant Person and the circumstances as of the date of determination, consistently applied including International Financial Reporting Standards adopted by the Accounting Standards Board of the Canadian Institute of Chartered Accountants (which have been adopted by the Borrower).

 

Governmental Authority” is defined in the CBA Model Provisions, and for greater certainty includes Health Canada.

 

Guarantee means any agreement by which any Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes liable upon, the obligation of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person or otherwise assures any creditor of such Person against loss, and shall include any contingent liability under any letter of credit or similar document or instrument.

 

 


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Hazardous Materials” means any contaminant, pollutant, waste or substance that is likely to cause immediately or at some future time harm or degradation to the surrounding environment or risk to human health; and without restricting the generality of the foregoing, including any pollutant, contaminant, waste, hazardous waste or dangerous goods that is regulated by any Requirements of Environmental Law or that is designated, classified, listed or defined as hazardous, toxic, radioactive or dangerous or as a contaminant, pollutant or waste by any Requirements of Environmental Law.

 

Hedge Transaction means an Interest Rate Hedge Transaction or a Currency Hedge Transaction.

 

Indemnitees” means the Lenders, the Agent and their respective successors and permitted assignees, any agent of any of them (specifically including a receiver or receiver-manager) and the respective officers, directors and employees of the foregoing.

 

Insolvency Event” means, in respect of any Person, the occurrence of any one or more of the following events:

 

 

(a)

such Person ceases to carry on its business, commences any proceeding under Insolvency Legislation including a proposal or an assignment in bankruptcy, petitions or applies to any tribunal for, or consents to, the appointment of any receiver, trustee or similar liquidator in respect of all or a substantial part of its property, admits the material allegations of a petition or application filed with respect to it in any proceeding commenced in respect of it under Insolvency Legislation, or takes any corporate action for the purpose of effecting any of the foregoing; or

 

 

 

(b)

any proceeding or filing is commenced against such Person seeking to have an order for relief entered against it as debtor or to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding-up, reorganization, arrangement, adjustment or composition of it or its debts under any Insolvency Legislation, or seeking the appointment of a receiver, trustee, custodian or other similar official for it or any of its property or assets; unless (i) such Person is diligently defending such proceeding in good faith and on reasonable grounds as determined by the Required Lenders and (ii) such proceeding does not in the opinion of the Lenders materially adversely affect the ability of such Person to carry on its business and to perform and satisfy all of its obligations.

 

 

Insolvency Legislation means legislation in any applicable jurisdiction relating to reorganization, arrangement, compromise or re-adjustment of debt, dissolution or winding-up, or any similar legislation, and specifically includes for greater certainty the Bankruptcy and Insolvency Act (Canada), the Companies' Creditors Arrangement Act (Canada) and the Winding-Up and Restructuring Act (Canada).

 

Intellectual Property means all rights, title and interests in intellectual property and all IP Ancillary Rights relating thereto, including all Copyrights, Patents, Trademarks, Internet Domain Names, Trade Secrets, industrial designs, integrated circuit topographies, plant breeders’ rights and rights under IP Licenses.

 

Interest means interest on loans, stamping fees in respect of bankers' acceptances, the difference between the proceeds received by the issuers of bankers' acceptances and the amounts payable upon the maturity thereof, issuance fees in respect of letters of credit, and any other charges or fees in connection with the extension of credit which are determined by reference to the amount of credit extended, plus standby fees in respect of the unutilized portion of any credit facility; but excluding capitalized interest (for greater certainty, being interest which is accrued but not paid), agency fees, arrangement fees, structuring fees, fees relating to the granting of consents, waivers, amendments, extensions or restructurings, the reimbursement of costs and expenses, and any

 

 


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similar amounts which may be charged from time to time in connection with the establishment, administration or enforcement of the Facilities.

 

Interest Rate Hedge Transaction” mean an agreement made between the Borrower and a Lender for the purpose of hedging interest rate risk, including an interest rate exchange agreements (commonly known as an “interest rate swap”) or a forward rate agreement.

 

Interim Financial Statements” means, in respect of any Person at any time, the unaudited financial statements of such Person (on a consolidated and unconsolidated basis) in respect of its most recently completed Fiscal Quarter (and also on a year-to-date basis in respect of such Fiscal Quarter and all previous Fiscal Quarters in the same Fiscal Year), including the notes thereto, prepared in accordance with GAAP except that such financial statements shall be subject to normal year-end adjustments.

 

Internet Domain Names” means all right, title and interest (and all related IP Ancillary Rights) in internet domain names.

 

Investment” means an investment made or held by a Person, directly or indirectly, in another Person (whether such investment was made by the first-mentioned Person in such other Person or was acquired from a third party), including a contribution of capital and including the acquisition or holding of the following: all or substantially all of the assets used in connection with a business; common or preferred shares; debt obligations; partnership interests; and investments in joint ventures; provided however that if a transaction would satisfy the definition of “Capital Expenditure” herein and also the definition of “Investment” herein, it shall be deemed to constitute an Investment and not a Capital Expenditure.

 

IP Ancillary Rights means, with respect to an item of Intellectual Property all foreign counterparts to, and all divisionals, reversions, continuations, continuations-in-part, reissues, re-examinations, renewals and extensions of, such Intellectual Property and all income, royalties, proceeds and liabilities at any time due or payable or asserted under or with respect to any of the foregoing or otherwise with respect to such Intellectual Property, including all rights to sue or recover at Law or in equity for any past, present or future infringement, misappropriation, dilution, violation or other impairment thereof, and, includes in each case, all rights to obtain any other IP Ancillary Right.

 

IP License means all contractual obligations (and all related IP Ancillary Rights), whether written or oral, granting any right, title and interest in any Intellectual Property.

 

Issuing Bank means BMO in its capacity as such.

 

"Landlord Agreement" means an agreement in form and substance satisfactory to the Agent given in favour of the Agent by Village and Village LP, as the landlord of the D2 Property (and also acknowledged by all mortgagees of such landlord if requested by the Agent upon the instructions of the Required Lenders), which shall include the following provisions: the landlord consents to the granting of a mortgage of the D2 Property by the Borrower (as tenant thereunder) in favour of the Agent and agrees that the Agent may assign the D2 Lease to a third party without the landlord's consent; the landlord agrees to give written notice to the Agent in respect of and a reasonable opportunity to cure any default under the Lease; the landlord agrees not to terminate the D2 Lease; and the landlord agrees to waive (or subordinate and defer the enforcement of) its right of distraint and any other rights and remedies and any security it may hold in respect of any property of the Borrower located on the D2 Property or affixed to the D2 Property which the Borrower is entitled to remove under Applicable Law or pursuant to the terms of the D2 Lease.

 

Laws” means all statutes, codes, ordinances, decrees, rules, regulations, municipal by-laws, judicial or arbitral or administrative or ministerial or departmental or regulatory judgments, orders, decisions, rulings or awards, or any provisions of such laws, including general principles of common

 

 


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and civil law and equity or policies or guidelines, to the extent such policies or guidelines have the force of law, binding on the Person referred to in the context in which such word is used; and “Law” means any of the foregoing.

 

Lenders means the lenders identified in Exhibit “A” attached hereto and any other Persons which may from time to time become lenders pursuant to this Agreement; and their respective successors and permitted assigns.

 

Lender-Related Distress Event” means, with respect to any Lender or any Person that directly or indirectly Controls such Lender (such Lender and each such Person being individually referred to in this definition as a “distressed person”), (i) the commencement of a voluntary or involuntary proceeding with respect to such distressed person under any Insolvency Legislation, (ii) the appointment of a custodian, conservator, receiver or similar official in respect of such distressed person or any substantial part of its assets, (iii) a forced liquidation, merger, sale or other change of Control of such distressed person supported in whole or in part by Guarantees or other support (including the nationalization or assumption of ownership or operating control of such distressed person by any Governmental Authority), or (iv) such distressed person makes a general assignment for the benefit of its creditors or is otherwise adjudicated as, or determined by any Governmental Authority having regulatory authority over such distressed person or its assets to be, insolvent, bankrupt, or deficient in meeting any capital adequacy or liquidity standard of any such Governmental Authority.

 

Letter of Credit means a stand-by letter of guarantee or documentary letter of credit.

 

Lien” means: (i) a lien, charge, mortgage, hypothec, pledge, security interest or conditional sale agreement; (ii) an assignment, lease, consignment, trust or deemed trust that secures payment or performance of an obligation; (iii) a garnishment; (iv) any other encumbrance of any kind; and (v) any commitment or agreement to enter into or grant any of the foregoing.

 

Liquidity Coverage means, at any time:

 

 

(a)

Unrestricted Cash as at that time; plus

 

 

(b)

the Facility A Available Commitment as at that time.

 

Loan Documents means collectively, this Agreement, the Security, any promissory notes issued by the Borrower to the Agent or the Lenders hereunder, all agreements relating to Hedge Transactions, all Service Agreements, any certificate completed and executed by or on behalf of any Credit Party and all other certificates, instruments, agreements and other documents delivered, or to be delivered, by or on behalf of any Credit Party to the Agent or the Lenders or any of them, as applicable, under or in connection with this Agreement, and specifically including any agreements or letters entered into between the Borrower and the Agent in respect of fees payable to the Agent or the Lenders.

 

MasterCard Line is defined in Section 4.02.

 

Material Adverse Change” means any change or event which: (i) constitutes a material adverse change in the business, operations, financial condition or properties of the Companies taken as a whole; or (ii) materially impairs the Companies' ability, taken as a whole, to timely and fully perform any of their material obligations under the Loan Documents, or (iii) materially impairs the ability of the Agent and the Lenders to enforce their rights and remedies under this Agreement or the Security.

 

Material Agreements” means each agreement listed in Schedule 6.01(o) hereto and each other agreement made between any Company and another Person from time to time which if terminated

 

 


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would result, or would have a reasonable likelihood of resulting, in a Default, Event of Default or Material Adverse Change.

 

Material Permit” means each licence or permit listed in Schedule 6.01(h) hereto and each other licence, permit, approval, registration or qualification granted to or held by any Company which if terminated would result, or would have a reasonable likelihood of resulting, in a Default, Event of Default or Material Adverse Change.

 

Maturity Date means February 7, 2022.

 

Medical Cannabis Jurisdiction means any country in which it is legal in all political subdivisions therein (including for greater certainty on a federal, state and municipal basis) to undertake Medical Cannabis-Related Activities. Each of Canada, Germany, Spain, Czech Republic, Portugal, Italy, Greece, the United Kingdom, Denmark, Colombia, Peru, Lesotho and Australia is a Medical Cannabis Jurisdiction as at the date of this Agreement.

 

Medical Cannabis-Related Activities means any activities, including advertising or promotional activities, relating to or in connection with the importation, exportation, cultivation, production, purchase, distribution or sale of Cannabis or Cannabis-related products solely for medical purposes.

 

Non-BA Lender” means a Lender identified in Exhibit “A” attached hereto as a Lender which will make BA Equivalent Loans instead of accepting Bankers' Acceptances hereunder.

 

Non-Funding Lender” means any Lender (i) that has failed to fund any payment or Advance required to be made by it hereunder or to purchase all participations required to be purchased by it hereunder and under the Loan Documents, or (ii) that has given verbal or written notice to the Borrower, the Agent or any other Lender, or has otherwise publicly announced, that it believes that it may be unable to fund advances under one or more credit agreements to which it is a party, or

(iii) with respect to which one or more Lender-Related Distress Events has occurred, or (iv) with respect to which the Agent believes, acting reasonably, that such Lender has defaulted or may default in fulfilling its obligations (whether as an agent, lender or letter of credit issuer) under one or more other credit agreements to which it is a party, or (v) with respect to which the Agent believes, acting reasonably, that there is a reasonable chance that such Lender will fail to fund any payment or Advance required to be made hereunder.

 

Non-Medical Cannabis-Related Activities means Cannabis-Related Activities other than Medical Cannabis-Related Activities.

 

Non-Medical Cannabis Jurisdiction” means any country in which it is legal in all political subdivisions therein (including for greater certainty on a federal, state and municipal basis) to undertake Non-Medical Cannabis-Related Activities. Canada is a Non-Medical Cannabis Jurisdiction as at the date of this Agreement.

 

Non-Revolving Facilities means Facility B and Facility C; and Non-Revolving Facility means either of them, as the context requires.

 

Non-Swingline Tranche means the portion of Facility A other than the Swingline.

 

Obligations” means, at any time, all direct and indirect, contingent and absolute indebtedness, obligations and liabilities of the Borrower to the Agent and the Lenders under or in connection with this Agreement and the other Loan Documents at such time, specifically including the Outstanding Principal Amount and all accrued and unpaid interest thereon, and all obligations arising under or in connection with Service Agreements and Hedge Transactions, together with all fees, expenses

 

 


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and other amounts payable pursuant to this Agreement and the Security; except that if otherwise specified or required by the context, Obligations shall mean any portion of the foregoing.

 

Outstanding Principal Amount” means, at any time, the aggregate of the Advances under the Facilities (or any Facility or any Tranche thereof if the context requires) which have not been repaid or satisfied at such time, determined as follows: (i) in the case of Prime-Based Loans and CDOR Loans, the principal amount thereof; (ii) in the case of Bankers' Acceptances, BA Equivalent Notes and Letters of Credit, the face amount thereof; and (iii) in the case of Hedge Transactions, the Aggregate Net Hedge Liability.

 

Patents means all rights, title and interests (and all related IP Ancillary Rights) arising under any requirement of Law in or relating to patents and applications therefor.

 

Pension Plan” means (i) a “pension plan” or “plan” which is subject to the funding requirements of applicable pension benefits legislation in any jurisdiction, or (ii) any pension benefit plan or similar arrangement applicable to employees of any Company.

 

Permitted Contingent Investment” means the acquisition of an option, warrant, right or other contingent agreement to make an Investment in a Person that is not exercisable, convertible or exchangeable unless and until (i) each jurisdiction in which such Person proposes to carry on Medical Cannabis-Related Activities becomes a Medical Cannabis Jurisdiction; and (ii) each jurisdiction in which such Person proposes to carry on Non-Medical Cannabis-Related Activities becomes a Non-Medical Cannabis Jurisdiction.

 

Permitted Funded Debt” means, without duplication: (i) the Obligations; (ii) indebtedness of any Company to another Company; (iii) Subordinated Debt including the Shareholder Loans and the BDC Participation Loan; and (iv) Funded Debt of the Companies secured by Permitted Liens.

 

Permitted Liens means:

 

 

(a)

Statutory Liens in respect of any amount which is not at the time overdue;

 

 

(b)

Statutory Liens in respect of any amount which may be overdue but the validity of which is being contested in good faith and in respect of which reserves have been established in accordance with GAAP;

 

 

 

(c)

Liens or rights of distress reserved in or exercisable under any lease for rent not at the time overdue or for compliance with the terms of such lease not at the time in default; and security deposits given under leases not in excess of six (6) months' rent;

 

 

 

(d)

any obligations or duties affecting Real Property due to any public utility or to any municipality or government, or to any statutory or public authority, with respect to any franchise, grant, licence or permit in good standing and any defects in title to structures or other facilities arising solely from the fact that such structures or facilities are constructed or installed on Real Property under government permits, leases or other grants in good standing; which obligations, duties and defects in the aggregate do not materially impair the use of such property, structures or facilities for the purpose for which they are held;

 

 

 

(e)

defects or irregularities in the title to Real Property which are of a minor nature and in the aggregate will not materially affect the value of such Real Property or impair the use of such Real Property for the purposes for which it is held;

 

 

 

(f)

Liens in respect of cash, including cash deposits, granted in the ordinary course of business as security for obligations in connection with contracts, bids, tenders or expropriation proceedings, surety or appeal bonds, costs of litigation when required by law and public and statutory obligations;

 

 

 


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(g)

warehousemen’s, storers’, repairers’, carriers’ and other similar Liens granted in the ordinary course of business;

 

 

 

(h)

security given to a public utility or any municipality or government or to any statutory or public authority to secure obligations incurred to such utility, municipality, government or other authority in the ordinary course of business and not at the time overdue;

 

 

 

(i)

Liens and privileges arising out of judgments or awards in respect of which: an appeal or proceeding for review has been commenced; a stay of execution pending such appeal or proceedings for review has been obtained; and reserves have been established in accordance with GAAP;

 

 

 

(j)

any Lien affecting any Real Property arising in the ordinary course of business or in connection with the construction or improvement of such Real Property or arising out of the furnishing of materials or supplies therefor, provided that such Lien secures moneys not at the time overdue (or if overdue, the validity of which is being contested in good faith and in respect of which reserves have been established in accordance with GAAP), notice of such Lien has not been given to the Agent or any Lender and such Lien has not been registered against title to such Real Property;

 

 

 

(k)

Liens affecting any Real Property arising in connection with registered restrictions, covenants, land use contracts, building schemes, declarations of covenants, conditions and restrictions, servicing agreements in favour of any Governmental Authority, easements, rights-of-way, servitudes, reciprocal agreements, cost-sharing agreements, party wall agreements, shoring agreements, or other similar rights in or with respect to such Real Property (including open space and conservation easements, restrictions or similar agreements and rights of way and servitudes for railways, water, sewer, drainage, gas and oil pipelines, electricity, light, power, telephone, telegraph, internet or cable television services and utilities) granted to or reserved by other Persons or properties, which, in the aggregate, do not materially impair the use of such Real Property for its intended purposes or the operation of the business thereon, and provided that same have been complied with;

 

 

 

(l)

Liens affecting any Real Property arising in connection with site plan agreements, subdivision agreements, development agreements and similar instruments registered or recorded in the ordinary course of business which do not, in the aggregate, materially impair the use of such Real Property for its intended purposes or the operation of the business thereon, and provided that same have been complied with;

 

 

 

(m)

Liens affecting any Real Property arising in connection with any right reserved to or vested in any Governmental Authority, by the terms of any permit, licence, certificate, order, grant, classification (including any zoning Laws and ordinances and similar legal requirements), registration or other consent, approval or authorization acquired by such Person from any Governmental Authority or by any Law, to terminate any such permit, licence, certificate, order, grant, classification, registration or other consent, approval or authorization or to require annual or other payments as a condition to the continuance thereof and which, in the aggregate, do not materially impair the use of such Real Property for its intended purposes or the operation of the business thereon, and provided that same have been complied with;

 

 

 

(n)

Liens affecting any Real Property arising in connection with the reservations, limitations, provisos and conditions, if any, expressed in any grants of such Real Property from any Governmental Authority, which, in the aggregate, do not materially impair the use of such Real Property for its intended purposes or the operation of the business thereon, and provided that same have been complied with;

 

 

 


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(o)

reservations, conditions and restrictions in respect of any Real Property contained in the original grant of land from the Crown, as varied by statute;

 

 

 

(p)

Liens existing as of the date of this Agreement which are permitted exceptions under any title insurance policies delivered to and accepted by the Agent in respect of the Property;

 

 

 

(q)

Permitted Purchase-Money Security Interests;

 

 

(r)

Liens securing Subordinated Debt, including the Shareholder Loans   and   the BDC Participation Loan;

 

 

 

(s)

the Specific Permitted Liens;

 

 

(t)

the Security; and

 

 

(u)

any other Lien in respect of which the Lenders in their discretion provide their written consent;

 

 

provided that the use of the term “Permitted Liens” to describe the foregoing Liens shall mean that such Liens are permitted to exist (whether in priority to or subsequent in priority to the Security, as determined by Applicable Law); and for greater certainty such Liens shall not be entitled to priority over the Security by virtue of being described in this Agreement as “Permitted Liens”.

 

Permitted Purchase-Money Security Interests” means Purchase-Money Security Interests incurred or assumed in connection with the purchase, leasing or acquisition of capital equipment in the ordinary course of business provided that the aggregate amount of the Companies’ liability thereunder does not at any time exceed two million Canadian Dollars (CDN$2,000,000), and provided further that such capital equipment does not become affixed to any Real Property.

 

Person” means a natural person, corporation, limited liability company, unlimited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

 

"Potential Statutory Priority Amount" at any time means the amount of all employee source deductions, goods and services tax and all other similar amounts payable by the Companies at such time which have not been paid or remitted when due and could result in a Statutory Lien.

 

Prime-Based Loan” means a loan made by a Lender to the Borrower in Canadian Dollars in respect of which interest is determined by reference to the Prime Rate, but excluding Advances in the form of BA Equivalent Loans.

 

Prime Rate” means the greater of the following: (i) the rate of interest announced from time to time by BMO as its reference rate then in effect for determining rates of interest on Canadian Dollar loans to its customers in Canada and designated as its prime rate; and (ii) the thirty (30) day CDOR Rate plus one-half percent (0.5%) per annum.

 

Proceeds of Realization” means all amounts received by the Agent or any Lender in connection with: (i) any realization in respect of the Security or any portion thereof, whether occurring as a result of enforcement or otherwise, (ii) any sale, expropriation, loss or damage or other disposition of the Collateral or any portion thereof (except any such disposition permitted pursuant to Section 7.02(d), and also excluding any insurance proceeds which are released to the Companies in accordance with Section 8.10), and (iii) any other amount paid by or recovered from any Credit Party, including as a result of its dissolution, liquidation, bankruptcy or winding-up or any other distribution of its assets to creditors; together with all other amounts which are expressly deemed to constitute “Proceeds of Realization” in this Agreement.

 

 


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Projects” means the D2 Project and the D3 Project, collectively and “Project” means either one of them, as the context requires.

 

Prohibited Transaction means a business, activity, person or entity engaged in activities related to the cultivation, production, distribution, sale or possession of (A) non-medical marijuana in any jurisdiction other than Canada and other jurisdictions where it is federally legal, or (B) medical marijuana in any jurisdiction other than Canada and other jurisdictions where it is federally legal.

 

Properties” means the D2 Property and the D3 Property; and “Property” means either of them, as the context requires.

 

Proportionate Share in respect of any Lender means:

 

 

(a)

in the context of such Lender's obligation to make Advances under a Facility or Tranche, such Lender's Commitment to make Advances under that Facility or Tranche divided by the aggregate amount of all Lenders' Commitments to make Advances under that Facility or Tranche;

 

 

 

(b)

subject to Section 11.03, in the context of any Lender's entitlement to receive payments of principal, interest or fees under a Facility or Tranche, the Outstanding Principal Amount due to such Lender under that Facility or Tranche divided by the aggregate amount of the Outstanding Principal Amount due to all Lenders under that Facility or Tranche; and

 

 

 

(c)

in any other context, such Lender's Commitment divided by the aggregate of all Lenders' Commitments.

 

 

Purchase-Money Security Interest” means (i) a Capital Lease; or (ii) a Lien on any property or asset which is created, issued or assumed to secure the unpaid purchase price thereof, provided that such Lien is restricted to such property or asset (and all additions thereto and replacements and proceeds thereof) and secures an amount not in excess of the purchase price thereof and any interest and fees payable in respect thereof.

 

Qualified Currency” means the legal tender of any Approved Medical Cannabis Jurisdiction or Approved Non-Medical Cannabis Jurisdiction.

 

Real Property” means a freehold or leasehold interest in real property, and includes all buildings and other improvements situated thereon and all fixtures attached thereto.

 

Related Person” in relation to any Person means a Subsidiary, Affiliate, Associate or employee of such Person.

 

Repayment” means a repayment by the Borrower on account of the Outstanding Principal Amount.

 

Repayment Notice means a notice delivered by the Borrower to the Agent committing it to make a Repayment, in the form of Exhibit “E”.

 

Required Lenders” means (i) at any time prior to the occurrence of an Event of Default which is continuing, any two or more Lenders which have issued Commitments hereunder representing two- thirds (2/3) or more of the total amount of credit available under the Facilities; and (ii) at any time after the occurrence of an Event of Default which is continuing, any two or more Lenders holding two-thirds (2/3) or more of the Outstanding Principal Amount under the Facilities; except that if at any time there are only two (2) Lenders under this Agreement, “Required Lenders” shall mean both Lenders, and if at any time there is only one (1) Lender under this Agreement, “Required Lenders” shall mean such Lender.

 

 


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Requirements of Environmental Law means: (i) obligations under common law; (ii) requirements imposed by or pursuant to statutes, regulations and by-laws whether presently or hereafter in force; (iii) directives, policies and guidelines issued or relied upon by any Governmental Authority to the extent such directives, policies or guidelines have the force of law; (iv) permits, licenses, certificates and approvals from Governmental Authorities which are required in connection with air emissions, discharges to surface or groundwater, noise emissions, solid or liquid waste disposal, the use, generation, storage, transportation or disposal of Hazardous Materials; and (v) requirements imposed under any clean-up, compliance or other order made pursuant to any of the foregoing, in each and every case relating to environmental, health or safety matters including all such obligations and requirements which relate to (A) solid, gaseous or liquid waste generation, handling, treatment, storage, disposal or transportation of Hazardous Materials and (B) exposure to Hazardous Materials.

 

Responsible Person” means (i) an officer or director of any Company or (ii) any other Person required to hold a security clearance pursuant to the Cannabis Act or the Cannabis Regulations.

 

Rollover means the renewal of an Availment Option upon its maturity in the same form.

 

Rollover Notice” means a notice substantially in the form of Exhibit “C” given by the Borrower to the Agent for the purpose of requesting a Rollover.

 

Sanctions means the sanctions laws, regulations, embargoes or restrictive measures administered, enacted or enforced by any Sanctions Authority.

 

Sanctions Authority” means Canada or any other country having jurisdiction over any of the Companies or the respective Governmental Authorities of any of the foregoing.

 

Sanctioned Entity” means (a) a country or a government of a country, (b) an agency of the government of a country, (c) an organization directly or indirectly controlled by a country or its government, (d) a Person resident in or determined to be resident in a country, in each case, that is subject to a sanctions program administered and enforced by a Sanctions Authority.

 

Sanctioned Person” means a Person that is, or is owned or Controlled by Persons that are, the subject of any Sanctions.

 

Security means the Guarantees, security agreements, mortgages, debentures and other documents required to be provided pursuant to Article VIII - and all other documents and agreements delivered by the Credit Parties or any other Persons to the Agent or the Lenders from time to time as security for the payment and performance of the Obligations, and the Liens constituted by the foregoing.

 

Senior Funded Debt” means, at any time, the Funded Debt of the Borrower on a consolidated basis at such time, excluding Subordinated Debt.

 

Senior Funded Debt to EBITDA Ratio” means, at any time, the ratio of (i) Senior Funded Debt at such time to (ii) EBITDA in the immediately preceding twelve (12) month period.

 

Service Agreements is defined in Section 4.03.

 

Settlement Agreement” means the settlement agreement dated March 2, 2020 and entered into between Village, Emerald, Emerald Canada and the Borrower in connection with the Shareholder Dispute.

 

Shareholder Dispute means the “Disputes” as defined in the Settlement Agreement.

 

 


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Shareholder Loan Agreement” means the Shareholder Loan Agreement among the Borrower and the Shareholders dated July 5, 2018, as amended by an Amendment Agreement No. 1 dated August 27, 2018, an Amendment Agreement No. 2 dated October 1, 2018, an Amendment

Agreement No. 3 dated November 7, 2018 and an Amendment Agreement No. 4 dated March 6,

2020.

 

Shareholder Loans” means the loans advanced by Village to the Borrower from time to time on or before the Amendment Closing Date in the aggregate principal amount of not less than thirteen million Canadian Dollars (CDN$13,000,000), bearing interest at a rate not in excess of eight percent (8%) per annum calculated semi-annually and payable on demand, pursuant to the Shareholder Loan Agreement.

 

Shareholders means Emerald Canada and Village; and Shareholder means either of them as the context requires.

 

Shareholders Agreement” means the unanimous shareholders agreement among the Borrower (by its prior name 1121371 B.C. Ltd.), Emerald Canada (by its prior name Emerald Health Botanicals Inc.), Emerald and Village, dated June 6, 2017.

 

Solvent” means, with respect to any Person as of the date of determination, (i) the aggregate property of such Person is sufficient, if disposed of at a fairly conducted sale under legal process, to enable payment of all its obligations, due and accruing due; (ii) such Person is able to meet its obligations as they generally become due; and (iii) such Person has not ceased paying its current obligations in the ordinary course of business as they generally become due; for purposes of this definition, the amount of any contingent obligation at such time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

 

Specific Permitted Liens means the Liens described in Schedule 6.01(i), as such Liens may be amended or replaced from time to time on substantially similar terms and conditions provided that the principal amount of the indebtedness secured thereby is not increased.

 

Statutory Lien” means a Lien in respect of any property or assets of a Company created by or arising pursuant to any Applicable Law in favour of any Governmental Authority to secure any obligation, including a Lien for the purpose of securing such Company's obligation to deduct and remit employee source deductions, goods and services tax and harmonized sales tax pursuant to the Income Tax Act (Canada), the Excise Tax Act (Canada), the Canada Pension Plan (Canada), the Employment Insurance Act (Canada) and any legislation in any jurisdiction similar to or enacted in replacement of the foregoing from time to time.

 

Subordinated Debt” means indebtedness of any Company to any Person which the Required Lenders in their sole discretion have consented to in writing and in respect of which the holder thereof has entered into a subordination, postponement and standstill agreement in favour of the Agent in form and substance satisfactory to the Agent and registered in all places where necessary or desirable to protect the priority of the Security, which shall provide (among other things) that: (A) the maturity date of such indebtedness is later than the Maturity Date; (B) the holder of such indebtedness may not receive any payments on account of principal or interest thereon (except to the extent, if any, expressly permitted therein); (C) any security held in respect of such indebtedness is subordinated to the Security; (D) the holder of such indebtedness may not take any enforcement action in respect of any such security (except to the extent, if any, otherwise expressly provided therein) without the prior written consent of the Agent; and (E) any enforcement action taken by the holder of such indebtedness will not interfere with the enforcement action (if any) being taken by the Agent in respect of the Security.

 

 


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Subsidiary” means a Person (other than a natural person) which is Controlled, directly or indirectly, by another Person (other than a natural person); and for greater certainty includes a Subsidiary of a Subsidiary.

 

Substitution means the substitution of one Availment Option for another, and does not constitute a fresh or new Advance.

 

Substitution Notice means a notice substantially in the form of Exhibit “D” given by the Borrower to the Agent for the purposes of requesting a Substitution.

 

"Swingline" is defined in Section 2.07.

 

"Swingline Commitment" means the commitment of the Swingline Lender to extend credit under the Swingline up to the Swingline Limit, and comprising a portion of such Lender’s Facility A Commitment.

 

"Swingline Lender" means BMO in such capacity.

 

"Swingline Limit" means one million, five hundred thousand Canadian Dollars (CDN$1,500,000). Taxes is defined in the CBA Model Provisions.

Trade Secrets means all right, title and interest (and all related IP Ancillary Rights) arising under any requirement of Law in or relating to trade secrets.

 

Trademarks” means all right, title and interest (and all related IP Ancillary Rights) in trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers and, in each case, all goodwill associated therewith, all registrations and recordations thereof and all applications in connection therewith.

 

Tranche means a designated portion of a Facility which is subject to certain additional terms and conditions as provided herein.

 

Unfunded Capital Expenditures” means Capital Expenditures made by the Companies which are not funded by any one or more of the following: an Advance under Facility B or Facility C, a Permitted Purchase-Money Security Interest, Subordinated Debt, insurance proceeds, or proceeds from an asset disposition.

 

Unrestricted Cash means, as of any date of determination, the amount of all monies standing to the credit of the Borrower that is in bank accounts maintained by the Borrower with the Agent that are (a) not subject to any Lien (other than a Permitted Lien), and (b) not subject to any restriction (specifically including for greater certainty any restriction under a Permitted Lien) which would prevent the Borrower from using such monies for operating purposes in the ordinary course of business.

 

Village” means Village Farms International, Inc., a corporation subsisting under the federal laws of Canada.

 

Village Guarantee is defined in Section 8.02(b).

 

Village LP” means Village Farms Canada Limited Partnership, a limited partnership formed and existing under the laws of British Columbia.

 

 


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Year-end Financial Statements” means, in respect of any Person at any time, the audited financial statements of such Person (on a consolidated and unconsolidated basis) in respect of its most recently completed Fiscal Year prepared in accordance with GAAP, including the notes thereto and an unqualified opinion of its auditor with respect thereto.

 

 

1.02

Accounting Principles

 

Except as otherwise provided herein, (i) each financial term in this Agreement shall be interpreted in accordance with GAAP in effect on the date of such interpretation; and (ii) where the character or amount of any asset or liability or item of revenue or expense is required to be determined, or any consolidation or other computation is required to be made for the purpose of this Agreement, such determination or calculation shall be made in accordance with GAAP in effect on the date of such determination. Notwithstanding the foregoing, if after the date of this Agreement there is a change in GAAP (referred to herein as an accounting change”), and if any financial ratio or amount determined pursuant to Section 7.03 would be materially different as a result of such accounting change, the Lenders and the Borrower shall discuss whether they wish to amend any financial covenants in Section 7.03 as result of such accounting change. Unless any such amendments have been agreed upon by all parties hereto in writing, compliance with the financial covenants in this Agreement shall be determined as if no such accounting change had occurred. In such event, the financial statements required to be provided hereunder shall be prepared in accordance with GAAP in effect on the date of such financial statements (after giving effect to such accounting change), and the Borrower shall concurrently deliver to the Agent a reconciliation in form and substance satisfactory to the Lenders showing all adjustments made to such financial statements in order to determine compliance with such financial covenants on the basis of GAAP in effect prior to such accounting change.

 

 

1.03

Currency References

 

All amounts referred to in this Agreement are in Canadian Dollars unless otherwise noted.

 

 

1.04

Extended Meanings

 

Except to the extent otherwise expressly provided herein:

 

 

(a)

terms defined in the singular have the same meaning when used in the plural, and vice-versa; and words importing gender include all genders;

 

 

 

(b)

when used in the context of a general statement followed by a reference to one or more specific items or matters, the term “including” shall mean “including, without limitation”, and the term “includes” shall mean “includes, without limitation”;

 

 

 

(c)

each reference herein to a statute or regulations made pursuant to a statute shall be deemed to include all amendments to such statute or regulations from time to time and all statutes or regulations which may come into effect from time to time substantially in replacement for the said statutes or regulations;

 

 

 

(d)

any reference herein to the exercise of discretion by the Agent or the Lenders (including phrases such as “in the discretion of”, “in the opinion of”, “to the satisfaction of” and similar phrases) shall mean that such discretion is absolute and unfettered; and

 

 

 

(e)

references to a time of day or date mean the local time or date in the City of Toronto, Ontario unless otherwise specified.

 

 

 


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1.05

Amendment and Restatement

 

This Agreement amends and restates the provisions of the Existing Credit Agreement and shall not be considered a novation thereof. Any provision hereof which differs from or is inconsistent with a provision of the Existing Credit Agreement constitutes an amendment to the Existing Credit Agreement with each such amendment being effective as and from the date hereof. This Agreement will not discharge or constitute a novation of any debt, obligation, covenant or agreement contained in the Existing Credit Agreement or in any Security, agreements, certificates and other documents executed and delivered by or on behalf of the Borrower in respect thereof or in connection therewith, but same shall remain in full force and effect save to the extent same are amended by the provisions of this Agreement. All representations and warranties set out in this Agreement are freshly made on the date hereof, but nothing herein shall release or otherwise affect the Borrower’s liability, without duplication, in connection with the representations and warranties contained in the Existing Credit Agreement. The Borrower hereby represents, warrants, acknowledges and agrees with the Agent that all Security executed and delivered by the Credit Parties to the Agent prior to the date of this Agreement is valid and enforceable in accordance with its terms and continues in full force and effect. Any reference to the Existing Credit Agreement in any other Loan Document shall be deemed to constitute a reference to this Agreement.

 

 

1.06

Exhibits and Schedules

 

The following Exhibits and Schedules are attached to this Agreement and incorporated herein by reference (but with respect to Exhibit “J”, subject to Section 12.01 hereof):

 

Exhibits

 

“A”-Lenders and Lenders' Commitments “B”-Draw Request

“C”-Rollover Notice “D”-Substitution Notice “E”-Repayment Notice

“F”-Borrowing Base Certificate “G”-Compliance Certificate

“H”-Excess Cash Flow Certificate “I”-Form of BA Equivalent Note “J”-CBA Model Provisions

 

Schedules

 

6.01(b)- Credit Parties Information 6.01(h)- Material Permits

6.01(i)- Specific Permitted Liens 6.01(m)- Intellectual Property 6.01(o)- Material Agreements 6.01(p)- Labour Agreements 6.01(q)- Environmental Matters 6.01(r)- Litigation

6.01(s)- Pension Plans

 

 

ARTICLE II - FACILITY A

 

 

2.01

Establishment of Facility A

 

Subject to the terms and conditions in this Agreement, each Lender hereby establishes a revolving credit facility for the Borrower in the maximum principal amount indicated opposite such Lender's name in Exhibit “A" under the heading "Facility A Commitments". The said credit facilities are established by the

 

 


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Lenders severally and not jointly, and are collectively referred to in this Agreement as "Facility A". Each Advance by a Lender under the Non-Swingline Tranche shall be made in its Proportionate Share of the Non-Swingline Tranche.

 

 

2.02

Purpose; Revolving Nature; Advances

 

 

(a)

Facility A is a revolving facility. The Borrower shall be entitled to obtain Advances under Facility A from time to time and repay all or any portion of the Outstanding Principal Amount under Facility A from time to time; provided that the Outstanding Principal Amount under Facility A shall not, at any time, exceed the Facility A Margin Limit in effect at such time. Facility A shall also include the Swingline, to a maximum amount equal to the Swingline Limit and on the basis more particularly described in Section 2.07 below.

 

 

 

(b)

Advances under Facility A shall be used by the Borrower for its working capital and other general corporate purposes.

 

 

 

2.03

Repayment

 

The Obligations under Facility A shall become due and payable on the earlier of: (i) the Acceleration Date; and (ii) the Maturity Date.

 

 

2.04

Availment Options

 

Subject to the restrictions contained in this Agreement (and in particular, Sections 5.02 and 5.03), the Borrower may receive Advances under Facility A by any one or more of the following Availment Options (or any combination thereof):

 

 

(a)

Prime-Based Loans; or

 

 

(b)

Bankers' Acceptances from BA Lenders with a maturity between 28 and 182 days (inclusive), subject to availability; or

 

 

 

(c)

BA Equivalent Loans from Non-BA Lenders with a maturity between 28 and 182 days (inclusive), subject to availability; or

 

 

 

(d)

CDOR Loans with a CDOR Period of one (1), three (3) or six (6) months, subject to availability; or

 

 

(e)

Letters of Credit, subject to Section 2.08.

 

Bankers' Acceptances, BA Equivalent Loans and CDOR Loans will not be issued with a maturity date later than the Maturity Date. The Borrower may convert all or any portion of the Outstanding Principal Amount under Facility A in the form of any above Availment Option into another form of Availment Option, subject to and in accordance with the terms and conditions of this Agreement (but for greater certainty, Bankers’ Acceptances. BA Equivalent Loans and CDOR Loans may not be converted into another Availment Option prior to the maturity thereof).

 

 

2.05

Interest and Fees

 

In respect of Advances under Facility A, the Borrower agrees to pay the following to the Agent on behalf of the Lenders (or if specified below, to the Issuing Bank for its own account):

 

 

(a)

interest on Prime-Based Loans at the Prime Rate plus the Applicable Margin per annum, payable monthly in arrears on the last day of each and every month;

 

 

 


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(b)

in respect of each Bankers' Acceptance, a stamping fee equal to the Applicable Margin, multiplied by the face amount of the Bankers' Acceptance with the product thereof further multiplied by the number of days to maturity of the Bankers' Acceptance and divided by 365, payable at the time of acceptance;

 

 

 

(c)

in respect of each BA Equivalent Note, a stamping fee equal to the Applicable Margin multiplied by the face amount of the BA Equivalent Note with the product thereof further multiplied by the number of days to maturity of the BA Equivalent Note and divided by 365, payable at the time of acceptance;

 

 

 

(d)

in respect of any CDOR Loan, interest at the CDOR Rate applicable to the relevant CDOR Period plus the Applicable Margin per annum, payable monthly in arrears on the last day of each and every month;

 

 

 

(e)

the following fees in respect of each Letter of Credit:

 

 

(i)

in respect of the period from the date of issuance of such Letter of Credit to the last day of the then current Fiscal Quarter, a fee equal to the Applicable Margin in effect on the date of issuance multiplied by the face amount of such Letter of Credit multiplied by the number of days in such period (including the first and last days of such period) and divided by three hundred and sixty-five (365), payable on the last Business Day of such Fiscal Quarter;

 

 

 

(ii)

in respect of each subsequent Fiscal Quarter (other than the Fiscal Quarter in which the Letter of Credit shall expire), a fee equal to the Applicable Margin in effect on the first day of such Fiscal Quarter multiplied by the face amount of such Letter of Credit multiplied by the number of days in such Fiscal Quarter (including the first and last days of such period) and divided by three hundred and sixty-five (365), payable on the last Business Day of such Fiscal Quarter; and

 

 

 

(iii)

in respect of the Fiscal Quarter in which such Letter of Credit shall expire, a fee equal to the Applicable Margin in effect on the first day of such Fiscal Quarter multiplied by the face amount of such Letter of Credit multiplied by the number of days in the period from and including the first day of such Fiscal Quarter to but excluding the day on which such Letter of Credit expires and divided by three hundred and sixty-five (365), payable on the last Business Day of such Fiscal Quarter;

 

 

 

(f)

a fronting fee in respect of each Letter of Credit payable to the Issuing Bank for its own account as follows:

 

 

 

(i)

in respect of the period from the date of issuance of such Letter of Credit to the last day of the then current Fiscal Quarter, a fee equal to one-quarter of one percent (0.25%) multiplied by the face amount of such Letter of Credit multiplied by the number of days in such period (including the first and last days of such period) and divided by three hundred and sixty-five (365), payable on the last Business Day of such Fiscal Quarter;

 

 

 

(ii)

in respect of each subsequent Fiscal Quarter (other than the Fiscal Quarter in which the Letter of Credit shall expire), a fee equal to one-quarter of one percent (0.25%) multiplied by the face amount of such Letter of Credit multiplied by the number of days in such Fiscal Quarter (including the first and last days of such period) and divided by three hundred and sixty-five (365), payable on the last Business Day of such Fiscal Quarter; and

 

 

 

(iii)

in respect of the Fiscal Quarter in which such Letter of Credit shall expire, a fee equal to one-quarter of one percent (0.25%) multiplied by the face amount of such Letter of Credit multiplied by the number of days in the period from and including the first day of such Fiscal Quarter to but excluding the day on which such Letter of Credit expires and divided by

 

 

 


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three hundred and sixty-five (365), payable on the last Business Day of such Fiscal Quarter;

 

 

(g)

administrative fees payable to the Issuing Bank for its own account in accordance with its usual practice in respect of the issuance, amendment and renewal of Letters of Credit; and

 

 

 

(h)

a standby fee with respect to the unused portion of the Non-Swingline Tranche, calculated on a daily basis as being the difference between (i) the Facility A Maximum Amount (less the Commitments of any Non-Funding Lenders under Facility A), less the Swingline Limit and (ii) the Outstanding Principal Amount under the Non-Swingline Tranche, multiplied by the Applicable Margin and divided by 365; which standby fee shall be payable quarterly in arrears on the last Business Day of each Fiscal Quarter based on the number of days in such Fiscal Quarter (including the first day and excluding the last day in such Fiscal Quarter) and on the Maturity Date.

 

 

 

2.06

Facility A Margin Limit

 

 

(a)

In this Agreement, "Facility A Margin Limit" means, at any time, an amount equal to the lesser of:

 

(A)

the Facility A Maximum Amount; and (B) an amount determined at such time as follows:

 

 

(i)

eighty-five percent (85%) of the Lenders’ estimated valuation of Eligible Receivables owing by Governmental Authorities domiciled in Canada; plus

 

 

 

(ii)

seventy-five percent (75%) of the Lenders’ estimated valuation of Eligible Receivables owing by other account debtors domiciled in Canada; plus

 

 

 

(iii)

the lower of (x) sixty-five percent (65%) of the Lenders’ estimated valuation (in Canadian Dollars based on the then applicable Exchange Rate) of Eligible Receivables owing by account debtors domiciled in other Approved Jurisdictions; and (y) one million Canadian Dollars (CDN$1,000,000); less

 

 

 

(iv)

the Potential Statutory Priority Amount at such time.

 

 

(b)

The Facility A Margin Limit shall be adjusted as at the date of each receipt by the Agent of a Borrowing Base Certificate and shall remain in effect until receipt by the Agent of a subsequent Borrowing Base Certificate; provided that if the Agent does not receive a Borrowing Base Certificate on or before the date required pursuant to Section 7.04, the Facility A Margin Limit shall be reduced to the lowest Facility A Margin Limit in the preceding twelve (12) months or such lower amount estimated by the Facility A Lenders acting reasonably to be the Facility A Margin Limit determined in accordance with the formula in paragraph (a) above, until such time as a Borrowing Base Certificate is thereafter received by the Agent.

 

 

 

(c)

The Facility A Lenders shall have no obligation to make any Advance under Facility A if after making such Advance the Outstanding Principal Amount under Facility A would exceed the Facility A Margin Limit then in effect.

 

 

 

(d)

If at any time the aggregate amount of the Outstanding Principal Amount under Facility A is in excess of the Facility A Margin Limit for any reason (specifically including as a result of a fluctuation in currency exchange rates), the Borrower agrees that immediately after receipt of a written request from the Agent it will make Repayments under Facility A in such amount as will result in the aggregate amount of the Outstanding Principal Amount under Facility A not exceeding the Facility A Margin Limit. The Agent shall firstly apply such Repayment against Loans under Facility A; and any remaining portion of such Repayment shall be held by the Agent and applied against Bankers’ Acceptances, BA Equivalent Loans, CDOR Loans and Letters of Credit under Facility A upon the maturity thereof.

 

 

 


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2.07

Swingline

 

A portion of Facility A in the maximum amount of the Swingline Limit (the "Swingline") shall be subject to the following terms and conditions, in addition to any other applicable terms and conditions contained in this Agreement:

 

 

(a)

The Swingline shall be established and maintained by the Swingline Lender only, and the Swingline Lender shall not have the right to assign or grant a participation in the Swingline in whole or in part to any other Person.

 

 

 

(b)

The Outstanding Principal Amount under the Swingline shall not at any time exceed the Swingline Limit.

 

 

 

(c)

The Swingline shall form a part of Facility A and, except to the extent provided in this Section, shall be subject to all terms and conditions of this Article II - specifically including the Facility A Margin Limit.

 

 

 

(d)

Subject to paragraph (f) below, Advances to and Repayments by the Borrower under the Swingline shall be made in the following manner. The Swingline Lender will make Advances to the Borrower into one or more Canadian Dollar bank accounts designated by the Borrower as required in order to honour cheques drawn by the Borrower on such accounts presented to the Swingline Lender for payment. As deposits are made into such accounts by the Borrower, the Swingline Lender shall withdraw funds from such accounts from time to time and apply such funds as repayments under the Swingline. Advances to the Borrower and Repayments by the Borrower under the Swingline shall be made without notice and shall be on a dollar for dollar basis (i.e. not subject to minimum amounts or multiples).

 

 

 

(e)

The obligation of the Swingline Lender to make each Advance under the Swingline shall be subject to the satisfaction of all conditions precedent in Section 9.02, except for the requirement in Section 9.02(c) to provide a Draw Request.

 

 

 

(f)

Interest on the Outstanding Principal Amount under the Swingline shall be payable by the Borrower to the Swingline Lender (for its own account) at the Prime Rate plus the Applicable Margin per annum, payable monthly in arrears on the last day of each and every month.

 

 

 

(g)

The Borrower hereby agrees to pay a standby fee with respect to the unused portion of the Swingline, payable to the Swingline Lender (for its own account), calculated on a daily basis as being the difference between (i) the Swingline Limit and (ii) the Outstanding Principal Amount under the Swingline, multiplied by the Applicable Margin and divided by 365; which standby fee shall be payable quarterly in arrears on the last Business Day of each Fiscal Quarter based on the number of days in such Fiscal Quarter (including the first day and excluding the last day in such Fiscal Quarter) and on the Maturity Date.

 

 

 

(h)

The Swingline Lender may in its discretion at any time, by written notice to the Borrower, require the Borrower to request an Advance under Facility A from the Facility A Lenders in an amount (in this paragraph called the "Swingline Reduction Amount") for the purpose of reducing the Outstanding Principal Amount under the Swingline; and the Borrower agrees to promptly comply with any such request. The proceeds of such Advance shall be applied to reduce the Outstanding Principal Amount under the Swingline accordingly. If the Borrower fails to comply with any such request from the Swingline Lender within two (2) Business Days after receipt thereof, each Facility A Lender agrees that upon request by the Swingline Lender it will make an Advance under Facility A in an amount equal to its Proportionate Share of the Swingline Reduction Amount, the proceeds of which shall be applied to reduce the Outstanding Principal Amount under the Swingline. In addition, each Facility A Lender hereby accepts from the Swingline Lender a participation (which participation shall be non-recourse to the Swingline Lender) in the Outstanding Principal Amount

 

 

 


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under the Swingline from time to time, in such Lender's Proportionate Share of Facility A. Each Facility A Lender hereby absolutely and unconditionally agrees to indemnify and hold the Swingline Lender harmless from liability in respect of, such Lender's said Proportionate Share of such Outstanding Principal Amount under the Swingline. Each said Facility A Lender acknowledges and agrees that its obligation to acquire a participation in such Outstanding Principal Amount under the Swingline and its said indemnity obligation are absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or Event of Default hereunder. For greater certainty however, nothing herein shall require a Facility A Lender to make Advances under Facility A in excess of its Commitment under Facility A.

 

 

2.08

Letters of Credit

 

Letters of Credit shall be subject to the following additional terms and conditions:

 

 

(a)

Letters of Credit may be issued in all Qualified Currencies. Letters of Credit will not be issued for the purpose of guaranteeing obligations of any Person, except as permitted under Section 7.02(b). Each Letter of Credit shall have a term not in excess of one (1) year.

 

 

 

(b)

The Equivalent Amount expressed in Canadian Dollars of the aggregate face amount of all Letters of Credit outstanding at any time under Facility A may not exceed six million Canadian Dollars (CDN$6,000,000).

 

 

 

(c)

If a Letter of Credit is issued in a Qualified Currency other than Canadian Dollars, each fee in respect of such Letter of Credit payable pursuant to section 2.05 hereof shall be payable in Canadian Dollars in accordance with Section 5.06.

 

 

 

(d)

Each request for the issuance of a Letter of Credit shall be delivered by the Borrower to the Issuing Bank in accordance with the notice requirements in section 5.02(a) herein, together with the Issuing Bank's customary form of application and indemnity agreement completed to its satisfaction and the proposed form of the Letter of Credit (which shall be satisfactory to the Issuing Bank) and such other certificates, documents and other information as the Issuing Bank may reasonably request.

 

 

 

(e)

The obligation of the Borrower to reimburse the Issuing Bank for all drawings under Letters of Credit shall be absolute, unconditional and irrevocable and shall be satisfied strictly in accordance with their terms, irrespective of:

 

 

 

(i)

any lack of validity or enforceability of any Letter of Credit;

 

 

(ii)

the existence of any claim, setoff, defence or other right which the Borrower or any other Person may at any time have against the beneficiary under any Letter of Credit, the Issuing Bank or any Lender (other than the defence of payment in accordance with the terms of this Agreement or a defence based on the negligence or wilful misconduct of the Issuing Bank or any Lender) or any other Person in accordance with this Agreement or other transaction;

 

 

 

(iii)

any draft or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; and

 

 

 

(iv)

any other circumstance or event whatsoever, whether or not similar to any of the foregoing.

 

 

(f)

In making any payment under any Letter of Credit (i) the Issuing Bank's exclusive reliance on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including reliance on the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary equals the amount of such draft and whether or not any document

 

 

 


- 29 -

 

 

 

presented pursuant to such Letter of Credit proves to be insufficient in any respect, if such document on its face appears to be in order, and whether or not any other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever and (ii) any non- compliance in any immaterial respect of the documents presented under such Letter of Credit with the terms thereof shall, in each case, not be deemed wilful misconduct or negligence of the Issuing Bank.

 

 

(g)

The Issuing Bank and its correspondents may accept and act upon the name, signature, or act of any party purporting to be the executor, administrator, receiver, trustee in bankruptcy or other legal representative of any party designated in any Letter of Credit in the place of the name, signature, or act of such party.

 

 

 

(h)

Concurrently with each request for the issuance of a Letter of Credit the Agent shall notify each Lender of the principal amount, the reference number and the expiration date thereof and the amount of such Lender's participation therein. By the issuance of a Letter of Credit hereunder and without further action on the part of the Issuing Bank or the Lenders, each said Lender hereby accepts from the Issuing Bank a participation (which participation shall be without recourse to the Issuing Bank) in such Letter of Credit in such Lender's Proportionate Share of Facility A, effective upon the issuance of such Letter of Credit. Each Lender hereby absolutely and unconditionally assumes, as primary obligor and not as a surety, and agrees to pay and discharge and to indemnify and hold the Issuing Bank harmless from liability in respect of, such Lender's said Proportionate Share of the amount of any drawing under a Letter of Credit. Each said Lender acknowledges and agrees that its obligation to acquire participations in each Letter of Credit issued by the Issuing Bank and its obligation to make the payments specified herein, and the right of the Issuing Bank to receive the same, in the manner specified herein, are absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or Event of Default hereunder, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. The Issuing Bank shall review each draft and any accompanying documents presented under a Letter of Credit and shall notify each said Lender of any such presentment. Promptly after it shall have ascertained that any draft and any accompanying documents presented under such Letter of Credit appear on their face to be in substantial conformity with the terms and conditions of the Letter of Credit, the Issuing Bank shall give notice to each said Lender and the Borrower of the receipt and amount of such draft and the date on which payment thereon will be made, and each said Lender shall, by 11:00 a.m. Toronto time on the date such payment is to be made, pay its said Proportionate Share of the amount so drawn under the Letter of Credit in immediately available funds, and the Issuing Bank shall make the appropriate payment to the beneficiary of such Letter of Credit. The Borrower agrees to immediately reimburse each said Lender in an amount equal to the said payment by such Lender with interest thereon payable at the same rate and in the same manner as Prime Rate Loans under Facility A.

 

 

 

(i)

On or before the Maturity Date the Borrower shall (i) arrange for the cancellation and return of all outstanding Letters of Credit to the Issuing Bank or (ii) provide cash collateral in favour of the Agent in respect of all outstanding Letters of Credit in an amount equal to the aggregate of the face amounts of all such Letters of Credit, plus an additional amount estimated by the Issuing Bank in respect of its anticipated fees and expenses associated with the settlement of such Letters of Credit. For greater certainty, the Agent shall have no obligation to release all or any portion of the Security unless and until all Letters of Credit are cancelled or such cash collateral is provided in respect thereof to the satisfaction of the Issuing Bank.

 

 

 

2.09

Cancellation

 

The Borrower may from time to time upon two (2) Business Days’ prior written notice to the Agent, permanently cancel any unadvanced portion of Facility A in a minimum amount of one hundred thousand Canadian Dollars (CDN$100,000) without payment of any penalty or fee (provided that such required

 

 


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minimum amount shall not apply in the case of a cancellation of Facility A in its entirety). The Facility A Maximum Amount shall be automatically and permanently reduced by the amount so cancelled and each Lender’s Commitment under Facility A shall be reduced by its Proportionate Share of the amount so cancelled.

 

ARTICLE III - NON-REVOLVING FACILITIES

 

 

3.01

Continuation of Facility B (formerly called Facility A)

 

Subject to the terms and conditions in this Agreement, each Lender hereby confirms that it has issued a Commitment in the maximum principal amount indicated opposite its name in Exhibit “A” under the heading “Facility B Commitments”. The said Commitments have been established by the Lenders severally and not jointly, and are hereinafter collectively referred to as “Facility B”. Facility B is a committed, non-revolving credit facility.

 

 

3.02

Establishment of Facility C

 

Subject to the terms and conditions in this Agreement, each Lender hereby establishes a committed, non-revolving credit facility for the Borrower in the maximum principal amount indicated opposite such Lender's name in Exhibit “A” under the heading “Facility C Commitments”. The said credit facilities are established by the Lenders severally and not jointly, and are hereinafter collectively referred to as Facility C”. Each Advance by a Lender under Facility C shall be made in its Proportionate Share of Facility C. The aggregate principal amount of all Advances under Facility C shall not exceed the Facility C Limit.

 

 

3.03

Purpose

 

 

(a)

Advances under Facility B have been used by the Borrower to assist in re-financing the D3 Property and in financing the upgrade and retrofit of the D3 Property.

 

 

 

(b)

Advances under Facility C shall be used by the Borrower to assist in financing the D2 Project and the D3 Project.

 

 

 

3.04

Non-Revolving Nature; Advances

 

 

(a)

Facility B is a non-revolving facility, and any Repayment under Facility B may not be reborrowed. Facility B has been fully advanced and no further Advances are permitted thereunder.