EX-10.40 3 tlry-ex1040_748.htm EX-10.40 tlry-ex1040_748.htm

 

Exhibit 10.40

 

Execution Version

 

 

 

1974568 ONTARIO LIMITED O/A APHRIA DIAMOND

as Borrower

 

- and -

 

APHRIA INC.

the “Parent” or “Limited Guarantor”

 

-and-

 

EACH OF THE SUBSIDIARIES OF THE BORROWER IDENTIFIED ON THE SIGNATURE PAGES HERETO AS GUARANTORS,

AND EACH ADDITIONAL SUBSIDIARY OF THE BORROWER PARTY HERETO FROM TIME TO TIME AS A GUARANTOR

collectively as Guarantors

 

- and -

 

BANK OF MONTREAL

AND THE ADDITIONAL LENDERS FROM TIME TO TIME PARTY TO THIS AGREEMENT

as Lenders

 

- and -

 

BANK OF MONTREAL

as Administrative Agent

 

-and-

 

BANK OF MONTREAL

as Sole Arranger and Sole Book Runner

 

 

 

 

 

 

CREDIT AGREEMENT

 

November 29, 2019

 

 

 

 

 

 

 


 

 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE I - INTERPRETATION

 

1.01

Definitions

1

1.02

Accounting Principles

25

1.03

Currency References

26

1.04

References to Statutes

26

1.05

Extended Meanings

26

1.06

Joint and Several Obligations

26

1.07

Exhibits and Schedules

26

ARTICLE II – FACILITY A (TERM FACILITY)

2.01

Establishment of Facility A

27

2.02

Purpose

27

2.03

Non-Revolving Nature

28

2.04

Repayment

28

2.05

Availment Options

29

2.06

Interest and Fees

29

2.07

Voluntary Cancellation; Voluntary Repayments

29

ARTICLE III - GENERAL CONDITIONS

3.01

Matters Relating to Interest

30

3.02

Notice Periods

31

3.03

Minimum Amounts, Multiples and Procedures re Draws, Conversions and Repayments

31

3.04

Place of Advances, Repayments

32

3.05

Evidence of Obligations (Noteless Advances)

32

3.06

Determination of Equivalent Amounts

32

3.07

Purchase of Bankers' Acceptances and BA Equivalent Notes

33

3.08

Provisions Regarding Bankers' Acceptances

33

3.09

Provisions regarding BA Equivalent Notes

34

3.10

No Repayment of Certain Availment Options

35

3.11

Illegality

36

3.12

Anti-Money Laundering

36

3.13

Terrorist Lists

36

ARTICLE IV - REPRESENTATIONS AND WARRANTIES

4.01

Representations and Warranties

37

4.02

Survival of Representations and Warranties

44

ARTICLE V - COVENANTS

5.01

Positive Covenants

45

5.02

Negative Covenants

48

5.03

Financial Covenants

53

5.04

Reporting Requirements

54

5.05

Anti-Money Laundering

55

5.06

Terrorist Lists

56

 

 

 


ii.

 

 

ARTICLE VI - SECURITY

6.01

Security to be Provided by the Credit Parties and Limited Recourse Guarantors

56

6.02

Security to be Provided by Others

58

6.03

General Provisions re Security; Registration

58

6.04

Opinions re Security

58

6.05

After-Acquired Property, Further Assurances

59

6.06

Insurance by Agent

59

6.07

Insurance Proceeds

59

6.08

Discharge of Certain Security

59

ARTICLE VII - CONDITIONS PRECEDENT

7.01

Conditions Precedent to First Advance

60

7.02

Conditions Precedent to all Advances

63

ARTICLE VIII - DEFAULT AND REMEDIES

8.01

Events of Default

64

8.02

Acceleration; Additional Interest

66

8.03

Acceleration of Certain Contingent Obligations

66

8.04

Combining Accounts, Set-Off

66

8.05

Appropriation of Monies

66

8.06

No Further Advances

68

8.07

Remedies Cumulative

68

8.08

Performance of Covenants by Agent

68

ARTICLE IX - THE AGENT AND THE LENDERS

9.01

Lenders' Decisions

68

9.02

Security

69

9.03

Application of Proceeds of Realization

70

9.04

Payments by Agent

71

9.05

Protection of Agent

72

9.06

Duties of Agent

73

9.07

Lenders' Obligations Several; No Partnership

74

9.08

Sharing of Information

74

9.09

Acknowledgement by Borrower

74

9.10

Amendments to ARTICLE IX

75

9.11

Deliveries, etc

75

9.12

Agency Fees

75

9.13

Non-Funding Lender

75

ARTICLE X - GUARANTEE

10.01

Guarantee

76

10.02

Nature of Guarantee

76

10.03

Liability Not Lessened or Limited

77

10.04

Agent not Bound to Exhaust Recourse

78

10.05

Enforcement

78

10.06

Guarantee in Addition to Other Security

78

10.07

Reinstatement

78

10.08

Waiver of Notice, etc

78

10.09

Subrogation Rights

78

10.10

Postponement and Subordination of Claims

79

10.11

Advances After Certain Events

79

 


iii.

 

ARTICLE XI - CBA MODEL PROVISIONS

11.01

CBA Model Provisions Incorporated by Reference

79

11.02

Inconsistencies with CBA Model Provisions

81

ARTICLE XII - GENERAL

12.01

Waivers

81

12.02

Expenses; Debit Authorization

82

12.03

General Indemnity

82

12.04

Environmental Indemnity

83

12.05

Survival of Certain Obligations despite Termination of Agreement

83

12.06

Interest on Unpaid Costs and Expenses

83

12.07

Notice

83

12.08

Severability

85

12.09

Further Assurances

85

12.10

Time of the Essence

85

12.11

Promotion and Marketing

85

12.12

Entire Agreement; Waivers and Amendments to be in Writing

85

12.13

Inconsistencies with Security

85

12.14

Confidentiality

85

12.15

Governing Law

86

12.16

Execution and Counterparts

86

12.17

Binding Effect

86

 

Exhibits

 

"A"-Lenders and Lenders' Commitments

"B"-Draw Request

"C"-Rollover Notice

"D"-Conversion Notice

"E"-Repayment Notice

"F"-Compliance Certificate

"G"-Form of BA Equivalent Note

"H"-CBA Model Provisions

"I"-Agreement and Acknowledgement to be bound – New Guarantor/Limited Recourse Guarantor

 

Schedules

 

4.01(b)-Corporate Information

4.01(h)-Material Permits

4.01(i)-Cannabis Investments

4.01(j)-Specific Permitted Liens

4.01(k)-Owned Properties

4.01(l)-Material Leased Properties

4.01(m)-Intellectual Property

4.01(o)-Material Agreements

4.01(p)-Labour Agreements

4.01(q)-Environmental Matters

4.01(r)-Litigation

4.01(s)-Pension Plans and Multi-employer Plans

 

 

 


 

 

CREDIT AGREEMENT

 

This Agreement dated as of November 29, 2019 is made among:

 

 

1974568 Ontario Limited

(as Borrower)

 

- and -

 

Aphria Inc. (the “Parent” or “Limited Guarantor”)

 

-and-

Each of the Subsidiaries of the Borrower identified in the signature pages hereto as Guarantors

and each other Subsidiary of the Borrower as may

become a party hereto as Guarantor from time to time pursuant to the terms hereof

collectively as Guarantors

 

- and -

 

BANK OF MONTREAL

AND THE ADDITIONAL LENDERS FROM TIME TO TIME PARTY TO THIS AGREEMENT

(as Lenders)

 

- and -

 

BANK OF MONTREAL

as Administrative Agent

 

-and-

 

BANK OF MONTREAL

as Sole Arranger and Sole Book Runner

 

 

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

 

1.01Definitions

 

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

12.01hereof). In addition, the following words and phrases shall have the respective meanings set forth below:

Acceleration Date" means the earlier of: (i) the occurrence of an Insolvency Event in respect of any Credit Party or Limited Recourse Guarantor; and (ii) the delivery by the Agent to the Borrower of a written notice that the Obligations are immediately due and payable, following the occurrence and during the continuation of an Event of Default other than an Insolvency Event.

 

 

 


2.

 

 

“Acceptable Appraisal” means an up-to-date appraisal (completed within six months of the Closing Date) in respect of the Project Property by an appraiser acceptable to the Agent in form and substance satisfactory to the Lenders which confirms the following approaches to value: fair market value, cost to complete approach and comparable transaction approach and alternate use value on a hypothetical best use facility basis; together with a transmittal letter from such appraiser addressed to the Agent which permits the Agent and the Lenders to rely thereon.

 

"Acquisition" means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person, or (b) the acquisition of in excess of fifty percent (50%) of the Equity Interests of any Person or otherwise causing any Person to become a Subsidiary of the Borrower

 

"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 Loan, a Bankers' Acceptance or a BA Equivalent Loan but for greater certainty does not include a Conversion or Rollover.

 

"Affiliate" is defined in the CBA Model Provisions.

 

Agency Fee Agreement” means an agency fee agreement dated the date hereof between the Borrower and the Agent, respecting the payment of certain fees and other amounts to the Agent for its own account, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

 

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

 

"Agreement" means this credit agreement (including the exhibits and schedules) as it may be further amended, supplemented, replaced or restated from time to time.

 

"AML Legislation" is defined in Section 5.05(a).

 

"Annual Business Plan" means a business plan in respect of the Companies for a Fiscal Year, disclosing all assumptions made in the formulation thereof, which shall include a detailed budget and projections on a quarterly basis in respect of profits, losses, revenue, expenses, cash flow, balance sheet items, Capital Expenditures, and compliance with all financial covenants in Section 5.03 herein, all in detail satisfactory to the Agent and the Lenders acting reasonably.

 

"Annual Excess Cash Flow" means, in respect of any Fiscal Year and in respect of any Person, consolidated EBITDA for such period of such Person less, without duplication,

(a)interest and scheduled principal payments in respect of Total Funded Debt for such period, and any voluntary or mandatory principal prepayments made in cash of Total Funded Debt, (b) Cash Taxes for such period, (c) Unfunded Capital Expenditures for such period, and (d) any cash expenses paid during such period to the extent previously deducted in computing net income in a prior period or which will be deducted in computing net income in a subsequent period.

 

"Applicable Law" is defined in the CBA Model Provisions.

 

Applicable Margin” in respect of any Availment Option, the percentage in the column relating to such Availment Option in the following table which corresponds to the Total Funded Debt to EBITDA Ratio in the first column which shall be determined on a quarterly basis (subject to the exception below contained in this definition) based on the Borrower’s quarterly consolidated

 


3.

 

financial statements for the prior Fiscal Quarter:

 

Level

Total Funded Debt to EBITDA Ratio

Prime Rate Advances

B/A

and B/A Equivalent Loan

I

<1.00:1

1.00%

2.25%

II

≥ 1.00 to < 1.50:1

1.25%

2.50%

III

≥ 1.50:1 to < 2.00:1

1.50%

2.75%

IV

≥ 2.0:1 to < 2.50:1

1.75%

3.00%

V

≥ 2.50:1

2.00%

3.25%

 

provided that:

 

(a)

the above rates per annum applicable to any Advance are, expressed on the basis of a year of 365 days or 366 days, as the case may be;

 

 

 

(b)

for the period from the Closing Date until the delivery by the Borrower of its financial statements in respect of the first Fiscal Quarter which includes the Conversion Date and the corresponding Compliance Certificate, the Applicable Margin shall be the rate applicable to Level V in the table set forth above;

 

 

 

(c)

subject to paragraph (b) above, changes in the Applicable Margin shall be effective on the date that the financial statements and Compliance Certificates required by Sections 5.04(a) and 5.04(c) are required to be delivered to the Agent, based upon the Total Funded Debt to EBITDA Ratio as of the end of the most recent Fiscal Quarter included in such financial statements so delivered, and shall remain in effect until the date immediately preceding the next required date of delivery of such financial statements and certificates indicating another such change;

 

 

 

(d)

if for any rolling period the Borrower’s EBITDA is zero, or if the Borrower fails to deliver any of the financial statements and Compliance Certificates as required in accordance with Sections 5.04(a) and 5.04(c) without the consent of the Agent, the Applicable Margin shall be deemed to be the rate applicable to Level V in the table set forth above, from the date that such financial statements and Compliance Certificates were due, until such financial statements and Compliance Certificates are delivered (or the date the same reflect a positive EBITDA, as applicable); and

 

 

 

(e)

with respect to Bankers’ Acceptances outstanding on the effective date of any such change in the Applicable Margin, changes in the Applicable Margin shall become applicable thereto upon the next rollover or conversion thereof after such change.

 

 

“Approved Jurisdiction” means a country in which it is legal in all political subdivisions therein (including for greater certainty on a federal, state and municipal basis) to undertake any Cannabis Activities provided that, with respect to the Companies only, in each case (i) such country has been approved in writing by the Required Lenders in their discretion and (ii) if required by the Agent, the ability to undertake Cannabis Activities to the extent permitted by Applicable Law therein is confirmed by a legal opinion provided by the Borrower's counsel in such jurisdiction, in form and substance satisfactory to the Agent. The Required Lenders may in their discretion from time to time (i) upon receipt of a written request by the Borrower, designate any jurisdiction an Approved Jurisdiction provided that the above criteria are satisfied; and (ii) revoke the designation

 


4.

 

of any jurisdiction as an Approved Jurisdiction by written notice to the Borrower if such criteria are not satisfied. Canada is the sole Approved Jurisdiction with respect to the Companies as at the date of this Agreement.

 

"Associate" has the meaning ascribed thereto in the Business Corporations Act

(Ontario).

 

"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 "G" attached hereto.

 

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

 

"Bankers' Acceptance" or “B/A” 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.

 

"BIA" means the Bankruptcy and Insolvency Act (Canada).

 

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

 

“Borrower” means 1974568 Ontario Limited, a corporation subsisting under the laws of the Province of Ontario.

“Borrower Year-end Financial Statements” in respect of any Fiscal Year means the annual reviewed financial statements of the Borrower prepared in accordance with GAAP, in each case, in respect of such Fiscal Year.

 

“Business” means the business conducted by the Companies, being the business of cultivating Cannabis products in Approved Jurisdictions and all other ancillary activities related to the foregoing.

 

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

 

"Canadian Dollars", "Dollars" and "CDN$" each means the lawful currency of Canada.

 

"Canadian Prime Rate" means the greater of the following: (i) the rate of interest announced from time to time by the Agent 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 percent (1.0%) per annum.

 

"Canadian Prime Rate 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 Canadian Prime Rate.

 

“Cannabis means:

 

(a)

any plant or seed, whether live or dead, from any species or subspecies of genus Cannabis, including Cannabis sativa, Cannabis indica and Cannabis ruderalis, Marijuana

 

 


5.

 

 

and Industrial Hemp and any part, whether live or dead, of the plant or seed thereof, including any stalk, branch, root, leaf, flower, or trichome;

 

 

 

(b)

any material obtained, extracted, isolated, or purified from the plant or seed or the parts contemplated by clause (a) of this definition, including any oil, cannabinoid, terpene, genetic material or any combination thereof;

 

 

 

(c)

any organism engineered to biosynthetically produce the material contemplated by clause (b) of this definition, including any micro-organism engineered for such purpose;

 

 

 

(d)

any biologically or chemically synthesized version of the material contemplated by clause (b) of this definition or any analog thereof, including any product made by any organism contemplated by clause (c) of this definition; and

 

 

 

(e)

any other meaning ascribed to the term “cannabis” under Applicable Law, including the Cannabis Act, the Controlled Drugs and Substances Act (Canada).

 

 

“Cannabis Act” means the Cannabis Act, SC 2018, c. 16, as amended or replaced from time to time.

 

“Cannabis Activities” means any activities (including advertising or promotional activities) relating to or in connection with the possession, exportation, importation, cultivation, production, processing, purchase, distribution or sale of Cannabis or Cannabis products, whether such activities are for medical, scientific, recreational or any other purpose.

 

Cannabis Authorizations” means, at any time, all Authorizations necessary for the conduct of Cannabis Activities by any Credit Party. For avoidance of doubt, each of the Health Canada Licences necessary for the conduct of Cannabis Activities by any Credit Party shall constitute a Cannabis Authorization.

 

Cannabis Laws” means Applicable Laws with respect to Cannabis Activities (other than Applicable Laws of general application), including without limitation the Cannabis Act, the Cannabis Regulations and the Controlled Drugs and Substances Act (Canada).

 

“Cannabis Regulations” means the regulations made from time to time under the Cannabis Act, the Controlled Drugs and Substances Act (Canada) and any other statute in an Approved Jurisdiction with respect to Cannabis 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 Land, plant, machinery or equipment, whether fixed or removable, but excluding (i) the portion of any expenditure for acquired equipment attributable to any trade-in which is made simultaneously with the purchase of the acquired equipment, (ii) expenditures made in connection with the replacement, repair or restoration of buildings, fixtures or equipment to the extent reimbursed or financed from insurance or expropriation proceeds, and (iii) capital lease payments.

 

“Capital Lease" means a lease of assets which in accordance with GAAP is required to be capitalized on the balance sheet of the lessee.

 

“Cash Equivalents” means (i) securities issued or fully guaranteed by the government of Canada, any province or territory of Canada, or any agency or instrumentality of any thereof, (ii) term deposits, certificates of deposit or bankers’ acceptances of any Lender, or any bank that is not a Lender but is referred to in either Schedule I, II or III of the Bank Act (Canada) the short-

 


6.

 

term debt or deposits of which have been rated at least A-1 or the equivalent thereof by Standard & Poor’s Financial Services, LLC or at least P-1 or the equivalent thereof by Moody’s Investors Service, Inc. or which have been rated at least R-1 or the equivalent thereof by DBRS Limited, and (iii) commercial paper rated at least R1(mid) by DBRS Limited, in each case provided for in clause (i), (ii) and (iii) above, maturing within one hundred and eighty (180) days after the date of acquisition.

 

"Cash Taxes" in respect of any fiscal period means all amounts actually paid in cash 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 "H", 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 Rate" means on any day the annual rate of interest which is the rate determined as being the arithmetic mean 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 "Reuters Screen CDOR Page" (as defined in the International Swap Dealer Association, Inc. definitions, as modified and amended from time to time) as of 10:00 A.M. Toronto, Ontario local time 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. Toronto, Ontario local time 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 Reuters Screen 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. Toronto, Ontario local time 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.

 

"Change of Control" means (a) the ownership, directly or indirectly, beneficially or of record, by any Person or group of Persons acting jointly or otherwise in concert, of Equity Interests representing a majority of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Parent, (b) the Parent ceases to Control the Borrower, (c) the Parent together with 2609733 Ontario Limited ceases to hold beneficially and of record one hundred percent (100%) of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower, (d) the ownership, directly or indirectly, beneficially or of record, by any Person or group of Persons other than the Borrower of one hundred percent (100%) of the Equity Interests of each Subsidiary of the Borrower, (e) the occupation of a majority of the seats (other than vacant seats) on the board of directors of any Credit Party by Persons who were neither (i) nominated by the board of directors of the Parent nor (ii) appointed by directors so nominated, and (f) Control of 2609733 Ontario Limited by any Person or group of Persons other than any of the existing direct and indirect shareholders of 2609733 Ontario Limited as at the Closing Date.

 

“Closing Date” means the date on which all conditions precedent listed in Section 7.01 have been satisfied or waived by the Lenders, as confirmed by the Agent to the Borrower in writing.

Collateral” means all property, assets and undertaking of the Credit Parties, the Limited Recourse Guarantors, or any other Person encumbered by the Security, and all proceeds of the foregoing.

 

 


7.

 

 

"Commitment" means, in respect of any Lender, such Lender's commitment to make Advances to the Borrower under Facility A.

 

“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 a Senior Officer of the Borrower to the Agent in the form of Exhibit "F".

 

“Constating Documents” means, with respect to any Person, as applicable:

 

 

(a)

its certificate and/or articles of incorporation, association, amalgamation or continuance, memorandum of association, charter, declaration of trust, trust deed, partnership agreement, limited liability company agreement or other similar document;

 

 

(b)

its by-laws; and

 

 

(c)

all unanimous shareholder agreements and any amendments thereto, other shareholder agreements and any amendments thereto, voting trust agreements and similar arrangements applicable to the Person’s Equity Interests;

 

 

all as in effect from time to time.

 

"Control" is defined in the CBA Model Provisions.

 

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

 

"Conversion Date" means November 30, 2020 or such later date as may be mutually agreed to in writing by all of the Lenders and the Borrower; provided that as of the date of any extension of the then applicable Conversion Date, the Lenders shall be satisfied that no Default, Event of Default or Material Adverse Change shall have occurred and be continuing and the Borrower shall be in compliance with all terms and conditions herein, including all financial covenants which will apply after such date, and the Borrower shall have provided a certificate to the Agent on behalf of the Lenders confirming such compliance.

 

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

 

"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 the Limited Guarantor and "Credit Party" means any of them as the context requires.

 

"Currency Hedge Agreements" means agreements for the purpose of hedging currency risk, including a currency exchange agreement or a foreign exchange forward contract.

 

“Debt Service Deficiency Agreement” is defined in Section 6.01(d). "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).

 


8.

 

"Distribution" means any amount paid, directly or indirectly, to or on behalf of the employees, directors, officers, shareholders, partners or unitholders of any of the Companies, or to any Related Party thereto, including for greater certainty amount paid by way of salary, bonus, commission, management fees, directors' fees, dividends, redemption of shares, distribution of profits, Investments or otherwise, and whether payments are made to such Persons in their capacity as shareholders, partners, unitholders, directors, officers, employees, owners or creditors of any of the Companies or otherwise, or any other direct or indirect payment in respect of the earnings or capital of any of the Companies; provided however that the payment of salaries, bonuses and commissions from time to time to the officers and employees of the Companies, the payment of directors' fees to the directors of the Companies, in each case in the ordinary course of business and at reasonable levels, and the repayment of the shareholder loan with the proceeds of the Advance on the Closing Date as contemplated in Section 2.02 shall not be considered Distributions.

 

"Domain Name" means all right, title and interest (and all related IP Ancillary Rights) in an internet domain name.

 

"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, for any period, and any Person, an amount equal to net income of such Person for such period minus, to the extent included in computing such net income (but without duplication):

 

 

(a)

any non-cash income and gains (including unrealized mark-to-market gains under Hedge Arrangements, fair valuation of financial instruments fair value credit adjustments on biological assets, non- cash income and gains from minority interests), except to the extent that such income or gains will inevitably result in future cash receipts;

 

 

 

(b)

any cash expenses and losses to the extent previously deducted in a prior period as a non-cash expense or loss under clause (g) below; and

 

 

 

(c)

any extraordinary or non-recurring income and gains unless approved by the Required Lenders;

 

 

plus, to the extent deducted from such net income (but without duplication):

 

 

(d)

Interest Expense;

 

 

(e)

all Taxes on income for such period, whether current or deferred and net of any incentive or similar tax credits;

 

 

 

(f)

the collective depreciation, depletion, impairment and amortization expense for such period;

 

 

 

(g)

all non-cash stock based compensation;

 

 

(h)

any extraordinary or non-recurring charges, expenses or losses approved by the Required Lenders; and

 

 

 

(i)

all transaction costs incurred in connection with the establishment of Facility A including all fees, costs and expenses payable on or before the Closing Date to the Agent and the Lenders, legal counsel for the Agent and the Companies and consultants retained by the Agent.

 

 

 


9.

 

 

provided that in respect of each entity which has become a Subsidiary of the Borrower in such fiscal period, EBITDA shall be determined as if such entity had been a Subsidiary during the entire fiscal period; and in respect of each entity which has ceased to be a Company in such fiscal period, EBITDA shall be determined as if such entity had not been a Company during the entire fiscal period.

 

"Equity Interest" means any share, interest, participation or other right to participate in the voting or equity ownership of a corporation and any equivalent ownership interest in any Person that is not a corporation, including any partnership or membership interest, and any warrant, option or other right which is exchangeable or convertible into any of the foregoing.

 

"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 8.01.

 

"Exchange Rate" means, in connection with the amount of any currency which is to be converted into another currency pursuant to this Agreement for any reason, the applicable rate of exchange for such conversion established by the Bank of Canada on the Business Day of such conversion (or on such other Business Day as may be specified herein); provided however that if a rate of exchange in respect of any currency is not published by the Bank of Canada, the rate of exchange for that currency shall be determined by the Agent in accordance with its usual practice.

 

"Facility A" is defined in Section 2.01. "Facility A Limit" is defined in Section 2.01.

"First-Ranking Security Interest" in respect of any Collateral means a Lien in such Collateral which is registered where necessary or desirable to record and perfect the charges contained therein (to the extent that such charges are capable of perfection under Applicable Law) 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 and the Parent as the context requires ending on the last days of May, August, November, and February in each year.

 

"Fiscal Year" means a fiscal year of the Borrower or the Parent as the context requires ending on the last day of May in each year.

 

Fixed Charges” means in respect of any period, the aggregate, without duplication, of:

(i) consolidated Interest Expense of the Borrower during such period; plus (ii) all scheduled principal payments on consolidated Total Funded Debt due (paid or accrued during such period) by the Borrower during such period except the portion of any final payment due in respect of such Total 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; plus (iii) all payments made by the Borrower during such period in respect of Capital Lease Obligations; provided that for Fiscal Quarters ending within 12 months of the Conversion Date, Fixed Charges shall include a principal component for any period during which the Borrower was not required to make principal payments under this Agreement based upon the Borrower’s principal payment obligations accruing due for subsequent financial periods. For example, if the Conversion Date occurs at the end of a Fiscal Quarter, the calculation of Fixed Charges for that Fiscal Quarter shall include a principal component equal to the scheduled principal payments required under this Agreement for the following four Fiscal Quarters. The projected component will reduce as time

 


10.

 

passes so that, using the above example, at the end of the third Fiscal Quarter following the Conversion Date, Fixed Charges for that Fiscal Quarter shall include three Fiscal Quarters of actual principal payments and one Fiscal Quarter of projected principal payments.

 

“Fixed Charge Coverage Ratio” means, as of the last day of any Fiscal Quarter and for the four rolling Fiscal Quarter period then ended, calculated on a consolidated basis, the ratio of: (a) consolidated EBITDA for the Borrower less the aggregate amount of consolidated Unfunded Capital Expenditures, Cash Taxes and cash Distributions made by the Borrower in respect of Equity Interests in the Borrower during such period, to (b) Fixed Charges.

 

Former Lender is defined in the definition of Hedging Obligations.

 

Funded Debt” in respect of any Person means all obligations of such Person and its Subsidiaries which are considered to constitute debt in accordance with GAAP, including, without duplication (i) indebtedness for borrowed money, (ii) interest-bearing liabilities to the extent interest is due and not yet paid, (iii) obligations secured by Purchase-Money Security Interests, (iv) obligations under Capital Leases, (v) capitalized interest, (vi) obligations under Hedging Agreements (solely to the extent such obligations have become due and payable), (vii) the redemption price of any securities issued by such Person which are redeemable at the option of the holder, (viii) any vendor take back obligations, and (ix) such Person’s contingent liability under Guarantees given in respect of obligations of other Persons of the nature described in clauses (i) through (viii) above; but excluding accounts payable, short term non-interest bearing liabilities, future or deferred income taxes (both current and long-term), Subordinated Debt (provided the holder of such indebtedness pursuant to the terms of an Intercreditor Agreement may not receive any payments on account of principal or interest thereon prior to the Termination Date), and prepaid or deferred revenue.

 

"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 a Person 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 such Person 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 effect in Canada 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, without limitation, International Financial Reporting Standards adopted by the Accounting Standards Board of the Chartered Professional Accountants of Canada (which have been adopted by the Credit Parties).

 

"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, excluding endorsement of cheques and drafts for deposit or collection in the ordinary course of business.

 


11.

 

 

"Guarantors" means collectively (i) each Subsidiary of the Borrower on the date hereof, and (ii) each other Person who becomes a Subsidiary of the Borrower on and after the date hereof and is required by the Agent and each of the Lenders from time to time to become a Guarantor pursuant to Section 6.02(c) hereof; and "Guarantor" means any of them as the context requires. As of the Closing Date the Borrower has no Subsidiaries.

 

"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.

 

“Health Canada Licence” means, the licence issued by Health Canada in respect of the Project and identified as licence #LIC-KX10UDSC08-2019 issued to the Borrower pursuant to the Cannabis Act and authorizing a minimum cultivation class for operations by the Borrower at the Project on the Project Property, and any other licence issued by Health Canada to any of the Companies in respect of its Cannabis Activities.

 

"Hedging Agreements" means Interest Rate Hedging Agreements and Currency Hedge Agreements.

 

"Hedging Obligations" means all obligations of the Borrower to (i) the Lenders or an Affiliate of a Lender pursuant to or arising in connection with Hedging Agreements made between the Borrower and any Lenders or any Affiliate of a Lender and (ii) any Person which was a Lender or an Affiliate of a Lender at the time of entering into a Hedging Agreement, but which is no longer a Lender (a Former Lender”).

 

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

 

“Industrial Hemp” has the meaning ascribed to such term or the term "hemp" (i) under the Applicable Law of any Approved Jurisdiction, including the Industrial Hemp Regulations (Canada) issued under the Cannabis Act; or (ii) under the Agricultural Marketing Act of 1946 (United States).

 

"Insolvency Event" means, in respect of any Person:

 

 

(a)

such Person ceases to carry on its business; or commits an act of bankruptcy or becomes insolvent (as such terms are used in the BIA); or makes an assignment for the benefit of creditors, files a petition in bankruptcy, makes a proposal or commences a proceeding under Insolvency Legislation; or 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; or 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 appointment of a receiver, trustee,

 

 


12.

 

 

custodian or other similar official for it or any substantial part of its property; unless (i) such Person is diligently defending such proceeding in good faith and on reasonable grounds as determined by the Required Lenders acting reasonably; and (ii) such proceeding does not, in the reasonable opinion of the Required 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 in insolvent circumstances, dissolution or winding-up, or any similar legislation, and specifically includes for greater certainty the BIA, 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, Domain Names, Trade Secrets, industrial designs, integrated circuit topographies, plant breeders' rights and rights under IP Licenses.

 

“Intercreditor Agreements” means any intercreditor, subordination or postponement agreement (including without limitation the Parent Subordination Agreement), that may be entered into from time to time which provides for the terms of subordination, ranking or priority and related customary intercreditor provisions of any other Funded Debt in relation to any of the Obligations and Security, which shall be in form and substance satisfactory to the Agent, acting reasonably.

 

"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 for greater certainty "Interest" shall not include 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 similar amounts which may be charged from time to time in connection with the establishment, administration or enforcement of Facility A.

 

“Interest Expense” means, in respect of any Person and in respect of any period, without duplication, the interest expense of such Person on Funded Debt (including that attributable to the interest component of payments under Capital Leases) including all commissions, discounts, and other fees paid or accrued during such period and all charges paid or accrued during such period with respect to letters of credit and letters of guarantee, all as determined in accordance with GAAP.

 

"Interest Rate Hedging Agreements" means agreements for the purpose of hedging interest rate risk, including interest rate exchange agreements (commonly known as "interest rate swaps") and forward rate agreements; and for greater certainty, including interest rate exchange agreements (commonly known as "cross-currency swaps").

 

"Interim Financial Statements" in respect of any Fiscal Quarter means (i) in the case of the Borrower, the unaudited financial statements of the Borrower on a consolidated basis, and (ii) in the case of the Parent, the unaudited financial statements of the Parent on a consolidated basis, and in each case the management prepared interim operating statements of the other Companies (in the case of the Borrower’s Interim Financial Statements) or the other Credit Parties (in the case of the Parent’s Interim Financial Statements), in each case in respect of such Fiscal Quarter

 


13.

 

(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 (in the case of the Parent’s Interim Financial Statements) any management's discussion and analysis with respect thereto.

 

"Investment" means: (i) 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); (ii) a contribution of capital; (iii) the acquisition or holding of common or preferred shares, debt obligations, partnership interests and interests in joint ventures; and (iv) the acquisition of all or substantially all of the assets used in connection with a business; provided however that if a transaction would constitute a "Capital Expenditure" as defined herein and would also constitute an "Investment" as defined 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.

"Land" means real property (including a leasehold interest in land) and all buildings, improvements, fixtures and plant situated thereon.

"Landlord Agreement" means an agreement in form and substance satisfactory to the Agent given by the landlord of a Material Leased Property in favour of the Agent, which shall include the following provisions (except to the extent otherwise agreed by the Agent in its discretion): such landlord consents to the granting of a security interest in the lease by the Company which is a tenant thereunder in favour of the Agent, agrees to give written notice to the Agent in respect of a default and a reasonable opportunity to cure any default before terminating the lease, and agrees to waive (or subordinate and defer the enforcement of) its rights and remedies and any security it may hold in respect of any assets owned by such Company located on such Material Leased Property or affixed to such Material Leased Property which the tenant is entitled to remove under Applicable Law or pursuant to the terms of the lease.

 

“Legal Reservations” means (i) the principle that equitable remedies may be granted or refused at the discretion of a court and the limitation of enforcement by laws relating to insolvency, reorganisation and other laws generally affecting the rights of creditors, (ii) the time barring of claims under the Limitation Act, 2002 (Ontario), as amended, or equivalent or analogous legislation of any other applicable jurisdiction, (ii) the possibility that an undertaking to assume liability for or indemnify a person against non-payment of Taxes may be void, (iv) defences of set-off or counterclaim, (v) similar principles, rights, defences or requirements under the laws of any applicable jurisdiction and (vi) any other matters which are set out as qualifications or reservations as to matters of law of general application accepted by the Required Lenders in any of the legal opinions delivered to the Lenders pursuant hereto.

 

“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; and "Lender" means any of them as the context requires.

 

 


14.

 

 

"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, without limitation, 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.

 

"Lending Office" in respect of any Lender means the office of such Lender designated by it from time to time as the office from which it will make Advances hereunder.

 

"Lien" means: (i) a lien, charge, mortgage, 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.

 

Limited Guarantor” means the Parent.

 

“Limited Recourse Guarantee is defined in Section 6.01(c).

 

“Limited Recourse Guarantors” means each shareholder of the Borrower (other than the Parent) from time to time. On the date hereof 2609733 Ontario Limited is the sole Limited Recourse Guarantor.

 

"Loan" means a Canadian Prime Rate Loan.

 

"Loan Documents" means this Agreement, the Security, the Agency Fee Agreement, the Parent Subordination Agreement and other agreements or letters entered into between the Borrower and the Agent in respect of fees payable to the Agent or the Lenders, any promissory notes issued by the Borrower to the Agent or the Lenders hereunder, any Intercreditor Agreements, all Hedging Agreements with a Lender or Affiliate of a Lender, all Service Agreements, and all other agreements, and instruments required or contemplated herein to be provided by the Credit Parties and other Persons in favour of the Agent or any of the Lenders and all amendments, restatements, supplements or other modifications thereto.

 

"Marijuana" has the meaning ascribed to such term under the Applicable Law in any Approved Jurisdiction.

 

"Material Adverse Change" means any change or event which: (i) constitutes a material adverse change in the business, operations, condition (financial or otherwise) or properties of the Parent or the Borrower on a consolidated basis; (ii) materially impairs the ability of the Parent or the Companies (taken as a whole) to timely and fully perform their respective obligations under the Loan Documents; (iii) materially impairs the validity or enforceability of any of the Loan Documents; (iv) materially impairs the ability of the Agent or the Lenders to enforce their rights and remedies under the Loan Documents; or

 


15.

 

(v) impairs the priority of any of the Security.

 

"Material Agreement" means an agreement made between a Company and another Person which (i) is, in the reasonable opinion of the Agent, material to the ownership, management and operation of the Business, including the Project and the Project Property, or (ii) if terminated would result, or would have a reasonable likelihood of resulting, in a Default, an Event of Default or a Material Adverse Change, specifically including, the Supply Agreement, and as at the date of this Agreement, each other agreement listed in Schedule 4.01(o).

 

"Material Leased Properties" means all Land leased by the Companies as tenants from time to time which if terminated would result, or would reasonably be expected to result, in an Event of Default or Material Adverse Change, specifically including as at the date of this Agreement the Land described in Schedule 4.01(l) attached hereto.

 

"Material Leases" means the leases relating to the Material Leased Properties.

 

"Material Permit" means a licence, permit, approval, registration or qualification granted to or held by a Company which if terminated would impair the ability of the Company to carry on the Business in the ordinary course, or would result, or would reasonably be expected to result, in an Event of Default or Material Adverse Change; specifically including, the Health Canada Licences and as of the date of this Agreement each other licence, permit, approval, registration or qualification listed in Schedule 4.01(h).

 

"Maturity Date" means the date which is three (3) years after the date of this Agreement.

 

“Minimum Equity Contribution” means a minimum equity injection in the Borrower by the Parent and other shareholders of the Borrower in an aggregate amount of not less than Twenty Million Dollars ($20,000,000) as shown on the balance sheet of the Borrower as at the Closing Date.

 

“Minimum Liquidity means in respect of the Parent, unrestricted cash and Cash Equivalents held by the Parent less all current liabilities of the Parent determined in accordance with GAAP.

"Minor Title Defects" in respect of any parcel of Land means encroachments, restrictions, easements, rights-of-way, servitudes and defects or irregularities in the title to such Land which are of a minor nature and, in the case of Land material to the operation of the Business of the Companies taken as a whole, which, in the aggregate, will not materially impair the use of such Land for the purposes for which such Land is held by the owner thereof; it is acknowledged that the Project Property is material to the operation of the Business of the Companies taken as a whole.

 

Multi-employer Plan” means a multi-employer pension plan within the meaning of the Pension Benefits Act (Ontario) or the pension benefits standards legislation of another province or jurisdiction in Canada and to which any Company is required to contribute pursuant to a collective agreement, participation agreement, any other agreement or statute or municipal by-law and which is not maintained or administered by such Company or its Affiliates.

 

"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 oral or written notice to the Borrower, the Agent or any other Lender, or has otherwise publicly announced, that it believes

 


16.

 

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 or lender) 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.

 

"Obligations" means, at any time and without duplication: (i) all direct and indirect, contingent and absolute indebtedness, obligations and liabilities of the Credit Parties to the Agent and the Lenders (or if the context requires, to any Lender) under or in connection with this Agreement and the Loan Documents (specifically including for greater certainty all Guarantees provided hereunder) at such time, specifically including the Outstanding Advances, all accrued and unpaid Interest thereon, and all fees, expenses and other amounts payable pursuant to this Agreement and the Loan Documents; plus (ii) the Hedging Obligations (if any) at such time; plus (iii) any obligations under Service Agreements at such time; provided that if otherwise specified or required by the context, "Obligations" shall mean any portion of the foregoing.

 

“Other Connection Taxes” means, with respect to the Lender, Taxes imposed as a result of a present or former connection between the Lender and the jurisdiction imposing such Tax (other than connections arising from such recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Advance or Loan Document).

 

Outstanding Advances" means, at any time, the aggregate of all obligations of the Borrower to the Lenders (or if the context requires, to any Lender) in respect of all Advances made under Facility A which have not been repaid or satisfied at such time, determined as follows: (i) in the case of Canadian Prime Rate Loans, the principal amount thereof; and (ii) in the case of Bankers' Acceptances, BA Equivalent Notes, the face amount thereof.

 

"Owned Properties" means all Land owned by the Companies from time to time, including but not limited to the Project Property and any Land described in Schedule 4.01(k) attached hereto.

"Parent" means Aphria Inc. or any successor thereto including by way of amalgamation.

 

“Parent Subordinated Debt means the unsecured indebtedness issued by the Borrower to the Parent in the principal amount of no less than Ninety-Eight Million Eight Hundred Thousand Dollars ($98,800,000), provided that such indebtedness is subject to the Parent Subordination Agreement.

 

“Parent Subordination Agreement” means the Intercreditor Agreement to be entered into by the Parent in favour of the Agent and the Lender on the Closing Date in form and substance satisfactory to the Lenders, as the same may be amended, restated, supplemented or replaced from time to time, pursuant to which the Parent agrees to subordinate and postpone the Parent Subordinated Debt to the Obligations and Security, which Intercreditor Agreement shall expressly permit the servicing of such Subordinated Debt only after the Conversion Date and in such case on account of interest on a monthly basis and principal on an annual basis subject to the prior Repayment required to be made pursuant to Section 2.04(c)(iv) (Annual Excess Cash Flow Sweep), and provided that immediately before and immediately after such Distribution, the Borrower shall be in pro forma compliance with the financial covenants in Section 5.03 and the Borrower shall have delivered a pro forma Compliance Certificate evidencing such compliance.

 

 


17.

 

 

"Parent Year-end Audited Financial Statements" in respect of any Fiscal Year means the audited consolidated financial statements of the Parent and the internally prepared financial statements of each of the other Credit Parties, in each case in respect of such Fiscal Year, including (in respect to the Parent audited consolidated financial statements) management’s discussion and analysis with respect thereto, from an accounting firm that is nationally recognized or major regional firm of chartered professional accountants.

 

"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 each pension or superannuation plan that is a “registered pension plan” as defined in subsection 248(1) of the Income Tax Act (Canada) required to be registered under Canadian federal or provincial law that is maintained or contributed to by the Borrower for its employees or former employees, but does not include the Canada Pension Plan or the Quebec Pension Plan as maintained by the Government of Canada or the Province of Quebec, respectively or a Multi-employer Plan.

 

"Permitted Acquisition" means an Investment that is either an acquisition of Equity Interests in a Person (referred to herein as a "share purchase"), or an acquisition of assets of a Person not in the ordinary course of business (referred to herein as an "asset purchase"), in either case if all of the following criteria are satisfied (except to the extent otherwise agreed in writing by the Required Lenders in their discretion):

 

 

(a)

the Required Lenders acting reasonably shall have provided their prior written consent to such Acquisition after conducting such due diligence they may consider appropriate in the circumstances (for greater certainty, specifically including in respect of financial matters, the corporate and capital structure of such Person, key management, and business, environmental, regulatory, tax and legal matters, and the Borrower shall provide all information requested by the Required Lenders in connection with such due diligence at least fifteen (15) days prior to the proposed completion of such Acquisition);

 

 

 

(b)

such Person is engaged in a business similar to or vertically integrated with the Business conducted by the Borrower;

 

 

 

(c)

no portion of Facility A shall be used, directly or indirectly, in connection with the financing of the acquisition unless approved by the written consent of all of the Lenders in their discretion;

 

 

 

(d)

if the acquisition involves a hostile or unsolicited take-over, it must be approved by all Lenders in their discretion;

 

 

 

(e)

in the case of a share purchase, upon the completion of such acquisition (i) all Funded Debt (except Funded Debt which will constitute Permitted Funded Debt hereunder) of such Person shall be repaid and all Liens (except Liens which will constitute Permitted Liens hereunder) affecting the assets of such Person shall be released and discharged, in each case within thirty (30) days of the acquisition;

 

 

 

(f)

in the case of a share purchase, the Subsidiary acquired shall be a wholly owned Subsidiary of the Borrower and shall provide a Guarantee and all other Security required herein to be provided in accordance with the requirements of Section

 

7.01 (including registrations, searches, legal opinions and ancillary documentation);

 

(g)

in the case of an asset purchase, (i) upon the completion of such transaction, all Funded Debt (except Funded Debt which will constitute Permitted Funded Debt hereunder)

 

 


18.

 

 

secured by the acquired assets shall be repaid within thirty (30) days following the completion of the acquisition; (ii) within thirty (30) days following the completion of such transaction, all Liens (except Liens which will constitute Permitted Liens hereunder) affecting such assets shall be released and discharged; (iii) within thirty (30) days following completion of such transaction, all Security required herein to be provided to the Agent in respect of such assets (including registrations, searches, legal opinions and ancillary documentation) shall be provided; and (iv) the asset purchase shall not involve the assumption of any material environmental liabilities, and all representations and warranties contained herein with respect to environmental matters shall be true and correct both immediately before and immediately after such acquisition in all material respects; and if, as a result of the acquisition, any Company will acquire ownership of any Real Property, the Borrower shall have provided an environmental questionnaire in form and substance satisfactory to the Agent in respect of such Real Property which evidences such material compliance with all such representations and warranties;

 

 

 

(h)

in the case of a share purchase, the acquired asset will only be located in an Approved Jurisdiction and used or useful in a business which is the same as or related, ancillary or complimentary to the Business carried on by the Companies;

 

 

 

(i)

in the case of a share purchase, if the target of a share purchase carries on any Cannabis Activities, the entity which will carry on the acquired business will own assets and carry on business only in one or more Approved Jurisdictions and the right to acquire Equity Interests shall be not exercisable until the earlier of: (i) the Cannabis Activities in which the target proposes to engage are legal at all required levels of government in the jurisdiction(s) in which the target is or proposes to operate, and (ii) the applicable Company has received approval to exercise such right from any stock;

 

 

 

(j)

the Borrower shall deliver a Compliance Certificate evidencing that it is in compliance in all material respects with all covenants and confirming the representations and warranties under this Agreement including the requirements in this definition of Permitted Acquisition and will remain in compliance in all material respects after giving effect to such acquisition; and no Default or Event of Default shall have occurred and be continuing or would result from the completion of such acquisition;

 

 

 

(k)

if the Borrower proposes to incur Subordinated Debt to finance all or any portion of such acquisition, the terms and conditions of such Subordinated Debt shall be satisfactory to the Required Lenders, and the holder(s) of such Subordinated Debt shall enter into a Intercreditor Agreement with the Agent containing terms and conditions contemplated in the definition of "Subordinated Debt" herein; and

 

 

 

(l)

if any such transaction would constitute both a Permitted Acquisition and a Capital Expenditure, it shall be deemed to constitute a Permitted Acquisition and not a Capital Expenditure.

 

 

"Permitted Funded Debt" means, without duplication: (i) the Obligations; (ii) indebtedness of any Company to another Company; (iii) Subordinated Debt; (iv) the Parent Subordinated Debt provided that the same constitutes Subordinated Debt, is unsecured, and is subject to the Parent Subordination Agreement; (v) Funded Debt of the Companies secured by Permitted Liens; (vi) obligations under any Guarantees which are considered to constitute Funded Debt, but only to the extent such Guarantees are permitted pursuant to this Agreement; (vii) Funded Debt in respect of corporate credit cards programs established by a financial institution other than BMO in an aggregate outstanding amount not to exceed Fifty Thousand Dollars ($50,000) (or equivalent in foreign currency), (viii) unsecured Funded Debt not referred to elsewhere in this definition in an aggregate outstanding amount not to exceed Two Million Dollars ($2,000,000); and (ix) any other Funded Debt consented to in writing by the Lenders.

 

 


19.

 

 

"Permitted Liens" means:

 

 

(a)

Statutory Liens (i) in respect of any amount which is not at the time overdue or (ii) in respect of any amount which may be past due but the quantum or validity of which is being diligently contested in good faith by appropriate proceedings and in respect of which any right of seizure or sale is stayed pending resolution of the dispute or (iii) that in the aggregate, not including those included in (i) or (ii) do not exceed $250,000 and in respect of which reserves (if any are required by GAAP) have been established to the extent required in accordance with GAAP;

 

 

 

(b)

Liens or rights of distress reserved in or exercisable under any lease of Land for rent and, in the case of Land material to the operation of the Business of the Companies taken as a whole, not at the time overdue or for compliance with the terms of such lease not at the time in default; and security deposits given in the ordinary course under leases of Land not in excess of six (6) months' rent; it is acknowledged that the Project Property is material to the operation of the Business of the Companies taken as a whole;

 

 

 

(c)

any obligations or duties affecting any Land 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 Land under government permits, leases or other grants in good standing; and if the Land subject thereto is material to the operation of the Business of the Companies taken as a whole, 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; it is acknowledged that the Project Property is material to the operation of the Business of the Companies taken as a whole;

 

 

 

(d)

Liens incurred or deposits of cash made or pledged to secure obligations under workers' compensation legislation or similar legislation, or in connection with contracts, bids, tenders or expropriation proceedings, surety or appeal bonds, costs of litigation when required by law, public and statutory obligations, and warehousemen's, storers', repairers', carriers' and other similar Liens and deposits;

 

 

 

(e)

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 (i) not at the time overdue or (ii) which are past due, but the quantum or validity of such obligations is being diligently contested in good faith by appropriate proceedings and in respect of which any right of seizure or sale is stayed pending resolution of the dispute or (iii) that, in the aggregate, not including those referred to in (i) and (ii) do not exceed $250,000 and in respect of which reserves (if any are required by GAAP) have been established to the extent required in accordance with GAAP;

 

 

 

(f)

Liens and privileges arising out of judgments or awards (i) which are satisfied before they are executed upon and which do not constitute an Event of Default under Section 8.01(n) or (ii) in respect of which (A) an appeal or proceeding for review has been commenced; (B) a stay of execution pending such appeal or proceedings for review has been obtained; and (C) reserves (if any are required by GAAP) have been established to the extent required in accordance with GAAP;

 

 

 

(g)

Liens for taxes, customs duties, local improvement charges, levies, rates and assessments (i) not yet due or (ii) or which are past due but the quantum or validity of which is being contested diligently and in good faith by the Borrower by appropriate

 

 


20.

 

 

proceedings and in respect of which any right of seizure or sale is stayed pending resolution of the dispute or (iii) that in the aggregate, not including those in (i) and (ii) for which a final assessment has not been received which do not exceed $250,000 and in respect of which reserves (if any are required by GAAP) have been established to the extent required in accordance with GAAP;

 

 

 

(h)

undetermined or inchoate Liens, charges and privileges incidental to current construction or current operations and statutory liens, charges, adverse claims, security interests or encumbrances of any nature whatsoever claimed or held by any Governmental Authority, provided the same are not of such nature as to create a Material Adverse Change or adversely affect in any material way the operations of the Business of the Companies taken as a whole;

 

 

 

(i)

any Lien arising in connection with the construction or improvement of any Land or arising out of the furnishing of materials or supplies therefor, provided that such Lien secures moneys (i) not at the time overdue or (ii) which are past due, but the quantum or validity thereof is being contested diligently and in good faith by appropriate proceedings and in respect of which any right of seizure or sale is stayed pending resolution of the dispute or (iii) that in aggregate, not including those referred to in (i) and (ii) do not exceed $250,000, and in respect of which a Lien has not been registered against title to such Land and in respect of which reserves (if any are required by GAAP) have been established to the extent required in accordance with GAAP;

 

 

 

(j)

common law rights of set-off, off-set or combinations of account, civil law rights of compensation or contractual rights of set-off, off-set or recourse to account balances incurred in the ordinary course (i) relating to the establishment of depository relations with a financial institution permitted hereunder and not given in connection with the issuance of Funded Debt, (ii) relating to pooled deposit or sweep accounts or cash pooling arrangements (including with respect to any joint and several liability provisions in relation thereto) permitted hereunder to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Borrower and any Subsidiary, (iii) relating to debit card or other payment services permitted hereunder or (iv) relating to purchase orders and other agreements (other than Funded Debt) entered into with customers in the ordinary course of business;

 

 

 

(k)

licences, easements, rights-of-way and rights in the nature of easements (including licences, easements, rights-of-way and rights in the nature of easements for sidewalks, public ways, sewers, drains, gas, steam and water mains or electric light and power, or telephone and telegraph conduits, poles, wires and cables) and zoning, land use and building restrictions, by-laws, regulations and ordinances of federal, provincial, municipal and other Governmental Authorities that, in the opinion of the Required Lenders, will not materially impair the use of the affected Land for the purpose for which it is used by that Person;

 

 

 

(l)

the right reserved to or vested in any Government Authority by the terms of any lease, licence, franchise, grant or permit or by any statutory provision to terminate any such lease, licence, franchise, grant or permit, or to require annual or other payments as a condition to the continuance thereof;

 

 

 

(m)

the Lien resulting from the deposit of cash or securities in connection with contracts, tenders or expropriation proceedings, or to secure workers’ compensation, unemployment insurance, surety or appeal bonds, costs of litigation when required by law, liens and claims incidental to current construction, mechanics’, warehousemen’s, carriers’ and

 

 


21.

 

 

other similar liens, and public, statutory and other like obligations incurred in the ordinary course, up to a maximum aggregate amount deposited at any time of $500,000 for all Companies;

 

 

 

(n)

Liens solely on any cash earnest money deposits made in connection with any letter of intent or purchase agreement permitted hereunder;

 

 

 

(o)

Minor Title Defects;

 

 

(p)

Permitted Purchase-Money Security Interests;

 

 

(q)

the Specific Permitted Liens; and

 

 

(r)

the Security

 

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 compliance with the provisions of this Agreement 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 is not at any time greater than Three Million Five Hundred Thousand Dollars ($3,500,000).

"Person" is defined in the CBA Model Provisions.

 

PPSA” shall mean the Personal Property Security Act (Ontario); provided that if by reason of mandatory provisions of law, the perfection, the effect of perfection or non- perfection or the priority of the Liens of the Agent in any Collateral or any other matter relating to Collateral is governed by the Personal Property Security Act as in effect in a jurisdiction other than Ontario or the Civil Code of Quebec, the term “PPSA” shall mean such other legislation as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority or other matter.

 

"Proceeds of Realization", in respect of the Security or any portion thereof, means all amounts received by the Agent and any Lender under the Security in connection with:

 

 

(a)

any realization thereof, whether occurring as a result of enforcement or otherwise;

 

 

 

(b)

any sale, expropriation, loss or damage or other disposition of any Property subject to the Security or any portion thereof (other than a disposition of Property made pursuant to Section 5.02(c); and

 

 

 

(c)

the dissolution, liquidation, bankruptcy or winding-up of any Credit Party or any other distribution of its assets to creditors;

 

 

and all other amounts which are expressly deemed to constitute "Proceeds of Realization" in this Agreement.

 

“Project means the greenhouse located on the Project Property to be used for cannabis cultivation and processing.

 

 


22.

 

 

“Project Property” means the Lands municipally known as 620 Essex County Road 14, Leamington, Ontario and legally described as:

 

PIN 75086-0239 LT

 

1STLY; PART OF LOT 6, CONCESSION 8 MERSEA, PARTS 1, 3, 5, 7, 8 AND 9 PLAN 12R26840 SAVE AND EXCEPT PARTS 1, 2 AND 3 PLAN 12R27357; S/T RESERVATIONS IN R1198184 AND R1198185; T/W R1198185 2NDLY;PT N1/2 LT 6 CON 8 MERSEA PT 1, 2, 3 12R1420 S/T R1394739; SUBJECT TO AN EASEMENT OVER PARTS 3 AND 8 PLAN 12R26840 AS IN MS36159; SUBJECT TO AN EASEMENT IN GROSS AS IN CE746822; MUNICIPALITY OF LEAMINGTON

 

“Project Property Lending Valuemeans, in respect of the single Advance under Facility A, the lending value attributed by the Lenders in their discretion to the Project Property immediately before such Advance, taking into consideration costs incurred and an Acceptable Appraisal on an "as completed" basis.

 

“Property” means, with respect to any Person, any or all of its present and future undertaking, property and assets, whether tangible or intangible, and includes rights under contracts and permits and all Owned Properties.

"Proportionate Share" in respect of any Lender means:

 

 

(a)

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

 

 

 

(b)

subject to Section 9.03, in the context of any Lender's entitlement to receive payments of principal, interest or fees in respect of Facility A, the Outstanding Advances due to such Lender under Facility A divided by the aggregate amount of the Outstanding Advances due to all Lenders under Facility A; 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 (including all additions thereto, replacements thereof, insurance thereon and proceeds thereof) and secures an amount not in excess of the purchase price thereof (including any costs of shipping, assembly, installation, insurance, freight and transfer taxes) and any interest and fees payable in respect thereof.

 

"Real Property" means the Owned Properties and the Material Leased Properties and Real Property means any one of them.

 

"Related Party" is defined in the CBA Model Provisions.

 

"Repayment" means a repayment by the Borrower on account of the Outstanding Advances.

 

"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 (2) or more Lenders which have issued Commitments hereunder representing two-thirds (2/3) or more of the aggregate amount of all Lenders' Commitments; and

 


23.

 

(ii) at any time after the occurrence of an Event of Default which is continuing, any two (2) or more Lenders which have Outstanding Advances representing two-thirds (2/3) or more of the total amount of the Outstanding Advances under Facility A; provided however that if at any time there are only two (2) Lenders under this Agreement, "Required Lenders" shall mean both such Lenders, and if at any time there is only one (1) Lender under this Agreement, "Required Lenders" shall mean such Lender.

 

"Requirements of Environmental Law" means: (i) obligations under common law; (ii) requirements having the force of law imposed by or pursuant to statutes, regulations and by-laws whether presently or hereafter in force; (iii) requirements announced by a Governmental Authority as having immediate effect (provided that at the time of making such announcement the government also states its intention of enacting legislation to confirm such requirements retroactively); (iv) all 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; (v) all 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 (vi) all 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, with respect to any Credit Party holding a Health Canada License, its person designated as such for the purposes of the Cannabis Act and 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.

“Sale-Leaseback” means an arrangement, transaction or series of arrangements or transactions under which title to any real property, tangible personal property or fixture is transferred by a Company (a “transferor”) to another Person which leases or otherwise grants the right to use such property to the transferor (or nominee of the transferor) and, whether or not in connection therewith, the transferor also acquires a right or is subject to an obligation to acquire such property or a material portion thereof, and regardless of the accounting treatment of such arrangement, transaction or series of arrangements or transactions.

 

Sanction(s)” means any international economic sanction administered or enforced by the United States Government (including without limitation, OFAC and the U.S. Department of State), Canada, the United Nations Security Council, the European Union, Her Majesty’s Treasury or other relevant sanctions authority.

 

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, or (d) a Person resident in or determined to be resident in a country, in each case, that is subject to a country sanctions program administered and enforced by OFAC, the US Department of State or any equivalent agency or body in Canada.

 

Sanctioned Person means a person named on the list of Specially Designated Nationals maintained by OFAC.

 

 


24.

 

 

"Security" means all Guarantees, security agreements, mortgages, debentures and other documents required to be provided to the Agent or the Lenders pursuant to ARTICLE VI and all other agreements required or contemplated herein to be delivered by the Credit Parties and other Persons to the Agent for the benefit of the Lenders from time to time as security for the payment and performance of the Obligations, and the security interests, assignments and Liens constituted by the foregoing.

"Senior Officer" means the President, Chief Financial Officer, Chief Executive Officer or corporate Secretary of the Borrower.

 

"Service Agreements" means all agreements from time to time made between any Company and BMO or any of its Affiliates (specifically including Harris N.A.) in respect of cash management, payroll, corporate credit cards or other banking services.

 

“Shareholders’ Agreement” means the Unanimous Shareholders Agreement dated February 16th, 2018 among the Parent, 2609733 Ontario Limited, Chris Mastronardi Benji Mastronardi, and the Borrower.

 

"Shareholders' Equity" means, in respect of any period, the consolidated shareholders' equity of the Parent for such period determined in accordance with GAAP.

 

"Solvent" means, with respect to any Credit Party as of the date of determination, (i) the aggregate property of such Credit Party 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 Credit Party is able to meet its obligations as they generally become due; and

(iii)such Credit Party 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 4.01(j) 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 by each such Lien shall not be increased.

 

"Statutory Lien" means a Lien in respect of any Property a Credit Party created by or arising pursuant to any applicable legislation in favour of any Person (such as but not limited to a Governmental Authority), including, without limitation, a Lien for the purpose of securing such Credit Party's obligation to deduct and remit employee source deductions and goods and services 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 Lenders in their sole discretion have consented to in writing and in respect of which the holder thereof has entered into a Intercreditor 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: (i) the maturity date of such indebtedness is later than the Maturity Date; (ii) 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); (iii) any security held in respect of such indebtedness is subordinated to the Security; (iv) 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

 


25.

 

written consent of the Agent; and (v) 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.

Subsidiaries” means the business entities which are controlled by another business entity (as used herein, "business entity" includes a corporation, company, partnership, limited partnership, trust or joint venture); and for greater certainty includes a Subsidiary of a Subsidiary; and Subsidiary” means any of them as the context requires.

 

“Supply Agreement” means the amended and restated wholesale cannabis supply agreement between the Parent as purchaser and the Borrower as supplier dated November 26, 2019.

 

“Tangible Net Worth” means in respect of any Person at any time, the excess of its total assets over its total liabilities; provided that the determination of such total assets shall exclude: (a) all goodwill, organizational expenses, research and development expenses, trademarks, trade mark applications, trade names, copyrights, patents, patent applications, licenses and rights in any thereof, and other similar intangibles; (b) all prepaid expenses, deferred charges or unamortized debt discount and expense; (c) all reserves carried and not deducted from consolidated assets; (d) any write-up in the book value of any capital asset resulting from a revaluation thereof; (e) prior to the Conversion Date, the Parent Subordinated Debt provided the same constitutes Permitted Funded Debt; and (f) any items not included in clauses (a) through (f) of this definition which are treated as intangibles under GAAP. For clarity, “Tangible Net Worth” will include biological assets at book value, inventory (including fair value components), and minority interests.

 

"Taxes" is defined in the CBA Model Provisions.

 

Termination Date” means the date on which (i) all Obligations due and owing under the Loan Documents have been paid in full, other than contingent claims for which no unsatisfied demand for payment has been made, (ii) all Commitments have been cancelled or lapsed and (iii) all Hedging Agreements (if any) have been terminated and all amounts due and owing thereunder (if any) have been paid in full or cash collateral is provided in respect thereof.

 

"Total Funded Debt" means, in respect of any Person at any time, its Funded Debt at such time, specifically including for greater certainty the Outstanding Advances owing by it at such time.

 

“Total Funded Debt to EBITDA Ratio" means, for any period, the ratio of (i) Total Funded Debt of the Companies at the end of such period to (ii) consolidated EBITDA of the Companies for such period.

 

"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.

 

“Unfunded Capital Expenditures” means Capital Expenditures made by the Companies, which is (are): (i) financed by operating cash flow net of proceeds from Dispositions permitted hereunder, (ii) not financed under Capital Leases, (iii) not financed with the proceeds of Facility A, (iv) not financed with the proceeds of other Permitted Funded Debt incurred substantially to fund such Capital Expenditures, and (v) not financed with new equity.

 

 


26.

 

 

 

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 an accounting change under GAAP (referred to herein as an "accounting change"), and if any financial ratio or amount determined pursuant to Section 5.02(w) would be materially different as a result of such accounting change, such financial ratio or amount shall be determined without regard to such accounting change and for the information of the Lenders the Parent shall also deliver to the Lenders a reconciliation in form and substance satisfactory to the Lenders.

 

 

1.03

Currency References

 

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

 

 

1.04

References to Statutes

 

Whenever in this Agreement reference is made to a statute or regulations made pursuant to a statute, such reference shall, unless otherwise specified, 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.

 

 

1.05

Extended Meanings

 

Terms defined in the singular have the same meaning when used in the plural, and vice- versa. 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". Any reference herein to any action to be taken or decision to be made by the Agent or the Lenders (or the Required Lenders, as the case may be) in their "sole discretion" shall mean that such sole discretion is absolute and unfettered.

 

 

1.06

Joint and Several Obligations

 

All obligations under ARTICLE X which are stated to be obligations of the Guarantors or any one or more of them shall, to the extent permitted by Applicable Law, be joint and several obligations of each of the Guarantors.

 

 

1.07

Exhibits and Schedules

 

The following exhibits and schedules are attached to this Agreement and incorporated herein by reference:

 

 


27.

 

 

Exhibits

 

"A"

-

Lenders and Lenders' Commitments

"B"

-

Draw Request

"C"

-

Rollover Notice

"D"

-

Conversion Notice

"E"

-

Repayment Notice

"F"

-

Compliance Certificate

"G"

-

Form of BA Equivalent Note

"H"

-

CBA Model Provisions

“I”

-

Agreement and Acknowledgement to be bound – New Guarantor

 

Schedules

 

4.01(b)

-

Corporate Information

4.01(h)

-

Material Permits

4.01(i)

-

Cannabis Investments

4.01(j)

-

Specific Permitted Liens

4.01(k)

-

Owned Properties

4.01(l)

-

Material Leased Properties

4.01(m)

-

Intellectual Property

4.01(o)

-

Material Agreements

4.01(p)

-

Labour Agreements

4.01(q)

-

Environmental Matters

4.01(r)

-

Litigation

4.01(s)

-

Pension Plans and Multi-employer Plans

 

ARTICLE II– FACILITY A (TERM FACILITY)

 

 

2.01

Establishment of Facility A

 

Subject to the terms and conditions in this Agreement, the Lenders hereby establish, on a several and not joint or joint and several basis, in favour of the Borrower, a committed, non- revolving credit facility referred to as “Facility A”, in the maximum aggregate principal amount of Eighty Million Dollars ($80,000,000) (the “Facility A Limit”). Each Lender’s commitment in respect of Facility A shall be limited to the maximum principal amount indicated opposite such Lender's name in Exhibit "A" under the heading "Facility A Commitments". Each Advance by a Lender under Facility A shall be made by such Lender in its Proportionate Share of Facility A.

 

Any undrawn amount under Facility A on the Closing Date shall be cancelled and the Lender’s Commitments in respect of such unused portion shall be reduced in accordance with their Proportionate Share.

 

 

2.02

Purpose

 

Subject to the terms hereof, Advances under Facility A shall be used by the Borrower by way of a single Advance on the Closing Date as follows: (i) not less than Fifty Million Dollars ($50,000,000) shall be used by the Borrower to refinance Funded Debt owed to the Parent by the Borrower on the Closing Date in respect of the Project and the Project Properties (which for clarity, is in addition to the Parent Subordinated Debt), but provided that the balance of the remainder of the Facility A availability is sufficient to pay such remaining Project Costs, and (ii) the balance of Facility A shall be used by the Borrower to refinance greenhouse retrofit costs and specific Capital Expenditures in respect of the

 


28.

 

Project, to pay closing and transactional costs on the Closing Date and for working capital of the Borrower.

 

 

2.03

Non-Revolving Nature

 

Facility A shall be a non-revolving facility, and any Repayment under Facility A may not be reborrowed.

 

 

2.04

Repayment

 

 

(a)

Notwithstanding all other provisions in this Section 2.04 the Obligations under Facility A shall become due and payable by the Borrower on the earliest of: (i) the Acceleration Date; and (ii) the Maturity Date.

 

 

 

(b)

Without limiting (a) above, the Borrower shall make a Repayment under Facility A on the last Business Day of each Fiscal Quarter commencing on the last Business Day in the first full Fiscal Quarter following the Conversion Date. Principal instalments shall be calculated on the Outstanding Advances under Facility A on the Conversion Date assuming an amortization of one hundred and twenty (120) months.

 

 

 

(c)

In addition to all other Repayments required pursuant to Section 2.04 (a) and (b) above, the following Repayments shall be required:

 

 

 

(i)

If any Company receives proceeds from a policy of insurance in respect of any Collateral, the Borrower shall make a Repayment to the Agent in an amount equal to the portion of such proceeds not permitted to be retained by such Company as provided in Section 6.07, within three (3) Business Days after receipt thereof.

 

 

 

(ii)

If any Company receives proceeds (net of transaction expenses) from the raising of capital by way of equity or Funded Debt (excluding Permitted Funded Debt), the Borrower shall make a Repayment to the Agent in an amount equal to one hundred percent (100%) of such net proceeds, within three (3) Business Days after receipt thereof.

 

 

 

(iii)

If any Company receives proceeds (net of transaction expenses, applicable taxes and usual adjustments) from a transaction involving the sale or other disposition of Property not in the ordinary course of business permitted under this Agreement, then the Borrower shall within three (3) Business Days of such receipt, make a Repayment to the Agent in an amount equal to one hundred percent (100%) of such net proceeds to the extent such net proceeds are not used to purchase similar assets with similar value within such one hundred and eighty (180) days period. Notwithstanding the foregoing however, the first One Million Dollars ($1,000,000) of net proceeds under this clause (iii) in the aggregate in any Fiscal Year shall not be required to be applied as a Repayment.

 

 

 

(iv)

The Borrower shall make a Repayment to the Agent within one hundred and twenty (120) days after the end of each Fiscal Year of the Borrower, commencing with the Fiscal Year ending May 31, 2021, in an amount equal to fifty percent (50%) the of Annual Excess Cash Flow if the Borrower’s Total Funded Debt to EBITDA Ratio is greater than 2.00:1 in respect of such Fiscal Year, unless such Repayment with the prior written consent of the Lenders is waived in respect of any Fiscal Year.

 

 

 


29.

 

 

 

(d)

The net proceeds required to be applied as a Repayment pursuant to paragraph (c) above shall be applied firstly against the Borrower’s obligations to make scheduled Repayments under Facility A, in reverse chronological order (including for clarity, the balloon payment payable on the Maturity Date) until paid in full.

 

 

 

2.05

Availment Options

 

 

(a)

Subject to the restrictions contained in this Agreement (and in particular, Sections 3.02 and 3.03) the Borrower may receive Advances under Facility A by any one (1) or more of the following Availment Options (or any combination thereof):

 

 

 

(i)

Canadian Prime Rate Loans;

 

 

(ii)

Bankers' Acceptances, each having a maturity between twenty-eight (28) and one hundred and eighty-two (182) days (inclusive), subject to availability; or

 

 

 

(iii)

BA Equivalent Loans from Non-BA Lenders with a maturity between twenty-eight (28) and one hundred and eighty-two (182) days (inclusive), subject to availability;

 

 

 

(b)

Bankers' Acceptances and BA Equivalent Loans will not be issued which in the opinion of the Lenders could result in the Facility A Limit being exceeded at any time. The Outstanding Advances under Facility A in the form of any above Availment Option may be converted 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 and BA Equivalent Loans may not be converted into another Availment Option prior to the maturity thereof).

 

 

 

2.06

Interest and Fees

 

In respect of Advances made under Facility A, the Borrower agrees to pay the following:

 

 

(a)

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

 

 

 

(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 three hundred and sixty-five (365) or three hundred and sixty-six (366), payable at the time of acceptance; and

 

 

(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 three hundred and sixty-five (365) or three hundred and sixty-six (366), payable at the time of acceptance.

 

 

Except as otherwise provided in this Agreement, such payments shall be made to the Agent for the account of the Lenders; and the Agent shall promptly remit to each Lender its Proportionate Share of each such payment.

 

 

2.07

Voluntary Cancellation; Voluntary Repayments

 

Upon delivery of an executed Repayment Notice to the Agent not less than one (1) Business Day and not more than three (3) Business Days prior to making a Repayment, the Borrower may make

 


30.

 

Repayments on account of the Outstanding Advances under Facility A from time to time in a minimum amount of Five Hundred Thousand Dollars ($500,000) and multiples of One Hundred Thousand Dollars ($100,000) without payment of any penalty or fee; provided the Borrower shall at its own expense also concurrently unwind Hedge Agreements to the extent necessary (if any) such that the aggregate notional amount of all outstanding Hedge Agreements does not exceed the Outstanding Advances under Facility A at such time; and further provided that Bankers' Acceptances and BA Equivalent Loans may not be repaid prior to the maturity thereof. Each such Repayment under Facility A shall be applied against the scheduled Repayments payable under Facility A in reverse chronological order.

 

ARTICLE III- GENERAL CONDITIONS

 

 

3.01

Matters Relating to Interest

 

 

(a)

Unless otherwise indicated, interest on any outstanding principal amount shall be calculated daily and shall be payable monthly in arrears on the last day of each and every month and on the Maturity Date. If the last day of a month is not a Business Day, the interest payment due on such day shall be made on the next Business Day, and interest shall continue to accrue on the said principal amount and shall also be paid on such next Business Day. Interest shall accrue from and including the day upon which an Advance is made or is deemed to have been made, and ending on but excluding the day on which such Advance is repaid or satisfied. Any change in the Canadian Prime Rate shall cause an immediate adjustment of the interest rate applicable to Canadian Prime Rate Loans without the necessity of any notice to the Borrower.

 

 

 

(b)

Unless otherwise stated, in this Agreement if reference is made to a rate of interest, fee or other amount "per annum" or a similar expression is used, such interest, fee or other amount shall be calculated on the basis of a year of three hundred and sixty-five (365) or three hundred and sixty-six (366) days, as the case may be. If the amount of any interest, fee or other amount is determined or expressed on the basis of a period of less than one year of three hundred and sixty-five (365) or three hundred and sixty-six (366) days, as the case may be, the equivalent yearly rate is equal to the rate so determined or expressed, divided by the number of days in the said period, and multiplied by the actual number of days in that calendar year. Interest and fees shall be calculated on the basis of a calendar year unless otherwise specified. All calculations of interest and fees under the Loan Documents shall be made on the basis of the nominal rates described in this Agreement and not on the basis of effective yearly rates or on any other basis that gives effect to the principle of deemed reinvestment. The Credit Parties acknowledge that there is a material difference between the stated nominal rates and effective yearly rates taking into account reinvestment, and that they are capable of making the calculations required to determine effective yearly rates.

 

 

 

(c)

Notwithstanding any other provisions of this Agreement, if the amount of any interest, premium, fees or other monies or any rate of interest stipulated for, taken, reserved or extracted under the Loan Documents would otherwise contravene the provisions of Section 347 of the Criminal Code (Canada), Section 8 of the Interest Act (Canada) or any successor or similar legislation, or would exceed the amounts which any Lender is legally entitled to charge and receive under any law to which such compensation is subject, then such amount or rate of interest shall be reduced to such maximum amount as would not contravene such provision; and to the extent that any excess has been charged or received such Lender shall apply such excess against the Outstanding Advances and refund any further excess amount.

 

 

 


31.

 

 

 

(d)

If interest or fees are not paid on the date due, the principal amount shall continue to bear interest at the rate that is applicable to the particular type of Advance determined from time to time in accordance herewith, subject to this Section 3.01(d), both before and after maturity, default and judgment, and overdue interest shall bear interest at the same rate, compounded monthly, and be payable on demand. Effective upon the occurrence of any Event of Default and for so long as any Event of Default shall be continuing, the interest rates, stamping fees, issuance fees otherwise payable hereunder shall automatically, immediately and without notice by the Agent to the Borrower be increased by two percent (2%) per annum (such increased rate, the "Default Rate"), to compensate the Agent and the Lenders for the additional risk, and all outstanding Obligations, including unpaid interest, stamping fees and issuance fees, shall continue to accrue interest from the date of such Event of Default at the Default Rate applicable to such Obligations. For greater certainty, the Default Rate shall apply whether or not the Agent declares all Obligations of the Borrower or any one or more of them to be immediately due and payable and whether or not the Agent takes any enforcement action or seeks to avail itself of any remedies hereunder.

 

 

 

3.02

Notice Periods

 

 

(a)

The Borrower shall provide two (2) Business Days' prior written notice to the Agent before 11:00 a.m. Toronto time in respect of any Advance, Rollover, Conversion or Repayment; other than a Conversion to a Canadian Prime Rate Loan which shall only require one (1) Business Day’s prior written notice to the Agent before 11:00 am Toronto time.

 

 

 

(b)

Notice of any Advance, Rollover, Conversion or voluntary Repayment referred to in paragraph (a) above shall be given in the form of a Draw Request, Rollover Notice, Conversion Notice or Repayment Notice, as the case may be, attached hereto as Exhibits.   All such notices shall be given to the Agent at its address set out in Section 12.07.

 

 

(c)

If notice is not provided as contemplated herein with respect to the maturity of a Bankers' Acceptance or BA Equivalent Loan, the Agent may convert the Bankers' Acceptance or BA Equivalent Loan upon its maturity into a Canadian Prime Rate Loan.

 

 

 

(d)

Any Conversion from one form of a Canadian Prime Rate Loan to Bankers’ Acceptances or a BA Equivalent Loan to another shall be subject to satisfaction of all of the terms and conditions applicable to the form of the new Availment Option as herein provided.

 

 

 

3.03

Minimum Amounts, Multiples and Procedures re Draws, Conversions and Repayments

 

 

(a)

Subject to paragraph (a) each request by the Borrower for an Advance or Conversion in the form of a Canadian Prime Rate Loan shall be in a minimum amount of Five Hundred Thousand Dollars ($500,000) and a multiple of One Hundred Thousand Dollars ($100,000).

 

 

 

(b)

Each request by the Borrower for an Advance by way of Bankers' Acceptances and BA Equivalent Notes shall be for an aggregate face amount of Bankers' Acceptances and BA Equivalent Notes of not less than Five Million Dollars ($5,000,000) and in a multiple of One Hundred Thousand Dollars ($100,000) and in such amount as will result in the face amount of each Bankers' Acceptance or BA Equivalent Note issued by a Lender being in a multiple of One Hundred Thousand Dollars ($100,000).

 

 

 

(c)

Upon receipt of a Draw Request under Facility A, the Agent shall promptly notify each Lender under Facility A of the contents thereof and such Lender's Proportionate Share of the Advance. Such Draw Request shall not thereafter be revocable.

 

 


32.

 

 

 

(d)

Each Advance shall be made by the applicable Lenders to the Agent at its address referred to in Section 12.07 or such other address as the Agent may designate by notice in writing to the Lenders from time to time. Each Lender shall make available its Proportionate Share of each said Advance to the Agent. Unless any condition of the Advance has not been satisfied or waived and the Agent has made that determination, the Agent shall make the funds so received from the Lenders available to the Borrower by 2:00 p.m. (Toronto time) on the requested date of the Advance. No Lender shall be responsible for any other Lender's obligation to make available its Proportionate Share of the said Advance.

 

 

 

(e)

The Borrower agrees to deliver in favour of each Lender such other agreements and documentation as such Lender may reasonably require (not inconsistent with this Agreement) in respect of such Lender's requirements for the acceptance of Bankers' Acceptances or the issuance of BA Equivalent Notes.

 

 

 

(f)

All payments of principal, interest and other amounts made by the Borrower to the Agent in respect of the Outstanding Advances under Facility A shall be paid by the Agent to the respective Lenders, each in accordance with its Proportionate Share thereof.

 

 

3.04

Place of Advances, Repayments

 

 

(a)

Advances by any Lender to the Borrower shall be made by such Lender to the Agent from such Lender's Lending Office in Canada. All payments of principal, interest and other amounts to be made by the Borrower pursuant to this Agreement shall be made to the Agent at its address noted in Section 12.07 or to such other address in Canada as the Agent may direct in writing from time to time. All such payments received by the Agent on a Business Day before 2:00 p.m. (Toronto time) shall be treated as having been received by the Agent on that day; and payments made after such time on a Business Day shall be treated as having been received by the Agent on the next Business Day.

 

 

 

(b)

Whenever any payment shall be due on a day which is not a Business Day, the date for payment thereof shall be extended to the next succeeding Business Day. Interest shall continue to accrue and be payable thereon as provided herein, until the date on which such payment is received by the Agent.

 

 

 

(c)

The Borrower hereby irrevocably authorizes the Agent to debit any account maintained by the Borrower with the Agent from time to time in order to pay any amount of principal, interest, fees, expenses or other amounts payable by the Borrower pursuant to this Agreement.

 

 

 

3.05

Evidence of Obligations (Noteless Advances)

 

The Agent shall open and maintain, in accordance with its usual practice, accounts evidencing the Obligations; and the information entered in such accounts shall constitute prima facie evidence of the Obligations absent manifest error. The Agent may, but shall not be obliged to, request the Borrower to execute and deliver promissory notes from time to time as additional evidence of the Obligations, in form and substance satisfactory to the Agent acting reasonably.

 

 

3.06

Determination of Equivalent Amounts

 

Whenever it is necessary or desirable at any time to determine the Equivalent Amount in Canadian Dollars of an amount expressed any other currency, or vice-versa, the Equivalent Amount shall be determined by reference to the Exchange Rate on the date of such determination.

 

 


33.

 

 

 

3.07

Purchase of Bankers' Acceptances and BA Equivalent Notes

 

 

(a)

In connection with the issuance by the Borrower of a Bankers' Acceptance or BA Equivalent Note, the amount payable by the purchaser thereof to the Borrower shall be determined in accordance with the following formula:

 

 

 

F

 

 

 

1 + (D x T/365)

 

 

 

where:

 

 

F

means the face amount of such Bankers' Acceptance or BA Equivalent Note,

 

 

D

means the discount rate applicable under paragraph (b), (c) or (d), as the case may be, below, and

 

 

 

T

means the number of days to maturity of such Bankers' Acceptance or BA Equivalent Note,

 

 

with the amount as so calculated being rounded up or down to the fifth decimal place and with 0.000005 being rounded up.

 

 

(b)

Each BA Lender which is a bank listed in Schedule I of the Bank Act (Canada) agrees to purchase those Bankers' Acceptances which it has accepted at a discount from the face amount thereof equal to the CDOR Rate for the relevant period in effect on the issuance date thereof; provided however that if BMO is the only BA Lender under Facility A, the discount rate shall be the applicable discount rate established by BMO on the issuance date thereof.

 

 

 

(c)

Each BA Lender which is a bank listed in Schedule II or Schedule III of the Bank Act (Canada) agrees to purchase those Bankers' Acceptances which it has accepted at a discount from the face amount thereof equal to the CDOR Rate for the relevant period in effect on the issuance date thereof plus a premium determined by such BA Lender not in excess of one-tenth of one percent (0.10%) per annum.

 

 

 

(d)

Each Non-BA Lender agrees to purchase BA Equivalent Notes issued by it hereunder at a discount from the face amount thereof equal to the CDOR Rate for the relevant period in effect on the issuance date thereof.

 

 

 

(e)

The discount applicable to each Bankers' Acceptances and BA Equivalent Note shall be determined on the basis of a year of three hundred and sixty-five (365) days.

 

 

 

3.08

Provisions Regarding Bankers' Acceptances

 

The following provisions are applicable to Bankers' Acceptances issued by the Borrower and accepted by any BA Lender hereunder:

 

Payment of Bankers' Acceptances

 

 

(a)

Subject to the next sentence, the Borrower agrees to provide for each Bankers' Acceptance by payment of the face amount thereof to the Agent on behalf of the BA Lender on the maturity of the Bankers' Acceptance or, prior to such maturity, on the Acceleration Date; and the Agent shall remit the said amount to such BA Lender and such BA Lender shall in turn remit such amount to the holder of the Bankers' Acceptance. If the Borrower does not provide for the payment of the Bankers' Acceptance accordingly,

 

 


34.

 

 

any amount not so paid shall be immediately subject to Conversion to a Canadian Prime Rate Loan under Facility A. The Borrower agrees not to claim any days of grace for the payment at maturity of any Bankers' Acceptance. The Borrower hereby waives any defences to payment which might otherwise exist if for any reason a Bankers' Acceptance is held by the BA Lender for its own account at maturity.

 

Availability of Bankers' Acceptances

 

 

(b)

If at any time and from time to time the Agent determines, acting reasonably, that there no longer exists a market for Bankers' Acceptances for the term requested by the Borrower, or at all, the Agent shall so advise the Borrower, and in such event the BA Lenders shall not be obliged to accept and the Borrower shall not be entitled to issue Bankers' Acceptances.

 

 

Power of Attorney

 

 

(c)

The Borrower hereby appoints each BA Lender as its true and lawful attorney to complete and issue Bankers' Acceptances on behalf of the Borrower in accordance with written (including electronic transmittal) transmitted instructions provided by the Borrower to the Agent on behalf of such BA Lender, and the Borrower hereby ratifies all that its said attorney may do by virtue thereof. The Borrower agrees to indemnify and hold harmless the Agent and the BA Lenders and their respective directors, officers and employees from and against any charges, complaints, costs, damages, expenses, losses or liabilities of any kind or nature which they may incur, sustain or suffer, arising from or by reason of acting, or failing to act, as the case may be, in reliance upon this power of attorney, except to the extent caused by the gross negligence or wilful misconduct (including wilful breach of this Agreement) of the Agent or the BA Lender or their respective directors, officers and employees. The Borrower hereby agrees that each Bankers' Acceptance completed and issued and accepted in accordance with this Section by a BA Lender on behalf of the Borrower is a valid, binding and negotiable instrument of the Borrower as drawer and endorser. The Borrower agrees that each BA Lender's accounts and records will constitute prima facie evidence of the execution and delivery by the Borrower of Bankers' Acceptances. This power of attorney shall continue in force until written notice of revocation has been served upon the Agent by the Borrower at the Agent's address set out in Section 12.07.

 

 

 

3.09

Provisions regarding BA Equivalent Notes

 

Each Non-BA Lender will not accept Bankers' Acceptances hereunder, and shall instead from time to time make BA Equivalent Loans to the Borrower. Each BA Equivalent Loan shall be evidenced by a non-interest bearing promissory note payable by the Borrower to the Non-BA Lender substantially in the form of Exhibit "G" attached hereto, which will be purchased by the Non-BA Lender. Each BA Equivalent Note shall be negotiable by the Non-BA Lender without notice to or the consent of the Borrower, and the holder thereof shall be entitled to enforce such BA Equivalent Note against the Borrower free of any equities, defences or rights of set-off that may exist between the Borrower and the Non-BA Lender. In this Agreement, all references to a BA Equivalent Note shall mean the loan evidenced thereby if required by the context; and all references to the "issuance" of a BA Equivalent Note by a Non-BA Lender and similar expressions shall mean the making of a BA Equivalent Loan by the Non-BA Lender which is evidenced by a BA Equivalent Note. The following provisions are applicable to each BA Equivalent Loan made by a Non-BA Lender to the Borrower hereunder:

 

Payment of BA Equivalent Notes

 

 

(a)

Subject to the next sentence, the Borrower agrees to provide for each BA Equivalent Note by payment of the face amount thereof to the Agent on behalf of the Non-BA

 

 


35.

 

 

Lender on the maturity of the BA Equivalent Note or, prior to such maturity, on the Acceleration Date; and the Agent shall remit the said amount to such Non-BA Lender and such Non-BA Lender shall in turn remit such amount to the holder of the BA Equivalent Note. If the Borrower does not provide for the payment of the BA Equivalent Note accordingly, any amount not so paid shall be immediately subject to Conversion to a Canadian Prime Rate Loan under Facility A. The Borrower agrees not to claim any days of grace for the payment at maturity of any BA Equivalent Note. The Borrower hereby waives any defences to payment which might otherwise exist if for any reason a BA Equivalent Note is held by the Non-BA Lender for its own account at maturity.

 

 

Availability of BA Equivalent Loans

 

 

(b)

The Non-BA Lender shall have no obligation to make BA Equivalent Loans during any period in which the BA Lenders' obligation to issue Bankers' Acceptances is suspended pursuant to Section 3.5 of the CBA Model Provisions.

 

 

Power of Attorney

 

 

(c)

The Borrower hereby appoints the Non-BA Lender as its true and lawful attorney to complete BA Equivalent Notes on behalf of the Borrower in accordance with written (including electronic transmission) transmitted instructions delivered by the Borrower to the Agent, and the Borrower hereby ratifies all that its said attorney may do by virtue thereof. The Borrower agrees to indemnify and hold harmless the Agent and the Non-BA Lender and their respective directors, officers and employees from and against any charges, complaints, costs, damages, expenses, losses or liabilities of any kind or nature which they may incur, sustain or suffer, arising from or by reason of acting, or failing to act, as the case may be, in reliance upon this power of attorney except to the extent caused by the gross negligence or wilful misconduct (including wilful breach of this Agreement) of the Agent or the Non-BA Lender or their respective directors, officers and employees. The Borrower hereby agrees that each BA Equivalent Note completed by the Non-BA Lender on behalf of the Borrower is a valid, binding and negotiable instrument of the Borrower as drawer and endorser. The Borrower agrees that the Non-BA Lender's accounts and records will constitute prima facie evidence of the execution and delivery by the Borrower of BA Equivalent Notes. This power of attorney shall continue in force until written notice of revocation has been served upon the Agent on behalf of the Non-BA Lender by the Borrower at the Agent's address provided in Section 12.07.

 

 

 

3.10

No Repayment of Certain Availment Options

 

The Borrower acknowledge that Bankers' Acceptances and BA Equivalent Loans may not be repaid prior to the maturity thereof. If prior to the maturity of such Availment Option the Agent receives any funds from the Borrower or any other Person which are intended to be applied as a Repayment thereof, the Agent may retain such funds without any obligation to invest such funds or pay interest thereon, and shall apply such funds against such Availment Option on the scheduled maturity date thereof.

 

Notwithstanding the foregoing, if for any reason a Bankers' Acceptance or BA Equivalent Loans is repaid or converted to another Availment Option prior to the scheduled maturity date thereof (whether as a result of acceleration or otherwise), the Borrower agrees to pay to the Agent upon demand all losses, damages, costs and expenses which the Agent or any Lender incurs as a result of such Repayment or Conversion prior to the said scheduled maturity date. Such losses, damages, costs and expenses shall include any and all breakage costs (such breakage costs to be determined in accordance with the Agent's standard procedures for a commercial borrower). A certificate as to such losses, damages, costs or expenses setting forth the calculations therefor will be prima facie evidence of such losses, damages, costs or expenses and be binding on the Borrower except for manifest error.

 


36.

 

 

 

3.11

Illegality

 

The obligation of any Lender to make Advances hereunder shall be suspended if and for so long as it is unlawful or impossible for such Lender to maintain Facility A or make Advances hereunder as a result of the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Lender with any request or directive (whether or not having the force of law, but if not having the force of law, compliance therewith is generally regarded by banks as mandatory) of any such Governmental Authority, central bank or comparable agency.

 

 

3.12

Anti-Money Laundering

 

The Borrower acknowledges that pursuant to AML Legislation the Agent and the Lenders