CENTURION FINANCIAL TRUST
As lender agent and nominee for Lenders from time to time collectively as the Lender
ASSURE HOLDINGS CORPORATION
as the Corporation
ASSURE HOLDINGS INC., ASSURE NEUROMONITORING, LLC, ASSURE NETWORKS, LLC, ASSURE NEUROMONITORING COLORADO, LLC, ASSURE NEUROMONITORING LOUISIANA, LLC, ASSURE NEUROMONITORING MICHIGAN, LLC, ASSURE NEUROMONITORING PENNSYLVANIA, LLC, ASSURE NEUROMONITORING TEXAS, LLC, ASSURE NEUROMONITORING TEXAS HOLDINGS, LLC, DNS LOUISIANA, LLC, ASSURE NEUROMONITORING ARIZONA, LLC, ASSURE NEUROMONITORING MINNESOTA, LLC, ASSURE NEUROMONITORING NEVADA, LLC, ASSURE NEUROMONITORING SOUTH CAROLINA, LLC, and DNS PROFESSIONAL READING, LLC
June9 , 2021
Principal Amount: $11,000,000 USDIssue Date: June
9 , 2021
Maturity Date: June
9 , 2025Currency: US Dollars
PRINCIPAL, INTEREST, PAYMENT, COMMITMENT FEE
on the first Business Day of each month during which any Obligations are outstanding, the first of such payments being due July 2, 2021 for the period from the Advance to the date of payment, and thereafter monthly.
such requested Advance and the amount, in the minimum amount of $250,000. Advances outstanding under the Senior Revolving Loan to the Corporation shall not exceed $2,000,000.
The Corporation will owe and pay to the Lender on first Advance of the Loan, less deposits paid to date which will be credited, a fee for 2.25% of the Commitment being $247,500, payment will be made by withholding from the Advance.
The Guarantors signing this Debenture do so for the purpose of agreeing to the representations and covenants set out herein.
In consideration for the Commitment, and subject to the approval of the TSX Venture Exchange (the “TSXV”), the Corporation will issue to the Lender, 1,375,000 common share purchase warrants (the “Warrants”), representing 12.5% of the aggregate value of the Commitment. Each such Warrant will entitle the Lender to purchase one common share in the capital of the Corporation at an exercise price equal to the last closing price of the Corporation’s common shares as of the date of the press release announcing the Commitment and issuance of the Warrants. Pursuant to the policies of the TSXV, the Warrants will be non-transferable and subject to applicable hold periods under Canadian and U.S. securities laws. The Warrants shall have a term that expires four years from the date of issuance.
The Lender hereby confirms that it is an “accredited investor” (as such term is defined in National Instrument 45-106 Prospectus Exemptions (“NI 45-106”)) by virtue of meeting the criteria set out in paragraph (m) of the definition of “accredited investor” in section 1.1 of NI 45- 106.
ARTICLE 2 INTERPRETATION
As used herein the following terms shall have the following meanings:
|(b)||“Affiliate” means, in respect of any corporation, any Person which, directly or indirectly, controls or is controlled by or is under common control with the corporation; and for the purpose of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) means the power to direct, or cause to be directed, the management and|
policies of a corporation whether through the ownership of Voting Shares or by contract or otherwise.
|(c)||“Applicable Law” means, in respect of any Person, property, transaction or event, all applicable laws, statutes, rules, by‒laws and regulations, and all applicable official directives, orders, judgments and decrees, of Governmental Bodies, including specifically all relating to anti-money laundering, anti- terrorism, sanction and anti-bribery.|
|(d)||“Assignment of Insurance” means the collateral assignment of insurance provided by the Corporation and the Guarantors to the Lender as security for the Obligations.|
|(e)||“Business Day” means any day other than Saturday, Sunday or a day on which chartered banks are closed for business in Toronto, Ontario.|
|(f)||“Capital Lease Obligations” means, as to any Person, the obligation of such Person to pay rent or other liquidated amounts under a lease of (or other agreement conveying the right to use) real or personal property, which obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under generally accepted accounting principles and, for purposes of this Debenture, the amount of such obligations shall in each case be the capitalized amount thereof, determined in accordance with generally accepted accounting principles.|
|(g)||“Change of Control” means the Guarantors ceasing to be, directly or indirectly, wholly owned by the Corporation (or by the Guarantors that assume the obligations under this Debenture as contemplated by this Debenture) or its successor.|
|(i)||“Contingent Liabilities” of any Person at any time means the amount of all indebtedness and liabilities, contingent or otherwise, of any other Person at such time:|
|(i)||guaranteed, directly or indirectly, in any manner by the Person including:|
|(iii)||to purchase such indebtedness or liabilities or to advance or supply funds for the payment or purchase of such indebtedness or liabilities;|
|(iv)||to purchase, sell or lease (as lessee or lessor) property, products, materials or supplies or to purchase or sell services in circumstances where it can reasonably be assumed that the purpose of such agreement was to provide funds to the other Person to enable the other Person to make payment of such indebtedness or liabilities or to provide goods or services to the other Person to enable it to satisfy other liabilities, regardless of the delivery or non‒delivery of the property, products, materials or supplies or the provision or non‒provision of the services, including take or pay or through put agreements; or|
|(v)||to make any loan, advance, capital contribution to or other investment in the other Person for the purpose of assuring a minimum equity, asset base, working capital or other balance sheet condition at any date or to provide funds for the payment of any liability, dividend or return of capital; or|
|(vi)||secured by any Encumbrance upon property owned by the Person, even though the Person has not assumed or become liable for the payment of such indebtedness or liabilities, provided that, if the Person has not agreed to such assumption, such indebtedness shall be deemed to be an amount equal to the lesser of (A) the amount of such indebtedness and liabilities and (B) the book value of such property.|
|(j)||“Debenture” means this Debenture together with the schedules and exhibits hereto, as they may be amended from time to time.|
|(m)||“Default” means any event which, but for the lapse of time, giving of notice or both, would constitute an Event of Default.|
|(n)||“EBITDA” means, with respect to the Corporation (on a consolidated basis), for any applicable period, an amount equal to earnings from operations before interest, income taxes, depreciation and amortization, calculated as follows:|
|(2)||any aggregate net gain (but not any aggregate net loss) during such period arising from the sale, exchange or other disposition of capital assets by the Corporation (including|
any fixed assets, whether tangible or intangible, all inventory sold in conjunction with the disposition of fixed assets and all securities); and
determining net income,
in each case to the extent included in the calculation of net income of the Corporation for such period in accordance with generally accepted accounting principles but without duplication,
|(4)||the amount of non‒cash charges (including depreciation, amortization and non-cash expenses relating to stock based compensation or accretion),|
in each case to the extent included in the calculation of net income of the Corporation for such period in accordance with generally accepted accounting principles, but without duplication.
|(o)||“Eligible Accounts” means, collectively, all Technical Revenues, PNE Revenues and Government / Hospital Revenues.|
|(p)||“Encumbrance” means any mortgage, lien, pledge, assignment, charge, security interest, title retention agreement, hypothec, levy, execution, seizure, attachment, garnishment, right of distress or other encumbrance in respect of property of any nature or kind whatsoever howsoever arising (whether consensual, statutory or arising by operation of law or otherwise) and includes arrangements known as sale and lease‒back, sale and buy‒back and sale with option to buy‒back.|
|(r)||“Environmental Laws” means all applicable federal, provincial, state, municipal or local laws, statutes, regulations or ordinances relating to the environment, occupational safety, health, product liability and transportation.|
|(s)||“Environmental Order” means any prosecution, order, decision, notice, direction, report, recommendation or request issued, rendered or made by any Governmental Body in connection with Environmental Laws.|
|(t)||“Funded Indebtedness” means, with respect to any Person at any particular time, the aggregate (without duplication) of the following amounts determined in accordance with generally accepted accounting principles at such time:|
|(i)||indebtedness for money borrowed and indebtedness represented by notes payable and drafts accepted representing extensions of credit (including, as regards any note or draft issued at a discount, the face amount of such note or draft) and including the face amount of bankers’ acceptances and letters of credit;|
|(ii)||all obligations (whether or not with respect to the borrowing of money) which are evidenced by bonds, debentures, notes or other similar instruments or not so evidenced but which would be considered to be indebtedness for borrowed money in accordance with generally accepted accounting principles;|
|(iii)||all indebtedness for borrowed money secured by an Encumbrance on any property of such Person;|
|(v)||Capital Lease Obligations and all other indebtedness issued or assumed as full or partial payment for property or services or by way of capital contribution;|
|(i)||to (v) above; and|
|(vii)||any of the foregoing amounts in respect of any Subsidiary of the Person whose accounts are not required under generally accepted accounting principles to be consolidated with the accounts of such Person,|
including the aggregate outstanding amount of the Obligations at such time; but for greater certainty, trade payables, expenses, costs and charges accrued in the ordinary course of business, customer advance payments and deposits received in the ordinary course of business shall not constitute Funded Indebtedness.
|(u)||“General Security Agreements” means the agreement creating security over all personal property of the Corporation and the Guarantors.|
|(v)||“Government / Hospital Revenue” means revenue generated by the Corporation, or its Subsidiary, billed directly to a hospital for a patient that has a government funded insurance plan and the Corporation performes the technical component of interoperative monitory, in each case, paid on a per-case and per-time basis, in a rate specified in the applicable contract between the Corporation, or its Subsidiary, and the relevant hospital.|
|(w)||“Governmental Body” means any government, parliament, legislature, or any regulatory authority, agency, commission or board of any government, parliament or legislature, or any court or any other law, regulation or rule-making entity (including any central bank, fiscal or monetary authority or authority regulating banks), having or purporting to have jurisdiction on behalf of any applicable government, parliament or legislature or any Person exercising or entitled to exercise administrative, regulatory or taxing authority under the authority of any of the foregoing.|
|(y)||“Guarantors” means, collectively and individually, Assure Holdings Inc., Assure Neuromonitoring, LLC, Assure Networks, LLC, Assure Neuromonitoring Colorado, LLC, Assure Neuromonitoring Louisiana, LLC, Assure Neuromonitoring Michigan, LLC, Assure Neuromonitoring Pennsylvania, LLC, Assure Neuromonitoring Texas, LLC, Assure Neuromonitoring Texas Holdings, LLC, DNS Louisiana, LLC, Assure Neuromonitoring Arizona, LLC, Assure Neuromonitoring Minnesota, LLC, Assure Neuromonitoring Nevada, LLC, Assure Neuromonitoring South Carolina, LLC, DNS Professional Reading and those other wholly-owned Subsidiaries of the Corporation which may, from time to time, be required to provide a Guarantee hereunder.|
|(z)||“Hazardous Substance” means any substance or combination of substances which is or may become hazardous, toxic, injurious or dangerous to persons, property, air, land, water, flora, fauna or wildlife, and includes but is not limited to any contaminants, pollutants, dangerous substances, liquid wastes, industrial wastes, hauled liquid wastes, toxic substances, hazardous wastes, hazardous materials or hazardous substances as defined in or pursuant to any Environmental Laws or Environmental Orders pursuant thereto.|
(aa) “Initial Term” means the 48 month period from the initial Advance to the Maturity Date.
(bb) “Initial Test EBITDA” means an amount determined by adding together EBITDA for the calendar months ending November 30, 2021 and December 31, 2021, dividing the sum by 2 and multiplying the quotient by 3.
(cc) “Instruments” means the Commitment Letter, this Debenture, the Security Documents, and any other agreements or instruments (whether now existing, presently arising or created in future) delivered by or on behalf of the Corporation or any Guarantor to the Lender in respect of this Debenture.
(dd)“Lender” shall have the meaning ascribed to such term in Section 1.1.
(ee) “Loan” means the drawn amount of the Commitment which constitutes a draw on the debt obligations described in this Debenture.
(ff) “Material Adverse Effect” means a material adverse effect upon the business, assets, financial condition or prospects of the Corporation and the Guarantors, taken as a whole, or upon their ability to perform their obligations under any of the Instruments.
(gg) “Material Authorization” means, with respect to any Person, any approval, permit, licence or similar authorization (including any trademark, trade name or patent) from, and any filing or registration with, any Governmental Body or other Person required by such Person to own its property and assets or to carry on its business as presently carried on by it or as contemplated hereunder to be carried on by it in each jurisdiction in which it does so or is contemplated to do so, where the failure to have such approval, permit, licence, authorization, filing or registration would have a Material Adverse Effect.
(hh)“Maturity Date” shall mean June 9 , 2025.
|(ii)||“Obligations” means all obligations and liabilities now or at any time and from time to time hereafter owing or payable by the Corporation or any Guarantor to the Lender under or in connection with the Instruments.|
(jj) “Order” means any order, notice, direction, report, recommendation or decision rendered by any Governmental Body.
(kk)“Permitted Encumbrances” means, in respect of any Person:
|(i)||encumbrances for taxes, assessments or governmental charges incurred in the ordinary course of business that are not yet due and payable or the validity of which is being actively and diligently contested in good faith by the relevant Person, provided adequate reserves with respect thereto are maintained on the books of the relevant Person in accordance with generally accepted accounting principles;|
|(ii)||construction, mechanics’, carriers’, warehousemen’s and materialmen’s liens and liens in respect of vacation pay, workers’ compensation, employment insurance or similar statutory obligations, provided the obligations secured by such liens are not yet due and payable or the validity of which is being actively and diligently contested in good faith by the relevant Person, provided adequate reserves with respect thereto are maintained on the books of the relevant Person, and, in the case of construction liens, which have not yet been filed or for which the relevant Person has not received written notice of an Encumbrance or which singly or in the aggregate do not materially detract from the value of the asset concerned or the Lender’s security;|
|(iii)||encumbrances arising from court or arbitral proceedings, provided that the claims secured thereby are being contested in good faith by the relevant Person, provided adequate reserves with respect thereto are maintained on the books of relevant Person in accordance with generally accepted|
accounting principles, execution thereon has been stayed and continues to be stayed and such Encumbrances do not result in an Event of Default;
|(iv)||good faith deposits made in the ordinary course of business to secure the performance of bids, tenders, contracts (other than for the repayment of borrowed money), leases, surety, customs, performance bonds and other similar obligations;|
|(v)||deposits to secure statutory obligations or in connection with any matter giving rise to an Encumbrance described in (ii) above;|
|(vi)||deposits of cash or securities in connection with any appeal, review or contestation of any Encumbrance or any matter giving rise to an Encumbrance described in (i) or (iii) above;|
|(vii)||zoning restrictions, easements, rights of way, leases or other similar encumbrances or privileges in respect of real property which in the aggregate do not materially affect the value of such property and any related Security Document nor impair the use of such property by the relevant Person in the operation of its business, and which are not violated in any material respect by existing or proposed structures or land use;|
|(ix)||security given by the relevant Person to a public utility or any Governmental Body, when required by such utility or Governmental Body in connection with the operations of the relevant Person, in the ordinary course of its business, which singly or in the aggregate do not materially detract from the value of the asset concerned or materially impair its use in the operation of the business of the relevant Person;|
|(x)||security interests charging property acquired, which is granted or assumed or which arises by operation of law in favour of the transferor concurrently with and for the purpose of the acquisition of such property, in each case where (i) the principal amount secured by the security interest is not in excess of the purchase price (after any post-closing adjustment) of the property acquired, and (ii) such security interest extends only to the property acquired and its proceeds, including capital leases; and,|
|(xi)||any other Encumbrance which the Lender approves in writing as a Permitted Encumbrance subsequent to the date hereof.|
(ll) “Person” means a natural person, partnership, corporation, joint stock company, trust, unincorporated association, joint venture or other entity or governmental entity, and pronouns have a similarly extended meaning.
(mm) “PNE Revenue” means revenue generated by the Corporation, or its Subsidiary, related to the interoperative neuromonitoring professional bill where a patient has
either a private funded insurance plan, workers compensation, or other coverage policy and where the Corporation, or its Subsidiary collects directly from the relevant third-party payor, whether directly through the Corporation, or its Subsidiary, owning 100% of the professional case revenue, or indirectly through fees relating to a master service agreement or as a distribution from such Person's ownership interest in the direct service provider.
(nn) “Premises” means any premises owned or occupied by the Corporation at any time.
(oo)“Rate” means the rate of interest described in Section 1.2.
(pp) “Receiver” shall include one or more of a receiver, receiver‒manager or receiver and manager of all or a portion of the undertaking, property and assets of the Corporation or any Guarantor appointed by the Lender pursuant to this Debenture, any of the Security Documents or by or under any judgment or order of a court.
(qq) “Requirement for Guarantor” means the requirement to add a Subsidiary as a guarantor (providing a guarantee and general security in the form required by the Lender) where the acquisition of such Subsidiary was financed, directly or indirectly, by proceeds of any Advance or of required to meet the covenant requirement of Revenue consolidation in the Corporation and Guarantors.
(rr) “Revenue” means all of the revenue of the Corporation and Guarantors including the PNE Revenue, Technical Revenue and Government/ Hospital Revenue and all revenue required to be consolidated from the Subsidiaries which for clarity is the amount of revenue of such Subsidiary that the Corporation or Guarantor as owner is entitled as its percentage interest.
(ss) “Secured Property” means all property and assets of the Corporation and the Guarantors subjected to the security interests and charges created by the Security Documents.
(tt) “Security Documents” means, collectively, this Debenture, the Guarantees, General Security Agreements, Shares Pledges, the Assignment of Insurance and all other agreements and other instruments delivered to the Lender by or on behalf of the Corporation or any Guarantors (whether now existing or presently arising) for the purpose of establishing, perfecting, preserving or protecting any security interest held by the Lender in respect of any Obligations.
(uu) “Senior Revolving Loan” means that certain portion of the Commitment which outstanding Advances shall not to exceed, in aggregate, $2,000,000 at any time, which is described as the "Senior Revolving Loan" in the Commitment Letter.
(vv) “Senior Term – Acquisition Line” means that certain portion of the Commitment equal to $3,000,000 which is described as the "Senior Term – Acquisition Line" in the Commitment Letter.
(ww)“Senior Term Loan” means that certain portion of the Commitment equal to
$6,000,000, which is described as the "Senior Term Loan" in the Commitment Letter.
(yy) “Subordination Agreement” means the agreement subordinating payment rights of the shareholders of the Corporation to the payment rights of the Lender.
(zz) “Subsidiary” means a corporation controlled by the corporation being considered, as the term “control” is defined in the Business Corporations Act (Ontario) and for this Debenture means the subsidiaries of the Corporation.
(aaa) “Taxes” means all taxes of any kind or nature whatsoever imposed by any Governmental Body including, without limitation, income taxes, sales or value‒ added taxes, levies, stamp taxes, royalties, duties, and all fees, deductions, and withholdings imposed, levied, collected, withheld or assessed, together with penalties, fines, additions to tax and interest thereon.
(bbb) “Technical Revenues” means revenue generated by the Corporation, or its Subsidiary, related to the interoperative neuromonitoring professional bill where a patient has either a private funded insurance plan, workers compensation, or other coverage policy and where the Corporation, or its Subsidiary collects directly from the patient, with such revenue being 100% owned by the Corporation.
(ccc) “Term Loan” means, collectively, the Senior Term – Acquisition Line and the Senior Term Loan.
|(a)||“This Debenture”, “hereto”, “hereby”, “hereunder”, “herein”, and similar expressions refer to the whole of this Debenture and not to any particular Article, Section, paragraph, clause, subdivision or other portion hereof.|
Income Tax Act (Canada).
|(c)||All references herein to any statute or regulation shall refer to such act and the regulations thereunder as the same may be amended or replaced from time to time.|
|(d)||Except as expressly provided herein, terms which are defined in the Personal Property Security Act (Ontario) shall have the same meaning where used herein as the same may be amended or replaced from time to time and specifically means the equivalent expression under the provisions of Article 9 of the Uniform Commercial Code of the State of Colorado.|
|(e)||Words importing the singular number only include the plural and vice versa and words importing gender shall include all genders.|
|(f)||All financial or accounting determinations, reports and statements provided for in this Debenture shall be made or prepared in accordance with generally accepted accounting principles applied in a consistent manner.|
|(g)||The division of this Debenture into Articles and Sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Debenture.|
|(h)||The Schedules annexed hereto shall, for all purposes, form an integral part of this Debenture.|
|(k)||Where the word “including” or “includes” is used in this Debenture, it means “including (or includes) without limitation”.|
|(l)||Wherever in this Debenture reference is made to generally accepted accounting principles, such reference shall be deemed to mean the generally accepted accounting principles from time to time approved by the Canadian Institute of Chartered Accountants, or any successor institute, applicable as at the date on which a given calculation is made or required to be made in accordance with generally accepted accounting principles.|
This Debenture shall be governed by and interpreted and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein. To the extent interpretation requires consideration of the grant of security and the perfection and enforcement thereof this Debenture shall be governed by and interpreted and enforced in accordance with the laws of the State of Colorado and the Uniform Commercial Code as adopted therein.
ARTICLE 3 SECURITY
|(a)||Subject to Sections 3.2, 3.3 and 3.4, as general and continuing collateral security for the payment and satisfaction of the Obligations, the Corporation, and each Guarantor hereby grants a security interest over all assets and further agrees to supplement and confirm such grant by the grant of security pursuant to the Security Documents to the Lender, such to be a security interest in, and charges by way of a fixed and a floating charge, the whole of the undertaking of the Corporation or Guarantor (as the case may be) and all of its property and assets,|
real and personal, movable and immovable, tangible and intangible, of every nature and kind whatsoever, wheresoever situate, both now owned and hereafter acquired. Each of the Corporation and Guarantors agrees to give the additional agreements defined as Security in supplement to this grant of security interest.
|(b)||The Corporation and each Guarantor and the Lender hereby acknowledge that (i) value has been given to the Corporation by the Lender, (ii) the Corporation and/or the Guarantors have rights in the Secured Property (other than after‒acquired property), and (iii) the Corporation and the Guarantors have not agreed to postpone the time of attachment of the security interest granted hereunder.|
The last day of any term created by any lease, verbal or written, or any agreement therefor, now held or hereafter acquired by the Corporation or any Guarantor is excepted out of the Secured Property, but the Corporation or Guarantor, as the case may be, shall stand possessed of any such reversion remaining in the Corporation or Guarantor of any leasehold premises in trust for the Lender to assign and dispose thereof as the Lender may direct. Where the giving of a charge or security interest on any real or personal property held by the Corporation or a Guarantor under lease requires the consent of the lessor of such property, the giving of the charge or security interest hereunder on such property shall not take effect until such consent is obtained or legally dispensed with but the suspension of the effect of the charge or security interest on such property shall not affect the charge or security interest on any other property of the Corporation or Guarantor, as applicable.
|(a)||To the extent that the creation of a granted security interest would constitute a breach, or cause the acceleration, of any agreement, right, licence, or permit to which any Credit Party is a party, the security interest will not attach to it. However, such Credit Party shall hold such contractual rights in trust for the Lender and shall assign that agreement, right, licence, or permit to the Lender immediately upon obtaining the consent of the other party, .|
|(b)||The security interest granted will be provided on the basis that it will nonetheless immediately attach to any related rights if, to the extent that, and as at the time that attachment to the related rights is not illegal, is not unenforceable against the Lender or other third parties generally, and would not result in an ineligible transfer or a material loss or expense to any Credit Party. Each Credit Party shall use reasonable efforts to obtain all required material approvals as soon as reasonably practicable.|
|(c)||To the extent permitted by applicable Law, each Credit Party shall hold in trust for the Lender and, after a Default occurs, provide the Lender with the benefits of, each agreement, right, licence, or permit and enforce all related rights at the direction of and for the benefit of the Lender or at the direction of any other Person that the Lender may designate.|
Each Credit Party will grant a security interest in its intellectual property only as security. Before the security interest becomes enforceable, the Lender will not be or be deemed to be the owner of any of the intellectual property. Further, the Lender will not be deemed to have assumed, or be deemed to be liable for, any covenant, agreement, or other obligation of any Credit Party under any agreement, right, licence, or permit relating to the intellectual property to which any Credit Party is a party
The charges and security interests hereby created shall have effect and be deemed to be effective whether or not the monies or obligations hereby secured or any part thereof shall be advanced or owing or in existence before or after or upon the date of this Debenture and neither the giving of this Debenture nor any advance of funds shall oblige the Lender to advance any funds or any additional funds.
Any and all payments made at any time in respect of the Obligations and the proceeds realized from any Secured Property held therefor (including amounts realized from the enforcement of this Debenture) may be applied (and reapplied from time to time notwithstanding any previous application) to such part or parts of the Obligations as the Lender sees fit. The Lender may hold as additional security hereunder any increase or profits or other proceeds realized from the Secured Property (including money) for such period of time as the Lender sees fit. The Corporation and the Guarantors shall be accountable for any deficiency.
Provided that if the Corporation, its successors or assigns or any of them, make or cause to be made due payment or performance of all Obligations in full and the Lender has no remaining commitments in respect of the Loan, then, subject to this Debenture, this Debenture and the other Instruments shall be absolutely null and void and the Lender shall on request therefor by the Corporation, and at the expense of the Corporation, at that time surrender this Debenture to the Corporation and discharge all of the Instruments, but until that time the same shall remain in full force and effect despite the repayment or satisfaction from time to time of the whole or any part of the Obligations.
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION AND THE GUARANTORS
The Corporation and each Guarantor represents and warrants to the Lender as follows:
to own its properties and assets and to carry on its business as presently carried on by it or as contemplated hereunder to be carried on by it and holds all Material Authorizations. Schedule 4.1 (a) is an accurate statement as to the jurisdiction of incorporation and location of assets of each.
|(b)||Power and Capacity. It has the corporate power and capacity to enter into this Debenture and each Instrument to which it is a party and to do all acts and things as are required or contemplated hereunder or thereunder to be done, observed and performed by it.|
|(c)||Due Authorization. It has taken all necessary corporate action to authorize the execution, delivery and performance of this Debenture and each Instrument to which it is a party.|
|(d)||No Shareholder Agreement. There is no shareholder agreement which restricts, in whole or in part, the powers of the Corporation’s or any Guarantor’s directors to manage or supervise their business and affairs.|
|(e)||No Contravention. The execution and delivery of this Debenture and the other Instruments to which it is a party and the performance by it of its obligations hereunder or thereunder (i) does not and will not contravene, breach or result in any default under its articles, by‒laws, constating documents or other organizational documents, or under any material lease, agreement or other legally binding instrument, license, permit or Applicable Law to which it is a party or by which it or any of its properties or assets may be bound, (ii) will not oblige it to grant any Lien to any Person other than the Lender and (iii) will not result in or permit the acceleration of the maturity of any indebtedness, liability or obligation of it under any material lease, agreement or other legally binding instrument of or affecting it.|
|(f)||No Consents Required. No authorization, consent or approval of, or filing with or notice to, any Person (including any Governmental Body) is required in connection with the execution, delivery or performance of this Debenture by it or any other Instrument by it, except for customary filings required in connection with the charges provided for herein and except for TSXV approval.|
|(g)||Permits. It has all licences, permits, approvals and franchises that it requires, or is required to have, to own its properties and assets and to carry on its business as presently conducted, except where the absence of same would not have a Material Adverse Effect. All such licences, permits, approvals and franchises are listed in Schedule 4.1(g) herein and are in good standing and no actions, proceedings, investigations or other steps of any kind are in process, pending or, to its knowledge, threatened or which might result in any such licence, permit, approval or franchise being terminated, revoked, withdrawn, suspended or otherwise made unavailable to the it for any period of time, except where such action, proceeding, investigation or other step would not have a Material Adverse Effect. It is|
conducting its business in compliance with all Applicable Laws, except where non-compliance would not have a Material Adverse Effect.
|(h)||Financial Statements. The Lender has been furnished with a copy of the audited, internally consolidated financial statements of the Corporation for the year ended December 31, 2020 and the internal financial statement of the Corporation for the period ended March 31, 2021 (the “Financial Statements”) and such have been prepared in accordance with generally accepted accounting principles and fairly, completely and accurately present the financial condition of the Corporation and the Guarantors (on a consolidated basis) and the financial information presented therein in all material respects for the period and as at the date thereof. The notes to such financial statements do not contain any misstatement of a material fact nor do they omit to state a material fact required to make any statement contained therein not untrue or misleading. It has no outstanding material liabilities (including Funded Indebtedness, Contingent Liabilities or otherwise) other than those disclosed in the Financial Statements, those expressly permitted herein, and those subsequently incurred in the ordinary course of business, which such obligations are currently in good standing in all material respects. Since the date of the Financial Statements, there has been no development which has had or will have a Material Adverse Effect.|
|(i)||Non‒Arm’s Length Transactions. Except as approved by the Lender in writing, or as is required to consolidate the Revenue at the Corporation and Guarantors, it has no obligations to any Person not dealing at Arm’s Length with it, other than on commercially reasonable terms and within the limitations of the other provisions hereof.|
|(j)||No Litigation. There is no court, administrative, regulatory or similar proceeding (whether civil, quasi‒criminal, or criminal), arbitration or other dispute settlement procedure, investigation or enquiry by any Governmental Body, or any similar matter or proceeding (collectively “proceedings”) against or involving it (whether in progress or, to its knowledge, threatened) which, if determined adversely to it, would have a Material Adverse Effect; no event has occurred which might give rise to any proceedings which would have a Material Adverse Effect, and there is no judgment decree, injunction, rule, award or order of any Governmental Body outstanding against it which has or may have a Material Adverse Effect.|
|(k)||No Default. It is not in default or breach under any material commitment or obligation (including obligations in relation to Funded Indebtedness) or under the terms and conditions relating to any Material Authorizations where such default or breach would give rise to a Material Adverse Effect, and there exists no state of facts which, after notice or the passage of time or both, would constitute such a default or breach; and there are no proceedings in progress, pending or, to its knowledge, threatened which may result in the revocation, cancellation suspension or any material adverse modification of any Material Authorization.|
|(i)||delivered or caused to be delivered all required Tax returns to the appropriate Governmental Body;|
|(ii)||paid in full all Taxes (including Tax instalments) due and owing by it to the date hereof, except any which are Permitted Encumbrances; and|
|(iii)||withheld and collected in all material respects all Taxes required to be withheld and collected by them and remitted such Taxes when due to the appropriate Governmental Body,|
and no material assessment, appeal or claim is, as far as it is aware, being asserted or processed with respect to such claim, Taxes or obligations.
|(m)||Authorized and Issued Capital. Schedule 4.1(m) accurately describes, as of the date hereof, the authorized and issued share capital of the Corporation and Guarantors.|
|(n)||Insurance. It insures with good and responsible insurance companies approved by the Lender all of its property and other assets of an insurable nature against fire and other casualties (including, without limitation, those casualties specified by the Lender) at a minimum in the same manner and to the same extent as such insurance is carried by prudent corporations carrying on a similar business and owning similar property, and under all applicable worker’s compensation laws, at a minimum in the same manner and to the same extent as such insurance is carried by prudent corporations carrying on a similar business and owning similar property.|
|(o)||Funded Indebtedness. Schedule 4.1(p) sets forth a complete and accurate list of all of its Funded Indebtedness (on a consolidated basis) at the date hereof in relation to which it has issued security.|
|(p)||Solvency. It has not committed an act of bankruptcy, proposed a compromise or arrangement to its creditors’ generally, had any petition for a receiving order in bankruptcy filed against it, taken any proceeding to have itself declared bankrupt or wound‒up or taken any proceeding to have a Receiver appointed over it or any part of its assets.|
|(q)||Articles, By‒Laws, Etc. True and complete copies of its articles of incorporation (including all amendments thereto) and by‒laws and all other constating documents of it have been delivered to the Lender. There are outstanding no applications or filings which would alter in any way its constating documents or corporate status. The minute books of it contain all by‒laws and resolutions of the directors and shareholders of it currently in effect and the corporate and other records of it have been maintained in all material respects in accordance with all Applicable Law.|
|(r)||Location of Business and Assets. As of the date hereof the only locations at which it has any place of business or assets (other than inventory and equipment located elsewhere in the ordinary course of business) are as set forth in Schedule 4.1(s) including the status as to owned or leased.|
|(s)||Title. It has good and marketable title to all of its undertaking, property and assets, free and clear of any Encumbrances and no Person has any agreement or right to acquire their interest in any of such properties out of the ordinary course of business.|
|(t)||Collections/ Revenue. Each of the Corporation and the Guarantors are entitled to collect and receive all receivables and revenues generated by Subsidiaries that are not Guarantors to the extent of the Revenue, exclusive of all other Persons, and collect and receive such receivables and revenues promptly after the same are generated. All Revenue of the Corporation, Guarantors and all Subsidiaries consolidates as to legal entitlement and practically at the Corporation and Guarantors as Revenue.|
The Corporation and each Guarantor covenants that the representations and warranties made by it in this ARTICLE 4 shall be true and correct on each day that this Debenture remains in force and effect, with the same effect as if such representations and warranties had been made and given on and as of such day, notwithstanding any investigation made at any time by or on behalf of the Lender or its counsel and notwithstanding any foreclosure or enforcement pursuant to any Security Documents; except that if any such representation and warranty is specifically given as of the date hereof or in respect of a particular date or particular period of time and relates only to such date or period of time, then such representation and warranty shall continue to be given as at such date or for such period of time.
ARTICLE 5 COVENANTS OF THE CORPORATION
So long as this Debenture remains outstanding, the Corporation and each Guarantor covenants and agrees to:
|(a)||To Use Proceeds. The Corporation shall use the first Advance of the Loan under this Debenture to pay the fees and expenses of the Lender due hereunder, otherwise only to refinance certain existing Funded Indebtedness with Central Bank & Trust, and for no other application or use, a breach of this requirement is specifically a default under this agreement. Approval of the use of an Advance for acquisition shall be in the discretion of the Lender but based on the criteria agreed between the Corporation and the Lender from time to time.|
|(b)||To Pay Costs. It shall pay all reasonable costs, charges and expenses of or incurred by the Lender (a) in taking, recovering or keeping possession of any of|
the Secured Property or in any other proceedings taken in enforcing the remedies provided herein or otherwise in relation to this Debenture or the Secured Property, or by reason of non-payment of the Obligations, (b) the costs of any sale proceedings hereunder, and (c) the costs of any Receiver with respect to, and all expenditures made by the Lender or any Receiver in the course of, doing anything hereby permitted to be done by the Lender or such Receiver. All such costs and expenses and other amounts payable hereunder, together with interest at the rate applicable to any Obligations, shall be payable on demand and shall constitute a charge on the Secured Property. Without limiting the generality of the foregoing, such costs shall extend to and include any reasonable legal costs incurred by or on behalf of the Lender or the Receiver as between solicitor and his own client
|(c)||To Pay Debts. It shall punctually pay and discharge every obligation, the failure to pay or discharge of which might result in any Encumbrance or right of distress, forfeiture, termination or sale or any other remedy being enforced against its assets and property and provide to the Lender when required by the Lender satisfactory evidence of such payment and discharge, but it may, on giving the Lender such security (if any) as the Lender may require, refrain from paying or discharging any obligation the liability for which is being contested in good faith.|
|(d)||To Comply with Obligations and Maintain Corporate Existence and Security. It shall:|
|(i)||pay or cause to be paid all Obligations falling due hereunder on the dates and in the manner specified herein and comply with its obligations hereunder, under the Security Documents and the other Instruments to which it is a party;|
|(iii)||diligently preserve all its rights, licences, powers, privileges, franchises and goodwill, except where failure to do so would not have a Material Adverse Effect;|
|(iv)||observe and perform all of its obligations and comply with all conditions under leases, licences and other agreements to which it is a party or upon or under which any of its assets or property is held, except where failure to do so would not have a Material Adverse Effect;|
|(v)||carry on and conduct its business in a proper and efficient manner so as to preserve and protect its assets and property and income therefrom; and specifically ensure that all inter-corporate arrangements are on market usual terms|
|(vi)||keep proper books of account with correct entries of all transactions in relation to its business;|
|(vii)||observe and comply with in all material respects all valid requirements of Applicable Law and of any Governmental Body relative to its assets and property or the carrying on by it of its business;|
|(viii)||repair and keep in repair and good order and condition in all material respects (reasonable wear and tear excepted) all property, including the Secured Property, the use of which is necessary in connection with its business;|
|(ix)||promptly notify the Lender in writing of any proposed change of name of it or of its chief place of business;|
|(x)||keep the Lender regularly informed in writing as to the location of the Secured Property (other than inventory located elsewhere in the ordinary course of business) and its books of account and other records;|
|(xi)||pay all Taxes, levied, assessed or imposed upon it or its property as and when the same become due and payable save and except where it contests in good faith the validity thereof by proper legal proceedings and for which provision for payment adequate in the reasonable opinion of the Lender has been made;|
|(xii)||forthwith notify the Lender of the commencement of any litigation or other claim or process having the risk of payment in excess of $100,000, any default (or event, condition or occurrence which with the giving of notice and/or the lapse of time would constitute a default) in connection with any indebtedness, Funded Indebtedness or Contingent Liability in an amount exceeding $100,000;|
|(xiii)||advise the Lender forthwith upon becoming aware of any Default or Event of Default hereunder with detailed particulars thereof and deliver to the Lender upon request a certificate in form and substance satisfactory to the Lender signed by a senior officer certifying that no Default or Event of Default has occurred or, if such is not the case, specifying all Default or Events of Default and their nature and status;|
|(xiv)||endeavour to collect or, in the case of its Subsidiaries, cause to be collected, all accounts receivable in the ordinary course of business and to maintain all agreement and process to consolidate all such receivables as collected as Revenue at the Corporation or Guarantors;|
|(xv)||promptly cure or cause to be cured any defects in the execution or delivery of any Instrument to which it is a party and any defects in the validity or enforceability of any security hereunder and at its expense duly execute and deliver or cause to be duly executed and delivered all documents as the Lender may consider necessary or desirable for such purposes;|
|(xvi)||at its cost and expense, upon the request of the Lender, duly execute and deliver, or cause to be duly executed and delivered, to the Lender such documents and do or cause to be done such acts as may be necessary or desirable in the reasonable opinion of the Lender to carry out the purposes of this Debenture;|
|(xvii)||effect such registrations as may be required by the Lender from time to time to protect the security interest granted hereunder;|
|(xviii)||execute and deliver such security, documents, instruments or agreements following the date hereof as may be necessary or desirable in the reasonable opinion of the Lender to carry out the purposes of this Debenture; and,|
|(xix)||except as approved by the Lender in writing, cause all Revenue and receivables generated by any of the Corporation's Subsidiaries, other than the Guarantors, to be promptly collected by the Corporation and the Guarantors in accordance with collection and remittance practices existing as of the effective date of this Debenture and be remitted as Revenue on a consolidated basis to the Corporation or Guarantors.|
|(e)||To Insure. It shall keep the Secured Property insured in such amounts as the Lender may reasonably require against loss or damage by fire and such other risks as the Lender may from time to time specify, with insurers approved by the Lender. It shall, whenever from time to time requested by the Lender, provide the Lender satisfactory evidence of such insurance and any renewal thereof which shall at all times be subject to charging clauses in a form approved by the Lender, and shall cause the Lender to be shown as a loss payee under the policy or policies. Each policy of insurance shall be in form and substance acceptable to the Lender, acting reasonably, shall not be subject to any co‒insurance clause and shall name the Lender as loss payee and additional insured.|
|(i)||The Corporation shall provide to the Lender within 120 days of the financial year end of the Corporation audited financial statements for the Corporation (on a consolidated basis), including the balance sheet and statements of income, retained earnings and changes in financial position, together with all supporting schedules.|
|(ii)||The Corporation shall provide quarterly financial statements to the Lender within 45 days after the end of each fiscal quarter including the year to date financial statements which shall contain a comparison of budget to actual and management comments regarding any material variations from budget annual budget setting out, among other things, the “bad debt allowance” and all “write off” of accounts receivable for a period commencing on the first day of the fiscal year in which such quarterly|
financial statement has been furnished and ending on the last day of the relevant reporting period.
|(iii)||Within 10 days of the end of each month, in respect of such preceding month, the Corporation shall provide (i) a detailed statement and an ageing of the accounts receivable, on a consolidated basis, in respect of all Eligible Accounts, and such other details, including detail of any adjustments to the carrying balances of accounts receivable from the prior period and not reflected in repayment (reflecting and discussing write-off, provisions, booked accrual rate and similar), classification by name, customer location and currency as the Lender may reasonably require, and|
(ii) a borrowing base reporting certificate substantially in the form of Exhibit 5.1(f), prepared as of the date of such certificate and in respect of such Eligible Accounts.
|(iv)||The Corporation shall provide to the Lender an annual budget and forecast for each fiscal year (including management discussion and analysis on budget and forecast which shall set out, without limitation, all assumptions, key drivers, and other material inputs used in forming such budget and forecast, and any other information which the Lender may reasonably request), in form and substance satisfactory to the Lender, acting reasonably, not later than 30 days after the first day of that fiscal year.|
|(v)||The Corporation shall provide to the Lender and its representatives, agents and designees any other information concerning its financial position and business operations which the Lender or such representative, agents or designees may from time to time reasonably request.|
|(vi)||The Corporation shall provide the Lender with such other reports as it provides any other lenders to the Corporation from time to time.|
|(g)||Notice of Litigation and Damage. It shall promptly notify the Lender of (a) all claims or proceedings pending or, to its knowledge, threatened against it which may give rise to uninsured liability in excess of $100,000 or which would have a Material Adverse Effect, and (b) all damage to or loss or destruction of any property comprising part of the Secured Property which may give rise to an insurance claim in excess of $100,000; and will supply the Lender with all information reasonably requested in respect of any such claim.|
|(h)||Security. The Corporation and Guarantors will provide and keep in good standing and perfected the Security required of the Corporation and Subsidiary Guarantors as described in the definition of Security and Article 2, at all times as first security for the Corporation and as to the Subsidiaries subject only to Permitted Encumbrances unless otherwise approved by the Lender. Forthwith, and in any event with thirty (30) days, on any entity becoming a Subsidiary needed to comply with the Requirement for Guarantor, advise the Lender of the|
acquisition or other obtaining of such Subsidiary and provide a Guarantee and Security in the form required by the Lender.
|(i)||Guarantees and Revenue Consolidation. The Corporation will notify the Lender of any acquisition of a Subsidiary promptly upon concluding the acquisition and will, at the request of the Lender, cause any wholly owned Subsidiary to provide a Guarantee and security and will cause the revenue of any Subsidiary that is not wholly owned to be consolidated to the Corporation or Guarantors.|
At all times, the Corporation hereby covenants and agrees that for so long as this Debenture is in force and any portion of the Obligations remains unpaid, unfulfilled and/or unsatisfied as follows, the Corporation shall not, and each Guarantor agrees that it shall not, without the prior consent of the Lender:
|(a)||Encumber Property. Create, grant, assume or suffer to exist any Encumbrance upon any of its properties or assets other than Permitted Encumbrances, and as to the Guarantors only Encumbrances arising from the acquisition of property, or the improvement of property for expansion, refurbishment, repurposing, material maintenance or similar in the ordinary course of business, unless approved by the Lender.|
|(b)||Sell. Remove, destroy, lease, transfer, assign, sell or otherwise dispose of (other than to another Guarantor) any of its property or assets, except for sales in the ordinary course of business, sales of obsolete equipment, and sales of other assets not in excess of $200,000 in the aggregate in any fiscal year.|
|(c)||Funded Indebtedness. Incur or become liable for any Funded Indebtedness other than the Obligations, debt which comprises Permitted Encumbrances and as to the Guarantors only debt incurred for the acquisition of property, or the improvement of property for expansion, refurbishment, repurposing, material maintenance or similar in the ordinary course of business, unless approved by the Lender in writing.|
|(d)||Indebtedness. Incur or repay any material debts, liabilities or obligations (including Funded Indebtedness and Contingent Liabilities) whether direct or indirect, actual or contingent, other than those specifically permitted hereunder or under the Security Documents, except for normal trade debts, liabilities or obligations to Persons dealing at Arm’s Length with it arising in the ordinary course of business.|
|(e)||Sale of Shares in Guarantors. Sell, assign or otherwise transfer (other than to another Guarantor) any shares which it holds, directly or indirectly, in the capital of any Subsidiary, without the prior written consent of the Lender.|
|(f)||Asset Sales. In addition to the restrictions elsewhere herein, set out sell any assets from the Corporation or a Guarantor to any person including to another person even if a related party or Subsidiary which is not a Guarantor.|
|(g)||Collections. Take any action to divert, redirect, assign, sell, or otherwise change the collection practices of the Corporation and the Guarantors of the revenues and receivables generated by any Subsidiary of the Corporation if the result of such diversion, redirection, assignment, sale or change would entitle any Person other than the Corporation or the Guarantors to such Revenues or receivables all of which are to be remitted on a consolidation basis as Revenue to the Corporation or Guarantors.|