When the financial position of a business has yet to been proven and that business must obtain a loan from a financial institution, the latter will often require the owners of the corporation to: a) subordinate repayment of any advances they made to the business to repayment of the financial institution’s loan, and b) make any necessary capital contribution to maintain the financial ratios. Without these undertakings, the financial institution may refuse to grant credit to the business, which may compromise the business’s capacity to adequately finance its activities. Our agreement template presents the main components of the legal framework of such undertakings.

0.00 INTERPRETATION
0.01 Definitions
0.01.01 Agreement
0.01.02 Breach
0.01.03 Charges of LENDER
0.01.04 Contribution Demand
0.01.05 Event of Default
0.01.06 Financing Agreement
0.01.07 Force Majeure
0.01.08 Legal Representatives
0.01.09 PARTY
0.01.10 Person
0.01.11 Project
0.01.12 Property
0.01.13 Subordinated Charge
0.01.14 SUBORDINATED CREDITOR
0.01.15 Subordinated Debt
0.01.16 Subordinated Document
0.01.17 Undertakings
0.02 Financial Expressions
0.03 Precedence
0.04 Jurisdiction
0.04.01 Governing Law
0.04.02 Non-compliance
0.05 Miscellaneous
0.05.01 Cumulative Rights
0.05.02 Time and Dates
0.05.03 Financial References
0.05.04 References within Agreement
0.05.05 Gender and Number
0.05.06 Headings
0.05.07 Presumptions
0.05.08 Knowledge
0.05.09 Approval
0.05.10 GAAP
1.00 PURPOSE
1.01 Contributions
1.02 Subordination
2.00 CONSIDERATION
3.00 TERMS OF PAYMENT
4.00 SECURITY
4.01 In favour of LENDER
4.01.01 Hypothec by …………………. (Name of subordinated creditor)
4.01.02 Hypothec by …………………. (Name of subordinated creditor)
4.02 In favour of the SUBORDINATED CREDITORS
5.00 MUTUAL REPRESENTATIONS AND WARRANTIES
6.00 REPRESENTATIONS AND WARRANTIES OF LENDER
7.00 REPRESENTATIONS AND WARRANTIES OF BORROWER
8.00 REPRESENTATIONS AND WARRANTIES OF THE SUBORDINATED CREDITORS
8.01 Status
8.02 Canadian Resident
8.03 Property
8.04 Capacity
8.05 Infringement
8.06 Acknowledgement
8.07 Acknowledgement between Subordinated Creditors
8.08 Subordination and Postponement of Debt
8.09 Subordination and Postponement of Charges
9.00 MUTUAL DUTIES AND OBLIGATIONS
10.00 OBLIGATIONS OF THE SUBORDINATED CREDITORS
10.01 Contribution
10.02 Contribution Request
10.03 Investment Proof
10.04 Exercise of Rights
10.05 Cancellation of Subordinated Charges
10.06 Assignment
11.00 OBLIGATIONS OF BORROWER
12.00 OBLIGATIONS OF LENDER
13.00 SPECIAL PROVISIONS
13.01 Further Assurances
13.02 Other Remedies
13.02.01 Choices
13.02.02 No Limitations
13.03 Prescription
13.04 Exception as to Postponement
13.05 Assignment
13.06 Assignment by LENDER
13.06.01 Acknowledgement
13.06.02 Documentation
13.07 Priority Collocation
13.08 Insolvency or Bankruptcy of BORROWER
13.08.01 Rights of LENDER
13.08.02 Rights of the SUBORDINATED CREDITORS
13.09 Payment Held in Deposit
13.10 Scope of the Subordination and the Postponement
14.00 GENERAL PROVISIONS
14.01 Notice
14.02 Dispute Resolution
14.02.01 Good Faith Negotiations
14.02.02 Mediation
14.02.03 Arbitration
14.03 Election
14.04 Counterparts
14.05 Amendment
14.06 Waiver of Rights
14.07 Electronic Transmission
14.08 Language
15.00 TERMINATION
15.01 Termination of Financing Agreement
15.02 Reimbursement in Full
16.00 EFFECTIVE DATE
17.00 DURATION
18.00 SCOPE


SCHEDULE 13.04 – CURRENCY NOTES