service standards – loan taking - bdc · western canada 1 rev. october 2019 part i – doing...

Western Canada Rev. October 2019

SERVICE STANDARDS – LOAN TAKING

Applies to British Columbia, Alberta, Saskatchewan, Manitoba, the Yukon,

Northwest Territories and Nunavut

The following provisions constitute instructions and are deemed incorporated into any mandate or instructions given by BDC to a solicitor. Acceptance of any mandate incorporates acceptance of these terms. This form will change from time to time and should be checked on-line for changes when instructions are received. Recent Changes (see sections in red in body of document as follows): October 2019 - 3 vii) – clarification with respect to electronic signatures

- 9(xiv) – added how to deal with buy-back charges encumbering realty - 11(ii) – update BDC contact person at Parlee McLaws LLP for Aircraft International

Registry April 2019 - 9(ii), 10(vi) and 11(v) – clarification that verification of insurance is required when relying

on an existing mortgage or GSA - 9(xiii) – added clarification on use of Purchase Money Security Interests - 10(i) – added clarification that taxes for current year which have been billed must be paid

prior to initial disbursement, in addition to previous year’s taxes - 11(i) – added requirement to include BDC Legal (West) email address

([email protected]) for PPR registrations in Alberta - 11(ii) – update BDC contact person at Parlee McLaws LLP for Aircraft International

Registry August 2017 - 11(i) –added Secured Party Codes for Lloydminster and Burnaby business centres

- Section 9 (ii) – Insurance on Assets. See revised insurance requirements for: o PROPERTY (building and equipment located outside of Canada) – NEW o BUILDER’S RISK OR COURSE OF CONSTRUCTION o TRANSPORTATION RISK (CARGO) – no longer a requirement to have

coverage for property transported by marine vessels shipped “under deck” o Insurance When Commitment over $25 million - this clause has been

eliminated as solicitors are responsible for verifying insurance for all charged assets for loans over $500,000, unless otherwise specified in the Service Standards.

TABLE OF CONTENTS

PART I – Doing Legal Work for BDC 1. Legal Entities ............................................................................................. 1 2. BDC Expectations and Communications .................................................. 1 3. Acting for BDC ........................................................................................... 2 4. Small Loans ............................................................................................... 3 5. Equipment Line Loans ............................................................................... 4 6. Loan Disbursement ................................................................................... 5 7. Reporting ................................................................................................... 6 8. Loan Amendments ................................................................................... 8

PART II –Security Taking Topics – Western

9. Miscellaneous Topics ................................................................................ 9 10. Mortgages of Land ................................................................................... 14 11. Personal Property Security ...................................................................... 17 Schedule A – Title Insurance Endorsement –First Canadian ........................ 21 Schedule B – Title Insurance Endorsement – Stewart Title .......................... 23 Schedule C – Title Insurance Endorsement – Chicago Title ......................... 26

Western Canada 1 Rev. October 2019

PART I – Doing Legal Work for BDC

1 Legal Entities Business Development Bank of Canada - BDC is a federal crown corporation created by the Business

Development Bank of Canada Act. It is a continuation of the former Federal Business Development Bank and stands possessed of all security granted to FBDB that may still be outstanding. Business Development Bank of Canada Act S.C. 1995, Chapter 28

Continuation of Federal Business Development Bank -- s. 3(1) 3. (1) The Federal Business Development Bank established by the Federal Business Development Bank Act is continued as a body corporate under the name "Business Development Bank of Canada".

BDC Capital Inc. – this subsidiary is now used by our Growth & Transition Capital Group to provide subordinate financing to new clients. The Growth & Transition Capital Group and a Business Centre will occasionally provide separate financing to a common client. In that case a priority agreement may be required between BDC and BDC Capital Inc.

AlterInvest Fund LP and AlterInvest II Fund LP – prior to the establishment of BDC Capital Inc., BDC provided subordinate financing solutions through AlterInvest Fund LP and AlterInvest II Fund LP, in which BDC was the general partner. Some older subordinate financing loans were made directly by BDC.

2 BDC Expectations and Communications i) Dealing with Business Centre Staff

You will direct all your correspondence and inquiries to, and receive your instructions from, the BDC representative who issued your instructing letter (the “S&D Officer”). You may contact BDC’s internal Legal Services directly for technical questions, if required.

ii) Form of Correspondence Written correspondence with the S&D Officer may be conducted by e-mail, surface mail or fax.

iii) Reliance

We are completely relying on you to place the required security in an enforceable fashion and in the rank of registration as per each Letter of Offer we may send to you. We will not be reading or checking any security that you provide.

You will not provide BDC with legal documents for our review. If you require BDC’s direction as to a particular form or change to a form, you are to provide your recommendation to the S&D Officer together with sufficient commentary so that BDC can make a decision on the question.

Documents, such as priority agreements, presented to the S&D Officer for signing should only be presented with your recommendation that they should be signed and not for BDC’s consideration or review. If you require a decision as to some specific issue in the form, you should set that out in writing to the S&D Officer and provide your recommendation.

iv) Letter of Offer Our Letter of Offer constitutes our only loan contract and sets out our required security and the rank of registration of that security that we require you to obtain. Any change in the security requirements requires an amendment to the Letter of Offer, which the S&D Officer will arrange to have prepared after the change is approved and arrange to have signed. If you recommend any change in the security, please do so in writing to the S&D Officer or instructing office and await approval in writing before making any changes. If you receive a change in instructions orally you are to confirm that change in writing back to the S&D Officer.

v) Response Times Feedback from BDC clients indicates concerns about the time required to complete security in many cases. While BDC appreciates that there can be any number of causes of delay outside your direct control, in an effort to avoid delays and to identify problems quickly, please adhere, as a minimum, to the following requirements: The client is to be advised of the documentation and information you require within two (2) business days

of your receipt of the Instructing letter; If the client has not responded within two (2) business days of your request, follow-up by telephone is

required, and advise BDC;


Searches must be ordered within two (2) business days of receipt of the search data; BDC is to be advised immediately of any problems encountered in the searches; and All the documentation should be submitted only when the file is complete. If you cannot complete the

security within forty-five (45) days of the date of the Instructing Letter, advise BDC.

3 Acting for BDC i) Contact Solicitor

BDC will direct its loan taking work to a Solicitor in a firm who will be responsible for the relationship with BDC and conduct of BDC loan taking files in that firm for that city or province (the “Contact”).

Where a firm has offices in more than one city, there may be different Contacts named by BDC for different cities.

Instructing Letters for loan taking work going to that firm will be directed to the Contact.

ii) Delegation

Regular Loan Taking (loans for $10M or less) - The Contact may delegate all or part of the legal work to other professionals in their firm to limit costs or satisfy client preferences provided that the delegated professional satisfies BDC’s requirements for errors and omissions insurance. The Contact may engage legal professionals of their choice in other jurisdictions as necessary for searches, registration or security completion. Involvement of professionals at a higher hourly rate requires the approval of the S&D Officer.

Loans where the loan amount is over $10M – The Contact has been selected for their personal skill and qualities and must remain in active control of all files instructed. They may delegate parts of the work to other professionals in the firm or agents at the same or lower hourly rate, as they feel appropriate within this limitation. The Contact may engage the services of legal professionals of their choice in other jurisdictions as necessary for searches, registration or security completion. Use of another professional or agent at a higher hourly rate requires the approval of the S&D Officer.

iii) Acting for BDC and the Borrower This is not permitted on loans over $3,000,000 without the consent of internal BDC Counsel. It is permitted on loans under that amount if there is clearly no conflict.

iv) Insurance You will maintain per claim errors and omissions insurance in an amount at least equal to the amount of any loan instructed to you.

v) Confidentiality BDC owes its clients an obligation of confidentiality as set out in section 37 of the Business Development Bank of Canada Act and you are required to keep the borrower’s and guarantor’s information confidential beyond such release as is necessarily permitted for the loan security taking process.

37. (1) Subject to subsection (2), all information obtained by the Bank in relation to its customers is privileged and a director, officer, employee or agent of, or adviser or consultant to, the Bank must not knowingly communicate, disclose or make available the information, or permit it to be communicated, disclosed or made available.

(2) Privileged information may be communicated, disclosed or made available (a) for the purpose of the administration or enforcement of this Act and legal proceedings related to it; (b) for the purpose of prosecuting an offence under this Act or any other Act of Parliament; (c) to the Minister of National Revenue solely for the purpose of administering or enforcing the Income Tax Act or

the Excise Tax Act; or (d) with the written consent of the person to whom the information relates.

vi) Security Forms

You will use the standard BDC forms available on the Internet - www.bdc.ca/forms. If you require the forms in French, please contact Legal Services. If it is necessary to use a different form where a standard BDC form of that type is available you must obtain the prior consent of internal BDC Counsel.

Tip Sheets – some forms come with a disposable coversheet with specific instructions as to the use or completion of that form. These coversheets constitute instructions.


Modification of Forms – the standard BDC forms should not generally require modification but if you feel it is necessary to make minor changes in order to provide valid, effective and enforceable security you may make those changes but must advise as to the particulars and nature of those changes in your Solicitor’s Report. Any substantial changes to our security forms must be approved by BDC’s Legal Services department prior to disbursement, accompanied by the particulars of the changes and your opinion as to how these changes affect BDC’s required security.

Priority Agreements – although there is a priority agreement in the package of standard BDC documents its use is not mandatory (subject to the following bullet point) as the circumstances of loans vary widely and we look to you to use such forms and wording as you feel appropriate to put BDC in the required priority position. You do not have to comment in your report on changes to that form, if any. Priority/Subordination Agreements must not contain standstill or other enforcement restrictions that are operative against BDC unless such are specifically approved in the Letter of Offer, approved by written instructions from BDC Counsel or approved by amendment to the Letter of Offer, for the relevant loan.

BDC and RBC have agreed upon three forms of priority agreement to be used on loans involving mutual customers. Form A contemplates that RBC will have priority over inventory and accounts receivable, with BDC having first priority over the remainder of the borrower’s personal property. Form B contemplates that RBC will have priority over inventory, accounts receivable and specific listed equipment, with BDC having first priority over the remainder of the borrower’s personal property. Form C contemplates that BDC will only have first priority over specific listed equipment, with RBC having first priority over the remainder of the borrower’s personal property. If you are instructed on a loan where RBC is the other lender, you should use the applicable form. The forms are available with the other standard BDC forms available on the Internet.

Other Forms – if forms other than those standard forms provided by BDC are required we expect you to prepare such forms.

vii) Document Signing Where the borrower or guarantor wishes to sign security documents in your presence, we would request that you accommodate them rather than requiring them to engage counsel. In this case we would expect that you would have such persons sign an additional document indicating that no legal advice was sought or given, that they had the opportunity to seek other counsel, etc. Exceptions: Restrictions under the Law Society rules in British Columbia; and You will be expected to require independent legal advice for a borrower or guarantor where you feel those

concerns arise on the information before you. In those cases where you are not able to provide signing services internally we would expect you to have

arrangements with an arm’s length law firm who would provide signing services at a reasonably modest fee.

BDC does not permit the use of electronic signatures by Borrowers or Guarantors on Letters of Offer, amending letters, or security and corporate documents for loans that are instructed to external counsel, unless such signatures are legally required in the jurisdiction where the loan is being completed or where the security is being registered. You are responsible to ensure that handwritten signatures are obtained and an opinion as to execution does not obviate that requirement.

4 Small Loans The Instructing Letter may identify a loan less than or equal to $100,000 and not secured by realty as a "Small Loan" for security taking purposes, and for which reduced requirements apply. As to Small Loans only, where there is a conflict between this section and requirements elsewhere in this document, the requirements of this section govern.

i) Searches/Priorities–Restricted Requirements No searches are required including governmental lien searches, PPR searches, execution searches, etc. Although the Letter of Offer requires a particular ranking of security, you are not expected to confirm priority of registration.


ii) Insurance Unless specifically instructed otherwise, you are not expected to confirm that insurance is in place;

iii) Company Status No opinion is required as to the corporate capacity of either the borrower or the guarantor. However, we do expect you to search the provincial corporations registry to confirm the identity and existence of the corporation.

iv) Solicitor’s Report No Solicitor’s Report is required. Instead, we only require your written confirmation that security has been received and registrations are completed.

v) Loan Disbursement Funds will be disbursed to the borrower directly by BDC unless your assistance is specifically requested prior to disbursement. Prior to disbursement we will require you to submit: Written email confirmation that security taking has been completed and registered; Your final account.

vi) Your Account Your account, when received at the same time as your confirmation that security is complete, will be paid from loan funds. Subsequent to disbursement you must collect any outstanding amount directly from the client.

5 Equipment Line Loans The Instructing Letter may indicate that we have authorized an Equipment Line Loan (EL Loan). Such loans may be processed separately or concurrently with a regular term loan. An EL Loan establishes a loan facility that can be drawn upon by the borrower over a period of 12 months to facilitate the purchase of specific items of equipment. Normally the equipment purchased under the EL Loan will not be identified at the time the security is prepared and registered. However, you may occasionally receive equipment lists relating to equipment financed under an EL Loan. When that happens, you will need to assess BDC’s priority in respect of the listed equipment, as described below. As to EL Loans only, where there is a conflict between this section and requirements elsewhere in this document, the requirements of this section govern.

i) Searches/Registrations (The special requirements for Small Loans contained elsewhere in these Service Standards do not apply to EL Loans). For all EL Loans, you will obtain the security called for in the Letter of Offer relating to the EL Loan and will complete all Corporate and PPR searches required in that regard. You must either register a GSA or confirm that BDC has an existing GSA that is properly registered and enforceable against the Borrower’s assets. In addition, you must specifically determine whether BDC has priority on equipment that may be financed by BDC under the EL Loan in the future. At the time that you are instructed to prepare security you may receive a list of equipment, prepared by BDC, which is being financed in connection with an EL Loan. If so, you must not only determine whether BDC has priority on future equipment that may be financed under the EL Loan (as outlined above), but you must also complete such additional searches and registrations as are necessary, including registrations against any ‘serial numbered goods’ (as defined in applicable PPSA legislation), to confirm that BDC has a first security interest on the specific equipment shown on BDC’s list. You are not expected to negotiate priority agreements in connection with EL Loans. However, using the Security Confirmation form described below, you must provide BDC a list of all creditors that may have priority over equipment financed by BDC under the EL Loan, including both future equipment purchases and any equipment shown on BDC’s equipment list.

ii) Loan Disbursement You will not be involved in the disbursement of EL Loans. All disbursements on EL Loans will be handled directly by BDC’s Security & Disbursement Group.


iii) Security Confirmation Immediately upon execution and registration of the security required in the Letter of Offer relating to an EL Loan, you will prepare a Security Confirmation form and send it by email to the BDC representative from the Security & Disbursement Group who instructed you on the EL Loan. The “Security Confirmation – Equipment Line” form can be downloaded from our website at: www.bdc.ca/forms When completing the Security Confirmation form you must check all boxes that apply to a particular loan. In general terms, we require that you indicate whether BDC has priority on the goods listed in any BDC equipment list that has been provided to you, and whether BDC has priority on all other equipment that may be financed under the EL Loan in the future. In the Security Confirmation form you must provide a list of all creditors that may have priority over BDC’s security interest in equipment. You should only list creditors with general registrations ahead of BDC, or subsequent general registrations that have priority over BDC by operation of an existing priority agreement. You are not required to provide a list of item specific registrations or serial numbered goods unless such registrations are an exact match to pieces of equipment shown on an equipment list that has been provided to you in connection with the EL Loan. Your Security Confirmation will be relied upon by our Security & Disbursement Group to prepare and obtain item specific waivers/priority agreements from the creditors that you have identified as having priority over BDC’s security interest.

iv) Insurance You verify insurance coverage on EL Loans in the same manner that you would for any other loan. Those requirements are set forth in the Insurance Section of these Service Standards.

v) Solicitor’s Report You will issue your Solicitor’s Report and deliver the security documentation for the EL Loan as soon as possible after security is complete. This should be done regardless of whether the loan has been disbursed. Please follow the standard reporting procedures contained in these Service Standards.

vi) Solicitor’s Account Depending on the nature of the loan, the EL Loan Program may require that BDC pay the legal costs associated with obtaining security for, and disbursing the EL Loans. The section of the Letter of Offer entitled “Legal Fees and Expenses” identifies whether the legal costs and fees are to be paid by the Borrower or BDC. Where the Letter of Offer provides that BDC is to pay the legal costs and fees, you will render a separate invoice to BDC for the costs associated with the preparation and registration of security for the EL Loan. That invoice will be paid directly by BDC and you should not deduct the costs associated with the EL Loan from any disbursement made to the borrower. Your invoice for the EL Loan should be submitted for payment to the representative of BDC’s Security and Disbursement Group who instructed you.

In the event you are concurrently instructed to complete an EL Loan for which BDC is to pay the legal costs and fees and a Term Loan, you will invoice BDC for the EL Loan and deduct your fees and disbursements for the Term Loan when that loan is disbursed.

If the Letter of Offer provides that the Borrower is to pay the legal costs and fees, you should recover your fees and disbursements directly from the Borrower. Unless specifically otherwise approved, BDC will not pay your account.

6 Loan Disbursement Prior to the release of any funds to you, BDC requires notice in writing (e-mail or fax are acceptable) that the security called for in the Letter of Offer is complete, in accordance with BDC instructions. Funds will be released to you on your request, but should only be requested if you are in a position to disburse them to the client immediately. Any delay in the release of funds must be reported to the S&D Officer as early as possible.


Conditions Precedent to disbursement – Satisfaction of conditions precedent is generally dealt with directly between the S&D Officer and the borrower but must be satisfied prior to disbursement so you should confirm this with the S&D Officer before requesting funds.

Conditions Precedent to disbursement - Contract Review – The Letter of Offer may require review of a lease, franchise or other agreement to be satisfactory to BDC’s lawyers or BDC’s legal advisors. We are expecting you to conduct this review and advise as to the basic outline and effect of the contract, whether it is consistent with the terms of the loan’s “Loan Purpose and Funding”, security and underlying conditions and conditions precedent as set out in the Letter of Offer and if there are any unusual terms that would negatively affect BDC’s position.

Except for “Fast Track” disbursements, loans will normally be disbursed through your office and funds will be wired to you in trust. Please provide the S&D Officer with a voided trust account cheque to provide account information for the transfer.

Fast Track refers to the early advance of part of the loan directly from the S&D Officer to the borrower prior to the security being completed. In this case a promissory note is taken by BDC and held temporarily until the security is complete. This is only done on some loans and may be referred to in an underlying condition in the Letter of Offer.

At the time each loan disbursement is wired or otherwise delivered to your office, you will receive a covering letter from BDC that may contain additional specific instructions. In the event of a discrepancy between that letter and these instructions that letter will govern.

In the event BDC asks that funds from a particular disbursement be paid to a third party we will expect that you obtain the borrowers approval as to that payment and the amount.

Any use of the borrowed funds or any request that you direct funds in a manner not in accordance with the “Loan Purpose and Funding” set out in the Letter of Offer must be reported to the S&D Officer in writing immediately.

Loan proceeds used to repay existing BDC loans will be applied internally by journal entry. No cheque will be issued for such amounts.

7 Reporting i) Form of Report

BDC’s form of Solicitor’s Report must be used in all cases unless another form is otherwise previously approved by Legal Services. Please go to www.bdc.ca/forms to download the report. Where existing GSA’s or existing mortgages are used, they are to be referred to in the Solicitor’s Report.

ii) Prior Charges We require the Solicitor’s Report to opine as to the priority of registration of BDC’s charges as against other registered charges, to indicate which prior registered charges are to remain outstanding (must be permitted) and which are to be discharged. BDC recognizes that you cannot certify as to priority over personal property absolutely given the uncertainty of title in personal property and unregistered claims that might appear, but we do expect you to do the usual searches as you deem necessary and to address any registered encumbrances or liens encountered. It is not acceptable to attach a PPR search and advise that BDC security is subject to the charges listed. You are to do that analysis and confirm that our security is in the required priority of registration given the dates and terminology of the registrations located. If BDC has been provided with a Solicitor’s Report reciting that certain encumbrances are to be discharged before the security is complete, we must as soon as possible thereafter be provided with your confirmation of their discharge or a letter of no further interest as may be appropriate.

iii) Opinions – Corporations, Partnerships and Trusts Traditional opinions as to capacity, authorization and execution are required for corporations and all non-corporate entities (partnerships, trusts, etc.) where the loan amount (total of all concurrent loans instructed to you) exceeds $5,000,000. However, when the total of all concurrent loans does not exceed $5,000,000, we do not require the traditional opinion. This is intended to reduce cost and time and to eliminate the practise of asking borrower’s counsel to provide a certificate on these points. In such circumstances, and absent any contrary knowledge, you will limit your investigation of capacity and authorization:


a) for corporate borrowers or guarantors to: i) Officers Certificate confirming incumbent officers and signatories and confirming there are no

proceedings for winding up; ii) Searches of the provincial/territorial corporate registry and, to the extent locally possible, certificates

from those registries confirming the corporation’s incorporation, status and directors and officers; and iii) Certified copy of Director’s Resolution approving the transaction.

b) for borrowers or guarantors constituted as partnerships or trusts to: i) A review of the Partnership/Trust Agreement; ii) Conducting and reviewing searches of the provincial/territorial registry and, to the extent locally

possible, certificates from those registries confirming the partnership’s registration; and iii) Obtaining a statutory declaration from the partner/trustee confirming that the partnership/trust

authorizes the loan, has capacity to provide the requested security and to stand as a borrower or guarantor on the loan, and confirming the name of the person authorized to execute the loan documents to bind the partnership/trust.

Corporations, Partnerships and Trusts not granting security – Where a corporation, partnership or trust is a borrower or guarantor, jointly or individually, under the Letter of Offer but is not granting a mortgage, general security agreement or other security, we would still expect the corporate/partnership/trust opinion issue to be addressed in accordance with this section.

iv) Foreign Corporations Given the high cost of obtaining opinions relative to foreign corporations, you are to discuss with the S&D Officer whether such opinions are required on a particular loan. You may take their written direction on this point but must refer to it in your Solicitor’s Report. In any case where we are taking security over foreign assets we will want confirmation of enforceability which may require opinions from foreign counsel. If foreign counsel is required, please see Section 8 i) Multiple Jurisdictions below.

v) Delivery of Security Documents and Report

Format Beginning on March 24, 2017, BDC will no longer require delivery of paper documentation; except for the following documents which must be tendered in original paper format for enforcement or discharge purposes:

Letters of credit obtained from other lenders; Marine Mortgages; Duplicate Certificates of Titles (when used in place of a mortgage); Assignment of Securities for share certificates in original form; Hypothecation of Shares in original form; Hypothecation of Source Code, Software; Promissory Notes prepared by external solicitors as part of continuing loan security; U.S. Debentures and U.S. vehicle registrations; Personal Guarantees given by Alberta Residents or required in connection with loans from Alberta

Business Centres where a Guarantees Acknowledgement Act certificate is required; Any other documents that cannot be enforced from an electronic record.

Subject to the foregoing, we require electronic (pdf) versions of the completed security documents, together with a pdf copy of your account, to be delivered to BDC not later than 30 days after the date of your first request for disbursement of the loan. If all of the security documents have not been finalized within that time frame, the available documents should be sent to BDC, and additional documents delivered as they are available (e.g. state of title certificates, updated PPR registrations, surveys, insurance confirmation, etc.). When there are multiple disbursements on a loan, an interim account should be issued to the Borrower, and a copy should be delivered to BDC together with the electronic security package. We do not require delivery of subsequent disbursement accounts. BDC does not require that you store either electronic or paper copies of our security documents beyond the time limits set by the applicable Law Society Rules in your jurisdiction. Delivery to Legal Services


Paper – the originals of only those security documents in the above list (see “Format” above), and any other document that must be tendered in paper format for enforcement purposes, to the following address: Business Development Bank of Canada Legal Services P.O. Box 6, Suite 200 - 505 Burrard Street Vancouver, B.C. V7X 1M3

Electronic – all security documents, including all reporting documents such as your Solicitor’s Report, cover letter for the security package, and a copy of your account, must be sent in PDF format (one document per PDF) to the following address: [email protected] a. If you are instructed for multiple loans, send the security documents using a separate email for

each loan multiple b. The subject line of your e-mail must include:

Borrower’s name Account number and loan multiple (one per email) Instructing Business Centre or Department

Electronic Files Naming – there is no longer a mandatory requirement to include the account or multiple number in the name of the document. There also is no longer a mandatory requirement for the use of abbreviations for the type of document. All security documents should be named using the following naming convention: Type of document (e.g. GSA or General Security Agreement or any other version as long as the

document type is easily identifiable to BDC) Only if there are multiple documents of the same type for the specific loan multiple (e.g. 2 GSA’s or 2

Guarantees), indicate the name of one of the parties to the document You are to forward to Legal Services the Security documents: Paper – only those documents that must be tendered in paper format for enforcement purposes (see

above).

Electronic a. all security documents b. all reporting documents such as your Solicitor’s Report c. the covering letter coming with the security package d. a copy of your account

NOTE: Original Letter of Offer – BDC will sometimes proceed with a loan based on a faxed copy of the accepted Letter of Offer. If the S&D Officer advises you they have not obtained the original please ensure that it is obtained and forwarded to the S&D Officer.

vi) Your Account You are to recover your fees and disbursements from the loan disbursements or directly from the borrower before releasing the final disbursement. Unless specifically otherwise approved or set out herein, BDC will not pay your account. We require a copy of your account in electronic format only.

8 Loan Amendments From time to time, amendments to our loans will require that supplemental security be prepared. We will send you an Instructing Letter enclosing the amendment requiring the supplemental security, as well as any other documents you may need to prepare the additional security. In accordance with our reporting requirements in Section 7, we require electronic versions of the completed security documents and the Solicitor’s Report not later than 30 days after the security has been completed. Please indicate in the Solicitor’s Report which sections are not applicable to the completed security. The outstanding balance of all loans being amended will be provided in the Instructing Letter. Where the total outstanding balance exceeds $5,000,000, you are expected to provide opinions in the Solicitor’s Report as to capacity, authorization and execution for corporations and all non-corporate entities (partnerships, trusts, etc.) granting the supplemental security required by the loan amendment. Do not provide opinions for any other loan parties.


You are to recover your fees for all amendment work directly from the borrower or the borrower’s solicitor, as there will be no loan disbursement from BDC for amendments. You do not need to send a copy of your account for loan amendment work with your Solicitor’s Report.

PART II – Security Taking Topics – Western

9 Miscellaneous Topics

i) Multiple Jurisdictions Where you are instructed to take security on a loan where there is security in more than one province we anticipate you will use local law firms as required but look to you to ensure the required security is taken. BDC will not instruct firms in each jurisdiction. Where you are instructed to take security on a loan where a foreign corporation is giving security and a foreign opinion is required, we anticipate that you will use local law firms as required but look to you to ensure the required security is taken. BDC will not instruct a firm in the foreign jurisdiction. The exception to the foregoing is if BDC’s loan is to specifically finance a project in the U.S, in which case, we will require that specific U.S. counsel be used. If the loan falls into this category, the S&D Officer will advise you and provide you with the contact information for the U.S. counsel to be used.

ii) Insurance on Assets The Letter of Offer sets out the required insurance policies and terms thereof (if any). Although the borrower is required to insure its assets for their full insurable value under the terms of the Letter of Offer we do not require you to verify insurance is in place in all cases. You are required to verify insurance for all charged assets for loans over $500,000. You are required to verify insurance in accordance with this section for all loans even if we are relying on an existing mortgage or General Security Agreement for the new loan. For loans up to and including $500,000, verification of insurance is only required for: buildings; aircraft; and marine vessels. A certificate of insurance issued to BDC for each applicable type of insurance is required prior to the first disbursement. The name on the certificate(s) must match the name of the customer (or guarantor owning the secured assets). The address and descriptions of insured property(ies) must match the addresses and descriptions of assets pledged as security. The certificate(s) of insurance must include the following general information:

1. Name of insured 2. Name of insurer3. Type of policy 4. Description of insured property 5. Policy number 6. Policy term7. Limit of coverage 8. Amount of deductible 9. Broker’s name/contact information

Forwarding Insurance Certificates – please forward to the S&D Officer certificates or policies relating to aircraft or marine vessels as soon as possible. For all other types of insurance, a copy of the certificate of insurance must be included with delivery of the security documents and your report to Legal Services.

iii) BDC’s requirements for the applicable types of insurance are as follows: a. PROPERTY (building and equipment):

This insurance is required when BDC has taken realty, equipment and/or business inventory as security. Coverage must include: Building and equipment insured on an “All Risks or Broad Form” and full “Replacement Cost” basis. BDC included as Mortgagee as its interests may appear. “Standard Mortgage Clause (approved by the Insurance Bureau of Canada)” in favour of BDC for all

realty (buildings). BDC included as Loss Payee for equipment/contents as its interests may appear 30 days prior notice of cancellation in favour of BDC. The clause is acceptable even if only

“endeavour to provide”


Note: Condominium/strata titles - Insurance should be confirmed both for the building policy held by the condominium/strata title corporation and for the owner’s policy covering the unit contents. BDC is only required to be named as loss payee on the owner’s policy. The Loss Payee and Standard Mortgage clause are not required on the condominium corporation policy.

b. PROPERTY (building and equipment) located outside of Canada BDC’s Operational Risk Management (“ORM”) Department is responsible for verifying the Insurance coverage on secured property located outside of Canada. Please forward Certificates of insurance to BDC’s S&D Officer for review by the ORM Department as soon as possible.

c. EQUIPMENT BREAKDOWN (Boiler & Machinery):

This insurance is required when a building pledged as security has pressure vessels for heating and/or other process machinery and equipment. Coverage must include: Standard Comprehensive All-Risks or Broad Form, Repair or Replacement Cost basis BDC included as Loss Payee as its interests may appear 30 days prior notice of cancellation clause in favour of BDC

d. BUILDERS’ RISK OR COURSE OF CONSTRUCTION:

This insurance is required to cover loss or damage to buildings while they are under construction for construction loans. The construction contract should specify which party is responsible for procuring the insurance; it can be the future owner of the completed building, the project manager or the general contractor. Coverage must include: o Building and equipment insured on an All Risks or Broad Form, Replacement Cost basis, including

coverage for Soft Costs o BDC included as Mortgagee as its interests may appear o Standard Mortgage Clause (approved by the Insurance Bureau of Canada) in favour of BDC for all

realty (buildings) o BDC included as Loss Payee for equipment/contents as its interests may appear o 30 days prior notice of cancellation clause in favour of BDC Note: The amount of insurance should reflect the construction costs as well as the soft costs such as architectural and engineering fees. Evidence of property insurance is required once construction has been completed.

e. TRANSPORTATION RISK (CARGO):

This insurance covers loss or damage to property while in the course of transportation and is required when BDC calls for a charge on equipment and the amount disbursed on equipment in transit will exceed $500,000. Coverage must include: o Property transported and insured on an All Risks, Replacement Cost basis, including loading or

unloading, covering any and all modes of transport used o BDC as Loss Payee as its interest may appear o 30 days prior notice of cancellation clause in favour of BDC (not relevant if the coverage is arranged

for a single voyage or trip and is imminent) f. MARINE:

This insurance is required when a marine vessel is pledged as security. A copy of the certificate of insurance must be provided to the S&D Officer for forwarding to our ORM Department – Insurance for review prior to disbursement. Coverage must include: o Marine vessels insured for full value of the vessel under a Standard Hull & Machinery insurance

clause in customary use for the occupation of the vessel. o BDC included as Loss Payee as its interests may appear. o Mortgagee Interest Clause in favour of BDC (required for vessels with a Current Liquidation Value

(CLV) ≥ $500,000). The S&D Officer can advise you as to the CLV o Protection & Indemnity (third party liability) coverage in the minimum amounts of:

- $1,000,000 for pleasure craft - $2,000,000 for commercial use - or as required by Transport Canada or as specified in the Letter of Offer

o BDC included as an Additional Insured (should be requested but may not be available if the vessel is insured through a P&I – protection & indemnity club)


o 30 days prior notice of cancellation clause in favour of BDC. The clause is acceptable even if only “endeavour to provide”

g. AVIATION:

This insurance is required when an aircraft is pledged as security. A copy of the certificate of insurance must be provided to the S&D Officer for forwarding to our ORM Department – Insurance for review prior to disbursement. Coverage must include: o Aircraft hull insured on an “All Risks” basis for the full value of the aircraft. o Hull War Risk and Related Perils (required if aircraft operated outside Canada/USA) o Insurance to include In-Flight coverage o Third Party Liability (including passenger) coverage in the minimum amounts of: (refer to Aircraft

Schedule B – General Security Agreement) - $1,000,000 for private aircraft - $2,000,000 for commercial use plus $1,000,000 per passenger

- or as required by Transport Canada or as specified in the Letter of Offer o BDC included as an Additional Insured (should always be requested but may not always be available

for small private aircraft) o Breach of Warranty clause in favour of BDC. o BDC included as Loss Payee as its interests may appear. o 30 days prior notice of cancellation clause in favour of BDC. The clause is acceptable even if only

“endeavour to provide” o BDC will accept AVN67C or AVN28B or its equivalent (this is an endorsement that is provided by

some insurers for leased/financed aircraft. It includes the Loss Payee, Breach of Warranty, Additional Insured and cancellation clauses).

Note: Breach of Warranty clause provides protection to BDC similar to the Standard Mortgage Clause in Property insurance. AVN67C and AVN28B are endorsements available in the London market for leased/financed aircraft. AVN67C is used for Airline operations while AVN28B applies to commercial general aviation risks. They include the Loss Payee, Breach of Warranty, and cancellation clauses. AVN67C also includes Additional Insured clause for financiers. If aircraft is grounded, coverage must include liability insurance for ground risk. This is referred to as Static Liability.

h. AVIATION GENERAL LIABILITY:

Clients that operate aircraft hangars that provide fuelling, maintenance and/or repair services to third parties must provide evidence of insurance that includes: o $1,000,000 limit of Hanger Keepers liability per occurrence or the maximum value of aircraft in the

hangar at any one time o Aviation Products Liability in the minimum amount of $1,000,000 per occurrence and in the annual

aggregate o BDC included as an Additional Insured o 30 days prior notice of cancellation clause in favour of BDC

i. MOTOR VEHICLES:

This insurance is required when motor vehicles are pledged as security. Coverage must include: o “All Risks” or “Collision and Comprehensive” insurance. o Lienholder Endorsement naming BDC as Loss Payee (should be requested but may not always be

available – e.g. government owned car insurance entities will not typically provide this). o 30 days prior notice of cancellation. The clause is acceptable even if only “endeavour to provide”

iv) Insurance Confirmation Checklist The S&D Officer gives the borrower an Insurance Confirmation Checklist which the borrower can take to its insurers to simplify placing insurance. This form will not normally come to you and if it does should not be considered a change in instructions. The insurance called for in the Insurance Confirmation Checklist should be the same as in the Letter of Offer as amended but in the event there is a difference we expect you to meet the requirements of the Letter of Offer rather than the Insurance Confirmation Form.

v) Life Insurance When life insurance is required, we require that you arrange for the execution of a notice of assignment form, and the registration of same with the Insurer. The Insurer's form may be used provided it does not contain unreasonable restrictions.


vi) Prior Permitted Charges on Land or Personal Property You are expected to conduct priority searches and confirm the priority of registration of the charge. Where we permit a prior charge up to a dollar amount, we require you to satisfy yourself and confirm to us that the prior charges do not and cannot in the future exceed the permitted amounts (except for interest and costs of enforcement). A priority agreement to restrict the priority of future advances may be required. If your searches reveal the following types of charges that are not specifically permitted by the security description in the Letter of Offer, they are to be treated as follows:

REAL PROPERTYCharge Treatment

Utility easements or rights-of-way to utility companies (hydro, telephone, sewer or governments, etc.)

No action required E & N Railway (B.C.) Under surface mineral rights in the crown or third parties Private easements or rights-of-way for access to adjoining lot, encroachments, etc. Charge to be postponed or loan amendment

permitting priority Buy-back charges in favour of municipalities or others Governmental restriction on use of property not arising from dealings with the property owner (e.g. flood plain agreement, height restriction)

Solicitor is to advise, in writing (letter or e-mail), to the S&D Officer as to nature and effect of the charge and advise if it does or does not unreasonably affect the use or saleability of the property. If it does not, nothing further is required. If it does, commentary as to the effect is to be provided so that BDC can assess and, if approved, prepare a loan amendment.

Governmental building approval – restricts use to particular construction may require posting of bonds, construction target dates, penaltiesDeveloper’s building restrictions Other covenants and restrictions Leases of land or buildings Lease to be postponed/discharged or loan

amendment permitting priority Non-disturbance agreement Authorization required by loan amendment

PERSONAL PROPERTY

Charge Treatment Other charges only on inventory and/or receivables where we have already allowed priority to operating lender

No action required except if our loan is a sub-debt loan in which case loan amendment required to permit

Leases and conditional sales agreements of specific equipment

Solicitor is to provide list of leased/sold equipment for sign-off by Field Management level of authority

Other charges on vehicles only Solicitor is to provide list of leased/sold equipment for sign-off by Field Management level of authority

Other charges on specific equipment or other personal property

Charge to be postponed/discharged or loan amendment permitting priority

Other general charges by Hypothec or GSA on a class of assets or all movables/personal propertyJudgements, governmental or other liens and writs of execution registered in PPR

vii) Searches We require you to make all necessary searches to establish the priority of registration of our security. Ownership searches of charged vehicles should be made where possible.

SEARCH REQUIRED SEARCH REQUIREDPPR/PPSA when personal

property charged Employment

Standards (wages)no

Land Title Office when real property interest charged

Bank Act where nature of business indicates and


we have not subordinated our position on inventory

Real Property Tax when land charged Zoning no Company Office Yes Revenue Canada no Worker’s Compensation No Actions / judgments no SST/Sales Tax No Condominium fees where lot chargedHotel Room Tax/Corporation Capital Tax (B.C.)

No Aircraft registration with Transport Canada

where aircraft charged

Executions where easily searched in PPR or general register

Certificate of air worthiness

Yes

Manufactured Home Registry

as applicable International Aircraft Registry

where applicable

Canada Shipping as applicable Municipal by-law search

no

Bankruptcy no NOTE: In any particular case you feel it would be wise to effect a non-mandatory search due to the particular facts of the file please discuss that with the S&D Officer.

viii) Landlord’s Consents and Waivers of Distraint In some cases the S&D Officer may have obtained (a) an undertaking to give notice; or (b) the landlord’s consent to the leasehold mortgage, but generally we expect you to attend to obtain a distraint waiver, a waiver and consent, or a landlord’s consent as may be called for in the Letter of Offer. Some lessors however, such as federal and provincial departments and their agencies, crown corporations, some large shopping centres and corporations such as C.P. Rail have their own form of consent and the S&D Officer will require your assistance in assessing its suitability.

ix) Loans to Corporations to be incorporated (TBI’S) In many cases, the only document signed by the borrower that contains the terms of a particular loan is the Letter of Offer. Where a corporation, intended to be a borrower, does not exist at the time the Letter of Offer is accepted, we require a subsequent written adoption of the Letter of Offer from that corporation and its acceptance of the terms of the loan.

x) Share Purchases In many cases, the target corporation is to be a borrower or guarantor under a loan providing funds to buy the shares of that corporation. In the event the Letter of Offer has not been signed by the company under its incumbent officers, then you must ensure that it is adopted and confirmed by the corporation by the authorized signatories at closing.

xi) Alberta Guarantees Acknowledgment Act In Alberta, the Guarantees Acknowledgment Act requires all individual guarantors executing a written guarantee to appear before a lawyer to acknowledge their execution of the guarantee on the form prescribed by the Guarantees Acknowledgment Forms Regulation. You are required to obtain signed Guarantees Acknowledgment Act forms from all individuals giving a guarantee that is (1) executed in connection with a loan originating in Alberta or (2) executed by Alberta residents regardless of jurisdiction of loan origination.

xii) Pari Passu and Asymmetric Co-Lending BDC has two different co-lending solutions, each of which involves a different form of agreement between BDC and the co-lender. The first is traditional pari passu (in which BDC takes on the same risk as its co-lender and a Pari Passu Agreement is used) and the second is asymmetric lending (in which BDC takes on more risk than the co-lender and an Intercreditor Agreement (Asymmetric Lending is used). The letter of offer will identify which agreement is required. Both forms are available at www.bdc.ca/forms with the other BDC security forms.

xiii) Purchase Money Security Interest (PMSI) Unless specifically authorized and approved on a particular loan, BDC does not rely on PMSI financing for security purposes. Accordingly, when financing personal property we require that you confirm our priority through registrations and, where necessary, duly executed priority agreements.


xiv) Buy-back Provisions / Development Agreements / Development Restrictions Often municipalities and land developers impose obligations on our loan parties that allow for the repurchase of realty if conditions related to a proposed development are not satisfied. Unless specifically authorized and approved on a particular loan, these buy-back provisions should be deleted, subordinated to BDC’s security, or otherwise resolved through an agreement approved by BDC’s internal Legal Services. Due to the difficulty and time required in negotiating the removal or subordination of these clauses, we ask that you advise the S&D Officer as early as possible of their existence. At that time you should also provide a summary of the clause and a recommended course of action.

10 Mortgages of Land

i) Taxes Where an interest in land is mortgaged, realty taxes up to the end of the previous year and all current year’s taxes which have been billed and are due as of the date of the initial disbursement must be paid prior to initial disbursement. If the loan is being disbursed in stages over the current year, the taxes for the current year must be paid proportionally to the date of the final disbursement or at least to ascertain that the current taxes are paid in accordance to the schedules allowed by the municipalities if the last disbursement occurs after these schedules. We will rely on you to this end and do not require further documentation or certificates. Please provide confirmation in your solicitor’s report.

ii) Readvanceable Mortgages Our form of mortgage is designed to be readvanceable up to a face amount to secure present and future obligations of the mortgagor to BDC except in B.C., where it is readvanceable to an unlimited amount. These mortgages were introduced at the dates indicated and mortgages taken after those dates should be in the new form. Older mortgages are loan specific.

B.C. – March 1996 Manitoba – July 2002 Saskatchewan and Alberta – April 2001NWT – June 2011 Nunavut – June 2011 Yukon – January 2002

NOTE: Where the face amount of the mortgage is different from the amount of the loan you are working on, the “Loan Amount” for use in the guarantee is the loan amount not the face amount of the mortgage.

iii) Old Forms In some cases old form or irregular mortgages may have been used after introduction of the readvanceable form. The existing mortgage must be examined in all cases.

iv) Leases and Guarantees In Saskatchewan, there is a separate form of mortgage when taken in support of a guarantee. In some jurisdictions, there is a separate form for mortgages of lease or for mortgages of unregistered lease. These forms are in the provincial directory of forms where applicable and there are comments in the mortgage cover sheets.

v) Mortgage Not on Demand While our mortgages may contain language such as “on demand”, they are not demand loans. As is further provided in each mortgage, the Letter of Offer governs each loan and default is required before a loan will be called.

vi) Supplementary or Superseding Loans relying on Existing Mortgages When you are instructed to take security for a loan where an existing mortgage is to be used, we expect you to: Obtain a copy of the existing mortgage – if not sent by the S&D Officer obtain from Land Title Office; Examine the mortgage for patent defects; In particular, please review the existing mortgage and ensure that the total outstanding commitment by

the BDC (balance outstanding on any prior loan accounts secured by the existing mortgage plus the total amount of the new loan) does not exceed the principal amount stated on the existing mortgage. The total commitment amount can be obtained from the S&D Officer.

Do searches to determine proper registration and no unauthorized registered prior charges. Search requirements in Section 8 above apply; and


Refer to the mortgage in your report – You will not be responsible for any defects in preparation, execution or registration that are not patent. Any that are, should be addressed.

We expect that you will verify that insurance is in place in accordance with the Insurance on Assets section of these Service Standards.

Where a subsequent mortgage to another lender has been registered subsequent to our mortgage and prior to our supplementary loan for which you have been instructed, we will rely on your advice as to the priority of our new advance and as to whether we require a priority agreement from the intervening lender to achieve the desired priority position.

vii) Certificates of Title We expect to receive certificates of title issued by the appropriate Land Title Office showing registration of our charges.

viii) Holdbacks BDC would not normally retain a holdback on loans of any size in British Columbia, Alberta or Saskatchewan. In other jurisdictions we would follow local practise as to when and by whom a hold back account is to be held as advised by counsel. In all cases BDC does not hold holdbacks on construction projects of $500,000 or less (cost of the construction project component).

ix) Strata or Condominium Properties If we are taking a mortgage over a strata or condominium property, we require an estoppel certificate to confirm that all strata or condominium fees are paid to date.

x) Surveys and Title Insurance Where a loan relies on a mortgage, new or existing, on land with buildings you are to obtain and review either a building location survey/location certificate or title insurance. In British Columbia, the survey must be prepared by a Certified Land Surveyor; a Survey Technician prepared survey will not be accepted. Survey requirements must be fulfilled prior to disbursement of the loan. Exceptions: For some rural properties over 5 acres, the S&D Officer may accept a sketch plan drawn to scale by the

account officer or the borrower. Surveys are not required for registered condominium or strata lots, unless there is a bare land

condominium or strata plan. “Small Loans” as discussed in section 4 above. 1. Building Location Survey/Location Certificate

BDC is prepared to accept an existing survey provided that it is no more than 10 years old and shows all existing structures (including additions) on the property and is accompanied by a statutory declaration from the owner stating that there have been no alterations, additions, or demolitions to those structures since the date of the survey. If the survey has been prepared contemporaneously with the loan the statutory declaration is not required.

2. New Construction

Title insurance is required for any new construction loan above $1,000,000 in Ontario. For new construction loans under $1,000,000 in Ontario and any amount elsewhere, if title insurance is not used a survey or location certificate must be prepared once foundation is in place. The survey or location certificate will have to be updated before last disbursement to ensure there are no above ground overhang encroachments. Title insurance is simpler and provides better protection for disbursements made prior to building completion.

3. Title Insurance

Where a survey/location certificate is required, title insurance from FCT (First Canadian Title), Stewart Title Guaranty Company or Chicago Title Insurance Company Canada (the “Approved Insurers”) may be used instead at the borrower’s option and cost.

BDC will accept such title insurance to cover off the “gap” caused by slow Land Titles Office procedures in Alberta and Manitoba.

Title Insurance may be available to protect against known title defects such as encroachments and BDC may be willing to accept this in a particular fact situation.

Please advise the S&D Officer in writing providing details of the title problem together with your opinion that the problem can be appropriately covered by title insurance and further written


instructions will be provided. In any case where title insurance is used, we will expect you to be satisfied that the policy obtained covers the risk(s) to be insured (survey, known defects).

In all cases, should BDC be prepared to accept title insurance, we require that the policy be issued through one of the Approved Insurers with BDC as the insured, for the amount of the mortgage and for a term equivalent to the life of the loan. BDC will only accept title insurance issued through the Approved Insurers, as they provide a special readvanceable endorsement for BDC mortgages (see section below re: Subsequent Advances). Please do not request that another insurer provide the coverage.

CONSTRUCTION LOANS: Should the loan include a construction component, the Approved Insurer must be notified so the appropriate construction endorsement can be added to the policy when it is issued.

In any case where title insurance is used, we will expect you to be satisfied that the policy obtained covers the risk(s) to be insured (survey, gap, known defects).

a. First Canadian Title Insurance (First Canadian) for Subsequent Advances

When obtaining title insurance through First Canadian, the Subsequent Loan Facilities Endorsement (see Schedule A for 04/10 revision – confirm with First Canadian that you have the current version) is deemed included in any policy issued in favour of BDC when a new or existing readvanceable BDC mortgage form is used. If making a supplementary loan relying on an existing readvanceable mortgage for which a First Canadian insurance policy is already in place, that policy can be used for the new loan although some modification and additional fee is required in some cases as follows:

1. Where the total amount of the new loan and existing loan(s) are less than the existing policy

amount: a. No notice to First Canadian required; b. You must follow the requirements of the Subsequent Loan Facilities Endorsement as to sub

searches, prior charges and payment of taxes. No confirmation of these searches, etc. is sent to First Canadian but must be retained on your file.

2. Where the total amount of new loan and existing loan(s) are greater than the existing policy

amount: a. First Canadian is to be advised at their Oakville Office as to:

borrower; policy number; new insured amount (total amount of loans); date of advance of new monies

b. An additional fee will be required based on the difference between the cost of a new policy for the existing insured amount and a new policy for the new insured amount;

c. You must follow the requirements of the Subsequent Loan Facilities Endorsement as to sub searches, prior charges and payment of taxes. Confirmation of these searches, etc. is sent to First Canadian as for a new policy;

d. First Canadian will issue an amended policy where the amount of insurance will be increased and the date of policy brought forward.

b. Stewart Title Guaranty Company (Stewart Title) for Subsequent Advances

When obtaining a title insurance policy through Stewart Title, the Subsequent Loan Facilities Endorsement (Special) 05/06/2008 revision (see Schedule B) is to be called for. If making a supplementary loan relying on an existing readvanceable mortgage for which such a Stewart Title insurance policy is already in place, that policy can be used for the new loan although some modification and additional fee is required in some cases as follows:


amount: a. No notice to Stewart Title is required; b. You must follow the requirements of the Endorsement as to sub searches, prior charges and

payment of taxes. No confirmation of these searches, etc. is sent to Stewart Title but must be retained on your file.

2. Where the total amount of new loan and existing loan(s) are greater than the existing policy amount: a. Stewart Title is to be advised as to:


borrower; policy number; new insured amount (total amount of loans); date of advance of new monies


c. You must follow the requirements of the Subsequent Loan Facilities Endorsement as to sub searches, prior charges and payment of taxes. Confirmation of these searches, etc. is sent to Stewart Title as for a new policy;

d. Stewart Title will issue an amended policy where the amount of insurance will be increased and the date of policy brought forward.

c. Chicago Title Insurance Company Canada (Chicago Title) for Subsequent Advances The Subsequent Loan Facilities Endorsement (see Schedule D – confirm with Chicago Title that you have the current version) is deemed included in Chicago Title when a new or existing readvanceable BDC mortgage form is used on an insured loan. Therefore, if making a supplementary loan relying on an existing readvanceable mortgage for which a Chicago Title insurance policy had been obtained as to an earlier loan, that policy can be used for the new loan although some modification and additional fee is required in some cases as follows:


amount: a. no notice to Chicago Title required; b. you must follow the requirements of the Subsequent Loan Facilities Endorsement as

to sub searches, prior charges and payment of taxes. No confirmation of these searches, etc. is sent to Chicago Title but must be retained on your file.

2. Where the total amount of new loan and existing loan(s) are greater than the existing policy amount:

a. Chicago Title is to be advised as to: borrower; policy number; new insured amount (total amount of loans); date of advance of new monies


c. You must follow the requirements of the Subsequent Loan Facilities Endorsement as to sub searches, prior charges and payment of taxes. Confirmation of these searches, etc. is sent to Chicago Title as for a new policy;

d. Chicago Title will issue an amended policy where the amount of insurance will be increased and the date of policy brought forward.

11 Personal Property Security i) Registration – Personal Property Security Act

Duration: As a general matter, financing statements are to be filed for a period equal to the “Maturity Date” of the loan plus five years. Where this results in a registration period that would require an “infinity” registration, please do not register for infinity but instead register for the maximum fixed term (usually 25 years) and then immediately extend the registration for the required number of years. This avoids the heavy cost of an infinity registration.

Secured Party Codes 1. Every Business Centre in British Columbia, Saskatchewan and Manitoba has its own code as follows:

Abbotsford 03620085 Kamloops 03620069 Terrace 03620131Burnaby 03620191 Kelowna 03620077 Tri-Cities 03620107Cranbrook 03620042 Nanaimo 03620093 Vancouver 03620140Fort St. John 03620051 North Vancouver 03620115 Victoria 03620158Fraser Valley 03620182 Prince George 03620123 Whitehorse 03620174


Prince Albert 151493263-2 Brandon AB410Regina 151493263-1 Winnipeg AB409Saskatoon 150029358-1 Winnipeg West AD262Lloydminster 152785971-1

Please DO NOT apply for a RIN number when registering in the Saskatchewan PPR

2. There is one code for each other PPR jurisdiction. It is important that this code be used. Alberta 50056670 Northwest Territories 905Yukon 1123 Nunavut 663

For registrations in Alberta, include the following email address in the Secured Party block on every new registration and any amendment to a registration: [email protected]

3. BDC Capital Inc. secured party code (loans from Growth & Transition) B.C. 57690006 Suite 2100, P.O. Box 6, 505 Burrard Street

Vancouver, B.C. V7X 1M6 Yukon NoneAlberta 60001993

110 – 7th Avenue, SW Calgary, Alberta T2P 0X8

Manitoba AC502Saskatchewan, NWT & Nunavut None

ii) Charges on Aircraft at the International Registry for International Interests in Mobile Equipment (Aircraft Equipment) (International Registry)

As of April 1, 2013, Canada implemented the Cape Town Convention on International Interests in Mobile Equipment and the Aircraft Protocol to the Convention. As a result, BDC is now required to register at the International Registry established under the Convention, an international security interest (known as an “international interest” under the Convention) when financing airplanes and helicopters of a defined size and airplane engines of a defined thrust capacity or horsepower (known as “aircraft objects" under the Convention). The Letter of Offer will set out BDC’s security requirements with respect to the Aircraft and will indicate where our security interest should be registered, including reference to the International Registry, if applicable. Such security requirements will include a security interest and international interest in the aircraft and engine(s) and may include an assignment of any lease agreement with respect to the aircraft. You are expected to confirm whether the aircraft qualifies for registration in the International Registry. A loan amendment will be required if BDC has called for an International Registration and you have determined that such is not necessary, or vice versa. We expect you to advise the S&D Officer if this is the case. The security documents for aircraft financing are included with BDC’s other security documentation available on the Internet - www.bdc.ca/forms. Note that there is a separate form of GSA and with attached schedules required for aircraft. The aircraft GSA and schedules are to be used regardless of whether the aircraft will be registered in the International Registry or solely in the Personal Property Registry, and the schedules must be reviewed and completed. A new GSA must be signed for all aircraft objects that are to be registered in the International Registry after April 1, 2013. The new forms also include an Assignment of Aircraft Lease Agreement and a Consent & Acknowledgment re Assignment of Aircraft Lease for circumstances where an aircraft is subject to a lease permitted by BDC. Where applicable, searches should be conducted in the International Registry and registrations performed. You are also required to register in the applicable Personal Property Registries. If you are not provided sufficient particulars to enable you to perform the necessary searches and registration, please request such information from the S&D Officer. You are responsible to confirm full satisfaction of all Conditions Precedents listed in the Letter of Offer, including the requirement that the borrower and any permitted lessee of the aircraft be registered as Transacting User Entities in the International Registry. If you or another individual at your firm is registered as a Professional User Entity under the Convention, you may (a) act for both BDC and the borrower as permitted by these Service Standards; and (b) act as agent for the borrower for International Registry purposes, even if you are not counsel for the borrower. If you or another individual at your firm is registered as a Professional User Entity under the Convention, you may also prepare all required security documents and complete all necessary provincial and international registrations on behalf of BDC. You will need to obtain authorization from BDC’s IR Administrator (see below) to complete the international registrations.


If you or another individual at your firm is not registered as a Professional User Entity under the Convention you may prepare all required security documents and complete all necessary provincial registrations on behalf of BDC. However, If any international registrations are required you must retain the services of BDC’s IR Administrator (see below) to complete those registrations. You will be required to provide our IR Administrator copies of the signed security documents when requesting an international registration. BDC’s IR Administrator is the Calgary law firm of Parlee McLaws LLP. Please direct any inquiries to:

Robyn Jeffrey Paralegal [email protected] Web site: www.parlee.com

Parlee McLaws LLPBarristers & Solicitors, Patent & TradeMark Agents 3300 TD Canada Trust Tower 421 – 7th Avenue SW Calgary, Alberta T2P 4K9 Direct dial: (403) 294-7011 Fax: (403) 265-8263

Dale Spackman Q.C. and/or Rhea Shelton of that firm are the backup contacts.

iii) Assignments of Shareholder’s Loans and Guarantees We do not require the registration of any financing statements in respect to assignments/postponements of shareholder’s loans or guarantees.

iv) General Security Agreement (GSA) GSA Form Our GSA is intended to be unlimited in amount and to secure any number of loans. It is designed to provide an all present and after acquired personal property charge. We also have a chattel mortgage form for the rare cases where we call for a charge on specific chattels only. The current form has been in use at all times in all western areas except Yukon before June 1997 and in Alberta, Saskatchewan and Manitoba prior to August 1995. Old Forms In some cases “loan specific” GSA’s or irregular forms may have been used in the Prairie Provinces after introduction of the readvanceable form. Also in the Prairie Provinces some old GSA’s had optional pages whereby they could be general or specific (i.e. a chattel mortgage). The existing GSA must be examined in all cases where it is to be relied upon for a new advance. Joint GSA One separate GSA is to be taken for each person required to give one. This simplifies using the GSA to secure other indebtedness, discharging individual borrowers and may ultimately save the client money. Floating Charge on Land The GSA contains a floating charge on land that is not to be registered as a land charge in the course of security taking.

v) Supplementary or Superseding Loans relying on Existing GSA’s When you are instructed for a loan where an existing GSA is to be used we expect you to: Obtain a copy of the existing GSA and any existing priority agreements – if not sent, request from the

S&D Officer; Examine the GSA for patent defects; Do searches to determine proper registration and no unauthorized registered prior charges. Search

requirements in 7 above apply; Add serial numbered good(s) if required; Extend registration period as required; Verify that insurance is in place in accordance with the Insurance on Assets section of these Service

Standards; and Refer to the GSA in your report – You will not be responsible for any defects in preparation, execution or

registration that are not patent. Any that are, should be addressed.

vi) Charges on Rolling Stock/Railway Equipment Where BDC is taking security over rolling stock as defined under the Canada Transportation Act, we will expect filing of our security agreement under that Act through the registry maintained by Industry Canada as well as the appropriate provincial security registry filings. You are not expected to automatically do the federal


filing when only a GSA is called for. If you think it is warranted in any case, please discuss that with the S&D Officer.

vii) Intellectual Property We have created a number of special security forms for use when requested, being:

Assignment of Copyright Assignment of Patents Assignment of Trademarks Source Code Hypothecation

Where one of these forms is called for, we will expect filing of a notice of our GSA interest (not the assignment or hypothecation) against the interest’s registration in the applicable federal registry as well as the appropriate provincial security registry filings. You are not expected to automatically do the federal filings when only a GSA is called for. If you think it is warranted in any case, please discuss that with the S&D Officer.

viii) Security over Fishing Licenses and Marine Mortgages Where BDC is taking security over fishing licenses, there is a special form of schedule which you must complete and attach to our standard GSA. If you are not provided sufficient particulars to enable you to complete the schedules, please request such information from the S&D Officer. Where BDC has taken a marine mortgage, you are also required to use BDC’s form of Marine Loan Agreement.


Schedule A

Subsequent Loan Facilities –BDC Loan

Canada (revised 04/10)

ENDORSEMENT

Attached to and forming a part of Title Insurance Policy No. •

Issued by

FIRST AMERICAN TITLE INSURANCE COMPANY 2235 Sheridan Garden Drive,

Oakville, Ontario L6J 7Y5 Telephone: 905-287-3112 or 1-866-804-3112

1. Amend Date of Policy: Subsequent Advances On the creation of future indebtedness and liability up to the Amount of Insurance, other than pursuant to advances contemplated by the Revolving Credit Operating Line Facility endorsement, the Company will deem the Date of Policy to be the date of the creation of such future indebtedness and liability, provided that, as of the date of the creation of such future indebtedness and liability, the Insured: (i) conducts a subsearch of the Public Records (including searching executions) and confirms there are no

liens, encumbrances or adverse interests registered against Title; (ii) does not have actual Knowledge of any liens, encumbrances or adverse interests; and (iii) confirms realty taxes are not in arrears. 2. Priority of subsequent advances: Date of Policy The Insured acknowledges and agrees that on the creation of future indebtedness, other than pursuant to advances contemplated by the Revolving Credit Operating Line Facility endorsement, and if the Date of Policy is not deemed to be amended as provided for in paragraph 1, the Company is not liable for any loss or damage sustained by the Insured by reason of any matters covered under the policy arising or created subsequent to the Date of Policy. 3. Increasing Amount of Insurance Additional indebtedness may be created by the mortgagor to an amount which exceeds the Amount of Insurance and in such case, the Company will increase the Amount of Insurance to the amount requested by the Insured, not to exceed the amount of the Insured Mortgage, and will amend the Date of Policy to the date of the creation of such additional indebtedness and liability, provided that, as of the date of the creation of such additional indebtedness, the Insured: (i) conducts a subsearch of the Public Records (including searching executions) and confirms there are no

liens, encumbrances or adverse interests registered against the Title; (ii) does not have actual Knowledge of any liens, encumbrances or adverse interests; (iii) confirms realty taxes are not in arrears; and (iv) agrees to pay the Company the premium at the then applicable rates for the increase in the Amount of

Insurance.


Subsequent Loan Facilities –BDC Loan

Canada (revised 04/10) 4. Limitation of Company’s liability The Insured acknowledges and agrees that: (i) in the event the total indebtedness of the mortgagor exceeds the Amount of Insurance and the Insured has

not increased the Amount of Insurance as provided for herein, the Company’s liability for loss or damage arising from matters covered under the policy will be limited to losses not exceeding the amount by which the value of the Land at the time of loss falls below the Amount of Insurance; and

(ii) if the indebtedness of the mortgagor is increased at any time subsequent to the Date of Policy so that the total Indebtedness of the mortgagor exceeds the Amount of Insurance and if the Date of Policy is not amended as provided for herein, the Company is not liable for any loss or damage sustained or incurred by the Insured by reason of any matters covered under the policy arising or created subsequent to the Date of Policy

This endorsement is issued as part of the policy. Except as it expressly states, it does not (i) modify any of

the terms and provisions of the policy, (ii) modify any prior endorsements, (iii) extend the Date of Policy or (iv) increase the Amount of Insurance. To the extent a provision of the policy or a previous endorsement is inconsistent with an express provision of this endorsement, this endorsement controls. Otherwise, this endorsement is subject to all of the terms and provisions of the policy and of any prior endorsements to it.

FIRST AMERICAN TITLE INSURANCE COMPANY

By:

Thomas H. Grifferty, Regional Vice President, International Operations

Issuing Guidelines: In order to issue the Subsequent Loan Facilities endorsement the Insured must comply with the provisions stated in the endorsement. As to paragraph 1, it is not necessary to advise us of each subsequent advance, but you must maintain a record of your searches (including confirmation of taxes) and the date of each advance.


Schedule B ENDORSEMENT TO TITLE POLICY

Attached to and forming part of Policy No. M-7762 Charge $Nil

05/06/2008 – Loan

ISSUED BY

S T E W A R T T I T L E G U A R A N T Y C O M P A N Y

HEREIN CALLED THE COMPANY

SUBSEQUENT LOAN FACILITIES ENDORSEMENT (SPECIAL)

1. Insurance covers all indebtedness and liability and payments do not reduce the Amount of Insurance

The Company acknowledges and agrees that the Insured Mortgage secures all present and future indebtedness and liability of the mortgagor up to the amount of insurance, as amended from time to time as provided for hereunder (the “Amount of Insurance”) and that, notwithstanding the terms and conditions of the policy and any endorsement, the Amount of Insurance shall not be reduced by payments made on any such indebtedness and liability.

2. Request to amend Date of Policy

On creation of future indebtedness and liability up to the Amount of Insurance, other than pursuant to advances contemplated by the Revolving Credit Endorsement, the Company will deem the Date of Policy to be the date of the creation of such future indebtedness and liability, provided that, as of the date of the creation of such future indebtedness and liability, the Insured: i) conducts a subsearch of the Public Records (including searching executions) and confirms there are no liens, encumbrances, or adverse interests registered against the Title; ii) does not have Knowledge of any liens, encumbrances or adverse interests; and iii) confirms realty taxes are not in arrears.

3. Priority of subsequent advances: Date of Policy The Insured acknowledges and agrees that on the creation of future indebtedness and liability, other than pursuant to advances contemplated by the Revolving Credit Endorsement, and if the Date of Policy is not deemed to be amended as provided for herein, the Company is not liable for any loss or damage sustained or incurred by the Insured by reason of any matters covered under the policy arising or created subsequent to the Date of Policy.

This Endorsement is made a part of the policy and is subject to all the terms and provisions thereof and of any prior endorsements thereto. Except to the extent expressly stated, this Endorsement neither modifies any of the terms and provisions of the policy and any prior endorsements, nor does it extend the effective date of the policy and prior endorsements, nor does it increase the face amount thereof. Signed under seal for the Company, but this Endorsement is to be valid only when it bears an authorized countersignature, dated XXXXXXX..

Countersigned:

Authorized Countersignature Stewart Title Guaranty Company Toronto, Ontario, Canada


ENDORSEMENT TO TITLE POLICY Attached to and forming part of Policy No. M-7762

Charge $Nil 05/06/2008 – Loan

ISSUED BY




- Page 2 - 4. Increasing Amount of Insurance

Additional indebtedness and liability may be created by the mortgagor to an amount which exceeds the Amount of Insurance and in such case, the Company will increase the Amount of Insurance to the amount requested by the Insured, not to exceed the amount of the Insured Mortgage, and will amend the Date of Policy to the date of the creation of such additional indebtedness and liability, provided that, as of the date of the creation of such additional indebtedness and liability, the Insured:

i) conducts a subsearch of the public records (including searching executions) and confirms there are no liens, encumbrances, or adverse interests registered against the title;

ii) does not have Knowledge of any liens, encumbrances or adverse interests; iii) confirms realty taxes are not in arrears; and

iv) agrees to pay the Company the premium at the then applicable rates for the increase in the Amount of Insurance.

5. Limitation of Company’s liability

The Insured acknowledges and agrees that:

i) in the event the total indebtedness and liability of the mortgagor exceeds the Amount of Insurance and the Insured has not increased the Amount of Insurance as provided for herein, the Company’s liability for loss or damage arising from matters covered under the policy will be limited to losses not exceeding the amount by which the value of the Land at the time of loss falls below the Amount of Insurance; and

This Endorsement is made a part of the policy and is subject to all the terms and provisions thereof and of any prior endorsements thereto. Except to the extent expressly stated, this Endorsement neither modifies any of the terms and provisions of the policy and any prior endorsements, nor does it extend the effective date of the policy and prior endorsements, nor does it increase the face amount thereof. Signed under seal for the Company, but this Endorsement is to be valid only when it bears an authorized countersignature, dated XXXXXXX..

Countersigned:



ENDORSEMENT TO TITLE POLICY Attached to and forming part of Policy No. M-7762

Charge $Nil 05/06/2008 – Loan

ISSUED BY




- Page 3 -

ii) if the indebtedness and liability of the mortgagor is increased at any time subsequent to the Date

of Policy so that the total indebtedness and liability of the mortgagor exceeds the Amount of Insurance and if the Date of Policy is not amended as provided for herein, the Company is not liable for any loss or damage sustained or incurred by the Insured by reason of any matters covered under this Policy arising or created subsequent to the Date of Policy.

Issuing Guidelines: This endorsement is not applicable in construction situations. If any subsequent registrations become apparent through a subsearch of title, or otherwise, these are to be reported to the Company prior to any amendment to the Date of Policy or Amount of Insurance and the Company reserves the right to provide further underwriting. This Endorsement is made a part of the policy and is subject to all the terms and provisions thereof and of any prior endorsements thereto. Except to the extent expressly stated, this Endorsement neither modifies any of the terms and provisions of the policy and any prior endorsements, nor does it extend the effective date of the policy and prior endorsements, nor does it increase the face amount thereof. Signed under seal for the Company, but this Endorsement is to be valid only when it bears an authorized countersignature, dated XXXXXXX..

Countersigned:



SCHEDULE C Issued by:

CHICAGO TITLE INSURANCE COMPANY Endorsement

Subsequent Loan Facilities (BDC 04/10) 1. Insurance covers all indebtedness and liability and payments do not reduce the Amount of Insurance The Company acknowledges and agrees that the Insured Mortgage secures all present and future indebtedness and liability of the mortgagor up to the amount of insurance as amended from time to time as provided for hereunder (the "Amount of Insurance") and that, notwithstanding the terms and conditions of the policy and any endorsement, the Amount of Insurance shall not be reduced by payments made on any such indebtedness and liability. 2. Amend Date of Policy: Subsequent Advances On the creation of future indebtedness and liability up to the Amount of Insurance, other than pursuant to advances contemplated by the revolving credit facility endorsement the Company will deem the Date of Policy to be the date of the creation of such future indebtedness and liability provided that, as of the date of the creation of such future indebtedness and liability, the insured: (i) conducts a subsearch of the public records (including searching executions) and confirms there are

no liens, encumbrances or adverse interests registered against the title; (ii) does not have actual knowledge of any liens, encumbrances or adverse interests; and (iii) confirms realty taxes are not in arrears. 3. Priority of subsequent advances: Date of Policy The insured acknowledges and agrees that on the creation of future indebtedness and liability, other than pursuant to advances contemplated by the revolving credit facility endorsement, and if the Date of Policy is not deemed to be amended as provided for in paragraph 2, the Company is not liable for any loss or damage sustained or incurred by the insured by reason of any matters covered under the Policy arising or created subsequent to the Date of Policy. 4. Increasing Amount of Insurance Additional indebtedness and liability may be created by the mortgagor to an amount which exceeds the Amount of Insurance and in such case, the Company will increase the Amount of Insurance to the amount requested by the insured, not to exceed the amount of the Insured Mortgage, and will amend the Date of Policy to the date of the creation of such additional indebtedness and liability, provided that, as of the date of the creation of such additional indebtedness and liability; the insured: i) conducts a subsearch of the public records (including searching executions) and confirms there are

no liens, encumbrances or adverse interests registered against the title; ii) does not have actual knowledge of any liens, encumbrances or adverse interests; iii) confirms realty taxes are not in arrears; and iv) agrees to pay the Company the premium at the then applicable rates for the increase in the Amount

of Insurance.


5. Limitation of Company's liability The insured acknowledges and agrees that: i) in the event the total indebtedness and liability of the mortgagor exceeds the Amount of Insurance and the insured has not increased the Amount of Insurance as provided for herein, the Company's liability for loss or damage arising from matters covered under the policy will be limited to losses not exceeding the amount by which the value of the land at the time of loss falls below the Amount of Insurance; and ii) if the Indebtedness and liability of the mortgagor is increased at any time subsequent to the Date of Policy so that the total indebtedness and liability of the mortgagor exceeds the Amount of Insurance and if the Date of Policy is not amended as provided for herein, the Company is not liable for any loss or damage sustained or incurred by the insured by reason of any matters covered under the Policy arising or created subsequent to the Date of Policy This endorsement is issued as part of the policy. Except as it expressly states, it does not (i) modify any of the terms and provisions of the policy, (ii) modify any prior endorsements, (iii) extend the Date of Policy, or (iv) increase the Amount of Insurance. To the extent a provision of the policy or a previous endorsement is inconsistent with an express provision of this endorsement, this endorsement controls. Otherwise, this endorsement is subject to all of the terms and provisions of the policy and of any prior endorsements.