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CoTec Holdings Corp. (TSXV:CTH) (the "Corporation") is pleased to announce that it has entered into a convertible loan agreement dated November 19, 2024 (the "Convertible Loan Agreement") with Kings Chapel International Limited ("Kings Chapel").
The Convertible Loan Agreement amends and restates, effective as of November 1, 2024, the terms of a series of loans that Kings Chapel has previously provided to the Corporation for the purposes of funding the Corporation's investments and working capital (the "Prior Loans"). As of the date hereof, the total principal amount of the Prior Loans, including an additional CAD$500,000 loan that the Corporation received from Kings Chapel on November 7, 2024, is CAD$3,013,147 with accrued and unpaid interest of CAD$220,896. Kings Chapel has also committed to advance an additional CAD$1,500,000 principal amount to the Corporation in three tranches of $500,000 to be advanced during December 2024, January 2025 and February 2025 respectively.
Pursuant to the Convertible Loan Agreement, the outstanding principal amount of the loan bears interest at an annual rate of 10% and is repayable, together with accrued and outstanding interest, on December 31, 2027. The Corporation's obligations under the Convertible Loan Agreement are unsecured. From and after January 1, 2025, the outstanding principal amount under the Convertible Loan Agreement will be converted into common shares of the Corporation ("Common Shares") (i) at any time at Kings Chapel's election, at a price of CAD$0.75 per share and (ii) automatically at a price of CAD$1.00 per share, on the first day on which the volume weighted average trading price of the Common Shares on the principal stock exchange on which the Common Shares are then traded over the immediately preceding 15 trading days is equal to or greater than $1.00. No conversion of the outstanding principal amount will occur to the extent that, after giving effect to the conversion, Kings Chapel, its affiliates and any person with whom Kings Chapel or its affiliates would own more than 49% of the outstanding Common Shares.
Kings Chapel is an existing insider and Control Person (as defined by TSX Venture Exchange Rules) of the Corporation. Julian Treger, a director of the Corporation and its Chief Executive Officer, is a beneficiary of a family trust associated with Kings Chapel. As a result, the execution of the Convertible Loan Agreement is a related party transaction subject to Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The execution of the Convertible Loan Agreement is exempt from the formal valuation requirements of MI 61-101 pursuant to subsection 5.5(b) of MI-61-101 because the Common Shares are listed only on the TSX Venture Exchange (the "TSXV") and is exempt from the minority shareholder approval requirements of MI 61-101 pursuant to subsection 5.7(1)(a) of MI 61-101 because neither the fair market value of the Convertible Loan Agreement (and the Common Shares issuable pursuant to the conversion of the outstanding principal amount of the Convertible Loan Agreement) exceeds 25% of the Corporation's market capitalization as determined in accordance with MI 61-101.