Mr. Todd Haugen reports

ENABLENCE TECHNOLOGIES ANNOUNCES C$5.975 MILLION DEBT FINANCING: OTHER CORPORATE UPDATE

Enablence Technologies Inc. has entered into a term loan agreement dated July 17, 2024, with Pinnacle Island II LP, a limited partnership formed under the laws of the Province of Ontario. Under the loan agreement, the lender has provided a subordinated secured non-revolving term loan in the maximum principal amount of $5,975,000. Further, the company has entered into an amending agreement to the existing loan facility with Pinnacle Island LP, established on Jan. 30, 2024, and amended on April 3, 2024, providing for, among other things, an increase in the amount owing under the Pinnacle I term loan by $410,000 (to an aggregate total principal amount of $9,435,000), which additional amount represents the interest rate accrued and unpaid as at June 30, 2024, on the convertible debenture (as defined below). The Pinnacle I term loan was previously disclosed in news releases dated Jan. 30, 2024, and April 3, 2024.

"This latest investment facility will provide us with added capacity, operational and product development flexibility as we continue to execute our strategic growth plan, which calls for continued support of high-growth, [planar lightwave circuits]-based advanced vision and artificial intelligence products," noted Todd Haugen, chief executive officer, Enablence. "At the same time, this investment will speed time to commercialization of new optical devices for traditional datacom and telecom businesses, which continue to benefit from high demand, which, in turn, is leading to a strengthening of our sales pipeline," added Mr. Haugen.

Key terms of the loan agreement

As noted above, the loan agreement provides for a term loan in the principal amount of $5,975,000. Other than the principal amount, the terms of the term loan are substantially the same as the terms of the Pinnacle I term loan. Specifically, the principal amount outstanding under the term loan bears an interest rate of 12 per cent per annum and has a maturity date of July 31, 2025. The company intends to use the proceeds of the term loan, after paying certain legal and other expenses, to finance its working capital requirements.

As additional consideration for entering into the loan agreement, the company agreed to pay a structuring fee of $300,000 to the lender, which amount will be paid in full on the maturity date.

The term loan will also be secured on the same basis as the Pinnacle I term loan, specifically by: (i) a second priority security interest over all of the present and after-acquired assets of the company and second priority pledge of the shares of Enablence Canada Inc. and Enablence USA Inc.; (ii) a guarantee and general security agreement provided by each of Enablence Canada, Enablence USA and Enable USA Components Inc., granting the lender a second priority security interest over all of its present and after-acquired assets; and (iii) a second priority pledge by Enablence USA of the shares of Enablence Components, in all cases pari passu with the security interests held by Pinnacle I in respect of the Pinnacle I term loan.

Key terms of the Pinnacle I amendment

As noted above, the company also entered into the Pinnacle I loan amendment, amending the loan agreement dated Jan. 30, 2024, as amended on April 3, 2024, providing for, among other things, an increase in the principal amount of the term loan by an additional $410,000, which Pinnacle I loan amendment amount represents the interest rate accrued and unpaid as at June 30, 2024, on the convertible debenture, thereby increasing the total principal amount of the term loan under the Pinnacle I loan agreement (as amended) to $9,435,000. The outstanding principal amount of the Pinnacle I term loan (including the increase pursuant to the Pinnacle I loan amendment) continues to bear an interest rate of 12 per cent per annum and has a maturity date of July 31, 2025.

For the details of the Pinnacle I loan agreement and the terms of the Pinnacle I term loan, please refer to the news release of the company dated Jan. 30, 2024, titled "Enablence Technologies Announces CDN$4.3 Million Debt Financing Package to Support Growth Plan" and the news release of the company dated April 3, 2024, titled "Enablence Technologies Announces $4.725 Million Follow-On Financing," copies of which are available on SEDAR+ under the company's issuer profile.

The increased amount of the Pinnacle I term loan represented by Pinnacle I loan amendment will continue to be secured on the same terms as the Pinnacle I term loan.

Other transaction documents

In connection with the loan agreement and the Pinnacle I loan amendment, the company also entered into: (i) an amendment to the second amended and restated loan agreement dated as of June 27, 2023, as amended on April 3, 2024, between Vortex ENA LP as lender and the company to, among other things, allow for the incurrence by the company of additional indebtedness as contemplated in the loan agreement; and (ii) an amendment and restatement of the existing intercreditor agreement dated Jan. 30, 2024, and amended on April 3, 2024, among the company, the guarantors, the lender, Pinnacle I and Vortex. The amended and restated intercreditor agreement includes Pinnacle II as a party and will govern the relationship between the secured lenders of the company after the execution and delivery of the loan agreement, the Pinnacle I loan amendment and the Vortex loan amendment. Specifically, the amended and restated intercreditor agreement provides, among other things, that: (i) the obligations owing by the company and the guarantors to Pinnacle I and Pinnacle II are fully subordinated to the prior repayment in full of the obligations owing by the company and the guarantors to Vortex; (ii) the security held by Vortex in respect of the assets of the company and the guarantors ranks in priority to the security held by Pinnacle I and Pinnacle II; (iii) the security held by Pinnacle I and Pinnacle II in respect of the assets of the company and the guarantors is held on a pari passu basis; and (iv) any payments to be made to Pinnacle I and Pinnacle II are to be made pro rata proportionally based on the full amount of the obligations owing by the company and the guarantors to each of them.

As consideration for the entry into of the Vortex loan amendment, the company has agreed to pay Vortex an amendment fee of $100,000, which amount will be paid in full on the maturity date of July 31, 2025.

Related-party considerations

As of the date of this news release, Pinnacle I holds a convertible debenture of the company, bearing a principal amount of $11-million, which may be converted at any time until June 30, 2027 (unless accelerated due to an event of default), at a price of $2 per share for up to 5.5 million shares of the company (representing approximately 22.5 per cent of the issued and outstanding shares of the company on a partially diluted basis). For details of the convertible debenture, please refer to the Pinnacle I original news release and the company's management information circular dated Jan. 30, 2024, each of which is available on SEDAR+ under the company's issuer profile. As such, Pinnacle I is considered a related party of the company for purposes of Multilateral Instrument 61-101 (Protection of Minority Security Holders in Special Transactions).

In addition, the lender and Pinnacle I are under common control as they share the same general partner, and as such, the lender may be considered a related party of the company for the purposes of MI 61-101.

Vortex may also be considered a related party of the company for purposes of MI 61-101 as the sole officer and director of the general partner of the lender, and Pinnacle I is also the sole officer and director of the general partner of Vortex. As a result of such relationships and their respective interests in the success of the company, the lender, Pinnacle I and Vortex may be acting jointly or in concert.

Accordingly, the term loan, the Pinnacle I loan amendment and the Vortex loan amendment are considered to be related-party transactions of the company for purposes of MI 61-101. The company is relying on exemptions from the formal valuation and minority shareholder approval requirements available under MI 61-101 in respect of each of the term loan, the Pinnacle I loan amendment and the Vortex loan amendment. The company is exempt from the formal valuation requirement in Section 5.4 of MI 61-101 in reliance on Section 5.5(b) of MI 61-101, as no securities of the company are listed on a specified market under MI 61-101. Additionally, the company is exempt from the minority shareholder approval requirement in Section 5.6 of MI 61-101 in reliance on Section 5.7(1)(f) of MI 61-101 in respect of the term loan and the Pinnacle I loan amendment as neither the term loan provided under the loan agreement, nor the increased principal amount represented by the Pinnacle I loan amendment amount is convertible, directly or indirectly, into equity or voting securities of the company.

The term loan, the Pinnacle I loan amendment and the Vortex loan amendment remain subject to the final acceptance of the TSX Venture Exchange.

Audit committee update

The company also wishes to announce that, effective July 12, 2024, Derek J. Burney and Oded Tal have been appointed to the audit committee of the company. The audit committee is composed of three members, being Louis De Jong (chair), Derek J. Burney and Oded Tal.

About Enablence Technologies Inc.

Enablence is a publicly traded company listed on the TSX Venture Exchange. The company designs, manufactures and sells optical components, primarily in the form of planar lightwave circuits, artificial intelligence and lidar technologies on silicon-based chips. Enablence products support a broad range of customers in the multibillion, data centre, telecom, automotive and industrial automation industries. Enablence operates a wafer fab in Fremont, Calif., with design centres in Canada and China, supported by sales and marketing operations worldwide.

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