Cresco Labs Inc 6-K, filed May 3, 2021
Cresco Labs Inc. (CRLBF)
About this 6-K
Cresco Labs Inc filed this 6-K on May 3, 2021.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
Under the Securities Exchange Act of 1934
For the Month of April 2021
000-56241
(Commission File Number)
Cresco Labs Inc.
(Exact name of Registrant as specified in its charter)
400 W Erie St Suite 110
Chicago, IL 60654
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ☐ Form 40-F ☒
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Exhibit Index
| Exhibit |
Description | |
| 99.1 | Material Change Report filed March 29, 2021 (incorporated by reference from Exhibit 4.10 of the Registrant’s Amendment No. 1 to Form F-10, filed with the Commission on April 23, 2021) | |
| 99.2 | First Amendment to Senior Secured Term Loan Agreement dated December 11, 2020 | |
| 99.3 | Senior Secured Term Loan Agreement dated January 22, 2020 | |
| 99.4 | Material Change Report filed April 19, 2021 (incorporated by reference from Exhibit 4.11 of the Registrant’s Amendment No. 1 to Form F-10, filed with the Commission on April 23, 2021) | |
| 99.5 | Material Change Report filed April 23, 2021 (incorporated by reference from Exhibit 4.12 of the Registrant’s Amendment No. 1 to Form F-10, filed with the Commission on April 23, 2021) | |
| 99.6 | Canaccord’s ATM Distribution Plan Equity Distribution Agreement dated April 23, 2021 | |
| 99.7 | Press Release dated April 26, 2021 | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CRESCO LABS INC. | ||||||
| Date: May 3, 2021 | By: | /s/ Charles Bachtell | ||||
| Charles Bachtell Chief Executive Officer | ||||||
Exhibit 99.2
Execution Version
FIRST AMENDMENT
TO SENIOR SECURED TERM LOAN AGREEMENT
This FIRST AMENDMENT TO SENIOR SECURED TERM LOAN AGREEMENT (this “Amendment”), made and entered into as of December 11, 2020 (the “First Amendment Date”), is by and among Cresco Labs Inc., a British Columbia company (the “Borrower”), the Lenders signatory hereto and [Redacted – Confidential], a Delaware limited liability company, as Administrative Agent for the Lenders (in such capacity, the “Administrative Agent”).
RECITALS
A. Reference is made to that certain Senior Secured Term Loan Agreement dated as of January 22, 2020 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), by and among the Borrower, the lenders from time to time party thereto (the “Lenders”), and the Administrative Agent.
B. The Borrower has requested an increase of the Loan Amount pursuant to Section 2.3 of the Loan Agreement, and that the Administrative Agent and each Initial Lender (acting as the Required Lenders under Section 2.3 of the Loan Agreement) consent to such increase subject to the terms and conditions set forth herein.
C. The Borrower has requested an extension of the Applicable Scheduled Maturity Date for certain Loans, certain other amendments to the Loan Agreement and certain other accommodations of the Administrative Agent and the Lenders as set forth below, and the Administrative Agent and the Lenders (acting as the Required Lenders under Section 12.1 of the Loan Agreement) have agreed to provide such increase, make such extension and make such other accommodations and amendments, subject to the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby covenant and agree to be bound as follows:
Section 1. Capitalized Terms. Capitalized terms used and not otherwise defined herein have the meanings assigned to them in the Loan Agreement, unless the context otherwise requires.
Section 2. First Amendment Loans; Increasing Lenders.
2.1. The Borrower hereby requests an increase of the Loan Amount by an additional $100,000,000 (the “First Amendment Loan Amount”) to a total of $200,000,000 pursuant to Section 2.3 of the Loan Agreement. The Administrative Agent and each Initial Lender (acting as the Required Lenders under Section 2.3 of the Loan Agreement) hereby consent to such increase subject to the terms and conditions of this Section 2.1.
2.2. The Lenders (other than OCN) providing the First Amendment Loan Amount (the “Increasing Lenders”) shall provide their respective portion of the First
Amendment Loan Amount (each portion, a “First Amendment Loan” and collectively the “First Amendment Loans”) to the Administrative Agent on or prior to the First Amendment Date.
2.3. Each Lender’s Commitment (including the Increasing Lenders’ Commitments with respect to the First Amendment Loan) as of the First Amendment Date is set forth on Schedule 1.2 of the Loan Agreement, as amended by this Amendment.
2.4. The address for notices for the purposes of the Loan Agreement for any Increasing Lenders that are not existing Lenders under the Loan Agreement is set forth on such Increasing Lender’s signature page hereto. With respect to any Lender that has changed its address for notices for purposes of the Loan Agreement, such Lender’s revised address for notices for the purposes of the Loan Agreement is set forth on such Lender’s signature page hereto.
2.5. The parties acknowledge and agree that this Amendment shall constitute the “Lender Supplement” required to be delivered pursuant to Section 2.3 of the Loan Agreement.
2.6. With respect to any Commitments, each Lender (a) represents and warrants that it is legally authorized to enter into this Amendment; (b) confirms that it has received a copy of the Loan Agreement, together with copies of the most recent financial statements delivered pursuant to Section 7.1 thereof, as applicable, and has reviewed such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Amendment; (c) agrees that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Agreement or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Agreement or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent by the terms thereof, together with such powers as are incidental thereto; and (e) agrees that it will be bound by the provisions of the Loan Agreement and will perform in accordance with its terms all the obligations which by the terms of the Loan Agreement are required to be performed by it as a Lender.
2.7. The obligation of the Increasing Lenders to make such additional Commitments and extend such additional Loans is subject to the satisfaction of the conditions set forth in Section 5 of this Amendment.
Section 3. Consent (OCN Loans).
3.1. OCN Refinancing. The Borrower and the Opaskwayak Cree Nation (“OCN”) have requested that the Administrative Agent and the Lenders constituting the Required Lenders consent to the refinancing of the OCN First Loan and the OCN Second Loan (collectively, the “OCN Loans”) in connection with this Amendment. The Borrower
2
and OCN desire that (a) a portion of the OCN Loans be converted from their status as subordinated Indebtedness to Tranche A Loans of an Extending Lender with the book recognition of USD$15,000,000 in Tranche A Loans of an Extending Lender, (b) USD$5,000,000 of the OCN Loans be paid on or within three (3) Business Days of the First Amendment Date with proceeds of the First Amendment Loans and (c) the remaining portion of the OCN Loans be paid by the Borrower to OCN through a payment in cash in an aggregate amount not to exceed USD$3,500,000 on or within three (3) Business Days of the First Amendment Date. The Borrower and OCN have requested that the OCN Loans constitute Tranche A Loans of an Extending Lender and therefore constitute “Obligations” under the Loan Agreement. The Borrower and OCN have requested that OCN constitute an Extending Lender under this Amendment, having all rights and obligations of a Lender under the Loan Agreement. Accordingly, the Borrower and OCN desire that the OCN Subordination Agreement (as amended by the First Amendment to Intercreditor Agreement dated as of July 15, 2020, the “OCN Subordination Agreement”) be terminated in connection with the execution of this Amendment and the OCN Loans would no longer constitute subordinated Indebtedness within the meaning of the Loan Agreement. Collectively, the Borrower’s request under this Section 3.1 of this Amendment shall be referred to as the “OCN Refinancing.” For the avoidance of doubt, OCN will not advance any additional funds in connection with this Amendment or the OCN Refinancing.
3.2. Consents Required for the OCN Refinancing. From and after the delivery of the OCN Subordination Agreement, Section 8.1(q) of the Loan Agreement prohibits the Loan Parties and their Subsidiaries from incurring or permitting to exist or remain outstanding the OCN Loans or any Permitted Refinancing Indebtedness in respect thereof. From and after the delivery of the OCN Subordination Agreement, Section 8.2(u) of the Loan Agreement prohibits the Loan Parties and their Subsidiaries from creating or permitting to exist any Lien securing the OCN Loans. From and after the delivery of the OCN Subordination Agreement, Section 8.7(i) of the Loan Agreement prohibits the Loan Parties and their Subsidiaries from making any Restricted Payment on the OCN Loans except solely in strict accordance with the OCN Subordination Agreement and solely with the proceeds of a Permitted Refinancing Indebtedness of the OCN Loans (provided that such Permitted Refinancing Indebtedness is subject to a subordination agreement on terms and conditions satisfactory to the Administrative Agent in its reasonable discretion) or a Permitted Equity Refinancing. Section 2.1 of the OCN Subordination Agreement prohibits the repayment of the OCN Loans except as provided for therein, which with respect to refinancing the OCN Loans only refinancing through the “proceeds of a Permitted Refinancing Indebtedness (as defined in the Senior Loan Agreement [(as defined in the OCN Subordination Agreement)])[.]” A breach of Section 2.1 of the OCN Subordination Agreement would result in the breach of Section 8.7(i) of the Loan Agreement. A release of the OCN Subordination Agreement would result in the breach of Section 8.2(u) or 8.7(i) of the Loan Agreement. An immediate Event of Default would arise under Section 10.1(a) of the Loan Agreement as a result of a breach of Section 8.1(q), 8.2(u) or 8.7(i) of the Loan Agreement.
3.3. Acknowledgement. The Borrower and OCN agree that the proposed OCN Refinancing does not constitute “Permitted Refinancing Indebtedness” under the Loan Agreement. The Lenders signatory hereto agree that after the OCN Refinancing the OCN
3
Loans would not constitute subordinated Indebtedness from and after the date of this Amendment and that OCN will not provide any additional funds in connection with the execution of this Amendment or the OCN Refinancing.
3.4. Consent. The Borrower has requested that the Administrative Agent and Lenders constituting the Required Lenders consent to the OCN Refinancing under the Loan Agreement, including without limitation Sections 8.1(q), 8.2(u) and 8.7(i) of the Loan Agreement and Section 2.1 of the OCN Subordination Agreement. The Administrative Agent and the Required Lenders hereby consent to the consummation of the OCN Refinancing and waive any occurrence of an Event of Default under the Loan Agreement, including without limitation under Section 10.1(a) of the Loan Agreement that would arise from a violation of Sections 8.1(q), 8.2(u) and 8.7(i) of the Loan Agreement and Section 2.1 of the OCN Subordination Agreement as a result of the OCN Refinancing.
3.5. Effect of Consent. The consent set forth in Section 3.4 of this Amendment is limited to the express terms thereof, and nothing herein shall be deemed a consent to or waiver by the Administrative Agent or the Lenders signatory hereto with respect to any other term, condition, representation, or covenant applicable to the Loan Parties or their Subsidiaries under the Loan Agreement, any other Loan Document or any of the other agreements, documents, or instruments executed and delivered in connection therewith, or of the covenants described therein. The consents set forth herein shall not be deemed to be a course of action upon which any Loan Party or any of their Subsidiaries may rely in the future, and the Borrower and each other Loan Party hereby expressly waives any claim to such effect. The Administrative Agent and the Lenders signatory hereto reserve the right to exercise any rights and remedies available to them in connection with any present or future Events of Default (other than as expressly waived in Section 3.4 of this Amendment).
Section 4. Amendments. The Loan Agreement is hereby amended as follows:
4.1. Addition or Revision of Defined Terms. Article 1 of the Loan Agreement is amended by adding or amending and restating, as applicable, the following definitions in their entirety to read:
“Applicable Rate” means either the Non-Extending Lender Applicable Rate, the Extending Lender Applicable Rate or the Increasing Lender Applicable Rate, as the context may require.
“Applicable Scheduled Maturity Date” means, subject to Section 3.8:
(a) with respect to Non-Extending Lenders, (i) the date which is eighteen (18) months after the Closing Date with respect to Tranche A Loans, and (ii) the date which is twenty-four (24) months after the Closing Date with respect to Tranche B Loans, and
(b) with respect to the Loans of each Extending Lender and each Increasing Lender, January 23, 2023,
4
in each case, unless such date is extended by the prior written agreement of the Administrative Agent and each Lender whose Loan is subject to such extension.
“Commitment” means, for each Lender (whether a Non-Extending Lender, Extending Lender or Increasing Lender), the obligation of such Lender to make Loans to the Borrower, as it may be modified or established (i) pursuant to Section 2.3, (ii) as a result of any assignment that has become effective pursuant to Section 12.6(b) or (iii) otherwise from time to time pursuant to the terms hereof. As of the First Amendment Date , the Commitments of each Lender (whether a Non-Extending Lender, Extending Lender or Increasing Lender) are set forth on Schedule 1.2, as the same shall be deemed to be supplemented in connection with the effectiveness of each Lender Supplement or Assignment and Assumption.
“Commitment Period” means the period commencing on the Closing Date and expiring on the earliest of (a) September 30, 2022, (b) the date on which the Administrative Agent notifies the Borrower that the Commitment Period has been terminated following the occurrence and during the continuance of an Event of Default as provided for in Section 10.2(i), and (c) such date that the Loan Amount (as increased to the maximum amount set forth herein) has been fully funded to the Borrower; provided that, the Commitment Period may be suspended by the Administrative Agent by written notice to the Borrower upon the occurrence and during the continuance of a Default.
“Exit Fee” means (a) with respect to the Loans of each Increasing Lender or the Tranche A Loans of each Extending Lender, [Redacted – Commercially Sensitive Information] of the amount of such Lender’s Loan then outstanding or (b) with respect to the Tranche B Loans of each Extending Lender, [Redacted – Commercially Sensitive Information] of the amount of such Lender’s Loan then outstanding.
“Extending Lender” means those Lenders indicated as “Extending Lenders” on Schedule 1.2(b) hereto.
“Extending Lender Applicable Rate” has the meaning specified in Section 3.4(a)(ii).
“First Amendment” means that certain First Amendment to Senior Secured Term Loan Agreement dated as of the First Amendment Date by and among the Borrower, the Administrative Agent and the Lenders party thereto.
“First Amendment Date” means December 11, 2020.
“First Amendment Fee” means, with respect to each Increasing Lender’s Commitment provided as of the First Amendment Date, [Redacted – Commercially Sensitive Information] of the principal amount of such Commitment.
5
“First Amendment Loan” means, when used in the singular form, each Loan extended pursuant to an Increasing Lender’s Commitment provided in conjunction with the First Amendment and, when used in the plural form, means all such First Amendment Loans collectively without distinction.
“Increasing Lender” means those Lenders providing First Amendment Loans and indicated as “Increasing Lenders” on Schedule 1.2(c) hereto.
“Increasing Lender Applicable Rate” has the meaning specified in Section 3.4(a)(iii).
“Lender” has the meaning assigned to it in the preamble to this Agreement. For the avoidance of doubt, the term “Lender” shall encompass any “Initial Lender,” “Non-Extending Lender,” “Extending Lender” or any “Increasing Lender” as the context may require.
“Non-Extending Lender” means those Lenders indicated as “Non- Extending Lenders” on Schedule 1.2(a) hereto.
“Non-Extending Lender Applicable Rate” has the meaning specified in Section 3.4(a)(i).
“Obligations” means any and all present and future Indebtedness (principal, interest, fees, costs and expenses, indemnities, attorneys’ fees and other amounts), liabilities and obligations (including, without limitation, guaranty obligations, indemnity obligations, Prepayment Premiums and any other amounts owing under Article III, and reimbursement obligations) of the Loan Parties to any Agent or any Lender and/or any indemnified person evidenced by or arising under or in respect of this Agreement, any Note and/or any of the other Loan Documents, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest, fees, costs, expenses and indemnities that accrue after the commencement by or against any Loan Party or any Subsidiary thereof of any proceeding under Debtor Relief Laws naming such Person as the debtor in such proceeding regardless of whether any such amounts are allowed or allowable claims in such proceeding.
“Prepayment Premium” means:
(a) with respect to all Loans of Non-Extending Lenders, the make- whole premium equal to the present value of all principal and interest payments with respect to such Loans remaining until the Applicable Scheduled Maturity Date; and
(b)(i) with respect to the First Amendment Loans of each Increasing Lender or the Tranche A Loans of each Extending Lender, the sum of (A) such Lender’s Exit Fee plus (B) if prepaid within the twelve (12) month period ending on July 22, 2022, [Redacted – Commercially Sensitive Information] of the principal amount of such Loan to be repaid with no additional amount thereafter,
6
(ii) with respect to the Tranche B Loans of each Extending Lender, the sum of (A) such Lender’s Exit Fee plus (B) if prepaid within the six (6) month period ending on July 22, 2022, [Redacted – Commercially Sensitive Information] of the principal amount of such Loan to be repaid with no additional amount thereafter;
provided that, with respect to (i) any prepayment of a Loan of an Increasing Lender or a Tranche A Loan of an Extending Lender on or before July 22, 2021 and (ii) any prepayment of a Tranche B Loan of an Extending Lender on or before January 22, 2022, the “Prepayment Premium” shall be the make-whole premium equal to the amount of all principal and interest payments with respect to such Loans remaining until the Applicable Scheduled Maturity Date plus such Lender’s Exit Fee.
“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of any Loan Party or any of their Subsidiaries, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such capital stock or other Equity Interest, or on account of any return of capital to such Person’s stockholders, partners or members (or the equivalent of any thereof), or any option, warrant or other right to acquire any such dividend or other distribution or payment. Without limiting the foregoing, “Restricted Payments” with respect to any Person shall also include all payments made by such Person with any proceeds of a dissolution or liquidation of such Person.
4.2. Advances. Section 2.2(a) of the Loan Agreement is amended and restated in its entirety as follows:
(a) Subject to Section 2.3, the Advances to be made on the Initial Funding Date shall be made by the Lenders in an amount to be specified in a written funding request delivered by the Borrower to the Administrative Agent at least two (2) Business Days before the Initial Funding Date. Advances made after the Initial Funding Date that are described in Section 2.1(a) shall be made contemporaneously with increases in the Loan Amount and the aggregate principal amount of the Commitments. The Advances made pursuant to Section 2.1(b) shall be made upon the Borrower’s delivery to the Administrative Agent of a written funding request (a “Funding Request”) for any such Advance, which Funding Request shall be delivered not later than 12:00 noon (New York City time) at least ten (10) Business Days prior to the requested Funding Date, and subject to satisfaction or waiver of each of the conditions precedent set forth in Section 5.3. The proceeds of the Advance made on the Initial Funding Date shall be utilized as follows: (i) first, the Facility Fee will be withheld on behalf of and paid pro rata to the Lenders, (ii) second, the Reserve Amount will be deposited into the Reserve Account to the
7
extent of the remaining proceeds of such Advances and (iii) third, the remaining proceeds of such Advances shall be deposited into such Accounts as the Borrower directs. The proceeds of Advances made after the Initial Funding Date shall be utilized as follows: (i) first, any fees agreed to in writing by the Borrower with respect to any applicable Lender will be withheld on behalf of and paid to such Lender (including, with respect to the First Amendment Loans, the First Amendment Fee, which will be withheld on behalf of and paid pro rata to each Increasing Lender) and (ii) second, the remaining proceeds of such Advances shall be deposited into such Accounts as the Borrower directs for proceeds of Advances on the Initial Funding Date, unless a Funding Request directs otherwise. Each Funding Request shall be irrevocable and shall specify (i) the principal amount of the proposed Loan, (ii) wire instructions for the deposit account of the Borrower into which such funds should be deposited, and (iii) the proposed borrowing date, which must be a Business Day. The Administrative Agent and the Lenders may act without liability upon the basis of written, emailed or telecopied notice believed by the Administrative Agent in good faith to be from the Borrower (or from any Responsible Officer thereof designated in writing purportedly from the Borrower to the Administrative Agent). The Administrative Agent and each Lender shall be entitled to rely conclusively on any Responsible Officer’s authority to request a Loan on behalf of the Borrower until the Administrative Agent receives written notice to the contrary. The Administrative Agent and the Lenders shall have no duty to verify the authenticity of the signature appearing on any written Funding Request.
4.3. Increase of Loan Amount. Section 2.3 of the Loan Agreement is amended by deleting the second paragraph thereof.
4.4. Repayment. Section 3.2 of the Loan Agreement is amended and restated in its entirety as follows:
Section 3.2 Repayment of Loan; Applicable Maturity Date.
(a) With respect to the Loans of Non-Extending Lenders: (i) The Borrower shall repay to the Non-Extending Lenders holding Tranche A Loans on the Applicable Maturity Date for such Tranche A Loans held by Non-Extending Lenders the aggregate Principal Amount of such Tranche A Loans on such date in full, together with all accrued and unpaid interest, fees, costs and other Obligations and amounts owed to any Agent or such Lender to but excluding the Applicable Maturity Date (with respect to the accrual of interest), in each case, on such Tranche A Loans. (ii) The Borrower shall repay to the Non-Extending Lenders holding Tranche B Loans on the Applicable Maturity Date for such Tranche B Loans held by Non-Extending Lenders the aggregate Principal Amount of such Tranche B Loans on such date in full, together with all accrued and unpaid interest, fees, costs and other Obligations and amounts owed to any Agent or such Lender to but excluding the Applicable Maturity Date (with respect to the accrual of interest), in each case, on such Tranche B Loans. (iii) Notwithstanding the provisions of this Section 3.2(a) to the contrary, the Borrower may not repay any Tranche B Loans
8
held by a Non-Extending Lender at any time before the repayment in full of all Tranche A Loans held by Non-Extending Lenders (except as permitted by Section 3.3).
(b) With respect to the Loans of Increasing Lenders or Extending Lenders: The Borrower shall repay on the Applicable Maturity Date for such Loans (i) the aggregate Principal Amount of such Loans on such date in full, plus (ii) all accrued and unpaid interest to but excluding the Applicable Maturity Date (with respect to the accrual of interest), plus (iii) the Exit Fee due to such Lender, plus (iv) any other fees, costs or other Obligations and amounts owed to any Agent or such Lender on such Loans.
(c) Any payments made prior to the repayments on the Applicable Maturity Date as set forth in this Section 3.2 shall be made as set forth below in Section 3.3.
4.5. Prepayments; Repayments. Section 3.3 of the Loan Agreement is amended and restated in its entirety as follows:
Section 3.3 Prepayments; Repayments.
(a) Voluntary Prepayment. The Borrower may voluntarily prepay, in whole or in part, each on a pro rata basis:
(i) first, the Tranche A Loans of the Non-Extending Lenders (and not the Tranche B Loans of the Non-Extending Lenders or the Loans of the Extending Lenders or Increasing Lenders),
(ii) second, either (A) both the Tranche A Loans of the Non- Extending Lenders and Tranche B Loans of the Non-Extending Lenders (and not the Loans of Extending Lenders or Increasing Lenders) or (B) the Tranche B Loans of the Non-Extending Lenders alone if no Tranche A Loans of the Non-Extending Lenders remain outstanding, then
(iii) third, the Loans of Extending Lenders and Increasing Lenders (together with the Loans of the Non-Extending Lenders or alone if no Loans of the Non-Extending Lenders remain outstanding),
in each case, at any time prior to the Applicable Scheduled Maturity Date upon ten (10) Business Days’ notice to the Administrative Agent. Any such voluntary prepayment shall be in the amount of all outstanding Obligations with respect to such prepaid Loans plus the Prepayment Premium with respect to such prepaid Loans and shall be tendered to the Administrative Agent at a time and in such manner as determined by the Administrative Agent in its reasonable discretion. Any partial prepayment of such Loans prepaid shall be in a minimum aggregate amount equal to $50,000,000 or a higher integral multiple of $10,000,000 (or, if less, the remaining outstanding balance of such Loans prepaid).
9
(b) Mandatory Prepayments. The Borrower will promptly notify the Administrative Agent of a Mandatory Prepayment Event as required under Section 7.4(a), and the applicable prepayment will be made no later than thirty (30) days from the date such notice is given. On the prepayment date, the Borrower shall prepay the principal amount of the Loans (pro rata between the Tranche A Loans and Tranche B Loans), together with all unpaid interest, fees and costs payable hereunder to (but excluding, with respect to the accrual of interest) the date of such prepayment, and all other outstanding Obligations with respect thereto, provided that the principal amount of the Loans payable with respect to clause (a) of the definition of “Mandatory Prepayment Event” shall be the amount by which the outstanding principal amount of the Loan exceeds the Loan Amount and with respect to clause (d) of the definition of a “Mandatory Prepayment Event,” if the making of any Loan by a Lender is made illegal by any applicable Governmental Authority, the Borrower shall be obligated to repay the Obligations only to such Lenders (and not to others). In addition, the Borrower shall prepay the outstanding principal amount of the Loan utilizing the insurance proceeds received by any Loan Party or any Subsidiary in excess of One Million and 00/100 Dollars ($1,000,000) arising from casualty or the loss of property if such insurance proceeds are not used to purchase replacement assets within one (1) year of receipt of such insurance proceeds. Solely with respect to the Loans of Increasing Lenders and Extending Lenders, the Borrower shall pay to each such Increasing Lender or Extending Lender such Lender’s Exit Fee on any Loan of such Increasing Lender or Extending Lender prepaid under this Section 3.4(b).
(c) Provisions Applicable to All Prepayments or Repayments. Notwithstanding anything to the contrary in this Agreement or any other Loan Document or otherwise, including the payment of any Exit Fee, upon the prepayment or repayment of the Loan in whole or in part (whether such prepayment is a mandatory prepayment, or a repayment upon acceleration pursuant to Section 10.2, whether by notice or automatically (on account of a Bankruptcy Event or otherwise)), the Borrower shall pay to the Administrative Agent for the ratable benefit of the Lenders in accordance with each Lender’s Applicable Percentage of the paid or prepaid Loans all accrued but unpaid interest, fees and costs payable hereunder to (but excluding, with respect to the accrual of interest) the date of such prepayment on the amount prepaid and any and all other outstanding Obligations which may be payable hereunder and under the other Loan Documents.
4.6. Interest Rate. Section 3.4(a) of the Loan Agreement is amended and restated in its entirety as follows:
(a) Subject to the provisions of Section 3.4(b):
(i) With respect to the Loans of each Non-Extending Lender, the outstanding Principal Amount of such Loan will bear interest at a rate per annum equal to fifteen percent (15.00%), less the Applicable Rate Adjustment (the “Non- Extending Lender Applicable Rate”), payable in cash.
10
(ii) With respect to the Loans of each Extending Lender, from and after the First Amendment Date, the outstanding Principal Amount of such Loan will bear interest at a rate per annum equal to twelve percent (12.00%) (the “Extending Lender Applicable Rate”), payable in cash.
(iii) With respect to the First Amendment Loans of each Increasing Lender, from and after the First Amendment Date, the outstanding Principal Amount of such Loan will bear interest at a rate per annum equal to twelve percent (12.00%) (the “Increasing Lender Applicable Rate”), payable in cash.
(iv) All accrued and unpaid interest on any Loan shall be paid for the applicable Interest Period on each Interest Payment Date, commencing with the first Interest Payment Date immediately following the applicable Funding Date.
4.7. Accounting Practices. Section 7.1(h) of the Loan Agreement is amended and restated in its entirety as follows:
(h) No Change to Accounting and Reporting Practices. No Loan Party shall make any material change in its accounting policies or financial reporting practices without the prior written consent of the Administrative Agent and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed, except as required by Law or applicable accounting rules; provided that each Loan Party may adopt dual reporting pursuant to generally accepted accounting principles in the United States in addition to IFRS without consent of the Administrative Agent or Required Lenders.
4.8. Indebtedness Covenant. Section 8.1(b) of the Loan Agreement is amended and restated in its entirety as follows:
(b) Indebtedness listed on Schedule 8.1 and any Permitted Refinancing Indebtedness in respect of such Indebtedness; provided, however, that with respect to any earn-out payments payable in cash, such earn-out payments shall not be paid if any Event of Default has occurred and is continuing;
4.9. Indebtedness Covenant (OCN). Section 8.1(q) of the Loan Agreement is amended and restated in its entirety as follows:
(q) Reserved.
4.10. Liens Covenant. Section 8.2(c) of the Loan Agreement is amended and restated in its entirety as follows:
(c) Liens listed on Schedule 8.2;
4.11. Liens Covenant (OCN). Section 8.2(u) of the Loan Agreement is amended and restated in its entirety as follows:
(u) Reserved.
11
4.12. Restricted Payments Covenant (OCN). Section 8.7(i) of the Loan Agreement is amended and restated in its entirety as follows:
(i) Reserved.
4.13. Non-Consenting Lenders. Section 12.1(c) of the Loan Agreement is amended and restated in its entirety as follows:
(c) If, in connection with any proposed amendment, waiver or consent requiring the consent of “each Lender” or “each Lender directly affected thereby,” the consent of the Required Lenders is obtained, but the consent of other necessary Lenders is not obtained (any such Lender whose consent is necessary but not obtained being referred to herein as a “Non-Consenting Lender”), then the Borrower or the Administrative Agent may elect to pay off or replace a Non-Consenting Lender as a Lender party to this Agreement, provided that, concurrently with such payoff or replacement, (i) if determined to be necessary by the Administrative Agent and Borrower, another bank or other Person which is reasonably satisfactory to the Borrower and the Administrative Agent shall agree, as of such date, to purchase for cash the Loan and other Obligations due to the Non- Consenting Lender pursuant to an Assignment and Assumption and to become a Lender for all purposes under this Agreement and to assume all obligations of the Non-Consenting Lender to be terminated as of such date, and (ii) the Borrower shall pay to such Non- Consenting Lender in same day funds on the day of such payoff or replacement all interest, fees and other amounts then accrued but unpaid to such Non-Consenting Lender by the Borrower hereunder to and including the date of termination, including without limitation payments due to such Non-Consenting Lender under Section 4.1 and Section 4.2; or
4.14. Exhibits and Schedules.
(a) Schedule 1.2 to the Loan Agreement is amended and restated in its entirety to read as set forth on Schedule 1.2 hereto.
(b) Schedule 6.14 to the Loan Agreement is amended and restated in its entirety to read as set forth on Schedule 6.14 hereto.
(c) Schedule 8.1 to the Loan Agreement is amended and restated in its entirety to read as set forth on Schedule 8.1 hereto.
4.15. Lenders. Pursuant to Section 12.1(c) of the Loan Agreement, Hanley Foundation, an Illinois foundation, TFH Partners LP, an Illinois limited partnership, and Clifton Capital LP, a Bermuda partnership (whose outstanding Loan is to be acquired by certain of the Increasing Lenders and thereupon be deemed to be First Amendment Loans hereunder), are no longer Lenders under the Loan Agreement and each reference to the term “Lender” or “Lenders” shall be deemed not to include those Persons.
12
Section 5. Effectiveness of Amendments. This Amendment shall become effective as of the First Amendment Date upon delivery of, and compliance with, the following:
5.1. This Amendment duly executed by the Borrower, the Administrative Agent and the Lenders.
5.2. A Reaffirmation of the Guaranty and Security Documents duly executed and delivered by the Guarantors, substantially in the form of Exhibit B attached hereto.
5.3. A Funding Request with respect to the Increased Loan Amount, which shall include disbursement instructions and funds flow, sufficiently in advance of the First Amendment Date as determined by the Administrative Agent in its reasonable discretion.
5.4. The Administrative Agent shall have received a certificate, signed by the chief financial officer of the Borrower, stating that on the First Amendment Date (a) each of the conditions precedent set forth in Section 5.3 of the Loan Agreement has been satisfied in form and substance acceptable to, or waived by, the Administrative Agent (except for the requirements under Sections 5.3(e), 5.3(f) and 5.3(g) of the Loan Agreement) and (b) the representations and warranties contained in Article 6 of the Loan Agreement and of Section 6 of this Amendment are true and correct in all material respects (or if made as of a specific date, such representations and warranties were true and correct in all material respects as of such date), except to the extent qualified by materiality, “Material Adverse Effect” or like qualification, in which case such representations and warranties are (or were) true and correct in all respects.
5.5. A certificate of the Manager, Member or Secretary (or other appropriate officer) of each Loan Party dated as of the First Amendment Date and certifying as to the following:
(a) a true and accurate copy of the articles of incorporation, certificate of formation, certificate of partnership or other equivalent documents of such Loan Party with all amendments thereto, certified by the appropriate governmental official of the jurisdiction of its organization as date reasonably acceptable to the Administrative Agent;
(b) a true and accurate copy of the bylaws, operating agreement or partnership agreement of such Loan Party;
(c) a true and accurate copy of the resolutions or unanimous written consent of the appropriate governing body of such Joining Party authorizing the execution, delivery, and performance of this Amendment, any other joinder documentation and the transactions contemplated hereby; and
(d) the incumbency, names, titles, and signatures of the officers of such Loan Party authorized to execute the Loan Documents to which such Loan Party is a party.
5.6. Completed UCC, tax lien, bankruptcy, litigation and judgment searches for each Loan Party with results satisfactory to the Administrative Agent.
13
5.7. Insurance certificates and endorsements (within 30 days of the First Amendment Date, if requested by the Administrative Agent) including each Loan Party in form and substance reasonably acceptable to the Administrative Agent listing the Administrative Agent as loss payee thereon with respect to property or casualty insurance and as an additional insured with respect to liability insurance.
5.8. A certificate of good standing for each Loan Party in its jurisdiction of organization as of a date reasonably acceptable to the Administrative Agent.
5.9. Written opinions delivered by counsel to the Borrower and each Loan Party (including their local counsel), addressed to the Administrative Agent and the Lenders and dated the First Amendment Date, in form and substance reasonably acceptable to the Administrative Agent and consistent with the opinions delivered in connection with the Loan Agreement with respect to the Borrower and the Loan Parties, and such opinion shall have been delivered to the Administrative Agent in sufficient counterparts for each Lender requesting such counterparts from time to time.
5.10. The Borrower shall have paid or reimbursed the Administrative Agent or each Lender for, or otherwise made arrangements for the payment or reimbursement to the Administrative Agent or such Lender in a manner reasonably acceptable to the Administrative Agent or such Lender, all fees and expenses then due and payable, including unpaid legal fees and expenses reasonably incurred by the Administrative Agent through the date of this Amendment in connection with this Amendment and the Loan Agreement.
5.11. The Borrower shall have delivered such documentation relating to the termination, satisfaction and discharge of the OCN Loans and any liens securing the OCN Loans concurrently with the effectiveness of the First Amendment and the payment of the amounts set forth in Section 3.1(b) and (c) hereof, acceptable to the Administrative Agent in its reasonable discretion, including but not limited to: (a) a termination of that certain First Amended Loan Amendment Term Sheet between OCN and CannaRoyalty Corp. dated July 15, 2020 (as amended, restated, supplemented or modified, the “OCN First Loan Document”), (b) a termination of that certain First Amended and Restated Loan Agreement between OCN and CannaRoyalty Corp. dated September 29, 2020 (as amended, restated, supplemented or modified, the “OCN Second Loan Document”), (c) a termination of that certain First Amended and Restated General Security Agreement dated as of September 29, 2020 by CannaRoyalty Corp. in favor of OCN (as amended, restated, supplemented or modified, the “OCN Security Agreement”; together with the OCN First Loan Document, and the OCN Second Loan Document, the “OCN Loan Documents”), and (d) a draft termination statement for any PPSA or UCC filings made pursuant to the OCN Loan Documents, to be filed immediately upon closing with delivery of a file-stamped copy to the Administrative Agent immediately upon receipt, as applicable.
Section 6. Representations, Warranties, Authority, No Adverse Claim.
6.1. Reassertion of Representations and Warranties, No Default. The Borrower hereby represents that on and as of the First Amendment Date and after giving effect to
14
this Amendment (a) all of the representations and warranties in the Loan Agreement and in this Amendment are true and correct in all material respects (or if made as of a specific date, such representations and warranties were true and correct in all material respects as of such date), except to the extent qualified by materiality, “Material Adverse Effect” or like qualification, in which case such representations and warranties are (or were) true and correct in all respects, and (b) there will exist no Default or Event of Default under the Loan Agreement as amended by this Amendment on such date that the Administrative Agent, the Lenders, or the Required Lenders, as applicable, have not waived.
6.2. Authority, No Conflict, No Consent Required. The Borrower represents and warrants that it has the power, legal right, and authority to enter into this Amendment and other agreements and documents executed and delivered by the Borrower in connection herewith (collectively, the “Amendment Documents”) and has duly authorized as appropriate the execution and delivery of the Amendment Documents by proper organizational action, and none of the Amendment Documents contravenes or constitutes a default under any material agreement, instrument, or indenture to which the Borrower is a party or a signatory, any provision of the Borrower’s organizational documents, or any other material agreement or requirement of law (excluding the Controlled Substances Act), or results in the imposition of any Lien on the Borrower’s property under any agreement binding on or applicable to the Borrower or any of their property except, if any, in favor of the Administrative Agent. The Borrower represents and warrants that other than as required in the ordinary course of business and in connection with the filing or recording of the Security Documents, no approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any Person, is necessary or required in connection with the execution, delivery or performance by, or enforcement against any Loan Party of any Amendment Document to which it is a party, except for those that the Borrower has obtained or provided and as to which the Borrower has delivered certified copies of documents evidencing each such action to the Administrative Agent.
Section 7. Affirmation of Loan Agreement, Further References, Affirmation of Security Interest. The Borrower, the Administrative Agent and each Lender each acknowledge and affirm that the Loan Agreement, as hereby amended, is hereby ratified and confirmed in all respects and all terms, conditions and provisions of the Loan Agreement, except as amended by this Amendment, shall remain unmodified and in full force and effect. All references in any document or instrument to the Loan Agreement are hereby amended and shall refer to the Loan Agreement as amended by this Amendment. The Borrower confirms to the Lenders and the Administrative Agent that the Obligations are and continue to be secured by the security interest granted by the Borrower in favor of the Administrative Agent under the Security Documents, any and all of the terms, conditions, provisions, agreements, requirements, promises, obligations, duties, covenants, and representations of the Borrower under any and all documents and agreements entered into with respect to the obligations under the Loan Agreement are hereby ratified and affirmed in all respects by the Borrower.
Section 8. Legal Expenses. As provided in Section 12.4 of the Loan Agreement, the Borrower agrees to pay or reimburse the Administrative Agent, upon execution of this Amendment, for all reasonable and invoiced (and showing in reasonable detail) out-of-pocket expenses paid or incurred by the Administrative Agent in connection with the negotiation, preparation, execution, collection and enforcement of the Amendment Documents.
15
Section 9. Merger and Integration, Superseding Effect. This Amendment, from and after the First Amendment Date, embodies the entire agreement and understanding between the parties hereto and supersedes and has merged into this Amendment all prior oral and written agreements on the same subjects by and between the parties hereto with the effect that this Amendment shall control with respect to the specific subjects hereof and thereof.
Section 10. Severability of Provisions. Any provision in any Amendment Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Amendment Documents are declared to be severable.
Section 11. Successors. The Amendment Documents shall be binding upon the Borrower, the Lenders, and the Administrative Agent, and their respective successors and assigns and shall inure to the benefit of the Borrower, the Lenders, and the Administrative Agent’s successors and assigns.
Section 12. Headings. The headings of various sections of this Amendment are for reference only and shall not be deemed to be a part of this Amendment.
Section 13. Counterparts. The Amendment Documents may be executed in several counterparts as deemed necessary or convenient, each of which, when so executed, shall be deemed an original, provided that all such counterparts shall be regarded as one and the same document.
Section 14. Release by Borrower. IN ORDER TO INDUCE THE ADMINISTRATIVE AGENT AND THE LENDERS TO ENTER INTO THIS AMENDMENT, THE BORROWER, ON BEHALF OF ITSELF AND ITS SUBSIDIARIES: (A) REPRESENTS AND WARRANTS TO THE ADMINISTRATIVE AGENT AND THE LENDERS THAT NO EVENTS HAVE TAKEN PLACE AND NO CIRCUMSTANCES EXIST AT THE FIRST AMENDMENT DATE WHICH WOULD GIVE THE BORROWER THE RIGHT TO ASSERT A DEFENSE, OFFSET OR COUNTERCLAIM TO ANY CLAIM BY THE ADMINISTRATIVE AGENT OR ANY LENDER FOR PAYMENT OR PERFORMANCE OF THE OBLIGATIONS; AND (B) HEREBY RELEASES AND FOREVER DISCHARGES THE ADMINISTRATIVE AGENT AND EACH LENDER PARTY HERETO AND EACH OF THEIR RESPECTIVE SUCCESSORS, ASSIGNS, DIRECTORS, OFFICERS, ADMINISTRATIVE AGENTS AND EMPLOYEES FROM ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS, PROCEEDINGS, DEBTS, SUMS OF MONEY, COVENANTS, CONTRACTS, CONTROVERSIES, CLAIMS AND DEMANDS, AT LAW OR IN EQUITY, OF WHICH THE BORROWER EVER HAD OR NOW HAS AGAINST THE ADMINISTRATIVE AGENT OR SUCH LENDER OR ANY OF THEIR RESPECTIVE SUCCESSORS, ASSIGNS, DIRECTORS, OFFICERS, ADMINISTRATIVE AGENTS OR EMPLOYEES BY VIRTUE OF THEIR RELATIONSHIP TO THE BORROWER IN CONNECTION WITH THIS LOANAGREEMENT, THE LOAN DOCUMENTS AND TRANSACTIONS RELATED THERETO ARISING PRIOR TO AND THROUGH THE FIRST AMENDMENT DATE.
16
Section 15. Governing Law.
15.1. THIS AMENDMENT WAS NEGOTIATED IN THE STATE OF ILLINOIS, AND ANY LOANS MADE UNDER THIS AMENDMENT OR THE LOAN AGREEMENT ARE MADE BY THE LENDERS AND ACCEPTED BY THE BORROWER IN THE STATE OF ILLINOIS, AND THE PROCEEDS OF THE LOAN DELIVERED PURSUANT TO THIS AMENDMENT OR THE LOAN AGREEMENT WERE DISBURSED FROM THE STATE OF ILLINOIS, WHICH STATE THE PARTIES IRREVOCABLY AND UNCONDITIONALLY AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, EACH AND ALL OF THIS AMENDMENT, THE LOAN AGREEMENT, THE OTHER LOAN DOCUMENTS, AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER STATE) AND ANY APPLICABLE LAW OF THE UNITED STATES. TO THE FULLEST EXTENT PERMITTED BY LAW, THE BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT, AND/OR THE LOAN.
15.2. ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST ANY AGENT, ANY LENDER OR ANY LOAN PARTY ARISING OUT OF OR RELATING TO THIS AMENDMENT OR THE LOAN AGREEMENT MAY AT SUCH AGENT’S OR SUCH LENDER’S OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN COOK COUNTY, ILLINOIS, AND THE BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. NOTHING HEREIN SHALL LIMIT THE RIGHT OF EITHER AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY LOAN PARTY IN THE COURTS OF ANY OTHER JURISDICTION. THE BORROWER DOES HEREBY DESIGNATE AND APPOINT:
Cogency Global
111 W. Washington St., Suite 1447
Chicago, IL 60602
17
AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN COOK COUNTY, ILLINOIS, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE MAILED OR DELIVERED TO THE BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE BORROWER IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF ILLINOIS. THE BORROWER (I) SHALL GIVE PROMPT WRITTEN NOTICE TO THE ADMINISTRATIVE AGENT OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK OR COOK COUNTY, ILLINOIS (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR COOK COUNTY, ILLINOIS, OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
15.3. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY LENDER WITH RESPECT TO THIS AMENDMENT OR THE LOAN AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, WHETHER IN LAW OR EQUITY, WHETHER IN CONTRACT OR IN TORT OR OTHERWISE, SHALL BE BROUGHT EXCLUSIVELY IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF ILLINOIS, AND, BY EXECUTION AND DELIVERY OF THIS AMENDMENT, EACH LENDER ACCEPTS, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AMENDMENT, THE LOAN AGREEMENT, OR ANY OTHER LOAN DOCUMENT FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS AVAILABLE. EACH LENDER IRREVOCABLY AGREES THAT ALL SERVICE OF PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH ON ITS SIGNATURE PAGE HERETO OR TO THE LOAN AGREEMENT OR RELEVANT LENDER SUPPLEMENT, AS APPLICABLE, OR AT SUCH OTHER ADDRESS OF WHICH THE BORROWER SHALL HAVE BEEN NOTIFIED PURSUANT THERETO, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY EACH LENDER TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.
Section 16. Waiver of Jury Trial. EACH PARTY HERETO HEREBY VOLUNTARILY, KNOWINGLY, UNCONDITIONALLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
18
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AMENDMENT, THE LOAN AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AMENDMENT, THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 16.
Section 17. Register. The Administrative Agent confirms to the Borrower that the Register most recently delivered to the Borrower prior to the First Amendment Date remains true and accurate on the First Amendment Date immediately prior to the effectiveness of the First Amendment.
[Signature page(s) follow.]
19
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the date and year first above written.
| BORROWER: | ||
| CRESCO LABS INC. | ||
| By: | (signed) Dennis Olis | |
| Name: | Dennis Olis | |
| Title: | Chief Financial Officer | |
First Amendment to Senior Secured Term Loan Agreement
| ADMINISTRATIVE AGENT: | ||
| [Redacted – Confidential] | ||
| By: | (signed) | |
| Name: | [Redacted – Confidential] | |
| Title: | President | |
First Amendment to Senior Secured Term Loan Agreement
| LENDERS: |
| [Redacted – Confidential] |
First Amendment to Senior Secured Term Loan Agreement
[Schedules Redacted – Confidential and/or Commercially Sensitive Information]
Exhibit 99.3
Execution Version
SENIOR SECURED TERM LOAN AGREEMENT
Dated as of January 22, 2020
among
CRESCO LABS INC., as Borrower,
THE LENDERS FROM TIME TO TIME PARTY HERETO
and
[Redacted – Confidential], as Administrative Agent
and
[Redacted – Confidential], as Collateral Agent
TABLE OF CONTENTS
| Page | ||||||
| ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS |
1 | |||||
| Section 1.1 |
Defined Terms |
1 | ||||
| Section 1.2 |
Uniform Commercial Code |
31 | ||||
| Section 1.3 |
Construction |
31 | ||||
| Section 1.4 |
Time Periods |
32 | ||||
| Section 1.5 |
Changes in IFRS |
32 | ||||
| Section 1.6 |
Delaware Divisions |
32 | ||||
| ARTICLE 2 THE LOAN |
32 | |||||
| Section 2.1 |
Loan |
32 | ||||
| Section 2.2 |
Advances |
33 | ||||
| Section 2.3 |
Increase of Loan Amount |
34 | ||||
| Section 2.4 |
Use of Proceeds |
34 | ||||
| ARTICLE 3 REPAYMENTS, PREPAYMENTS, INTEREST AND FEES |
34 | |||||
| Section 3.1 |
Repayments and Prepayments; Application |
34 | ||||
| Section 3.2 |
Repayment of Loan; Applicable Maturity Date |
35 | ||||
| Section 3.3 |
Prepayments; Repayments |
35 | ||||
| Section 3.4 |
Interest |
36 | ||||
| Section 3.5 |
Application of Payments |
36 | ||||
| Section 3.6 |
Fees |
36 | ||||
| Section 3.7 |
Evidence of Debt |
36 | ||||
| Section 3.8 |
Payments Generally; Administrative Agent’s Claw Back |
37 | ||||
| Section 3.9 |
Sharing of Payments |
37 | ||||
| Section 3.10 |
Apportionment of Payments. |
38 | ||||
| ARTICLE 4 CHANGED CIRCUMSTANCES, TAXES AND CERTAIN OTHER PROVISIONS |
39 | |||||
| Section 4.1 |
Increased Costs |
39 | ||||
| Section 4.2 |
Taxes |
40 | ||||
| ARTICLE 5 CONDITIONS PRECEDENT TO CLOSING AND FUNDING |
43 | |||||
| Section 5.1 |
Reserved |
43 | ||||
| Section 5.2 |
Conditions to Closing Date under this Agreement |
43 | ||||
| Section 5.3 |
Each Advance |
45 | ||||
| ARTICLE 6 REPRESENTATIONS AND WARRANTIES |
46 | |||||
| Section 6.1 |
Existence, Qualification and Power; Compliance with Laws |
46 | ||||
| Section 6.2 |
Authorization; No Contravention |
47 | ||||
| Section 6.3 |
Governmental Authorization; Other Consents |
47 | ||||
| Section 6.4 |
Binding Effect |
47 | ||||
| Section 6.5 |
Litigation |
47 | ||||
| Section 6.6 |
No Default |
47 | ||||
i
| Section 6.7 |
Indebtedness |
47 | ||||
| Section 6.8 |
Insurance |
47 | ||||
| Section 6.9 |
Taxes |
48 | ||||
| Section 6.10 |
ERISA Compliance |
48 | ||||
| Section 6.11 |
Margin Regulations; Investment Company Act; Public Utility |
|||||
| Holding Company Act |
48 | |||||
| Section 6.12 |
Disclosure |
49 | ||||
| Section 6.13 |
Reserved |
49 | ||||
| Section 6.14 |
Material Agreements; No Defaults; Customers and Suppliers |
49 | ||||
| Section 6.15 |
Oral Agreements; Matters Not of Record |
50 | ||||
| Section 6.16 |
Creation, Perfection and Priority of Liens |
50 | ||||
| Section 6.17 |
Equity Interests |
50 | ||||
| Section 6.18 |
No Agreements to Merge |
50 | ||||
| Section 6.19 |
Labor Matters |
50 | ||||
| Section 6.20 |
Brokerage Commissions |
51 | ||||
| Section 6.21 |
Agreements with Affiliates |
51 | ||||
| Section 6.22 |
Anti-Money Laundering and Anti-Terrorism Laws |
51 | ||||
| Section 6.23 |
Anti-Bribery and Anti-Corruption Laws |
52 | ||||
| Section 6.24 |
Representations and Warranties as to Financial Statements, |
|||||
| Documents, Projections, Solvency and Other Information |
53 | |||||
| Section 6.25 |
Cannabis Licenses and Core Business |
53 | ||||
| Section 6.26 |
Compliance with Laws, Etc. |
54 | ||||
| Section 6.27 |
Environmental Matters |
54 | ||||
| Section 6.28 |
Title to Properties |
55 | ||||
| Section 6.29 |
Intellectual Property |
55 | ||||
| Section 6.30 |
No Proposed Legislation |
56 | ||||
| Section 6.31 |
Representation regarding Super Voting Shares |
56 | ||||
| ARTICLE 7 AFFIRMATIVE COVENANTS |
56 | |||||
| Section 7.1 |
Financial Statements and Other Reports |
56 | ||||
| Section 7.2 |
Minimum Cash Balance |
58 | ||||
| Section 7.3 |
Furnishing of Information and Inspection of Collateral |
58 | ||||
| Section 7.4 |
Notices |
59 | ||||
| Section 7.5 |
Payment of Obligations |
60 | ||||
| Section 7.6 |
Preservation of Existence, Etc. |
61 | ||||
| Section 7.7 |
Maintenance of Insurance |
61 | ||||
| Section 7.8 |
Compliance |
62 | ||||
| Section 7.9 |
Books and Records |
62 | ||||
| Section 7.10 |
Intangible, Recording and Stamp Tax |
62 | ||||
| Section 7.11 |
Further Assurances |
62 | ||||
| Section 7.12 |
Special Covenants Relating to Collateral |
62 | ||||
| Section 7.13 |
Performance under Contractual Obligations |
63 | ||||
| Section 7.14 |
Reserved |
63 | ||||
| Section 7.15 |
Material Subsidiaries |
63 | ||||
| Section 7.16 |
Cannabis Licenses |
65 | ||||
| Section 7.17 |
Acquisition Documents |
66 | ||||
| Section 7.18 |
Labor Matters |
66 | ||||
ii
| Section 7.19 |
Employee Benefit Plans |
66 | ||||
| Section 7.20 |
Maintenance of Properties |
66 | ||||
| Section 7.21 |
Environmental Matters |
66 | ||||
| Section 7.22 |
Post-Closing Obligations |
67 | ||||
| ARTICLE 8 NEGATIVE COVENANTS |
68 | |||||
| Section 8.1 |
Other Indebtedness |
68 | ||||
| Section 8.2 |
Liens |
70 | ||||
| Section 8.3 |
Dispositions or Transfers |
73 | ||||
| Section 8.4 |
Investments |
75 | ||||
| Section 8.5 |
Fundamental Changes |
77 | ||||
| Section 8.6 |
Transactions with Affiliates |
78 | ||||
| Section 8.7 |
Restricted Payments |
78 | ||||
| Section 8.8 |
Margin Regulations |
80 | ||||
| Section 8.9 |
No Other Negative Pledge |
80 | ||||
| Section 8.10 |
No Change in Fiscal Year. |
80 | ||||
| Section 8.11 |
Stay, Extension and Usury Laws |
80 | ||||
| Section 8.12 |
Agreements to Restrict Dividends |
80 | ||||
| Section 8.13 |
Litigation |
81 | ||||
| Section 8.14 |
Use of Proceeds |
81 | ||||
| Section 8.15 |
Governing Documents |
81 | ||||
| Section 8.16 |
Principal Place of Business |
81 | ||||
| Section 8.17 |
Sale and Leaseback Transactions |
81 | ||||
| Section 8.18 |
Key Service Providers |
81 | ||||
| Section 8.19 |
Conduct of Business |
81 | ||||
| Section 8.20 |
Reserved |
81 | ||||
| Section 8.21 |
Anti-Money Laundering and Anti-Terrorism Laws |
81 | ||||
| Section 8.22 |
Anti-Bribery and Anti-Corruption Laws |
82 | ||||
| Section 8.23 |
Investment Company Act of 1940 |
82 | ||||
| ARTICLE 9 RESERVE ACCOUNT AND DEPOSIT ACCOUNTS |
82 | |||||
| Section 9.1 |
Establishment of and Deposit into Reserve Account |
82 | ||||
| Section 9.2 |
Reserve Account |
82 | ||||
| Section 9.3 |
Acknowledgement of Security Interests |
83 | ||||
| Section 9.4 |
The Loan Parties Rights |
83 | ||||
| Section 9.5 |
Reserve Amount |
83 | ||||
| Section 9.6 |
Operating Accounts |
84 | ||||
| ARTICLE 10 EVENTS OF DEFAULT AND REMEDIES |
84 | |||||
| Section 10.1 |
Event of Default |
84 | ||||
| Section 10.2 |
Remedies Upon Event of Default |
86 | ||||
| Section 10.3 |
Application of Funds |
86 | ||||
| Section 10.4 |
Protective Advances/Cure Rights |
87 | ||||
| ARTICLE 11 ADMINISTRATIVE AGENT AND COLLATERAL AGENT |
87 | |||||
| Section 11.1 |
Appointment and Authority |
87 | ||||
| Section 11.2 |
Rights as a Lender |
88 | ||||
iii
| Section 11.3 |
Exculpatory Provisions |
88 | ||||
| Section 11.4 |
Reliance by Agent |
89 | ||||
| Section 11.5 |
Delegation of Duties |
89 | ||||
| Section 11.6 |
Resignation or Removal of the Administrative Agent or |
|||||
| Collateral Agent |
89 | |||||
| Section 11.7 |
Non-Reliance on Agent and Other Lenders |
90 | ||||
| Section 11.8 |
Administrative Agent May File Proofs of Claim |
90 | ||||
| Section 11.9 |
Collateral and Subsidiary Guarantor Releases |
91 | ||||
| ARTICLE 12 MISCELLANEOUS |
91 | |||||
| Section 12.1 |
Amendments, Actions Under this Agreement, Etc. |
91 | ||||
| Section 12.2 |
Notices; Effectiveness; Electronic Communication |
93 | ||||
| Section 12.3 |
No Waiver; Cumulative Remedies |
94 | ||||
| Section 12.4 |
Expenses; Indemnity; Damage Waiver |
94 | ||||
| Section 12.5 |
Payments Set Aside |
96 | ||||
| Section 12.6 |
Successors And Assigns |
96 | ||||
| Section 12.7 |
Right of Setoff |
98 | ||||
| Section 12.8 |
Interest Rate Limitation |
99 | ||||
| Section 12.9 |
Counterparts; Integration; Effectiveness |
99 | ||||
| Section 12.10 |
Survival of Representations and Warranties |
99 | ||||
| Section 12.11 |
Severability |
100 | ||||
| Section 12.12 |
Governing Law; Jurisdiction; Etc. |
100 | ||||
| Section 12.13 |
WAIVER OF JURY TRIAL |
101 | ||||
| Section 12.14 |
Relationship of Parties |
102 | ||||
| Section 12.15 |
USA Patriot Act Notice |
102 | ||||
| Section 12.16 |
Time of the Essence |
102 | ||||
| Section 12.17 |
Telephone and Electronic Authorization |
102 | ||||
| Section 12.18 |
Confidentiality as to Loan Documents, Etc. |
103 | ||||
| Section 12.19 |
Confidentiality |
103 | ||||
| Section 12.20 |
Judgment Currency |
104 | ||||
| Section 12.21 |
Electronic Documentation |
104 | ||||
EXHIBITS
Exhibit A – Form of Note
Exhibit B – Form of Assignment and Assumption
Exhibit C – Form of Lender Supplement
Exhibit D – Form of Compliance Certificate
SCHEDULES
Schedule 1.1 – Cannabis Licenses
Schedule 1.2 – Initial Lenders’ Commitments
Schedule 6.14 – Material Agreements
Schedule 6.17 – Equity Interests
Schedule 6.19 – Labor Matters
Schedule 6.28 – Real Property Interests
Schedule 7.12 – Material Real Property
Schedule 7.18 – Labor Agreements
iv
Schedule 8.1 – Permitted Indebtedness
Schedule 8.2 – Permitted Liens
Schedule 8.3 – Dispositions and Transfers
Schedule 8.4 – Permitted Investments
Schedule 8.6 – Transactions with Affiliates
Schedule 8.7 – Restricted Payments
Schedule 8.13 – Litigation
Schedule 12.17 – Borrower’s Authorized Signatories
[Remainder of page intentionally blank.]
v
SENIOR SECURED TERM LOAN AGREEMENT
THIS SENIOR SECURED TERM LOAN AGREEMENT, dated as of January 22, 2020, (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, this “Agreement”), among Cresco Labs Inc., a British Columbia company (together with its successors and permitted assigns, the “Borrower”), and the lenders from time to time party hereto (each a “Lender” and collectively the “Lenders”), [Redacted – Confidential], a Delaware limited liability company as administrative agent for the Lenders (in such capacity, together with its successors and assigns in such capacity, the “Administrative Agent”) and [Redacted – Confidential], a Delaware limited liability company, as collateral agent for the benefit of the Secured Parties (in such capacity, together with its successors and assigns in such capacity, the “Collateral Agent”).
WHEREAS, subject to the terms and conditions of this Agreement and the other Loan Documents, the Borrower has requested that the Lenders extend, and the Lenders have agreed to extend, a senior secured loan to the Borrower in an aggregate principal amount of up to Seventy Five Million and 00/100 Dollars ($75,000,000) (which may be increased pursuant to Section 2.3 below) for the uses provided for herein, and the Borrower is willing to grant security interests in the Collateral to the Collateral Agent for the benefit of the Secured Parties in order to secure Borrower’s obligations hereunder.
NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter contained, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Defined Terms.
As used in this Agreement, the following terms shall have the meanings set forth below:
“Accounts” means any checking, savings or other deposit account maintained by the Loan Parties (including the Reserve Account). All funds in each Account shall be conclusively presumed to be Collateral or the proceeds of Collateral and neither the Collateral Agent nor any Lender shall have any duty to inquire as to the source of the amounts on deposit in any Account.
“Administrative Agent” has the meaning assigned to such term in the preamble hereto.
“Administrative Agent’s Office” means the Administrative Agent’s address and, as appropriate, account as set forth on the signature page, or such other address or account as the Administrative Agent may from time to time notify to the Borrower and the Lenders.
“Administrative Questionnaire” means an administrative questionnaire in a form supplied by the Administrative Agent.
“Advance” means an advance of any portion of the Loan Amount pursuant to the provisions of this Agreement.
1
“Affiliate” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. Notwithstanding the foregoing, under no circumstance shall any Agent, any Lender or any of their respective Affiliates be deemed to be an Affiliate of any of the Loan Parties or any Subsidiary thereof for purposes of this Agreement or any other Loan Document.
“Agent” means the Administrative Agent or the Collateral Agent, as applicable.
“Agreement” has the meaning assigned to such term in the preamble hereto.
“All-in Yield” means, as to any Loan, the yield thereof, including in the form of interest payments and Facility Fees.
“Anti-Corruption Laws” has the meaning specified in Section 6.23.
“Anti-Money Laundering and Anti-Terrorism Laws” means any requirement of Law relating to terrorism, economic sanctions or money laundering, including, without limitation, (a) the Money Laundering Control Act of 1986 (i.e., 18 U.S.C. §§ 1956 and 1957), (b) the Bank Secrecy Act of 1970 (31 U.S.C. §§ 5311-5330 and 12 U.S.C. §§ 1818(s), 1820(b) and 1951-1959), and the implementing regulations promulgated thereunder, (c) the USA PATRIOT Act and the implementing regulations promulgated thereunder, (d) the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada), (e) laws, regulations and Executive Orders administered under any Sanctions Programs, (f) any law prohibiting or directed against terrorist activities or the financing or support of terrorist activities (e.g., 18 U.S.C. §§ 2339A and 2339B) and (g) any similar laws enacted in the United States, Canada or any other jurisdictions in which the parties to this Agreement operate, as any of the foregoing laws have been, or shall hereafter be, amended, renewed, extended, or replaced and all other present and future legal requirements of any Governmental Authority governing, addressing, relating to, or attempting to eliminate, terrorist acts and acts of war and any regulations promulgated pursuant thereto.
“Applicable Maturity Date” means the earlier of (a) the Applicable Scheduled Maturity Date and (b) the date on which the Principal Amount of the Loan becomes due and payable as herein provided, whether at declaration of acceleration, call for redemption or otherwise.
“Applicable Percentage” means with respect to any Lender as of any date, the percentage (carried out to the ninth decimal place) of the Principal Amount of the Loan owed to such Lender at such time.
“Applicable Rate” has the meaning specified in Section 3.4(a).
“Applicable Rate Adjustment” means, with respect to any Loan, the percentage (as the same may be amended on each Funding Date) that would result in the All-in Yield on such Loan being equivalent to an interest rate per annum of [Redacted – Commercially Sensitive Information].
“Applicable Scheduled Maturity Date” means, subject to Section 3.8, (i) the date which is eighteen (18) months after the Closing Date with respect to Tranche A Loans, and (ii) the date which is twenty-four (24) months after the Closing Date with respect to Tranche B Loans, in each case, unless such date is extended by the prior written agreement of the Administrative Agent and the Lenders.
2
“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 12.6(b)), and accepted by the Administrative Agent, in substantially the form of Exhibit B attached hereto and made a part hereof or any other form approved by the Administrative Agent.
“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”, as now and hereinafter in effect, or any successor statute.
“Bankruptcy Event” means any of the following: (a) a receiver, liquidator or trustee shall be appointed for any Subsidiary; (b) any Subsidiary shall be adjudicated as bankrupt or insolvent; (c) any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal, state or provincial law, shall be filed by or against, consented to, or acquiesced in by, any Subsidiary, or (d) any proceeding for the dissolution, liquidation, insolvency, bankruptcy or wind-up (voluntary or involuntary) of any Subsidiary shall be instituted.
“BIA” means the Bankruptcy and Insolvency Act (Canada) as now and hereinafter in effect, or any successor statute.
“Blocked Person” means any Person:
(a) that (i) is identified on the list of “Specially Designated Nationals and Blocked Persons” published by OFAC and/or any other similar lists maintained by OFAC pursuant to authorizing statute, executive order or regulation; (ii) (A) is an agency of the government of a country, (B) an organization controlled by a country, or (C) resides, is organized or chartered in a country, region or territory that is the target of comprehensive sanctions under any Sanctions Program (a “Sanctioned Country”); (iii) a Person listed in any economic or financial sanctions- related or trade embargoes-related list of designated Persons maintained under any of the Anti- Money Laundering and Anti-Terrorism Laws; or (iv) (A) is a Person whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of the Executive Order or any related legislation or any other similar executive order(s) or (B) engages in any dealings or transactions prohibited by Section 2 of the Executive Order or is otherwise associated with any such Person in any manner violative of Section 2 of the Executive Order; and
(b) that is owned or controlled by or that is acting for or on behalf of, any Person described in clause (a) above.
“Borrower” has the meaning assigned to such term in the preamble hereto.
“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the State of New York.
3
“Canadian Pledge and Security Agreement” means that certain Pledge and Security Agreement of even date herewith by and among the Borrower and the Collateral Agent for the benefit of the Secured Parties, in substantially the form acceptable to the Collateral Agent, as the same may be amended, restated, amended and restated, replaced, supplemented or otherwise modified from time to time.
“Cannabis License” means (a) each license specified on Schedule 1.1, (b) any license acquired after the Closing Date by any Loan Party or Subsidiary thereof permitting such Loan Party or such Subsidiary to cultivate, produce, warehouse, store, transport, modify, distribute or sell cannabis or THC-infused products to medical or recreational purchasers in any jurisdiction, including in Canada, the United States or any province or state thereof, or (c) any authorization, permit or licence otherwise required by any Loan Party or any Subsidiary thereof to operate the Core Business.
“Capital Lease Obligations” means, with respect to any Person for any period, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as liabilities on a balance sheet of such Person under IFRS and the amount of which obligations shall be the capitalized amount thereof determined in accordance with IFRS. Notwithstanding the foregoing, for purposes of this Agreement, any lease (whether entered into before or after December 31, 2018) that, in the good faith determination of such Person, would have been classified as an operating lease pursuant to IFRS as in effect on December 31, 2018, shall be deemed to be an operating lease and shall not be included in the definition of “Capital Lease Obligations.”
“Cash Equivalents” means (a) any readily-marketable securities (i) issued by, or directly, unconditionally and fully guaranteed or insured by the United States or Canadian federal government or (ii) issued by any agency of the United States or Canadian federal government the obligations of which are fully backed by the full faith and credit of the United States or Canadian federal government, (b) any readily-marketable direct obligations issued by any other agency of the United States or Canadian federal government, any state of the United States or any Canadian province or any political subdivision of any such state or province or any public instrumentality thereof, in each case having a rating of at least “A-1” from S&P or at least “P-1” from Moody’s, (c) any commercial paper rated at least “A-1” by S&P or “P-1” by Moody’s and issued by any Person organized under the laws of any state of the United States, (d) any Dollar-denominated time deposit, insured certificate of deposit, overnight bank deposit or bankers’ acceptance issued or accepted by (i) any Lender or (ii) any commercial bank that is (A) organized under the laws of the United States or Canada, any state thereof or the District of Columbia, (B) “adequately capitalized” (as defined in the regulations of its primary federal banking regulators) and (C) has Tier 1 capital (as defined in such regulations) in excess of Two Hundred Fifty Million and 00/100 Dollars ($250,000,000), (e) shares of any United States or Canadian money market fund that (i) has substantially all of its assets invested continuously in the types of investments referred to in clause (a), (b), (c) or (d) above with maturities as set forth in the proviso below, (ii) has net assets in excess of Five Hundred Million and 00/100 Dollars ($500,000,000) and (iii) has obtained from either S&P or Moody’s the highest rating obtainable for money market funds in the United States or Canada; provided, however, that the maturities of all obligations specified in any of clauses (a), (b), (c) and (d) above shall not exceed three hundred sixty-five (365) days, and (f) instruments
4
equivalent to those referred to in clauses (a) through (e) above denominated in other currencies and comparable in credit quality and tenor to those referred to above and customarily used for short and medium term investment purposes in jurisdictions outside the United States or Canada to the extent reasonably required in connection with any business conducted by such Person in such jurisdictions.
“CCAA” means the Companies’ Creditors Arrangement Act (Canada) as now and hereinafter in effect, or any successor statute.
“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority, (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any applicable Governmental Authority or (d) the Loan being classified as an HVCRE; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.
“Change of Control” means an event or series of events by which, without the consent of the Required Lenders:
(a) the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the U.S. Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended) of shares representing more than fifty percent (50.00%) of the voting power of the outstanding shares of voting stock of the Borrower on a fully diluted basis;
(b) the Holders of Super Voting Shares on any date cease to hold at least fifty percent (50.00%) of the Super Voting Shares issued and outstanding as of such date; or
(c) the majority of the seats (other than vacant seats) on the board of directors or similar governing body of the Borrower shall cease to be occupied by Persons (i) who were members of the board of directors or similar governing body of the Borrower on the Closing Date or (ii) who were nominated, appointed or approved by the Borrower’s board of directors or similar governing body of the Borrower.
For purposes of this definition, a Person shall not be deemed to have beneficial ownership of securities subject to a stock or share purchase agreement, merger or amalgamation agreement or similar agreement until the consummation of the transactions contemplated by such agreement.
Notwithstanding the foregoing, a transaction will not be deemed to involve a Change of Control under clause (a) or (b) above if (i) the Borrower becomes a direct or indirect wholly owned Subsidiary of a holding company and (ii)(A) the direct or indirect holders of the voting stock of
5
such holding company immediately following that transaction are the same as the holders of the Borrower’s voting shares immediately prior to that transaction, including with respect to the Holders of Super Voting Shares, or (B) immediately following that transaction, the holders of the Borrower’s voting stock immediately prior to that transaction (or another holding company satisfying the requirements of this sentence) are the beneficial owners, directly or indirectly, of more than fifty percent (50.00%) of the voting stock of such holding company, including with respect to the Holders of Super Voting Shares.
“Claims” has the meaning set forth in Section 12.4(b).
“Closing Date” means a date selected by the Administrative Agent occurring within three (3) Business Days following such date as all of the conditions precedent in Section 5.2 are satisfied or waived by the Administrative Agent.
“Code” means the Internal Revenue Code of 1986, and the regulations promulgated thereunder, as amended and in effect.
“Collateral” means all real property and personal property assets securing or intending to secure the Obligations, except for the “Excluded Property” (as defined in the Security Documents).
“Collateral Agent” is defined in the preamble to this Agreement.
“Commitment” means, for each Lender, the obligation of such Lender to make Loans to the Borrower, as it may be modified or established (i) pursuant to Section 2.3, (ii) as a result of any assignment that has become effective pursuant to Section 12.6(b) or (iii) otherwise from time to time pursuant to the terms hereof. The initial amount of each Initial Lender’s Commitment as of the Closing Date is set out on Schedule 1.2, as the same shall be deemed to be supplemented in connection with the effectiveness of each Lender Supplement.
“Commitment Period” means the period commencing on the Closing Date and expiring on the earliest of (a) the date which is six (6) months from the Closing Date, provided that the Administrative Agent may in its discretion and with the consent of the Required Lenders extend such date to not later than October 22, 2020, by providing written notice to the Borrower at least twenty (20) Business Days prior to the expiration of the Commitment Period to be so extended, (b) the date on which the Administrative Agent notifies the Borrower that the Commitment Period has been terminated following the occurrence and during the continuance of an Event of Default as provided for in Section 10.2(i), and (c) such date that the Loan Amount (as increased to the maximum amount set forth herein) has been fully funded to the Borrower; provided that, the Commitment Period may be suspended by the Administrative Agent by written notice to the Borrower upon the occurrence and during the continuance of a Default.
“Competitor” means the Persons listed on the “Competitor List” delivered by the Borrower to the Administrative Agent in writing prior to or on the Closing Date, and the Affiliates of such Persons.
“Compliance Certificate” means a compliance certificate delivered in accordance with Section 7.1(d).
6
“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
“Consolidated EBITDA” means, with respect to the Borrower, on a consolidated basis determined in accordance with IFRS, for any period, the amount equal to the Consolidated Net Income of the Borrower plus, without duplication: (i) interest charges, (ii) federal, state, provincial, local and foreign income taxes expense, (iii) depreciation, depletion and amortization expense, (iv) payments of any premiums and any other costs, fees and expenses required to be paid by the terms thereof in connection with the repayment or redemption of Indebtedness existing as of the date of this Agreement, (v) severance costs, restructuring costs, asset impairment charges and acquisition transition services costs, provided in each case such costs or charges were deducted in calculating Consolidated Net Income for such period, (vi) all unusual, nonrecurring or extraordinary non-cash losses, charges or expenses (including to the extent related to impairment of goodwill), (vii) interest income, to the extent such interest income was deducted in computing such Consolidated Net Income, (viii) any expenses or charges related to any issuance of capital stock, any Investment, acquisition, disposition, recapitalization or the incurrence, modification or repayment of Indebtedness permitted to be incurred by this Agreement, in each case whether or not successful, (ix) the settlement amounts relating to the settlement of any claims against the Loan Parties, in an amount not to exceed [Redacted – Commercially Sensitive Information] for any four Fiscal Quarter period, (x) all expenses related to restricted stock and redeemable stock interests granted to officers, directors and employees, to the extent such expenses were deducted in computing such Consolidated Net Income and minus (xi) all unusual, nonrecurring or extraordinary non-cash gains and income.
“Consolidated Net Income” means the Net Income of each Loan Party and each of their respective Subsidiaries on a consolidated basis, provided that:
(a) the cumulative effect of a change in accounting principles will be excluded;
(b) to the extent deducted in the calculation of Net Income, any non-recurring charges associated with any premium or penalty paid, write-offs of deferred financing costs (including unamortized original issue discount) or other financial recapitalization changes in connection with redeeming or retiring any Indebtedness prior to its maturity will be added back to the calculation of Consolidated Net Income;
(c) any asset impairment write downs under IFRS will be excluded;
(d) unrealized gains and losses due solely to fluctuations in currency values and the related tax effects according to IFRS will be excluded; and
(e) unrealized losses and gains under Hedging Obligations included in the determination of Net Income, will be excluded.
“Consolidated Total Assets” means, as of the last day of any period, the total assets of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with IFRS, as of the most recent date for which internal financial statements have been provided pursuant to Section 7.1, or if such financial statements have not been delivered at the time of determination,the most recent date for which consolidated financial statements of the Borrower are publicly available on SEDAR or EDGAR.
7
“Consolidated Total Revenue” means, for any period, the revenue of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with IFRS.
“Contractual Obligation” means, as to any Person, any provision of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.
“Control” (including the correlative meanings, the terms, “controlling”, “controlled by” and “under common control with”) of any specified Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.
“Controlled Substances Act” means the Controlled Substances Act (21 U.S.C. § 801 et seq.), and any rules or regulations promulgated thereunder as in effect from time to time.
“Core Business” means the cultivation, production, warehousing, storage, transportation, modification, distribution or sale of cannabis or THC-infused products to medical or recreational purchasers in any jurisdiction, including in Canada, the United States or any province or state thereof.
“Current Value” has the meaning specified therefor in Section 7.12(c).
“DACA Agreement” means, with respect to any Account established by the Borrower, an agreement in form and substance satisfactory to the Collateral Agent establishing “control” (as defined in the UCC) of such Account by the Collateral Agent and whereby the bank maintaining such account agrees, upon the occurrence and during the continuance of an Event of Default, to comply only with the instructions originated by the Collateral Agent, without the further consent of any Loan Party or any Subsidiary thereof all as set forth in such DACA Agreement, as the same may be amended, restated, amended and restated, replaced, supplemented or otherwise modified from time to time.
“Debtor Relief Laws” means each of the (a) the Bankruptcy Code, (b) the BIA, (c) the CCAA, and (d) all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States, the Laws of Canada or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
“Default” means any event, act or condition described in Section 10.1 that is, with the giving of notice, lapse of time, or both, and would constitute, unless cured or waived, an Event of Default.
“Default Rate” means an interest rate equal to (a) the Applicable Rate plus (b) [Redacted – Commercially Sensitive Information] per annum.
8
“Defaulting Lender” means any Lender that (a) has failed to fund any portion of an Advance when required hereunder, (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within one (1) Business Day of the date when due, unless the subject of a good faith dispute, or (c) has been deemed insolvent or become the subject of a bankruptcy, insolvency, receivership or other similar proceeding.
“Depository Institution” means a bank, credit union or other financial institution that regularly takes deposits and is duly chartered under federal or state Law and the deposits of which are insured by the Federal Deposit Insurance Corporation or equivalent governmental agency.
“Disposition” or “Dispose” means, with respect to any Person, the sale, lease, sale and leaseback, assignment, conveyance, transfer or other voluntary disposition (whether in one transaction or series of transactions) of any property (including, without limitation, any Equity Interests) by such Person (or the granting of any option or other right to do any of the foregoing), including any sale, assignment, transfer, division or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith, and including any expropriation of any property of such Person.
“Dollar” and “$” mean dollars in lawful currency of the United States.
“EDGAR” means the United States Securities and Exchange Commission’s Electronic Data Gathering, Analysis, and Retrieval system.
“Eligible Assignee” means any Person (other than a natural person); provided that notwithstanding the foregoing, “Eligible Assignee” shall not include the Borrower or any of the Borrower’s Affiliates or any Competitor.
“Eligible Institution” means a Depository Institution or trust company the short term unsecured debt obligations or commercial paper of which are rated at least A-1+ by S&P, P-1 by Moody’s, and F-1+ by Fitch in the case of accounts in which funds are held for thirty (30) days or less, or, in the case of letters of credit or accounts in which funds are held for more than thirty (30) days, the long term unsecured debt obligations of which are rated at least “AA” by Fitch or S&P or “Aa2” by Moody’s.
“Eligible Participant” means any Person (other than a natural person); provided that notwithstanding the foregoing, “Eligible Participant” shall not include the Borrower or any of the Borrower’s Affiliates or any Competitor.
“Employee Benefit Plan” means any employee benefit plan that is described in Section 3(3) of ERISA and which is maintained for employees of any Loan Party or their respective Subsidiaries or any ERISA Affiliate thereof.
“Environment” means the natural environment (including soil, land, surface or subsurface strata), surface waters, groundwater, sediment, ambient air (including all layers of the atmosphere), indoor air, organic and inorganic matter and living organisms, and any other environmental medium or natural resource.
9
“Environmental Actions” means any summons, citation, notice, directive, order, claim, litigation, investigation, judicial or administrative proceeding or judgment from any Person or Governmental Authority involving violations or alleged violations of Environmental Laws or Releases, exposure to or cleanup of any Hazardous Materials (a) from any assets, properties or businesses owned or operated by any Loan Party or any of their respective Subsidiaries or any predecessor in interest; (b) onto any facilities which received Hazardous Materials generated by any Loan Party or any of their Subsidiaries or any predecessor in interest, or (c) with respect to any Environmental Liabilities and Costs.
“Environmental Law” means any and all current or future foreign, federal, state, provincial or local statutes, laws, common-law doctrine, ordinances, orders, rules, regulations, judgments, governmental authorizations, or any other requirements of Governmental Authorities relating to (a) the Environment, including those Laws relating to Releases of Hazardous Materials, (b)protection of the public health and welfare with respect to the exposure to or the Release of any Hazardous Materials or (c) occupational safety and health, industrial hygiene or the protection of human, plant or animal health or welfare (to the extent related to exposure to or management of Hazardous Materials), in any manner applicable to any Loan Party or any Material Subsidiary.
“Environmental Liabilities and Costs” means all liabilities, monetary obligations, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants and costs of investigations and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim or demand by any Governmental Authority or any third party, and which relate to any actual or alleged noncompliance with or liability pursuant to any Environmental Law or Environmental Action, including any condition of the Environment or a Release of Hazardous Materials from or onto (a) any property presently or formerly owned by any Loan Party or any Subsidiary thereof or (b) any facility which received Hazardous Materials generated by any Loan Party or any Subsidiary thereof.
“Environmental Lien” means any Lien in favor of any Governmental Authority for Environmental Liabilities and Costs.
“Environmental Permit” means any permit, approval, identification number, license or other authorization pursuant to or required under any Environmental Law.
“Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants or options for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, membership or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
10
“ERISA Affiliate”: As applied to any Person, any trade or business (whether or not incorporated) which is a member of a group of which that Person is a member and which is under common control within the meaning of Section 414(b), (c), (m) or (o) of the Code.
“Event of Default” has the meaning assigned to such term in Section 10.1.
“Excluded Taxes” means, with respect to any Agent or any Lender or any other recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes) imposed as a result of such recipient being organized under the laws of, or having its principal office or, in the case of any Lender that is a bank, its applicable lending office, located in the jurisdiction (or any political subdivision thereof) imposing such tax, (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction imposed as a result of such recipient being organized under the laws of, or having its principal office or, in the case of any Lender that is a bank, its applicable lending office, located in the jurisdiction (or any political subdivision thereof) imposing such tax, (c) Connection Income Taxes not otherwise described in (a) or (b) above, (d) in the case of a Lender, any U.S. or Canadian federal withholding tax that is imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement (or, if it is a bank, designates a new lending office) or is attributable to such Lender’s failure or inability (other than as a result of a Change in Law after such Lender becomes a party hereto) to comply with Section 4.2, except to the extent that such Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (if it is a bank) or assignment, to receive additional amounts from the Loan Parties with respect to such withholding tax pursuant to Section 4.2(a) and (e) any U.S. federal withholding taxes imposed on amounts payable by the Borrower pursuant to FATCA.
“Executive Order” means Executive Order No. 13224 on Terrorist Financings: - Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten To Commit, or Support Terrorism issued on 23rd September, 2001, as amended by Order No. 132684, as so amended.
“Facility Fee” means, with respect to each Commitment made on the Closing Date, [Redacted – Commercially Sensitive Information] of the principal amount of such Commitment. For greater certainty, the Facility Fee shall not be payable with respect to any Commitment made after the Closing Date without the written agreement of the Borrower.
“Fiscal Quarter” means each of the calendar quarters during any Fiscal Year.
“Fiscal Year” means any period of twelve (12) consecutive months ending on December 31 of any calendar year.
“Fitch” means Fitch Ratings Inc.
“Foreign Official” has the meaning specified in Section 6.23.
“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
11
“Funding Date” means the Initial Funding Date and each other date on which any Advance is made thereafter.
“Funding Request” has the meaning specified in Section 2.2.
“Governing Documents” means (a) (i) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction), (ii) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement, and (iii) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity, (b) any certificate of designation or instrument relating to the rights of holders (including preferred shareholders) of Equity Interests in such entity, and (c) any shareholder rights agreement, voting trusts or other similar agreement to which such entity is a party.
“Governmental Authority” means the government of the United States or Canada or any other nation, or of any political subdivision thereof, whether state, provincial or local, and any agency, authority, instrumentality, regulatory body, court, tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
“Guarantee” or “Guaranty” means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien); provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.
12
“Hazardous Materials” means all chemicals, materials, substances, solid and hazardous wastes, toxic substances, flammable materials, solvents, radioactive materials, carcinogens, pesticides, pollutants, contaminants, compounds, in any form, including petroleum or petroleum distillates and any petroleum by-products, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas or mold, subject to regulation under, or which may give rise to liability pursuant to, any Environmental Law.
“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person under:
| (a) | interest rate swap agreements, interest rate cap agreements, interest rate collar agreements and other agreements or arrangements with respect to interest rates; |
| (b) | commodity swap agreements, commodity option agreements, forward contracts and other agreements or arrangements with respect to commodity prices; |
| (c) | foreign exchange contracts, currency swap agreements and other agreements or arrangements with respect to foreign currency exchange rates; and |
| (d) | other agreements or arrangements designed to protect such Person against fluctuations in interest rates, commodity prices or currency exchange rates. |
“Holders of Super Voting Shares” means Charles Bachtell, Joseph Caltabiano, Robert M. Sampson, Brian McCormack and Dominic Sergi, each an individual residing in Illinois.
“Hope Heal Health” means Hope Heal Health, Inc., a Massachusetts corporation.
“Hope Heal Health Acquisition” means the transactions contemplated pursuant to that certain Agreement and Plan of Merger, dated November 19, 2018, by and among Hope Heal Health, Inc., 1880 West, LLC, Cresco HHH, LLC, Cresco 1880 West, LLC, the individuals party thereto and John Rogue as the representative, as amended by that certain letter agreement, dated December 2018, and as further amended, restated, amended and restated, supplemented or otherwise modified from time to time with the prior written consent of the Administrative Agent and Required Lenders.
“HVCRE” means a loan that is categorized as a high volatility commercial real estate loan exposure pursuant to Part 217 of Chapter II of title 12 of the Code of Federal Regulations.
“IFRS” means International Financial Reporting Standards, as adopted by the International Accounting Standards Board, as in effect in Canada from time to time.
“Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with IFRS:
(a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;
13
(b) all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments;
(c) any Hedging Obligations;
(d) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business as described below);
(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;
(f) the aggregate amount of all Capital Lease Obligations of such Person which, in accordance with IFRS, is required to be shown on the balance sheet of such Person;
(g) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person, valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; and
(h) all Guarantees of such Person in respect of any of the foregoing.
For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person. The amount of any Hedging Obligation on any date shall be the Mark-to-Market Exposure thereof as of such date. Indebtedness shall not include any trade account payables arising from the acquisition of goods, supplies or merchandise, paid within sixty (60) days of the incurrence of such trade account payables, each in the ordinary course of such Person’s business.
Notwithstanding the foregoing, the following shall not constitute Indebtedness:
| (1) | any obligation arising from any agreement providing for indemnities, Guarantees, purchase price adjustments, holdbacks, contingency payment or earnout obligations based on the performance of the acquired or disposed assets, subordinated vendor takeback loan or similar obligations (other than Guarantees of Indebtedness) customarily incurred by any Person in connection with the acquisition or disposition of any assets, including capital stock, in an aggregate amount not to exceed Twenty Million and 00/100 Dollars ($20,000,000) at any one time outstanding; |
| (2) | any indebtedness that has been defeased in accordance with IFRS or defeased pursuant to the irrevocable deposit of cash or Cash Equivalents (in an amount sufficient to satisfy all obligations relating thereto at maturity or redemption, as |
14
| applicable, including all payments of interest and premium, if any) in a trust or account created or pledged for the sole benefit of the holders of such indebtedness, and subject to no other Liens, and in accordance with the other applicable terms of the instrument governing such indebtedness; provided, however, if any such defeasance shall be terminated prior to the full discharge of the indebtedness for which it was incurred, then such indebtedness shall constitute Indebtedness for all relevant purposes of this Agreement; |
| (3) | any item that would not appear as a liability upon a balance sheet of the specified Person in accordance with IFRS; and |
| (4) | for greater certainty, Operating Leases. |
“Independent Accountant” means any firm of nationally recognized, certified public accountants which is independent and which is selected by the Borrower and reasonably acceptable to the Administrative Agent.
“Indemnified Taxes” means (a) Taxes other than Excluded Taxes and (b) to the extent not otherwise described in (a), Other Taxes.
“Indemnitee” has the meaning specified in Section 12.4(b).
“Initial Funding Date” means, subject to the satisfaction of Section 5.3, January 30, 2020 or such other date as the Borrower and the Administrative Agent may agree in writing.
“Initial Lender” means a Lender (i) party to this Agreement as of the Closing Date or (ii) that becomes a party to this Agreement on or before the Initial Funding Date and funds its Commitment on the Initial Funding Date.
“Insolvency Proceeding” means a bankruptcy, insolvency, receivership, liquidation, winding up, reorganization or similar proceeding.
“Inspection” has the meaning specified in Section 7.3(a).
“Intellectual Property” has the meaning specified therefor in the Security Agreement.
“Interest Payment Date” means (a) the first Business Day of each Fiscal Quarter and (b) the Applicable Maturity Date.
“Interest Period” means, with respect to any Interest Payment Date, (a) initially, the period commencing on the Initial Funding Date of the initial Advance and ending on March 31, 2020, (b) thereafter until the Applicable Maturity Date, each period commencing on (and including) the first (1st) day of the preceding Fiscal Quarter and terminating on (and including) the last day of the preceding Fiscal Quarter and (c) the period that ends on the Applicable Maturity Date, commencing the first (1st) day of the Fiscal Quarter in which the Applicable Maturity Date occurs and terminating on the Applicable Maturity Date.
15
“Investment” means, with respect to any Person, all direct or indirect investments by that Person in other Persons (including Affiliates) in the forms of loans (including guarantees or other obligations), advances, extensions of credit or capital contributions, purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with IFRS. The acquisition by a Loan Party or any Subsidiary thereof of a Person that holds an Investment in any third Person shall be deemed to be an Investment by such Loan Party in that third Person in an amount equal to the fair market value of the Investment held by the acquired Person in that third Person.
“IRS” means the United States Internal Revenue Service.
“Key Person” means [Redacted – Commercially Sensitive Information].
“Laws” means, collectively, each international, foreign, Federal, state, provincial, territorial, municipal and local statute, treaty, rule, regulation, ordinance, code and administrative or judicial precedent or authority, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and each applicable administrative order, directive, decree, policy, directed duty, license, authorization and permit of, and agreement with, any Governmental Authority.
“Lender” has the meaning assigned to it in the preamble to this Agreement.
“Lender Supplement” means a Lender Supplement substantially in the form of attached Exhibit C.
“Lien” means any recorded or unrecorded, express or implied, written or oral, mortgage, pledge, deed of trust, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale, Capital Lease Obligation, or other title retention agreement, any covenant, condition, restriction, lease, easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).
“Loan” means any extension of credit by a Lender to the Borrower under this Agreement or any other Loan Document.
“Loan Amount” means the aggregate principal amount of the loan to be advanced pursuant to this Agreement, which shall be Seventy-Five Million and 00/100 Dollars ($75,000,000) as of the Closing Date and may be increased in accordance with Section 2.3.
“Loan Documents” means, collectively, this Agreement, the Notes, the Security Documents, the Subsidiary Guaranty, the Perfection Certificate and all other documents, instruments, letters and agreements executed or delivered in connection with the Loan or this Agreement.
“Loan Parties” means the Borrower and any Subsidiary Guarantor.
16
“Loan Proceeds” means the aggregate Advances made by the Lenders to the Borrower pursuant to the Loan Documents.
“Mandatory Prepayment Event” means the occurrence of any of the following at any time during the effectiveness of this Agreement or while any Obligations remain outstanding hereunder: (a) the sum of the aggregate principal amount of outstanding Loans exceeds the Loan Amount; (b) any Governmental Authority enforces a prohibition or ban on the Core Business or processes or methods related to the Core Business (e.g., cultivation, production, warehousing, storage, transportation, modification, distribution or sale), whether under the Controlled Substances Act or otherwise, (c) any Cannabis License is revoked, suspended, cancelled without replacement on or before the date of such revocation, suspension or cancellation, or any illegality of such Cannabis License under applicable Law, including the Controlled Substances Act, is actively enforced by a Governmental Authority having jurisdiction, (d) the making or payment of any Loan or other Obligations by any Lender or any Loan Party is made illegal or unenforceable by action of any applicable Governmental Authority, (e) a Material Adverse Effect, (f) a Change in Law which has a material adverse impact on the Core Business or (g) the Key Person fails to be actively involved in the management and operations of the Core Business on behalf of the Loan Parties, except by reason of death or disability; provided that in the case of clauses (b), (c), (e) and (f) such event has an adverse impact of greater than (i) at any time when the aggregate principal amount of the Loans outstanding is One Hundred Million and 00/100 Dollars ($100,000,000) or less, twenty percent (20.00%) of Consolidated EBITDA for the most recent period of four consecutive Fiscal Quarters ended as of the end of the most recent Fiscal Quarter for which audited financial statements have been delivered pursuant to Section 7.1(a) or internal financial statements have been delivered pursuant to Section 7.1(b) (or forty percent (40.00%) of Consolidated EBITDA, if Consolidated EBITDA for such period is at least Sixty Million and 00/100 Dollars ($60,000,000)) and (ii) at any time when the aggregate principal amount of the Loans outstanding is more than One Hundred Million and 00/100 Dollars ($100,000,000), twenty percent (20.00%) of Consolidated EBITDA for the most recent period of four consecutive Fiscal Quarters ended as of the end of the most recent Fiscal Quarter for which audited financial statements have been delivered pursuant to Section 7.1(a) or internal financial statements have been delivered pursuant to Section 7.1(b); provided, in each case, that if such financial statements have not been delivered pursuant to Section 7.1(a) or Section 7.1(b) at the time of determination then such four consecutive Fiscal Quarter period shall end as of the last day of the most recent Fiscal Quarter for which consolidated financial statements of the Borrower are publicly available on SEDAR or EDGAR.
“Margin Regulations” has the meaning specified in Section 6.11(a).
“Mark-to-Market Exposure” means all obligations of a Person under any Hedging Obligation that such Person would be required to pay if the agreements governing such Hedging Obligation were terminated.
“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect on, the operations, business, assets or financial condition of the Loan Parties taken as a whole; (b) a material impairment of the legality, validity or binding effect against the Loan Parties, taken as a whole, of any Loan Document to which they are a party or (c) a material impairment of the validity, perfection or priority of the security interest created pursuant to the Security Documents.
17
“Material Agreements” has the meaning specified in Section 6.14.
“Material Real Property” means (a) on the Closing Date, each fee-owned real property listed on Schedule 7.12 and (b) any fee-owned real property acquired by any Loan Party after the Closing Date with a Current Value in excess of [Redacted – Commercially Sensitive Information].
“Material Subsidiary” means any direct or indirect Subsidiary of the Borrower or any Loan Party that (a) owns or holds a Cannabis License or (b) as of the last day of the Fiscal Quarter for which financial statements have been delivered hereunder (or if such financial statements have not been delivered at the time of determination, the most recent date for which consolidated financial statements of the Borrower are publicly available on SEDAR or EDGAR) had (i) revenues representing in excess of five percent (5.00%) of Consolidated Total Revenue for the period of four consecutive Fiscal Quarters ending as of such date or (ii) assets representing in excess of five percent (5.00%) of Consolidated Total Assets as of such date; provided that, if at any time (A) the aggregate amount contributed to Consolidated Total Revenue by all Subsidiaries that are not Material Subsidiaries exceeds ten percent (10.00%) of Consolidated Total Revenue for the period of four consecutive Fiscal Quarters ending as of such date or (B) the Consolidated Total Assets of all Subsidiaries that are not Material Subsidiaries exceeds ten percent (10.00%) of Consolidated Total Assets as of such date, then the Borrower (or, in the event the Borrower has failed to do so within ten (10) days, the Administrative Agent) shall designate sufficient Subsidiaries as “Material Subsidiaries” to eliminate such excess, and such designated Subsidiaries shall for all purposes of this Agreement constitute Material Subsidiaries. Any determination as to whether a Subsidiary shall be a Material Subsidiary shall be made on the Closing Date and thereafter on the date that financial statements are delivered or should have been delivered pursuant to Section 7.1. To the extent a Subsidiary becomes a Material Subsidiary in connection with such determination, the Borrower shall cause such Subsidiary to comply with the requirements of Section 7.15 in accordance with the provisions thereof and otherwise in the Loan Documents upon the Administrative Agent’s request. Notwithstanding any other term of this Agreement, (i) each of [Redacted - Confidential] shall be deemed not to be a Material Subsidiary unless designated as such by the Borrower in writing; provided that if a [Redacted - Confidential] would be a Material Subsidiary if not for this clause (i) and is not designated as a Material Subsidiary in accordance with this clause (i), then the Restricted Party that is the direct parent of such [Redacted - Confidential] shall be deemed to be a Material Subsidiary, (ii) each of (A) [Redacted – Confidential], (B) [Redacted – Confidential], or (C) [Redacted - Confidential], shall be deemed not to be a Subsidiary or an Affiliate of a Loan Party until such time that a Loan Party beneficially owns more than fifty percent (50.00%) of the securities having the total voting power of its Equity Interests entitled to vote for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) and (iii) until the date that is 30 days after the Closing Date, Origin House and its Subsidiaries shall be deemed not to be Subsidiaries or Affiliates of a Loan Party; provided that the 30-day period set forth in Section 7.15 shall nonetheless commence on the Closing Date with respect to Origin House as though it were a Subsidiary of a Loan Party on the Closing Date.
“Maximum Commitments” means (a) as to any Lender, the aggregate commitment of such Lender to make its ratable portion of the Loan and (b) as to all Lenders, the aggregate commitment of all Lenders to make the Loan which aggregate commitment shall be the Loan Amount.
18
“Maximum Loan Amount” has the meaning set forth in Section 2.3.
“Maximum Rate” has the meaning set forth in Section 12.8.
[Redacted - Confidential] has the meaning set forth in the definition of “Material Subsidiary”.
“Minimum Cash Balance” means Twenty Million and 00/100 Dollars ($20,000,000).
“Moody’s” means Moody’s Investors Service, Inc.
“Mortgage” means a mortgage, charge, deed of trust or deed to secure debt, in form and substance reasonably satisfactory to the Administrative Agent and the Required Lenders, made by a Loan Party in favor of the Collateral Agent for the benefit of the Secured Parties, securing the Obligations and delivered to the Administrative Agent.
“Multiemployer Plan” means any multiemployer plan that is described in Section 3(37) of ERISA and which is maintained for employees of any Loan Party or their respective Subsidiaries or any ERISA Affiliate thereof.
“Net Income” means, at any date of determination, in respect of a Person the net income and earnings (or loss) of such Person, determined in accordance with IFRS, excluding, however:
| (a) | any gain or loss, together with any related provision for taxes on such gain or loss, realized in connection with: (a) any disposition of assets; or (b) the disposition of any securities by such Person or the extinguishment of any Indebtedness of such Person; and |
| (b) | any extraordinary gain or loss, together with any related provision for taxes on such extraordinary gain or loss. |
“Non-Recourse Debt” means Indebtedness incurred or assumed by a Loan Party in respect of which a Lien is granted or intended to be granted by such Loan Party and which Indebtedness is incurred or assumed solely to finance the construction, development or acquisition of an asset or property (the “Non-Recourse Asset”) from a Person at arm’s length to the Loan Parties; provided that:
| (a) | such Indebtedness is incurred at the time of construction, development or acquisition of the Non-Recourse Asset (or within one hundred twenty (120) days thereafter); and |
| (b) | the grantees of the Liens have no recourse whatsoever (other than recourse on an unsecured basis in respect of false or misleading representations or warranties and customary indemnities provided with respect to such financings) against any other assets, properties or undertakings of the Loan Parties; and |
| (c) | no Guarantee of such Indebtedness is provided by the Loan Parties. |
19
“Note” means a promissory note made by the Borrower in favor of a Lender evidencing such Lender’s Loan, substantially in the form of Exhibit A attached hereto and made a part hereof, as the same may be amended, restated, amended and restated, replaced, supplemented or otherwise modified from time to time.
“Obligations” means any and all present and future Indebtedness (principal, interest, fees, costs and expenses, indemnities, attorneys’ fees and other amounts), liabilities and obligations (including, without limitation, guaranty obligations, indemnity obligations, Prepayment Premium and reimbursement obligations) of the Loan Parties to any Agent or any Lender and/or any indemnified person evidenced by or arising under or in respect of this Agreement, any Note and/or any of the other Loan Documents, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest, fees, costs, expenses and indemnities that accrue after the commencement by or against any Loan Party or any Subsidiary thereof of any proceeding under Debtor Relief Laws naming such Person as the debtor in such proceeding regardless of whether any such amounts are allowed or allowable claims in such proceeding.
“OCN First Loan” means the First Loan (as defined on Schedule 8.1) as in effect on the Closing Date (as may be amended, restated or modified in a manner that is not materially adverse to the Secured Parties), in an aggregate principal amount not to exceed CDN$27,000,000.
“OCN Second Loan” means the Second Loan (as defined on Schedule 8.1) as in effect on the Closing Date (as may be amended, restated or modified in a manner that is not materially adverse to the Secured Parties), in an aggregate principal amount not to exceed CDN$3,500,000.
“OCN Subordination Agreement” means a subordination agreement by and between the Administrative Agent (on behalf of the Lenders) and the Opaskwayak Cree Nation (and any other lender in connection with the OCN First Loan or the OCN Second Loan) on terms and conditions satisfactory to the Administrative Agent, acting reasonably, including without limitation, (i) subordination of all Liens granted in connection with the Indebtedness under the OCN First Loan and the OCN Second Loan to all Liens granted to the Secured Parties in connection with the Security Documents, (ii) not less than 180-day enforcement standstill, and (iii) not less than 180- day principal, interest and fee payment blockage during the continuance of any Event of Default (subject to customary blockage limitations), which, for greater certainty, will permit such payments in accordance with the terms of the Credit Agreement while such payment blockage is not in effect.
“OFAC” means the United States Department of the Treasury’s Office of Foreign Assets Control.
“Operating Lease” means any lease (whether entered into before or after December 31, 2018) that would have been classified as an operating lease pursuant to IFRS as in effect on December 31, 2018.
“Origin House” means each of CannaRoyalty Corp., an Ontario corporation, d/b/a Origin House and its Subsidiaries.
“Origin House Acquisition” means the transactions contemplated pursuant to that certain Arrangement Agreement, dated April 1, 2019, by and between Cresco Labs Inc. and CannaRoyalty
20
Corp. d/b/a Origin House, as amended by that certain Agreement to Amend the Plan of Arrangement, dated May 12, 2019, that certain Second Agreement to Amend the Plan of Arrangement, dated June 5, 2019 and that certain Amending Agreement, dated November 12, 2019 and as further amended, restated, amended and restated, supplemented or otherwise modified from time to time with the prior written consent of the Administrative Agent and Required Lenders.
“Other Connection Taxes” means, with respect to the Administrative Agent or any Lender, Taxes imposed as a result of a present or former connection between such Person and the jurisdiction imposing such Tax (other than connections arising from such Person having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
“Other Taxes” means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.
“Participant” has the meaning specified in Section 12.6(d).
“Patent” has the meaning specified therefor in the Security Agreement.
“Patriot Act” means the USA PATRIOT Improvement and Reauthorization Act of 2005, Pub. L. 109-77, signed into law March 9, 2006, as amended.
“Percentage Ownership” means, with respect to a Restricted Party, the percentage of such Restricted Party’s issued and outstanding Equity Interests (excluding directors’ qualifying shares or other securities required by applicable Law to be owned by a Person other than a Restricted Party) that are beneficially owned by Restricted Parties.
“Perfection Certificate” means a certificate in form and substance reasonably satisfactory to the Administrative Agent and the Required Lenders providing information with respect to the property of each Loan Party and each Material Subsidiary thereof.
“Permitted Acquisition” means the acquisitions permitted under Sections 8.4(c) through 8.4(e).
“Permitted Acquisition Indebtedness” means Indebtedness of a Restricted Party to the extent such Indebtedness was Indebtedness of any other Person existing at the time (a) such Person became a Restricted Party or (b) such Person was merged or consolidated with or into a Restricted Party; provided that on the date such Person became a Subsidiary of the Borrower or the date such Person was merged or consolidated with or into a Restricted Party, as applicable, either:
| (a) | immediately after giving effect to such transaction on a pro forma basis as if the same had occurred at the beginning of the applicable four Fiscal Quarter period, the Restricted Parties would be permitted to incur at least One and 00/100 Dollar ($1) of additional Indebtedness pursuant to the Total Fixed Charge Coverage Ratio test set forth in Section 8.1(e); or |
21
| (b) | immediately after giving effect to such transaction on a pro forma basis as if the same had occurred at the beginning of the applicable four Fiscal Quarter period, the Total Fixed Charge Coverage Ratio of the Borrower would be equal to or greater than the Total Fixed Charge Coverage Ratio of the Borrower immediately prior to such transaction. |
“Permitted Changes” means:
| (a) | with the prior written consent of the Administrative Agent and the Required Lenders, (i) any merger, amalgamation or consolidation with or into the Borrower in a transaction in which the Borrower is the surviving entity or (ii) if the Person formed by or surviving any such merger or consolidation is not the Borrower (any such Person, the “Successor Borrower”), (A) no Event of Default shall exist or result therefrom, (B) the Successor Borrower shall deliver to the Administrative Agent all information as may be reasonably requested by the Administrative Agent to satisfy any applicable “know your customer” requirements, (C) the Successor Borrower shall be an entity organized or existing under the laws of Canada or a province thereof and (D) the Successor Borrower shall expressly assume the Obligations of such Borrower in a manner reasonably satisfactory to the Administrative Agent; it being understood and agreed that if the foregoing conditions under clauses (A) through (D) are satisfied, the Successor Borrower will succeed to, and be substituted for, such Borrower under this Agreement and the other Loan Documents, provided that the prior written consent of the Administrative Agent and the Required Lenders shall not be required if the Person that is a party to a merger, amalgamation or consolidation described in clause (i) above and surviving such a transaction is formed by the Borrower solely for facilitating such transaction; |
| (b) | any merger, amalgamation, dissolution, winding up, liquidation, or consolidation of a Subsidiary of a Loan Party into any Person in order to consummate an Investment or asset Disposition permitted by Section 8.3 or Section 8.4, or if all of the property of such Subsidiary passes to another Restricted Party (provided that if such Subsidiary is a Loan Party, then the Restricted Party to which its property passes is also a Loan Party) or is disposed of as permitted under Section 8.3 or Section 8.4, and not otherwise causing a Default under this Agreement, respectively; provided that when any Subsidiary that is a Loan Party is merging with a Person that is not a Loan Party, to the extent such other Person is required to become a Subsidiary Guarantor, it shall deliver all information as may be reasonably requested by the Administrative Agent to satisfy any applicable “know your customer” requirements and, if necessary, shall comply with Section 7.15; |
| (c) | any Subsidiary of a Loan Party may merge, amalgamate or consolidate with or into a Loan Party or any other Subsidiary of a Loan Party; provided that when any Subsidiary that is a Loan Party is merging with another Subsidiary that is not a Loan Party, a Loan Party shall be the continuing and surviving Person; |
22
| (d) | a change in the legal form of a Subsidiary of a Loan Party, if the Borrower determines in good faith that such action is in the best interests of the Borrower and is not materially disadvantageous to the Lenders; provided that any requirements under any Loan Document with respect to such change shall be promptly satisfied; provided further that, if such Subsidiary is a Loan Party, ten (10) days’ prior written notice of such change in legal form shall be provided to the Administrative Agent; and |
| (e) | a Disposition by a Subsidiary of all or substantially all of its assets (upon voluntary liquidation or otherwise) to another Subsidiary; provided that if the transferor in such a transaction is a Loan Party, then either (i) the transferee must be a Loan Party or (ii) to the extent constituting an Investment, such Investment must be a Permitted Investment in, or Permitted Indebtedness of, a Subsidiary that is not a Loan Party; and provided further, if necessary, such transferee shall comply with Section 7.15. |
“Permitted Equity Refinancing” means cash proceeds of an equity offering of the Borrower consisting of (a) a sale of subordinate voting shares or other treasury stock of the Borrower through an at the market offering or other similar offering for a fixed price or (b) a sale of shares, or units consisting of shares and warrants, of the Borrower in a public offering or private placement at a price and on a closing date specified in an agency agreement, underwriting agreement or other similar agreement, in each case, to the extent such equity offering is otherwise not prohibited by this Agreement and does not result in a Change of Control.
“Permitted Indebtedness” has the meaning specified in Section 8.1.
“Permitted Investments” has the meaning specified in Section 8.4.
“Permitted Liens” has the meaning specified in Section 8.2.
“Permitted Refinancing Indebtedness” means any Indebtedness of the Borrower or any of its Subsidiaries issued (a) in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund for value, in whole or in part, or (b) constituting an amendment, modification or supplement to or deferral or renewal of ((a) and (b) collectively, a “Refinancing”) any other Indebtedness of the Borrower or any of its Subsidiaries; provided that:
| (a) | the principal amount of such Permitted Refinancing Indebtedness does not exceed the amount of the Indebtedness so refinanced (plus all accrued and unpaid interest thereon and the amount of any premium paid on the Indebtedness being refinanced necessary to accomplish such Refinancing and reasonable fees and expenses incurred in connection therewith); |
| (b) | such Permitted Refinancing Indebtedness has a final maturity date either (a) no earlier than the final maturity date of Indebtedness being refinanced or (b) no earlier than 91 days after the latest Applicable Scheduled Maturity Date; |
23
| (c) | the Refinancing Indebtedness has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred that is equal to or greater than the Weighted Average Life to Maturity of the Indebtedness being refinanced; |
| (d) | if the Indebtedness being Refinanced is subordinated in right of payment to the Obligations, such Permitted Refinancing Indebtedness is subordinated in right of payment to the Obligations on terms at least as favorable, taken as a whole, to the Secured Parties as those contained in the documentation governing the Indebtedness being Refinanced; |
| (e) | if the Indebtedness being Refinanced is unsecured, such Permitted Refinancing Indebtedness is unsecured; and |
| (f) | if the Indebtedness being Refinanced is pari passu in right of payment with the Obligations, such Permitted Refinancing Indebtedness is pari passu with, or subordinated in right of payment to, the Obligations. |
“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
“Phase I ESA” means an ASTM E1527-13 Phase I Environmental Site Assessment.
“Phase II ESA” means an ASTM E1903-11 Phase II Environmental Site Assessment.
“Pledge and Security Agreement” means that certain Pledge and Security Agreement of even date herewith by and among each Loan Party and the Collateral Agent for the benefit of the Secured Parties, in substantially the form acceptable to the Collateral Agent, as the same may be amended, restated, amended and restated, replaced, supplemented or otherwise modified from time to time.
“Post-Closing Obligations” has the meaning specified in Section 7.22.
“PPSA” means the Personal Property Security Act (British Columbia) and the regulations thereunder or any successor statute; provided, however, if validity, perfection and effect of perfection and non-perfection of the Collateral Agent’s Liens on any applicable Collateral are governed by the personal property security laws or other applicable laws of any jurisdiction in Canada other than British Columbia, PPSA shall mean those personal property security laws or such other applicable laws (including the Civil Code of Quebec) in effect from time to time in such other jurisdiction for the purposes of the provisions hereof relating to such validity, perfection and effect of perfection and non-perfection and for the definitions related to such provisions, as from time to time in effect.
24
“Prepayment Premium” means the make-whole premium equal to the present value of all principal and interest payments of the Loan remaining until the Applicable Scheduled Maturity Date.
“Principal Amount” means, (i) when used with respect to the Loan, at any time, the then- outstanding principal amount of the Loan, and (ii) when used with respect to any other Indebtedness, the then-outstanding principal amount or accreted value of such Indebtedness, as the same may be increased or decreased, as a result of prepayment or otherwise, from time to time, including interest that accrues and remains unpaid in accordance with this Agreement or any agreement governing such other Indebtedness.
“Real Property Deliverables” means each of the following agreements, instruments and other documents in respect of each parcel of Material Real Property:
| (a) | a Mortgage duly executed by the applicable Loan Party; |
| (b) | evidence of the recording of each Mortgage in such office or offices as may be necessary or, in the opinion of the Administrative Agent or the Required Lenders, desirable to perfect the Lien purported to be created thereby or to otherwise protect the rights of the Administrative Agent and the Lenders thereunder; |
| (c) | a Title Insurance Policy with respect to each Mortgage; |
| (d) | a current ALTA survey and a surveyor’s certificate, in form and substance reasonably satisfactory to the Required Lenders, certified to the Administrative Agent and to the issuer of the Title Insurance Policy with respect thereto by a professional surveyor licensed in the state in which such Material Real Property is located and reasonably satisfactory to the Required Lenders; |
| (e) | an opinion of counsel, reasonably satisfactory to the Administrative Agent and the Required Lenders, in the state or province where such Material Real Property is located with respect to the enforceability of the Mortgage to be recorded and such other matters as the Administrative Agent or the Required Lenders may reasonably request; |
| (f) | an environmental indemnity agreement reasonably satisfactory to the Administrative Agent and the Required Lenders; |
| (g) | a Phase I ESA (and, if reasonably requested by the Required Lenders based upon the results of such Phase I ESA, a Phase II ESA) of each Material Real Property completed by an independent environmental consulting firm reasonably acceptable to the Required Lenders, and in each case with results of the Phase I ESA and/or Phase II ESA, as applicable, which are reasonably satisfactory to the Required Lenders; and |
| (h) | such other agreements, instruments and other documents (including guarantees and opinions of counsel) as the Administrative Agent or the Required Lenders may reasonably require. |
25
“Registered Intellectual Property” means Intellectual Property that is issued, registered, renewed or the subject of a pending application.
“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees and administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.
“Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, seeping, migrating, dumping or disposing of any Hazardous Material (including the abandonment or discarding of barrels, containers and other closed receptacles containing any Hazardous Material) into the Environment, including, without limitation, the movement of Hazardous Materials through or in the ambient air, soil, surface or ground water, or property.
“Remedial Action” means all actions taken to (a) investigate, clean up, remove, remediate, contain, treat, monitor, assess, evaluate or in any other way address Hazardous Materials in the Environment, (b) respond to any Environmental Actions, (c) prevent or mitigate any Release, or (d) perform pre-remedial studies and investigations and post-remedial operation and maintenance activities.
“Reportable Event” means a “reportable event” as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to an Employee Benefit Plan (other than an event for which the thirty (30) day notice period is waived pursuant to applicable regulations).
“Required Lenders” means Lenders holding at least a majority of the aggregate Principal Amount of the Loan, from time to time; provided, however, that any such amounts held by any of the Loan Parties or any of their respective Affiliates or by any Defaulting Lender shall be excluded for all purposes under this definition for determining “Required Lenders” for any purpose. Notwithstanding the foregoing, in no event shall Required Lenders consist of fewer than two non-Defaulting Lenders at any time at which there shall be at least two non-Defaulting Lenders party to this Agreement, and for purposes of the foregoing, Lenders that are Affiliates (and Approved Funds of such Lender or an Affiliate thereof) of one another shall be treated as a single Lender.
“Reserve Account” means, subject to Section 9.2, an identifiable account separate from all other funds held by the Reserve Account Bank that is either (i) an account or accounts (or subaccounts thereof) maintained with a federal or state-chartered Depository Institution or trust company which complies with the definition of Eligible Institution, or (ii) a segregated trust account or accounts (or subaccounts thereof) maintained with a federal or state chartered Depository Institution or trust company acting in its fiduciary capacity which, in the case of a state chartered Depository Institution or trust company is subject to regulations substantially similar to 12 C.F.R. § 9.10(b), having in any case a combined capital and surplus of at least the Reserve Amount and subject to supervision or examination by federal and state authorities. A Reserve Account will not be evidenced by a certificate of deposit, passbook or other instrument.
“Reserve Account Bank” means Century Bank or such other bank or banks selected by the Administrative Agent to maintain the Reserve Account. The Administrative Agent may, in its reasonable discretion, request that the Borrower change the Reserve Account Bank up to one (1)
26
time per year; provided that at any time during the continuance of an Event of Default there shall be no restriction on the Administrative Agent’s ability to request that the Borrower change the Reserve Account Bank.
“Reserve Amount” means Twenty Five Million and 00/100 Dollars ($25,000,000).
“Responsible Officer” means the chief executive officer, president, chief financial officer, treasurer or the general counsel of the Borrower or any Person designated by a Responsible Officer to act on behalf of a Responsible Officer, or other duly authorized Person acceptable to the Administrative Agent; provided that such designated Person may not designate any other Person to be a Responsible Officer. Any document delivered hereunder that is signed by a Responsible Officer of the Borrower shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of the Borrower and such Responsible Officer shall be conclusively presumed to have acted on behalf of the Borrower.
“Restricted Party” has the meaning specified in the introductory paragraph of Article 8.
“Restricted Payment” means (a) any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of any Loan Party or any of their Subsidiaries, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such capital stock or other Equity Interest, or on account of any return of capital to such Person’s stockholders, partners or members (or the equivalent of any thereof), or any option, warrant or other right to acquire any such dividend or other distribution or payment and (b) any payment of principal or interest with respect to the OCN First Loan or the OCN Second Loan. Without limiting the foregoing, “Restricted Payments” with respect to any Person shall also include all payments made by such Person with any proceeds of a dissolution or liquidation of such Person.
“S&P” means Standard & Poor’s Financial Services LLC, a division of McGraw-Hill Financial Inc., and any successor thereto.
“Sanctions Program” means any of the sanctions programs and related requirements of Law administered by (a) the U.S. government, including those administered by the Treasury Department’s Office of Foreign Assets Control or the U.S. Department of State, or (b) the Government of Canada, the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom, in each case, as renewed, extended, amended, or replaced.
“Secured Parties” means, collectively, the Agents and the Lenders.
“Security Documents” means the Pledge and Security Agreement, the Canadian Pledge and Security Agreement any DACA Agreement, any Mortgage and all other security agreements or other instruments, agreements, and documents (including UCC and PPSA financing statements) executed and delivered by or on behalf of a Loan Party to the Collateral Agent or the Administrative Agent granting a Lien to secure any of the Obligations.
27
“SEDAR” means the Canadian Securities Administrators’ System for Electronic Document Analysis and Retrieval.
“Solvent” and “Solvency” means, with respect to any Person on a particular date, that on such date (a) at fair valuation, all of the properties and assets of such Person are greater than the sum of the debts, including contingent liabilities, of such Person, (b) the present fair saleable value of the properties and assets of such Person is not less than the amount that would be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person is able to realize upon its properties and assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (d) such Person does not intend to, and does not believe that it will, incur debts beyond such Person’s ability to pay as such debts mature, (e) such Person is not engaged in a business or a transaction, and is not about to engage in a business or transaction, for which such Person’s properties and assets would constitute unreasonably small capital after giving due consideration to the prevailing practices in the industry in which such Person is engaged, (f) such Person is not “insolvent” within the meaning of Section 101(32) of the Bankruptcy Code and (g) such person is not “insolvent” under the BIA or CCAA. The amount of all guarantees or other contingent liabilities at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, can reasonably be expected to become an actual or matured liability.
“Specified Currency” has the meaning specified in Section 12.20.
“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which more than fifty percent (50.00%) of securities having the total voting power of the Equity Interests entitled to vote for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise Controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.
“Subsidiary Guarantor” means each Material Subsidiary of the Borrower or of any Loan Party.
“Subsidiary Guaranty” means the Guaranty dated as of the date hereof and executed by each Subsidiary Guarantor in favor of the Administrative Agent for the benefit of the Lenders, in substantially the form acceptable to the Administrative Agent, as the same may be amended, restated, amended and restated, replaced, supplemented or otherwise modified.
“Super Voting Shares” means the Super Voting Shares of the Borrower, without par value, the terms of which are set forth in the articles of incorporation of the Borrower under the heading “Share Provisions to the Articles Effective Novemb[e]r 30, 2018” and “Appendix 2 to Amendment Resolution,” as such provisions may be replaced by those set forth in Section 28 of the proposed articles of incorporation of the Borrower attached to the Borrower’s management information circular, dated December 23, 2019.
28
“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“Termination Event” means (i) the filing of a notice of intent to terminate an Employee Benefit Plan or the treatment of an Employee Benefit Plan amendment as a termination under Section 4041 of ERISA or (ii) the institution of proceedings by the PBGC to terminate an Employee Benefit Plan.
“Title Insurance Policy” means an ALTA form loan title insurance policy, dated the date on which a subject Mortgage is filed, in form and substance, and from a title insurance company, reasonably acceptable to the Collateral Agent, insuring the Lien of such Mortgage and covering all interests mortgaged to the Collateral Agent under the Mortgage, including comprehensive, access and zoning endorsements, among others as required by the Collateral Agent, to the extent available in the applicable jurisdiction, and deleting all standard exceptions, including but not limited to the survey exception (if a survey is required by the Collateral Agent or the title company providing such Title Insurance Policy).
“Total Fixed Charge Coverage Ratio” means, at any date, for the period of four consecutive Fiscal Quarters ended as of the end of the most recent Fiscal Quarter for which audited financial statements have been delivered pursuant to Section 7.1(a) or internal financial statements have been delivered pursuant to Section 7.1(b) (or if no such financial statements have been delivered, the end of the most recent Fiscal Quarter for which consolidated financial statements of the Borrower are publicly available on SEDAR or EDGAR), the ratio of (a) Consolidated EBITDA minus (i) unfinanced capital expenditures of the Borrower and its Subsidiaries and classified as such on a balance sheet in conformity with IFRS, (ii) Restricted Payments paid by a Loan Party in cash to a Person that is not a Restricted Party, and (iii) federal, state, provincial, local and foreign income taxes of the Borrower and its Subsidiaries paid in cash and classified as such on a balance sheet in conformity with IFRS to (b) Total Fixed Charges of the Borrower and its Subsidiaries on a consolidated basis.
“Total Fixed Charges” means, with respect to any Person, for any period, the amount equal to the aggregate consolidated cash interest expense as determined in accordance with IFRS, including to the extent applicable and without duplication, the portion of any Capital Lease Obligations allocable to interest expense, all commissions, discounts and other fees charged with respect to letters of credit and bankers’ acceptance financing, the amortization of debt discounts and the net costs under a swap agreement in respect of interest rates, and the interest portion of any deferred payment obligations, in each case paid, payable or allocable in cash during such period.
“Trademark” has the meaning specified therefor in the Security Agreement.
“Tranche A Loan” means a Loan designated as a Tranche A Loan in a writing delivered by the Lender of such Loan to the Borrower and the Administrative Agent at least one (1) Business Day prior to the Funding Date for such Loan; provided that any Loan that is not designated as a Tranche B Loan in accordance with this Agreement shall be deemed to be a Tranche A Loan.
29
“Tranche B Loan” means any Loan designated as a Tranche B Loan in a writing delivered by the Lender of such Loan to the Borrower and the Administrative Agent at least one (1) Business Day prior to the Funding Date for such Loan.
“Transactions” means the transactions provided for in, or contemplated by, the Loan Documents.
“Transfer” means any direct or indirect sale, transfer, conveyance, division, installment sale, master lease, grant of Lien or other interest, license, lease, alienation or assignment, whether voluntary or involuntary, of all or any portion of the direct or indirect legal or beneficial ownership of, or any interest in (a) the Collateral or any part thereof, or (b) any Loan Party or any Subsidiary thereof, including any agreement to transfer or cede to another Person any voting, management or approval rights, or any other rights, appurtenant to any such legal or beneficial ownership or other interest.
“Tryke” means each of (i) Tryke Companies, LLC, an Arizona limited liability company (“Tryke Companies”), (ii) Tryke Companies SO NV, LLC, a Nevada limited liability company, (iii) Tryke Companies Reno, LLC, a Nevada limited liability company, and (iv) Tryke Companies Utah, LLC, a Utah limited liability company.
“Tryke Acquisition” means the transactions contemplated pursuant to that certain Membership Interest Purchase Agreement, dated September 15, 2019, by and among Seacoast Investments Fund I, LLC, Seacoast Investments Fund II, LLC, Seacoast Investments Fund IV, LLC, TH Realty I, LLC, TH Realty II, LLC, TH Realty II-B LLC, Cresco Labs, LLC, Cresco Labs Inc. and Tryke Sellers’ Representative, as amended, restated, amended and restated, supplemented or otherwise modified from time to time with the prior written consent of the Administrative Agent and Required Lenders.
“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code as in effect from time to time in the State of Illinois; provided further that, if by reason of mandatory provisions of law, perfection, or the effect of perfection, priority or non-perfection, of a security interest in any of the Collateral or the availability of any remedy hereunder is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Illinois, “Uniform Commercial Code” means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection, priority, or effect of perfection or non-perfection or availability of such remedy, as the case may be.
“UETA” has the meaning specified in Section 12.21.
“United States” and “U.S.” mean the United States of America.
“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing:
(a) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by
30
(b) the then outstanding principal amount of such Indebtedness.
“Wholly-Owned Subsidiary” means, a Subsidiary, for which all of the Equity Interests of such Subsidiary are, directly or indirectly, owned or controlled by the Borrower and/or one or more of its Wholly-Owned Subsidiaries (except for directors’ qualifying shares or other shares required by applicable Law to be owned by a Person other than a Borrower and/or one or more of its Wholly-Owned Subsidiaries).
Section 1.2 Uniform Commercial Code. Any terms used in this Agreement that are defined in the UCC shall be construed and defined as set forth in the UCC unless otherwise defined herein, provided, however, that to the extent that the UCC is used to define any term herein and such term is defined differently in different Divisions of the UCC, unless expressly stated otherwise the definition of such term contained in Article 8 of the UCC shall govern.
Section 1.3 Construction. All references to sections and schedules are to sections and schedules in or to this Agreement unless otherwise specified. All accounting terms not specifically defined herein shall be construed in accordance with IFRS. When used herein, the term “financial statements” shall include the notes and schedules thereto. Unless otherwise specified herein or therein, all terms defined in this Agreement shall have the definitions given them in this Agreement when used in any other Loan Document or in any certificate or other document made or delivered pursuant thereto. All uses of the word “including” shall mean “including, without limitation” unless the context shall indicate otherwise. Unless otherwise specified, the words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined. With respect to terms defined by cross-reference to another agreement, such defined terms shall have the definitions set forth in such other agreement as of the Closing Date, and no modifications to such agreement shall have the effect of changing such definitions for the purposes of this Agreement unless the Administrative Agent expressly agrees that such definitions as used in this Agreement have been revised. The parties hereby acknowledge and agree that, as to any clauses or provisions contained in this Agreement or any of the other Loan Documents to the effect that the Borrower (a) represents or warrants on behalf of, or covenants on behalf of, any other Loan Party or an Affiliate thereof, (b) shall cause any other Loan Party or an Affiliate thereof to act or refrain from acting, to comply with, to permit, to perform, to pay, to furnish, to cure, to remove, to observe, to deliver, to suffer, to initiate, to provide, to make available, to furnish in any manner, or (c) shall cause to occur or not to occur, or otherwise be obligated in any manner with respect to, any matters pertaining to any other Loan Party or an Affiliate thereof, such clause or provision is intended to mean, and shall be construed as meaning, that the Borrower shall cause such other Loan Party or such Affiliate to take such action (and in all cases throughout the Loan Documents the words “Borrower shall” or “Borrower shall not” (or words of similar meaning) means “Borrower shall cause the applicable Loan Party or the applicable Affiliate” or “Borrower shall not permit such applicable Loan Party or the applicable Affiliate” to so act or not to so act, as applicable, as the context may require (and any instance in the Loan Documents where such words already appear shall not be deemed or construed to mean that any other instance where such words do not appear were not intended to be interpreted as provided above)). Unless otherwise expressly provided for herein or in any other Loan Documents, any approval or consent required or permitted to be taken by any Lender, the Required Lenders or any Agent pursuant to this Agreement and any other Loan Documents may be exercised, made or withheld in the sole discretion of such Lender, Required Lenders or such Agent, as applicable, acting reasonably.
31
Section 1.4 Time Periods. In this Agreement, in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding”. Periods of days referred to in this Agreement shall be counted in calendar days unless Business Days are expressly prescribed. Any period determined hereunder by reference to a month or months or year or years shall end on the day in the relevant calendar month in the relevant year, if applicable, immediately preceding the date numerically corresponding to the first day of the next such period, provided, that if such period commences on the last day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month during which such period is to end), such period shall, unless otherwise expressly required by the other provisions of this Agreement, end on the last day of the calendar month. Unless otherwise specified, all references to specific times shall mean and be a reference to such time in New York, New York.
Section 1.5 Changes in IFRS. As used herein and in any certificate or other document made or delivered pursuant hereto, accounting terms not defined in Section 1.1, and accounting terms partly defined in Section 1.1 to the extent not defined, shall have the respective meanings given to them under IFRS. If at any time any change in IFRS would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Administrative Agent (in consultation with the Required Lenders) shall so request, the Borrower and the Administrative Agent shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in IFRS, provided that until so amended, (a) such ratio or requirement shall continue to be computed in accordance with IFRS prior to such change therein and (b) the Borrower shall provide the Administrative Agent financial statements and other documents required under this Agreement or as reasonably requested herein setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in IFRS.
Section 1.6 Delaware Divisions. For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its Equity Interests at such time.
ARTICLE 2
THE LOAN
Section 2.1 Loan. On the terms and subject to the conditions of this Agreement, from and after the Closing Date to and including the last day of the Commitment Period, (a) the Lenders agree to provide Advances to the Borrower, and the Borrower agrees to borrow and accept proceeds of such Advances, up to Seventy-Five Million and 00/100 Dollars ($75,000,000), provided that the maximum aggregate principal amount of the Loans shall be equal to the lesser of (i) the Loan Amount and (ii) the aggregate principal amount of the Commitments, and (b) upon the Borrower’s request, the Lenders agree to provide additional Advances to the Borrower, and the Borrower agrees to borrow and accept proceeds of such requested Advances, for amounts in excess of Seventy-Five Million and 00/100 Dollars ($75,000,000), up to the Maximum Loan Amount, provided that the maximum aggregate principal amount of the Loans shall be equal to the lesser of (i) the Loan Amount and (ii) the aggregate principal amount of the Commitments. Any amounts borrowed and repaid under this Agreement may not be reborrowed.
32
Section 2.2 Advances.
(a) Subject to Section 2.3, the Advances to be made on the Initial Funding Date shall be made by the Lenders in an amount to be specified in a written funding request delivered by the Borrower to the Administrative Agent at least two (2) Business Days before the Initial Funding Date. Advances made after the Initial Funding Date that are described in Section 2.1(a) shall be made contemporaneously with increases in the Loan Amount and the aggregate principal amount of the Commitments. The Advances made pursuant to Section 2.1(b) shall be made upon the Borrower’s delivery to the Administrative Agent of a written funding request (a “Funding Request”) for any such Advance, which Funding Request shall be delivered not later than 12:00 noon (New York City time) at least ten (10) Business Days prior to the requested Funding Date, and subject to satisfaction or waiver of each of the conditions precedent set forth in Section 5.3. The proceeds of the Advance made on the Initial Funding Date shall be utilized as follows: (i) first, the Facility Fee will be withheld on behalf of and paid pro rata to the Lenders, (ii) second, the Reserve Amount will be deposited into the Reserve Account to the extent of the remaining proceeds of such Advances and (iii) third, the remaining proceeds of such Advances shall be deposited into such Accounts as the Borrower directs. The proceeds of Advances made after the Initial Funding Date shall be utilized as follows: (i) first, any fees agreed to in writing by the Borrower with respect to any applicable Lender will be withheld on behalf of and paid to such Lender, (ii) second, to the extent any additional Reserve Amount is required to be deposited in the Reserve Account pursuant to this Agreement, the Reserve Amount will be deposited into the Reserve Account to the extent of the remaining proceeds of such Advances and (iii) third, the remaining proceeds of such Advances shall be deposited into such Accounts as the Borrower directs for proceeds of Advances on the Initial Funding Date, unless a Funding Request directs otherwise. Each Funding Request shall be irrevocable and shall specify (i) the principal amount of the proposed Loan, (ii) wire instructions for the deposit account of the Borrower into which such funds should be deposited, and (iii) the proposed borrowing date, which must be a Business Day. The Administrative Agent and the Lenders may act without liability upon the basis of written, emailed or telecopied notice believed by the Administrative Agent in good faith to be from the Borrower (or from any Responsible Officer thereof designated in writing purportedly from the Borrower to the Administrative Agent). The Administrative Agent and each Lender shall be entitled to rely conclusively on any Responsible Officer’s authority to request a Loan on behalf of the Borrower until the Administrative Agent receives written notice to the contrary. The Administrative Agent and the Lenders shall have no duty to verify the authenticity of the signature appearing on any written Funding Request.
(b) Each Funding Request pursuant to this Section 2.2 shall be irrevocable and the Borrower shall be bound to make a borrowing in accordance therewith.
(c) All Loans under this Agreement shall be made by the Lenders simultaneously and proportionately to their pro rata shares of the Commitments, it being understood that no Lender shall be responsible for any default by any other Lender in that other Lender’s obligations to make a Loan requested hereunder, nor shall the Commitment of any Lender be increased or decreased as a result of the default by any other Lender in that other Lender’s obligation to make a Loan requested hereunder, and each Lender shall be obligated to make the Loans required to be made by it by the terms of this Agreement regardless of the failure by any other Lender. Not later than 10:00 am New York City time, on the requested Funding Date, each Lender shall make available to the Administrative Agent an amount in immediately available funds equal to the Advance to be made by such Lender.
33
(d) On the requested Funding Date, the Administrative Agent shall deliver the aggregate of the amounts made available to the Administrative Agent by the Lenders in immediately available funds, as specified in Section 2.1(a).
Section 2.3 Increase of Loan Amount. At any time from and including the Closing Date to and including the last day of the Commitment Period, provided that there does not exist any Default or Event of Default that is continuing, the Loan Amount may be increased, subject to Section 2.1, upon the Borrower’s request, up to an aggregate principal amount at any time outstanding not to exceed Two Hundred Million and 00/100 Dollars ($200,000,000) (the “Maximum Loan Amount”), provided that if Commitments are unavailable for the full amount of the Maximum Loan Amount, the Loan Amount and the principal amount of the Loan shall increase to the lesser amount for which Commitments are available. Any increase contemplated under this Section 2.3 shall be effective only upon the Administrative Agent’s receipt of a fully-executed Lender Supplement in substantially the form of Exhibit C attached hereto. If the Loan Amount (a) is equal to or less than One Hundred Million and 00/100 Dollars ($100,000,000), such Lender Supplement shall be executed by at least the Administrative Agent (and the Administrative Agent’s execution of such Lender Supplement shall not be unreasonably withheld, conditioned or delayed), the Borrower and the Lenders providing additional Commitments pursuant thereto (including each new Lender) and (b) exceeds One Hundred Million and 00/100 Dollars ($100,000,000), executed by the Administrative Agent, the Borrower, Required Lenders and to the extent not included in Required Lenders and still a Lender at such time, each Initial Lender; provided that, in case of either clause (a) or (b) above, the Administrative Agent consents (such consent not to be unreasonably withheld, conditioned or delayed) to any proposed new Lender providing additional Commitments pursuant to such increase. No Lender is required to provide any such increase.
Each such increase and other Loan provided hereunder shall be either a Tranche A Loan or a Tranche B Loan with an All-in Yield not exceeding the All-in Yield for the Tranche A Loans; provided that if the All-in Yield for the Tranche A Loans is increased then the All-in Yield for the Tranche B Loans may be increased to an amount not exceeding the All-in Yield for the Tranche A Loans. For the avoidance of doubt, the Applicable Maturity Date for the Tranche A Loans may not be extended without the prior written consent of all Lenders holding Tranche A Loans. This paragraph may not be amended without the prior written consent of all Lenders holding Tranche A Loans.
Section 2.4 Use of Proceeds. The Loan shall be used to fund the entire Reserve Amount to be deposited into the Reserve Account, and thereafter to fund Permitted Acquisitions and Permitted Investments pursuant to Section 8.4(f) and (g); provided that the proceeds of each Advance may be invested in Cash Equivalents pending regulatory approval of any Permitted Acquisition.
ARTICLE 3
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
Section 3.1 Repayments and Prepayments; Application. The Borrower agrees that the Loan shall be repaid and prepaid pursuant to the provisions of this Article 3.
34
Section 3.2 Repayment of Loan; Applicable Maturity Date. The Borrower shall repay to the Lenders holding Tranche A Loans on the Applicable Maturity Date for Tranche A Loans the aggregate Principal Amount of the Tranche A Loans on such date in full, together with all accrued and unpaid interest, fees, costs and other Obligations and amounts owed to any Agent or any Lender, in each case, on the Tranche A Loans. The Borrower shall repay to the Lenders holding Tranche B Loans on the Applicable Maturity Date for Tranche B Loans the aggregate Principal Amount of the Tranche B Loans on such date in full, together with all accrued and unpaid interest, fees, costs and other Obligations and amounts owed to any Agent or any Lender, in each case, on the Tranche B Loans. Prior thereto repayments of the Loan shall be made as set forth below in Section 3.3. Notwithstanding the provisions of this Section 3.2 to the contrary, the Borrower may not repay any Tranche B Loans at any time before the repayment in full of all Tranche A Loans (except as permitted by Section 3.3).
Section 3.3 Prepayments; Repayments.
(a) Voluntary Prepayment. The Borrower may voluntarily prepay (i) the Tranche A Loans (and not the Tranche B Loans) and (ii) both the Tranche A Loans and Tranche B Loans on a pro rata basis (and the Tranche B Loans alone if no Tranche A Loans remain outstanding), in each case, at any time prior to the Applicable Scheduled Maturity Date upon ten (10) Business Days’ notice to the Administrative Agent. Any such voluntary prepayment shall be in the amount of all outstanding Obligations plus the Prepayment Premium and shall be tendered to the Administrative Agent at a time and in such manner as determined by the Administrative Agent in its reasonable discretion.
(b) Mandatory Prepayments. The Borrower will promptly notify the Administrative Agent of a Mandatory Prepayment Event as required under Section 7.4(a), and the applicable prepayment will be made no later than thirty (30) days from the date such notice is given. On the prepayment date, the Borrower shall prepay the principal amount of the Loans (pro rata between the Tranche A Loans and Tranche B Loans), together with all unpaid interest, fees and costs payable hereunder to (but excluding) the date of such prepayment, and all other outstanding Obligations with respect thereto, provided that the principal amount of the Loans payable with respect to clause (a) of the definition of “Mandatory Prepayment Event” shall be the amount by which the outstanding principal amount of the Loan exceeds the Loan Amount and with respect to clause (d) of the definition of a “Mandatory Prepayment Event,” if the making of any Loan by a Lender is made illegal by any applicable Governmental Authority, the Borrower shall be obligated to repay the Obligations only to such Lenders (and not to others). In addition, the Borrower shall prepay the outstanding principal amount of the Loan utilizing the insurance proceeds received by any Loan Party or any Subsidiary in excess of One Million and 00/100 Dollars ($1,000,000) arising from casualty or the loss of property if such insurance proceeds are not used to purchase replacement assets within one (1) year of receipt of such insurance proceeds.
(c) Provisions Applicable to All Prepayments or Repayments. Notwithstanding anything to the contrary in this Agreement or any other Loan Document or otherwise, upon the prepayment or repayment of the Loan in whole or in part (whether such prepayment is a mandatory prepayment, or a repayment upon acceleration pursuant to Section 10.2, whether by notice or automatically (on account of a Bankruptcy Event or otherwise)), the Borrower shall pay to the Administrative Agent for the ratable benefit of the Lenders in accordance with each Lender’s Applicable Percentage of the paid or prepaid Loans all accrued but unpaid interest, fees and costs
35
payable hereunder to (but excluding) the date of such prepayment on the amount prepaid and any and all other outstanding Obligations which may be payable hereunder and under the other Loan Documents.
Section 3.4 Interest.
(a) Subject to the provisions of Section 3.4(b), the outstanding Principal Amount of the Loan will bear interest at a rate per annum equal to [Redacted – Commercially Sensitive Information], less the Applicable Rate Adjustment (the “Applicable Rate”), payable in cash. All accrued and unpaid interest on the Loan shall be paid for the applicable Interest Period on each Interest Payment Date, commencing with the first Interest Payment Date immediately following the applicable Funding Date.
(b) After an Event of Default has occurred and is continuing, at the election of the Administrative Agent and the Required Lenders and upon notice to the Borrower, the entire Principal Amount of each Loan shall bear interest at a rate per annum equal to the Default Rate, accruing from the date on which such Event of Default occurred and all interest thereafter accrued on the Loan during the continuance of an Event of Default (including following the exercise of remedies pursuant to Section 10.2) shall be payable on demand.
(c) Interest shall accrue from and including the applicable Funding Date through payment in full of the Obligations. All interest shall be calculated by multiplying (i) the actual number of days elapsed in the Interest Period for which the calculation is being made, based on thirty (30) day months, by (ii) a daily rate based on a three hundred sixty (360) day year (that is, the Applicable Rate or the Default Rate, as then applicable, expressed as an annual rate divided by 360) by (iii) the Principal Amount; provided, however, that if any payment made under the Loan is ever rescinded, voided, or must otherwise be returned by the Lenders to the Borrower in connection with any bankruptcy, reorganization, receivership, insolvency, or otherwise, the amount returned shall bear interest from the date returned to the Borrower until the date such amount is paid to the Lenders.
Section 3.5 Application of Payments. So long as no Event of Default has occurred and is continuing, all payments, repayments and prepayments shall be applied: first, to the Agents’ and the Lenders’ charges, fees, expenses, indemnities and other obligations (other than the interest and principal) as provided in the Loan Documents; second, to accrued and unpaid interest then owing; and third, to all other Obligations, and in each case with respect to the Lenders, as applicable to each Lender, pro rata.
Section 3.6 Fees. All charges, fees, expenses, indemnities and other obligations (other than the interest and principal) owing under any of the Loan Documents shall be paid by the Loan Parties (who shall be jointly and severally liable therefor) in immediately available funds, at the times and in the amounts set forth in such Loan Documents.
Section 3.7 Evidence of Debt. The Loan made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive, absent manifest error, of the amount of the Loan made by the Lenders to the Borrower and the interest, costs and payments thereon. Any failure to so record or any error in doing so shall not,
36
however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through Administrative Agent) a Note, which shall evidence such Lender’s Loan in addition to such accounts or records. Each Lender may attach schedules to its Note and endorse thereon the date, amount and maturity of its Loan and payments with respect thereto which shall be conclusive, absent manifest error.
Section 3.8 Payments Generally; Administrative Agent’s Claw Back. All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to (a) the Administrative Agent, for the account of the respective Lenders to which such payments are owed, at the Administrative Agent’s Office, or (b) at the direction of the Administrative Agent, directly to the respective Lenders to which such payment are owed, at the applicable Lender’s lending office, in each case, in Dollars and in immediately available funds not later than 1:00 p.m. New York City time on the date(s) specified herein; provided that thirty (30) days prior to the Applicable Scheduled Maturity Date of a Tranche A Loan, the Borrower shall deliver to the Administrative Agent a notice describing the sources of funds to be used to make such payment which sources of funds shall be one or more of the following: (i) cash generated in the ordinary course of business, (ii) proceeds of issuance of Equity Interests or (iii) proceeds of Indebtedness with a maturity date that occurs on or after the latest Applicable Scheduled Maturity Date with respect to the Tranche B Loans; and provided further that such funds payable by the Borrower upon the Applicable Scheduled Maturity Date of a Tranche A Loan shall be deposited with the Administrative Agent not later than 1:00 p.m. New York City time on the date prior to the Applicable Scheduled Maturity Date of such Tranche A Loan, and the Administrative Agent shall (i) hold such funds in escrow pending their distribution to the Lenders and (ii) issue a notice on such Applicable Scheduled Maturity Date to the Lenders of Tranche B Loans stating whether all funds required to discharge the Tranche A Loans have been delivered by the Borrower in accordance with this Agreement, and the deposit of such funds by the Borrower shall conclusively satisfy the Borrower’s obligation to pay such funds to the Agent and the applicable Lenders. The Administrative Agent will (or will direct the Borrower to) promptly distribute to each Lender its Applicable Percentage (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s lending office. All payments received by the Administrative Agent after 1:00 p.m. New York City time shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next succeeding Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.
Section 3.9 Sharing of Payments. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of any Obligation in excess of its ratable share of payments on account of similar obligations obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in such similar obligations held by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that (a) if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and each Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together
37
with an amount equal to such Lender’s ratable share (according to the proportion of (i) the amount of such Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid by the purchasing Lender in respect of the total amount so recovered and (b) the provisions of this Section 3.9 shall not be construed to apply to (i) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement, or (ii) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to any Loan Party or any Subsidiary thereof (as to which the provisions of this Section 3.9 shall apply). The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 3.9 may, to the fullest extent permitted by law, exercise all of its rights (including the Lender’s right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation.
Section 3.10 Apportionment of Payments.
(a) All payments of principal and interest in respect of outstanding Loans, all payments of fees (other than the fees set forth in Section 3.6, the Facility Fee and the fees in any fee letter with any Agent) and all other payments in respect of any other Obligations, shall be allocated by the Administrative Agent among such of the Lenders as are entitled thereto, in proportion to their respective pro rata share of the outstanding Loan or otherwise as provided herein or, in respect of payments not made on account of Loans, as designated by the Person making payment when the payment is made.
(b) (i)(A) After the occurrence and during the continuance of an Event of Default described in Section 10.1(a), (e) or (f), (B) after the acceleration of the Loans pursuant to Section 10.2, (C) after the exercise of enforcement remedies by the Administrative Agent (acting at the written direction of Required Lenders) pursuant to the Loan Documents or (D) otherwise upon the direction of the Required Lenders, after the occurrence and during the continuance of an Event of Default, then (ii) in each case, the Administrative Agent shall apply all payments in respect of any Obligations, including, without limitation, proceeds of the Collateral and any amounts received on account of the Obligations (whether received as a consequence of the exercise of any remedies under Section 10.2 hereof or any Loan Document or as a distribution out of any proceeding in respect of or commenced under any Insolvency Proceeding including payments in respect of “adequate protection” for the use of Collateral during such proceeding) or under any plan of reorganization or on account of any liquidation of any Loan Party or any Subsidiary thereof, subject to the provisions of this Agreement, (A) first, ratably to pay the Obligations in respect of any fees, expense reimbursements, indemnities and other amounts then due and payable to the Administrative Agent and its agents and attorneys until paid in full; (B) second, ratably to pay the Obligations in respect of any fees, expense reimbursements, indemnities, premiums (including the Prepayment Premium, if applicable) and other amounts then due and payable to the Lenders until paid in full; (C) third, ratably to pay interest then due and payable in respect of the Loan until paid in full; (D) fourth, ratably to pay principal of the Loan until paid in full; (E) fifth, to the ratable payment of all other Obligations then due and payable until all such Obligations are paid in full; and (F) sixth, to the extent of any remaining amount, to an Account or Accounts as directed by the Borrower.
(c) For purposes of Section 3.10(b), “paid in full” means payment in cash of all amounts owing under the Loan Documents (other than contingent indemnification obligations for
38
which no claim has been asserted) according to the terms thereof, including loan fees, service fees, professional fees, interest (and specifically including interest, fees and expenses accrued after the commencement of any Insolvency Proceeding, whether or not the same would be or is allowed or disallowed in whole or in part in any Insolvency Proceeding), default interest, interest on interest, and expense reimbursements, whether or not same would be or is allowed or disallowed in whole or in part in any Insolvency Proceeding.
(d) In the event of a conflict between the priority provisions of this Section 3.10 and other provisions contained in any other Loan Document, the terms and provisions of this Section 3.10 shall control and govern.
ARTICLE 4
CHANGED CIRCUMSTANCES, TAXES AND CERTAIN OTHER PROVISIONS
Section 4.1 Increased Costs.
(a) If any Change in Law shall:
(A) impose, modify or deem applicable any reserve, special deposit, liquidity or similar requirement (including any compulsory loan requirement, insurance charge or other assessment) against assets of, deposits with or for the account of, or credit extended by, any Lender;
(B) impose on any Lender any other condition, cost or expense (other than Taxes) affecting this Agreement or Loan made by such Lender; or
(C) subject any Lender or any Agent, as applicable, to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (d) and (e) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto;
and the result of any of the foregoing shall be to increase the cost to such Lender or such Agent of making, continuing, converting into or maintaining any Loan or of maintaining its obligation to make any such Loan or to reduce the amount of any sum received or receivable by such Lender or such Agent hereunder, whether of principal, interest or otherwise, then the Loan Parties shall pay to such Lender or such Agent such additional amount or amounts as will compensate such Lender or such Agent for such additional costs incurred or reduction suffered.
(b) If any Lender determines that any Change in Law regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement or the Loan made by such Lender to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy and liquidity), then from time to time the Loan Parties shall pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.
39
(c) A certificate of the applicable Lender or Agent setting forth the amount or amounts necessary to compensate such Lender or such Agent or its holding company as specified in paragraph (a) or (b) of this Section 4.1 shall be delivered to the Borrower and shall be conclusive absent manifest error. The Loan Parties shall pay such Agent or such Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.
Failure or delay on the part of any Agent or any Lender to demand compensation pursuant to this Section 4.1 shall not constitute a waiver of such Agent’s or such Lender’s right to demand such compensation.
Section 4.2 Taxes.
(a) Payments Free of Taxes. Any and all payments by or on account of any of the Obligations hereunder or under any other Loan Document shall be made free and clear of and without deduction or withholding for any Taxes, provided that if a Loan Party or any Subsidiary thereof shall be required by applicable Law to deduct or withhold, or a Lender or an Agent, as applicable, shall be required to remit, any Taxes from such payments, then (i) such Loan Parties or such Subsidiary shall make any such deductions or withholdings and (ii) such Loan Parties or such Subsidiary shall timely pay the full amount deducted or withheld to the relevant and applicable Governmental Authority in accordance with applicable Law and (iii) if such Taxes are Indemnified Taxes, the sum payable shall be increased as necessary so that after making all required deductions, withholdings or remittances (including deductions, withholdings or remittances applicable to additional sums payable under this Section 4.2), such Lender or such Agent receives an amount equal to the sum it would have received had no such deductions, withholdings or remittances been made.
(b) Payment of Other Taxes. Without limiting or duplicating the provisions of Section 4.2(a), the Loan Parties or any Subsidiary thereof shall timely pay (or, at the option of the Administrative Agent, timely reimburse it for the payment of) any Other Taxes to the relevant and applicable Governmental Authority in accordance with applicable Law.
(c) Indemnification by the Loan Parties. The Loan Parties shall indemnify each Agent and each Lender within five (5) days after written demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 4.2) paid by such Agent or such Lender, as the case may be, and any penalties, interest and expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant and applicable Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or by an Agent on its own behalf, as applicable, shall be conclusive absent manifest error.
(d) Evidence of Payments. As soon as practicable after any payment of Taxes (imposed with respect to this Agreement or any other Loan Document) by a Loan Party to an applicable Governmental Authority, the Borrower shall deliver to the applicable Lender or Agent, as the case may be, the original or a certified copy of a receipt issued by such applicable Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment satisfactory to such Lenders or such Agent, as applicable.
40
(e) Status of Lenders. (i) Any Lender that is entitled to an exemption from, or reduction in the rate of, withholding tax under the Law of the jurisdiction in which any Loan Party or any Subsidiary thereof is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower, at the time or times prescribed by applicable Law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable Law as will permit such payments to be made without withholding or at a reduced rate of withholding. Such delivery shall be required on the Closing Date (or, in the case of an assignee, on the date of assignment) and on or before the date such documentation expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent documentation so delivered or as may reasonably be requested by the Borrower. In addition, any Lender, if requested by the Borrower, shall deliver such other documentation prescribed by applicable Law or reasonably requested by the Borrower as will enable the Borrower to determine whether or not such Lender is subject to backup withholding requirements.
(ii) Without limiting the generality of the foregoing, in the event that any Loan Party or any Subsidiary thereof is resident for tax purposes in the United States, any Lender that is entitled to an exemption from, or reduction in the rate of, United States withholding tax shall deliver to the Borrower (in such number of copies as shall be reasonably requested by the Borrower) on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower), whichever of the following is applicable:
(A) duly completed copies of IRS Form W-8BEN or W-8BEN-E claiming eligibility for benefits of an income tax treaty to which the United States is a party;
(B) duly completed copies of IRS Form W-8ECI;
(C) duly completed copies of IRS Form W-8IMY;
(D) in the case of a Lender that is entitled to claim the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” related to the Borrower, as described in section 881(c)(3)(C) of the Code and (y) duly completed copies of IRS Form W-8BEN or W-8BEN-E; or
(E) any other form prescribed by applicable Law as a basis for claiming exemption from or a reduction in United States federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable Law to permit the Borrower to determine the withholding or deduction required to be made.
(iii) If a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section
41
1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower at the time or times prescribed by Law and at such time or times reasonably requested by the Borrower such documentation prescribed by applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower as may be necessary for the Borrower to comply with its obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this paragraph, “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
(iv) Without limiting the generality of the foregoing, in the event that any Loan Party or any Subsidiary thereof is resident for tax purposes in Canada, any Lender that is entitled to an exemption from, or reduction in the rate of, Canadian withholding tax shall, to the extent it is legally entitled to do so, if reasonably requested by the Borrower, deliver to the Borrower (in such number of copies as shall be reasonably requested by the Borrower) executed copies of Canada Revenue Agency Form NR301, NR302 or NR303, as applicable, together with such supplementary documentation as may be prescribed by applicable Law, certifying such Lender’s eligibility to receive a reduced rate of withholding tax or exemption provided by any tax treaty between Canada and another jurisdiction in respect of payments made to it under any Loan Document.
(v) Notwithstanding the foregoing, no Lender shall be required to provide any documentation pursuant to this Section 4.2(e) that it is not legally permitted to provide.
(f) Treatment of Certain Refunds. If any Lender or any Agent determines, in its sole discretion, that it has received a refund of any Indemnified Taxes as to which it has been indemnified by any Loan Party or with respect to which any Loan Party has paid additional amounts pursuant to this Section 4.2, it shall pay to the applicable Loan Party an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by such Loan Party under this Section 4.2 with respect to the Indemnified Taxes giving rise to such refund), net of all out-of-pocket expenses of such Lender or such Agent, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Loan Parties, upon the request of such Lender or such Agent, as applicable, agree to repay the amount paid over to such Loan Party (plus any penalties, interest or other charges imposed by the relevant and applicable Governmental Authority) to such Lender or such Agent, as applicable, in the event such Lender or such Agent is required to repay such refund to such applicable Governmental Authority. This Section 4.2(f) shall not be construed to require any Agent or any Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to any Loan Party or any other Person.
(g) Mitigation Obligations; Designation of a Different Lending Office. If the Loan Parties are required to pay any additional amount to any Agent or any Lender that is a bank or any Governmental Authority for the account of any Agent or any Lender that is a bank pursuant to this Section 4.2, then such Agent or such Lender, as applicable, shall use reasonable efforts to designate a different lending office for funding or booking its Loan hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Agent or such Lender, such designation or assignment (i) would eliminate or reduce amounts
42
payable pursuant to this Section 4.2 in the future, and (ii) would not subject such Agent or such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Agent or such Lender. The Loan Parties hereby agree to pay all costs and expenses incurred by such Agent or such Lender in connection with any such designation or assignment.
ARTICLE 5
CONDITIONS PRECEDENT TO CLOSING AND FUNDING
Section 5.1 Reserved.
Section 5.2 Conditions to Closing Date under this Agreement. The occurrence of the Closing Date is subject to the satisfaction or waiver by the Administrative Agent and each Lender of each of the conditions precedent set forth below:
(a) Loan Documents. The Loan Documents shall have been duly authorized, executed and delivered by each of the parties thereto (including the Initial Lenders party to this Agreement on the Closing Date) and shall be in full force and effect, and each Agent shall have received copies of the fully executed originals of each Loan Document, including without limitation any amendments thereto, along with a completed Perfection Certificate satisfactory in form and substance to the Administrative Agent and the Lenders.
(b) Certificates. The Administrative Agent shall have received certificate(s), addressed to the Administrative Agent and each Lender, dated as of the Closing Date, from each Loan Party as to the following, and such certificate(s) shall be accurate in all respects:
(A) the certification of the resolutions, in full force and effect, authorizing, to the extent relevant, the execution, delivery and performance of this Agreement and each other Loan Document to be executed by it and the performance of its obligations contemplated hereby and thereby;
(B) the incumbency and signatures of those Responsible Officers who have signed or will sign each Loan Document to which the Borrower is or will be a party, or who is, until replaced by another such Responsible Officer duly authorized for such purpose, authorized to act with respect to each Loan Document;
(C) the Governing Documents for each Loan Party;
(D) a recent certificate of good standing or equivalent for each Loan Party from the applicable office of such Loan Party’s jurisdiction of organization;
(E) certification that (i) each of the conditions precedent to the Closing Date has been satisfied in form and substance acceptable to, or waived by, the Administrative Agent and (ii) the representations and warranties contained in this Agreement and each of the other Loan Documents are true and correct in all material respects (or if made as of a specific date, such representations and warranties were true and correct in all material respects as of such date), except to the extent qualified by materiality, “Material Adverse Effect” or like qualification, in which case such representations and warranties are (or were) true and correct in all respects;
43
(F) certification that each Loan Party immediately before and after giving effect to the transactions contemplated by this Agreement and the other Loan Documents is, and will be, Solvent;
such certificate(s) to be executed by a Responsible Officer and addressed to the Administrative Agent and each Lender and accompanied by copies of all documents referred to in clauses (i) through (vi) immediately above, in each case as then in effect, certified to be true, complete and correct and, that each such document has not been amended, supplemented or modified (other than in connection with any amendment, supplement or modification so delivered) and is in full force and effect.
(c) Payment of Fees and Expenses. All charges, fees, expenses, indemnities and other obligations (other than the interest and principal) due to be paid under the Loan Documents on the Closing Date and invoiced in writing to the Borrower at least one (1) Business Days prior to the Closing Date have been paid (or will be paid with Loan Proceeds on the applicable Funding Date).
(d) Establishment of the Reserve Account. The Reserve Account shall have been established and be subject to an effective DACA Agreement in form and substance reasonably satisfactory to both Agents; provided that, with respect to the Advance made on the Initial Funding Date, the amounts required to be deposited in the Reserve Account pursuant to the Loan Documents shall be so deposited from the proceeds of the Advance made on the Initial Funding Date.
(e) Litigation. To the knowledge of the Borrower, no pending or threatened (in writing) litigation or proceeding against the Loan Parties exists that could reasonably be expected to have a Material Adverse Effect on any Loan Party.
(f) Illegality, Etc. There shall be no preliminary or permanent injunction or temporary restraining order or other order issued by a Governmental Authority or other legal restraint or prohibition (other than the Controlled Substances Act) enjoining or preventing, in whole or in part, the making of the Loan or the transactions contemplated by the Loan Documents, or which, in the judgment of the Administrative Agent, would make it illegal for any Agent or any Lender to perform its obligations under the Loan Documents.
(g) Collateral Searches. The Administrative Agent shall have received the results of searches for any effective UCC or PPSA financing statements, tax Liens, judgment Liens or Liens against Intellectual Property filed against any Loan Party or its property, which results shall not show any such Liens (other than Permitted Liens acceptable to the Agents and the Lenders).
(h) Collateral Creation and Perfection Matters. The deliveries, filings, recordings and other actions necessary, in the reasonable opinion of the Collateral Agent, in order to establish and to perfect the security interests in the Collateral to be granted to the Collateral Agent for the benefit of the Secured Parties have been made or taken or shall be made concurrently.
(i) No Material Adverse Effect. There has not been a Material Adverse Effect since December 31, 2018.
44
(j) Additional Documents. The Administrative Agent shall have received such other documents from the Borrower and each other Loan Party as it may reasonably request at least one (1) Business Day prior to the Closing Date.
(k) Initial DACA Agreements for Accounts other than the Reserve Account. Prior to the Closing Date, the Borrower shall have made commercially reasonable efforts to deliver to the Administrative Agent DACA Agreements covering the Accounts specified in Section 9.6 other than the Reserve Account and otherwise in form and substance approved by the Administrative Agent.
(l) Opinion of Counsel. Each Agent and each Lender shall have received a legal opinion from the Borrower’s counsel in form and substance reasonably acceptable to the Administrative Agent.
(m) Fee Letter. Each Agent shall have received a fully-executed fee letter in form and substance acceptable to each Agent.
(n) Financial Statements. The Administrative Agent shall have received: (i) unaudited consolidated financial statements of the Borrower and its Subsidiaries for the Fiscal Quarter ended September 30, 2019, and (ii) audited consolidated financial statements of the Borrower and its Subsidiaries for the Fiscal Years ended December 31, 2018, December 31, 2017, and December 31, 2016.
Section 5.3 Each Advance. The Administrative Agent and the Lenders shall not be required to make any Advance unless on Initial Funding Date and each other applicable Funding Date thereafter:
(a) Funding Request. The Administrative Agent has received a Funding Request as required under Section 2.2 at least ten (10) Business Days (or two (2) Business Days in the case of the initial Advance) before such Advance, unless such period or Funding Request is waived in writing by the Administrative Agent and each Lender providing such Advance.
(b) Event of Default. There exists no Default or Event of Default that has occurred and is continuing, nor would a Default or Event of Default result from such Advance.
(c) Representations and Warranties. Each of the representations and warranties made by the Loan Parties contained in the Loan Documents is (x) with respect to any representations or warranties that contain a materiality qualifier, true and correct in all respects as of such Funding Date, except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct in all respects on and as of such earlier date and (y) with respect to any representations or warranties that do not contain a materiality qualifier, true and correct in all material respects as of such Funding Date, except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct in all material respects on and as of such earlier date.
(d) Payment of Fees and Expenses. All charges, fees, expenses, indemnities and other obligations (other than the interest and principal) due to be paid under the Loan Documents on the applicable Funding Date and invoiced in writing to the Borrower at least one (1) Business Day prior to the applicable Funding Date have been paid (or will be paid with Loan Proceeds on the applicable Funding Date).
45
(e) Establishment of the Reserve Account. The Reserve Account shall have been established and be subject to an effective DACA Agreement in form and substance reasonably satisfactory to both Agents; provided that, with respect to an Advance made after the Closing Date, any amounts required to be deposited in the Reserve Account pursuant to the Loan Documents shall be so deposited from the proceeds of such Advance.
(f) Lender Commitments. The Administrative Agent shall have received proceeds of the Commitments of the Lenders for such Advance (it being understood that this condition is for the sole benefit of the Administrative Agent and may not be relied upon by any Lender as a condition to such Lender’s obligation to fund its pro rata share of the Advance).
(g) Lender Administrative Questionnaires. The Administrative Agent shall have received an Administrative Questionnaire from each Lender having a Commitment as of the applicable Funding Date which has not previously provided an Administrative Questionnaire.
(h) Insurance. With respect to (a) the Advance made on the Initial Funding Date the Administrative Agent shall have received copies of certificates of insurance evidencing the existence of all insurance required to be maintained by each of the Loan Parties under the Loan Documents, including such insurance required under Section 7.7(a) and (b) any Advance after the Initial Funding Date, only to the extent the policies of insurance evidenced in any such certificates delivered pursuant to subsection (a) above have expired or lapsed, new or renewed certificates of insurance evidencing the existence of all insurance required to be maintained by each of the Loan Parties under the Loan Documents, including such insurance required under Section 7.7(a).
(i) Use of Proceeds. The Advance is reasonably expected to be utilized in accordance with Section 2.4 (including the proviso thereof) within thirty (30) days following the funding of such Advance.
Each Funding Request with respect to each such Advance shall constitute a representation and warranty by the Borrower that the conditions contained in Sections 5.3(b) and 5.3(c) have been satisfied.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
In order to induce the Agents and the Lenders to enter into this Agreement, each Loan Party represents and warrants to the Lenders, for itself and each of its Subsidiaries, as of the Closing Date, the Initial Funding Date and each other Funding Date thereafter, and each other date on which the representations and warranties set forth in this Article 6 are reasserted:
Section 6.1 Existence, Qualification and Power; Compliance with Laws. Each Loan Party (a) is duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own its assets and carry on its business, and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, and (c) is
46
duly qualified and is licensed and in good standing under the Laws of each jurisdiction where its ownership of assets or the conduct of its business requires such qualification or license, unless the failure to be so qualified or licensed in such foreign jurisdiction would not reasonably be expected to result in a Material Adverse Effect; provided that this Section 6.1 shall not be deemed to expand, limit or otherwise modify the representations set forth in Section 6.25 in respect of Cannabis Licenses.
Section 6.2 Authorization; No Contravention. The execution, delivery and performance by each Loan Party of each Loan Document to which such Loan Party is a party, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Loan Party Governing Documents, (b) conflict with or result in any material breach or contravention of, or the creation of any Lien under, or require any payment to be made under (i) any Contractual Obligation of such Loan Party or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Loan Party or its assets is subject, or (c) violate any applicable Law (excluding the Controlled Substances Act).
Section 6.3 Governmental Authorization; Other Consents. Other than as required in the ordinary course of business and in connection with the filing or recording of the Security Documents, no approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against any Loan Party of any Loan Document to which it is a party.
Section 6.4 Binding Effect. This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto. This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally.
Section 6.5 Litigation. There are no actions, inquiries, suits, proceedings, claims or disputes pending or, to the knowledge of the Loan Parties, threatened in writing, at law, in equity, in arbitration or before any Governmental Authority, by or against any Loan Party or any Subsidiary thereof or against any of its properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby or, (b) purport to affect or pertain to the Core Business in each case in a manner that could reasonably be expected to have a Material Adverse Effect.
Section 6.6 No Default. No Loan Party or any Subsidiary thereof is in default under or with respect to any Contractual Obligation that could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.
Section 6.7 Indebtedness. No Loan Party has any outstanding Indebtedness, other than Permitted Indebtedness.
Section 6.8 Insurance. The Loan Parties and each Subsidiary thereof maintain insurance in compliance with Section 7.7.
47
Section 6.9 Taxes.
(a) Each Loan Party and each Subsidiary thereof has filed all Federal, state, provincial and other tax returns and reports required to be filed, and have paid all Federal, state, provincial and other taxes, assessments, fees and other governmental charges levied or imposed upon it or its properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with IFRS. No Loan Party or any Subsidiary thereof is party to any tax sharing agreement.
(b) There is no proposed tax assessment against the Loan Parties or any Subsidiary thereof.
Section 6.10 ERISA Compliance. No Loan Party or any Subsidiary thereof is obligated to contribute to, and is not itself an “employee benefit plan,” as defined in Section 3(3) of ERISA, which “employee benefit plan” is subject to Title I of ERISA or Section 4975 of the Code, and none of the assets of such Loan Party or such Subsidiary constitute or will constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101. In addition, (a) no Loan Party or any Subsidiary thereof is a “governmental plan” within the meaning of Section 3(32) of ERISA and (b) transactions by or with a Loan Party or any Subsidiary thereof are not subject to any state or other statute, regulation or other restriction regulating investments of, or fiduciary obligations with respect to, governmental plans within the meaning of Section 3(32) of ERISA which is similar to the provisions of Section 406 of ERISA or Section 4975 of the Code and which prohibit or otherwise restrict the transactions contemplated by this Agreement or any other Loan Document.
Section 6.11 Margin Regulations; Investment Company Act; Public Utility Holding Company Act.
(a) None of the Loan Proceeds will be used in violation of Regulations U or X of the Board of Governors of the Federal Reserve System (12 C.F.R. Part 221 and 207) (the “Margin Regulations”), for the purpose of purchasing or carrying any “margin stock” as defined in the Margin Regulations or reducing or retiring any Indebtedness which was originally incurred to purchase or carry margin stock or for any other purpose which might make this transaction a “purpose credit” within the meaning of the Margin Regulations. Neither any of the Loan Parties, nor any of their Subsidiaries nor any Person acting on behalf of such Loan Parties or such Subsidiaries has taken or will take any action which might cause any Loan Document to violate the Margin Regulations or any other regulations of the Board of Governors of the Federal Reserve System or to violate Section 7 of the Securities Exchange Act of 1934, or any rule or regulation promulgated thereunder, in each case as now in effect or as the same may hereafter be in effect.
(b) None of the Loan Parties or any Subsidiary thereof is (i) an “investment company” or an “affiliated person” or “promoter” of, or “principal underwriter” of or for, an “investment company”, as such terms are defined in the Investment Company Act of 1940, as amended, or (ii) other than the Controlled Substances Act, subject to regulation under any requirement of Law that limits in any respect its ability to incur Indebtedness or which may otherwise render all or a portion of the Obligations unenforceable.
48
(c) No Loan Party or any Subsidiary thereof is subject to regulation under the Public Utility Holding Company Act of 2005, the Federal Power Act, the Interstate Commerce Act (as any of the preceding have been amended), or any other Law which regulates the incurring by the Borrower of Indebtedness, including laws relating to common or contract carriers or the sale of electricity, gas, steam, water or other public utility services.
Section 6.12 Disclosure. No financial statement delivered to the Administrative Agent pursuant to Section 7.1(a) or (b) (in each case, as modified or supplemented by other information so furnished, and in the case of financial statements delivered to the Administrative Agent pursuant to Section 7.1(b), subject to the absence of footnote disclosure and normal year-end audit adjustments) contains any material misstatement of fact or, when taken as a whole, omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading in any material respect.
Section 6.13 Reserved.
Section 6.14 Material Agreements; No Defaults; Customers and Suppliers.
(a) As of the Closing Date, no Loan Party or any Subsidiary thereof is party to any contracts, instruments or other agreements under which such Loan Party or such Subsidiary has a potential outstanding liability in excess of [Redacted – Commercially Sensitive Information] (collectively, together with similar agreements entered into after the Closing Date, the “Material Agreements”) other than this Agreement (with respect to the Borrower) or such Material Agreements set forth on Schedule 6.14 (with respect to any Loan Party or any Subsidiary thereof).
(b) No Loan Party or any of its Subsidiaries is a party to any Material Agreement or subject to any restriction or limitation in any Governing Document or any judgment, order, regulation, ruling or other requirement of a court or other Governmental Authority, which (either individually or in the aggregate) has, or in the future could reasonably be expected (either individually or in the aggregate) to have, a Material Adverse Effect.
(c) Each such Material Agreement (i) is in full force and effect and is binding upon and enforceable against each Loan Party or its Subsidiaries that is a party thereto and, to the best knowledge of such Loan Party, all other parties thereto in accordance with its terms, except as such may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights generally and by general equitable principles and (ii) is not in default due to the action or inaction of any Loan Party or its Subsidiaries or, to the best knowledge of any Loan Party, any other party thereto unless the failure of such Material Agreement to be in full force and effect or being subject to such default, individually or in the aggregate for all Material Agreements not in full force or effect or subject to such default, could not reasonably be expected to have a Material Adverse Effect.
(d) No event has occurred which, immediately or upon the expiration of applicable cure or grace periods, would constitute a default under any Material Agreement unless the failure of such Material Agreement to be in full force and effect or being subject to such default, individually or in the aggregate for all Material Agreements not in full force or effect or subject to such default, could not reasonably be expected to have a Material Adverse Effect.
49
(e) Except as could not reasonably be expected to have a Material Adverse Effect, there exists no actual or threatened termination, cancellation or limitation of, or modification to or change in, the business relationship between (i) any Loan Party or its Subsidiaries, on the one hand, and any customer or any group thereof, on the other hand, whose agreements with any Loan Party or its Subsidiaries are individually or in the aggregate material to the business or operations of such Loan Party or Subsidiary, or (ii) any Loan Party or its Subsidiaries, on the one hand, and any supplier or any group thereof, on the other hand, whose agreements with any Loan Party or Subsidiaries are individually or in the aggregate material to the business or operations of such Loan Party or Subsidiary.
Section 6.15 Oral Agreements; Matters Not of Record. No Loan Party is a party to any oral agreement or matters that are not of record that are or would otherwise be Liens on any of the Collateral (other than Permitted Liens).
Section 6.16 Creation, Perfection and Priority of Liens. The execution and delivery of the Security Documents by each Loan Party to which it is a party to, together with the filing of any UCC or PPSA financing statements delivered to the Administrative Agent, are effective to create in favor of the Collateral Agent for the benefit of the Secured Parties, as security for the Obligations, a valid and perfected first priority Lien (subject to Permitted Liens) on all of the Collateral then in existence that may be perfected by filing or recording, and all filings and other actions required pursuant to the Loan Documents to perfect such Lien will have been duly taken on or prior to (or to the extent permitted by the Loan Documents, following) the Closing Date with respect to the Loan Parties as of the Closing Date.
Section 6.17 Equity Interests. All outstanding Equity Interests of the Loan Parties and each Subsidiary thereof are duly authorized, validly issued, fully paid and (to the extent applicable) non- assessable. Except as set forth on Schedule 6.17, on the Closing Date, there are no outstanding subscriptions, options, conversion rights, warrants or other agreements or commitments of any nature whatsoever (firm or conditional) obligating a Loan Party to issue, deliver or sell, or cause to be issued, delivered or sold, any additional Equity Interests of a Loan Party or obligating a Loan Party to grant, extend or enter into any such agreement or commitment. All Equity Interests of the Loan Parties have been offered and sold in material compliance with all federal and state securities laws and all other applicable Law. None of the Equity Interests of the Loan Parties are subject to any Lien except those in favor of the Collateral Agent and Permitted Liens.
Section 6.18 No Agreements to Merge. No Loan Party or any Subsidiary thereof has as any legal obligation, absolute or contingent, to any Person to effect any merger, consolidation, division or other reorganization or to enter into any agreement with respect thereto, except to the extent permitted under Section 8.4 or Section 8.5.
Section 6.19 Labor Matters. There are no disputes presently subject to grievance procedure, arbitration or litigation under any of the collective bargaining agreements, employment contracts or employee welfare or incentive plans to which any Loan Party or any Subsidiary thereof is a party, which could reasonably be expected to have a Material Adverse Effect. Except as set forth in Schedule 6.19, as of the Closing Date, no Loan Party or any Subsidiary thereof is a party to or bound by any collective bargaining agreement or other contract with a labor union or labor organization and there are no strikes, lockouts, work stoppages or slowdowns, or jurisdictional disputes or organizing activities occurring or threatened. No Loan Party or any of its Subsidiaries or ERISA Affiliates has incurred any liability or
50
obligation under the Worker Adjustment and Retraining Notification Act (“WARN”) or similar state law, which remains unpaid or unsatisfied. The hours worked and payments made to employees of any Loan Party or its Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable legal requirements, except to the extent such violations could not, individually or in the aggregate, reasonably be expected to be material. All payments due from any Loan Party or its Subsidiaries on account of wages and employee health and welfare insurance and other benefits have been paid or accrued as a liability on the books of such Loan Party or Subsidiary, except where the failure to do so could not, individually or in the aggregate, reasonably be expected to be material.
Section 6.20 Brokerage Commissions. No Person is entitled to receive any broker’s commissions in connection the transactions contemplated by this Agreement.
Section 6.21 Agreements with Affiliates. No Loan Party is a party to any Contractual Obligations with any of their Affiliates or any of their Related Parties except as permitted under Section 8.6.
Section 6.22 Anti-Money Laundering and Anti-Terrorism Laws.
(a) None of the Loan Parties, any of their respective Subsidiaries or Affiliates, their respective directors, officers or employees nor to the knowledge of the Borrower, their respective agents, has violated or is in violation of any of the Anti-Money Laundering and Anti- Terrorism Laws in any material respect or has engaged in or conspired to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the Anti-Money Laundering and Anti-Terrorism Laws.
(b) None of the Loan Parties, nor any Subsidiary of any of the Loan Parties or their Affiliates, nor any officer, director, employees or principal shareholder or owner of any of the Loan Parties or any of their Subsidiaries, nor any of the Loan Parties’ or any of their Subsidiaries’ respective agents acting or benefiting in any capacity in connection with the Loans or other transactions hereunder, is a Blocked Person.
(c) None of the Loan Parties, nor any Subsidiary or Affiliate of any of the Loan Parties, nor any of their respective agents acting in any capacity in connection with the Loans or other transactions hereunder, (i) conducts any business with or for the benefit of any Blocked Person or engages in making or receiving any contribution of funds, goods or services to, from or for the benefit of any Blocked Person, or (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked or subject to blocking pursuant to any Sanctions Programs.
(d) The Borrower will not request any Loan hereunder, and the Borrower shall not use, and shall procure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Loan hereunder (i) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Blocked Person, or in any Sanctioned Country, or (ii) in any manner that would result in the violation of Anti-Money Laundering and Anti-Terrorism Laws applicable to the Borrower, any of its Subsidiaries, either Agent or any Lender.
(e) The Loan Parties have adopted, implemented and maintain policies and procedures that are reasonably designed to ensure compliance with the Anti-Money Laundering and Anti-Terrorism Laws by the Loan Parties, their respective Subsidiaries and their respective directors, officers, employees and agents.
51
Section 6.23 Anti-Bribery and Anti-Corruption Laws.
(a) The Loan Parties, their respective Subsidiaries and Affiliates, their respective directors, officers and employees and to the knowledge of the Borrower, their respective agents, are in compliance with the U.S. Foreign Corrupt Practices Act of 1977, as amended, the Corruption of Foreign Public Officials Act (Canada) and the anti-bribery and anti-corruption laws, rules and regulations of any jurisdictions applicable to the Loan Parties or their Subsidiaries (collectively, the “Anti-Corruption Laws”).
(b) None of the Loan Parties nor any of their Subsidiaries or Affiliates has at any time:
(i) offered, promised, paid, given, or authorized the payment or giving of any money, gift or other thing of value, directly or indirectly, to or for the benefit of any employee, official, or other person acting on behalf of any foreign (i.e., non-U.S.) Governmental Authority, or of any public international organization, or any foreign political party or official thereof, or candidate for foreign political office (collectively, “Foreign Official”), for the purpose of: (A) improperly influencing any act or decision of such Foreign Official in his, her, or its official capacity; or
(ii) inducing such Foreign Official to do, or omit to do, an act in violation of the lawful duty of such Foreign Official, or (C) securing any improper advantage, in order to obtain or retain business for, or with, or to direct business to, any Person; or acted or attempted to act in any manner which would subject any of the Loan Parties to liability under any Anti-Corruption Law.
(c) The Borrower has not received notice that there are or have been any allegations, investigations or inquiries with regard to a potential violation of any Anti-Corruption Law by any of the Loan Parties or any of their respective current or former directors, officers, employees, stockholders or agents, or other persons acting on their behalf.
(d) The Loan Parties have adopted, implemented and maintain anti-bribery and anti-corruption policies and procedures that are reasonably designed to ensure compliance with the Anti-Corruption Laws by the Loan Parties, their respective Subsidiaries and their respective directors, officers, employees and agents.
(e) The Borrower will not request any Loan hereunder, and the Borrower shall not use, and shall procure that its Subsidiaries, Affiliates and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Loan hereunder in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws.
52
Section 6.24 Representations and Warranties as to Financial Statements, Documents, Projections, Solvency and Other Information.
(a) Each delivery by a Loan Party to any Agent or any Lender of any schedules (including the schedules attached to this Agreement), or financial statements, whether before or after the Closing Date, shall be a representation and warranty that such schedules, financial statements and other reports are true, correct and complete (in accordance with IFRS if applicable) in all material respects, that there are no omissions therefrom that would result in such financial statements and other reports being incomplete, incorrect or misleading in any material respect as of the date thereof, and that such financial statements accurately present in all material respects the financial condition and results of operations of the Loan Parties as at the dates thereof and for the periods covered thereby.
(b) All material indebtedness and other liabilities (including, without limitation, Indebtedness, liabilities for taxes, long-term leases and other unusual forward or long-term commitments), direct or contingent, of the Borrower and its Subsidiaries are set forth in the financial statements that have been delivered to the Administrative Agent and the Lenders by the Borrower.
(c) Since December 31, 2018, no event or development has occurred that (either individually or in the aggregate) has had or could reasonably be expected to have a Material Adverse Effect.
(d) The Borrower’s projected consolidated statements of income and cash flows and balance sheets after giving effect to the making of the Loan and the application of the proceeds thereof and the other transactions contemplated hereby to occur on the Closing Date, for Borrower’s fiscal year ending December 31 2019, have been prepared in good faith based upon assumptions believed by the Borrower to be reasonable as of the time prepared, it being understood that (i) the projections are only forecasts and no warranty is made as to their accuracy and (ii) actual results of operations may materially differ.
(e) After giving effect to the transactions contemplated by this Agreement and before and after giving effect to each Loan, each Loan Party is, and the Loan Parties and its Subsidiaries on a consolidated basis are, Solvent. No transfer of property is being made by any Loan Party or any Subsidiary and no obligation is being incurred by any Loan Party or any of its Subsidiaries in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of such Loan Party or any of its Subsidiaries.
Section 6.25 Cannabis Licenses and Core Business. Each Loan Party and all of their respective Subsidiaries have, where necessary for the operation of the Core Business in compliance with applicable Law (excluding the Controlled Substances Act), obtained all required permits, licenses, registrations, qualifications or approvals, including the Cannabis Licenses, in all jurisdictions in which it conducts or proposes to conduct its Core Business for such operations unless the failure to obtain such permit, lease, regulation, qualification, approval or Cannabis License could not reasonably be expected to have a Material Adverse Effect. Each Cannabis License or other such permit, license, registration, qualification or approval is valid and fully-effective, except as could not reasonably be expected to have a Material
53
Adverse Effect. Each Loan Party and each Subsidiary thereof has taken all actions necessary for the validity and effectiveness for each Cannabis License or other such permit, license registration, qualification or approval and does not anticipate any variations or difficulties in renewing such licenses, permits, registrations, or qualifications, or any other required license, permit, registration, or qualification, except in each case as could not reasonably be expected to have a Material Adverse Effect. No Loan Party or any of their respective Subsidiaries are engaged in any business other than the Core Business and business activities incidental or related thereto. With respect to the Cannabis Licenses listed on Schedule 1.1 (other than any Cannabis License owned or held by Origin House), as of the Closing Date the grant of a security interest (i) in each such Cannabis Licenses or (ii) in the Equity Interests of any Person that owns or holds each such Cannabis Licenses, in each case, pursuant to the Security Documents (without giving effect to clauses (iii), (vii) and (xi) of the definition of Excluded Property as set forth in the Pledge and Security Agreement) does not violate or require any consent under the terms of each such Cannabis Licenses or applicable state Law under which each such Cannabis License has been issued in any material respect.
Section 6.26 Compliance with Laws, Etc.. Except with respect to the Controlled Substances Act, each Loan Party and Material Subsidiary is: (i) in material compliance with the requirements of all applicable Laws, rules, regulations and orders of any Governmental Authority, and (ii) with regard to the conduct of the Core Business, is in material compliance with all licensing, legislation, regulations, by- laws or other lawful requirements of any Governmental Authority in each jurisdiction where it carries on its business.
Section 6.27 Environmental Matters. With respect to each Loan Party and its Subsidiaries, (a) the business, operations, assets and property of such Loan Party and its Subsidiaries are in compliance with all Environmental Laws except as could not reasonably be expected (either individually or in the aggregate) to result in material Environmental Liabilities and Costs to a Loan Party or its Subsidiaries; (b) there has been no Release by a Loan Party, its Subsidiaries or their respective Agents or contractors or, to the knowledge of each Loan Party, any other Person at any of the properties owned or operated, or, to the knowledge of each Loan Party, formerly owned and operated, by any Loan Party or its Subsidiaries or a predecessor in interest, or, to the knowledge of each Loan Party, at any disposal or treatment facility which received Hazardous Materials generated by any Loan Party, its Subsidiaries or any predecessor in interest in either case except as would not reasonably be expected (either individually or in the aggregate) to result in material Environmental Liabilities and Costs to a Loan Party or its Subsidiaries; (c) no Environmental Action that is pending or unresolved has been asserted against any Loan Party or any of its Subsidiaries or any predecessor in interest nor does any Loan Party have knowledge or notice of any threatened or pending Environmental Action against any Loan Party or any of its Subsidiaries or any predecessor in interest; (d) to the knowledge of each Loan Party, no Environmental Actions have been asserted against any facilities that may have received Hazardous Materials generated by any Loan Party or its Subsidiaries or any predecessor in interest in either case except as would not reasonably be expected (either individually or in the aggregate) to result in material Environmental Liabilities and Costs; (e) no property now owned, or to the knowledge of each Loan Party, now leased or formerly owned or leased by a Loan Party or any of its Subsidiaries has been used for the generation, treatment, storage, transportation, handling or disposal site for any Hazardous Material in a manner which violates the Environmental Laws in any material respect or has resulted in or would reasonably be expected to result in a material Environmental Action, material Environmental Liabilities and Costs, or a material obligation to conduct a Remedial Action, in each case, asserted against a Loan Party or its Subsidiary; (f) no Loan Party or any of its Subsidiaries has failed to report to the proper Governmental Authority any Release which is required
54
to be so reported by any Environmental Laws except as would not reasonably be expected (either individually or in the aggregate) to result in material Environmental Liabilities and Costs; (g) each Loan Party and its Subsidiaries holds all Environmental Permits in connection with the operation of the business carried on by it, except for such Environmental Permits as to which a Loan Party’s failure to maintain or comply with would not reasonably be expected (either individually or in the aggregate) to result in material Environmental Liabilities and Costs; (h) no Loan Party nor any of its Subsidiaries has received any notification pursuant to any Environmental Laws that (i) any work, repairs, construction or capital expenditures are required to be made in respect as a condition of continued compliance with any Environmental Laws, or any Environmental Permit or (ii) any Environmental Permit referred to above is about to be reviewed, made subject to limitations or conditions, revoked, withdrawn or terminated, in each case, except as would not reasonably (either individually or in the aggregate) be expected to result in material Environmental Liabilities and Costs, (i) there are no Environmental Liens asserted against any property owned or, to the knowledge of such Loan Party, operated by any Loan Party or any Subsidiaries, and (j) to the knowledge of any Loan Party, there are no facts or circumstances that would reasonably be expected to result in Environmental Liabilities and Cost or require a material capital expenditure to comply with Environmental Laws.
Section 6.28 Title to Properties. As of the Closing Date, all real property interests owned or leased by any Loan Party or any of its Subsidiaries is set forth on Schedule 6.28. Each Loan Party and its Subsidiaries have (i) good, sufficient and legal title to (in the case of fee interests) the real property owned by it, (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property) real property leased by it or (iii) good title to all of their respective material personal property. Except as permitted by Section 8.2, all such properties are free and clear of Liens.
Section 6.29 Intellectual Property. Each Loan Party and its Subsidiaries owns or licenses or otherwise has the right to use all Intellectual Property rights that are material to the operation of its business, except where the failure to own, license or use Intellectual Property could not reasonably be expected to have a Material Adverse Effect. To the knowledge of each Loan Party, the use of such Intellectual Property does not infringe upon, dilute, misappropriate or conflict with the rights of any other Person with respect thereto, except where such infringement, dilution, misappropriation or conflict could not reasonably be expected to have a Material Adverse Effect. Set forth on Schedule V to the Pledge and Security Agreement and the Canadian Pledge and Security Agreement is a complete and accurate list, as of the Closing Date and as of each date that such schedule is required to be updated pursuant to the Pledge and Security Agreement and the Canadian Pledge and Security Agreement, of each item of Registered Intellectual Property owned by each Loan Party and its Subsidiaries. No claim or litigation regarding any U.S. federally registered Trademark is pending or threatened in writing, which could reasonably be expected to have a Material Adverse Effect. To the knowledge of each Loan Party, no Patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code pertaining to Intellectual Property (other than the Controlled Substances Act or the Lanham Act (to the extent that the use of any Trademark of a Loan Party or any of its Subsidiaries is found to not be a “lawful” use of such Trademark in commerce within the meaning of 15 U.S.C. §§ 1051, 1127; 37 C.F.R. § 2.69 (Use of a mark in commerce must be lawful use to be the basis for federal registration of the mark)) is pending or proposed, which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
55
Section 6.30 No Proposed Legislation. The Loan Party is not aware of any legislation (other than the Controlled Substances Act), or proposed legislation published by a legislative body, which could reasonably be expected to have a Material Adverse Effect.
Section 6.31 Representation regarding Super Voting Shares. As of the Closing Date, the provisions of the articles of incorporation of the Borrower described in the “Super Voting Shares” definition are the only provisions of any Governing Document of the Borrower that set forth and govern the terms of the Super Voting Shares. As of the Closing Date, the Holders of Super Voting Shares hold at least fifty percent (50.00%) of the Super Voting Shares issued and outstanding as of the Closing Date.
ARTICLE 7
AFFIRMATIVE COVENANTS
Commencing on the Closing Date, and so long thereafter as any Loan or other Obligation (other than contingent indemnification obligations for which no claim has been asserted) hereunder shall remain unpaid or unsatisfied, each Loan Party shall, and shall cause each of its Subsidiaries, as applicable below, to:
Section 7.1 Financial Statements and Other Reports. Provide to the Administrative Agent the following financial information and statements in form reasonably acceptable to the Administrative Agent:
(a) Annual Reports. As soon as available, but not later than one hundred and twenty (120) days after the end of each Fiscal Year commencing with the Fiscal Year ending December 31, 2019, provide to the Administrative Agent the audited consolidated balance sheets of the Borrower as at the end of, and the related consolidated statements of income, retained earnings and cash flows for, such Fiscal Year, and the corresponding figures as at the end of, and for, the preceding Fiscal Year, accompanied by a report and opinion of an Independent Accountant, which report and opinion shall be prepared in accordance with generally accepted auditing standards relating to reporting and which report shall contain no qualified or adverse opinion or disclaimer of opinion (provided, that a going concern or similar qualification shall not be considered a “qualified or adverse opinion or disclaimer of opinion” if the sole reason for such qualification is that the Loan becomes classified as a current obligation within one (1) year of the Applicable Scheduled Maturity Date), together with a certificate signed by an Responsible Officer of the Borrower, to the effect that such financial statements fairly present in all material respects the consolidated financial position of each Loan Party, as at the dates indicated and the results of its operations for the periods indicated in conformity with IFRS.
(b) Quarterly Reports. As soon as available, and in any event within sixty (60) days after the end of each of the first three Fiscal Quarters of each Fiscal Year commencing with the first such Fiscal Quarter ending immediately after the Closing Date, the consolidated unaudited balance sheet of the Borrower as of the close of such Fiscal Quarter and related consolidated statements of income, retained earnings and cash flow for such Fiscal Quarter and that portion of the Fiscal Year ending as of the close of such Fiscal Quarter, including comparisons of (i) the current period to the corresponding period in the prior year, and (ii) the year-to-date to the corresponding period in the prior year, in each case certified by a Responsible Officer of the Borrower as fairly presenting in all material respects the consolidated financial position, results of operations and cash flow of each Loan Party as at the dates indicated and for the periods indicated in accordance with IFRS (subject to the absence of footnote disclosure and normal year-end audit adjustments).
56
(c) Monthly Reports. Within thirty (30) days of the end of each calendar month, commencing with the month beginning December 1, 2019, the Borrower shall deliver to the Administrative Agent (i) a statement of consolidated cash and cash equivalents for the Borrower as of the last day of such month (ii) a statement of consolidated revenue for such month and (iii) such additional information as may be reasonably requested by the Administrative Agent or agreed to by the parties hereto. For the avoidance of doubt, the monthly reports required to be delivered pursuant to this Section 7.1(c), shall be delivered for all twelve (12) calendar months, including for months in which annual reports and quarterly reports are delivered.
(d) Compliance Certificate. Concurrently with delivery of the financial statements required under clause (a) or (b) above, a Compliance Certificate substantially in the form of attached Exhibit D duly executed by a Responsible Officer of the Borrower that, among other things, (i) certifies that no Default or Event of Default is continuing as of the date of delivery of such Compliance Certificate or, if a Default or Event of Default is continuing, states the nature thereof and the action that the Borrower proposes to take to cure such Default or Event of Default, (ii) certifies that all filings required under the Security Documents have been made and listing each such filing that has been made since the date of the last certificate delivered in accordance with this Section 7.1(d), (iii) certifies that the Loan Parties have delivered all documents and information they are required to deliver pursuant to any Loan Document on or prior to the date of delivery of such Compliance Certificate, or have attached such documents and information to such Compliance Certificate, (iv) confirms that there have been no changes to the information contained in each of the Perfection Certificates delivered on the Closing Date or the date of the most recently updated Perfection Certificate delivered pursuant to this clause (d) and/or attaching an updated Perfection Certificate identifying any such changes to the information contained therein and (v) certifies that the minimum cash balance requirement under Section 7.2 is satisfied.
(e) Dispositions. Promptly and in any event within five (5) days after execution, receipt or delivery thereof, copies of any material notices that any Loan Party executes or receives in connection with the sale or other Disposition of the Equity Interests of, or all or substantially all of the assets of, any Loan Party or any Subsidiary that holds a Cannabis License.
(f) Public Company Filings and Other Reports. Promptly and in any event within five (5) days after (i) the sending or filing thereof, copies of all statements, reports and other material information any Loan Party sends to any holders of its Indebtedness in excess of [Redacted – Commercially Sensitive Information] or to holders of the Borrower’s Equity Interests or that it files on SEDAR or EDGAR or any national (domestic or foreign) securities exchange, (ii) the board of directors’ approval thereof, minutes of the meetings of the Borrower’s board of directors, subject to redaction for matters reasonably subject to a claim of attorney-client privilege, and (iii) the receipt thereof, a copy of any material notice received from any holder of its Indebtedness having a principal amount equal to or greater than [Redacted – Commercially Sensitive Information].
57
(g) Bank Account Information. At the request of the Administrative Agent, the Borrower will provide the Administrative Agent with read only access to the Borrower’s and each other Loan Party’s bank accounts.
(h) No Change to Accounting and Reporting Practices. No Loan Party shall make any material change in its accounting policies or financial reporting practices without the prior written consent of the Administrative Agent and the Required Lenders, which consent shall not be unreasonably withheld, conditioned or delayed, except as required by Law or applicable accounting rules.
(i) Additional Reporting Deliverables. Promptly upon request, such other information concerning the assets, condition or operations, financial or otherwise, of any Loan Party or any of its Subsidiaries as the Administrative Agent or the Required Lenders may from time to time may reasonably request.
Section 7.2 Minimum Cash Balance. The cash and Cash Equivalents held on a consolidated basis by all Loan Parties (but not their Subsidiaries which are not Loan Parties) shown on each monthly balance sheet delivered in accordance with Section 7.1(c) shall be equal to or greater than the Minimum Cash Balance.
Section 7.3 Furnishing of Information and Inspection of Collateral.
(a) Inspection. The Borrower will furnish or cause to be furnished to the Administrative Agent from time to time such information with respect to the financial affairs of any Loan Party or any of their Subsidiaries and the Collateral as the Administrative Agent may reasonably request. The Borrower will, during regular business hours and with reasonable prior written notice, permit the Administrative Agent or its respective agents or representatives and/or certified public accountants or other auditors acceptable to the Administrative Agent, to: (i) examine and make copies of and abstracts from all books and records relating to the financial affairs of any Loan Party or any of their Subsidiaries or any Collateral, (ii)(A) visit the offices and properties of the Borrower for the purpose of examining such books and records and to verify materials, leases, notes, inventory, accounts receivable, deposit accounts and its other assets, to conduct audits, physical counts, valuations and appraisals and (B) after the occurrence and during the continuance of an Event of Default, assertion of any Environmental Actions, or violation of Environmental Laws, with respect to any Material Real Property, conduct Phase I ESAs (and, if reasonably requested by the Administrative Agent or the Required Lenders based upon the results of any such Phase I ESA, a Phase II ESA) or examinations, provided that Phase I ESAs shall be delivered in connection with any Mortgage on any Material Real Property as required under this Agreement, (iii) discuss matters relating to the Core Business or any Collateral or such Loan Party’s performance hereunder or under the other Loan Documents to which it is a party with any of the officers, directors, employees or independent public accountants of the Borrower, to the extent reasonably available, having knowledge of such matters and (iv) conduct a review of its books and records with respect to the financial affairs of any Loan Party or any of their Subsidiaries or any Collateral (each inspection and audit described in clauses (i) though (iv) above, an “Inspection”).
58
(b) Reimbursement. The Borrower shall reimburse the Administrative Agent for its reasonable and invoiced (and showing in reasonable detail) out-of-pocket costs and expenses incurred in connection with one such Inspection per twelve-month period, and the Administrative Agent will each bear its own costs and expenses for any additional Inspections during such twelve- month period; provided that the Borrower shall also reimburse the Administrative Agent for their reasonable out-of-pocket costs and expenses incurred in connection with any additional Inspections that the Administrative Agent deem desirable to conduct while any Event of Default has occurred and is continuing or is reasonably necessary while any other Default has occurred and is continuing.
(c) Confidentiality. In connection with any such Inspection, to the extent no applicable confidentiality agreement is already in place with respect to such Person, each Person conducting such Inspection (including any third party certified public accounting firms or auditing firms) shall have agreed in writing to maintain the confidentiality of the Borrower’s and its Affiliates’ confidential non-public information on terms reasonably acceptable to the parties thereto.
(d) No Disruption of Business. The Administrative Agent shall conduct, and shall cause its respective agents, representatives, accountants and auditors to conduct, such Inspection in a commercially reasonable manner so as to minimize any burden (financial or otherwise) on the Borrower and its Affiliates and any disruption to the business and operations of the Borrower and its Affiliates (it being understood and agreed that an Inspection conducted in a substantially similar manner and scope as that conducted by the Administrative Agent prior to the Closing Date shall be deemed commercially reasonable).
Section 7.4 Notices. Promptly notify the Administrative Agent of:
(a) the occurrence of any Default, Event of Default or Mandatory Prepayment Event;
(b) any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual Obligation of any Loan Party (including failure to pay any amount due in respect of any Permitted Indebtedness on the date scheduled for payment therefor, without giving effect to any grace period); (ii) any dispute, litigation, investigation, proceeding or suspension between any Loan Party and any Governmental Authority; or (iii) the commencement of, or any material development in, any litigation or proceeding affecting any Loan Party;
(c) Reserved;
(d) (i) as soon as possible and in any event within 10 days after any Loan Party or any ERISA Affiliate thereof knows or has reason to know that (1) any Reportable Event with respect to any Employee Benefit Plan has occurred, (2) any other Termination Event with respect to any Employee Benefit Plan subject to Title IV of ERISA has occurred, or (3) an accumulated funding deficiency has been incurred or an application has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including installment payments) or an extension of any amortization period under Section 412 of the Internal Revenue
59
Code with respect to an Employee Benefit Plan, a statement of an Authorized Officer of the Borrower setting forth the details of such occurrence and the action, if any, which such Loan Party or such ERISA Affiliate proposes to take with respect thereto, (ii) promptly and in any event within 3 days after receipt thereof by any Loan Party or any ERISA Affiliate thereof from the PBGC, copies of each notice received by any Loan Party or any ERISA Affiliate thereof of the PBGC’s intention to terminate any Employee Benefit Plan or to have a trustee appointed to administer any Employee Benefit Plan, (iii) promptly and in any event within 10 days after the filing thereof with the IRS if requested by the Required Lenders, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Employee Benefit Plan and Multiemployer Plan, (iv) promptly and in any event within 10 days after any Loan Party or any ERISA Affiliate thereof knows or has reason to know that a required installment within the meaning of Section 412 of the Internal Revenue Code has not been made when due with respect to an Employee Benefit Plan, (v) promptly and in any event within 3 days after receipt thereof by any Loan Party or any ERISA Affiliate thereof from a sponsor of a Multiemployer Plan or from the PBGC, a copy of each notice received by any Loan Party or any ERISA Affiliate thereof concerning the imposition or amount of withdrawal liability under Section 4202 of ERISA or indicating that such Multiemployer Plan may enter reorganization status under Section 4241 of ERISA, and (vi) promptly and in any event within 10 days after any Loan Party or any ERISA Affiliate thereof sends notice of a plant closing or mass layoff (as defined in WARN) to employees, copies of each such notice sent by such Loan Party or such ERISA Affiliate thereof;
(e) the occurrence of a default or event of default under any Indebtedness of any Loan Party in a principal amount equal to or greater than Two Million and 00/100 Dollars ($2,000,000); hereunder;
(f) the declaration or distribution of any Restricted Payment not permitted
(g) any casualty or other insured damage to any material portion of any Collateral or the commencement of any action or proceeding for the taking of any material portion of any Collateral or any part thereof or interest therein under power of eminent domain or by condemnation or similar proceeding; and
(h) any rescission, revocation, termination, suspension or other adverse development concerning any Cannabis License.
Each notice pursuant to this Section 7.4 shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what actions the Borrower has taken and proposes to take, or what actions the Borrower has caused and proposes to cause any Material Subsidiary to take, with respect thereto. Each notice pursuant to Section 7.4(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.
Section 7.5 Payment of Obligations. Each Loan Party and each Subsidiary thereof shall pay and discharge, prior to delinquency, all its obligations and liabilities, including (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in
60
accordance with IFRS are being maintained by such Loan Party or such Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien (other than a Permitted Lien) upon any Loan Party’s property; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with IFRS are being maintained by such Loan Party or such Subsidiary.
Section 7.6 Preservation of Existence, Etc.. Except as provided in Section 8.3 or as would constitute a Permitted Change, (a) preserve, renew and maintain in full force and effect the legal existence of each Loan Party under the Laws of the jurisdiction of its organization; and (b) take all action reasonably necessary to maintain all assets, rights, privileges, permits, licenses and franchises that are material to and necessary for the operation of the Core Business; provided that this Section 7.6 shall not be deemed to expand, limit or otherwise modify the covenants set forth in Section 7.16 with respect to Cannabis Licenses.
Section 7.7 Maintenance of Insurance.
(a) Liability. Maintain with financially sound and reputable insurers having an A.M. Best rating of A- or better and not Affiliates of any Loan Party protecting the Loan Parties against loss from liability imposed by law or assumed in any agreement, document, or instrument and arising from bodily injury, death or property damage, as shall be in accordance with the general practices of businesses engaged in similar activities in similar geographic areas on the Closing Date, and in amounts, containing such terms, in such forms and for such periods as may be reasonable and prudent in accordance with sound business practices.
(b) Additional Insurance. Such other policies of insurance as the Administrative Agent may reasonably request in writing to the extent available on commercially reasonable terms.
(c) General. All policies for required insurance will be in form and substance satisfactory to the Administrative Agent acting reasonably. All liability policies evidencing required insurance will name the Collateral Agent, on behalf of the Secured Parties (as defined under the applicable Security Documents), as additional insured pursuant to endorsements and certificates acceptable to the Agents, acting reasonably. All property casualty policies evidencing required insurance will name the Collateral Agent, on behalf of the Secured Parties (as defined under the applicable Security Documents), as loss payee pursuant to endorsements and certificates acceptable to the Agents, acting reasonably. The policies will provide for at least thirty (30) days prior written notice of the cancellation or modification thereof to be given to the Collateral Agent. Certificates of insurance evidencing that such insurance is in full force and effect, will be delivered to the Administrative Agent, together with proof of the payment of the premiums thereof. Prior to the expiration of each such policy, the Borrower shall furnish the Administrative Agent with evidence that such policy has been renewed or replaced in the form of the original or a certified copy of the renewal or replacement policy or, if acceptable to the Administrative Agent, a certificate reciting that there is in full force and effect, with a term covering at least the next succeeding calendar year, insurance of the types and in the amounts required in this Section 7.7.
(d) Settlement of Claims. No Loan Party or any Subsidiary thereof shall settle any claim under any casualty insurance policies, if such claim involves any loss in equal to or
61
greater than [Redacted – Commercially Sensitive Information], without the prior written approval of the Administrative Agent, not to be unreasonably withheld, conditioned or delayed and the Borrower shall use commercially reasonable efforts to cause each such policy that is renewed or entered into after the Closing Date to contain a provision to such effect.
Section 7.8 Compliance. Comply in all respects with all Laws applicable to it except for the Controlled Substances Act and any rules or regulations promulgated thereunder and except to the extent non-compliance could not reasonably be expected to have a Material Adverse Effect, provided that, in the event the Controlled Substances Act and any rules or regulations promulgated thereunder are modified such that the Core Business is no longer in violation of the Controlled Substances Act following such modification, the Loan Parties shall comply in all respects with the Controlled Substances Act as so modified except to the extent non-compliance could not reasonably be expected to have a Material Adverse Effect.
Section 7.9 Books and Records. Maintain and implement administrative and operating procedures, and keep and maintain all documents, books, records, computer tapes and disks and other information reasonably necessary for the operation of the Core Business.
Section 7.10 Intangible, Recording and Stamp Tax. Promptly pay all intangible taxes or documentary stamp taxes assessed against any Loan Parties, any Agent or any Lender as a result of this Agreement or any document related hereto, if any.
Section 7.11 Further Assurances. At any time and from time to time, execute, acknowledge and deliver such further documents, agreements and instruments and take such further action as may reasonably be requested by the Administrative Agent, in each case further and more perfectly to effect the purposes of this Agreement and the other Loan Documents, including, from time to time to better assure, preserve, protect and perfect the interest of the Collateral Agent in the Collateral and the rights and remedies of the Secured Parties under the Loan Documents. Without limiting the foregoing, to the extent that the Collateral Agent determines from time to time that additional pledge agreements, financing statements, recognition agreements and other documents are required in order to perfect all Liens and encumbrances in favor of the Collateral Agent, the Borrower shall execute and deliver such documents, instruments and other agreements as the Collateral Agent may reasonably request.
Section 7.12 Special Covenants Relating to Collateral.
(a) Defense of Title. Defend the Collateral, the title and interest therein represented and warranted in the Security Documents and the legality, validity, binding nature and enforceability of each Lien and encumbrance contained in the Security Documents and the first priority of the Liens created pursuant to the Security Documents against all matters (other than claims by holders of Permitted Liens), including: (a) any attachment, levy, or other seizure by legal process or otherwise of any or all Collateral; (b) any Lien or encumbrance or claim thereof on any or all Collateral; (c) any attempt to foreclose, conduct a trustee’s sale, or otherwise realize upon any or all Collateral; and (d) any claim questioning the legality, validity, binding nature, enforceability or priority of the Security Documents, in each case, at the Loan Parties’ sole cost and expense. Each Loan Party shall notify the Administrative Agent and each Lender promptly in writing of any of the foregoing and will provide such information with respect thereto as the Administrative Agent may from time to time request.
62
(b) Landlord Waivers; Collateral Access Agreements. (i) Use commercially reasonable efforts to deliver to the Administrative Agent a landlord waiver, in form and substance reasonably satisfactory to the Administrative Agent and the Required Lenders and which may be included as a provision contained in the relevant lease, executed by each landlord with respect to each of the Loan Parties’ leases for real property where the Loan Parties’ books and records are located and where Collateral with a book value in excess of [Redacted – Commercially Sensitive Information] (when aggregated with all other Collateral at the same location) is located and (ii) if at any time any Collateral with a book value in excess of [Redacted – Commercially Sensitive Information] (when aggregated with all other Collateral at the same location) is or the Loan Parties’ books and records are stored on the premises of a bailee, warehouseman, or similar party, use commercially reasonable efforts to obtain written subordinations or waivers or collateral access agreements, as the case may be, in form and substance reasonably satisfactory to the Administrative Agent and the Required Lenders.
(c) Material Real Property. Within 10 Business Days of the acquisition by any Loan Party after the date hereof of any Material Real Property, the Borrower shall notify the Administrative Agent in writing thereof, setting forth with specificity a description of the interest acquired, the location of the real property, any structures or improvements thereon and either an appraisal or such Loan Party’s good-faith estimate of the current value of such real property (for purposes of this Section 7.12, the “Current Value”). The Administrative Agent (acting at the written direction of the Required Lenders) shall notify such Loan Party whether it intends to require a Mortgage (and any other Real Property Deliverables) with respect to such Material Real Property. Upon receipt of such notice requesting a Mortgage (and any other Real Property Deliverables), the Person that has acquired such Material Real Property shall promptly furnish the same to the Administrative Agent.
Section 7.13 Performance under Contractual Obligations . Timely observe and perform all of the covenants and agreements required to be performed and/or observed by the Loan Parties or any Subsidiary thereof under any Contractual Obligations, and shall enforce the performance and observance by any counterparty to any Material Agreement of all of the covenants and agreements required to be performed and/or observed by such counterparty under any Material Agreements except, in each case, to the extent that a failure to so observe, perform and enforce could not reasonably be expected to have a Material Adverse Effect.
Section 7.14 Reserved.
Section 7.15 Material Subsidiaries. In the event any Person is or becomes a direct or indirect Material Subsidiary of any Loan Party, the Borrower shall notify each Agent of each such event or transaction concurrently with the delivery of the deliverables for the Closing Date and with each Compliance Certificate, provided that upon the completion of the corresponding acquisitions, any direct or indirect Subsidiary that is acquired or that results from the consummation of the Origin House Acquisition, the Hope Heal Health Acquisition or the Tryke Acquisition and that is a Material Subsidiary of any Loan Party after the consummation of such acquisition shall all be Material Subsidiaries for purposes of this Agreement. Each Material Subsidiary of a Loan Party shall within thirty (30) days after becoming a Material Subsidiary (or such later date as may be agreed by the Administrative Agent in its sole and absolute discretion):
(a) become (if not already a party thereto) a party to the Subsidiary Guaranty, the Security Agreement and any other Security Document requested by the Collateral Agent, in a manner reasonably satisfactory to the Collateral Agent;
63
(b) pursuant to, and to the extent required by, the Security Agreement (taking into account any thresholds, carve-outs or other limitations set forth therein), pledge to the Collateral Agent for the benefit of the Lenders (i) all of the outstanding Equity Interests owned directly by such Material Subsidiary, along with undated stock or other powers for such certificates, executed in blank (or, if any such Equity Interests are uncertificated, or if any such certificates cannot be located after reasonable efforts exercised by such Material Subsidiary, confirmation and evidence satisfactory to the Collateral Agent that the security interest in such uncertificated securities has been pledged to and perfected by the Lender in accordance with the UCC, PPSA or any similar law which may be applicable), and (ii) all notes evidencing intercompany Indebtedness in favor of such Material Subsidiary, as the case may be, in accordance with the terms of the Security Documents;
(c) deliver to the Collateral Agent copies of (i) UCC, PPSA or similar search reports for the applicable jurisdiction, federal, provincial, state or other tax Liens, judgment, litigation and bankruptcy reports dated a date reasonably near (but prior to) the date such Person becomes a Subsidiary Guarantor and a party to the Security Agreement, listing all effective UCC, PPSA or similar financing statements, federal, provincial, state or other tax Liens, and judgment Liens which name such Person, as the debtor, and pending litigation and bankruptcies against such Person, and which are filed or pending, as applicable, in each jurisdiction in which UCC, PPSA or similar filings are to be made pursuant to this Agreement or the other Loan Documents and any other appropriate jurisdictions, together with copies of such financing statements (none of which (other than Permitted Liens) shall cover any of the Collateral), and (ii) search results from the United States Patent and Trademark Office, United States Copyright Office and Canadian Intellectual Property Office to the extent any patents, trademarks or copyrights form a part of the Collateral being granted by such Person;
(d) deliver to the Collateral Agent (i) acknowledgment copies or confirmation statements of properly filed UCC or PPSA financing statements or such other in form and substance satisfactory to the Collateral Agent, such UCC or PPSA financing statements naming such Person as the debtor and the Collateral Agent as the secured party, and filed under the UCC or PPSA as adopted in all applicable jurisdictions as may be necessary or appropriate to perfect the first priority security interest of the Collateral Agent pursuant to the Security Agreement, and (ii) appropriate trademark, copyright and patent security agreements or supplements to be filed with the United States Patent and Trademark Office, United States Copyright Office and Canadian Intellectual Property Office to the extent relevant; and
(e) deliver to the Collateral Agent (i) a pledge from any Loan Party that is the direct parent of such Material Subsidiary of its Equity Interests in such Material Subsidiary in favor of the Lender pursuant to the Security Agreement (or a reaffirmation of such pledge if such direct parent is already a party to the Security Agreement), together with updated schedules to the Security Agreement setting forth such Loan Party’s Equity Interests in such Material Subsidiary, and (ii) any other Security Documents reasonably requested by the Collateral Agent in respect of such Loan Party’s pledge of its Equity Interests in such Material Subsidiary in favor of the Collateral Agent, in each case, in form and substance reasonably satisfactory to the Collateral Agent.
64
In the event that the Borrower or any of its Subsidiaries completes an acquisition or a disposition subsequent to the commencement of the four consecutive Fiscal Quarter period specified in the definition of “Material Subsidiary” and on or prior to the date on which the transaction occurred that led to a determination of whether a Person became a Material Subsidiary, then the determination of whether such Person is a Material Subsidiary will be made giving pro forma effect to such acquisitions and dispositions (i) as if the same had occurred at the beginning of such period for the purpose of calculating Consolidated Total Revenue and (ii) on the last date of such period for the purpose of calculating Consolidated Total Assets.
The foregoing shall be accompanied with other documentary evidence, reasonably requested by the Administrative Agent, in a form reasonably satisfactory to the Administrative Agent, that evidences the foregoing, including copies of the resolutions of the board of directors (or equivalent body) of such Material Subsidiary authorizing the relevant transactions, copies of such Material Subsidiary’s organizational documents, incumbency certificates of such Material Subsidiary, opinions of legal counsel and evidence of the insurance required to be maintained pursuant to Section 7.7.
The Borrower may cause Subsidiaries that are not Material Subsidiaries to be Loan Parties for the purposes of this Agreement by causing such Subsidiary to execute and deliver each of the documents and instruments set forth in this Section 7.15 applicable to a Material Subsidiary, and such Subsidiary shall become a Loan Party effective upon the completion of such documents and instruments.
Section 7.16 Cannabis Licenses. At all times:
(a) maintain in good standing and keep effective all Cannabis Licenses necessary for the operation of the Core Business to the extent that the failure to maintain in good standing and keep effective such Cannabis Licenses could reasonably be expected to have an adverse impact of (i) at any time when the principal amount of the Loans is One Hundred Million and 00/100 Dollars ($100,000,000) or less, twenty percent (20.00%) of Consolidated EBITDA for the most recent period of four consecutive Fiscal Quarters ended as of the end of the most recent Fiscal Quarter for which audited financial statements have been delivered pursuant to Section 7.1(a) or internal financial statements have been delivered pursuant to Section 7.1(b) (or forty percent (40.00%) of Consolidated EBITDA, if Consolidated EBITDA for such period is at least Sixty Million and 00/100 Dollars ($60,000,000)) and (ii) at any time when the principal amount of the Loans is more than One Hundred Million and 00/100 Dollars ($100,000,000), twenty percent (20.00%) of Consolidated EBITDA for the most recent period of four consecutive Fiscal Quarters ended as of the end of the most recent Fiscal Quarter for which audited financial statements have been delivered pursuant to Section 7.1(a) or internal financial statements have been delivered pursuant to Section 7.1(b); provided, in each case, that if such financial statements have not been delivered pursuant to Section 7.1(a) or Section 7.1(b) at the time of determination then such four consecutive Fiscal Quarter period shall end as of the last day of the most recent Fiscal Quarter for which consolidated financial statements of the Borrower are publicly available on SEDAR or EDGAR; and
(b) notify the Administrative Agent in writing of the cancellation, suspension, lapse, termination, postponement, invalidity or replacement of any Cannabis License.
65
Section 7.17 Acquisition Documents. During the negotiation of any Permitted Acquisition, and in any case before closing on such Permitted Acquisition, circulate for the Administrative Agent’s reasonable review all material documentation related to such Permitted Acquisition or such further documentation as either Agent shall reasonably request.
Section 7.18 Labor Matters. At all times during the period the Obligations are outstanding not become a party to or bound by any collective bargaining agreement, employment contract, employee welfare or incentive plan or other contract with a labor union or labor organization, except as set forth on Schedule 7.18 or as could not reasonably be expected to have a Material Adverse Effect.
Section 7.19 Employee Benefit Plans. At all times during the period the Obligations are outstanding cause itself and each ERISA Affiliate to: (a) keep in full force and effect any and all Employee Benefit Plans which are presently in existence or may, from time to time, come into existence under ERISA, unless such Employee Benefit Plans can be terminated without material liability to such Loan Party or any of its Subsidiaries in connection with such termination (as distinguished from any continuing funding obligation), (b) make contributions to all Employee Benefit Plans in a timely manner and in an amount sufficient to comply with the requirements of ERISA, (c) comply in all material respects with the requirements of ERISA which relate to such Employee Benefit Plans, and (d) notify the Lender immediately upon receipt by such Loan Party or any of its Subsidiaries of any written notice of the institution of any proceeding or other action relating to any Employee Benefit Plans, in the case of each of Section 7.19(a) through 7.19(d) that could reasonably be expected to have a Material Adverse Effect.
Section 7.20 Maintenance of Properties. The Borrower shall, and shall cause each other Loan Party and their respective Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition (other than wear and tear occurring in the ordinary course of business) all properties used in the business of such Loan Party and its Subsidiaries and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof which in the exercise of its reasonable business judgment are required for the continuation of its business.
Section 7.21 Environmental Matters. The Borrower shall, and shall cause each other Loan Party and their respective Subsidiaries to, (a) comply, and cause all lessees and other Persons operating or occupying properties owned or leased by it to comply in all material respects, with all Environmental Laws and material Environmental Permits, (b) obtain and renew all Environmental Permits required by Environmental Laws for its operations and properties, (c) conduct any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action required by Environmental Laws or any Governmental Authority to address Hazardous Materials at, on, under or emanating from any properties owned or leased by it in accordance with the requirements of all Environmental Laws, (d) keep any property owned by it or any of its Subsidiaries free of Environmental Liens or leased by it or any of its Subsidiaries free of any Environmental Liens resulting from the activities of any Loan Party, its Subsidiaries or their respective agents or contractors, (e) provide the Administrative Agent written notice within five (5) days of becoming aware of any Release of a Hazardous Material in excess of any reportable quantity pursuant to any Environmental Law from or onto property owned or leased by it or any of its Subsidiaries and take any Remedial Actions required under Environmental Law to abate said Release; and (f) provide the Administrative Agent with written notice within ten (10) days of receipt by or knowledge
66
of a Loan Party or any Subsidiary thereof of any of the following: (A) notice that an Environmental Lien has been filed, in each case, against any property of any Loan Party or any of its Subsidiaries; (B) commencement of any Environmental Action or notice that an Environmental Action will be filed against any Loan Party or any of its Subsidiaries; and (C) notice of a violation, citation or other administrative order which, in the case of each of the foregoing (A) through (C), would reasonably be expected to result in material Environmental Liabilities and Costs to a Loan Party or its Subsidiaries.
Section 7.22 Post-Closing Obligations. Notwithstanding the conditions precedent set forth in Article 5 or any other provision of this Agreement, the Borrower has informed the Administrative Agent and the Lenders that certain of such items required to be delivered to the Administrative Agent or otherwise satisfied as conditions precedent to the effectiveness of this Agreement will not be delivered to Administrative Agent as of the Closing Date. Therefore, as an accommodation to Borrower (but subject to the other conditions set forth herein), the Administrative Agent and the Lenders have agreed to allow the Borrower to complete such conditions on a post-closing basis. In consideration of such accommodation, Borrower hereby agrees to take, and cause each other Loan Party to take, each of the actions described with respect to the following items (collectively, the “Post-Closing Obligations”), the Borrower shall deliver (or otherwise satisfy) each Post-Closing Obligation to the reasonable satisfaction of the Administrative Agent in the form, manner and time set forth hereunder for such Post-Closing Obligation or within such longer time or different form or manner as the Administrative Agent may reasonably agree.
(a) Within thirty (30) days of the Closing Date, notwithstanding any contrary requirement for timing of such compliance under the terms of Section 7.15, the Borrower shall cause any entity becoming a Subsidiary of any Loan Party pursuant to the consummation of the Origin House Acquisition that would constitute a Material Subsidiary under Section 7.15 to comply with all requirements of Section 7.15 (including execution of any joinders, grants or pledges or provision of any documentation required thereunder).
(b) Within sixty (60) days of the Closing Date, and subject to the terms of Section 9.6, the Borrower shall use commercially reasonable efforts to establish DACA Agreements in form and substance acceptable to the Administrative Agent over operating Accounts existing as of the Closing Date.
(c) Within sixty (60) days of the Closing Date, the Borrower shall deliver to the Administrative Agent an executed OCN Subordination Agreement; provided that if the Administrative Agent does not deliver to the Borrower an initial draft of such OCN Subordination Agreement within five (5) Business Days of the Closing Date, such period shall be extended by the number of days from the Closing Date to the date such initial draft is delivered to the Borrower.
(d) Within sixty (60) days of the Closing Date (or such later date as the Administrative Agent may agree), the Borrower shall provide deliver to the Administrative Agent the insurance endorsements required by Section 7.7.
67
ARTICLE 8
NEGATIVE COVENANTS
Commencing on the Closing Date, and so long thereafter as any Loan or other Obligation (other than contingent indemnification obligations for which no claim has been asserted) hereunder shall remain unpaid or unsatisfied, no Loan Party shall, nor shall it permit any of its Subsidiaries (each such Loan Party and Subsidiary, a “Restricted Party”) to, directly or indirectly:
Section 8.1 Other Indebtedness. Incur or permit to exist or remain outstanding any Indebtedness; provided, however, that the Loan Parties and their Subsidiaries may incur or permit to exist or remain outstanding the following Indebtedness (“Permitted Indebtedness”):
(a) Indebtedness in favor of the Lenders or the Administrative Agent under the Loan Documents;
(b) Indebtedness listed on Schedule 8.1 (other than the OCN First Loan and the OCN Second Loan) and any Permitted Refinancing Indebtedness in respect of such Indebtedness; provided, however, that with respect to any earn-out payments payable in cash, such earn-out payments shall not be paid if any Event of Default has occurred and is continuing;
(c) Indebtedness of the Restricted Parties in respect of guarantees and/or obligations as an account party in respect of the face amount of letters of credit in respect thereof, in each case securing obligations not constituting Indebtedness for borrowed money (including worker’s compensation claims and security to a landlord for any lease obligation of a Restricted Party and obligations incurred in connection with insurance or similar requirements) provided in the ordinary course of business and (to the extent such practice has been established) consistent with past practice;
(d) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business and (to the extent such practice has been established) consistent with past practice; provided, however, that such Indebtedness is extinguished within ten (10) Business Days of incurrence;
(e) Indebtedness incurred if the Total Fixed Charge Coverage Ratio determined on a pro forma basis after giving effect to the incurrence of such Indebtedness (including the pro forma application of the net proceeds therefrom) would not be less than 2.00 to 1.00, provided that, such Indebtedness shall be subordinated to the Obligations on terms acceptable to the Administrative Agent;
(f) Non-Recourse Debt not to exceed Five Million and 00/100 Dollars ($5,000,000) at any time outstanding;
(g) intercompany Indebtedness owing to and held by any Restricted Party, provided that: (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than a Loan Party and (ii) any sale or other transfer of any such Indebtedness to a Person that is not a Loan Party, will be deemed, in each case, to constitute an incurrence of such Indebtedness by the Restricted Party, as the case may be, that was not permitted by this clause (g);
68
(h) Indebtedness of a Restricted Party that is not a Loan Party owed to another Restricted Party;
(i) the Guarantee by any Restricted Party of Indebtedness of a Restricted Party that was permitted to be incurred by another provision of this Section 8.1;
(j) the incurrence by a Loan Party of Hedging Obligations for the purpose of managing risks in the ordinary course of business and (to the extent such practice has been established) consistent with past practice and not for speculative purposes, provided that the net Mark-to-Market Exposure of all Hedging Obligations shall not exceed Five Million and 00/100 Dollars ($5,000,000) in the aggregate at any time;
(k) Indebtedness in respect of workers’ compensation claims, warehouse receipt or similar facilities, casualty or liability insurance, take-or-pay obligations in supply arrangements, self-insurance obligations, bankers’ acceptances, performance bonds, completion bonds, bid bonds, appeal bonds and surety bonds or other similar bonds or obligations, and any Guarantees or letters of credit functioning as or supporting any of the foregoing, in each case provided by such Restricted Party in the ordinary course of business and (to the extent such practice has been established) consistent with past practice;
(l) Indebtedness constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business and (to the extent such practice has been established) consistent with past practice, provided that such Indebtedness shall not exceed Five Million and 00/100 Dollars ($5,000,000) in the aggregate at any time;
(m) Permitted Acquisition Indebtedness and any Permitted Refinancing Indebtedness in respect of such Permitted Acquisition Indebtedness;
(n) Indebtedness under cash management agreements or incurred in respect of netting services, overdraft protections and similar protections, in each case, in connection with cash management or deposit accounts in the ordinary course of business and (to the extent such practice has been established) consistent with past practice;
(o) Indebtedness representing deferred compensation to directors, officers, members of management or employees (in their capacities as such) of a Restricted Party incurred in the ordinary course of business and (to the extent such practice has been established) consistent with past practice;
(p) such other Indebtedness consented to by the Administrative Agent and the Required Lenders from time to time in writing; and
(q) Indebtedness outstanding on the Closing Date in an aggregate principal amount not exceeding CDN$30,500,000 in connection with the OCN First Loan and the OCN Second Loan (plus any interest that is capitalized or paid in kind thereon), and any Permitted Refinancing Indebtedness in respect thereof; provided that such Indebtedness and any Permitted
69
Refinancing Indebtedness in respect thereof is subject to the OCN Subordination Agreement (or any subordination agreement delivered in replacement thereof), from and after the date the OCN Subordination Agreement is required to be delivered in accordance with Section 7.22 and no payments are made thereunder prior to the delivery of the OCN Subordination Agreement other than as permitted under Section 8.7.
For the avoidance of doubt, for purposes of determining compliance with this Section 8.1, in the event that any proposed Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (a) through (q) above, the Restricted Parties will be permitted to divide and classify such item of Indebtedness at the time of its incurrence in any manner that meets the criteria of one or more of such clauses, does not cause the Restricted Parties to exceed the limits of such clauses and otherwise complies with this Section 8.1. In addition, any Indebtedness originally divided or classified as incurred pursuant to clauses (a) through (q) above may later be re-divided or reclassified by the Restricted Parties in any manner that meets the criteria of one or more of such clauses and will be deemed as having been incurred pursuant to another of such clauses; provided that such re-divided or reclassified Indebtedness could be incurred pursuant to such new clause at the time of such re-division or reclassification, shall not cause the Restricted Parties to exceed the limits of such clause and otherwise complies with this Section 8.1.
Notwithstanding any other provision of this Section 8.1 and for the avoidance of doubt, the maximum amount of Indebtedness that may be incurred pursuant to this Section 8.1 will not be deemed to be exceeded with respect to any outstanding Indebtedness due solely to the result of fluctuations in the exchange rates of currencies or increases in the value of property securing Indebtedness which occur subsequent to the date that such Indebtedness was incurred as permitted by this Section 8.1.
Section 8.2 Liens. Create or permit to exist any Lien on any of its assets (including Collateral), except for the following (the “Permitted Liens”):
(a) Liens in favor of the Agents or the Lenders under the Loan Documents;
(b) Liens junior to the Liens in favor of the Agents and the Lenders, subject to intercreditor agreements subordinating such Liens to the Agents’ Liens in the Collateral on terms acceptable to the Agents;
(c) Liens listed on Schedule 8.2 (other than any Liens granted in connection with the OCN First Loan or the OCN Second Loan);
(d) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, provided that any reserve or other appropriate provision as shall be required in conformity with IFRS shall have been made therefor;
(e) Liens incurred or deposits made in the ordinary course of business and (to the extent such practice has been established) consistent with past practice in connection with workers’ compensation, unemployment insurance and other social security legislation;
70
(f) Liens created by or resulting from any legal proceeding with respect to which a Restricted Party is prosecuting an appeal or other proceeding for review and the Restricted Party is maintaining adequate reserves in accordance with IFRS;
(g) Liens in favor of a Restricted Party given by a Person other than a Restricted Party and Liens in favor of a Loan Party given by another Restricted Party;
(h) Liens on property of a Person (i) existing at the time of acquisition thereof or (ii) existing at the time such Person is merged with or into or consolidated with a Restricted Party; provided that such Liens were in existence prior to, and not in contemplation of, such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Restricted Party, provided that the Indebtedness secured by such Liens shall not exceed Five Million and 00/100 Dollars ($5,000,000) in the aggregate at any time;
(i) Liens securing Non-Recourse Debt permitted by Section 8.1(f);
(j) Liens securing Hedging Obligations permitted by Section 8.1(j);
(k) Liens incurred or deposits made in the ordinary course of business and (to the extent such practice has been established) consistent with past practice in connection with worker’s compensation, unemployment insurance or other social security or similar obligations;
(l) Liens, deposits or pledges to secure public or statutory obligations, or the performance of bids, tenders, contracts (other than contracts for the payment of Indebtedness), stay and customs bonds, leases, statutory obligations, statutory bonds, return of money bonds or other similar obligations arising in the ordinary course of business and (to the extent such practice has been established) consistent with past practice, provided that the Indebtedness arising under performance bonds for bids, tenders and contracts secured by such Liens shall not secure Indebtedness exceeding Five Million and 00/100 Dollars ($5,000,000) in the aggregate at any time;
(m) Liens given to a public utility of any municipality or governmental or other public authority when required by such utility or authority in connection with the ownership of assets, provided that such Liens do not materially interfere with the use of such assets in the operation of the business;
(n) reservations, limitations, provisos and conditions, if any, expressed in any original grant from the government of Canada of any real property or any interest therein or in any comparable grant in jurisdictions other than Canada, provided they do not materially interfere with the use of such assets;
(o) survey exceptions, encumbrances, easements or reservations of, or rights of others for, rights of way, zoning or other restrictions as to the use of properties, and defects in title which, in the case of any of the foregoing, were not incurred or created to secure the payment of Indebtedness, and which in the aggregate do not materially adversely affect the value of such properties or materially impair the use for the purposes of which such properties are held by the Restricted Parties;
71
(p) servicing agreements, development agreements, site plan agreements, and other agreements with Governmental Authorities pertaining to the use or development of assets, provided each is complied with in all material respects and does not materially interfere with the use of such assets in the operation of the business;
(q) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other assets relating to such letters of credit and products and proceeds thereof to the extent the obligations so secured are permitted by Section 8.1;
(r) bankers’ Liens and Liens in favor of collecting or payor banks having a right of setoff, revocation, refund or chargeback with respect to money or instruments of the Borrower or any Subsidiary thereof on deposit with or in possession of such bank;
(s) Liens arising by reason of a judgment, decree or court order, to the extent not otherwise resulting in an Event of Default;
(t) extensions or renewals of any Liens referred to in clauses (a) through (s) above, provided that the renewal or extension is limited to all or part of the assets or property securing the original Lien; and
(u) Liens securing Indebtedness permitted under Section 8.1(q); provided that such Liens are subject to the OCN Subordination Agreement (or any subordination agreement delivered in replacement thereof), from and after the date the OCN Subordination Agreement is required to be delivered in accordance with Section 7.22 and no payments are made thereunder prior to the delivery of the OCN Subordination Agreement other than as permitted under Section 8.7.
For the avoidance of doubt, for purposes of determining compliance with this Section 8.2, (i) a Lien securing an item of Indebtedness need not be permitted solely by reference to one category (or portion thereof) of Permitted Liens described in clauses (a) through (u) above but may be permitted in part under any combination thereof that meets the criteria of one or more of such clauses, does not cause the Restricted Parties to exceed the limits of such clauses and otherwise complies with this Section 8.2, and (ii) in the event that a Lien securing an item of Indebtedness (or any portion thereof) meets the criteria of one or more of the categories (or portions thereof) of Permitted Liens described in clauses (a) through (u) above, the Restricted Parties shall be entitled to divide, classify or reclassify, or later divide, classify, or reclassify, such Lien securing such item of Indebtedness (or any portion thereof) in any manner that complies (based on circumstances existing at the time of such division, classification or reclassification) with the criteria of one or more of such clauses, does not cause the Restricted Parties to exceed the limits of such clauses, and otherwise complies with this Section 8.2.
In addition, with respect to any Lien securing Indebtedness that was permitted to secure such Indebtedness at the time of the incurrence of such Indebtedness, such Lien shall also be permitted to secure any increase in the amount of such Indebtedness in connection with any accrual of interest, the accretion of accreted value, the amortization of original issue discount, the payment of interest in the form of additional Indebtedness with the same terms or in the form of common equity of a Loan Party, the payment of dividends on preferred stock in the form of additional shares
72
of preferred stock of the same class, accretion of original issue discount or liquidation preference, and increases in the amount of Indebtedness outstanding solely as a result of fluctuations in the exchange rate of currencies or increases in the value of property securing Indebtedness described in the definition of “Indebtedness.”
For the avoidance of doubt, in no circumstance may the obligations of any Loan Party or its Subsidiaries under any Material Agreement be secured by any Lien, except as otherwise permitted by this Section 8.2.
Section 8.3 Dispositions or Transfers. Make any Disposition or Transfer, except for the following:
(a) any single transaction or series of related transactions that involves assets or other Equity Interests having a fair market value of less than Five Million and 00/100 Dollars ($5,000,000); provided that the aggregate amount of any such transactions shall not have a fair market value exceeding a maximum of Five Million and 00/100 Dollars ($5,000,000) during the term of this Agreement;
(b) sales of real estate owned by any Loan Party or any Subsidiary thereof; provided that, with respect to real estate sale-and-leaseback transactions, at least seventy-five percent (75.00%) of the net cash proceeds of such sale-and-leaseback transaction will be (i) reinvested into real estate owned by a Loan Party or a Subsidiary thereof, which real estate shall not be subject to any Lien, (ii) used to make a capital expenditure or otherwise invest in property owned by a Loan Party in furtherance of the Core Business, or (iii) repay Indebtedness outstanding under this Agreement in accordance with its terms, it being understood that the net proceeds of a sale-and-leaseback transaction shall be net of any amount received in expectation that it will later be applied to the property subject to the sale-and-leaseback transaction;
(c) sales of inventory in the ordinary course of business and in compliance with all applicable Laws (including with reference to the enforcement policies of the applicable Governmental Authority) and industry standards;
(d) any Disposition or Transfer of cash or Cash Equivalents in a manner not otherwise prohibited by this Agreement;
(e) Dispositions or Transfers (including without limitation surrenders and waivers) of accounts or notes receivable or other contract rights in connection with the compromise, settlement or collection thereof in the ordinary course of business or in bankruptcy or similar proceedings;
(f) the trade or exchange by a Restricted Party of any asset for any other asset or assets that is used or useable in the Core Business, including any cash or Cash Equivalents necessary in order to achieve an exchange of equivalent value; provided, however, that the fair market value of the asset or assets received by the Restricted Party in such trade or exchange (including any such cash or Cash Equivalents) is at least equal to the fair market value (as determined in good faith by the Borrower) of the asset or assets disposed of by the Restricted Party pursuant to such trade or exchange;
73
(g) any sale, lease, conveyance or other disposition of (i) inventory, products or services in the ordinary course of business and (to the extent such practice has been established) consistent with past practice, and (ii) any property or equipment that has become damaged, worn out or obsolete or pursuant to a program for the maintenance or upgrading of such property or equipment;
(h) a Restricted Payment or Permitted Investment that is otherwise permitted by this Agreement;
(i) a surrender or waiver of contract rights or a settlement, release or surrender of contract, tort or other claims in the ordinary course of business and (to the extent such practice has been established) consistent with past practice;
(j) sales, transfers and other dispositions of Investments in joint ventures to the extent required by, or made pursuant to, customary buy/sell arrangements between the joint venture parties set forth in joint venture arrangements and similar binding arrangements and the transfer of assets as part of the consideration for Investment in a joint venture permitted under Section 8.4;
(k) sales or dispositions in respect of which a Restricted Party is required to pay the proceeds thereof to a third party pursuant to the terms of agreements or arrangements in existence as at the Closing Date, as set forth on Schedule 8.3;
(l) the unwinding of any Hedging Obligations;
(m) the abandonment of intellectual property rights in the ordinary course of business and (to the extent such practice has been established) consistent with past practice or in the reasonable business judgment of the Borrower to the extent not necessary in connection with the Core Business;
(n) the issuance of directors’ qualifying shares and shares issued to foreign nationals as required by applicable law;
(o) Liens permitted by Section 8.2;
(p) any Disposition or Transfer by any Loan Party to any other Loan Party to the extent any resulting Investment constitutes a Permitted Investment;
(q) any Disposition or Transfer by any Restricted Party that is not a Loan Party to any other Restricted Party to the extent any resulting Investment constitutes a Permitted Investment;
(r) any sale-and-leaseback transaction of non-real estate property; provided that the proceeds of such transaction are not used to repay Indebtedness other than amounts outstanding under the Loan or other Obligations; and
(s) any Disposition or Transfer of assets or property subject to a Permitted Lien resulting from foreclosure on such assets or property.
74
provided that the Loan Parties shall not dispose of Material Subsidiaries in a single transaction or a series of related transactions if the portion of Consolidated EBITDA reasonably attributable to such Material Subsidiaries represented more than (i) at any time when the principal amount of the Loans is One Hundred Million and 00/100 Dollars ($100,000,000) or less, twenty percent (20.00%) of Consolidated EBITDA for the most recent period of four consecutive Fiscal Quarters ended as of the end of the most recent Fiscal Quarter for which audited financial statements have been delivered pursuant to Section 7.1(a) or internal financial statements have been delivered pursuant to Section 7.1(b) (or forty percent (40.00%) of Consolidated EBITDA, if Consolidated EBITDA for such period is at least Sixty Million and 00/100 Dollars ($60,000,000)) and (ii) at any time when the principal amount of the Loans is more than One Hundred Million and 00/100 Dollars ($100,000,000), twenty percent (20.00%) of Consolidated EBITDA for the most recent period of four consecutive Fiscal Quarters ended as of the end of the most recent Fiscal Quarter for which audited financial statements have been delivered pursuant to Section 7.1(a) or internal financial statements have been delivered pursuant to Section 7.1(b); provided further, in each case, that if such financial statements have not been delivered pursuant to Section 7.1(a) or Section 7.1(b) at the time of determination then such four consecutive Fiscal Quarter period shall end as of the last day of the most recent Fiscal Quarter for which consolidated financial statements of the Borrower are publicly available on SEDAR or EDGAR.
Section 8.4 Investments. Make any Investments except the following (“Permitted Investments”):
(a) Investments listed on Schedule 8.4;
(b) the Origin House Acquisition;
(c) the Hope Heal Health Acquisition;
(d) the Tryke Acquisition;
(e) acquisitions approved with the prior written consent of the Administrative Agent and the Required Lenders; provided that (i) for acquisitions that are consummated for total cash consideration (including cash contributions or other financing provided to the acquired entity to enable it to reach positive cash flow based on then current projections) aggregating up to One Hundred Million and 00/100 Dollars ($100,000,000) in the aggregate at any time during the term of this Agreement, such consent shall not be unreasonably withheld, delayed or conditioned, and (ii) for all other such acquisitions, such prior written consent shall be in the sole discretion of the Administrative Agent and the Required Lenders;
(f) Investments made in furtherance of the acquisitions specified Sections 8.4(b) through 8.4(e), including, without limitation, advances, deposits and prepayments for purchases of any assets used in the Core Business;
(g) Investments in the real estate, construction and buildout costs, property, plant and equipment including land, buildings, machinery, production equipment, computers, furniture, fixtures and vehicles belonging to any Restricted Party and in which such Restricted Party, if it is a Loan Party, will provide a security interest, mortgage or fixture filing, as applicable, to the Collateral Agent for the benefit of the Lenders, provided that such Investments shall not exceed Eighty Million and 00/100 Dollars ($80,000,000) in the aggregate for any consecutive twelve (12) month period;
75
(h) any Investment in Cash Equivalents;
(i) any Investment made as a result of the receipt of non-cash consideration from a Disposition or Transfer that was made pursuant to and in compliance with Section 8.3(a);
(j) Hedging Obligations permitted by Section 8.1(j);
(k) stock, obligations or securities received as a result of the bankruptcy or reorganization of a Person or taken in settlement or other resolutions of claims or disputes or in satisfaction of judgments, and extensions, modifications and renewals thereof in the ordinary course of business and (to the extent such practice has been established) consistent with past practice;
(l) advances to customers or suppliers in the ordinary course of business and (to the extent such practice has been established) consistent with past practice that are, in conformity with IFRS, recorded as accounts receivable, prepaid expenses or deposits on the statement of financial position of the Restricted Parties and endorsements for collection or deposit arising in the ordinary course of business and (to the extent such practice has been established) consistent with past practice, in an amount not to exceed Five Million and 00/100 Dollars ($5,000,000) at any time during which the Obligations are outstanding;
(m) loans or advances to officers and employees of a Restricted Party any of its Subsidiaries made in the ordinary course of business and (to the extent such practice has been established) consistent with past practice, which, in the aggregate outstanding amount, do not at any time exceed Two Million and 00/100 Dollars ($2,000,000);
(n) Guarantees issued in accordance with Section 8.1(c);
(o) guarantees supporting the performance of bids, tenders, contracts (other than contracts for the payment of Indebtedness), stay and customs bonds, leases, statutory obligations, statutory bonds, return of money bonds or other similar obligations arising in the ordinary course of business and (to the extent such practice has been established) consistent with past practice;
(p) any Investment by a Loan Party in another Loan Party (including any Investment by a Loan Party in a Restricted Party that is not a Loan Party for the ultimate purpose of making such Investment in a Loan Party, so long as such Investments are part of one substantially contemporaneous transaction) or by a Restricted Party that is not a Loan Party in another Restricted Party; provided that, if the recipient of such Investment is not a Loan Party, the Percentage Ownership of the Restricted Party making such Investment is not greater than the Percentage Ownership of the Restricted Party receiving such Restricted Payment;
(q) Investments in the ordinary course of business and (to the extent such practice has been established) consistent with past practice consisting of the contribution of assets in whatever manner pursuant to joint marketing or other business arrangements with other Persons in an aggregate amount not to exceed Five Million and 00/100 Dollars ($5,000,000) at any time;
76
(r) any Investments received in compromise or resolution of obligations of trade creditors or customers, including accounts receivable, that were incurred in the ordinary course of business of a Restricted Party, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer;
(s) other Investments having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (s) since the Closing Date, not to exceed the amount equal to thirty percent (30.00%) of Consolidated EBITDA for the most recently completed twelve fiscal months for which the internal financial statements are available immediately preceding the date on which such Investment is made;
(t) any Investment in respect of share price guarantees for share consideration given by a Restricted Party with respect to acquisitions prior to the Closing Date in an aggregate amount not to exceed Thirty-Five Million and 00/100 Dollars ($35,000,000) as scheduled and identified on Schedule 8.4;
(u) any Investment in any Person solely in exchange for the issuance of Equity Interests of the Borrower, including the portion of any Investment for which the consideration is solely Equity Interests of the Borrower;
(v) Investments in the ordinary course of business and (to the extent such practice has been established) consistent with past practice consisting of loans or advances from any Loan Party or any Subsidiary thereof to any non-Loan Party Subsidiary in an aggregate amount not to exceed Five Million and 00/100 Dollars ($5,000,000) at any time; and
(w) Any Investment that constitutes a Restricted Payment permitted by Section 8.7.
For the avoidance of doubt, for purposes of determining compliance with this Section 8.4, (i) an Investment need not be permitted solely by reference to one category (or portion thereof) of Permitted Investments described in clauses (a) through (w) above but may be permitted in part under any combination thereof that meets the criteria of one or more of such clauses, does not cause the Restricted Parties to exceed the limits of such clauses and otherwise complies with this Section 8.4, and (ii) in the event that an Investment (or any portion thereof) meets the criteria of one or more of the categories (or portions thereof) of Permitted Investments described in clauses (a) through (w) above, the Restricted Parties shall be entitled to divide, classify or reclassify, or later divide, classify, or reclassify, such Investment (or any portion thereof) in any manner that complies (based on circumstances existing at the time of such division, classification or reclassification) with the criteria of one or more of such clauses, does not cause the Restricted Parties to exceed the limits of such clauses, and otherwise complies with this Section 8.4.
Section 8.5 Fundamental Changes. Without the written consent of the Required Lenders, other than with respect to clause (a) of the definition of “Permitted Changes”: (a) wind-up, liquidate or dissolve, or enter into any consolidation, merger or amalgamation, except for Permitted Changes or (b) change the terms of any Material Agreement in such a way that could reasonably be expected to be materially adverse to the Lenders.
77
Section 8.6 Transactions with Affiliates. Enter into any material transaction of any kind with any Affiliate of a Loan Party or a Subsidiary, whether or not in the ordinary course of business, other than on fair and reasonable terms substantially as favorable to the Loan Party or such Subsidiary as would be obtainable by the Loan Party or such Subsidiary at the time in a comparable arm’s length transaction with a Person other than an Affiliate, provided that the foregoing restriction shall not apply to:
(a) transactions scheduled and identified on Schedule 8.6;
(b) transactions between or among Loan Parties and any of their Wholly-Owned Subsidiaries or between and among Restricted Parties; provided that if one such Restricted Party is not a Loan Party then the Percentage Ownership of each such Restricted Party must be equal;
(c) any transaction with an Affiliate or Subsidiary that constitutes a Permitted Change or is not prohibited by Section 8.4 or Section 8.7;
(d) employment, indemnification, and compensation arrangements (including arrangements made with respect to benefits, bonuses and equity-based awards) entered into in the ordinary course of business and (to the extent such practice has been established) consistent with past practice with members of the board of directors, officers, employees or consultants of a Loan Party or a Subsidiary of a Loan Party; and
(e) payments by Loan Party and its Subsidiaries pursuant to tax sharing agreements among such Loan Party and its Subsidiaries on customary terms that require each party to make payments when such taxes are due or refunds received of amounts equal to the income tax liabilities and refunds generated by each such party calculated on a separate return basis and payments to the party generating tax benefits and credits of amounts equal to the value of such tax benefits and credits made available to the group by such party.
Section 8.7 Restricted Payments. Make any Restricted Payment except the following:
(a) Restricted Payments listed on Schedule 8.7(A);
(b) Restricted Payments listed on Schedule 8.7(B) pertaining to obligations under definitive agreements for a Permitted Acquisition;
(c) Restricted Payments made solely from cash proceeds of an equity offering of any Loan Party or of any equity investment by third parties in any Loan Party (including cash proceeds received from an exercise of warrants or options or from the issue or sale of convertible or exchangeable securities of a Loan Party that have been converted into or exchanged for Equity Interests), in each case only if such cash proceeds were obtained after the Closing Date and to the extent such equity offering or equity investment is otherwise permitted by this Agreement and does not result in a Change of Control;
78
(d) any Restricted Payment consented to in writing by the Administrative Agent with the consent of the Required Lenders;
(e) Restricted Payments made to Loan Parties (including Restricted Payments paid by a Loan Party to a Restricted Party that is not a Loan Party for the ultimate purpose of distributing such Restricted Payment to a Loan Party, so long as such Restricted Payments are part of one substantially contemporaneous transaction) or by Restricted Parties that are not Loan Parties to any other Restricted Party; provided that, if the recipient of such Restricted Payment is not a Loan Party, the Percentage Ownership of the Restricted Party making such Restricted Payment is not greater than the Percentage Ownership of the Restricted Party receiving such Restricted Payment;
(f) the distribution, as a dividend or otherwise, of shares of capital stock of, or Indebtedness owed to a Loan Party by a Subsidiary of a Loan Party that is not a Loan Party;
(g) Restricted Payments by a Restricted Party to allow the payment of cash in lieu of the issuance of fractional shares upon the exercise of options or warrants or upon the conversion or exchange of Equity Interests of any such Restricted Party; provided that the aggregate amount of all Restricted Payments paid under this clause (g) shall not exceed One Hundred Thousand and 00/100 Dollars ($100,000);
(h) Acquisitions by a Restricted Party of Equity Interests of a non-wholly- owned Subsidiary of such Restricted Party in exchange for Equity Interests of the Borrower, consistent with past practice;
(i) Restricted Payments (i) consisting of regularly scheduled payments of interest and fees to Opaskwayak Cree Nation on the OCN First Loan and the OCN Second Loan (x) prior to the delivery of the OCN Subordination Agreement, as required pursuant to the terms thereof on the Closing Date so long as no Event of Default has occurred and is continuing at the time of such payment or would result therefrom, and (y) following delivery of the OCN Subordination Agreement, made in strict accordance with the OCN Subordination Agreement, and (ii) consisting of payments of principal to Opaskwayak Cree Nation on the OCN First Loan and the OCN Second Loan made solely with one or more of (x) the proceeds of a Permitted Refinancing Indebtedness of such OCN First Loan and OCN Second Loan, and (y) the proceeds of a Permitted Equity Refinancing; provided that such Permitted Refinancing Indebtedness is subject to a subordination agreement on terms and conditions satisfactory to the Administrative Agent in its reasonable discretion.
(j) Restricted Payments made in furtherance of the acquisitions specified in Sections 8.4(c) through 8.4(d) as set forth on Schedule 8.7(B) and made in furtherance of the acquisitions consented to pursuant to Section 8.4(e), and as specified in such consent.
For the avoidance of doubt, in determining whether any Restricted Payment is permitted by this Section 8.7, in the event that a proposed Restricted Payment (or portion thereof) meets the criteria of one or more of the categories of Restricted Payments described in clauses (a) through (j) above, the Restricted Parties will be entitled to classify and later reclassify (based on circumstance existing at the time of such reclassification) such Restricted Payment or portions thereof in any
79
manner that meets the criteria of one or more of such clauses, does not cause the Restricted Parties to exceed the limits of such clauses and otherwise complies with this Section 8.7, and such Restricted Payment or portion thereof will be treated as having made pursuant to only such clause or clauses (or portions thereof).
Section 8.8 Margin Regulations. Use the proceeds of the Loan in violation of the Margin Regulations, or for the purpose of purchasing or carrying any “margin stock” as defined in the Margin Regulations or reducing or retiring any Indebtedness which was originally incurred to purchase or carry “margin stock” or for any other purpose which might make this transaction a “purpose credit” within the meaning of the Margin Regulations.
Section 8.9 No Other Negative Pledge. Other than (a) the Loan Documents, (b) applicable Laws, (c) any agreement or instrument creating a Permitted Lien (but only to the extent such agreement or restriction applies to the assets subject to such Permitted Lien), (d) customary provisions in leases and licenses of real or personal property entered into by any Loan Party or any Subsidiary as lessee or licensee in the ordinary course of business, restricting the granting of Liens therein or in property that is the subject thereof, and (e) customary restrictions and conditions contained in any agreement relating to the sale of assets pending such sale, provided that such restrictions and conditions apply only to the assets being sold and such sale is permitted under this Agreement, enter into, incur or permit to exist, directly or indirectly, any agreement, instrument, deed, lease or other arrangement that prohibits, restricts or imposes any condition upon the ability of any Loan Party or any Subsidiary thereof to create, incur or permit to exist any Lien (other than Permitted Liens) upon any of its property or revenues in favor of the Secured Parties to secure the Obligations under the Loan Documents, whether now owned or hereafter acquired.
Section 8.10 No Change in Fiscal Year. Change the Fiscal Year or Fiscal Quarter of any Loan Party without the prior written consent of the Administrative Agent, except, in each case, as required by IFRS.
Section 8.11 Stay, Extension and Usury Laws. At any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of its obligations under this Agreement or the other Loan Documents and the Borrower (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Lenders, but shall suffer and permit the execution of every such power as though no such law has been enacted.
Section 8.12 Agreements to Restrict Dividends. Enter into any arrangement or agreement the operative effect of which is to restrict the payment of dividends or distributions by any Subsidiary of a Loan Party except for agreements or arrangements, which (a) exist on the Closing Date, (b) are binding on a Subsidiary at the time such Subsidiary first becomes a Subsidiary, so long as such agreement or arrangement was not entered into solely in contemplation of such Person becoming a Subsidiary, (c) are customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business, (d) are customary restrictions in leases, subleases, licenses or asset sale agreements otherwise permitted under this Agreement so long as such restrictions may relate to the assets subject thereto, (e) are on cash, other deposits or net worth or similar restrictions imposed by Persons under contracts entered into in the ordinary course of business, or (f) are contained in any employment, compensation or separation agreement or arrangement entered into by a Loan Party or a Subsidiary thereof in the ordinary course of business.
80
Section 8.13 Litigation. Except as set forth in Schedule 8.13, (a) commence any litigation other than in the ordinary course of business or (b) settle any litigation or dispute for an amount in excess of Two Million and 00/100 ($2,000,000) (net of amounts covered by insurance or indemnity) without the prior written consent of the Administrative Agent not to be unreasonably withheld, conditioned or delayed.
Section 8.14 Use of Proceeds. Use any Loan Proceeds for any purpose other than as set forth in Section 2.4.
Section 8.15 Governing Documents. Amend or modify any of its Governing Documents without the Required Lenders’ written consent in a manner that adds a requirement for additional Restricted Payments, that modifies any provisions concerning Super Voting Shares or that could reasonably be expected to be materially adverse to the Lenders. For the avoidance of doubt, the amendments and modifications to the Loan Parties’ Governing Documents contemplated by the Borrower’s management information circular, dated December 23, 2019, shall be permitted hereunder and shall not be deemed to violate this Section 8.15.
Section 8.16 Principal Place of Business. Change a Loan Party’s principal place of business or chief executive office or reorganize a Loan Party in a different jurisdiction without providing ten (10) days’ prior written notice to the Administrative Agent.
Section 8.17 Sale and Leaseback Transactions. Enter into any sale and leaseback transaction, other than as permitted under Section 8.3.
Section 8.18 Key Service Providers. Appoint, retain or terminate any auditor without the Administrative Agent’s prior written consent not to be unreasonably withheld, conditioned or delayed.
Section 8.19 Conduct of Business. (a) Engage or plan to engage in any business, conduct or agreement other than the Core Business and any other business reasonably related, complementary or ancillary thereto or (b) sell any inventory outside the normal course of business except as otherwise permitted under Section 8.3.
Section 8.20 Reserved.
Section 8.21 Anti-Money Laundering and Anti-Terrorism Laws. (a)(i) conduct any business or engage in any transaction or dealing with or for the benefit of any Blocked Person, including the making or receiving of any contribution of funds, goods or services to, from or for the benefit of any Blocked Person; (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked or subject to blocking pursuant to the Sanctions Programs; (iii) use any of the proceeds of the Advances or the transactions contemplated by this Agreement to finance, promote or otherwise support in any manner any illegal activity, including, without limitation, any violation of the Anti-Money Laundering and Anti-Terrorism Laws or any specified unlawful activity as that term is defined in the Money Laundering Control Act of 1986, 18 U.S.C. §§ 1956 and 1957; or (iv) violate, attempt to violate, or engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, any of the Anti-Money Laundering and Anti-Terrorism Laws in any material respects; or (b) with respect to any Loan Party, any Subsidiary or Affiliate of any Loan Party, any officer, director or principal
81
shareholder or owner of any Loan Party, any of the Loan Parties’ respective agents acting or benefiting in any capacity in connection with the Loans or other transactions hereunder, shall be or shall become a Blocked Person.
Section 8.22 Anti-Bribery and Anti-Corruption Laws. (a) offer, promise, pay, give, or authorize the payment or giving of any money, gift or other thing of value, directly or indirectly, to or for the benefit of any Foreign Official for the purpose of: (i) influencing any act or decision of such Foreign Official in his, her, or its official capacity; or (ii) inducing such Foreign Official to do, or omit to do, an act in violation of the lawful duty of such Foreign Official, or (iii) securing any improper advantage, in order to obtain or retain business for, or with, or to direct business to, any Person; or (b) act or attempt to act in any manner which would subject any of the Loan Parties or their Subsidiaries to liability under any Anti-Corruption Law.
Section 8.23 Investment Company Act of 1940. Engage in any business, enter into any transaction, use any securities or take any other action or permit any of its Subsidiaries to do any of the foregoing, that would cause it or any of its Subsidiaries to be required to register under the registration requirements of the Investment Company Act of 1940, as amended, by virtue of being an “investment company” or a company “controlled” by an “investment company” not entitled to an exemption within the meaning of such Act.
ARTICLE 9
RESERVE ACCOUNT AND DEPOSIT ACCOUNTS
Section 9.1 Establishment of and Deposit into Reserve Account. The Loan Parties shall at their sole expense establish and maintain until all of the Obligations have been paid in full (other than contingent indemnification obligations for which no claim has been asserted) the Reserve Account as a special, segregated, irrevocable account in the name of a Loan Party, for and on behalf of the Collateral Agent for the benefit of the Lenders, at the Reserve Account Bank, named the “Reserve Account”, which shall be under the dominion and control of the Collateral Agent pursuant to an executed DACAAgreement, subject to the terms and conditions of the Security Documents and to the terms hereof. Subject to Section 9.5, the Loan Parties shall maintain a balance of not less than the Reserve Amount in the Reserve Account from the Closing Date and at all times thereafter, except with the written consent of the Administrative Agent and the Required Lenders.
Section 9.2 Reserve Account. Except with the written consent of the Administrative Agent and the Required Lenders, at all times before the consummation of the Hope Heal Health Acquisition, (i) maintain the Reserve Account at the Reserve Account Bank, (ii) not establish any other depositary account for purposes of holding the Reserve Amount other than the Reserve Account, (iii) enter into and maintain a DACA Agreement with respect to the Reserve Account by and among the holder of the Reserve Account, the Reserve Account Bank and the Collateral Agent in form and substance agreeable to the Collateral Agent, and (iv) deposit and maintain the full Reserve Amount in the Reserve Account; provided that in the event the DACA Agreement with respect to the Reserve Account is terminated by the Reserve Account Bank (for any reason other than a default or breach of such DACA Agreement by the holder of the Reserve Account), the Borrower shall use its commercially reasonable efforts, prior the effective date of such termination, to (A) establish a replacement Reserve Account with a replacement Reserve Account Bank and (B) enter into replacement DACA Agreement with respect to such replacement Reserve Account with such replacement Reserve Account Bank and the Collateral Agent, and the failure of such DACA
82
Agreement to be in effect during the period in which the Borrower is using its commercially reasonable efforts as aforesaid, and thereafter if such commercially reasonable efforts are not successful, shall not be a breach of this Agreement, provided further that in the event that a replacement Reserve Account with a replacement Reserve Account Bank is not established prior to the effective date of such termination, the Administrative Agent or the Collateral Agent may, and are authorized by the Borrower to, direct the existing Reserve Account Bank to transfer all funds in the Reserve Account to a deposit account designated by the Administrative Agent or the Collateral Agent and thereafter such Account shall be treated as the Reserve Account for the purpose of this Agreement, and the funds therein shall be dealt with in accordance with this Agreement.
Section 9.3 Acknowledgement of Security Interests. Pursuant to the Security Documents, in order to secure the payment and performance of the Obligations, the Loan Parties have pledged to and created in favor of the Collateral Agent a security interest in and to the Reserve Account, and all cash, Cash Equivalents, instruments, investments, securities entitlements and other securities at any time on deposit in the Reserve Account, and all proceeds of any of the foregoing. The Reserve Account shall constitute collateral security for the payment and performance by the Borrower of the Obligations hereunder and shall at all times (subject to the proviso in Section 9.2) be subject to the control of the Collateral Agent and shall be held in the custody of the depository under the DACA Agreement(s) in trust for the purposes of, and on the terms set forth in, such DACA Agreement(s). Such DACA Agreement(s) provided with respect to the Reserve Account shall be in form and substance to the sole satisfaction of the Collateral Agent. Upon the reasonable request of the Collateral Agent, the Loan Parties shall immediately move the Reserve Account and all funds contained therein to a Depository Institution chosen by the Collateral Agent.
Section 9.4 The Loan Parties Rights. The Loan Parties shall not have any rights or powers with respect to any amount in the Reserve Account or any part thereof except (a) as provided for in the DACA Agreement(s), (b) the right to have such amounts applied in accordance with the provisions hereof and (c) subject to the written consent of the Administrative Agent and the Required Lenders, which shall not be unreasonably withheld, conditioned or delayed, to remove any amount in the Reserve Account in excess of the Reserve Amount. No Loan Party may make any disbursements from the Reserve Account except in accordance with this Agreement.
Section 9.5 Reserve Amount. The Reserve Amount shall be held in the Reserve Account at all times from the Closing Date until the earliest of (i) the consummation of the Hope Heal Health Acquisition, (ii) such other time as consented to by the Administrative Agent and the Required Lenders in writing, provided that, in the case of request by the Borrower for use of the Reserve Amount for acquisitions described in Sections 8.4(d) through 8.4(f), such consent shall not be unreasonably withheld, delayed or conditioned, and (iii) irrevocable payment in full of all Obligations hereunder, to be confirmed by the Administrative Agent in writing (the earliest of such dates, the “Reserve Amount Release Date”). Upon the Reserve Amount Release Date, the Agents shall take all necessary actions, if any, to permit the Loan Parties to exercise control over the Reserve Account, including to withdraw the Reserve Amount therefrom, provided that, in the event of a Reserve Amount Release Date under clause (i) of the preceding sentence, the Administrative Agent and the Lender have been provided assurances reasonably acceptable to them that the Hope Heal Health Acquisition has occurred or will occur upon the disbursement of Reserve Amount to the Borrower.
83
Section 9.6 Operating Accounts. After the Closing Date, the Loan Parties and their Subsidiaries may from time to time in their reasonable discretion open and maintain operating Accounts for purposes of operating the Core Business of the Loan Parties or their respective Subsidiaries with a Depository Institution as the Loan Parties and their Subsidiaries may from time to time reasonably determine. Each applicable Loan Party shall use commercially reasonable efforts to enter into a DACA Agreement with respect to each such operating Account of each applicable Loan Party by and among such depository institution, the applicable Loan Party and the Collateral Agent (A) if such Account contains funds exceeding One Million and 00/100 Dollars ($1,000,000) at any time or (B) if funds in the amount of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000) are deposited into such Account during any month.
ARTICLE 10
EVENTS OF DEFAULT AND REMEDIES
Section 10.1 Event of Default. An Event of Default shall exist upon the occurrence of any of the following specified events (each, an “Event of Default”):
(a) Non-Payment. (i) The Borrower shall fail to pay (A) any Principal Amount of any Loan when the same becomes due or, (B) any interest, fees or other amounts payable under the terms of this Agreement or any of the other Loan Documents within three (3) days of the date when the same becomes due, or (ii) any Loan Party fails to pay when due any amount payable under the Subsidiary Guaranty.
(b) Specific Covenants. (i) the Borrower fails to perform or observe, or fails to cause any Subsidiary to perform or observe, any covenant or agreement contained in any of Section 7.4, Section 7.6(a), Section 7.15 (to the extent a specific time frame for completion is set forth in Section 7.15), Section 7.16, Article 8 and Article 9.
(c) Other Defaults. Any Loan Party or any Subsidiary thereof fails to perform or observe (i) any other covenant or agreement contained in Section 7.6(b) and Section 7.7(a) and such failure continues for ten (10) days after the earlier of the date a Responsible Officer of the Borrower has actual knowledge of such failure or written notice thereof to the Borrower from the Administrative Agent or any Lender, or (ii) any other covenants or agreement (not specified in Section 10.1(a)-(b) or the preceding clause (i) of this Section 10.1(c)) contained in any Loan Document on its part to be performed or observed and such failure continues for thirty (30) days after the earlier of the date a Responsible Officer of the Borrower has actual knowledge of such failure or written notice thereof to the Borrower from the Administrative Agent or any Lender.
(d) Representations and Warranties. Any representation, warranty, certification or written statement of fact made or deemed made by or on behalf of any Loan Party in any other Loan Document, or in any document delivered in connection herewith or therewith shall be incorrect in any material respect when made or deemed made.
(e) Insolvency Proceedings, Etc. (i) Any Loan Party, institutes or consents to the institution of any proceeding, or makes any filing, under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, interim receiver, trustee, monitor, custodian, conservator, liquidator, rehabilitator or
84
similar officer for it or for all or any material part of its property; or (ii) a proceeding shall be commenced or a petition filed, without the application or consent of any Loan Party, as applicable, seeking or requesting the appointment of any receiver, interim receiver, trustee, monitor, custodian, conservator, liquidator, rehabilitator or similar officer is appointed and the appointment continues undischarged, undismissed or unstayed for sixty (60) calendar days or an order or decree approving or ordering any of the foregoing shall be entered; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for sixty (60) calendar days, or an order for relief is entered in any such proceeding.
(f) Inability to Pay Debts; Attachment. (i) Any Loan Party becomes unable or admits in writing its inability or fails generally to pay its debts as they become due in the ordinary course of business, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within sixty (60) days after its issuance or levy.
(g) Cross Default. Failure by a Loan Party to pay any Indebtedness (other than Indebtedness owing to another Loan Party) within any applicable grace period after final maturity or the acceleration of any such Indebtedness by holders thereof because of a default, in each case if the total amount of such Indebtedness unpaid or accelerated exceeds Ten Million and 00/100 Dollars ($10,000,000).
(h) Judgments. There is entered against any Loan Party (i) one or more final judgments for the payment of money in the aggregate amount exceeding One Million and 00/100 Dollars ($1,000,000) (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage), or (ii) any one or more non-monetary judgments the financial impact of which exceeds the aggregate amount of One Million and 00/100 Dollars ($1,000,000) and, in either case under clause (i) or (ii) of this provision, such judgment is not, within sixty (60) days after the entry thereof, satisfied, vacated, discharged or execution thereof stayed or bonded pending appeal, or such final judgment is not satisfied, vacated, discharged prior to the expiration of any such stay.
(i) Invalidity of Loan Documents. Any material provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party contests in any manner the validity or enforceability of any provision of any Loan Document; or any Governmental Authority with jurisdiction commences a proceeding seeking to invalidate the Loan Documents; or any Loan Party denies that it has any or further liability or obligation under any Loan Document or purports to revoke, terminate or rescind any provision of any Loan Document (other than in accordance with the Loan Documents).
(j) Security Documents. Except as resulting from the actions or omissions of the Administrative Agent or the Lenders, any Lien intended to be created by any Security Document shall at any time be invalidated, subordinated or otherwise cease to be in full force and effect, or any security interest purported to be created by any Security Document shall cease to be, or shall be asserted by any Loan Party in writing not to be, a valid, first priority (except as expressly otherwise provided in this Agreement or such Security Document) perfected Lien in the Collateral covered thereby (except for immaterial items of Collateral).
85
(k) Criminal Act. Any Loan Party or any officer of any Loan Party or Subsidiary thereof authorized to act on behalf of it and in such capacity is criminally indicted or convicted (a) under any Law constituting embezzlement, theft, fraud or intentional misconduct, the adverse effect to any Loan Party or Loan Parties in the aggregate is in excess of Ten Million and 00/100 Dollars ($10,000,000) or (b) under any Law, that may reasonably be expected to lead to a forfeiture of any property of such Loan Party having a fair market value in excess of Ten Million and 00/100 Dollars ($10,000,000).
(l) Subsidiary Guaranty. Any Loan Party shall repudiate or purport to revoke the Subsidiary Guaranty, provided that no Event of Default under this clause (l) shall occur with respect to any Loan Party that has been released from the Subsidiary Guaranty in accordance with this Agreement.
(m) Blocked Person. Any Loan Party or any Subsidiary thereof shall become a Blocked Person.
(n) Change of Control. There occurs any Change of Control.
(o) Fraud. Fraud or intentional misrepresentation by any Loan Party or any Subsidiary thereof in connection with the Loan.
Section 10.2 Remedies Upon Event of Default. In the case of an Event of Default, at any time thereafter during the continuance of such Event of Default, the Administrative Agent may, and at the request of the Required Lenders, shall, by written notice to the Borrower, take any one or more of the following actions, at the same or different times: (i) terminate this Agreement and any Commitments made hereunder, (ii) exercise any all remedies available to the Administrative Agent and the Lenders under the Security Documents or otherwise available at law or in equity, including the Uniform Commercial Code, by suit in equity by action at law, judicial or no judicial foreclosure, or otherwise, (iii) set off any amounts held in the Reserve Account or any other Account under the Administrative Agent’s control, (iv) instruct any Loan Party to carry on and conduct such Loan Party’s business in substantially the same manner in the Core Business and to do all things necessary to maintain any Cannabis Licenses in continued effect and (v) declare any Note and any Loan then outstanding to be due and payable in whole (or in part, in which case any portion of the Principal Amount not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the Principal Amount so declared to be due and payable, together with accrued interest thereon and all charges, fees, expenses, indemnities and other Obligations owing or payable hereunder or under any other Loan Document, shall become due and payable immediately, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other notice of any kind, all of which are hereby waived by the Borrower. The Loan Parties must cooperate with the Administrative Agent and continue to operate the business as required by the Administrative Agent.
Section 10.3 Application of Funds. After the occurrence and during the continuance of an Event of Default, any amounts received on account of the Obligations shall be applied by the Administrative Agent in accordance with Section 3.10(b)-(c).
86
Section 10.4 Protective Advances/Cure Rights. If the Borrower fails to do so, at any time prior to payment in full of the Obligations under the Loan, the Administrative Agent, on behalf of the Lenders, without waiving or releasing any of the Obligations, upon prior written notice to the Borrower, may (but shall not be required to) make any payments as the Administrative Agent may deem necessary to protect and/or maintain the Collateral. In addition, if the Borrower fails to do so, if at any time a breach, Default or Event of Default, occurs or any Loan Party otherwise fails to perform or comply with any of the terms, covenants, and conditions to be performed and/or complied with, any other Indebtedness, then the Administrative Agent, on behalf of the Lenders, without waiving or releasing any of the Obligations, may (but shall not be required to):
(a) make advances to the Loan Parties and/or directly make any payments as the Administrative Agent may deem necessary to cure or remedy such event or failure, including, without limitation, to cure or prevent a Default or Event of Default or an exercise of any rights or remedies or options against the Loan Parties or Lenders; and/or
(b) perform any other acts on their part to be performed for such purposes.
The making by the Administrative Agent of any such advances, payments or performances will not, however, be deemed to cure any Default or Event of Default under the Loan Documents arising from the predicated Events of Default. All sums so advanced or paid and all costs and expenses incurred by the Administrative Agent in connection with the performance of any such act shall be subject to the same terms and shall be deemed to be part of the Loan (including that such advances shall bear interest at the Applicable Rate or, if an Event of Default shall have occurred and be continuing and the Administrative Agent has so elected, the Default Rate, and be due on the Applicable Maturity Date, will be added to the Principal Amounts of the Loan and the Note and if repaid prior to the Applicable Maturity Date will be secured by the Security Documents). All such payments and advances so actually made shall conclusively be deemed to be protective advances which are required and mandatory to preserve and protect the Collateral Agent’s security for the performance of the Obligations under the Loan Documents, and shall be secured by the Security Documents to the same extent and with the same priority as the other principal, interest and other amounts payable under the Loan Documents.
ARTICLE 11
ADMINISTRATIVE AGENT AND COLLATERAL AGENT
Section 11.1 Appointment and Authority.
(a) Each of the Lenders hereby irrevocably appoints [Redacted – Confidential] to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorize the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.
(b) Each of the Lenders hereby irrevocably appoints [Redacted – Confidential] to act on its behalf as the Collateral Agent hereunder and under the other Loan Documents and authorize the Collateral Agent to take such actions on its behalf and to exercise such powers as are delegated to the Collateral Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.
87
(c) The provisions of this Article (except Section 11.9) are solely for the benefit of the Agents and the Lenders, and no Loan Party nor any of their Related Parties shall have rights as a third party beneficiary of any of such provisions.
Section 11.2 Rights as a Lender. The Person serving as an Agent hereunder, to the extent a Lender, shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as an Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with any Loan Party or any Subsidiary or other Affiliate thereof as if such Person were not an Agent hereunder and without any duty to account therefor to the Lenders.
Section 11.3 Exculpatory Provisions. No Agent shall have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, each Agent:
(a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;
(b) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that such Agent is required to exercise as directed in writing by the Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that such Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose such Agent to liability or that is contrary to any Loan Document or applicable Law; and
(c) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as such Agent or any of its Affiliates in any capacity. Such Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Lenders (or such other number or percentage of the Lenders as shall be necessary, or such Agent shall believe in good faith to be necessary, under the circumstances as provided in Section 12.1 and Section 10.2) or (ii) in the absence of its own gross negligence or willful misconduct. Such Agent shall not be deemed to have knowledge of any Default unless and until written notice describing such Default is given to any Agent by the Borrower or any Lender. Such Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan
88
Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article 5 or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to Agent.
Section 11.4 Reliance by Agent. Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any writing sent through electronic mail) sent by a Loan Party believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. In determining compliance with any condition hereunder to the making of a Loan, that by its terms must be fulfilled to the satisfaction of a Lender, each Agent may presume that such condition is satisfactory to such Lender unless such Agent shall have received written notice to the contrary from such Lender prior to the making of such Loan. Each Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
Section 11.5 Delegation of Duties. Each Agent may perform any and all of their duties and exercise their rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by such Agent. Each Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of any Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as such an Agent.
Section 11.6 Resignation or Removal of the Administrative Agent or Collateral Agent.
(a) The Administrative Agent may at any time give written notice of its resignation to the Lenders and the Borrower to be effective not earlier than thirty (30) days from the date of such notice.
(b) The Collateral Agent may at any time give written notice of its resignation to the Lenders and the Borrower to be effective not earlier than thirty (30) days from the date of such notice.
(c) The Required Lenders may remove either Agent from their capacity as such Agent under this Article 11, upon 10 Business Days’ written notice to such Agent. Upon receipt of such notice, such Agent shall cease all further activities and duties in the capacity in for which it was removed and provide such assistance as the Required Lenders may reasonably request to effect an orderly transition to a new Agent.
(d) Upon receipt of any written notice of resignation by either Agent, or upon the removal of such Agent by the Required Lenders, or if there exists a vacancy in any such capacity for whatever reason, the Required Lenders shall have the right to appoint with the consent of the Borrower which shall not be unreasonably withheld, delayed or conditioned (except that such consent shall not be required at any time that an Event of Default is continuing), an Eligible Assignee as a successor. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring or removed Agent gives written notice of its resignation, then such retiring or removed Agent may, on behalf
89
of the Secured Parties, appoint a successor Agent meeting the qualifications set forth above; provided that if the retiring or removed Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation or removal shall nonetheless become effective in accordance with such written notice, and (1) the retiring or removed Agent, as applicable, shall be discharged from its duties and obligations hereunder and under the other Loan Documents, and (2) all payments, communications and determinations provided to be made by, to or through such retiring or removed Agent shall instead be made by or to each Lender, until such time as the Required Lenders appoint a successor Agent as provided for above in this Section 11.6. Upon the acceptance of a successor’s appointment as an Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) or removed Agent, and the retiring or removed Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section 11.6). After the retiring or removed Agent’s resignation or removal hereunder and under the other Loan Documents, the provisions of this Article and Section 12.4 shall continue in effect for the benefit of such retiring or removed Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Agent was acting as the Administrative Agent or the Collateral Agent, as applicable.
Section 11.7 Non-Reliance on Agent and Other Lenders. Each Lender acknowledges that it has, independently and without reliance upon any Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon any Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.
Section 11.8 Administrative Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Subsidiary, Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loan, and all other obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Section 3.6 and Section 12.4) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event
90
that the Administrative Agent shall consent to the making of such payments directly to the Lenders to pay to the Administrative Agent any amount due for the compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Section 3.6 and Section 12.4. Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.
Section 11.9 Collateral and Subsidiary Guarantor Releases. The Lenders hereby empower and authorize the Administrative Agent to execute and deliver to the Borrower on the Lenders’ behalf any agreements, documents or instruments as shall be necessary or appropriate to effect any releases of Collateral which shall be permitted by the terms hereof or of any other Loan Document (including, without limitation, in connection with any asset sale permitted hereunder or in connection with any release of a Subsidiary Guarantor made in accordance with the Loan Documents) or which shall otherwise have been approved by the Required Lenders (or, if required by the terms of Section 12.1, all of the Lenders) in writing. In addition, the Lenders authorize the Administrative Agent to release any Subsidiary Guarantor from its obligations under the Loan Documents if such Person is no longer required to be a Subsidiary Guarantor hereunder or if such Person is sold, transferred or assigned in accordance with and to the extent permitted by the terms of this Agreement. Upon the request of the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release or subordinate its interest in particular types or items of Collateral, or to release any Subsidiary Guarantor from its obligations under the Loan Documents pursuant to the foregoing. In each case as specified hereto, the Administrative Agent shall (and each Lender hereby authorizes the Administrative Agent to), at the Borrower’s expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the security interest granted under the Loan Documents or to subordinate its interest therein, or to release a Subsidiary Guarantor from its obligations under the Guaranty, in each case in accordance with the terms of the Loan Documents.
ARTICLE 12
MISCELLANEOUS
Section 12.1 Amendments, Actions Under this Agreement, Etc.
(a) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and either Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Maximum Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender directly affected thereby (except the waiver of the obligation to pay Default Rate of interest (both prior to its accrual and retroactively) shall not constitute a reduction in the rate of interest or fees for purposes of this clause (ii)), (iii) postpone the scheduled date of payment of the principal amount of any Loan (other than any reduction of the amount of, or any extension of the payment date for, the mandatory prepayments required under Section 3.3 in each case which shall only require the approval of the Required Lenders), or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the
91
scheduled date of expiration of any Maximum Commitment, without the written consent of each Lender directly affected thereby, (iv) change any of the provisions of Section 3.5, Section 3.9, Section 3.10 and this Section 12.1, the definition of “Required Lenders,” or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender, (v) except as permitted by the terms of a Loan Document, release any Loan Party from its obligations under the Loan Documents without the written consent of each Lender, (vi) increase the Loan Amount or the aggregate Commitments (A) up to and including Two Hundred Million and 00/100 Dollars ($200,000,000), other than in accordance with Section 2.3, or (B) in excess of Two Hundred Million and 00/100 Dollars ($200,000,000), without the prior written consent of each Lender or (vii) except as provided in clause (b) of this Section 12.1 or in any Security Document, release all or substantially all of the Collateral, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the either Agent without the prior written consent of such Agent. Notwithstanding the foregoing, no consent with respect to any amendment, waiver or other modification of this Agreement shall be required of any Defaulting Lender, except with respect to any amendment, waiver or other modification referred to in clause (i), (ii) or (iii) of the first proviso of this paragraph and then only in the event such Defaulting Lender shall be directly affected by such amendment, waiver or other modification;
(b) The Lenders hereby irrevocably authorize the Collateral Agent, at its option, to release any Liens granted to the Collateral Agent by the Loan Parties on any Collateral (i) upon the occurrence of the payment in full of all Obligations, (ii) constituting property being sold or disposed of if the Borrower certifies to the Administrative Agent that the sale or disposition is made in compliance with the terms of this Agreement (and the Administrative Agent may rely conclusively on any such certificate, without further inquiry) or (iii) as required to effect any sale or other disposition of such Collateral in connection with any exercise of remedies of the Administrative Agent and the Lenders pursuant to Article 10. Any such release shall not in any manner discharge, affect, or impair the Obligations or any Liens (other than those expressly being released) upon (or obligations of the Loan Parties in respect of) all interests retained by the Loan Parties, including the proceeds of any sale, all of which shall continue to constitute part of the Collateral;
(c) If, in connection with any proposed amendment, waiver or consent requiring the consent of “each Lender” or “each Lender directly affected thereby,” the consent of the Required Lenders is obtained, but the consent of other necessary Lenders is not obtained (any such Lender whose consent is necessary but not obtained being referred to herein as a “Non-Consenting Lender”), then the Borrower or the Administrative Agent may elect to replace a Non-Consenting Lender as a Lender party to this Agreement, provided that, concurrently with such replacement, (i) another bank or other Person which is reasonably satisfactory to the Borrower and the Administrative Agent shall agree, as of such date, to purchase for cash the Loan and other Obligations due to the Non-Consenting Lender pursuant to an Assignment and Assumption and to become a Lender for all purposes under this Agreement and to assume all obligations of the Non-Consenting Lender to be terminated as of such date, and (ii) the Borrower shall pay to such Non-Consenting Lender in same day funds on the day of such replacement all interest, fees and other amounts then accrued but unpaid to such Non-Consenting Lender by the Borrower hereunder to and including the date of termination, including without limitation payments due to such Non-Consenting Lender under Section 4.1 and Section 4.2; or
92
(d) Notwithstanding anything to the contrary herein, the Administrative Agent may, with the consent of the Borrower only, amend, modify or supplement this Agreement or any of the other Loan Documents to cure any ambiguity, omission, mistake, defect or inconsistency.
(e) Notwithstanding anything to the contrary herein, the Borrower may amend the schedules hereto (except for Schedule 1.2) within 30 days after the Closing Date solely to the extent necessary to reflect the Origin House Acquisition; provided that any material amendment to the schedules is subject to the consent of the Administrative Agent (such consent not to be unreasonably withheld, conditioned or delayed).
Section 12.2 Notices; Effectiveness; Electronic Communication.
(a) Notices Generally. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be either (i) in writing and delivered by nationally recognized courier service or mailed by certified or registered mail or (ii) by electronic mail, (A) as to the Borrower, each Lender, each Agent, at its address specified on its signature page hereto (or, in the case of a Lender that becomes party to this Agreement by assignment, at its address specified in the Assignment and Assumption pursuant to which it became a Lender hereunder) and (B) any other Person, at such other Person’s address as shall be designated by such Person in a written notice to the Administrative Agent. All notices, elections, requests and demands under this Agreement shall be effective and deemed received upon the earliest of (i) the actual receipt of the same by personal delivery, (ii) one (1) Business Day after being deposited with a nationally recognized overnight courier service, or (iii) three (3) Business Days after being deposited in the United States mail. Any notice so given by electronic mail shall be deemed to have been given as of the date on which the sender of such communication shall confirm receipt thereof by the appropriate parties. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given as herein required shall be deemed to be receipt of the notice, election, request, or demand sent.
(b) Change of Address, Etc. The Borrower or any Agent may change its address, electronic mail address or telephone number for notices and other communications hereunder by written notice to the other parties hereto. Each other Lender may change its address, electronic mail address or telephone number for notices and other communications hereunder by written notice to the Borrower and each Agent.
(c) Reliance by Agents and Lenders. The Agents and the Lenders shall be entitled to rely and act upon any notices purportedly given by or on behalf of the Borrower even if such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein. The Borrower shall indemnify each Agent and each Lender, and the Related Parties of each of them, from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower.
93
Section 12.3 No Waiver; Cumulative Remedies. No failure by any Lender or any Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges of the Lenders and the Agents herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.
Section 12.4 Expenses; Indemnity; Damage Waiver.
(a) Costs and Expenses.
(A) The Borrower shall pay on the Closing Date all reasonable and invoiced (and showing in reasonable detail) out-of-pocket expenses incurred by the Agents (including the reasonable and invoiced (and showing in reasonable detail) fees, charges and disbursements of counsel for the Agents), that have been invoiced to the Borrower at least one (1) Business Day prior to the Closing Date, in connection with the preparation, negotiation, due diligence, execution, and delivery of this Agreement and the other Loan Documents.
(B) The Borrower shall pay (X) all reasonable and invoiced (and showing in reasonable detail) out-of-pocket expenses incurred by either Agent (including the reasonable and invoiced (and showing in reasonable detail) fees, charges and disbursements of counsel for such Agent), in connection with the administration of this Agreement and the other Loan Documents (including, without limitation, any such fees, charges and disbursements of counsel arising from either Agent’s actions under Section 7.12), (Y) all reasonable and invoiced (and showing in reasonable detail) out-of- pocket expenses incurred by either Agent (including the reasonable and invoiced (and showing in reasonable detail) fees, charges and disbursements of counsel for such Agent), in connection with any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), and (Z) all documented out-of-pocket expenses incurred by any Agent or any Lender (including the reasonable documented fees, charges and disbursements of counsel for the Administrative Agent and each Lender), in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section 12.4, and (B) in connection with the Loan hereunder, including all such reasonable and invoiced (and showing in reasonable detail) out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of the Loan.
(b) Indemnification by Borrower. The Borrower shall indemnify and defend each Agent (and any sub-agent thereof), each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the reasonable and documented fees, charges and disbursements of any counsel for any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower or any other Loan Party (collectively, “Claims”) arising out of, in connection
94
with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties to the Loan Documents of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or the use or proposed use of the proceeds therefrom or (iii) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising, in whole or in part, out of the comparative or contributory negligence of any Indemnitee or its agents; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of any Indemnitee or its agents. This Section 12.4 shall not apply with respect to Taxes other than any Taxes that represent losses, claims and damages arising from any non-Tax claim.
(c) Reimbursement by Lenders. To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under Section 12.4(a)-(b) to be paid by it to any Agent (or any sub-agent thereof), or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), or such Related Party, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against such Agent (or any such sub- agent) in its capacity as such, or against any Related Party of any of the foregoing acting for such Agent (or any such sub-agent) in connection with such capacity. The obligations of the Lenders hereunder to make payments pursuant to this Section 12.4(c) are several and not joint. The failure of any Lender to make any payment under this Section 12.4(c) on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to make its payment under this Section 12.4(c).
(d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable Law, the Borrower, on behalf of itself and each other Loan Party and its Related Parties, shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof. No Indemnitee referred to in Section 12.4(b) shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby, unless such distribution is determined by a court of competent jurisdiction to be gross negligence or willful misconduct.
(e) Payments. All amounts due under this Section 12.4 shall be payable not later than five (5) Business Days after demand therefor.
95
(f) Survival. The agreements in this Section 12.4 shall survive the resignation or replacement of any Agent, the replacement of any Lender, the termination of the Loan and the repayment, satisfaction or discharge of all the other obligations.
Section 12.5 Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is made to any Agent or any Lender, or any Agent or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by such Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by either Agent. The obligations of the Lenders under clause (b) of the preceding sentence shall survive the payment in full of the obligations and the termination of this Agreement.
Section 12.6 Successors And Assigns.
(a) Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender, and any purported assignment or transfer by the Borrower in violation of the foregoing shall be null and void. Any Lender may at any time assign or otherwise transfer any of its rights or obligations hereunder without the consent of Borrower (i) to an Eligible Assignee in accordance with the provisions of Section 12.6(b), (ii) by way of participation to an Eligible Assignee in accordance with the provisions of Section 12.6(d), or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 12.6(f) (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided for in Section 12.6(d) and, to the extent expressly contemplated hereby, the Related Parties of the Administrative Agent and each Lender) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b) Assignments by Lenders. Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of the Loan at the time owing to it); provided that:
(A) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loan and commitments assigned;
(B) each partial assignment shall be in a minimum amount of Ten Million and 00/100 Dollars ($10,000,000) of the assigning Lender’s rights and obligations under this Agreement with respect to the Loan and commitments assigned or, if less, the total amount of such Lender’s rights and obligations under this Agreement;
96
(C) any Eligible Assignee that is not an existing Lender shall complete an Administrative Questionnaire in form and substance satisfactory to the Administrative Agent;
(D) any Eligible Assignee that is not a financial institution shall be an Approved Fund or a Fund that is acceptable to the Administrative Agent;
(E) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, and the Administrative Agent shall promptly provide a copy of the same to the Borrower; and
(F) the Administrative Agent or one or more of its Affiliates shall serve as administrative agent hereunder.
Subject to acceptance and recording thereof by the Administrative Agent pursuant to Section 12.6(c), from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Section 4.1 and Section 12.4 with respect to facts and circumstances occurring prior to the effective date of such assignment. Upon request, Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 12.6(b) shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 12.6(d).
(c) Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders and Principal Amounts (and stated interest) of the Loan owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by Borrower at any reasonable time and from time to time upon reasonable prior written notice. In addition, at any time that a request for consent for a material or substantive change to the Loan Documents is pending, any Lender wishing to consult with other Lenders in connection therewith may request and receive from the Administrative Agent a copy of the Register.
97
(d) Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Eligible Participant (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of the Loan owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in Section 12.1(a)(i)-(iv) that affects such Participant. Subject to Section 12.6(e), the Borrower agrees that each Participant shall be entitled to the benefits of Section 4.1 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 12.6(b). To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 12.7 as though it were a Lender.
(e) Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 4.1 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with Borrower’s prior written consent.
(f) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to an Eligible Assignee to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledge or assignee for such Lender as a party hereto.
(g) Electronic Execution of Assignments. The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act or any other similar state laws based on the Uniform Electronic Transactions Act.
Section 12.7 Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, after obtaining the prior written consent of the Administrative Agent (but without the prior notice to or consent of the Borrower, any such notice and consent being expressly waived by the Borrower to the extent permitted by applicable Law), to the fullest extent permitted by applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender to or for the credit or the account of the Borrower or any other Loan Party against any and all of the obligations of Borrower or such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Lender,
98
irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations of Borrower or such Loan Party may be contingent or unmatured or are owed to a branch or office of such Lender different from the branch or office holding such deposit or obligated on such indebtedness. The rights of each Lender under this Section 12.7 are in addition to other rights and remedies (including other rights of setoff) that such Lender may have. Each Lender agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.
Section 12.8 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the Principal Amounts of the Loan or, if it exceeds such unpaid Principal Amounts, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.
Section 12.9 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. Delivery of any executed counterpart of this Agreement by facsimile or transmitted electronically in either a Tagged Image Format File (“TIFF”) or Portable Document Format (“PDF”) shall be equally effective as delivery of a manually executed counterpart of this Agreement. Any party delivering an executed counterpart by facsimile TIFF, or PDF shall also deliver a manually executed counterpart of this Agreement, but failure to do so shall not affect the validity, enforceability or binding effect of this Agreement.
Section 12.10 Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by each Agent and each Lender, regardless of any investigation made by such Agent or such Lender or on their behalf and notwithstanding that any Agent or any Lender may have had notice or knowledge of any Default at the time of any Advance, and shall continue in full force and effect as long as any Loan or any other Obligations (other than contingent indemnification obligations for which no claim has been asserted) remain unpaid or unsatisfied.
99
Section 12.11 Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 12.12 Governing Law; Jurisdiction; Etc.
(a) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF ILLINOIS, AND THE LOAN MADE BY LENDERS AND ACCEPTED BY BORROWER IN THE STATE OF ILLINOIS, AND THE PROCEEDS OF THE LOAN DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF ILLINOIS, WHICH STATE THE PARTIES IRREVOCABLY AND UNCONDITIONALLY AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, EACH AND ALL OF THIS AGREEMENT, THE NOTE, THE OTHER LOAN DOCUMENTS, AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER STATE) AND ANY APPLICABLE LAW OF THE UNITED STATES. TO THE FULLEST EXTENT PERMITTED BY LAW, THE BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT, THE NOTE, AND/OR THE LOAN.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST ANY AGENT, ANY LENDER OR ANY LOAN PARTY ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY AT SUCH AGENT’S OR SUCH LENDER’S OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN COOK COUNTY, ILLINOIS, AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. NOTHING HEREIN SHALL LIMIT THE RIGHT OF EITHER AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY LOAN PARTY IN THE COURTS OF ANY OTHER JURISDICTION. BORROWER DOES HEREBY DESIGNATE AND APPOINT:
Cogency Global
111 W. Washington St., Suite 1447
Chicago, IL 60602
AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT,
100
ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN COOK COUNTY, ILLINOIS, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE MAILED OR DELIVERED TO THE BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE BORROWER IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF ILLINOIS. THE BORROWER (I) SHALL GIVE PROMPT WRITTEN NOTICE TO THE ADMINISTRATIVE AGENT OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK OR COOK COUNTY, ILLINOIS (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR COOK COUNTY, ILLINOIS, OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
(c) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY LENDER WITH RESPECT TO THIS AGREEMENT, ANY NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, WHETHER IN LAW OR EQUITY, WHETHER IN CONTRACT OR IN TORT OR OTHERWISE, SHALL BE BROUGHT EXCLUSIVELY IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF ILLINOIS, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH LENDER ACCEPTS, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, ANY NOTE OR ANY OTHER LOAN DOCUMENT FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS AVAILABLE. EACH LENDER IRREVOCABLY AGREES THAT ALL SERVICE OF PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH ON ITS SIGNATURE PAGE HERETO OR AT SUCH OTHER ADDRESS OF WHICH THE BORROWER SHALL HAVE BEEN NOTIFIED PURSUANT THERETO, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY EACH LENDER TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.
Section 12.13 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY VOLUNTARILY, KNOWINGLY, UNCONDITIONALLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 12.13.
101
Section 12.14 Relationship of Parties. The relationship between the Borrower, on the one hand, and the Lenders and Agents, on the other, is, and at all times shall remain, solely that of borrower and lenders. Neither the Lenders nor the Agents shall under any circumstances be construed to be partners or joint venturers of any Loan Party or any of their Affiliates or direct or indirect owners; nor shall the Lenders or Agents under any circumstances be deemed to be in a relationship of confidence or trust or a fiduciary relationship with any Loan Party or any of their Affiliates or direct or indirect owners, or to owe any fiduciary duty to any Loan Party or any of their Affiliates or direct or indirect owners. The Lenders and the Agents do not undertake or assume any responsibility or duty to any Loan Party or any of their Affiliates or direct or indirect owners to select, review, inspect, supervise, pass judgment upon or otherwise inform any Loan Party or any of their Affiliates or direct or indirect owners of any matter in connection with its or its property, any security held by the Collateral Agent or the operations of any Loan Party or any of their Affiliates or direct or indirect owners. Each Loan Party and each of their Affiliates or direct or indirect owners shall rely entirely on their own judgment with respect to such matters, and any review, inspection, supervision, exercise of judgment or supply of information undertaken or assumed by any Lender or any Agent in connection with such matters is solely for the protection of the Lenders and the Agents and neither any Loan Party or any of their Affiliates or direct or indirect owners is entitled to rely thereon.
Section 12.15 USA Patriot Act Notice. Each Lender that is subject to the Patriot Act and each Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the Patriot Act it is required to obtain, verify and record, and the Borrower hereby agrees to provide, information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or such Agent, as applicable, to identify the Borrower, and otherwise enable compliance, in accordance with the Patriot Act.
Section 12.16 Time of the Essence. Time is of the essence with respect to the Loan Documents.
Section 12.17 Telephone and Electronic Authorization.
(a) Each Agent and the Lenders may honor telephone or email instructions for repayments, by any one of the individuals authorized to sign Loan agreements on behalf of the Borrower, or any other individual designated by any one of such authorized signers. A list of authorized signers shall be named in Schedule 12.17. Schedule 12.17 may be modified from time- to-time by the Borrower; provided that at all times the individuals named as Chairperson, President, Chief Executive Officer, Secretary and Treasurer of the Borrower shall be deemed to be authorized signers.
(b) The Borrower shall indemnify and hold each Agent and each Lender harmless from all liability, loss, and costs in connection with any act resulting from telephone or email instructions such party believes are made by any individual authorized by the Borrower in Section 12.17(a) (or deemed authorized in accordance with Schedule 12.17) to give such instructions other than losses caused by such Agent’s or such Lender’s gross negligence or willful misconduct. This paragraph will survive this Agreement’s termination, and will benefit each Agent, each Lender and their respective officers, employees, and agents.
102
Section 12.18 Confidentiality as to Loan Documents, Etc.. This Agreement, the other Loan Documents and any written communications provided to the Loan Parties and their Subsidiaries by the Administrative Agent and the Lenders prior to or after the date hereof in connection with this Agreement and the other Loan Documents are exclusively for the information of the Loan Parties and their Subsidiaries and, along with the identity of Lenders or prospective Lenders may not be disclosed by the Loan Parties or their Subsidiaries to any third party or circulated or referred to publicly without the Administrative Agent’s prior written consent except that such information, including the existence and a copy of this Agreement (with the names of the Lenders redacted), may be disclosed, after providing written notice to the Administrative Agent (to the extent legally permissible), pursuant to a subpoena or order issued by a court of competent jurisdiction or by a judicial, administrative or legislative body or committee, or as required by applicable Law; provided that the applicable Loan Party shall have, to the extent legally permissible (i) promptly notified the Administrative Agent of the receipt of any such subpoena or order, (ii) consulted with the Administrative Agent as to the advisability of taking steps to resist or narrow the scope of the disclosure contemplated thereby and (iii) cooperated with the Administrative Agent in any reasonable efforts it may make to obtain an order or other reliable assurance that confidential treatment will be accorded to such information. The Loan Parties’ disclosure of the identity of Lenders or prospective Lenders (x) to its officers, directors, agents and advisors (including legal counsel, accountants, and other professional advisors) and employees (to the extent such information is reasonably necessary or beneficial for the performance of their duties) who have been instructed by one or more of the Loan Parties to keep such information confidential, in accordance with this Section 12.18, and (y) in connection with any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of the Loan Parties’ rights hereunder or thereunder, in each case, shall not be subject to the limitations set forth in this Section. Each of the Agents and each Lender agrees that the terms of this Section shall set forth the entire agreement between the Borrower, the Loan Parties and the Agents and each Lender with respect to any confidential information previously received by the Loan Parties and their Subsidiaries in connection with this Agreement, and this Section shall supersede any and all prior confidentiality agreements entered into by the Borrower, a Loan Party or any Subsidiary thereof with respect to such confidential information.
Section 12.19 Confidentiality. Each of the Agents and each Lender agrees to hold any information relating to the Borrower, the Loan Parties and any of their Subsidiaries furnished to it by or on behalf of the Borrower, the Loan Parties or any of their Subsidiaries in confidence and shall not reveal the same, except for disclosure (i) to its Affiliates and to the Agents and any other Lender and their respective Affiliates, and, in each case, their respective employees, directors, and officers provided such parties have been instructed to keep such information confidential in accordance with this Section 12.19, (ii) to legal counsel, accountants, and other professional advisors to the Agents or such Lender provided such parties have been instructed to keep such information confidential in accordance with this Section 12.19, (iii) to the extent necessary to comply with law or any legal, judicial or administrative process or as otherwise required by law or the requests of any Governmental Authority (in which case such Person, (x) shall limit such disclosure only to the extent necessary to comply with such law, process or request and (y) to the extent permitted by law, agrees to inform the Borrower promptly thereof), (iv) to its direct or indirect contractual counterparties in swap agreements or to legal counsel, accountants and other professional advisors to such counterparties provided such parties have agreed to keep such information confidential in accordance with this Section 12.19, (v) to rating agencies if requested or required by such agencies in
103
connection with a rating relating to the Loan hereunder, (vi) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, and (x) to the extent such information (1) becomes publicly available other than as a result of a breach of this Section or (2) becomes available to the Agents or any Lender on a non-confidential basis from a source other than a Loan Party or any Subsidiary thereof. The Borrower agrees that the terms of this Section shall set forth the entire agreement between the Borrower, the Loan Parties and the Agents and each Lender with respect to any confidential information previously or hereafter received by the Agents or such Lender in connection with this Agreement, and this Section shall supersede any and all prior confidentiality agreements entered into by an Agent or any Lender with respect to such confidential information.
Section 12.20 Judgment Currency. If for the purposes of obtaining judgment in any court it is necessary to convert a sum due from any Loan Party hereunder in the currency expressed to be payable herein (the “Specified Currency”) into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the Specified Currency with such other currency at the Administrative Agent’s main New York City office on the Business Day preceding that on which final, non-appealable judgment is given. The obligations of each Loan Party in respect of any sum due hereunder shall, notwithstanding any judgment in a currency other than the Specified Currency, be discharged only to the extent that on the Business Day following receipt by any Lender (including the Administrative Agent), as the case may be, of any sum adjudged to be so due in such other currency such Lender (including the Administrative Agent), as the case may be, may in accordance with normal, reasonable banking procedures purchase the Specified Currency with such other currency. If the amount of the Specified Currency so purchased is less than the sum originally due to such Lender (including the Administrative Agent), as the case may be, in the Specified Currency, each Guarantor agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender (including the Administrative Agent), as the case may be, against such loss.
Section 12.21 Electronic Documentation. Delivery of an executed counterpart of a signature page of any Loan Document by electronic format (e.g., “pdf”) is effective as delivery of a manually executed counterpart. The words “execution,” “signed,” “signature,” and words of like import shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, or any applicable state laws based on the Uniform Electronic Transactions Act (“UETA”). The Administrative Agent may, on behalf of the Borrower, create a microfilm or optical disk or other electronic image of this Agreement and any or all of the Loan Documents. The Administrative Agent may store each such electronic image in its electronic form and then destroy any paper original as part of the Administrative Agent’s normal business practices, with the electronic image deemed to be an original and of the same legal effect, validity, and enforceability as such paper original. The Administrative Agent is authorized, when appropriate, to convert any instrument into a “transferable record” under UETA, with the image of such instrument in the Administrative Agent’s possession constituting an “authoritative copy” under UETA.
[Signature page follows.]
104
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed and delivered under seal as of the date first set forth above.
| BORROWER: | ||
| CRESCO LABS INC., | ||
| a British Columbia company | ||
| By: |
| |
| Name: | Ken Amann | |
| Title: | Chief Financial Officer | |
| Address for Notices: | ||
| 400 W. Erie St. Suite 110 | ||
| Chicago, IL 60654 | ||
| Attention: | John Schetz | |
| Phone: | (312) 410-8226 |
| Email: | john.schetz@crescolabs.com | |
| With a copy to: | ||
| Bennett Jones LLP | ||
| One First Canadian Place | ||
| Toronto, ON M5X 1A4 | ||
| Attention: | Aaron Sonshine | |
| Phone: | (416) 777-6448 |
| Email: | sonshinea@bennettjones.com |
[Signatures continue on following page(s).]
Senior Secured Term Loan Agreement
| ADMINISTRATIVE AGENT: | ||||
| [Redacted – Confidential] | ||||
| By: |
| |||
| Name: | [Redacted – Confidential] | |||
| Title: | President | |||
| Address for Notices: | ||||
| [Redacted – Confidential] | ||||
| With a copy to: | ||||
| Dorsey & Whitney LLP | ||||
| 50 South Sixth Street, Suite 1500 | ||||
| Minneapolis, MN 55402 | ||||
| Attention: | [Redacted – Confidential] | |||
| Phone: | [Redacted – Confidential] | |||
| Email: | [Redacted – Confidential] | |||
[Signatures continue on following page(s).]
Senior Secured Term Loan Agreement
| COLLATERAL AGENT: | ||||
| [Redacted – Confidential] | ||||
| By: |
| |||
| Name: | [Redacted – Confidential] | |||
| Title: | President | |||
| Address for Notices: | ||||
| [Redacted – Confidential] | ||||
| With a copy to: | ||||
| Dorsey & Whitney LLP | ||||
| 50 South Sixth Street, Suite 1500 | ||||
| Minneapolis, MN 55402 | ||||
| Attention: | [Redacted – Confidential] | |||
| Phone: | [Redacted – Confidential] | |||
| Email: | [Redacted – Confidential] | |||
[Signatures continue on following page(s).]
Senior Secured Term Loan Agreement
| INITIAL LENDERS: | ||
| [Redacted – Confidential] | ||
| By: |
| |
| Name: | [Redacted – Confidential] | |
| Title: | Chief Financial Officer | |
| Address for Notices: | ||
| [Redacted – Confidential] | ||
Senior Secured Term Loan Agreement
EXHIBIT A
FORM OF PROMISSORY NOTE
[ ], 20[ ]
FOR VALUE RECEIVED, CRESCO LABS INC., a British Columbia company (the “Obligor”), DOES HEREBY PROMISE TO PAY to the order of [LENDER] (the “Lender”) or its registered assigns at the office of [Redacted – Confidential], in its capacity as administrative agent (together with its successors and assigns, “Administrative Agent”), at [Redacted – Confidential], in lawful money of the United States of America in immediately available funds, on the Maturity Date, the aggregate Principal Amount of the Loan made by the Lender, together with all accrued and unpaid interest and other Obligations and amounts owed to the Lender on the Loan, in like money, at such interest rates as are set forth in the Loan Agreement.
The Obligor and any and all sureties, guarantors and endorsers of this Promissory Note and all other parties now or hereafter liable hereon severally waive grace, demand, presentment for payment, protest, notice of any kind (including, but not limited to, notice of dishonor, notice of protest, notice of intention to accelerate or notice of acceleration) and diligence in collecting and bringing suit against any party hereto and agree to the extent permitted by applicable law (i) to all extensions and partial payments, with or without notice, before or after maturity, (ii) to any substitution, exchange or release of any security now or hereafter given for this Note, (iii) to the release of any party primarily or secondarily liable hereon, and (iv) that it will not be necessary for any holder of this Note, in order to enforce payment of this Note, to first institute or exhaust such holder’s remedies against the Obligor or any other party liable hereon or against any security for this Note. The non-exercise by the holder of any of its rights hereunder in any particular instance shall not constitute a waiver thereof in that or any subsequent instance.
This Note is one of the Notes referred to in that certain Senior Secured Term Loan Agreement, dated as of January 22, 2020 (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Loan Agreement”; capitalized terms used but not defined herein shall have the meanings given to them in the Loan Agreement) among the Obligor, as borrower, the Lenders referred to therein, the Administrative Agent and [Redacted – Confidential], in its capacity as collateral agent, and is entitled to the benefits of, and is secured by the security interests granted in, the Loan Agreement and the other Loan Documents, which Loan Agreement and other Loan Documents, among other things, contain provisions for voluntary prepayments, mandatory prepayment and for acceleration of the maturity hereof upon the occurrence of certain events, all as provided in the Loan Agreement. This Note is made pursuant and subject to the terms and conditions of the Loan Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS.
IN WITNESS WHEREOF, the undersigned has duly executed this Promissory Note as of the date first written above.
| CRESCO LABS INC., a British Columbia company | ||
| By: |
| |
| Name: | ||
| Title: | ||
Promissory Note
EXHIBIT B
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT(this “Agreement”), dated as of [ ], 20[ ], by and between [ ], a [ ] (the “Assignor”) and [ ], a [ ] (the “Assignee”).
Reference is made to that certain Senior Secured Term Loan Agreement, dated as of January 22, 2020 (as may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), among Cresco Labs Inc., a British Columbia company (the “Borrower”), and the lenders from time to time party thereto (each a “Lender” and collectively the “Lenders”), [Redacted – Confidential], a Delaware limited liability company as administrative agent for the Lenders (in such capacity, together with its successors and assigns, the “Administrative Agent”) and [Redacted – Confidential], a Delaware limited liability company, as collateral agent for the benefit of the Secured Parties (in such capacity, together with its successor and assigns, the “Collateral Agent”). Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Loan Agreement.
The Assignor and the Assignee hereby agree as follows:
As of the Assignment Effective Date (as defined below), the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, all of the Assignor’s rights and obligations under the Loan Agreement to the extent related to the amounts and percentages specified in Section 1 of Schedule I hereto.
1. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim and (ii) it has full power and authority, and has taken all actions necessary, to execute and deliver this Agreement and to consummate the transactions contemplated hereby, (b) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto or the attachment, perfection or priority of any Lien granted by the Borrower to the Collateral Agent in the Collateral, and (c) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Loan Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto.
2. The Assignee (a) agrees that it will, independently and without reliance upon the Administrative Agent, the Collateral Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Agreement, (b) appoints and authorizes each of the Administrative Agent and
Collateral Agent to take such action as agent on its behalf and to exercise such powers under the Loan Agreement and the other Loan Documents as are delegated to each such agent by the terms thereof, together with such powers as are reasonably incidental thereto, (c) agrees that it will perform in accordance with their terms all of the obligations that, by the terms of the Loan Agreement, are required to be performed by it as a Lender, (d) represents and warrants that it has full power and authority, and has taken all actions necessary, to execute and deliver this Agreement and to consummate the transactions contemplated hereby, (e) confirms it has received such documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Agreement, (f) sets forth beneath its name on the signature pages hereof its address for notices and (g) if applicable, attaches two properly completed Forms W-8BEN, W-8ECI, W-8IMY or successor or form prescribed by the IRS, certifying that such Assignee is entitled to receive all payments under the Loan Agreement payable to it without deduction or withholding of any United States federal income taxes, a U.S. Tax Compliance Certificate, and such other tax forms that may be required under the Loan Agreement.
3. Following the execution of this Agreement by the Assignor and the Assignee, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date of this Agreement shall be the effective date specified in Section 2 of Schedule I hereto (the “Assignment Effective Date”).
4. As of the Assignment Effective Date, (a) the Assignee shall be a party to the Loan Agreement and have all of the rights and obligations under the Loan Agreement of a Lender and (b) the Assignor shall relinquish all of its rights and be released from its obligations under the Loan Documents in its capacity as a Lender, to the extent arising or accruing from and after the date hereof.
5. From and after the Assignment Effective Date, the Administrative Agent shall make all payments under the Loan Documents in respect of the interest assigned hereby to the Assignee.
6. This Agreement shall be governed by, and be construed and interpreted in accordance with, the law of the State of Illinois.
7. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement.
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
| ASSIGNOR: | ||
| [ASSIGNOR NAME] | ||
| By: |
| |
| Name: | ||
| Title: | ||
| ASSIGNEE: | ||
| [ASSIGNEE NAME] | ||
| By: |
| |
| Name: | ||
| Title: | ||
| Address for notices: | ||
| [ ] | ||
| Tel: | [ ] | |
| Fax: | [ ] |
| Email: | [ ] |
| With a copy to: | ||
| [ ] | ||
| Tel: | [ ] | |
| Fax: | [ ] |
| Email: | [ ] |
| ACCEPTED AND AGREED this [ ] day of [ ], 20[ ]: | ||
| [Redacted – Confidential] as Administrative Agent | ||
| By: |
| |
| Name: | ||
| Title: |
SCHEDULE I
SECTION 1.
| Outstanding principal amount of Loans assigned to Assignee: |
$ | [ | ] | |
| Percentage of aggregate outstanding principal amount of Loans assigned to Assignee: |
[ | ]% |
SECTION 2.
| Assignment Effective Date: | [ ], 20[ ] |
EXHIBIT C
FORM OF LENDER SUPPLEMENT
LENDER SUPPLEMENT, dated [ ], 20[ ] (this “Supplement”), to the Senior Secured Term Loan Agreement, dated as of January 22, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), among Cresco Labs Inc., a British Columbia corporation (the “Borrower”), the Lenders party thereto and [Redacted – Confidential], a Delaware limited liability company as administrative agent (in such capacity, the “Administrative Agent”) and as collateral agent (in such capacity, the “Collateral Agent”) for itself and the Lenders.
RECITALS
WHEREAS, the Loan Agreement provides in Section 2.3 thereof that any bank, financial institution or other entity may extend and/or increase Commitments under the Loan Agreement subject to the written request of the Borrower and the written approval of the Administrative Agent, the Required Lenders, if applicable, and the Lenders providing additional Commitments, by executing and delivering to the Borrower and the Administrative Agent a supplement to the Loan Agreement in substantially the form of this Supplement
WHEREAS, the undersigned [Augmenting Lender] [was not an original party to the Loan Agreement but now desires to become a party thereto/ is a Lender party to the Loan Agreement and now desires to increase its Commitment];
NOW, THEREFORE, each of the parties hereto hereby agrees as follows:
1. [The undersigned [Augmenting Lender] agrees to be bound by the provisions of the Loan Agreement and agrees that it shall, on the date of this Supplement, become a Lender for all purposes of the Loan Agreement to the same extent as if originally a party thereto, with a Commitment with respect to Loans of [ ] ($[ ])/ The undersigned Augmenting Lender agrees that on the date of this Supplement its Commitment shall be increased by [ ] ($[ ]), and such Augmenting Lender’s total Commitment shall be equal to [ ] ($[ ]).]
2. This Loans advanced pursuant to this Lender Supplement shall be designated as Tranche [ ] Loans.
3. The undersigned Augmenting Lender (a) represents and warrants that it is legally authorized to enter into this Supplement; (b) confirms that it has received a copy of the Loan Agreement, together with copies of the most recent financial statements delivered pursuant to Section 7.1 thereof, as applicable, and has reviewed such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Supplement; (c) agrees that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Agreement or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise
such powers and discretion under the Loan Agreement or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent by the terms thereof, together with such powers as are incidental thereto; and (e) agrees that it will be bound by the provisions of the Loan Agreement and will perform in accordance with its terms all the obligations which by the terms of the Loan Agreement are required to be performed by it as a Lender.
4. The undersigned’s address for notices for the purposes of the Loan Agreement is as follows:
[ ]
5. The Borrower hereby represents and warrants that no Default or Event of Default has occurred and is continuing on and as of the date hereof.
6. Capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in the Loan Agreement.
7. This Supplement shall be governed by, and construed in accordance with, the laws of the State of Illinois.
8. This Supplement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same document.
[Signature pages follow.]
IN WITNESS WHEREOF, each of the undersigned has caused this Supplement to be executed and delivered by a duly authorized officer on the date first above written.
| [INSERT NAME OF ANY LENDER INCREASING COMMITMENT OR PROVIDING NEW COMMITMENT] | ||
| By: |
| |
| Name: | ||
| Title: | ||
Acknowledged as of the date first written above:
[Redacted – Confidential], as Administrative Agent
| By: |
| |
| Name: | ||
| Title: |
[INSERT NAME OF ANY REQUIRED LENDER OR INITIAL LENDER NOT LISTED ABOVE, IF REQUIRED PURSUANT TO SECTION 2.3 OF THE LOAN AGREEMENT]
| By: |
| |
| Name: | ||
| Title: |
Accepted and agreed to as of the date first written above:
[CRESCO LABS INC., as Borrower, if required under Section 2.3 of the Loan Agreement]
| By: |
| |
| Name: | ||
| Title: |
EXHIBIT D
FORM OF COMPLIANCE CERTIFICATE
To: [Redacted – Confidential]:
THE UNDERSIGNED HEREBY CERTIFIES THAT:
(1) I am a Responsible Officer of CRESCO LABS INC. (the “Borrower”);
(2) I have reviewed the terms of the Senior Secured Term Loan Agreement dated as of January 22, 2020 (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), by and among the Borrower, and the lenders from time to time party thereto (each a “Lender” and collectively the “Lenders”), [Redacted – Confidential], a Delaware limited liability company as administrative agent for the Lenders and [Redacted – Confidential], a Delaware limited liability company, as collateral agent for the benefit of the Secured Parties;
(3) no Default or Event of Default (as such terms are defined in the Loan Agreement) is continuing as of the date hereof, except as described below (or on a separate attachment to this Certificate). The exceptions listing, in detail, the nature of the condition or event, the period during which it has existed and the action which the Borrower has taken, is taking or proposes to take with respect to each such condition or event are as follows:
;
(4) all filings required under the Security Documents have been made, and since the date of the last Compliance Certificate delivered in connection with Section 7.1(d) of the Loan Agreement, the following filings under the Security Documents have been made:
;
(5) [the Loan Parties have delivered all documents and information they are required to deliver pursuant to any Loan Document on or prior to the date hereof] OR [I have attached hereto true, complete and correct copies of all documents and information each Loan Party is required to deliver pursuant to any Loan Document on or prior to the date hereof];
(6) [there have been no changes to the information contained in each of the Perfection Certificates delivered on the Closing Date or the date of the most recently updated Perfection Certificate delivered pursuant to Section 7.1(d) of the Loan Agreement] OR [I have attached a true, complete and correct copy of an updated Perfection Certificate identifying any such changes to the information contained therein since the date of the most recently delivered Perfection Certificate];
(7) the minimum cash balance requirement under Section 7.2 of the Loan Agreement is satisfied; and
(8) The representations and warranties contained in Article 6 of the Loan Agreement are (x) with respect to any representations or warranties that contain a materiality qualifier, true and correct in all respects as of the date hereof, except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct in all respects on and as of such earlier date and (y) with respect to any representations or warranties that do not contain a materiality qualifier, true and correct in all material respects as of the date hereof, except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct in all material respects on and as of such earlier date.
The foregoing certification, together with any attachments hereto delivered with this Certificate in support hereof, are made and delivered this day of , pursuant to Section 7.1(d) of the Loan Agreement.
| CRESCO LABS INC., a British Columbia company | ||
| By: |
| |
| Name: | ||
| Title: |
[Schedules Redacted – Confidential and/or Commercially Sensitive Information]
Exhibit 99.6
Execution Version
CANACCORD’S ATM DISTRIBUTION PLAN
EQUITY DISTRIBUTION AGREEMENT
April 23, 2021
Cresco Labs Inc.
Suite 2200
1055 West Hastings Street
Vancouver, BC V6E 2E9
| Attention: | Charles Bachtell | |
| Chief Executive Officer |
Dear Sirs/Mesdames:
Re: Canaccord’s ATM Distribution Plan
Canaccord Genuity Corp. (the “Agent” or “Canaccord”) understands that Cresco Labs Inc. (the “Corporation”) has filed a short form base shelf prospectus dated April 23, 2021 (the “Base Shelf Prospectus”) with the securities regulatory authority in each of the Qualifying Jurisdictions (as defined herein) relating to the issue and sale of up to US$1,000,000,000 aggregate amount of securities of the Corporation, including the Offered Shares (as defined herein), and has received a final receipt pursuant to the Passport System (as defined herein) evidencing that a final receipt for the Base Shelf Prospectus has been issued, or deemed to have been issued, by the regulators in each of the Qualifying Jurisdictions. The Agent further understands that, in filing the Base Shelf Prospectus, the Corporation has selected the BCSC (as defined herein) as the principal regulator under Part 3 of NP 11-202 (as defined herein).
Pursuant to the terms and conditions hereof, the Agent confirms that it is prepared to act as the sole and exclusive agent of the Corporation to offer subordinate voting shares in the capital of the Corporation (“Subordinate Voting Shares”) having an aggregate offering price of up to US$100,000,000 of Subordinate Voting Shares in the capital of the Corporation (the “Offered Shares”) for sale to the public from time to time under the Base Shelf Prospectus, as supplemented by a Prospectus Supplement (as defined herein), pursuant to “at-the-market distributions” within the meaning of NI 44-102 (as defined herein) during the period in which the Base Shelf Prospectus is effective, subject to earlier termination hereunder.
The Agent and the Corporation acknowledge and agree that this Agreement shall supersede and replace in all respects the equity distribution agreement between the Agent and the Corporation dated December 3, 2019 (the “Prior Agreement”) with respect to the distribution of the Offered Shares contemplated hereunder; provided, however, that for greater certainty, any liability or obligations arising under the Prior Agreement (including, without limitation, under Sections 10, 12, 14, 15, 16 and 19 thereof) shall continue to be in full force and effect in accordance with their terms. The Parties further confirm that, for the avoidance of doubt, the distribution of the Offered Shares contemplated under this Agreement shall only be effected under the Base Shelf Prospectus, Prospectus Supplement and Supplementary Material (each as defined herein), and not under similar documents contemplated in the Prior Agreement.
The following are the terms and conditions of this Agreement:
| 1. | DEFINITIONS AND INTERPRETATION |
| 1.1 | Definitions. In this Agreement (including the Schedules hereto), unless the context otherwise requires: |
“Acquired Business” means any entity or business (other than the Corporation) whose financial statements are included or incorporated by reference in the Prospectus;
“Acquired Business Financial Statements” means, collectively, the audited and any unaudited financial statements of any Acquired Business that are included or incorporated (or deemed to be incorporated) by reference in the Prospectus, together with the notes thereto and, in the case of audited financial statements, the auditor’s report thereon;
“Act” means the Securities Act (Ontario);
“affiliate” has the meaning given thereto in NI 51-102;
“Agent” has the meaning given thereto in the first paragraph on the first page of this Agreement;
“Agent’s Fee” has the meaning given thereto in Section 2.4;
“Agent’s Information” means, in respect of the Prospectus, any statements contained therein relating solely to and furnished in writing to the Corporation by the Agent expressly for purposes of inclusion therein;
“Agreement” means and refers to this equity distribution agreement between the Corporation and the Agent resulting from the mutual execution and delivery of this agreement, and does not refer to any particular section, paragraph or other part of this equity distribution agreement;
“Anti-Money Laundering Laws” has the meaning given thereto in Section 1(1)(qq) of Schedule C;
“Assets and Properties” with respect to any person means all assets and properties of every kind, nature, character and description (whether real, personal or mixed, tangible or intangible, choate or inchoate, absolute, accrued, contingent, fixed or otherwise, and, in each case, wherever situated), including the goodwill related thereto, operated, owned, licensed or leased by or in the possession of such person;
“ATM Distribution” means a distribution of Offered Shares that constitutes an “at-the-market distribution” within the meaning of NI 44-102;
“Auditors” means Marcum LLP, being the current auditor of the Corporation, or any other auditors of the Corporation from time to time;
“Authorized Representatives” means, for a Party, the Designated Representatives of that Party who are identified in Schedule A hereto (as such Schedule A may be amended from time to time by any Party by notice to the other Party as provided herein, which amendment shall be effective upon all Parties mutually agreeing in writing to an amended and restated form of Schedule A) as being Authorized Representatives of that Party;
“Base Shelf Prospectus” has the meaning given thereto in the first paragraph on the first page of this Agreement;
“BCBCA” means the Business Corporations Act (British Columbia);
“BCSC” means the British Columbia Securities Commission;
“Bringdown Certificate” has the meaning given thereto in Section 9.3;
“Business Acquisition Report” has the meaning given thereto in NI 51-102;
“Business Day” means any day on which the CSE and chartered banks in Toronto, Ontario, are open for business;
- 2 -
“Claims” has the meaning given thereto in Section 1.1 of Schedule F;
“Constating Documents” means the Notice of Articles and Articles of the Corporation;
“Corporation” has the meaning given thereto in the first paragraph on the first page of this Agreement;
“Corporation Financial Statements” means, collectively, the audited annual financial statements and unaudited interim financial statements of the Corporation that are filed on the Public Record and are included or incorporated (or deemed to be incorporated) by reference in the Prospectus, together with the notes thereto and, in the case of the audited annual financial statements, the auditor’s report thereon;
“Corporation’s Counsel” means Bennett Jones LLP, Canadian counsel to the Corporation, and, where applicable, other external counsel of the Corporation from time to time in the United States and any other jurisdiction where the Corporation or any of its Subsidiaries have material operations;
“Cresco” means Cresco Labs, LLC, a limited liability company existing under the laws of Illinois, and includes any successor to or of the company;
“Cresco Corp.” means Cresco U.S. Corp., a company existing under the laws of Illinois, and includes any successor corporation to or of the company;
“CSE” means the Canadian Securities Exchange;
“Designated News Releases” means a news release designated by the Corporation in respect of previously undisclosed information that, in the Corporation’s determination, constitutes a material fact (as such term is defined in Securities Laws) and that is identified by the Corporation as a “designated news release” for the purposes of the Prospectus in writing on the face page of the version of such news release that is filed by the Corporation on SEDAR as contemplated by Section
5.5 of the Companion Policy to NI 44-102;
“Designated Representatives” means, for a Party, the individuals from that Party identified as such in Schedule A hereto (as such Schedule A may be amended from time to time by any Party by notice to the other Party as provided herein, which amendment shall be effective upon all Parties mutually agreeing in writing to an amended and restated form of Schedule A);
“Directed Selling Efforts” means “directed selling efforts” as defined in Regulation S and, without limiting the foregoing, but for greater clarity, means, subject to the exclusions from the definition of directed selling efforts contained in Regulation S, any activity undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for the Offered Shares and includes the placement of any advertisement in a publication with a general circulation in the United States that refers to the offering of any of the Offered Shares;
“Eligible Issuer” means an issuer which meets the criteria and has complied with the requirements of NI 44-101 so as to be qualified to offer securities by way of a short form prospectus under applicable Securities Laws;
“Environmental Laws” means all applicable Laws currently in existence in Canada and the United States (whether federal, provincial, state or municipal) relating to the protection and preservation of the environment, occupational health and safety, product safety, product liability or hazardous substances;
- 3 -
“Filing Date” means the date on which the Prospectus Supplement is first filed with the Qualifying Authorities in accordance with Section 9.1(b);
“General Solicitation” and “General Advertising” means “general solicitation” and “general advertising”, respectively, as used in Rule 502(c) of Regulation D, including any advertisement, article, notice or other communications published in any newspaper, magazine or similar media or broadcast over the internet, radio or television, or any seminar or meeting whose attendees had been invited by general solicitation or general advertising or in any other manner involving a public offering within the meaning of Section 4(a)(2) of the U.S. Securities Act;
“Government Official” means (i) any official, officer, employee, or representative of, or any person acting in an official capacity for or on behalf of, any Governmental Body, (b) any salaried political party official, elected member of political office or candidate for political office, or (c) any company, business, enterprise or other entity owned or controlled by any person described in the foregoing clauses;
“Governmental Body” means any (i) multinational, federal, provincial, state, municipal, local or other governmental or public authority, body, department, central bank, court, commission, board, bureau, agency or instrumentality, domestic or foreign, (ii) any subdivision or authority of any of the foregoing, or (iii) any quasi-governmental, self-regulatory organization or private body exercising any regulatory, expropriation or taxing authority under or for the account of its members or any of the above, and includes the Qualifying Authorities;
“IFRS” means International Financial Reporting Standards;
“IIROC” means the Investment Industry Regulatory Organization of Canada;
“Indemnified Party” has the meaning given thereto in Section 1.1 of Schedule F;
“Indemnifying Party” has the meaning given thereto in Section 1.1 of Schedule F;
“Initial Acquisition Comfort Letter” has the meaning given thereto in Section 9.2(c);
“Initial Corporation Comfort Letter” has the meaning given thereto in Section 9.2(b);
“Initial Legal Opinions” has the meaning given thereto in Section 9.2(a);
“Intellectual Property” means, for the relevant person, all proprietary rights provided in law and at equity to all patents, trademarks, copyrights, industrial designs, software, trade secrets, know-how, concepts, information and other intellectual and industrial property;
“IT Systems and Data” has the meaning given thereto in Section 1(1)(ss) of Schedule C;
“knowledge of the Corporation”, “of which the Corporation is aware” (or similar phrases) means the actual knowledge of the Chief Executive Officer, Chief Operating Officer or Chief Financial Officer of the Corporation, in each case after having made due and reasonable inquiries with respect to such facts or circumstances;
“Law” means any and all applicable laws, including all statutes, codes, ordinances, decrees, rules, regulations, municipal by-laws or judgments, orders, decisions, rulings or awards of any Governmental Body, binding on or affecting the Person referred to in the context in which the word is used;
“Leased Premises” has the meaning given thereto in Section 1(1)(dd) of Schedule C;
- 4 -
“Marketplace” means any recognized Canadian “marketplace” as that term is defined in NI 21-101 upon which the Subordinate Voting Shares are listed, quoted or otherwise traded in a Qualifying Jurisdiction;
“Material Adverse Effect” means a material adverse effect on (i) the business, affairs, operations, condition (financial or otherwise), earnings, assets, liabilities (absolute, accrued, contingent or otherwise) or capital of the Corporation and the Subsidiaries, taken as a whole, whether or not arising in the ordinary course of business, (ii) the transactions contemplated by this Agreement, and (iii) the ability of the Corporation or the Agent to perform its obligations under this Agreement;
“material change”, “material fact” and “misrepresentation” with respect to circumstances in which the Securities Laws of a particular jurisdiction are applicable, as each of such terms is defined under the Securities Laws of that jurisdiction, and if not so defined, or in circumstances in which the laws of no particular jurisdiction is applicable, as each of such term is defined under the Act;
“Material Subsidiaries” means each Subsidiary identified in Schedule G as a material Subsidiary of the Corporation (as updated by the Corporation in Exhibit A to a Placement Notice and an Officer’s Certificate delivered pursuant to Section 9.3 from time to time where any other Subsidiary reasonably is considered to be material to the business and operations of the Corporation and its Subsidiaries, taken as a whole, at the relevant time);
“MI 11-102” means Multilateral Instrument 11-102 — Passport System;
“Net Proceeds” has the meaning given thereto in Section 7.2;
“NI 21-101” means National Instrument 21-101 — Marketplace Operation;
“NI 44-101” means National Instrument 44-101 — Short Form Prospectus Distributions;
“NI 44-102” means National Instrument 44-102 — Shelf Distributions;
“NI 51-102” means National Instrument 51-102 — Continuous Disclosure Obligations;
“No Trade Period” has the meaning given thereto in Section 4.7;
“NP 11-202” means National Policy 11-202 — Process for Prospectus Reviews in Multiple Jurisdictions;
“OFAC” means the Office of Foreign Assets Control of the U.S. Treasury Department;
“Offered Shares” has the meaning given thereto in the second paragraph on the first page of this Agreement;
“Parties” means the Corporation and the Agent, and “Party” means either of them;
“Passport Procedures” means the procedures described under MI 11-102 and NP 11-202;
“Passport System” means the system and procedures for the filing of prospectuses and related materials in one or more Canadian jurisdictions pursuant to MI 11-102 adopted by the Qualifying Authorities (other than the Ontario Securities Commission) and NP 11-202;
“pending” means, with respect to a Placement Notice for the period beginning on the issuance of the written notice contemplated by Section 4.1 and ending on the earlier of: (i) the issuance of the Placement Notice with respect to the intended or expected sale of Offered Shares relating to such written notice and (ii) delivery of written notice from the Corporation to the Agent indicating that the Corporation no longer intends or expects to initiate the sale of such Offered Shares;
- 5 -
“Person” includes an individual, a corporation, a partnership, a trust, a trustee, a joint venture, a syndicate, a sole proprietorship, other bodies corporate, an unincorporated organization, a union, a regulatory body or any agency thereof, a government or any department or agency thereof and the heirs, executors, administrators or other legal representatives of an individual;
“Placement” means an issuance and sale of Offered Shares hereunder by the Corporation, acting through the Agent as its agent, pursuant to an ATM Distribution;
“Placement Notice” has the meaning given thereto in Section 4.1;
“Placement Shares” has the meaning given thereto in Section 4.1;
“Placement Time” means each time at which Placement Shares are sold pursuant to a Placement Notice;
“Prospectus” means the Base Shelf Prospectus as supplemented by the Prospectus Supplement and any Supplementary Material;
“Prospectus Supplement” means the shelf prospectus supplement to be filed in accordance with NI 44-102 in respect of the distribution of the Offered Shares pursuant to the Shelf Procedures, the Passport Procedures and the provisions of this Agreement, and includes, from and after the Filing Date, any subsequent amendments thereto or amended, re-filed or amended and restated forms thereof;
“Public Record” means all information filed by or on behalf of the Corporation with the Qualifying Authorities (including the Base Shelf Prospectus and the Prospectus Supplement) after January 1, 2020 in compliance, or intended compliance, with any applicable Securities Laws;
“Qualifying Authorities” means, collectively, the securities commissions or similar securities regulatory authorities in the Qualifying Jurisdictions;
“Qualifying Jurisdictions” means, collectively, each of the provinces of Canada;
“Regulation D” means Regulation D under the U.S. Securities Act;
“Regulation S” means Regulation S under the U.S. Securities Act;
“Representation Date” has the meaning given thereto in Section 9.3;
“Securities Laws” means, collectively, the securities acts or similar statutes of each of the Qualifying Jurisdictions and the respective rules and regulations under such laws, together with applicable published national, multilateral and local policy statements, instruments, notices and blanket orders of the Qualifying Jurisdictions and all rules, by-laws and regulations governing the CSE;
“SEDAR” means the System for Electronic Data Analysis and Retrieval established under National Instrument 13-101 — System for Electronic Document Analysis and Retrieval;
“Settlement Date” has the meaning given thereto in Section 7.1;
“Settlement Procedures” means those procedures relating to the issuance and delivery of Placement Shares and the payment of the Net Proceeds from the sale of such Placement Shares on each Settlement Date as mutually agreed to in writing by the Parties from time to time during the term of this Agreement;
- 6 -
“Shelf Procedures” means the rules and procedures for shelf prospectuses established under NI 44-102;
“Subordinate Voting Shares” has the meaning given thereto in the second paragraph on the first page of this Agreement;
“Subsidiary” means those entities that would be considered a “subsidiary” of the Corporation pursuant to Securities Laws and includes the Material Subsidiaries, and “Subsidiaries” means all of them (as updated by the Corporation in Exhibit A to a Placement Notice and an Officer’s Certificate delivered pursuant to Section 9.3 from time to time);
“Supplementary Material” means, collectively,(i) any amendment (including both an amendment that does not fully restate the original text and an amendment and restatement) to the Base Shelf Prospectus, and any documents or information incorporated by reference in, the Base Shelf Prospectus, and to the extent that such document is deemed to be incorporated by reference in the Base Shelf Prospectus for the purposes of a distribution of Offered Shares contemplated hereby, and (ii) all supplemental, additional or ancillary material, information, reports, applications, statements or documents related to the Base Shelf Prospectus or the Prospectus Supplement, including but not limited to all Designated News Releases which are incorporated by reference in the Prospectus, and which are filed from and after the Filing Date and which relate to transactions in Offered Shares as contemplated hereunder;
“Tax Act” means the Income Tax Act (Canada), as amended from time to time;
“Taxes” means all taxes (including income tax, capital tax, payroll taxes, employer health tax, workers’ compensation payments, property taxes, custom and land transfer taxes), duties, royalties, levies, imposts, assessments, deductions, charges or withholdings and all liabilities with respect thereto including any penalty and interest payable with respect thereto;
“Trading Day” means any day on which securities are purchased and sold on the CSE;
“Transfer Agent” means Odyssey Trust Company or other duly appointed transfer agent for the Subordinate Voting Shares from time to time;
“U.S. Marijuana Laws” has the meaning given thereto in Section 1(1)(qq) of Schedule C;
“U.S. Person” means a “U.S. person” as defined in rule 902(k) of Regulation S; and
“U.S. Securities Act” means the United States Securities Act of 1933, as amended.
| 1.2 | The division of this Agreement into sections, paragraphs and clauses and the provision of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. Unless something in the subject matter or context is inconsistent therewith, references herein to sections, paragraphs or clauses are to sections, paragraphs or clauses of this Agreement. |
| 1.3 | Words importing the singular number include the plural and vice versa; words importing gender shall include all genders. |
| 1.4 | References herein to any statute shall extend to and include orders-in-council, regulations or instruments passed under and pursuant to such statute, any amendment or re-enactment of such statute, orders-in-council, regulations or instruments, and any statute, orders-in-council, regulations or instruments substantially in replacement thereof. References herein to any statute, regulation, order-in-council or instrument shall include any amendments thereto from time to time. |
- 7 -
| 1.5 | Any reference herein to the Prospectus or to a matter being included or disclosed in the Prospectus shall be deemed to refer to and include the documents incorporated, or deemed under Securities Laws to be incorporated, by reference in the Prospectus as of the applicable date. |
| 1.6 | Wherever used herein, the word “including”, when following any statement, term or list, is not to be construed as limiting the statement, term or list to the specific items or matters set forth immediately following such word or to similar items or matters, and shall be construed as “including, without limitation”. |
| 1.7 | The words “hereto”, “herein”, “hereby”, “hereunder”, “hereof” and similar expressions mean and refer to this Agreement as a whole and not to any particular section, paragraph or other part of this Agreement. |
| 1.8 | Except as expressly set out in this Agreement, the computation of any period of time referred to in this Agreement shall exclude the first day and include the last day of such period. If the time limited for the performance or completion of any matter under this Agreement expires or falls on a day that is not a Business Day, the time so limited shall extend to the next following Business Day. |
| 1.9 | Appended hereto are the following schedules (which are incorporated into this Agreement by reference and are deemed to be a part hereof): |
| Schedule A | – | Designated Representatives and Authorized Representatives | ||
| Schedule B | – | Form of Placement Notice | ||
| Schedule C | – | Representations and Warranties | ||
| Schedule D | – | Form of Officer’s Certificate | ||
| Schedule E | – | Matters to be Addressed in Legal Opinions | ||
| Schedule F | – | Indemnification and Contribution | ||
| Schedule G | – | Material Subsidiaries | ||
| 2. | APPOINTMENT OF AGENT |
| 2.1 | The Corporation hereby appoints the Agent to act as its sole and exclusive agent with respect to the sale of the Offered Shares through the facilities of the CSE or any other Marketplace pursuant to an ATM Distribution as provided herein, and the Agent hereby accepts such appointment on the terms and conditions contained herein. Such appointment shall be on an exclusive basis during the term hereof, and the Corporation agrees that, during the term hereof, it will not appoint any other Person to act as the Corporation’s agent with respect to sales of the Offered Shares through the facilities of the CSE or any other Marketplace by way of an ATM Distribution. Nothing contained herein shall otherwise prohibit or restrict the Corporation from issuing securities or raising money in any manner other than through an ATM Distribution. |
| 2.2 | The Corporation acknowledges and agrees that the Agent and its affiliates may, to the extent permitted under Securities Laws and the rules of the CSE and any other applicable Marketplace, purchase and sell securities of the Corporation for their own account while this Agreement is in effect, provided that: (i) the Corporation shall not be deemed to have authorized or consented to any such purchase or sale by the Agent or any of its affiliates; (ii) the Agent shall not, and no Person |
- 8 -
| acting jointly or in concert with the Agent shall, over-allot Offered Shares in connection with the distribution of Offered Shares under an ATM Distribution or effect any other transactions that are intended to stabilize or maintain the market price of the Offered Shares in connection with such distribution; and (iii) the Agent and its affiliates shall not purchase and sell Offered Shares for their own account under an ATM Distribution in a manner which could directly or indirectly result in a sale with lower Net Proceeds to the Corporation than otherwise available through the CSE or any other Marketplace. |
| 2.3 | The Agent covenants and agrees that it will comply with all Laws (including Securities Laws) and requirements of the CSE and any other applicable Marketplace applicable to it and necessary to be complied with by the Agent in connection with the performance of its obligations hereunder. Neither the Agent nor any of its affiliates or any Person acting on their behalf will engage in any Directed Selling Efforts or in any form of General Solicitation or General Advertising in the United States with respect to the Offered Shares. The Agent covenants and agrees that it will not offer to sell or solicit an offer to buy any of the Offered Shares within the United States or to, or for the account or benefit of, any U.S. Person. The Corporation and the Agent agree that no “marketing materials” or “standard term sheet” (both within the meaning of National Instrument 41-101 – General Prospectus Requirements) shall be provided to any purchaser or prospective purchaser of Offered Shares in connection with a Placement or proposed Placement. |
| 2.4 | In consideration for its services hereunder, including the ancillary service of acting as financial advisor to the Corporation with respect to the terms of any sale of Offered Shares pursuant to an ATM Distribution hereunder, the Agent shall be entitled to receive, and the Corporation agrees to pay, a fee equal to 2.0% of the gross proceeds from any sales of Offered Shares made hereunder (the “Agent’s Fee”). |
| 3. | PERIODIC OFFERING OF SECURITIES |
| 3.1 | Pursuant to the terms and conditions hereof and from time to time during the term hereof, the Corporation may, acting through the Agent, as agent of the Corporation, issue and sell the Offered Shares through the facilities of the CSE or any other Marketplace in one or more transactions that constitute ATM Distributions. |
| 3.2 | The issuance and sale of the Offered Shares on the CSE or other Marketplace pursuant to ATM Distributions will be made pursuant to the Prospectus filed with the Qualifying Authorities. |
| 3.3 | The Corporation hereby consents to the use by the Agent of copies of the Prospectus in connection with the offering and sale to the public of the Offered Shares on the CSE or other Marketplace pursuant to ATM Distributions. |
| 4. | INITIATING A PLACEMENT |
| 4.1 | The Corporation may, from time to time during the term of this Agreement, deliver to the Agent one or more notice(s) (a “Placement Notice”) that: (a) requests that the Agent sell up to a specified dollar amount or a specified number of Offered Shares (the “Placement Shares”) pursuant to the terms and conditions hereof; and (b) specifies any parameters in accordance with which the Corporation requires that the Placement Shares be sold (such as a minimum market price per Placement Share, the time period in which sales are to be made and/or specific dates on which the Placement Shares may not be sold). A Placement Notice shall also contain any updates as contemplated in Section 8.1. |
| 4.2 | The form of Placement Notice shall be in the form set out in Schedule B hereto, as may be amended in writing by the Parties from time to time during the term of this Agreement. From and after such agreement being made, all Placement Notices shall be delivered in the agreed form until such time as the Parties may agree in writing to an amended or replacement form. |
- 9 -
| 4.3 | A Placement Notice shall: |
| (a) | be signed by an Authorized Representative of the Corporation; |
| (b) | be addressed and sent by electronic mail (or such other method mutually agreed to in writing by the Parties) to each Designated Representative of the Agent; and |
| (c) | be effective upon receipt by the Agent unless and until the earliest of the following occurs: |
(i) the Agent advises the Corporation, by electronic mail (or such other method mutually agreed to in writing by the Parties) addressed and sent to each of the Designated Representatives of the Corporation, that it declines to accept the terms of sale set forth in the Placement Notice; (ii) the entire amount of the Placement Shares specified therein has been sold and all such sales have settled in accordance with the terms of sale set forth in the Placement Notice and the terms and conditions hereof; (iii) the Corporation or the Agent suspends the sale (or further sale, as applicable) of the Placement Shares in accordance with Section 6; (iv) the Agent receives from the Corporation a subsequent Placement Notice with parameters that expressly supersede those contained in the earlier dated Placement Notice; or (v) this Agreement has been terminated pursuant to Section 13 hereof.
| 4.4 | On receiving a Placement Notice, an Authorized Representative of the Agent shall promptly acknowledge receipt thereof (or notify the Corporation that the Agent declines to accept the Placement Notice pursuant to Section 4.3(c)(i)) by signing the Placement Notice and returning a copy thereof to the Corporation by electronic mail (or such other method mutually agreed to in writing by the Parties) addressed and sent to each of the Designated Representatives of the Corporation. For all purposes hereof, and notwithstanding any other provision hereof, the Agent shall be deemed not to have received a Placement Notice unless receipt thereof shall have been so acknowledged by an Authorized Representative of the Agent. |
| 4.5 | The Parties acknowledge and agree that neither the Corporation nor the Agent shall have any obligation with respect to a Placement or any Placement Shares unless and until the Corporation delivers and the Agent acknowledges receipt of a Placement Notice pursuant to the terms set forth above, and then only upon the terms specified therein and herein. |
| 4.6 | A Placement Notice shall not contain any parameters that conflict with the provisions of this Agreement or that subject or purport to impose upon or subject the Agent to any obligations in addition to the Agent’s obligations contained in this Agreement. In the event of a conflict between the terms of this Agreement and the terms of a Placement Notice with respect to an issuance and sale of Placement Shares, the terms of this Agreement shall prevail. |
| 4.7 | The Corporation covenants and agrees that: |
| (a) | each Placement Notice delivered by or on behalf of the Corporation to the Agent shall be deemed to be an affirmation that: (i) the representations and warranties made by the Corporation in this Agreement and in any certificates provided pursuant hereto are true and correct as at the time the Placement Notice is issued and all such representations and warranties shall be deemed to have been made as at such time, except only to the extent that any such representation and warranty is, by its express terms, limited to a specific date, or as otherwise updated and expressly disclosed in the Placement Notice; and (ii) the Corporation has complied with all covenants and agreements to be performed, and satisfied all conditions to be satisfied, by or on the part of the Corporation hereunder at or prior to the time the Placement Notice is issued; and |
| (b) | the Corporation shall not, during the time period (the “No Trade Period”) in which the Corporation has knowledge of a “material change” or “material fact” with respect to the |
- 10 -
| Corporation which has not been generally disclosed, issue a Placement Notice until such No Trade Period ends either through a change in circumstances or the filing of a material change report, a Designated News Release or any other Supplementary Material that discloses such “material change” or “material fact”. |
At any time while a Placement Notice is pending or effective (and not currently suspended), the Corporation shall promptly notify the Agent of the commencement of a No Trade Period and suspend any further sale of Placement Shares under the Placement Notice in accordance with Section 6.1 until the end of the No Trade Period.
| 4.8 | The Corporation acknowledges and agrees that, in order to allow the Agent to conduct its “due diligence” investigations with respect to the Corporation as contemplated in Sections 9.1(h) and (i) in a timely and responsible manner, it will provide the Agent with at least five Business Days (or such lesser number of days as agreed to by the Parties) notice in writing of any intent or expectation on the part of the Corporation, to deliver a Placement Notice hereunder. |
| 5. | SALE OF PLACEMENT SHARES BY AGENT |
| 5.1 | Subject to the terms and conditions set forth herein, upon the Corporation’s delivery and the Agent’s acknowledgment of receipt of a Placement Notice, and unless the sale of the Placement Shares described therein has been declined by the Agent, suspended by the Corporation or the Agent (for as long as such suspension is in place) or otherwise terminated in accordance with the provisions hereof, the Agent, for the period(s) specified in the Placement Notice (subject to any No Trade Periods or other date specified in the Placement Notice on which Placement Shares may not be sold), will use its commercially reasonable efforts, consistent with its normal trading and sales practices, and in compliance with all applicable Laws (including Securities Laws), all applicable IIROC dealer member rules and Universal Market Integrity Rules (including section 5.1 thereof), and the applicable rules of the CSE and any other applicable Marketplace, and upon the terms and conditions set forth in this Agreement, the Prospectus applicable to the Agent, to sell such Placement Shares up to the amount specified and otherwise in accordance with parameters set forth in the Placement Notice. |
| 5.2 | It is understood and agreed that the Agent shall act as the agent of the Corporation with respect to the sale of Offered Shares in accordance with the terms and conditions hereof, and is and will be under no obligation to purchase any such Offered Shares that may be offered for sale by the Corporation hereunder. |
| 5.3 | After consultation with the Corporation and subject to the terms of a Placement Notice, the Agent may sell the Placement Shares specified in the Placement Notice through the facilities of the CSE or any other Marketplace by any method permitted by law and constituting an ATM Distribution, including sales made directly on the CSE through a dealer that is a registered dealer with the CSE and sales made on any other Marketplace through a Marketplace participant. |
| 5.4 | The Agent will send by electronic mail (or such other method mutually agreed to in writing by the Parties) to the Designated Representatives of the Corporation, not later than 12:00 noon (British Columbia time) on the Trading Day immediately following the Trading Day on which any sales of Placement Shares have been made hereunder, confirmation of the following information: |
| (a) | the number of Placement Shares sold on such day; |
| (b) | the average price at which the Placement Shares were sold on such day; |
| (c) | the aggregate gross proceeds from the sales of Placement Shares on such day; |
| (d) | the total Agent’s Fee payable in respect of such sales; and |
| (e) | the Net Proceeds payable to the Corporation. |
- 11 -
| 5.5 | The Agent will deliver to the Corporation, for each fiscal quarter of the Corporation during which Offered Shares are sold through the Agent or distributed pursuant to this Agreement, and otherwise as reasonably requested by the Corporation to enable the Corporation to meet its quarterly reporting requirements under Securities Laws or any applicable requirements of the CSE or any other Marketplace, within three Business Days (or such lesser number of days as agreed to by the Parties) after the end of the fiscal quarter, a report stating the number of Offered Shares distributed pursuant to this Agreement during such fiscal quarter on the CSE or such other Marketplace together with such information as specified in Section 5.4 calculated on an aggregate quarterly basis. Unless Securities Laws, the applicable requirements of the CSE or such other Marketplace otherwise require, the Parties agree that the Agent’s report referred to in this Section 5.5 shall state the aggregate number of Offered Shares issued on all Settlement Dates occurring during the fiscal quarter together with such information as specified in Section 5.4 on an aggregate quarterly basis. |
| 6. | SUSPENSION OF SALES |
| 6.1 | At any time while a Placement Notice is pending or effective (and not suspended), the Corporation or the Agent may, and, upon commencement of a No Trade Period, the Corporation shall, by written notice to the other Party addressed and sent by electronic mail (or such other method mutually agreed to in writing by the Parties) to its Designated Representatives, temporarily or indefinitely suspend any sale or further sale of Placement Shares under a Placement Notice, which notice shall be effective immediately, unless otherwise specified in the notice; provided, however, that any such suspension shall not affect any Party’s obligations with respect to any Placement Shares sold hereunder prior to the receipt of such notice. Any such notice shall set out the duration of such suspension or provide that such suspension is indefinite until further notice is provided by such Party. For greater certainty, in the event that the Agent is informed by the Corporation of the occurrence of one or more of the events described in Section 9.1(d), the Agent shall have the right to immediately suspend the sale of any Placement Shares. For greater certainty, a Placement Notice may specify a period or periods during which Placement Shares may not be sold, and in such case, the sale of Placement Shares under such Placement Notice shall be suspended during any such periods identified, and the Placement Notice itself shall constitute notice of the suspension(s) as contemplated above. |
| 6.2 | Without limiting the generality of the foregoing, any sale of Placement Shares made but not yet settled before a notice of suspension is given pursuant to Section 6.1 shall be settled in accordance with the provisions of Section 7, and the obligations of the Parties with respect to settling any such sale shall not be affected by the suspension. |
| 6.3 | Any notice of suspension provided pursuant to Section 6.1, including the reason for such notice of suspension, will be kept strictly confidential by the Agent and its affiliates and any Person acting on its behalf, unless: (i) such information is or becomes generally available to the public other than as a result of a disclosure by the Agent in violation of this Agreement; (ii) the disclosure of such information is expressly permitted, in writing, by the Corporation; or (iii) the disclosure of such information is required by applicable Securities Laws to which the Agent is subject or by order of a Governmental Body and pursuant to which the Agent is required to disclose such information. |
| 7. | SETTLEMENT AND DELIVERY OF PLACEMENT SHARES |
| 7.1 | Settlement for any sale of Placement Shares on the CSE or any other Marketplace shall occur on the second Trading Day (or such earlier day as is then current industry practice for regular-way trading) following the date on which the sale is made (each such Trading Day being a “Settlement Date”). |
| 7.2 | The amount of proceeds to be delivered to the Corporation on a Settlement Date (the “Net Proceeds”), payable against receipt by the Agent of the Placement Shares sold as provided herein, shall be equal to the aggregate sales price received by the Agent at which such Placement Shares were sold, less the Agent’s Fee payable by the Corporation in respect of such sales. |
- 12 -
| 7.3 | On each Settlement Date, the Corporation will issue and deliver (or cause to be issued and delivered) to the Agent the Placement Shares sold by the Agent against delivery by the Agent to the Corporation of the Net Proceeds from the sale of such Placement Shares, all in accordance with the Settlement Procedures. |
| 7.4 | If the Corporation defaults in its obligation to issue and deliver the Placement Shares on a Settlement Date, the Corporation agrees that: |
| (a) | in the event the Agent has delivered to the Corporation the Net Proceeds from the sales of the Placement Shares on the applicable Settlement Date in accordance with the Settlement Procedures prior to the occurrence of such default, the Corporation will immediately return the full amount of such Net Proceeds to the Agent; and |
| (b) | in the event that the Net Proceeds from sales of the Placement Shares are returned to the Agent pursuant to Section 7.4(a), provided that the Agent has delivered the Placement Shares to purchasers thereof on the applicable Settlement Date by way of an alternative settlement method, the Corporation will use its commercially reasonable efforts to issue and deliver (or cause to be issued and delivered) to the Agent an equivalent number of Offered Shares equal to the Placement Shares promptly in accordance with the Settlement Procedures, and the Agent will promptly thereafter deliver to the Corporation the amount of the Net Proceeds from such sales less the amount of any costs directly incurred by the Agent arising out of or in connection with the late delivery of such Placement Shares (including, reasonable legal fees and expenses and any commission, discount or other compensation to which it would otherwise be entitled absent such default), together with reasonable particulars of any such costs, or, at the election of the Agent, such costs may be separately invoiced to the Corporation. |
| 7.5 | The Agent covenants and agrees to copy or otherwise include the Corporation on all correspondence between the Agent and the Transfer Agent of the Corporation, in connection with or arising from or relating to the settlement (electronic or otherwise) of any sale of Placement Shares hereunder, and further, shall be responsible for taking all actions required to be taken by it within the applicable time periods to ensure that all sales of Placement Shares hereunder are settled without default in accordance with existing industry practice for regular-way trading. |
| 8. | REPRESENTATIONS AND WARRANTIES OF THE CORPORATION |
| 8.1 | The Corporation represents and warrants to, and covenants and agrees with, the Agent that each of the matters set forth in Schedule C are true and correct and shall be true and correct (except only to the extent that any such representation is, by its express terms, limited to a specific date or, with respect to any such representation made or deemed to be made after the date hereof, as otherwise updated and expressly disclosed in a Placement Notice) as of: (a) the date of this Agreement; (b) the Filing Date; (c) each Representation Date on which a Bringdown Certificate is required to be delivered pursuant to Section 9.3; (d) each time a Placement Notice is delivered to the Agent or a suspended Placement Notice ceases to be suspended; (e) each Placement Time; and (f) each Settlement Date, and acknowledges that the Agent is relying upon these representations and warranties in connection with entering into this Agreement and performing its obligations hereunder. |
| 8.2 | Notwithstanding any other provision hereof, the Corporation acknowledges and agrees that all of its representations and warranties contained herein or in certificates delivered pursuant hereto shall survive, as of their respective dates, regardless of, and without mitigation, diminishment or restriction because of: (a) any investigation made by or on behalf of the Agent, the Agent’s counsel or any directors, officers, employees, control persons, representatives or advisors of the Agent, (b) delivery and acceptance of the Placement Shares and payment therefor; or (c) any termination of this Agreement. |
- 13 -
| 9. | COVENANTS OF THE CORPORATION |
| 9.1 | General. The Corporation covenants and agrees with the Agent that the Corporation will: |
| (a) | prepare, and allow the Agent to participate in the preparation and approve the form of, the Prospectus Supplement and all other documentation required to be filed, delivered or disseminated under Securities Laws for any Placement of the Offered Shares; |
| (b) | file the Prospectus Supplement with the Qualifying Authorities in accordance with the Shelf Procedures and the Passport Procedures on or before the third Business Day following execution and delivery of this Agreement; |
| (c) | fulfill all legal and regulatory requirements (including pursuant to NI 44-102) to be fulfilled by the Corporation necessary to enable the Offered Shares to be offered for sale and distributed to the public through the facilities of the CSE or any other Marketplace pursuant to ATM Distributions through a dealer duly registered under Securities Laws, such that the Offered Shares so distributed will not be subject to any restrictions on resale pursuant to Securities Laws (except where such restrictions apply because the holder is a “control person” within the meaning of Securities Laws or is restricted from trading Subordinate Voting Shares by virtue of having knowledge of material undisclosed information concerning the Corporation); provided, however, that if the fulfillment of any such requirements would (or would reasonably be expected to) result in the Agent becoming subject to additional responsibilities or liabilities, then the Corporation shall first consult with the Agent as to the particulars of its proposed conduct or course of action (it being acknowledged and agreed, however, that for greater certainty, except as otherwise provided herein the Corporation shall have no obligation to confer with the Agent as to the content of documents prepared and filed or disseminated pursuant to its ongoing continuous disclosure requirements under Securities Laws which includes those types of documents incorporated by reference in the Base Shelf Prospectus or Prospectus Supplement); |
| (d) | throughout any period during which a Placement Notice is pending or effective (and not suspended) and, if there is a period during which no Placement Notice is pending or effective or during which a Placement Notice is suspended, prior to the delivery of a new Placement Notice or a suspended Placement Notice ceasing to be suspended, promptly notify the Agent, in writing, with full particulars, of: |
| (i) | any change (actual, contemplated or threatened) in the business, affairs, operations, assets, liabilities (contingent or otherwise) or capital of the Corporation and its Subsidiaries, taken as a whole; |
| (ii) | any change in any fact covered by a statement (other than a statement furnished by or relating solely to the Agent) contained or referred to in the Prospectus (as the same exists at the time); or |
| (iii) | any material fact or any event, matter or circumstance which has been discovered but has not been disclosed in the Prospectus; |
which is, or may be, of such a nature as to render the Prospectus (as the same exists at the time) misleading or untrue in any material respect or which would result in the Prospectus (as the same exists at the time) containing a misrepresentation (including, for greater certainty, an omission to state a material fact that is required to be stated, or that
- 14 -
is necessary to be stated in order for an included statement not to be misleading) or which would result in the Prospectus (as the same exists at the time) not complying with any of the laws, regulations or policy statements of any Qualifying Authority or which would reasonably be expected to have a significant effect on the market price or value of the Subordinate Voting Shares. In addition, during such period, the Corporation shall in good faith discuss with the Agent and its counsel any change in circumstances (actual or anticipated) relating to the business, affairs, operations, assets, liabilities (contingent or otherwise) or capital of the Corporation or its Subsidiaries, if any, which is of such a nature that there is or could be reasonable doubt as to whether any notice need to be given to the Agent pursuant to this Section and, in any event, prior to filing any Supplementary Material;
| (e) | if there is a change or occurrence of a nature referred to in any of clauses (i) through (iii) of Section 9.1(d) or if it is otherwise necessary for any other reason to amend or supplement the Prospectus in order to comply with Securities Laws, promptly prepare and, subject to Section 9.1(f), file with the Qualifying Authorities such Supplementary Material as may be necessary to remedy the deficiency, occasioned by the change or occurrence or to otherwise comply with Securities Laws; |
| (f) | throughout any period during which a Placement Notice is pending or effective (and not suspended): |
| (i) | give the Agent notice of its intention to file or prepare any Supplementary Material; |
| (ii) | furnish the Agent with a copy of the Supplementary Material within a reasonable amount of time prior to the proposed filing of same; |
| (iii) | unless the Supplementary Material is required to be filed pursuant to the Corporation’s continuous disclosure requirements under Securities Laws (which includes those types of documents incorporated by reference or deemed to be incorporated by reference in the Base Shelf Prospectus or Prospectus Supplement), not file or use any Supplementary Material to which the Agent or counsel to the Agent reasonably objects; and |
| (iv) | promptly advise the Agent of the filing of (and, if applicable, granting of a receipt for) the Supplementary Material, and furnish the Agent with true and complete copies thereof; |
| (g) | promptly furnish to the Agent copies of any statements, reports, circulars or other records or communications (including any such materials that constitute Supplementary Material) that the Corporation sends to its securityholders or may from time to time publish or publicly disseminate if same are not available to the public on the SEDAR website at www.sedar.com; |
| (h) | allow the Agent and its representatives to conduct all “due diligence” inquiries and investigations that the Agent may reasonably require, and to obtain satisfactory responses and results therefrom, in order for the Agent to fulfill its obligations as an “underwriter” within the meaning of Securities Laws and to enable the Agent to responsibly sign any certificate required to be signed by the Agent in the Prospectus Supplement; |
| (i) | without limiting the generality of Section 9.1(h) or the scope of the inquiries and investigations that the Agent may conduct for the purposes set forth therein, prior to the Filing Date and during each successive notice period referred to in Section 4.8 in connection with the proposed delivery of a Placement Notice and each time the |
- 15 -
| Corporation is required to deliver a Bringdown Certificate pursuant to Section 9.3, the Corporation shall: |
| (i) | provide or arrange for reasonable access by the Agent and its representatives to the management personnel, properties and records of the Corporation (including its Subsidiaries) for the purposes of viewing, interviewing or reviewing the same; and |
| (ii) | make available such of its senior officers as the Agent may reasonably request, and use its commercially reasonable efforts to make available representatives of the Auditors, and the auditors of any Acquired Business Financial Statements included or incorporated by reference in the Prospectus, to answer any questions the Agent may have and to participate in one or more due diligence sessions; |
| (j) | comply with all Securities Laws so as to permit Placements as contemplated in this Agreement and the Prospectus Supplement; |
| (k) | throughout any period during which a Placement Notice is pending or effective, not take, directly or indirectly, any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, the stabilization, maintenance or manipulation of the price of the Subordinate Voting Shares; |
| (l) | file or deliver, within the time limits prescribed by and otherwise in accordance with Securities Laws, all statements, reports, circulars or other records required to be filed or delivered by the Corporation with or to any of the Qualifying Authorities pursuant to Securities Laws; |
| (m) | throughout any period during which a Placement Notice is pending or effective (and not suspended) and prior to the delivery of a new Placement Notice or a suspended Placement Notice ceasing to be suspended, promptly inform the Agent of: |
| (i) | any request by a Qualifying Authority or any other Governmental Body for any Supplementary Material or any revision to any record forming part of the Public Record or for any additional information concerning this Agreement or the transactions contemplated hereby; |
| (ii) | the issuance by any Qualifying Authority or other Governmental Body of any order, ruling or direction to cease, suspend or otherwise restrict the trading of the Subordinate Voting Shares or any other securities of the Corporation, or preventing, suspending or otherwise restricting the use of the Prospectus or any other prospectus or qualifying document relating to the distribution of the Offered Shares, or suspending the qualification of such Offered Shares for offering, distribution or resale in any jurisdiction, or of the initiation or, to the knowledge of the Corporation, threat of any proceeding for any such purpose; and |
| (iii) | the receipt of any communication from any Qualifying Authority or other Governmental Body relating to the Prospectus, the Public Record or the distribution of the Offered Shares; |
| (n) | in the event of the issuance of any order, ruling or direction contemplated in paragraph (m) above, promptly use its commercially reasonable efforts to obtain the termination or withdrawal of such order, ruling or direction; |
| (o) | not purchase Subordinate Voting Shares, and not permit any of its affiliates or any Person acting on its behalf to purchase Subordinate Voting Shares, under a normal course issuer |
- 16 -
| bid throughout (i) any period during which a Placement Notice is pending or effective, and |
| (i) during the period beginning on the second Business Day immediately prior to the date on which any Placement Notice is delivered to the Agent hereunder and ending on the second Business Day immediately following the final Settlement Date with respect to the Offered Shares sold pursuant to such Placement Notice, without having first agreed with the Agent, acting reasonably, as to the appropriate adjustments, if any, to be made to the parameters set forth in such Placement Notice; |
| (p) | apply the Net Proceeds from the sale of the Offered Shares as set forth in the Prospectus under the heading “Use of Proceeds”; |
| (q) | use its commercially reasonable efforts to comply with the terms and conditions of its listing agreement with the CSE and any other applicable Marketplace and maintain the listing of the Subordinate Voting Shares in good standing on the CSE and each such other Marketplace or Marketplaces, provided that the Corporation shall not be required to comply with this Section 9.1(q) following the completion of a merger, amalgamation, arrangement, business combination or take-over bid pursuant to which the Corporation ceases to be a “reporting issuer” (within the meaning of Securities Laws in Canada); |
| (r) | maintain a transfer agent for the Subordinate Voting Shares in accordance with the rules of the CSE and any other Marketplace (if applicable); |
| (s) | use its commercially reasonable efforts to maintain its status as a reporting issuer in each of the Qualifying Jurisdictions not in default of the securities legislation, in any material respect, of such Qualifying Jurisdictions, provided that the Corporation shall not be required to comply with this Section 9.1(s) following the completion of a merger, amalgamation, arrangement, business combination or take-over bid pursuant to which the Corporation ceases to be a “reporting issuer” (within the meaning of Securities Laws in Canada); |
| (t) | comply with Ontario Securities Commission Rule 48-501 – Trading During Distributions, Formal Bids and Share Exchange Transactions; |
| (u) | not engage in, and not permit any of its affiliates or any Person acting on its behalf engage in any Directed Selling Efforts or in any form of General Solicitation or General Advertising in the United States with respect to the Offered Shares; and |
| (v) | use its commercially reasonable efforts to ensure that the terms of any underwriting agreement, agency agreement or similar agreement relating to the distribution or sale of the securities of the Corporation that is executed after the date of this Agreement does not limit or restrict the Corporation’s ability to issue or sell Placement Shares in accordance with the terms of this Agreement. |
| 9.2 | Initial Opinions, Comfort Letters and Other Materials. The Corporation shall deliver, or cause to be delivered, to the Agent, on the Filing Date, the following documents: |
| (a) | written opinions, addressed and in form and substance satisfactory to the Agent and the Agent’s counsel, from: |
| (i) | the Corporation’s Counsel in Canada, Bennett Jones LLP, and from local counsel (only in respect of matters governed by the laws of the Qualifying Jurisdictions where Bennett Jones LLP is not qualified to practice law, determined by the Corporation and acceptable to the Agent, acting reasonably) concerning the matters set forth in Schedule E and as to such legal matters, including compliance with Securities Laws in any way connected with the issuance, sale and delivery of the Offered Shares, as the Agent may reasonably request; and |
- 17 -
| (ii) | the General Counsel of the Corporation with respect matters set forth in Schedule E; |
it being understood that in rendering such opinions Corporation’s Counsel and the Corporation’s General Counsel may rely on, as to relevant matters of fact, certificates of officers of the Corporation, public officials and agencies, and the Transfer Agent (together, the “Initial Legal Opinions”);
| (b) | a “long form comfort letter” from the Auditor (the “Initial Corporation Comfort Letter”), having a cut-off date of not more than two Business Days prior to the Filing Date, in form and substance satisfactory to the Agent and the Agent’s counsel, acting reasonably: |
| (i) | confirming that at all material times it was independent of the Corporation within the meaning of Securities Laws; and |
| (ii) | expressing, as of such date, the conclusions and findings of the Auditor with respect to the financial information and other matters ordinarily covered by accountants’ “comfort letters” to underwriters in connection with public offerings to the effect that such Auditor has carried out certain procedures performed for the purposes of comparing certain specified financial information and percentages appearing in the Prospectus (including, for greater certainty, the documents incorporated by reference therein) with indicated amounts in the financial statements or accounting records of the Corporation, and has found such information and percentages to be in agreement; |
| (c) | if Acquired Business Financial Statements are included or incorporated by reference in the Prospectus, a “comfort letter” from the auditors of the Acquired Business Financial Statements (the “Initial Acquisition Comfort Letter”) having a cut-off date of not more than two Business Days prior to the Filing Date, in form and substance satisfactory to the Agent and the Agent’s counsel, acting reasonably: |
| (i) | confirming that at all material times they were independent of the Acquired Business within the meaning of Securities Laws; |
| (ii) | expressing, as of such date, the conclusions and findings of such auditors with respect to the financial information and other matters ordinarily covered by accountants’ “comfort letters” to underwriters in connection with public offerings to the effect that such auditors have carried out certain procedures performed for the purposes of comparing certain specified financial information and percentages appearing in the Prospectus (including, for greater certainty, the documents incorporated by reference therein) with indicated amounts in the financial statements or accounting records of the Acquired Business, and have found such information and percentages to be in agreement; |
| (d) | an officer’s certificate signed by the General Counsel of the Corporation addressed to the Agent and Agent’s counsel and dated the Filing Date, in form and substance satisfactory to the Agent and the Agent’s counsel, acting reasonably, certifying the following: |
| (i) | the articles, by-laws and other constating documents of the Corporation, Cresco and Cresco Corp.; |
| (ii) | all resolutions of the Corporation’s directors relating to the ATM Distribution and the transactions and agreements contemplated herein; and |
| (iii) | the incumbency and specimen signatures of the Corporation’s signing officers, |
- 18 -
| and attaching thereto certificates of status and/or compliance (or equivalent) for the jurisdiction in which each of the Corporation, Cresco and Cresco Corp. is in existence, each dated as close to the Filing Date as is reasonable; |
| (e) | copies of correspondence indicating that the Corporation has obtained all necessary approvals for the issuance of the Offered Shares, to be listed on the CSE; |
| (f) | a “reporting issuer” list indicating that the Corporation a reporting issuer in each of the Qualifying Jurisdictions, is not in default in any material respect of any requirement under Securities Laws and is not on the list of defaulting issuers maintained by the Qualifying Authorities; and |
| (g) | a certificate from the Transfer Agent signed by an authorized officer confirming the issued and outstanding share capital of the Corporation. |
| 9.3 | Bringdown Certificates. Without limiting Section 4.7, during the term of this Agreement, |
| (a) | each time the Corporation files: |
| (i) | an amendment (including an amendment that does not fully restate the original text and an amendment and restatement) to the Base Shelf Prospectus; |
| (ii) | a Business Acquisition Report or any other Acquired Business Financial Statements; |
| (iii) | an annual information form, audited annual financial statements or annual management’s discussion and analysis (or, in any case, any amendment thereto or an amended, re-filed or amended and restated form thereof); or |
| (iv) | interim financial statements or interim management’s discussion and analysis (or, in either case, any amendment thereto or an amended, re-filed or amended and restated form thereof); or |
| (b) | if reasonably requested by the Agent following the filing of a material change report, Designated News Release or other document incorporated or deemed to be incorporated by reference into the Prospectus, |
(each date of filing of one or more of the documents referred to in paragraph (a) above and any time of a request pursuant to paragraph and (b) above being a “Representation Date”), the Corporation shall deliver to the Agent a certificate, in the form attached hereto as Schedule D (a “Bringdown Certificate”); provided, however, that the requirement to provide a certificate under this Section 9.3 shall be deemed to be waived for any Representation Date occurring at a time at which no Placement Notice is pending or effective (including where a Placement Notice is suspended), which waiver shall continue until the earlier to occur of the date the Corporation delivers a Placement Notice hereunder or the suspension of a Placement Notice ceases (which for such calendar quarter shall be considered to be a Representation Date) and the next occurring Representation Date.
| 9.4 | Further Legal Opinions. Following the date hereof, within three Trading Days after each Representation Date with respect to which the Corporation is obligated to deliver a Bringdown Certificate and for which no waiver is applicable pursuant to Section 9.3, the Corporation shall cause to be delivered to the Agent opinions similar to the Initial Legal Opinions, dated as of the Representation Date, from the Corporation’s Counsel in Canada and the Corporation’s General Counsel concerning the matters set forth for such counsel in Schedule E (provided, however, that the Corporation’s Counsel in Canada shall not be required to provide further legal opinions with respect to the matters described in paragraphs 3 to 12 of the form of opinion prescribed therein). |
- 19 -
| 9.5 | Further Comfort Letters. Within three Trading Days after each Representation Date with respect to which the Corporation is obligated to deliver a Bringdown Certificate and for which no waiver is applicable pursuant to Section 9.3, the Corporation shall cause to be delivered to the Agent a “long form comfort letter” dated as of the Representation Date from the Auditor and, if applicable, a “long form comfort letter” from the auditors of each Acquired Business Financial Statements which are included or incorporated by reference in the Prospectus as at the Representation Date, having a cut-off date of not more than two Business Days prior to such date, in form and substance satisfactory to the Agent and the Agent’s counsel, acting reasonably: |
| (a) | confirming that at all material times they were independent of the Corporation or the Acquired Business, as applicable, within the meaning of Securities Laws; and |
| (b) | with respect to financial information concerning: |
| (i) | the Corporation, other than in respect of Acquired Business Financial Statements, updating the Initial Corporation Comfort Letters with any information that would have been included in the Initial Corporation Comfort Letters had such initial letter been given as of such Representation Date and modified as necessary to contemplate any Supplementary Material (other than any Supplementary Material superseded by a subsequently filed document); |
| (ii) | an Acquired Business for which an Initial Acquisition Comfort Letter was previously delivered hereunder, updating the Initial Acquisition Comfort Letter with any information that would have been included in the Initial Acquisition Comfort Letter had such initial letter been given as of such Representation Date and modified as necessary to contemplate any Supplementary Material; and |
| (iii) | an Acquired Business for which an Initial Acquisition Comfort Letter was not previously delivered hereunder, expressing, as of such Representation Date, the conclusions and findings of such audit firm with respect to the financial information and other matters ordinarily covered by accountants’ “comfort letters” to underwriters in connection with public offerings to the effect that such auditors have carried out certain procedures performed for the purposes of comparing certain specified financial information and percentages appearing in the Prospectus (including, for greater certainty, the documents incorporated by reference therein) with indicated amounts in the financial statements or accounting records of the Acquired Business, and have found such information and percentages to be in agreement. |
| 9.6 | Further Officer’s Certificates. Within three Trading Days after each Representation Date with respect to which the Corporation is obligated to deliver a Bringdown Certificate and for which no waiver is applicable pursuant to Section 9.3, the Corporation shall cause to be delivered to the Agent an officer’s certificate signed by the General Counsel of the Corporation addressed to the Agent and dated the Representation Date, in form and substance satisfactory to the Agent and the Agent’s counsel, acting reasonably, certifying and attaching thereto certificates of status and/or compliance (or equivalent) for the jurisdiction in which the Corporation, Cresco, Cresco Corp. and each other Material Subsidiary is in existence, each dated as close to the Representation Date as is reasonable. |
| 9.7 | Time of Further Deliveries. Notwithstanding Sections 9.3, 9.4, 9.5 and 9.6, if the Corporation decides to complete a Placement following a Representation Date in respect of which the waiver provided in Section 9.3 applied, then, prior to or concurrently with delivering the Placement Notice to the Agent or an existing Placement Notice ceasing to be suspended, the Corporation shall deliver |
- 20 -
| or cause to be delivered to the Agent, as applicable, the Bringdown Certificate contemplated in Section 9.3, the legal opinions contemplated in Section 9.4, any “comfort letters” as contemplated in Section 9.5 and the officer’s certificate contemplated in Section 9.6, in each case dated as of the date of the Placement Notice or the date the existing Placement Notice ceases to be suspended and otherwise substituting the date of the Placement Notice or the date the existing Placement Notice ceases to be suspended for the “Representation Date” as that term is used in Section 9.3. |
| 10. | EXPENSES |
| 10.1 | The Corporation agrees, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated in accordance with Section 13, to pay and be responsible for all expenses of or incidental to the performance of its obligations hereunder, including, expenses relating to: |
| (a) | the preparation, printing, filing and delivery of the Prospectus (including any Supplementary Material), including any filing fees payable to Qualifying Authorities or any other Governmental Bodies; |
| (b) | the preparation, issuance and delivery of the Offered Shares; |
| (c) | the printing and delivery of any documents required hereunder to be delivered to or as directed by the Agent; |
| (d) | the fees, disbursements and expenses of counsel to the Corporation and of the Corporation’s registrar and transfer agent, the Auditors (and any auditors of any Acquired Business Financial Statements) and other advisors; |
| (e) | the reasonable fees (not to exceed: (i) $125,000 to and including the date of this Agreement, and (ii) $25,000 in any 12-month period thereafter during the term of this Agreement), disbursements and related taxes of counsel to the Agent, and all other reasonable out-of-pocket expenses of the Agent in relation to the Agreement and ongoing services in connection with the matters and transactions contemplated by the Agreement; and |
| (f) | the fees and expenses incurred in connection with the listing of the Offered Shares for trading on the CSE and any other Marketplace on which the Subordinate Voting Shares are listed or quoted. |
| 11. | CONDITIONS TO AGENT’S OBLIGATIONS |
| 11.1 | The obligations of the Agent hereunder with respect to any sale of Placement Shares (other than the obligations in Section 2.3) shall be subject to the completion by the Agent of ongoing due diligence reviews satisfactory to the Agent in its sole and reasonable judgment, and to the continuing satisfaction (or waiver by the Agent, in its sole and unfettered discretion) of the following additional conditions: |
| (a) | the Prospectus Supplement shall have been filed with the Qualifying Authorities under the Shelf Procedures and the Passport Procedures in accordance with Section 9.1(b) hereof and all requests for additional information on the part of the Qualifying Authorities shall have been complied with to the satisfaction of the Agent and the Agent’s counsel, acting reasonably; |
| (b) | no Supplementary Material (other than documents incorporated by reference and required to be filed pursuant to NI 51-102) shall have been filed to which the Agent, acting reasonably, objects; |
- 21 -
| (c) | at the Placement Time and at the Settlement Date for such Placement Shares, no order, ruling or direction of any Qualifying Authority or other Governmental Body shall have been issued that has the effect of: |
| (i) | ceasing, suspending or otherwise restricting the trading of such Placement Shares or any other securities of the Corporation, or |
| (ii) | preventing, suspending or otherwise restricting the use of the Prospectus or any other prospectus or qualifying document relating to the distribution of such Placement Shares, or |
| (iii) | suspending the qualification of such Placement Shares for offering, distribution or resale in any jurisdiction, and no proceedings for any such purpose shall have been initiated, announced or threatened; |
| (d) | all representations and warranties of the Corporation contained herein and in any certificates delivered pursuant hereto shall be true and correct, with the same force and effect as if then made, except to the extent that any such representation and warranty is limited to a specified date, (or is updated as permitted by Section 4.7 or 9.3); |
| (e) | the Corporation shall have complied with all agreements and all conditions on its part theretofore to be performed or satisfied hereunder; |
| (f) | the Agent shall have received all documents required to be delivered or furnished to the Agent pursuant to Section 8.2, in each case on or before the date on which delivery of such document is required pursuant to this Agreement; |
| (g) | the Corporation shall have duly notified the CSE of the issuance of the Placement Shares and the CSE shall not have objected thereto or denied the listing thereof; |
| (h) | the Corporation shall have delivered or caused to be delivered to the Agent and the Agent’s counsel such other certificates or other documents as they may reasonably request for the purpose of enabling them to pass upon the issuance and sale of the Placement Shares as herein contemplated, or in order to evidence or confirm: (i) the accuracy of any of the representations or warranties contained herein; (ii) the fulfillment of any of the conditions contained herein; or (iii) the accuracy and completeness of any information contained in the Prospectus; and |
| (i) | there shall not have occurred any event, matter or circumstance that would permit the Agent to terminate this Agreement pursuant to Section 13.1. |
| 12. | INDEMNIFICATION AND CONTRIBUTION |
The Parties acknowledge the provisions concerning indemnification and contribution set forth in Schedule F, which forms and integral part of this Agreement, and agree to the matters set forth therein.
| 13. | TERMINATION |
| 13.1 | In addition to any other remedies that may be available to the Agent, the Agent shall be entitled, at its option and at any time, on notice to the Corporation as provided in Section 14, without liability on its part, to terminate and cancel its participation in this Agreement and its obligations hereunder if: |
| (a) | there has occurred a Material Adverse Effect, or any event, matter, circumstance, development or change in fact or law has arisen, occurred or come into effect or existence that, in the opinion of the Agent, has had or may reasonably be expected to have a Material Adverse Effect; |
- 22 -
| (b) | the Corporation shall be in material breach of, material default under or material non- compliance with any covenant, agreement, representation, warranty, term or condition contained in this Agreement or in any certificate or document delivered pursuant hereto; |
| (c) | any condition to the Agent’s obligations hereunder is not fulfilled in any material respect; |
| (d) | the Agent is not satisfied, in its sole discretion, acting reasonably, with the results of its “due diligence” review as contemplated herein; |
| (e) | there shall be announced or there shall develop, occur or come into effect or existence any: (i) event, action, state, condition or major financial occurrence of national or international consequence (including as a result of the COVID-19 pandemic); (ii) outbreak or escalation of hostilities, declaration by the United States or Canada of a national emergency or war, or other calamity or crisis; (iii) change or development involving a prospective change in national or international political, financial or economic conditions; or (iv) governmental action or law, regulation or policy of a Governmental Body, the effect of which on financial markets in any such case makes it, in the sole judgment of the Agent, acting reasonably, impractical or inadvisable to proceed with the offering, sale or delivery of the Placement Shares; |
| (f) | any inquiry, investigation, legal action or other proceeding (whether formal or informal) by or before a Governmental Body in respect of the Corporation or any of its Subsidiaries shall have commenced or been announced or threatened, or any order, ruling or direction of a court or competent regulatory or Governmental Body shall have been issued, which make it, in the sole judgment of the Agent, acting reasonably, impractical or inadvisable to proceed with the offering, sale or delivery of the Placement Shares; or |
| (g) | any suspension or limitation of trading in the Subordinate Voting Shares or in securities generally on the CSE or any other Marketplace (if applicable), or in respect of the settlement or clearance thereof, shall have occurred. |
| 13.2 | In addition to any other remedies that may be available to the Corporation, the Corporation shall be entitled, at its option and at any time, on notice to the Agent as provided in Section 14, without liability on its part, to terminate and cancel its participation in this Agreement and its obligations hereunder if the Agent shall be in breach of, default under or non-compliance with any material covenant, agreement, representation, warranty, term or condition contained in this Agreement or in any certificate or document delivered pursuant hereto. |
| 13.3 | The Corporation, on the one hand, and the Agent, on the other hand, shall have the right, by giving 15 days’ prior written notice to the other Party, to terminate this Agreement at any time in the terminating Party’s sole discretion. |
| 13.4 | Any termination pursuant to Section 13.1, Section 13.2 or Section 13.3 shall be: |
| (a) | effective at the close of business on the later of: (i) the date of receipt by the non- terminating Party of the notice of termination or, in the case of termination under Section 13.3, the 15th day following receipt of any notice of termination; and (ii) the Settlement Date for any sale of Placement Shares made before the date of receipt of notice of termination that has not settled (in which case, for greater certainty, such sale of Placement Shares shall settle in accordance with the provisions of this Agreement); and |
- 23 -
| (b) | without liability of any Party to any other Party, provided that no termination of this Agreement shall relieve any Party from liability for any breach by it of this Agreement that has occurred prior to the date of termination. |
| 13.5 | Unless earlier terminated pursuant to Section 13.1, Section 13.2 or Section 13.3 or otherwise by mutual agreement of the Parties, this Agreement shall automatically terminate upon the earlier of the date on which: |
| (a) | the issuance and sale of all of the Offered Shares through the Agent on the terms and conditions set forth herein is completed; and |
| (b) | the receipt issued for the Base Shelf Prospectus ceases to be effective in accordance with Securities Laws. |
| 13.6 | Notwithstanding any other provision hereof, but subject to the express provisions with respect to survival in such sections, the provisions of Section 8, Section 10, Section 12, Section 14 and Section 16 shall remain in full force and effect notwithstanding termination of this Agreement, and any mutual agreement to terminate shall be deemed to so provide. |
| 14. | NOTICES |
| 14.1 | Unless otherwise provided herein, all notices or other communications required or permitted to be given by any Party to any other Party pursuant hereto shall be in writing and personally delivered or transmitted by facsimile or electronic mail addressed to the recipient as follows: |
If to the Corporation, to:
Cresco Labs Inc.
Suite 2500 Park Place
666 Burrard Street
Vancouver, British Columbia V6C 2X8
| Attention: | Charles Bachtell, CEO | |||
| Electronic Mail: | [Redacted] |
and with a copy to:
Bennett Jones LLP
Suite 3400
1 First Canadian Place
P.O. Box 130
Toronto, Ontario M5X 1A4
| Attention: | Aaron Sonshine | |||
| Facsimile No.: | (416) 863-1716 | |||
| Electronic Mail: | sonshinea@bennettjones.com |
If to the Agent, to:
Canaccord Genuity Corp.
161 Bay Street, Suite 3000
Toronto, Ontario M5J 2S1
| Attention: | Ron Sedran, Managing Director, Equity Capital Markets | |||
| Electronic Mail: | [Redacted] |
- 24 -
with a copy to the Agent’s counsel:
Blake, Cassels & Graydon LLP
855 – 2nd Street SW, Suite 3500
Calgary, Alberta T2P 4J8
| Attention: | Chad Schneider | |||
| Facsimile No.: | (403) 260-9700 | |||
| Electronic Mail: | chad.schneider@blakes.com |
or to such other address for delivery, facsimile number or electronic mail address as a Party may otherwise designate by giving notice to the other Parties as provided herein.
| 14.2 | Any such notice or other communication delivered personally in accordance with Section 14.1 shall be deemed to have been given and received by the addressee: (i) when actually delivered, if so delivered during the addressee’s normal business hours on any Business Day; or (ii) at the commencement of the first Business Day following the actual time of delivery, if not so delivered on a Business Day or during the addressee’s normal business hours. |
| 14.3 | Any such notice or other communication transmitted by facsimile or electronic mail in accordance with Section 14.1 shall be deemed to have been given and received by the addressee: (i) when transmitted by the transmitting Party, if so transmitted during the addressee’s normal business hours on any Business Day; or (ii) at the commencement of the first Business Day following the time of transmission, if not so transmitted on a Business Day or during the addressee’s normal business hours; provided, however, that, in the case of a transmission by facsimile, the transmitting Party obtains and retains documentary confirmation from its telecommunications equipment that the transmission was successful and, in the case of a transmission by electronic mail, the addressee shall have confirmed receipt by return electronic mail transmission, which the Parties hereto agree to do so as soon as is reasonably practicable upon receipt of any notice or other communication by electronic mail. |
| 15. | SUCCESSORS AND ASSIGNS |
| 15.1 | This Agreement shall enure to the benefit of and be binding upon the Corporation and the Agent and their respective successors and permitted assigns, and with respect to rights of indemnity and contribution as provided in Schedule F, the Indemnified Parties contemplated therein. |
| 15.2 | References herein to any of the Parties named in this Agreement shall be deemed to include the successors and permitted assigns of such Party. |
| 15.3 | Except as expressly provided in Schedule F, nothing in this Agreement (express or implied) is intended to confer upon any Person other than the Parties and their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement. |
| 15.4 | No Party may assign its rights or obligations under this Agreement without the prior written consent of the other Party. |
| 16. | GOVERNING LAW, ETC. |
| 16.1 | This Agreement shall be governed by, and construed in accordance with, the laws of the Province of Ontario applicable to contracts made and to be performed within the Province of Ontario. |
| 16.2 | For the purpose of all legal proceedings, this Agreement shall be deemed to have been performed in the Province of Ontario and the courts of the Province of Ontario shall have jurisdiction to |
- 25 -
| entertain any action arising hereunder. Each Party hereby irrevocably submits to the exclusive jurisdiction of the courts of the Province of Ontario for the adjudication of any dispute arising hereunder or in connection herewith or with any transaction contemplated hereby, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. |
| 16.3 | Each Party hereby irrevocably waives any right it may have to a trial by jury in respect of any claim based upon or arising out of this Agreement or any transaction contemplated hereby. |
| 17. | RELATIONSHIP BETWEEN THE PARTIES |
| 17.1 | The Corporation acknowledges and agrees that, subject to Section 2.2: |
| (a) | the Agent has been retained solely to act as firm underwriter (as that term is used in the Act), as agent and not as principal, in connection with the sale of the Offered Shares, and that no fiduciary relationship between the Corporation and the Agent has been created in respect of any of the transactions contemplated by this Agreement, irrespective of whether the Agent has advised or is advising the Corporation on other matters; |
| (b) | the Corporation is capable of evaluating and understanding and does understand and accept the terms, risks and conditions of the transactions contemplated by this Agreement; |
| (c) | the Corporation has been advised that the Agent and its affiliates are engaged in a broad range of transactions which may involve interests that differ from those of the Corporation, and that the Agent has no obligation to disclose such interests and transactions to the Corporation by virtue of any fiduciary relationship; and |
| (d) | it waives, to the fullest extent permitted by law, any claims it may have against the Agent for breach of fiduciary duty or alleged breach of fiduciary duty, and agrees that the Agent shall not have liability (whether direct or indirect) to it in respect of any such claim or to any Person asserting a fiduciary duty claim on behalf of or in right of the Corporation, including securityholders, employees or creditors of the Corporation. |
| 17.2 | This Agreement is not intended to create, and shall not be construed or deemed to create, a partnership or joint venture between the Parties. |
| 18. | FORCE MAJEURE |
| 18.1 | No Party shall be liable to any of the others, or held in breach of this Agreement, if prevented, hindered or delayed in the performance or observance of any provision contained herein by reason of an act of a Force Majeure. Performance times under this Agreement shall be extended for a period of time equivalent to the time lost because of any delay that is excusable under this Section 18, subject in any case to Securities Laws. |
| 18.2 | For the purposes of this Agreement, “Force Majeure” shall mean an event, condition or circumstance (and the effect thereof including mechanical, electronic or communication interruptions, disruptions or failures resulting from any of the foregoing) that is not within the reasonable control of the Party claiming a Force Majeure and which, notwithstanding the exercise of commercially reasonable efforts to prevent such event, condition or circumstance or mitigate the effect thereof (which each Party hereby covenants to exercise), the Party claiming a Force Majeure is unable to prevent or mitigate the effect thereof, and which thus causes a delay or disruption in the performance of any obligation imposed on such Party hereunder. Subject to the foregoing, such events of Force Majeure shall include strikes, lock-outs, work stoppages, work slow-downs, industrial disturbances, storms, fires, floods, landslides, snowslides, earthquakes, explosions, |
- 26 -
| lightning, tempest, accidents, epidemics, acts of war (whether declared or undeclared), threats of war, actions of terrorists, blockades, riots, insurrections, civil commotions, public demonstrations, revolution, sabotage or vandalism, acts of God, any laws, rules, regulations, orders, directives, restraints or other actions issued, imposed or taken by any Governmental Body following the execution and delivery of this Agreement, and inability to obtain, maintain or renew or delay in obtaining, maintaining or renewing necessary permits or approvals (after using reasonable commercial efforts to do so) following the execution and delivery of this Agreement, or any cause similar to any of the foregoing; provided, however, that a Party’s own lack of funds or other financial problems shall in no event constitute Force Majeure in respect of such Party. |
| 19. | GENERAL |
| 19.1 | Except as required by law or the policies of the CSE (which the Parties acknowledge will, among other things, require this Agreement to be filed on SEDAR and a press release regarding this Agreement), no public announcement or press release concerning this Agreement or the subject matter hereof may be made by a Party without the prior consent and approval of the other Party, which consent and approval shall not be unreasonably withheld. |
| 19.2 | This Agreement (including all schedules attached hereto), any Placement Notices issued pursuant hereto and any Settlement Procedures agreed to by the Parties constitute the entire agreement between the Parties concerning the subject matter hereof, and supersede all other prior and contemporaneous agreements, understandings, negotiations and undertakings (both written and oral) between the Parties concerning the subject matter hereof. |
| 19.3 | No amendment to this Agreement shall be valid or binding unless set forth in writing and executed by the Parties. No waiver of any breach of any provision of this Agreement will be effective or binding unless made in writing and signed by the Party purporting to give the same and, unless otherwise provided, will be limited to the specific breach waived. |
| 19.4 | If any one or more of the provisions hereof, or the application thereof in any circumstance, is held invalid, illegal or unenforceable as determined by a court of competent jurisdiction, then such provision shall be given full force and effect to the fullest possible extent that it is valid, legal and enforceable, and the remainder of the provisions hereof shall be construed as if such invalid, illegal or unenforceable provision was not and had never been contained herein, but only to the extent that giving effect to such provision and the remainder of the terms and provisions hereof shall be in accordance with the intent of the Parties as reflected in this Agreement. |
| 19.5 | Without limiting Section 19.4, if one or more of the provisions hereof conflicts with any legal or regulatory requirement to which this Agreement and the relationship of the Parties hereunder are properly subject, then such legal or regulatory requirement shall prevail and the Parties shall forthwith meet and negotiate in good faith the manner in which this Agreement shall be deemed to be amended to the extent required to eliminate any such conflict. |
| 19.6 | The rights and remedies of the Parties hereunder are cumulative and are in addition to, and not in substitution for, any other rights and remedies available at law or in equity or otherwise. No single or partial exercise by a Party of any right or remedy precludes or otherwise affects the exercise of any other right or remedy to which that Party shall be entitled. |
| 19.7 | Each Party shall from time to time execute and deliver all such further documents and instruments and do all acts and things as any of the other Parties may reasonably require to effectively carry out or better evidence or perfect the full intent and meaning of this Agreement. |
| 19.8 | Time shall be of the essence of this Agreement. |
- 27 -
| 19.9 | This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of an executed Agreement by one Party to the other may be made by facsimile or other electronic transmission. |
If the foregoing correctly sets forth the understanding between the Corporation and the Agent, please confirm your acceptance and agreement by executing a copy of this letter in the space provided below for that purpose and delivering the same to the Agent, whereupon this letter shall constitute a binding agreement between the Corporation and the Agent.
[Remainder of this page intentionally left blank]
- 28 -
| Yours truly, | ||
| CANACCORD GENUITY CORP. | ||
| By: | (signed) “Ron Sedran” | |
| Name: | Ron Sedran | |
| Title: | Managing Director, Equity Capital Markets | |
THE FOREGOING IS ACCEPTED AND AGREED as of the date first above written.
| CRESCO LABS INC. | ||
| By: | (signed) “Charles Bachtell” | |
| Name: | Charles Bachtell | |
| Title: | Chief Executive Officer | |
- 29 -
SCHEDULE A
DESIGNATED REPRESENTATIVES AND AUTHORIZED REPRESENTATIVES
The Designated Representatives and Authorized Representatives of the Corporation are as follows:
| Name and Office/Title |
Email Address |
Telephone Numbers |
Authorized Representative? | |||
| Charles Bachtell, Chief Executive Officer |
[Redacted] | Office: [Redacted] | Y | |||
| Dennis Olis, Chief Financial Officer |
[Redacted] | Office: [Redacted] | Y | |||
| John Schetz, General Counsel |
[Redacted] | Office: [Redacted] | Y |
The Designated Representatives and Authorized Representatives of the Agent are as follows:
| Name and Office/Title |
Email Address |
Telephone |
Authorized Representative? | |||
| Darren Hunter Global Head Canadian Equity Trading |
[Redacted] | Office: [Redacted] | Y | |||
| Ron Sedran MD, Equity Capital Markets |
[Redacted] | Office: [Redacted] | Y | |||
| Steve Winokur MD, Investment Banking |
[Redacted] | Office: [Redacted] | Y | |||
| Brad Delany VP, Electronic Trading |
[Redacted] | Office: [Redacted] Cell: [Redacted] |
N | |||
| Ioana Pintea Administrator, Investment Banking |
[Redacted] | Office: (416) 508-3882 | N | |||
| Emily Jameson Senior Associate, Equity Capital Markets |
[Redacted] | Office: [Redacted] Cell: [Redacted] |
N |
SCHEDULE B
FORM OF PLACEMENT NOTICE
| FROM: | Cresco Labs Inc., by [Name], [Title] | |
| TO: | Canaccord Genuity Corp. Darren Hunter [Redacted] Ron Sedran [Redacted] Steve Winokur [Redacted] Brad Delany [Redacted] Ioana Pintea [Redacted] Emily Jameson [Redacted] | |
| DATE: | , | |
| SUBJECT: | Placement Notice No. | |
Reference is made herein to the Equity Distribution Agreement dated April 23, 2021 (the “Equity Distribution Agreement”) between Cresco Labs Inc. and Canaccord Genuity Corp. (the “Agent”). Unless otherwise defined herein, all capitalized terms referred to in this Placement Notice shall have the meanings attributed to them in the Equity Distribution Agreement.
Trading Instructions
Pursuant to the terms and subject to the conditions contained in the Equity Distribution Agreement, the undersigned hereby requests, as a duly appointed Authorized Representative of the Corporation, that the Agent sell Placement Shares, as agent of the Corporation, in accordance with the following trading instructions (if any of the following trading instructions are not applicable, specify “N/A”):
| Maximum number of Placement Shares to be sold (A) |
| |
| Total number of Subordinate Voting Shares outstanding on the date of this Placement Notice (B) |
| |
| Maximum number of Placement Shares to be sold expressed as a percentage of the total number of Subordinate Voting Shares outstanding on the date of this Placement Notice (A ÷ B x 100) | % | |
| Minimum price per Placement Share to be sold | $ | |
| First permitted Trading Day of trading |
| |
| Last permitted Trading Day of trading |
| |
| Specific dates on which Placement Shares may not be sold: | ||
|
| ||
| Other trading instructions: | ||
|
| ||
Other Terms Applicable to this Placement Notice
Upon receiving this Placement Notice, an Authorized Representative of the Agent will acknowledge receipt hereof by signing this Placement Notice and returning a copy hereof to the Corporation by electronic mail addressed and sent to the Designated Representatives of the Corporation or notify the Corporation that the Agent declines to accept the Placement Notice. For all purposes hereof, the Agent will be deemed not to have received this Placement Notice unless receipt hereof shall have been so acknowledged by an Authorized Representative of the Agent.
This Placement Notice is effective upon receipt by the Agent unless and until the earliest of the following occurs: (i) the Agent advises the Corporation, by electronic mail addressed and sent to the Designated Representatives of the Corporation, that it declines to accept the terms of sale set forth in this Placement Notice; (ii) the entire amount of the Placement Shares specified herein has been sold and all such sales have settled in accordance with the terms and conditions of the Equity Distribution Agreement; (iii) the Corporation or the Agent suspends the sale (or further sale, as applicable) of the Placement Shares in accordance with Section 6 of the Equity Distribution Agreement; (iv) the Agent receives from the Corporation a subsequent Placement Notice with parameters that expressly supersede those contained in this Placement Notice; or (v) the Equity Distribution Agreement has been terminated pursuant to Section 13 thereof.
This Placement Notice shall not contain any parameters that conflict with the provisions of the Equity Distribution Agreement or that subject or purport to impose upon or subject the Agent to any obligations in addition to the Agent’s obligations contained in the Equity Distribution Agreement. In the event of a conflict between the terms of the Equity Distribution Agreement and the terms of this Placement Notice with respect to an issuance and sale of Placement Shares, the terms of the Equity Distribution Agreement shall prevail.
The Corporation covenants and agrees that the delivery of this Placement Notice by or on behalf of the Corporation to the Agent shall be deemed to be an affirmation that: (i) the representations and warranties made by the Corporation in the Equity Distribution Agreement and in any certificates provided pursuant thereto are true and correct as at the time this Placement Notice is issued, except only to the extent that any such representation and warranty is, by its express terms, limited to a specific date, or as expressly disclosed in Exhibit A to this Placement Notice; and (ii) the Corporation has complied with all covenants and agreements to be performed, and satisfied all conditions to be satisfied, by or on the part of the Corporation under the Equity Distribution Agreement at or prior to the time this Placement Notice is issued.
[Remainder of this page intentionally left blank]
- 2 -
| CRESCO LABS INC. | ||
| Per: |
| |
| Signature of Authorized Representative | ||
|
| ||
| Name of Authorized Representative (Please Print) | ||
|
| ||
| Title of Authorized Representative (Please Print) | ||
|
| ||
| E-mail Address of Authorized Representative (Please Print) | ||
|
| ||
| Direct Office Telephone Number (and extension, if applicable) | ||
|
| ||
| Telephone Number (Cell) | ||
[Signatures continued on next page]
- 3 -
Acknowledged this day of , 20 by Canaccord Genuity Corp.
| Per: |
| |
| Signature of Authorized Representative | ||
|
| ||
| Name of Authorized Representative (Please Print) | ||
|
| ||
| Title of Authorized Representative (Please Print) | ||
|
| ||
| E-mail Address of Authorized Representative (Please Print) | ||
|
| ||
| Direct Office Telephone Number (and extension, if applicable) | ||
|
| ||
| Telephone Number (Cell) | ||
- 4 -
Exhibit A to Placement Notice
Exceptions to the representations and warranties made by the Corporation in the Equity Distribution Agreement and in any certificates provided pursuant thereto:
- 5 -
SCHEDULE C
REPRESENTATIONS AND WARRANTIES
| 1. | The Corporation represents and warrants to, and covenants with, the Agent (and acknowledges that the Agent is relying on such representations, warranties and covenants) as follows: |
| (a) | the Corporation: (i) is a corporation duly incorporated and organized and is a valid and subsisting corporation under the laws of British Columbia, and has all requisite power, capacity and authority to carry on its business as now conducted in each of the jurisdictions it carries on business and to own, lease or operate its Assets and Properties and to offer, issue and sell the Offered Shares, and neither the Corporation nor, to the knowledge of the Corporation, any other person, has taken any steps or proceedings, voluntary or otherwise, requiring or authorizing the Corporation’s dissolution or winding up, and (ii) has full corporate right, power and authority to execute this Agreement and to carry out its obligations hereunder and thereunder; |
| (b) | the Corporation is the direct or indirect registered and beneficial owner of all of the issued and outstanding shares and other voting securities of each of its Material Subsidiaries, in each case, except as disclosed in the Prospectus, free and clear of all encumbrances, liens, mortgages, hypothecations, security interests, charges or adverse interests whatsoever, and no person, firm, corporation or entity has any agreement, option, right or privilege (whether pre-emptive or contractual) capable of becoming an agreement or option, for the purchase from the Corporation or any Subsidiary of any of the shares or other securities of any Material Subsidiary; |
| (c) | this Agreement has been duly authorized by all necessary corporate action on the part of the Corporation and constitutes valid obligations of the Corporation legally binding upon the Corporation, enforceable in accordance with its terms, subject to the fact that enforceability may be affected by bankruptcy, insolvency, arrangement, liquidation, moratorium, reorganization or other similar laws of general application relating to or affecting the enforcement of creditors’ rights generally, by general principles of equity, including the fact that equitable remedies (such as specific performance and injunctive relief) may only be awarded in the discretion of a court, applicable statutes of limitations and that the ability to sever unenforceable terms may be limited by applicable Law; |
| (d) | each Material Subsidiary is a corporation incorporated, amalgamated, continued or organized and is validly existing under the laws of its jurisdiction of incorporation, amalgamation, continuation or organization and has all requisite power, capacity and authority to carry on its business as now conducted in each of the jurisdictions it carries on business and to own, lease or operate its Assets and Properties and none of the Material Subsidiaries nor, to the knowledge of the Corporation, any other person, has taken any steps or proceedings, voluntary or otherwise, requiring or authorizing such Material Subsidiaries’ dissolution or winding up; |
| (e) | other than in respect of U.S. Marijuana Laws, the Corporation and each of its Subsidiaries: (i) has conducted and is conducting its business in compliance with all applicable Laws of each jurisdiction in which its business is carried on, other than non-compliance that individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect, and, to the knowledge of the Corporation, there are no facts that would give rise to a notice of material non-compliance with any such applicable Laws, (ii) is duly licensed, registered or qualified in all jurisdictions in which it owns, leases or operates its property or carries on business where such license, registration or qualification is necessary to enable its business to be carried on as it is now conducted and Assets and Properties to be owned, leased or operated, except where the failure to be so licensed, |
| registered or qualified would not reasonably be expected to have a Material Adverse Effect, and all such licenses, registrations or qualifications are valid and existing and in good standing to the extent they are material to the Corporation and its Subsidiaries taken as a whole; |
| (f) | the Corporation is a reporting issuer in each of the Qualifying Jurisdictions, is not in default in any material respect of any requirement under Securities Laws and is not on the list of defaulting issuers maintained by the Qualifying Authorities; |
| (g) | no approval, authorization, consent or other order of, and no filing, registration or recording with, any Governmental Body, any of the Qualifying Authorities or lenders to the Corporation is required of the Corporation in connection with the execution and delivery of, or with the performance by the Corporation of its obligations under this Agreement, except those which have been obtained or such customary post-Settlement Date notice filings with Qualifying Authorities and the CSE; |
| (h) | the execution and delivery of this Agreement, the performance by the Corporation of its obligations hereunder, including the offer, issue and sale of the Offered Shares, and the consummation of the transactions contemplated in this Agreement, do not and will not: |
| (i) | conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, whether after notice or lapse of time or both, (A) any statute, rule or regulation applicable to the Corporation or any Material Subsidiary, including applicable Securities Laws; (B) the constating documents or resolutions of the Corporation or any Material Subsidiary; (C) any material mortgage, note, indenture, contract, agreement, joint venture, partnership, instrument, lease or other document to which the Corporation or any Subsidiary is a party or by which it is bound; or (D) any judgment, decree or order binding the Corporation or its Assets and Properties or any Subsidiary or its Assets and Properties; or except, in the case of clauses (C) and (D) above, for such breach, violation or default which has not had and would not reasonably be expected to have a Material Adverse Effect; or |
| (ii) | affect the rights, duties and obligations of any parties to any material indenture, agreement or instrument to which the Corporation or any Subsidiary is a party, nor give a party the right to terminate any such indenture, agreement or instrument by virtue of the application of terms, provisions or conditions in such indenture, agreement or instrument, except as would not reasonably be expected to have a Material Adverse Effect; |
| (i) | the Offered Shares have been duly authorized and validly allotted and reserved for issuance, and upon receipt by the Corporation of the consideration therefor, will be issued as fully paid and non-assessable Subordinate Voting Shares; |
| (j) | the Subordinate Voting Shares, and all other classes of shares authorized and/or issued by the Corporation, Cresco and Cresco Corp., have the attributes and characteristics and conform in all material respects with the descriptions thereof contained in the Prospectus; |
| (k) | the Subordinate Voting Shares are listed and posted for trading on the CSE and all necessary consents, approvals, authorizations have been obtained by the Corporation from the CSE to ensure that, subject to fulfilling the standard listing conditions of the CSE, the Offered Shares will be listed and posted for trading on the CSE upon their issuance; |
| (l) | (i) no default exists under and no event has occurred which, after notice or lapse of time or both, or otherwise, constitutes a default under or breach, by the Corporation, any |
- 2 -
| Subsidiary, or any other person, of any material obligation, agreement, covenant or condition contained in any material contract to which the Corporation or any Subsidiary is a party; and (ii) no order, ruling or determination having the effect of suspending the sale or ceasing the trading of the Offered Shares or any other security of the Corporation, Cresco or Cresco Corp. has been issued or made by any Qualifying Authority or stock exchange or any other regulatory authority and is continuing in effect and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Corporation, are contemplated or threatened by any such authority or under any applicable Securities Laws, or except, in the case of clause (i) which has not had and would not reasonably be expected to have a Material Adverse Effect; |
| (m) | except as disclosed in the Prospectus, neither the Corporation, nor any Subsidiary is currently party to any agreement in respect of: (i) the purchase of any Assets and Properties or any interest therein that would be material to the Corporation and its Subsidiaries taken as a whole, or the sale, transfer or other disposition of any Assets and Properties or any interest therein currently owned, directly or indirectly, by the Corporation or any Subsidiary whether by asset sale, transfer of shares or otherwise, that would be material to the Corporation and its Subsidiaries taken as a whole; or (ii) the change of control of the Corporation (whether by sale or transfer of shares or sale of all or substantially all of the Assets and Properties of the Corporation or otherwise); |
| (n) | the Corporation Financial Statements: (i) have been prepared in accordance with IFRS consistently applied throughout the periods referred to therein, (ii) present fairly, in all material respects, the financial position (including the assets and liabilities, whether absolute, contingent or otherwise as required by IFRS) of the Corporation and the Subsidiaries on a consolidated basis as at such dates and the results of its operations and its cash flows for the periods then ended and contain and reflect adequate provisions or allowance for all reasonably anticipated liabilities, expenses and losses of the Corporation and the Subsidiaries on a consolidated basis in accordance with IFRS, and (iii) have been audited (in the case of the annual financial statements comprising the Corporation Financial Statements) or have been reviewed (in the case of the interim financial statements comprising the Corporation Financial Statements) by independent public accountants within the meaning of applicable Securities Laws and the rules of the Chartered Professional Accountants of Canada, and there has been no change in accounting policies or practices of the Corporation since January 1, 2020 except as disclosed in the Corporation Financial Statements. Except as set out in the Corporation Financial Statements or as incurred in the ordinary course of business since December 31, 2020 and as would not individually or on the aggregate have a Material Adverse Effect, the Corporation does not have any outstanding indebtedness or any liabilities or obligations including any unfunded obligation under any employee plan, whether accrued, absolute, contingent or otherwise as of the date of the applicable financial statements; |
| (o) | there are no off-balance sheet transactions, arrangements, obligations (including contingent obligations) or other relationships of the Corporation or the Subsidiaries with unconsolidated entities and there are no other material liabilities of the Corporation or the Subsidiaries (absolute, accrued, contingent or otherwise), except as disclosed in the Corporation Financial Statements or incurred in the ordinary course of business since the date of the last interim Financial Statements; |
| (p) | the Corporation maintains a system of internal accounting controls sufficient to provide reasonable assurances that, (i) transactions are executed in accordance with management’s general or specific authorization, and (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with IFRS and to maintain accountability for assets; |
- 3 -
| (q) | all Taxes due and payable by the Corporation and the Subsidiaries have been paid, other than any immaterial amounts (considered in the context of the Corporation and its Subsidiaries, taken as a whole) as may have failed to have been paid when due. All tax returns, declarations, remittances and filings required to be filed by each of the Corporation and the Material Subsidiaries have been filed with all appropriate Governmental Body and all such returns, declarations, remittances and filings are complete and accurate, in all material respects, and no material fact or facts have been omitted therefrom which would make any of them materially misleading. No examination of any tax return of the Corporation or any of the Material Subsidiaries is currently in progress to the knowledge of Corporation, and there are no material (considered in the context of the Corporation and its Subsidiaries, taken as a whole) issues or disputes outstanding with any Governmental Body respecting any taxes that have been paid, or may be payable, by the Corporation or the Subsidiaries. There are no agreements, waivers or other arrangements with any taxation authority providing for an extension of time for any assessment or reassessment of Taxes with respect to the Corporation or any Material Subsidiary; |
| (r) | neither Corporation nor any of the Material Subsidiaries have: (i) made an assignment in favour of its creditors nor a proposal in bankruptcy to their respective creditors or any class thereof, nor has any petition for a receiving order been presented in respect of them, or (ii) initiated proceedings with respect to a compromise or arrangement with their respective creditors or for their winding up, liquidation or dissolution. No receiver has been appointed in respect of the Corporation or the Material Subsidiaries or any of their respective Assets and Properties and no execution or distress has been levied upon any of their Assets and Properties; |
| (s) | the Corporation has established on its books and records reserves that are adequate for the payment of all Taxes not yet due and payable, and there are no liens for Taxes on the Assets and Properties of the Corporation or the Subsidiaries (other than liens for Taxes that are not yet due and payable or that are being contested in good faith), and, to the knowledge of the Corporation, there are no audits pending of the tax returns of the Corporation or any Subsidiary (whether federal, state, provincial, local or foreign) and there are no claims which have been asserted relating to any such tax returns, in each case under this clause (s) which would reasonably be expected to have a Material Adverse Effect; |
| (t) | Marcum LLP are independent auditors with respect to the Corporation as required under Securities Laws and there has not been any “disagreement” or “reportable event” (within the respective meanings of NI 51-102) with Marcum LLP or any former auditors of the Corporation; |
| (u) | the audit committee’s responsibilities and composition comply with National Instrument 52- 110 Audit Committees of the Canadian Securities Administrators, as such instrument applies to “venture issuers”; |
| (v) | the authorized capital of the Corporation consists of an unlimited number of Subordinate Voting Shares, Special Subordinate Voting Shares, Super Voting Shares and Proportionate Voting Shares, of which 237,132,070 Subordinate Voting Shares, 63,868,296 Special Subordinate Voting Shares, 500,000 Super Voting Shares and 136,459 Proportionate Voting Shares are issued and outstanding as fully paid and non- assessable shares in the capital of the Corporation as of the close of business on April 22, 2021; |
| (w) | no person has any agreement, option, right or privilege (whether pre-emptive, contractual or otherwise) capable of becoming an agreement for the purchase, acquisition, subscription for or issue of any of the unissued Subordinate Voting Shares or other securities of the Corporation or (directly or indirectly) any Material Subsidiary or any other |
- 4 -
| security convertible into or exchangeable for any such shares or securities, or to require the Corporation or any Material Subsidiary to purchase, redeem or otherwise acquire any of the outstanding securities in the capital of the Corporation or any Material Subsidiary, except as disclosed in the Prospectus in respect of the Corporation; |
| (x) | except as disclosed in the Prospectus, to the knowledge of the Corporation, no agreement is in force or effect which in any manner affects the voting or control of any of the securities of the Corporation or any Material Subsidiary; |
| (y) | except as disclosed in the Prospectus, no legal or governmental actions, suits, judgments, investigations or proceedings are pending to which the Corporation or any Subsidiary, or to the knowledge of the Corporation, the directors, officers or employees of the Corporation or a Subsidiary are a party or to which the Assets and Properties of the Corporation or a Subsidiary is subject and, to the knowledge of the Corporation, no such proceedings have been threatened against or are pending with respect to the Corporation or any Subsidiary, or with respect to their Assets and Properties and none of the Corporation or any Subsidiary is subject to any judgment, order, writ, injunction, decree or award of any Governmental Body, which, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect; |
| (z) | neither the Corporation nor any Material Subsidiary is in violation of its constating documents; |
| (aa) | except as disclosed in the Prospectus, other than liens arising in the ordinary course of business which, individually or in the aggregate, do not and will not have a Material Adverse Effect, the Corporation and each Material Subsidiary owns or has the right to full use of all Assets and Properties owned or used in its business free and clear of any actual, pending or, to the knowledge of the Corporation, threatened claims, liens, charges, options, set- offs, free-carried interests, royalties, encumbrances, security interests or other interests whatsoever; |
| (bb) | except as would not reasonably be expected to have a Material Adverse Effect, all contracts to which the Corporation and/or any Subsidiary is a party are, to the knowledge of the Corporation, in full force and effect and are valid and enforceable by and against the Corporation or the Subsidiary, as the case may be, in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting the rights of creditors generally, and except as limited by the application of equitable principals when equitable remedies are sought, applicable statutes of limitations and by the fact that the ability to sever unenforceable terms may be limited by applicable Laws, and none of the Corporation or any Subsidiary is in material default or breach of any contract that is material to the Corporation and its Subsidiaries taken as a whole; |
| (cc) | to the knowledge of the Corporation and other than certain restrictions on the registration of trademarks, patents and other Intellectual Property related to cannabis at the U.S. federal level, the Corporation and/or the Material Subsidiaries, as applicable, own or have obtained valid and enforceable licenses for, or other rights to use, the Intellectual Property material to its business as of the date hereof and the Corporation and each Subsidiary is not a party to or bound by any contract or any other obligation whatsoever that limits or impairs its ability to sell, transfer, assign or convey, or that otherwise affects, such Intellectual Property, except in each case that would not have a Material Adverse Effect. There is no pending action or proceeding, nor any action threatened in writing or proceeding, against any person by the Corporation and the Subsidiaries with respect to the use of the Intellectual Property material to the business of the Corporation and its Subsidiaries taken as a whole, and there are no state of facts or circumstances which cast doubt on the validity or enforceability of such Intellectual Property, except for |
- 5 -
| circumstances which would not have a Material Adverse Effect. To the knowledge of the Corporation, the conduct of the Corporation’s and the Subsidiaries’ respective businesses does not infringe upon the intellectual property rights, domestic or foreign, of any other person, except where such infringement would not have a Material Adverse Effect and the Corporation and the Subsidiaries have not received any claim or notice (written or otherwise) that the conduct of their respective businesses, including the use of the Intellectual Property, infringes upon or breaches any industrial or intellectual property rights of any other person, or the trade secrets, know-how or confidential or proprietary information of any other person, except where such claim or notice would not reasonably be expected to have a Material Adverse Effect; |
| (dd) | with respect to each premises of the Corporation and each of the Material Subsidiaries which is material to the business of the Corporation and which the Corporation or a Material Subsidiary occupies as tenant (each, a “Leased Premises”), the Corporation or a Material Subsidiary occupies such Leased Premises and has the exclusive right to occupy and use such Leased Premises and each of the leases pursuant to which the Corporation or a Material Subsidiary occupies such Leased Premises is, to the knowledge of the Corporation, in good standing and in full force and effect in all material respects under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made or proposed to be made of such property and buildings by the Corporation or the Material Subsidiaries; |
| (ee) | neither the Corporation nor any Material Subsidiary is a party to or bound by any collective agreement and is not currently conducting negotiations with any labour union or employee association; |
| (ff) | the Corporation and each Subsidiary is in compliance with all laws respecting employment and employment practices, terms and conditions of employment, pay equity and wages and has not and is not engaged in any unfair labour practice, except in each case as would not reasonably be expected to have a Material Adverse Effect; |
| (gg) | each employee benefit plan that is maintained, administered or contributed to by the Corporation and the Material Subsidiaries for employees or former employees of the Corporation and the Material Subsidiaries has been maintained in all material respects in compliance with its terms and applicable Laws. All material accruals for unpaid vacation pay, premiums for unemployment insurance, health premiums, federal or state pension plan premiums, accrued wages, salaries and commissions and employee benefit plan payments have been reflected in the books and records of the Corporation and the Material Subsidiaries, except as would not reasonably be expected to have a Material Adverse Effect; |
| (hh) | no material labour dispute, disruption, grievance, arbitration or other conflict exists with the employees of the Corporation or the Material Subsidiaries, or, to the knowledge of the Corporation, is imminent or threatened; |
| (ii) | to the knowledge of the Corporation, since January 1, 2020, none of the directors, officers or employees of the Corporation or any of the Material Subsidiaries, any person who owns, directly or indirectly, an ownership interest in the Material Subsidiaries or any associate or affiliate of any of the foregoing, had or has any material interest, direct or indirect, in any transaction or any proposed transaction (including any loan made to or by any such person) with the Corporation or the Material Subsidiaries which, as the case may be, materially affects, is material to or will materially affect the Corporation or the Material Subsidiaries, except as disclosed in the Prospectus; |
| (jj) | the Corporation and the Subsidiaries (i) have obtained insurance policies with responsible insurers as are appropriate to their respective Assets and Properties, are sufficient for all |
- 6 -
| applicable requirements of applicable Law and in such amounts and against such risks as are customarily carried and insured against by comparable businesses, and all such insurance policies are in full force and effect, except in each case as would not reasonably be expected to have a Material Adverse Effect; (ii) are not in default with respect to the payment of any premium or compliance with any of the provisions contained in such insurance policies and have not failed to give any notice or present any material claim under any such insurance policy in due and timely fashion, except as would not reasonably be expected to have a Material Adverse Effect. Except as would not reasonably be expected to have a Material Adverse Effect, neither the Corporation nor any Subsidiary has received notice from any of the insurers regarding cancellation of such insurance policy; |
| (kk) | the minute books, share certificate books, registers of securityholders, registers of transfers and registers of directors and partners and any similar corporate records of the Corporation and the Material Subsidiaries are complete and accurate in all material respects; |
| (ll) | other than in respect of U.S. Marijuana Laws or as otherwise publicly announced, to its knowledge, the Corporation is not aware of any applicable Law or governmental position or change in applicable Law or change in governmental position which it anticipates may have a Material Adverse Effect; |
| (mm) | except as would not have Material Adverse Effect, each of the Corporation, the Subsidiaries and each of their respective Assets and Properties and the operation of their respective businesses, (i) are in compliance with any and all Environmental Laws, (ii) the Corporation and each of the Subsidiaries has complied in all respects with all reporting and monitoring requirements under all Environmental Laws, (iii) has received all material permits, licenses or other approvals required under applicable Environmental Laws to conduct their business, and (iv) is in compliance with all terms and conditions of any such permit, license or approval; |
| (nn) | except for the Agent, there is no person acting or purporting to act at the request of the Corporation, who is entitled to any brokerage or finder’s fee in connection with the transactions contemplated by this Agreement; |
| (oo) | except as disclosed in the Prospectus, since December 31, 2020, there has not been any material change in the business, affairs, operations, revenues, capital, properties, assets or liabilities (absolute, accrued, contingent or otherwise), condition (financial or otherwise) or results of operations of the Corporation and the Subsidiaries (taken as a whole) which would have a Material Adverse Effect; |
| (pp) | neither the Corporation nor any of its Subsidiaries nor, to the knowledge of the Corporation, any director, officer, agent, employee, affiliate or other person acting on behalf of the Corporation or any of its Subsidiaries has, in the course of its actions for, or on behalf of, the Corporation or any of its Subsidiaries (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any domestic Government Official, “foreign official” (as defined in the U.S. Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (collectively, the “FCPA”)) or employee from corporate funds; (iii) violated or is in violation of any provision of the FCPA, the Corruption of Foreign Public Officials Act (Canada), or any other applicable anti-bribery statute or regulation; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any domestic Government Official, foreign official or employee; and the Corporation and its Subsidiaries have conducted their respective businesses, transactions, negotiations, discussions and dealings in compliance with applicable anti- bribery and anti-corruption statutes laws and regulations applicable in any jurisdiction in which they are located or conducting business; |
- 7 -
| (qq) | other than in respect of certain United States federal laws relating to the cultivation, distribution or possession of marijuana in the United States and other related judgments, orders or decrees (collectively, the “U.S. Marijuana Laws”), the operations of the Corporation and its Subsidiaries are and have been conducted at all times in compliance with the anti-money laundering laws of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines issued, administered or enforced by any Governmental Body to which they are subject (collectively, the “Anti-Money Laundering Laws”) and no action, suit or proceeding by or before any Governmental Body or any arbitrator involving the Corporation or its Subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Corporation, threatened; |
| (rr) | neither the Corporation nor any of its Subsidiaries nor, to the knowledge of the Corporation, any director, officer, agent, employee, affiliate or person acting on behalf of the Corporation or its Subsidiaries is currently subject to any U.S. sanctions administered by the OFAC; and the Corporation will not directly or indirectly use the proceeds under any ATM Distribution, or lend, contribute or otherwise make available such proceeds to any Subsidiary, or any joint venture partner or other person or entity, for the purpose of facilitating or financing the activities of or business with any person, or in any country or territory, that currently is the subject to any sanctions administered by OFAC; |
| (ss) | to the knowledge of the Corporation, the Corporation and the Subsidiaries’ information technology assets and equipment, computers, systems, networks, hardware, software, websites, applications, and databases (collectively, “IT Systems and Data”) are adequate for, and operate and perform in all respects as required in connection with the operation of the business of the Corporation and the Subsidiaries as currently conducted, free and clear of all material bugs, errors, defects, Trojan horses, time bombs, malware and other corruptants, except in each case as would not reasonably be expected to have a Material Adverse Effect. Except as would not reasonably be expected to have a Material Adverse Effect, the Corporation and the Subsidiaries have implemented and maintain commercially reasonable physical, technical and administrative controls, policies, procedures, and safeguards to maintain and protect their material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and Data used in connection with their businesses; |
| (tt) | the Corporation has not filed any confidential material change report which remains confidential as at the date hereof; |
| (uu) | the Corporation has filed a current annual information form in the form prescribed by NI 51-102 in each of the Qualifying Jurisdictions prior to the date of this Agreement; the Corporation is as of the date hereof an Eligible Issuer in the Qualifying Jurisdictions and, on the dates of and upon filing of the Prospectus Supplement, will be an Eligible Issuer in the Qualifying Jurisdictions and there will be no documents required to be filed under the applicable Securities Laws of the Qualifying Jurisdictions in connection with any ATM Distribution of the Offered Shares that will not have been filed as required as at those respective dates; |
| (vv) | the Corporation has filed all documents forming the Public Record on a timely basis, except for any failure to file on a timely basis which is not material. As of their respective dates, the documents forming the Public Record complied in all material respects with the requirements of the applicable Securities Laws of the Qualifying Jurisdictions, and none of the documents forming the Public Record, when filed, contained any misrepresentation or contained an untrue statement of a material fact, or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made, which has not been corrected by the filing on a public basis of a subsequent document which forms part of the Public Record; |
- 8 -
| (ww) | subject to the qualifications and limitations described under the heading “Eligibility for Investment” in the Prospectus Supplement, the Offered Shares will be qualified investments under the Tax Act and the regulations thereunder for trusts governed by registered retirement savings plans, registered retirement income funds, registered education savings plans, deferred profit sharing plans, a registered disability savings plan and tax free savings accounts; |
| (xx) | the definitive form and terms of the certificate representing the Subordinate Voting Shares, if certificated, have been duly approved and adopted by the board of directors of the Corporation and the form and terms of the certificate representing the Subordinate Voting Shares do not and will not conflict with any applicable Laws or rules, by-laws and regulations of the CSE; |
| (yy) | Odyssey Trust Company has been duly appointed as the registrar and transfer agent for the Subordinate Voting Shares; |
| (zz) | all forward-looking information and statements of the Corporation contained in the Prospectus and the assumptions underlying such information and statements, subject to any qualifications contained therein, including any forecasts and estimates, expressions of opinion, intention and expectation, as at the time they were or will be made, were or will be made on reasonable grounds after due and proper consideration and were or will be truly and honestly held and fairly based; |
| (aaa) | the statistical, industry and market related data included in the Prospectus is derived from sources which the Corporation reasonably believes to be accurate, reasonable and reliable, and such data is consistent with the sources from which it was derived; |
| (bbb) | other than in respect of U.S. Marijuana Laws, the acquisitions of the respective material businesses and/or companies disclosed in the Prospectus were effected in compliance with all applicable Laws, and no payments will accrue, be owing or be payable by, the Corporation or any Subsidiary to any person in connection with any such acquisition except: (i) as and to the extent disclosed in the Prospectus, or (ii) for any such payments as would not be material to the Corporation and the Subsidiaries (taken as a whole); |
| (ccc) | other than in respect of U.S. Marijuana Laws and except as would not reasonably be expected to have a Material Adverse Effect: (i) each of the Corporation and the Subsidiaries have all licenses, permits, authorizations, certifications, consents and orders necessary for the conduct of its business as presently conducted, (ii) none of the Corporation or the Subsidiaries have received any penalty, enforcement action or public notice violation or notice thereof from any state, municipal or local government in respect of such licenses and/or permits, and (iii) each of the Corporation and the Subsidiaries is in compliance in all material respects with each material license and permit held by it; |
| (ddd) | other than as disclosed in the Prospectus, the Corporation has not completed or entered into an agreement to complete a “significant acquisition” nor is it proposing any “probable acquisitions” (as such terms are used in NI 44-101 and NI 51-102) that would require the inclusion of any additional financial statements (in addition to the financial statements included in the Prospectus) or any pro forma financial statements pursuant to the Securities Laws of the Qualifying Jurisdictions, and for which a Business Acquisition Report has not been filed under NI 51-102; |
| (eee) | other than as disclosed in the Prospectus, the Corporation has not entered into any agreement or arrangement in respect of a transaction that would be a “significant acquisition” for the purposes of Part 8 of NI 51-102 and there are no proposed acquisitions by the Corporation that have progressed to the state where a reasonable person would believe that the likelihood of the Corporation completing the acquisition is high and would |
- 9 -
| be a “significant acquisition” for the purposes of Part 8 of NI 51-102 that would require the inclusion or incorporation by reference of any additional financial statements or pro forma financial statements in the Prospectus or the filing of a Business Acquisition Report pursuant to Securities Laws; |
| (fff) | the Corporation is a “foreign private issuer” (as defined in Rule 405 under the U.S. Securities Act); |
| (ggg) | the Corporation is, and will at each Placement Time be, in compliance in all material respects with the policies of the CSE existing on the date hereof; |
| (hhh) | at the respective times of filing and at all times subsequent thereto during the distribution of the Offered Shares, the Base Shelf Prospectus and the Prospectus Supplement together with all Supplementary Material will comply in all material respects with the requirements of all applicable Securities Laws pursuant to which they have been filed and will provide full, true and plain disclosure of all material facts relating to the Offered Shares and will not contain any misrepresentation, provided that the foregoing shall not apply with respect to Agent’s Information; and |
| (iii) | any Acquired Business Financial Statements included in the Prospectus (i) have been prepared in accordance with IFRS (or other applicable permitted accounting principles) consistently applied throughout the periods referred to therein, (ii) contain no misrepresentations,(iii) are in compliance with the applicable requirements of Form 51- 102F4 – Business Acquisition Report and National Instrument 52-107 – Acceptable Accounting Principles and Auditing Standards, and (iv) have been audited (in the case of the annual financial statements) or have been reviewed (in the case of the interim financial statements) by independent public accountants or auditors within the meaning of applicable Securities Laws. |
- 10 -
SCHEDULE D
FORM OF OFFICER’S CERTIFICATE
TO: CANACCORD GENUITY CORP.
This certificate is delivered to you today pursuant to Section 9.3 of the Equity Distribution Agreement dated April 23, 2021 (the “Agreement”) between Cresco Labs Inc. (the “Corporation”) and Canaccord Genuity Corp.
The undersigned, being the duly appointed and , respectively, of the Corporation, hereby certify, for and on behalf of the Corporation and not in the respective personal capacities of the undersigned, that to the knowledge of the undersigned:
| (a) | [except as set out in Exhibit A hereto,] the representations and warranties of the Corporation contained in the Agreement are true and correct in all material respects (except for those that are qualified by materiality or Material Adverse Effect which shall be true and correct in all respects) on and as of the date hereof (except to the extent such representations and warranties speak as of a specific date or time in which case such as of that specific date or time only), and |
| (b) | the Corporation has complied with all covenants and agreements and satisfied all conditions on its part to be complied with or satisfied pursuant to the Agreement at or prior to the date hereof. |
| DATED: |
|
| CRESCO LABS INC. | ||
| By: |
| |
| Name: | ||
| Title: | ||
| By: |
| |
| Name: | ||
| Title: | ||
Exhibit A to Officer’s Certificate
Exceptions to the representations and warranties made by the Corporation in the Equity Distribution Agreement and in any certificates provided pursuant thereto:
- 2 -
SCHEDULE E
MATTERS TO BE ADDRESSED IN LEGAL OPINIONS
| A. | MATTERS TO BE ADDRESSED IN OPINION OF THE CORPORATION’S CANADIAN COUNSEL |
Following are the matters to be addressed in the opinion of Bennett Jones LLP, as Corporation’s Counsel in Canada, to be delivered pursuant to Section 9.2(a)(i) of the Agreement:
| 1. | that the Corporation is a corporation validly incorporated and existing under the BCBCA and has all requisite corporate power and capacity to carry on its business as presently carried on and to own, lease and operate its properties and assets, as described in the Prospectus; |
| 2. | the attributes and characteristics of the Offered Shares conform in all material respects with the descriptions thereof in the Prospectus; |
| 3. | the form of the definitive certificate representing the Subordinate Voting Shares has been duly approved and adopted by the Corporation and complies with the terms and conditions of the Constating Documents, the BCBCA and the requirements of the CSE; |
| 4. | Odyssey Trust Company has been duly appointed as the transfer agent and registrar for the Subordinate Voting Shares; |
| 5. | the Offered Shares have been duly authorized and validly allotted and reserved for issuance, and upon receipt by the Corporation of the consideration therefor, will be issued as fully paid and non- assessable Subordinate Voting Shares; |
| 6. | the Corporation has the necessary corporate power and capacity to certify and file the Base Shelf Prospectus and the Prospectus Supplement and all necessary corporate action has been taken by the Corporation to authorize the certification by it of the Base Shelf Prospectus and the Prospectus Supplement and the filing thereof, as the case may be, in each of the Qualifying Jurisdictions under Securities Laws; |
| 7. | the Corporation has the necessary corporate power and capacity to execute and deliver this Agreement and to perform its obligations hereunder and to carry out the transactions contemplated hereby and by the Base Shelf Prospectus and Prospectus Supplement (including to sell the Offered Shares), as applicable, and this Agreement has been duly authorized, executed and delivered by or on behalf of the Corporation and is a legal, valid and binding obligation of the Corporation, enforceable against the Corporation in accordance with its terms (subject to reasonable opinion qualifications); |
| 8. | the execution and delivery by the Corporation of this Agreement, the fulfilment of the terms hereof by the Corporation, and the sale and delivery by the Corporation at the Placement Time of the Placement Shares do not and will not result in a breach of, and do not and will not create a state of facts which, after notice or lapse of time or both, will result in a breach of, and do not and will not conflict with, any statute, rule or regulation applicable to the Corporation or any terms, conditions or provisions of the Constating Documents; |
| 9. | except such as have been made or obtained under Securities Laws, no consent, approval, authorization or order of or filing, registration or qualification with any court, Governmental Body or regulatory authority is required, for the execution, delivery and performance by the Corporation this Agreement or the consummation by the Corporation of the transactions contemplated herein; |
| 10. | all necessary documents have been filed, all necessary proceedings have been taken and all other legal requirements have been fulfilled by the Corporation under the laws of each of the Qualifying |
| Jurisdictions to qualify the distribution of the Offered Shares in each of the Qualifying Jurisdictions through investment dealers or brokers registered under applicable Securities Laws who have complied with the relevant provisions of such legislation; |
| 11. | confirming the statements under the heading “Eligibility for Investment” in the Prospectus Supplement, subject to the qualifications, assumptions and limitations set out under such heading; and |
| 12. | the compliance with the laws of the Province of Québec in connection with the purchase of Placement Shares by purchasers in such province. |
| B. | MATTERS TO BE ADDRESSED IN OPINION OF THE CORPORATION’S GENERAL COUNSEL |
Following are the matters to be addressed in the opinion of internal general counsel to the Corporation to be delivered pursuant to Section 9.2(a)(ii) of this Agreement:
| 13. | the valid corporate existence of Cresco and Cresco Corp.; and |
| 14. | the corporate power and capacity of Cresco and Cresco Corp. to carry on its business and activities and to own and lease its property and assets. |
In connection with such opinion, internal counsel of the Corporation may rely on, to the extent appropriate in the circumstances but only as to matters of fact, on certificates of officers of the Corporation, Material Subsidiaries and others.
- 2 -
SCHEDULE F
INDEMNIFICATION AND CONTRIBUTION
| 1. | INDEMNIFICATION |
| 1.1 | Indemnification of Agent. The Corporation (the “Indemnifying Party”) agrees to indemnify and hold harmless the Agent, the directors, officers, partners, employees and agents of the Agent and each Person, if any, who (i) controls the Agent within the meaning of the Act, or (ii) is controlled by or is under common control with the Agent (collectively, the “Indemnified Parties” and individually, an “Indemnified Party”), from and against any and all costs, charges, expenses, losses (other than losses of profit in connection with the distribution of the Offered Shares), claims, actions, suits, proceedings, damages or liabilities, joint or several (including, if settled in accordance with the terms hereof, the aggregate amount paid in reasonable settlement of any actions, suits, proceedings or claims) and the reasonable fees and disbursements and taxes of their counsel that may be incurred in advising with respect to and/or defending any action, suit, proceeding, investigation or claim that may be made or threatened against any Indemnified Party in enforcing this indemnity (collectively, the “Claims”), whether under the provisions of any statute or otherwise, and which are caused or incurred by or arise, directly or indirectly, by reason of: |
| (a) | any untrue statement or alleged untrue statement of a material fact contained in the Prospectus, or in any other material or document filed under any Securities Laws or delivered by or on behalf of the Corporation pursuant to this Agreement or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or any misrepresentation or alleged misrepresentation contained therein; |
| (b) | any breach by the Corporation of any of its covenants or agreements contained in this Agreement including any default by the Corporation of its obligation to issue and deliver to the Agent any Placement Shares on the applicable Settlement Date in accordance with the Settlement Procedures; |
| (c) | any inaccuracy or misrepresentation in any representation or warranty of the Corporation set forth in Schedule C of the Agreement or in any certificate of the Corporation delivered pursuant to this Agreement; |
| (d) | the failure by the Corporation to comply with any applicable requirement of Securities Laws in connection with the transactions contemplated by this Agreement; or |
| (e) | any order or any inquiry, investigation or proceeding instituted, threatened or announced by any Governmental Body, based upon any untrue statement, omission or misrepresentation contained in the Prospectus, preventing or restricting the trading in or the sale of distribution of the Offered Shares; |
provided, however, that the indemnity in this Section 1.1 shall not apply to Claims arising out of or based, directly or indirectly, on any untrue statement, omission or misrepresentation, or any alleged untrue statement, omission or misrepresentation, made in reliance upon and in conformity with written information relating to the Agent and furnished in writing to the Corporation by the Agent expressly for use in the Prospectus, or in any other material or document filed under any Securities Laws or delivered by or on behalf of the Agent pursuant to this Agreement, or in the event and to the extent that a court of competent jurisdiction in a final judgment from which no appeal can be made or a regulatory authority in a final ruling from which no appeal can be made shall determine that the Claim resulted from the fraud, willful misconduct or gross negligence of the Indemnified Party claiming indemnity (provided that for greater certainty, an Indemnified Party’s failure to
- 3 -
conduct such reasonable investigation so as to provide reasonable grounds for a belief that the Prospectus contained no misrepresentation (or, colloquially, to permit the Indemnified Party to sustain a “due diligence defence” under Securities Laws) shall not constitute “fraud”, “willful misconduct” or “gross negligence” for purposes of this Section 1.1 or otherwise disentitle an Indemnified Party from claiming indemnification). This indemnity agreement shall be in addition to any liability that the Corporation might otherwise have.
| 1.2 | Actions Against Parties; Notification. Each Indemnified Party shall give notice as promptly as reasonably practicable to the Indemnifying Party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify the Indemnifying Party shall not relieve such Indemnifying Party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. If any such action is brought against any Indemnified Party and it notifies the Indemnifying Party of its commencement, the Indemnifying Party shall be entitled to participate in and, to the extent that it elects by delivering written notice to the Indemnified Party promptly after receiving notice of the commencement of the action from the Indemnified Party, to assume the defense of the action, with counsel reasonably satisfactory to the Indemnified Party, and after notice from the Indemnifying Party to the Indemnified Party of its election to assume the defense, the Indemnifying Party shall not be liable to the Indemnified Party for any legal or other expenses except as provided below and except for the reasonable costs of investigation subsequently incurred by the Indemnified Party in connection with the defense. The Indemnified Party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel shall be at the expense of such Indemnified Party unless (a) the employment of counsel by the Indemnified Party has been authorized in writing by the Indemnifying Party, (b) the Indemnified Party has reasonably concluded (based on advice of counsel to the Indemnified Party) that there may be legal defenses available to it or other Indemnified Parties that are different from or in addition to those available to the Indemnifying Party, (c) a conflict or potential conflict exists (based on written advice of counsel to the Indemnified Party) between the Indemnified Party and the Indemnifying Party (in which case the Indemnifying Party shall not have the right to direct the defense of such action on behalf of the Indemnified Party), or (d) the Indemnifying Party has not in fact employed counsel, reasonably satisfactory to the Indemnified Party, to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees and expenses of counsel shall be at the expense of the Indemnifying Party. All such fees and expenses shall be reimbursed by the Indemnifying Party promptly as they are incurred. In no event shall the Indemnifying Party be liable for fees and expenses of more than one counsel (in addition to any local or special counsel) separate from their own counsel for all Indemnified Parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. Neither the Indemnifying Party nor any of the Indemnified Parties shall, without the prior written consent of the Indemnified Party and the Indemnified Parties, such consent not to be unreasonably withheld, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any Governmental Body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 1 or Section 2 of this Schedule F (whether or not the Indemnified Parties are actual or potential parties thereto), provided that the Indemnifying Party may consent to any such settlement, compromise or consent, without the consent of the Indemnified Parties, where such settlement, compromise or consent (y) includes an unconditional release of each Indemnified Party from all liability arising out of such litigation, investigation, proceeding or claim and (z) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any Indemnified Party. |
| 1.3 | If any legal proceedings shall be instituted against the Corporation or if any regulatory authority or stock exchange shall carry out an investigation of the Corporation and, in either case, any Indemnified Party is required to testify, or respond to procedures designed to discover information, in connection with or by reason of the services performed by the Agent hereunder, then the Indemnified Parties may employ their own legal counsel and the Corporation shall pay and |
- 4 -
| reimburse the Indemnified Parties for the reasonable fees, charges and disbursements (on a full indemnity basis) of such legal counsel, the other expenses reasonably incurred by the Indemnified Parties in connection with such proceedings or investigation and a fee at the normal per diem rate for any director, officer or employee of the Agent involved in the preparation for or attendance at such proceedings or investigation. However, the Corporation shall not, in connection with any such proceeding or separate but substantially similar or related proceedings arising out of the same general allegations or circumstances, be liable for the fees or expenses of more than one separate law firm in respect of all such Indemnified Parties. |
| 2. | CONTRIBUTION |
| 2.1 | If the indemnification provided for in Section 1 above is for any reason unavailable to or insufficient to hold harmless an Indemnified Party in respect of any Claims referred to therein, then each Indemnifying Party in respect of which indemnity has been sought shall contribute to the aggregate amount of such Claims incurred by such Indemnified Party, as incurred, (a) in such proportion as is appropriate to reflect the relative benefits received by the Corporation on the one hand and the Agent on the other hand from the offering of the Offered Shares pursuant to this Agreement or (b) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (a) above but also the relative fault of the Corporation on the one hand and of the Agent on the other hand in connection with the statement, omission or misrepresentation or the matters referred to in Section 1.1(b) and Section 1.1(c) above, which resulted in such Claim, as well as any other relevant equitable considerations. |
| 2.2 | The relative benefits received by the Corporation on the one hand and the Agent on the other hand in connection with the offering of the Offered Shares pursuant to this Agreement shall be deemed to be in the same proportion as the total net proceeds from the sale of the Offered Shares pursuant to this Agreement (before deducting expenses) received by the Corporation bear to the total compensation (before deducting expenses) received by the Agent from the sale of the Offered Shares on behalf of the Corporation. |
| 2.3 | The relative fault of the Corporation on the one hand and the Agent on the other hand shall be determined by reference to, among other things, whether any untrue or alleged untrue statement of a material fact, omission or alleged omission to state a material fact or misrepresentation or alleged misrepresentation relates to information supplied or which ought to have been supplied by the Corporation or by the Agent and the Parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement, omission or misrepresentation. |
| 2.4 | The Corporation and the Agent agree that it would not be just and equitable if contribution pursuant to this Section 2 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 2. The aggregate amount of the Claims incurred by an Indemnified Party and referred to above in this Section 2 shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any Governmental Body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement, omission or alleged omission or misrepresentation or alleged misrepresentation. The rights to contribution provided in this Section 2 shall be in addition to and without prejudice to any other right to contribution which the Agent may have. |
| 2.5 | Notwithstanding the provision of this Section 2, the Agent shall not be required to contribute any amount in excess of the Agent’s Fee received by it in respect of the sale of Offered Shares on behalf of the Corporation and no party who has been determined by a court of competent jurisdiction in a final judgment to have engaged in any fraud, fraudulent misrepresentation or gross negligence (provided that for greater certainty, the Agent’s failure to conduct such reasonable investigation so as to provide reasonable grounds for a belief that the Prospectus contained no |
- 5 -
| misrepresentation (or colloquially, to permit the Agent to sustain a “due diligence defence” under Securities Laws) shall not constitute “gross negligence” for purposes of this Section 2.5 or otherwise disentitle an Indemnified Person from claiming indemnification) shall be entitled to contribution any Person who has not been determined by a court of competent jurisdiction in a final judgment to have engaged in such fraud, fraudulent misrepresentation or gross negligence. |
| 2.6 | For purposes of this Section 2, each Person, if any, who controls the Agent and each affiliate of the Agent, and any directors, officers, partners, employees or agents of the Agent, shall have the same rights to contribution as the Agent, subject in each case to the provisions of this Section 2. |
| 2.7 | Any party entitled to contribution, promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made under this Section 2, will notify any such party or parties from whom contribution may be sought, but the omission to so notify will not relieve that party or parties from who contribution may be sought from any other obligation it or they may have under this Section 2 except to the extent that the failure to so notify such other party or parties materially prejudiced the substantive rights or defenses of the party or parties from whom contribution is sought. Except for a settlement entered into pursuant to Section 1.3 above, no party will be liable for contribution with respect to any action or claim settled without its written consent if such consent is required pursuant to Section 1.3 above. |
| 3. | THIRD PARTY BENEFICIARIES |
| 3.1 | It is the intention of the parties hereto that the directors, officers, partners, employees and agents of the Agent and the affiliates of the Agent (the “Agent Beneficiaries”) shall be entitled to the benefit of the covenants of the Corporation under Section 1 or Section 2 of this Schedule F, and for this purpose the Corporation hereby: (a) appoint the Agent, and the Agent hereby accepts such appointment, as trustee of the covenants of the Corporation under Section 1 or Section 2 for the benefit of the Agent Beneficiaries; and (b) acknowledges and agrees that the Agent shall be entitled to enforce such covenants on behalf of the Agent Beneficiaries notwithstanding that none of the Agent Beneficiaries is a direct party to this Agreement. |
- 6 -
SCHEDULE G
MATERIAL SUBSIDIARIES
| Name |
Jurisdiction of Organization | |
| AFS Maryland, LLC | Maryland | |
| Alta Supply, Inc. | California | |
| Arizona Facilities Supply, LLC | Arizona / Maryland | |
| Bluma Wellness Inc. | British Columbia | |
| Cali-Antifragile Corp. | California | |
| CannaRoyalty Corp. | Ontario | |
| Cresco HHH, LLC | Massachusetts | |
| Cresco Labs Ohio, LLC | Ohio | |
| Cresco Labs, LLC | Illinois | |
| Cresco Yeltrah LLC | Pennsylvania | |
| CRHC Holdings Corp. | Ontario | |
| Cub City, LLC | California | |
| FloraCal | California | |
| FloraMedex, LLC | Illinois | |
| JDRC Managed Services, LLC | Illinois | |
| Kaya Management, Inc. | California | |
| MedMar, Inc. | Illinois | |
| PDI Medical III, LLC | Illinois | |
| Phoenix Farms of Illinois, LLC | Illinois | |
| River Distributing Co., LLC | California | |
| SLO Cultivation, Inc. | California | |
| Valley Agriceuticals, LLC | New York |
Exhibit 99.7
Cresco Labs Announces Previously Filed Base Shelf Prospectus and Effectiveness of Corresponding U.S. Registration Statement
CHICAGO—(BUSINESS WIRE)—April 26, 2021—Cresco Labs Inc. (“Cresco Labs” or the “Company”) (CSE:CL) (OTCQX:CRLBF) (FSE:6CQ), a vertically integrated multistate operator and the number one U.S. wholesaler of branded cannabis products, today announced that a final base shelf prospectus, preliminarily filed on February 26th, 2021 (the “Shelf Prospectus”), replacing the Company’s prior shelf prospectus has been receipted with the securities commissions in each of the provinces of Canada. The Company also announced that a corresponding registration statement on Form F-10 (the “Registration Statement” and, together with the Shelf Prospectus, the “MJDS Shelf”) has been deemed effective by the U.S. Securities and Exchange Commission under the U.S./Canada Multijurisdictional Disclosure System.
“As the legislative branch continues to make important, incremental steps toward cannabis banking reform, Cresco Labs is getting prepared to capture the investor demand in the U.S.,” said Charlie Bachtell, CEO of Cresco Labs. “Our U.S. shelf registration statement is now effective and over the coming months we look forward to taking additional steps, such as reporting financials under GAAP, that will help enable us to up-list onto a major U.S. exchange as soon as permitted.”
The Company preliminarily filed this Shelf Prospectus in February 2021 to replace the prior base shelf prospectus that was set to expire in August 2021 and to maintain financial strength and flexibility going forward. The Company will continue its ongoing strategy of maintaining a range of tools for financing opportunities. The MJDS Shelf provides for the offer and sale of the Company’s subordinate voting shares, debt securities, subscription receipts, warrants, and units in both Canada and the U.S.
The Company today also announced a new equity distribution agreement (the “Equity Distribution Agreement”) with Canaccord Genuity Corp. to replace the Equity Distribution Agreement filed in December 2019 due to the expiration of the prior shelf prospectus. Pursuant to this Agreement, the Company may, from time to time, sell up to US$100,000,000 of its subordinate voting shares (“Subordinate Voting Shares”) in Canada (the “ATM Program”).
Since the Subordinate Voting Shares will be distributed at trading prices prevailing at the time of the sale, prices may vary between purchasers and during the period of distribution. The volume and timing of sales, if any, will be determined at the sole discretion of the Company’s management and in accordance with the terms of the Equity Distribution Agreement. Sales of Subordinate Voting Shares, if any, under the ATM Program are anticipated to be made in transactions in Canada that are deemed to be “at-the-market distributions” as defined in National Instrument 44-102 - Shelf Distributions, as sales made directly on the Canadian Securities Exchange or any other recognized Canadian “marketplace” within the meaning of National Instrument 21-101 - Marketplace Operation. The ATM Program is being made pursuant to a Canadian prospectus supplement dated April 23, 2021 (the “Prospectus Supplement”) to the Base Shelf Prospectus.
The Prospectus Supplement (together with the related Base Shelf Prospectus) and Equity Distribution Agreement are available at the Company’s profile on the SEDAR website maintained by the Canadian Securities Administrators at www.sedar.com. The Registration Statement can be found on EDGAR at www.sec.gov.
This news release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, Subordinate Voting Shares in the United States or in any other jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction.
The Subordinate Voting Shares distributed under the ATM Program have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons absent registration or an applicable exemption from the registration requirements.
About Cresco Labs Inc.
Cresco Labs is one of the largest vertically integrated multistate cannabis operators in the United States, with a mission to normalize and professionalize the cannabis industry. Employing a consumer-packaged goods (“CPG”) approach, Cresco Labs is the largest wholesaler of branded cannabis products in the U.S. Its brands are designed to meet the needs of all consumer segments and comprised of some of the most recognized and trusted national brands including Cresco, High Supply, Mindy’s Edibles, Good News, Remedi, Wonder Wellness Co. and FloraCal Farms. Sunnyside, Cresco Labs’ national dispensary brand, is a wellness-focused retailer created to build trust, education and convenience for both existing and new cannabis consumers. Recognizing that the cannabis industry is poised to become one of the leading job creators in the country, Cresco Labs operates the industry’s largest Social Equity and Educational Development initiative, SEED, which was established to ensure that all members of society have the skills, knowledge and opportunity to work and own businesses in the cannabis industry. Learn more about Cresco Labs at www.crescolabs.com.
Forward Looking Statements
This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute “forward- looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward- looking statements are not representative of historical facts or information or current condition, but instead represent only the Company’s beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of the Company’s control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as, ‘may,’ ‘will,’ ‘should,’ ‘could,’ ‘would,’ ‘expects,’ ‘plans,’ ‘anticipates,’ ‘believes,’ ‘estimates,’ ‘projects,’ ‘predicts,’ ‘potential’ or ‘continue’ or the negative of those forms or other comparable terms. The forward-looking information and forward-looking statements contained herein may include, but is not limited to, information concerning the anticipated sale and distribution of Subordinate Voting Shares under
the ATM Program, the volume and timing of the sale and distribution of Subordinate Voting Shares under the ATM Program and the Company’s intended use of the net proceeds of any offering of Subordinate Voting Shares under the ATM Program. The Company’s forward- looking statements involve known and unknown risks, uncertainties and other factors which may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including but not limited to those risks discussed under “Risk Factors” in the Company’s Annual Information Form for the year ended December 31, 2020 filed on March 26, 2021, the Base Shelf Prospectus, the Prospectus Supplement and other documents filed by the Company with Canadian securities regulatory authorities; and other factors, many of which are beyond the control of the Company. Readers are cautioned that the foregoing list of factors is not exhaustive. Because of these uncertainties, you should not place undue reliance on the Company’s forward-looking statements. No assurances are given as to the future trading price or trading volumes of Cresco Labs’ shares, nor as to the Company’s financial performance in future financial periods. The Company does not intend to update any of these factors or to publicly announce the result of any revisions to any of the Company’s forward-looking statements contained herein, whether as a result of new information, any future event or otherwise. Except as otherwise indicated, this press release speaks as of the date hereof. The distribution of this press release does not imply that there has been no change in the affairs of the Company after the date hereof or create any duty or commitment to update or supplement any information provided in this press release or otherwise.
No stock exchange, securities commission or other regulatory authority has approved or disproved the information contained herein.
Contacts
Cresco Labs Contacts:
Media:
Jason Erkes, Cresco Labs
Chief Communications Officer
press@crescolabs.com
Investors:
Jake Graves, Cresco Labs
Manager, Investor Relations
investors@crescolabs.com
For general Cresco Labs inquiries:
312-929-0993
info@crescolabs.com