Charlotte's Web Holdings, Inc 8-K/A, filed Nov 23, 2022
Charlotte's Web Holdings, Inc. (CWBHF)
About this 8-K/A
Charlotte's Web Holdings, Inc filed this 8-K/A on November 23, 2022, reporting on events of November 14, 2022.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
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Explanatory Note
This Amendment No. 1 amends the Current Report on Form 8-K filed on November 15, 2022 (the “Original Form 8-K”) by Charlotte’s Web Holdings, Inc. (the “Company”) with the Securities and Exchange Commission (the “SEC”) reporting the entry into a subscription agreement (the “Subscription Agreement”) with BT DE Investments, Inc. a wholly-owned subsidiary of BAT Group (LSE: BATS and NYSE: BTI), providing for the issuance of an approximately US$56.8 million (CS$75.3 million) convertible debenture (the “Debenture”) that is convertible into 19.9% ownership of Charlotte’s Web common shares at a conversion price of CS$2.00 per common share of the Company on the Toronto Stock Exchange (TSX) and an investor rights agreement. This amendment is being filed solely to amend the Original Form 8-K to include Exhibits 10.1, 10.2 and 10.3, which are also being made available by the Company on SEDAR. Other than as described above, this amendment does not amend any other information previously filed in the Original Form 8-K.
| Item 9.01. | Financial Statements and Exhibits. | |
| (d) | Exhibits: | |
| Exhibit No. |
Description |
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| 10.1∔† | Subscription Agreement, dated November 14, 2022, by and between BT DE Investments, Inc. a wholly-owned subsidiary of BAT Group and Charlotte’s Web Holdings, Inc. | ||
| 10.2∔† | Convertible Debenture, dated November 14, 2022, issued by Charlotte’s Web Holdings, Inc. | ||
| 10.3∔† | Investor Rights Agreement, dated November 14, 2022, by and between Charlotte’s Web Holdings, Inc. and BT DE Investments, Inc. a wholly-owned subsidiary of BAT Group. | ||
| 99.1 | Press Release of Charlotte’s Web Holdings, Inc. dated as of November 15, 2022 (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission on November 15, 2022 (File No. 000-56364)).
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| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | ||
| ∔ | Certain identified information has been excluded from the exhibit pursuant to Item 601(a)(6) and/or Item 601(b)(10)(iv) of Regulation S-K. | ||
| † |
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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.
| CHARLOTTE’S WEB HOLDINGS, INC. | |||
| Date: November 23, 2022 | By: | /s/ Stephen Rogers | |
| Stephen Rogers | |||
| Senior Vice President - General Counsel and Corporate Secretary | |||
Execution Version
Exhibit 10.1
SUBSCRIPTION
AGREEMENT
between
BT DE INVESTMENTS INC.
and
CHARLOTTE’S WEB HOLDINGS, INC.
NOVEMBER 14, 2022
[Certain information indicated by [***] has been excluded from this Exhibit 10.1 because it is private or confidential and not material.]
TABLE OF CONTENTS
ARTICLE
1
DEFINITIONS AND INTERPRETATION
| Section 1.1 | Definitions. | 1 |
| Section 1.2 | Gender and Number. | 12 |
| Section 1.3 | Headings, etc. | 12 |
| Section 1.4 | Currency. | 12 |
| Section 1.5 | Certain Phrases, etc. | 12 |
| Section 1.6 | Knowledge of the Company. | 13 |
| Section 1.7 | Accounting Terms. | 13 |
| Section 1.8 | Schedules. | 13 |
| Section 1.9 | Company Covenants and Agreements. | 13 |
| Section 1.10 | References to Persons and Agreements. | 13 |
| Section 1.11 | Statutes. | 13 |
| Section 1.12 | Non-Business Days. | 14 |
| Section 1.13 | No Presumption. | 14 |
ARTICLE
2
PURCHASE AND SALE OF CONVERTIBLE DEBENTURE
| Section 2.1 | Purchase and Sale of Convertible Debenture. | 14 |
| Section 2.2 | Purchase Price. | 14 |
| Section 2.3 | Use of Proceeds. | 14 |
ARTICLE
3
REPRESENTATION AND WARRANTIES
| Section 3.1 | Representations and Warranties of the Company. | 15 |
| Section 3.2 | Representations and Warranties of the Purchaser. | 15 |
ARTICLE
4
CLOSING DELIVERIES
| Section 4.1 | Closing Deliveries. | 15 |
ARTICLE
5
POST-CLOSING COVENANTS
| Section 5.1 | Reserved. | 16 |
ARTICLE
6
SURVIVAL AND INDEMNIFICATION
| Section 6.1 | Survival of Representations and Warranties. | 16 |
| Section 6.2 | Indemnification. | 16 |
| ( i ) |
ARTICLE
7
GENERAL PROVISIONS
| Section 7.1 | No Obligation to Finance. | 17 |
| Section 7.2 | Governing Law and Jurisdiction. | 17 |
| Section 7.3 | Notices. | 18 |
| Section 7.4 | Time of the Essence. | 19 |
| Section 7.5 | Expenses. | 19 |
| Section 7.6 | Severability. | 19 |
| Section 7.7 | Entire Agreement. | 19 |
| Section 7.8 | Successors and Assigns. | 20 |
| Section 7.9 | Third Party Beneficiaries. | 20 |
| Section 7.10 | Amendments. | 20 |
| Section 7.11 | Waiver. | 20 |
| Section 7.12 | Further Assurances. | 20 |
| Section 7.13 | Confidentiality. | 21 |
| Section 7.14 | Public Notices and Press Releases. | 22 |
| Section 7.15 | Counterparts. | 22 |
ADDENDA
Schedule A Representations and Warranties of the Company
Schedule B Representations and Warranties and Acknowledgements of the Purchaser
| ( ii ) |
SUBSCRIPTION AGREEMENT
This SUBSCRIPTION AGREEMENT dated November 14, 2022 (this “Agreement”) is made by and between BT DE INVESTMENTS INC., a corporation existing under the Laws of the State of Delaware (the “Purchaser”), and CHARLOTTE’S WEB HOLDINGS, INC., a corporation existing under the Act (the “Company”).
RECITALS:
| A. | The Purchaser wishes to purchase from the Company, and the Company wishes to issue and sell to the Purchaser, on a private placement basis, the Convertible Debenture for an aggregate purchase price of $75,341,080 (the “Investment”). |
| B. | The Purchaser and the Company wish to enter into this Agreement to record their agreement in respect of the Investment. |
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged by the Parties, the Parties hereby agree as follows:
ARTICLE
1
DEFINITIONS AND INTERPRETATION
Section 1.1 Definitions.
Whenever used in this Agreement, the following terms shall have the meanings set forth below:
“Act” means the Business Corporations Act (British Columbia).
“Affiliate” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such specified Person; provided, that, with respect to the Purchaser, “Affiliate” shall also include (1) BAT Parent and (2) all entities in which BAT Parent owns, directly or indirectly, an equity ownership of at least 50%.
“Agreement” has the meaning ascribed to such term in the preamble to this Agreement.
“Anti-Corruption Laws” means the Corruption of Foreign Public Officials Act (Canada), the UK Bribery Act 2010 (United Kingdom), the Foreign Corrupt Practices Act of 1977 (United States) and any other analogous Laws.
“Anti-Spam Laws” means an Act to promote the efficiency and adaptability of the Canadian economy by regulating certain activities that discourage reliance on electronic means of carrying out commercial activities, and to amend the Canadian Radio-television and Telecommunications Commission Act, the Competition Act, the Personal Information Protection and Electronic Documents Act and the Telecommunications Act (Canada) and any other analogous Laws.
“Authorization” means, with respect to any Person, any Order, license, permit, certification, approval, registration, consent, authorization, clearance, franchise, qualification, filing, privilege, variance or exemption issued or granted by, or any Contract with, any Governmental Authority having jurisdiction over such Person and/or any of its assets or any applicable stock exchange on which securities of such Person may be listed, as the same may have been, or may from time to time be, amended, supplemented or replaced.
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“Bankruptcy Event” means, with respect to any Person, such Person: (1) committing an act of bankruptcy; (2) becoming insolvent; (3) proposing a compromise or arrangement to creditors generally; (4) a bankruptcy or receivership Order being granted by a court of competent jurisdiction against it; (5) making a voluntary assignment in bankruptcy; (6) taking any proceedings (a) with respect to a compromise or arrangement, (b) to be declared bankrupt or wound-up, or (c) to have a receiver appointed for all or any of its property; or (7) having any execution or distress become enforceable against or levied upon all or any of its assets; in each case, under or pursuant to Bankruptcy Laws.
“Bankruptcy Laws” means, collectively, all bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar Laws affecting creditors’ rights generally.
“BAT Parent” means British American Tobacco plc.
“Board” means the board of directors of the Company, as the same may be constituted from time to time.
“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in Toronto, Ontario, New York City, New York or London, United Kingdom are authorized or required by Law to close.
“Business Sustainability Breach” means, in respect of private business dealings or in dealings with the public or government sector (whether in relation to the affairs of the Company or any of its Subsidiaries), whether directly or indirectly, any of:
| (1) | giving, making, offering or receiving or agreeing to give, make, offer or receive any payment, gift or other advantage which would violate any Anti-Corruption Laws; |
| (2) | receiving, agreeing or attempting to receive the benefits of or profits from a crime or agreeing to assist any Person to retain the benefits of or profits from a crime; and |
| (3) | involvement in or attempted involvement in modern slavery or human trafficking or agreeing or attempting to assist any Person that is involved in modern slavery or human trafficking in any activity which would violate Human Trafficking Laws. |
“Cannabis” means (1) all living or dead material, plants, seeds, plant parts or plant cells from any cannabis species or subspecies (including sativa, indica and ruderalis), including wet and dry material, derivatives, trichomes, oil and extracts from cannabis (including cannabinoid or terpene extracts from the cannabis plant); and (2) biologically or synthetically synthesized analogs of cannabinoids extracted from the cannabis plant using micro-organisms, including (a) cannabis and marijuana or marihuana (as such term is defined under Law, including the Cannabis Act and Section 802 of Title 21 of the United States Code) and (b) “hemp” or “industrial hemp” (as is defined in the Industrial Hemp Regulations issued under the Cannabis Act, Section 1639(o) of Title 7 of the United States Code, or other applicable Laws).
“Cannabis Act” means the Cannabis Act (Canada).
“Cannabis Authorizations” means all Authorizations issued or granted, or required to be issued or granted, to a Person under or pursuant to Cannabis Laws, including all Contracts with Governmental Authorities thereunder or relating to Cannabis Laws.
“Cannabis Laws” means all Laws and other statutory requirements relating to Cannabis, including the Cannabis Act, and all Cannabis Authorizations.
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“Claim” means any action, charge, claim, demand, litigation, cause of action, suit, arbitration, proceeding, citation, summons, subpoena, hearing, complaint, assessment, inquiry or investigation of any nature, civil, criminal, regulatory, prosecutorial or otherwise, at law or in equity, by or before any Governmental Authority or similar body.
“Closing” means the closing of the purchase and sale of the Convertible Debenture pursuant to this Agreement.
“Code” means the Internal Revenue Code of 1986, as amended.
“Common Shares” means the common shares in the capital of the Company.
“Company” has the meaning ascribed to such term in the preamble to this Agreement.
“Company Fundamental Representations” means, collectively, the representations and warranties relating to the Company and its Subsidiaries in the following Sections of Schedule A: Section (1) (Incorporation and Organizational Matters), Section (2) (Corporate Authorization, Qualification and Power), Section (3) (Execution and Binding Obligation), Section (4) (Authorized and Issued Capital), Section (5) (No Bankruptcy), Section (6) (Organizational Structure and Ownership of Subsidiaries), Section (8) (No Prospectus), Section (9) (Underlying Shares to be Issued as Fully Paid), Section (11) (No Conflict), Section (13) (Money Laundering), Section (14) (Corrupt Practices), Section (15) (Sanctions) and Section (16)(b) (Public Disclosure, Securities Laws and TSX Matters).
“Company Indemnified Persons” has the meaning ascribed to such term in Section 6.2(b).
“Company Intellectual Property” means Intellectual Property owned by, licensed to or used by the Company or any of its Subsidiaries.
“Company Option” means an option to purchase Common Shares issued or issuable pursuant to the Equity Incentive Plans, as the context requires.
“Company Restricted Stock” means the Company’s Common Shares issued or issuable as restricted stock awards or units pursuant to the Equity Incentive Plans, as the context requires.
“Company Shareholders” means, collectively, all Persons that own and/or control, directly or indirectly, Common Shares, and “Company Shareholder” means any one of them, as the context requires.
“Company Warrant” means a warrant to purchase Common Shares pursuant to the terms of the Contract governing the issuance or grant thereof.
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“Confidential Information” means, with respect to the Company and its Subsidiaries, on the one hand, and the Purchaser and its Affiliates, on the other hand, all confidential or proprietary information, intellectual property and confidential facts relating to the business and affairs of the Company and its Subsidiaries, on the one hand, or the Purchaser and its Affiliates, on the other hand, respectively, including their respective customers, products, services, technology, trade secrets, know-how, systems and operations; provided, that “Confidential Information” does not include any information that: (1) is or becomes generally available to the public other than as a result of disclosure, directly or indirectly, by the Purchaser or any of its Affiliates or any of their respective Representatives, on the one hand, or the Company or any of its Subsidiaries or any of their respective Representatives, on the other hand, in violation of Section 7.13; (2) is or becomes available to the Purchaser or its Affiliates or any of their respective Representatives, on the one hand, or the Company or any of its Subsidiaries or any of their respective Representatives, on the other hand, on a non-confidential basis from a source other than the other or any of its Representatives, as applicable, unless the applicable Person knew, after reasonable inquiry, that such source was prohibited from disclosing the information to it by a contractual, fiduciary or other legal obligation; or (3) the Purchaser, on the one hand, or the Company, on the other hand, can show was independently acquired or developed by or on behalf of the Purchaser or any of its Affiliates or any of their respective Representatives, on the one hand, or by the Company or any of its Subsidiaries or any of their respective Representatives, on the other hand, prior to the disclosure by or on behalf of the other of, and without the use of any, Confidential Information.
“Contract” means any agreement, indenture, contract, lease, deed of trust, license, option, instruments, arrangement, obligation, understanding or other commitment, in each case whether written or oral.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs, management and policies of a Person, whether through the ownership of voting securities or partnership or other interests, by Contract or otherwise. The terms “Controlling” and “Controlled by” shall have correlative meanings.
“Controlled Group” means, collectively, all trades or businesses (whether or not incorporated) (i) under common control with the Company within the meaning of Section 414(t) of the Code or (ii) which together with the Company is treated as a single employer under Section 414(t) of the Code.
“Convertible Debenture” means the convertible debenture due on the seventh anniversary of the Closing in an aggregate principal amount of $75,341,080 issued on and dated as of the date hereof.
“COVID Program” has the meaning ascribed to such term in Section (23)(e) of Schedule A.
“Data Protection Authority” means any Governmental Authority responsible for the enforcement of Data Protection Laws.
“Data Protection Laws” means all Laws relating to privacy and/or the processing of Personal Data, including PIPEDA and any similar or analogous Laws of any other jurisdiction.
“Disclosure Letter” means the disclosure letter delivered by the Company to the Purchaser concurrently with the execution of this Agreement.
“Disclosure Record” means, collectively, all documents publicly filed by the Company on SEDAR or EDGAR under applicable Securities Laws.
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“EDGAR” means the Electronic Data Gathering, Analysis, and Retrieval system.
“Employee Plans” has the meaning ascribed to such term in Section (23)(j) of Schedule A.
“Encumbrance” means, with respect to any property or asset, any mortgage, lien (statutory or otherwise), pledge, charge, security interest, hypothec, prior Claim, occupancy right, right of first refusal or offer, adverse Claim, lease, easement, license, option, title retention agreement or arrangement, conditional sale, deemed or statutory trust, restrictive covenant or other encumbrance of any nature, in each case, whether contingent or absolute.
“Environmental Laws” means all Laws and Contracts with Governmental Authorities and all other statutory requirements, relating to public health, the protection of the environment, or the generation, transportation, storage, treatment or disposal of any Hazardous Materials, and all Authorizations issued or granted pursuant to or under such Laws, Contracts and other statutory requirements.
“Equity Incentive Plans” means, collectively, all plans of the Company and/or any of its Subsidiaries in effect from time to time pursuant to which securities of the Company and/or any of its Subsidiaries may be issued, or options or other securities convertible or exercisable into, or exchangeable for, securities of the Company and/or any of its Subsidiaries may be granted, to the Persons set out therein (including the equity incentive plan approved by the Company Shareholders at the annual and special meeting of the Company Shareholders held on June 9, 2021).
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Financial Statements” means, collectively, the: (1) audited consolidated financial statements of the Company and its Subsidiaries, as applicable, as at and for the years ended December 31, 2021 and December 31, 2020, including the notes thereto together with any auditor’s report thereon as at and for the periods included therein; and (2) unaudited consolidated financial statements of the Company and its Subsidiaries as at and for the period ended September 30, 2022 (the “Financial Statements Date”).
“GAAP” means United States generally accepted accounting principles.
“Governmental Authority” means (1) any domestic or foreign government, whether national, federal, provincial, state, regional, territorial, municipal or local (whether administrative, legislative, executive or otherwise); (2) any domestic or foreign agency, authority, ministry, department, regulatory authority, court, central bank, bureau, board or other instrumentality having legislative, judicial, taxing, regulatory, prosecutorial or administrative powers or functions of, or pertaining to, government, including Health Canada, the United States Food and Drug Administration, the United States Department of Agriculture, the United States Drug Enforcement Agency and any other applicable regulatory authorities, whether national, federal, provincial, state, regional, territorial, municipal or local (whether administrative, legislative, executive or otherwise), with oversight of the Cannabis industry and any business or operations within the Cannabis industry generally; and (3) any court, commission, individual, arbitrator, arbitration panel or other body having adjudicative, regulatory, judicial, quasi-judicial, administrative or similar functions, including the Securities Regulators.
“Hazardous Materials” means, collectively, petroleum, petroleum hydrocarbons, petroleum products or petroleum by-products, radioactive materials, asbestos or asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea formaldehyde, mould, lead or lead-containing materials, and polychlorinated biphenyls, and any other chemical, material, natural or artificial substance, waste or thing (whether in a solid, gas, liquid, gas, vapour or other form) in any amount or concentration that is: (1) defined as or included in the definition of “hazardous substances”, “hazardous materials”, “hazardous wastes”, “extremely hazardous wastes”, “restricted hazardous wastes”, “toxic substances”, “toxic pollutants”, “pollutants”, “deleterious substances”, “dangerous goods”, “corrosive substances”, “regulated substances”, “solid wastes” or “contaminants” or words of similar import under any Environmental Laws; or (2) otherwise regulated under or for which liability can be imposed under Environmental Laws, or that is reasonably capable (alone or in combination) of causing harm to humans or any other living organism, or of damaging the environment or public health or welfare (including controlled, clinical, special or hazardous waste, polluting, toxic or dangerous substances, radiation, noise, vibration, electricity and heat).
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“Human Trafficking Laws” means the Modern Slavery Act 2015 (United Kingdom), the Criminal Code of Canada and the Immigration and Refugee Protection Act (Canada) and any other analogous Laws.
“Indebtedness” means, with respect to any Person, without duplication: (1) all indebtedness for borrowed money; (2) that portion of obligations with respect to capital leases that is properly classified as a liability on a balance sheet prepared in conformity with GAAP; (3) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money; (4) any obligation owed for all or any part of the deferred purchase price of property or services; (5) all indebtedness secured by any Encumbrance on any property or asset owned or held by such Person regardless of whether the indebtedness secured thereby shall have been assumed by such Person or is non-recourse to the credit of such Person; (6) the face amount of any letter of credit or banker’s acceptance issued or accepted, as the case may be, for the account of such Person or as to which such Person is otherwise liable for reimbursement of drawings or otherwise; (7) the direct or indirect guarantee, endorsement (otherwise than for collection or deposit in the Ordinary Course), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another Person (or such Person in a different capacity); (8) any obligation of such Person the primary purpose or intent of which is to provide assurance to an obligee that the obligation of the obligor thereof will be paid or discharged, or any Contract relating thereto will be complied with, or the holders thereof will be protected (in whole or in part) against loss in respect thereof; (9) all obligations of such Person in respect of which interest charges are customarily paid; and (10) all net obligations, determined on a marked-to-market-basis, of such Person in respect of any exchange traded or over the counter derivative transaction, whether entered into for hedging or speculative purposes or otherwise.
“Indemnified Persons” has the meaning ascribed to such term in Section 6.2(b).
“Information” means, collectively: (1) know-how (including trade secrets and other unpatented or unpatentable proprietary or Confidential Information, systems or procedures); (2) computer software, inventions, designs and other industrial or intellectual property of any nature whatsoever; (3) any information of a scientific, technical, or business nature; (4) pharmacological, medicinal chemistry, biological, chemical, biochemical, toxicological and clinical test data, analytical and quality control data and stability data; (5) process, horticultural and development information, results and data; (6) research, developmental, and demonstration work; (7) data and data files; and (8) all other information, methods, processes, formulations and formulae. For greater certainty, “Information”: (a) may be embodied in or on any media, including hardware, software and/or documentation; (b) includes inventions to the extent such inventions are not included in Intellectual Property Rights; and (c) may include elements of public or non-proprietary information (provided, that the compilation of such public or non-proprietary information with or without other proprietary information results in such compilation being considered as proprietary to the Person compiling such information).
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“Intellectual Property” means, collectively, all Intellectual Property Rights and Information.
“Intellectual Property Rights” means, collectively, all intellectual property rights as recognized under the Laws of Canada or any other countries or jurisdictions, including rights in and to Patents, Trademarks, copyrights, industrial designs and other intellectual property, and includes all applications or registrations, including any continuations, continuations in part, reissues, re-examinations, renewals and extensions thereof and amendments thereto, and rights to apply in any or all countries of the world for such registrations and applications, rights to bring a Claim, at law, in equity or otherwise, for any past, present and/or future infringement, violation or misappropriation, rights and privileges arising under Laws, and other industrial or intellectual property rights of the same or similar effect or nature in any jurisdiction relating to the foregoing throughout the world, and all goodwill associated with the foregoing.
“Investment” has the meaning ascribed to such term in the recitals to this Agreement.
“Investor Rights Agreement” means the Investor Rights Agreement entered into between the Purchaser and the Company in connection with the Closing.
“IRS” means the Internal Revenue Service.
“Law” means any and all applicable: (1) foreign or domestic constitution, treaty, law, statute, regulation, code, ordinance, principle of common law or equity, rule, municipal bylaw, Order or other requirement having the force of law; (2) policy, practice, protocol, standard or guideline of any Governmental Authority which, although not necessarily having the force of law, is regarded by such Governmental Authority as requiring compliance as if it had the force of law; and (3) rules of the TSX or such other national stock or securities exchange in the United States or Canada on which the Common Shares are principally traded.
“Leased Real Property” means, collectively all leasehold or sub-leasehold estates and other rights to license, use or occupy any land, buildings, structures, improvements, fixtures or other interests in real property held by the Company or any of its Subsidiaries.
“Losses” has the meaning ascribed to such term in Section 6.2.
“Material Adverse Effect” means any change (including a decision to implement such a change made by the Board or by senior management of the Company who believe that confirmation of the decision of the Board is probable), event, occurrence, violation, inaccuracy, circumstance, development or effect that is, individually or in the aggregate, or would reasonably be expected to be, individually or in the aggregate, materially adverse to the business, assets (including intangible assets), capitalization, liabilities (contingent or otherwise), condition (financial or otherwise) or results of operations of the Company and/or its Subsidiaries, taken as a whole, except any such change, event, occurrence, violation, inaccuracy, circumstance, development or effect resulting from or arising in connection with:
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| (1) | any change, development or condition in or relating to global, national or regional political conditions or in general economic, business, banking, regulatory, currency exchange, interest rate, rates of inflation or market conditions or in national or global financial, debt, commodities or capital markets; |
| (2) | any change in the credit, debt, financial or capital markets, or changes in interest or exchange rates, in each case, in Canada and/or the United States; |
| (3) | any change or proposed change in Laws affecting the Company or any of its Subsidiaries or their customers, or changes, or the adoption, proposal or implementation of changes, in GAAP, or the interpretation of any of the foregoing; |
| (4) | any national or international disasters, calamities, emergencies, the continuation or escalation of the COVID-19 pandemic, or any military conflict, outbreak or escalation of hostilities, declared or undeclared war, or act of foreign or domestic terrorism; or |
| (5) | the execution of this Agreement and the public announcement of the transactions contemplated hereby in compliance with the terms of this Agreement and the other Transaction Agreements; |
provided, that: (a) with respect to clauses (1) through (4) above, such matter does not have a materially disproportionate effect on the Company and its Subsidiaries, taken as a whole, relative to other comparable Persons operating in the industries and businesses in which the Company and its Subsidiaries operate; and (b) references in this Agreement and the other Transaction Agreements to dollar amounts are not intended to be, and shall not be deemed to be, illustrative for purposes of determining whether a “Material Adverse Effect” has occurred.
“Material IP Contracts” means all Contacts to which the Company or any of its Subsidiaries is a party, or by which the Company or any of its Subsidiaries, or any of their properties or assets, may be bound, a material purpose of which is the development, maintenance, use, licensing, transfer, or disclosure of Intellectual Property, in each case other than (i) contracts for commercially available software, (ii) non-exclusive licenses of Intellectual Property granted in connection with the provision of products or services that are entered into in the Ordinary Course between the Company or any of its Subsidiaries and any third party (including customers, contractors, consultants, vendors and suppliers), (iii) non-disclosure, confidentiality and other similar contracts entered into in the Ordinary Course, and (v) personnel invention assignment agreements.
“Material Contract” has the meaning ascribed to such term in Section 21(a)(xii) of Schedule A.
“Misrepresentation” has the meaning ascribed to such term in applicable Securities Laws.
“Money Laundering Laws” has the meaning ascribed to such term in Section 13 of Schedule A.
“NI 45-106” means National Instrument 45-106 - Prospectus Exemptions.
“NI 51-102” means National Instrument 51-102 - Continuous Disclosure Obligations.
“NI 52-109” means National Instrument 52-109 - Certification of Disclosure in Issuers’ Annual and Interim Filings.
“Notice” has the meaning ascribed to such term in Section 7.3.
“OFAC” means the Office of Foreign Assets Control of the Department of Treasury of the United States.
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“OHSA” has the meaning ascribed to such term in Section 23(g) of Schedule A.
“Order” means any order, directive, judgment, decree, injunction, decision, ruling, award or writ of any Governmental Authority.
“Ordinary Course” means, with respect to an action taken by a Person, that such action is consistent with the past practices of such Person (including with respect to quantity, subject to reasonable adjustments for inflation, and frequency) and is taken in the ordinary course of normal operations of such Person. For the avoidance of doubt, any extraordinary actions taken in response to the COVID-19 pandemic are not “ordinary course” for purposes of this definition.
“Owned Real Property” means, collectively, all land, together with all buildings, structures, improvements and fixtures located thereon, and all easements and other rights and interests appurtenant thereto, owned by the Company or any of its Subsidiaries.
“Parties” means, collectively, the Purchaser and the Company, and “Party” means any one of them, as context requires.
“Patents” means, collectively, all patents and applications arising or under the Laws of Canada, the United States or any other jurisdiction, country or region, including national and regional patents and applications and international patent applications, including, without limitation: (1) patent applications and issued patents therefor, and equivalent rights under the Patent Act (Canada) and the Patent Act (United States), including (a) utility patents, design patents, originals, provisionals, non-provisionals, divisionals, reissues, renewals, re-examinations, continuations, continuations-in-part, continuing prosecution applications, requests for continuing examinations and extensions, and applications for the foregoing, and (b) patent applications and issued patents for plant patents; (2) applications and issued registrations for plant varietals, including applications and registrations under the Plant Breeders’ Rights Act (Canada) and the Plant Variety Protection Act (United States); (3) national and multinational counterparts of such patent and plant varietal applications, and issued patents or registrations applied for or registered in any and/or all countries of the world; (4) all rights to claim priority from and to apply in any and/or all countries of the world for such applications and issued patents or registrations, including all rights provided by multinational treaties or conventions for any of the foregoing; and (5) inventions and plant varietals described in any such applications and issued patents or registrations, including those that are included in any claim, capable of being reduced to a claim or could have been included as a claim in any such pending patent applications and issued patents.
“Permitted Encumbrances” means, collectively, the Encumbrances described in Section 1.1 of the Disclosure Letter under the heading “Permitted Encumbrances”, but only to the extent that any such Encumbrance conforms to the description thereof in Section 1.1 of the Disclosure Letter under the heading “Permitted Encumbrances” and has been complied with by the Company and/or its Subsidiaries in all material respects in accordance with the terms thereof.
“Person” means any individual, corporation, partnership, limited partnership, firm, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Authority or other entity.
“Personal Data” means any “personal information” (within the meaning of PIPEDA), and any other information relating to an identifiable Person that can be directly or indirectly identified in particular by reference to an identifier.
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“PIPEDA” means the Personal Information Protection and Electronic Documents Act (Canada).
“Publicly Available Software” means, collectively: (1) any software that contains, or is derived in any manner (in whole or in part) from, any software that is distributed as “free software” or “open source software” (e.g., Linux), or pursuant to “open source,” “copyleft” or similar licensing and distribution models; and (2) any software that requires as a condition of use, modification and/or distribution of such software that such software or other software incorporated into, derived from, or distributed with such software be (a) disclosed or distributed in source code form, (b) licensed for the purpose of making derivative works or (c) redistributable at no or minimal charge.
“Purchase Price” has the meaning ascribed to such term in Section 2.2.
“Purchaser” has the meaning ascribed to such term in the preamble to this Agreement.
“Purchaser Indemnified Persons” has the meaning ascribed to such term in Section 6.2(a).
“Qualifying Jurisdictions” means, collectively, all of the provinces and territories of Canada.
“Registered Company Intellectual Property” has the meaning ascribed to such term in Section 26(b) of Schedule A.
“Regulatory Approvals” means, collectively: (1) the TSX Conditional Approval; and (2) any other consent, waiver, permit, exemption, review, order, decision, notice or approval of, or any registration and/or filing with, any Governmental Authority, or the expiry, waiver or termination of any waiting period imposed by Law or a Governmental Authority, in each case, required in connection with the Investment and the transactions contemplated under this Agreement and the other Transaction Agreements, as determined by the Purchaser, acting reasonably.
“Representative” means, with respect to any Person, such Person’s directors, officers, employees, agents, consultants, insurers, financing sources, legal counsel, accountants, advisors and other representatives; provided, that, with respect to the Purchaser and its Affiliates for purposes of Section 7.13, “Representative” shall also include a prospective purchaser of the Convertible Debenture or Common Shares from the Purchase or Affiliate that agrees to be bound by the provisions of Section 7.13(1), mutatis mutandis.
“Sanctioned Country” means a country or territory that is the subject of comprehensive country-wide or territory-wide Sanctions from time to time. As of the date hereof, Sanctioned Country means each of the following: Cuba, Iran, North Korea, Syria and the so-called Donetsk People’s Republic, so-called Luhansk People’s Republic, and the territory of Crimea.
“Sanctioned Person” means a Person that is: (a) listed on a Sanctions List; (b) ordinarily resident or located in, or organised under the laws of, a Sanctioned Country; and/or (c) 50% or more owned, directly or indirectly, individually or in the aggregate, or controlled by, or acting on behalf or at the direction of, a Person referred to in (a) or (b).
“Sanctions” means any trade, anti-terrorism, economic or financial sanctions Laws, regulations, embargoes or restrictive measures administered, enacted or enforced from time to time by a Sanctions Authority.
“Sanctions Authority” means: (1) the United States; (2) the European Union; (3) United Kingdom; (4) United Nations; (5) Canada; and (6) any government and official institution or agency of the foregoing, including OFAC, the US Department of State, His Majesty’s Treasury, the Minister of Foreign Affairs (Canada) and the Governor in Council (Canada).
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“Sanctions List” means the Specially Designated Nationals and Blocked Persons List and the Sectoral Sanctions Identification List maintained by OFAC, the Consolidated List of Financial Sanctions Targets maintained by His Majesty’s Treasury, regulations made under the Special Economic Measures Act (Canada), the United Nations Act (Canada), the Justice for Victims of Corrupt Foreign Officials Act (Canada), the Freezing Assets of Corrupt Foreign Officials Act (Canada) or any similar list maintained by, or public announcement of a Sanctions designation made by, a Sanctions Authority.
“Schedule” means a schedule attached to and forming an integral part of this Agreement.
“Securities Laws” means, collectively, the United States federal securities Laws and the securities Laws of each of the provinces and territories of Canada and any other jurisdictions in which the Common Shares are listed, and the respective regulations, instruments and rules made thereunder, together with all applicable published policy statements, notices, blanket orders, “no action” letters and rulings of the applicable Securities Regulators and the securities commissions or other securities regulatory authorities of each other jurisdiction in which the Common Shares are listed, including the applicable rules and requirements of the TSX.
“Securities Regulators” means, collectively, the United States Securities and Exchange Commission and the securities commissions or other securities regulatory authorities in each of the Qualifying Jurisdictions.
“SEDAR” means the System for Electronic Document Analysis and Retrieval.
“Subsidiaries” means, with respect to any Person, any other Person with respect to which the first Person (i) has the right to elect a majority of the board of directors or other Persons performing similar functions or (ii) beneficially owns more than 50% of the voting stock (or of any other form of voting or Controlling equity interest in the case of a Person that is not a corporation), in each case, directly or indirectly through one or more other Persons.
“Tax Act” means the Income Tax Act (Canada).
“Tax Returns” means all returns, reports, declarations, elections, notices, filings, forms, statements and other documents (whether in tangible, electronic or other form), including any amendments, schedules, attachments, supplements, appendices and/or exhibits thereto, as applicable, made, prepared, filed or required by a Governmental Authority to be made, prepared or filed by Law in respect of Taxes.
“Taxes” means any and all: (1) taxes, duties, fees, excises, premiums, assessments, imposts, levies, expansion fees and other charges of any kind whatsoever imposed by any Governmental Authority, including all interest, penalties, fines, additions to tax or other additional amounts imposed by any Governmental Authority in respect thereof, and including those levied on, or measured by, or referred to as, income, gross receipts, profits, gains, windfall, royalty, capital, transfer, land transfer, sales, goods and services, harmonized sales, use, value-added, excise, special assessment, stamp, withholding, business, franchising, property, real or personal property, development, occupancy, employee health, payroll, employment, workers’ compensation, employment or unemployment, severance, health, social services, education, utility and social security taxes, all surtaxes, all customs duties and import and export taxes, countervail and anti-dumping, all license, franchise and registration fees and all employment insurance, health insurance and other pension plan premiums or contributions imposed by any Governmental Authority; (2) interest, penalties, fines, additions to tax or other additional amounts imposed by any Governmental Authority on or in respect of amounts of the type described in clause (1) or this clause (2); (3) any liability for the payment of any amounts of the type described in clauses (1) or (2) as a result of being a member of an affiliated, consolidated, combined or unitary group for any period; and (4) any liability for the payment of any amounts of the type described in clauses (1) or (2) as a result of any express or implied obligation to indemnify any other Person or as a result of being a transferee or successor in interest to any Person.
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“Trademarks” means all trade or brand names, business names, trademarks, service marks, certification marks, logos, slogans, corporate names, uniform resource locators, domain names, trading styles, commercial symbols and other source and business identifiers, trade dress, distinguishing guises, tag lines, designs and general intangibles of like nature, whether or not registered or the subject of an application for registration and whether or not registrable and all goodwill associated therewith.
“Transaction Agreements” means, collectively, this Agreement, the Convertible Debenture, the Investor Rights Agreement and all agreements, certificates and other instruments delivered pursuant hereto and thereto.
“TSX” means the Toronto Stock Exchange.
“TSX Conditional Approval” means the conditional approval of the TSX dated as of November 14, 2022, conditionally approving the issuance of the Convertible Debenture, the issuance of the Underlying Shares, the listing of the Underlying Shares on the TSX and the other transactions contemplated by this Agreement and the other Transaction Agreements.
“Underlying Shares” means Common Shares for which the Convertible Debenture is convertible.
“United States” or “U.S.” means the United States of America, its territories and possessions, any state of the United States and the District of Columbia.
Section 1.2 Gender and Number.
Any reference in this Agreement to gender includes all genders. Words importing the singular number only include the plural and vice versa.
Section 1.3 Headings, etc.
The provision of a Table of Contents, the division of this Agreement into Articles and Sections, and the insertion of headings, are for convenience of reference only and do not affect the interpretation of this Agreement.
Section 1.4 Currency.
All references in this Agreement to dollars or to $ are expressed in Canadian dollars unless otherwise specifically indicated.
Section 1.5 Certain Phrases, etc.
In this Agreement, unless otherwise specified:
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| (1) | the words “including”, “includes” and “include” mean “including (or includes or include) without limitation”; |
| (2) | the phrase “the aggregate of”, “the total of”, “the sum of” or a phrase of similar meaning means “the aggregate (or total or sum), without duplication, of”; |
| (3) | the words “Article”, “Section” and “Schedule” followed by a number mean and refer to the specified Article, Section or Schedule of this Agreement; and |
| (4) | 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”. |
Section 1.6 Knowledge of the Company.
Where any representation or warranty contained in this Agreement is qualified by reference to the “knowledge of the Company”, “the Company’s knowledge”, or any other similar knowledge qualification, it refers to the actual knowledge of Jacques Tortoroli, Jared Stanley and Greg Gould, in each case, without personal liability and after reasonable inquiry.
Section 1.7 Accounting Terms.
All accounting terms not specifically defined in this Agreement are to be interpreted in accordance with GAAP.
Section 1.8 Schedules.
The Schedules attached to this Agreement form an integral part of this Agreement for all purposes hereof.
Section 1.9 Company Covenants and Agreements.
All covenants or agreements contained in this Agreement on the part of the Company shall also apply to its Subsidiaries, mutatis mutandis, and each such covenant or agreement shall be construed as a covenant by the Company to cause (to the fullest extent permitted by Law) such Subsidiary to perform or not perform the required action, as applicable, in accordance with the terms of such covenant or agreement, mutatis mutandis.
Section 1.10 References to Persons and Agreements.
Any reference in this Agreement to a Person includes its heirs, administrators, executors, legal representatives, successors and permitted assigns, as applicable. Except as otherwise provided in this Agreement, the term “Agreement” and any reference to this Agreement, or to any other agreement, document or other instrument, includes, and is a reference to, this Agreement or such other agreement, document or other instrument, as the same may have been, or may from time to time be, amended, restated, replaced, supplemented or novated, and includes all schedules hereto.
Section 1.11 Statutes.
Except as otherwise provided in this Agreement, any reference in this Agreement to a statute refers to such statute, and all rules and regulations made thereunder, as the same may have been, or may from time to time be, amended, re-enacted or replaced.
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Section 1.12 Non-Business Days.
Whenever payments are to be made, or an action is to be taken, on a day which is not a Business Day, such payment shall be made, or such action shall be taken, on or not later than the next succeeding Business Day.
Section 1.13 No Presumption.
This Agreement is the product of negotiation by the Parties having the assistance of counsel and other advisers. It is the intention of the Parties that neither Party shall be presumed to be the drafter hereof and that this Agreement not be construed more strictly with the regard to one Party than to the other Party.
ARTICLE
2
PURCHASE AND SALE OF CONVERTIBLE DEBENTURE
Section 2.1 Purchase and Sale of Convertible Debenture.
| (1) | In reliance upon the representations and warranties of the Company set forth in Schedule A, the Purchaser hereby agrees to purchase from the Company, and the Company hereby agrees to sell to the Purchaser, the Convertible Debenture, free and clear of all Encumbrances except restrictions imposed by Securities Laws and any applicable foreign and state securities Laws. |
| (2) | The Convertible Debenture shall be issued contemporaneously herewith to the Purchaser by way of physical delivery of a certificate representing the Convertible Debenture registered in the name of the Purchaser (or in such other name as the Purchaser shall have notified the Company in writing not less than two Business Days prior to the date hereof). |
Section 2.2 Purchase Price.
Contemporaneously herewith the Purchaser shall pay or cause to be paid to the Company an amount in cash equal to $75,341,080 (the “Purchase Price”) by wire transfer of immediately available funds to such account(s) of the Company designated in writing by the Company not less than two Business Days prior to the date hereof.
Section 2.3 Use of Proceeds.
Unless otherwise consented to in writing by the Purchaser in advance (which consent may be withheld or delayed in the Purchaser’s discretion), the Parties acknowledge and agree that the proceeds of the Investment shall be used by the Company to fund the growth plan of the Company, in each case (a) as approved by the Board or in accordance with the Company’s Board-approved budget; and (b) only in those jurisdictions where it is legal to conduct such activities under all applicable Laws; provided, that the proceeds of the Investment shall not be used, in whole or in part, for any of the following: (a) the payment of any dividend or other distribution on or in respect of the Common Shares or any other securities in the capital of the Company (other than the Convertible Debenture); (b) the repurchase, redemption or retraction of Common Shares or any other securities in the capital of the Company; (c) the payment of bonuses, incentive payments or other similar amounts to directors, officers, members of management, employees or consultants of the Company or any of its Subsidiaries outside the Ordinary Course or not consistent with past practice; or (d) for any conduct defined as “specified unlawful activity” under Section 1956(c)(7) of Title 18 of the United States Code.
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ARTICLE
3
REPRESENTATION AND WARRANTIES
Section 3.1 Representations and Warranties of the Company.
The Company represents and warrants to the Purchaser as set out in Schedule A as of the date hereof, and acknowledges that the Purchaser and/or its Affiliates, as applicable, is relying on such representations and warranties in connection with entering into the Transaction Agreements and consummating the transactions contemplated thereby.
Section 3.2 Representations and Warranties of the Purchaser.
The Purchaser represents and warrants to the Company as set out in Schedule B as of the date hereof, and acknowledges that the Company and/or its Affiliates, as applicable, is relying on such representations and warranties in connection with entering into the Transaction Agreements and consummating the transactions contemplated thereby.
ARTICLE
4
CLOSING DELIVERIES
Section 4.1 Closing Deliveries.
| (1) | The Purchaser shall deliver to the Company the following contemporaneously herewith: |
| (a) | Certificate of Status - a certificate of status or equivalent for the Purchaser dated no earlier than three Business Days prior to the date hereof; |
| (b) | Transaction Agreements - the other Transaction Agreements executed by the Purchaser and/or its applicable Affiliates, as applicable (other than the Convertible Debenture); and |
| (c) | Board Resolutions - copies of resolutions of the board of directors of the Purchaser approving the execution and delivery of this Agreement and the other Transaction Agreements, and the consummation of the transactions contemplated hereby and thereby, certified by an officer of the Purchaser. |
| (2) | The Company shall deliver to the Purchaser the following contemporaneously herewith: |
| (a) | Certificate of Status - a certificate of status or equivalent for the Company and each of the Company’s Subsidiaries dated no earlier than three Business Days prior to the date hereof; |
| (b) | Transaction Agreements - the other Transaction Agreements (other than the Convertible Debenture) executed by the Company and/or its applicable Affiliates, as applicable; |
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| (c) | Convertible Debenture - the Convertible Debenture executed in original form by the Company; |
| (d) | Board Resolutions - copies of resolutions of the Board approving the execution and delivery of this Agreement and the other Transaction Agreements, and the consummation of the transactions contemplated hereby and thereby, certified by an officer of the Company; |
| (e) | Other Third Party Consents, etc. - copies of the executed consents, waivers, approvals, notices and Authorizations set out in Section 10 of the Disclosure Letter, in form and substance reasonably acceptable to the Purchaser. |
| (f) | Legal Opinions - opinions from counsel to the Company; and |
| (g) | Other Documents - copies of all such other documents, certificates, agreements or evidence as the Purchaser may reasonably request in order to effect or evidence the consummation of the transactions contemplated by this Agreement and the other Transaction Agreements, in each case, duly executed by the Company and/or its applicable Affiliates, as applicable. |
ARTICLE
5
POST-CLOSING COVENANTS
Section 5.1 Reserved.
ARTICLE
6
SURVIVAL AND INDEMNIFICATION
Section 6.1 Survival of Representations and Warranties.
(i) The representations, warranties and covenants contained in this Agreement and in all certificates and documents delivered pursuant to or contemplated by this Agreement shall survive the Closing and shall terminate at the expiration of 18 months following Closing; provided, however, that (i) the Company Fundamental Representations shall survive indefinitely; (ii) the representations and warranties contained in Section 28 of Schedule A shall survive until 60 days after the date on which the latest applicable limitation period under Law expires with respect to any taxation year that is relevant in determining any liability with respect to those Tax matters.
Section 6.2 Indemnification.
| (a) | The Purchaser and its Affiliates are relying on the representations and warranties, certificates and covenants of the Company contained herein in connection with entering into this Agreement and the transactions contemplated herein and the Company agrees, as the Purchaser’s sole and exclusive remedy (except as otherwise contemplated in this Section 6.2(a)), to indemnify the Purchaser and its Affiliates, and their respective directors, officers, employees, agents and other representatives (collectively, the “Purchaser Indemnified Persons”), against all losses, claims, costs, expenses, damages or liabilities (collectively, “Losses”; provided, however, that “Losses” shall not include incidental, consequential, special, exemplary or punitive damages) which any of them may suffer or incur, directly or indirectly, as a result of or arising from a breach of any such representations, warranties, certifications and covenants; provided, that, the aggregate liability of the Company for indemnification pursuant to this Section 6.2(a) shall in no event exceed the Purchase Price. Notwithstanding anything contained in this Section 6.2(a) or any other provision of this Agreement, the foregoing limitation shall not apply to, and the indemnification contemplated in this Section 6.2(a) shall not be the sole and exclusive remedy of the Purchaser Indemnified Persons in respect of, any Losses suffered or incurred by any of them as a result of or arising out of the Company’s fraud, intentional misrepresentation or willful breach. |
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| (b) | The Company is relying on the representations and warranties, certificates and covenants of the Purchaser contained herein in connection with entering into this Agreement and the transactions contemplated herein and the Purchaser agrees, as the Company's sole and exclusive remedy (except as otherwise contemplated in this Section 6.2(b)), to indemnify the Company and its Affiliates, and their respective directors, officers, employees, agents and other representatives (collectively, the “Company Indemnified Persons” and, together with the Purchaser Indemnified Persons, the “Indemnified Persons”), against all Losses which any of them may suffer or incur, directly or indirectly, as a result of or arising from a breach of any such representations, warranties, certifications and covenants; provided, that, the aggregate liability of the Purchaser for indemnification pursuant to this Section 6.2(b) shall in no event exceed the Purchase Price. Notwithstanding anything contained in this Section 6.2(b) or any other provision of this Agreement, the foregoing limitation shall not apply to, and the indemnification contemplated in this Section 6.2(b) shall not be the sole and exclusive remedy of the Company Indemnified Persons in respect of, any Losses suffered or incurred by any of them as a result of or arising out of the Purchaser's fraud, intentional misrepresentation or willful breach. |
| (c) | The calculation of “Losses” and the indemnification provided under this Section 6.2 shall take account of and reflect (to the extent applicable and without restriction): (1) any Losses suffered or incurred directly by the Indemnified Persons; and (2) any Losses suffered or incurred indirectly by the Indemnified Persons taking into account, if applicable, the ownership interest held by the Purchaser and/or its Affiliates in the Company, including as a result of the indemnification payment being made and consequent diminution in value of the Company. |
ARTICLE
7
GENERAL PROVISIONS
Section 7.1 No Obligation to Finance.
Other than the obligation to fund the Purchase Price in accordance with Section 2.2, neither the Purchaser nor any of its Affiliates shall have any obligation to provide any further financing to the Company, its Subsidiaries or any of its or their respective Affiliates, or otherwise to guarantee the fulfillment of any of their respective obligations to any other Person.
Section 7.2 Governing Law and Jurisdiction.
This Agreement shall be governed by, and construed and interpreted in accordance with, the Laws of the Province of Ontario and the federal Laws of Canada applicable therein, without regard to conflict of Laws principles. Each Party irrevocably attorns and submits to the exclusive jurisdiction of the Ontario courts situated in the City of Toronto (and appellate courts therefrom), and waives objection to the venue of any proceeding in such court or that such court provides an inappropriate forum.
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Section 7.3 Notices.
Any demand, notice, direction or other communication to be made or given hereunder (in each case, a “Notice”) must be in writing and made or given by personal delivery, by courier or by email transmission, or sent by registered mail, charges prepaid, addressed to the respective Parties as follows:
| (1) | to the Company, at: |
700 Tech Court
Louisville, CO 80027
United States
Attention: General Counsel
E-mail: [* * *]
with a copy (which shall not constitute notice) to:
DLA Piper (Canada) LLP
Suite 6000, 1 First Canadian Place
PO Box 367, 100 King St W
Toronto, Ontario M5X 1E2
Canada
| Attention: | Jarrod Isfeld |
| Russel W. Drew | |
| Email: | jarrod.isfeld@dlapiper.com |
| russel.drew@dlapiper.com |
| (2) | to the Purchaser, at: |
Globe House
4 Temple Pl
London WC2R 2PG
| Attention: | Juan Palacios |
| Email: | [* * *] |
and with a copy (which shall not constitute notice) to:
Jones Day
250 Vesey Street
New York, New York 10281
United States
| Attention: | Randi C. Lesnicki |
| Bradley C. Brasser | |
| Email: | rclesnick@jonesday.com |
| bcbrasser@jonesday.com |
[***] Indicates material that has been excluded from this Exhibit 10.1 because it is private or confidential and not material.
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or to such other address or email as any Party may from time to time designate in accordance with this Section 7.3. Any Notice made by personal delivery or by courier shall be conclusively deemed to have been given and received on the day of actual delivery thereof or if such day is not a Business Day, on the first Business Day thereafter. Any Notice made or given by email on a Business Day before 5:00 p.m. (local time of the recipient) shall be conclusively deemed to have been given and received on such Business Day and otherwise shall be conclusively deemed to have been given and received on the first Business Day following the transmittal thereof. Any Notice that is mailed shall be conclusively deemed to have been given and received on the third Business Day following the date of mailing but if, at the time of mailing or within three Business Days thereafter, there is or occurs a labour dispute or other event that might reasonably be expected to disrupt delivery of documents by mail, any Notice shall be delivered or transmitted by any other means provided for in this Section 7.3.
Section 7.4 Time of the Essence.
Time is of the essence in this Agreement.
Section 7.5 Expenses.
Except as otherwise expressly provided in this Agreement or any other Transaction Agreement, each Party will pay for its own costs and expenses incurred in connection with this Agreement and the other Transaction Agreements, and the transactions contemplated hereby and thereby. The fees and expenses referred to in this Section 7.5 are those which are incurred in connection with the negotiation, preparation, execution and performance of this Agreement and the other Transaction Agreements, and the transactions contemplated hereby and thereby, including the fees and expenses of legal counsel, accountants and other advisors.
Section 7.6 Severability.
If any provision of this Agreement is determined to be illegal, invalid or unenforceable by an arbitrator or any court of competent jurisdiction, that provision will be severed from this Agreement, and the remaining provisions will remain in full force and effect. Upon any such determination, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement be consummated as originally contemplated to the greatest extent possible.
Section 7.7 Entire Agreement.
This Agreement and the other Transaction Agreements constitute the entire agreement among the Parties and their respective Affiliates with respect to the transactions contemplated hereby and thereby, and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties and their respective Affiliates with respect to such transactions. There are no representations, warranties, covenants, conditions or other agreements, express or implied, collateral, statutory or otherwise, among the Parties in connection with the subject matter of this Agreement and the other Transaction Agreements, except as specifically set forth herein and therein. The Parties have not relied and are not relying on any other information, discussion or understanding in entering into and completing the transactions contemplated by this Agreement and the other Transaction Agreements.
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Section 7.8 Successors and Assigns.
| (1) | This Agreement becomes effective only when executed by the Parties. After that time, it is binding on and enures to the benefit of the Parties and their respective successors and permitted assigns, as applicable. |
| (2) | Neither this Agreement, nor any of the rights or obligations hereunder, may be assigned or transferred, in whole or in part, by the Company without the prior written consent of the Purchaser. The Purchaser may assign this Agreement, or any of its rights and/or obligations hereunder, to any of its Affiliates; provided, that the Purchaser shall remain responsible for the covenants, agreements and obligations of the Purchaser under this Agreement notwithstanding any such assignment. |
Section 7.9 Third Party Beneficiaries.
Except as expressly provided in this Agreement, the Parties intend that: (1) this Agreement will not benefit or create any right or cause of action in favour of any Person other than the Parties; and (2) no Person other than the Parties shall be entitled to rely on the provisions of this Agreement in any action, suit, proceeding, hearing or other forum. The Parties reserve their right to vary or rescind the rights granted by or under this Agreement to any Person that is not a Party, at any time and in any way whatsoever, without notice to or consent of that Person.
Section 7.10 Amendments.
This Agreement may only be amended, supplemented or otherwise modified by written agreement signed by both Parties.
Section 7.11 Waiver.
No waiver of any of the provisions of this Agreement will constitute a waiver of any other provision (whether or not similar). No waiver will be binding unless executed in writing by the Party to be bound by the waiver. A Party’s failure or delay in exercising any right under this Agreement will not operate as a waiver of that right. A single or partial exercise of any right will not preclude a Party from any other or further exercise of that right or the exercise of any other right.
Section 7.12 Further Assurances.
Each Party shall promptly do, make, execute, deliver, or cause to be done, made, executed or delivered, all such further acts, documents and things as the other Party may reasonably require from time to time for the purpose of giving effect to this Agreement, and the transactions contemplated hereby, and shall use commercially reasonable efforts, and take all such steps as may be reasonably within its power, to implement to their full extent the provisions of this Agreement in accordance with the terms hereof.
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Section 7.13 Confidentiality.
| (1) | The Purchaser (and each of its Affiliates that receives Confidential Information of the Company and/or any of its Subsidiaries), on the one hand, and the Company (and each of its Affiliates that receives Confidential Information of the Purchaser and/or any of its Affiliates), on the other hand, shall keep confidential and not disclose such Confidential Information in any manner whatsoever, in whole or in part, except as permitted by this Section 7.13. |
| (2) | Notwithstanding Section 7.13(1): |
| (a) | the Purchaser may disclose Confidential Information to (i) each of its Affiliates and (ii) its and their respective Representatives; provided, that prior to making any disclosure to a Representative, each such Representative has been informed of the confidential nature of the Confidential Information and has been directed to hold the Confidential Information in accordance with this Section 7.13; |
| (b) | the Company may disclose Confidential Information to (i) each of its Affiliates and (ii) its and their respective Representatives; provided, that prior to making any disclosure to a Representative, each such Representative has been informed of the confidential nature of the Confidential Information and has been directed to hold the Confidential Information in accordance with this Section 7.13; and |
| (c) | the Purchaser (and each of its Affiliates that receives Confidential Information of the Company and/or any of its Subsidiaries), on the one hand, and the Company (and each of its Affiliates that receives Confidential Information of the Purchaser and/or any of its Affiliates), on the other hand, shall use commercially reasonable efforts to cause each of its Representatives that receives Confidential Information to observe the terms of this Section 7.13 in respect thereof and shall be responsible for any breach of the terms of this Section 7.13 by its Representatives. |
| (3) | The disclosure restrictions contained in Section 7.13(1) do not apply to disclosure that is required by Law, any Order or any other legally binding document discovery requests. Prior to making any such disclosure, the applicable Party that received Confidential Information (or which Party’s Affiliate and/or Representative received Confidential Information, as applicable) shall, to the extent not prohibited by the Law, Order or legally binding request: (a) give the other Party prompt written notice of the requirement and the proposed content of any disclosure; and (b) at the other Party’s request and expense, co-operate with the other Party in limiting the extent of the disclosure and in obtaining an appropriate protective order or pursuing such legal action, remedy or assurance as the other Party deems necessary to preserve the confidentiality of the Confidential Information. If a protective order or other remedy is not obtained or the other Party fails to waive compliance with Section 7.13(1), the applicable Party that received Confidential Information (or which Party’s Affiliate and/or Representative received Confidential Information, as applicable) may disclose only that portion of the Confidential Information that it is advised by outside counsel it is required to disclose and shall exercise commercially reasonable efforts to obtain reliable assurance that confidential treatment is given to the Confidential Information disclosed. |
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| (4) | For the avoidance of doubt, the disclosure restrictions contained in Section 7.13(1) do not apply to disclosure that is made by a Party with the prior written consent of the other Party. |
Section 7.14 Public Notices and Press Releases.
The Company agrees to cooperate in the preparation of presentations, if any, to the Purchaser’s Affiliates regarding the transactions contemplated by this Agreement. The initial press release with respect to the transactions contemplated by this Agreement and the other Transaction Agreements will be in a form mutually agreed by the Parties. Except as set forth in the preceding sentence, neither Party shall: (1) issue any press release or otherwise make public announcements with respect to this Agreement or the other Transaction Agreements, or the transactions contemplated hereby or thereby, without the prior written consent of the other Party (which consent shall not be unreasonably withheld, conditioned or delayed); or (2) make any regulatory filing with any Governmental Authority or the TSX with respect thereto without prior consultation with the other Party; provided, that, neither Party shall be required to obtain consent for any subsequent release in the event that the information contained in such subsequent release is the same as the information contained in the initial agreed press release (or any subsequently agreed release) so long as such information is still accurate at the time of such subsequent release; provided, further, that, the Parties’ obligations under this section shall be subject to each Party’s overriding obligation to make any disclosure or regulatory filing required under Laws, and the Party making such requisite disclosure or regulatory filing shall use all commercially reasonable efforts to give prior oral and written notice to the other Party and a reasonable opportunity to review and comment on the requisite disclosure or regulatory filing before it is made.
Section 7.15 Counterparts.
This Agreement may be executed (including by electronic means) in any number of counterparts, each of which (including any electronic transmission of an executed signature page), is deemed to be an original, and such counterparts together constitute one and the same instrument.
[Signature page follows.]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed on the date first written above.
| CHARLOTTE’S WEB HOLDINGS, INC. | |
| By: | /s/ Jacques Tortoroli |
| Name: Jacques Tortoroli | |
| Title: Chief Executive Officer | |
| BT DE INVESTMENTS INC. | |
| By: | /s/ Valerie Solomon |
| Name: Valerie Solomon | |
| Title: Director | |
[SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT]
Schedule
A
Representations and Warranties of the Company
| (1) | Incorporation and Organizational Matters. The Company and each of its Subsidiaries has been duly incorporated or otherwise organized and is validly existing under the Laws of the jurisdiction in which it was incorporated, or otherwise organized, as the case may be, and no steps or proceedings have been taken by any Person, voluntary or otherwise, requiring or authorizing the dissolution or winding up of the Company or any of its Subsidiaries. |
| (2) | Corporate Authorization, Qualification and Power. |
| (a) | The Company and each of its Subsidiaries, if applicable, has all requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform under this Agreement and each of the other Transaction Agreements to which it is or will be a party and to consummate the transactions contemplated hereby and thereby. |
| (b) | The Company and each of its Subsidiaries is duly qualified to carry on its business in each jurisdiction in which the conduct of its business or the ownership, leasing or operation of its property and assets requires such qualification (except where any failure would not have a Material Adverse Effect) and has all requisite corporate power and authority to conduct its business and to own, lease and operate its properties and assets. |
| (3) | Execution and Binding Obligation. |
| (a) | This Agreement has been duly authorized, executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to Bankruptcy Laws, and will not violate or conflict with the constating documents of the Company or the terms of any restriction or Contract to which the Company is subject. |
| (b) | Each of the other Transaction Agreements has been or will be duly authorized, executed and delivered by the Company and each of its Subsidiaries that is or will be a party thereto and constitutes (or shall when executed, constitute) a legal, valid and binding obligation of the Company and each of its applicable Subsidiaries, as applicable, enforceable against each of them in accordance with its terms, subject to Bankruptcy Laws, and will not violate or conflict with the constating documents of the Company and each of its applicable Subsidiaries or the terms of any restriction or Contract to which the Company or any of its Subsidiaries is subject. |
| (4) | Authorized and Issued Capital. |
| (a) | The authorized share capital of the Company is as set out in Section 4(a) of the Disclosure Letter. Section 4(a) of the Disclosure Letter sets out, as of the date hereof, the number of issued and outstanding: (i) Common Shares (other than shares of Company Restricted Stock); and (ii) (A) Company Warrants, (B) Company Options, and (C) Company Restricted Stock, in each case, setting forth the number of Common Shares subject to each such Company Option, Company Warrant, and Company Restricted Stock award, and the grant date, vesting schedule, and exercise or reference price with respect to each such Company Option, Company Warrant, and Company Restricted Stock award. Except as disclosed in Section 4(a) of the Disclosure Letter, the Company has no other outstanding agreement, subscription, warrant, option, right or commitment or other right or privilege (whether by law, pre-emptive or contractual), nor has it granted any right or privilege capable of becoming an agreement, subscription, warrant, option, right or commitment, obligating it to issue or sell any Common Shares or other equity or voting securities, including any security or obligation of any kind convertible in to exchangeable or exercisable for any Common Shares or other equity or voting security of the Company or any of its Subsidiaries. |
| A - 1 |
| (b) | There are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any Common Shares. |
| (c) | Each (i) Company Option and Company Restricted Stock award was granted in compliance with all applicable Laws and all the terms and conditions of the Equity Incentive Plans pursuant to which it was issued, (ii) Company Option has an exercise price per Common Share equal to or greater than the closing price of a Common Share on the date of such grant, (iii) Company Option and Company Restricted Stock award has a grant date identical to the date on which the Board actually awarded such Company Option or Company Restricted Stock award and (iv) Company Option qualifies for the Tax and accounting treatment afforded to such Company Option in the Company’s Tax Returns. |
| (d) | All outstanding Common Shares and other securities of the Company have been issued in compliance with all Laws, including Securities Laws. |
| (5) | No Bankruptcy. No Bankruptcy Event has occurred with respect to the Company or any of its Subsidiaries. The Company and its Subsidiaries each has sufficient working capital to satisfy its obligations under this Agreement and the other Transaction Agreements and has sufficient capital to satisfy the “going concern” test under GAAP. |
| (6) | Organizational Structure and Ownership of Subsidiaries. |
| (a) | Section 6(a) of the Disclosure Letter sets forth: (i) each of the Company’s Subsidiaries; (ii) the holder of the equity interests in each Subsidiary; and (iii) the jurisdiction of organization of each Subsidiary (and, if different, its jurisdiction of Tax residence). |
| (b) | Section 6(b) of the Disclosure Letter sets forth the Company’s or its Subsidiaries’ shares, equity interest or other direct or indirect ownership interest in any Person that is not a Subsidiary of the Company. |
| (c) | All of the outstanding Common Shares or other securities of the Company have been duly authorized and are validly issued, fully paid and non-assessable. Upon the issuance of any Common Shares in accordance with the terms of the Equity Incentive Plans in effect on the date of this Agreement or as otherwise expressly permitted by this Agreement, such Common Shares will be duly authorized and validly issued, fully paid and non-assessable. Each of the outstanding shares or other securities of each of the Company’s Subsidiaries is duly authorized, validly issued, fully paid and non-assessable and owned by the Company or by a direct or indirect wholly-owned Subsidiary of the Company, free and clear of any Encumbrance other than Permitted Encumbrances. |
| A - 2 |
| (d) | Except as disclosed in Section 6(a) of the Disclosure Letter, neither the Company nor any of its Subsidiaries has any other outstanding Contract, subscription, warrant, option, right or commitment, or other right or privilege (whether by law, pre-emptive or contractual), nor has it granted any right or privilege capable of becoming a Contract, subscription, warrant, option, right or commitment, obligating it to issue or sell any Common Shares or other equity or voting securities of the Company or any of the Company’s Subsidiaries, including any security or obligation of any kind convertible into or exchangeable or exercisable for any Common Shares or other equity or voting security of the Company or any of its Subsidiaries. |
| (7) | Shareholders’ and Similar Agreements. Neither the Company nor any of its Subsidiaries is subject to, or affected by, any unanimous shareholders agreement involving a Person other than the Company or any of its Subsidiaries and is not a party to any shareholder, pooling, voting, or other similar arrangement or agreement relating to the ownership or voting of any of the securities of the Company or of any of its Subsidiaries other than as between the Company and any of its Subsidiaries or pursuant to which any Person other than the Company or any of its Subsidiaries may have any right or claim in connection with any existing or past equity interest in the Company or in any of its Subsidiaries. |
| (8) | No Prospectus. |
| (a) | Assuming the accuracy of the representations of the Purchaser in Schedule B, the issue and sale of the Convertible Debenture pursuant to this Agreement is exempt from the requirement to file a prospectus, registration statement or similar document and the requirement to deliver an offering memorandum or similar document under applicable Securities Laws relating to the sale of the Convertible Debenture in the manner contemplated by this Agreement. |
| (b) | The Company has complied in all respects with the requirements of all applicable Laws in relation to the issue of the Convertible Debenture and Underlying Shares hereunder, and, forthwith after Closing, the Company shall file such forms and documents as may be required under Securities Laws, including a Form 45-106F1 as prescribed by NI 45-106, if applicable. |
| (9) | Underlying Shares to be Issued as Fully Paid. The Underlying Shares to be issued as described in this Agreement and the Convertible Debenture have been duly authorized and reserved for issuance and, when issued and delivered, will be validly issued and fully paid Common Shares in the capital of the Company free and clear of all Encumbrances (other than Encumbrances imposed by or permitted by the Purchaser). |
| (10) | Consents, etc. |
| (a) | No consent, waiver, approval, notice or Authorization of, filing with, or notification to, any Governmental Authority, the TSX or any other Person, as applicable, is required for the execution, delivery and performance by the Company or any of its Subsidiaries of the Transaction Agreements or for the consummation of the transactions contemplated thereby except as set out in Section 10(a) of the Disclosure Letter, all of which have been obtained, made or given, as applicable, as of the date hereof. |
| A - 3 |
| (b) | As of the date hereof, the Board has, and the governing bodies of the Company’s applicable Subsidiaries have, authorized the entering into of this Agreement and the performance by the Company and its applicable Subsidiaries, as applicable, of its obligations under this Agreement and the other Transaction Agreements, and no action has been taken to amend or supersede such determinations, resolutions or authorizations. |
| (11) | No Conflict. |
| (a) | Each of the execution and delivery of this Agreement and the other Transaction Agreements, the performance by the Company of its obligations hereunder and thereunder, the sale of the Convertible Debenture hereunder by the Company and the consummation of the transactions contemplated in this Agreement and the other Transaction Agreements (including the exercise or conversion of the Convertible Debenture), (i) do not and will not 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 Law applicable to the Company or its Subsidiaries; (B) the articles, by-laws or resolutions of the directors or shareholders of the Company or its Subsidiaries; (C) any Contract to which the Company or any of its Subsidiaries is a party or by which any of them is bound except where such conflict, breach, violation or default would not result in a Material Adverse Effect; or (D) any judgment, decree or Order binding the Company or its Subsidiaries or the property or assets thereof; and (ii) do not affect the rights, duties and obligations of any parties to any Contract to which the Company or any of its Subsidiaries is a party or by which any of them is bound, nor give a party the right to terminate or accelerate any such Contract, by virtue of the application of terms, provisions or conditions in such Contract, except where those rights, duties or obligations, or rights to terminate or accelerate, are affected in a manner that would not result in a Material Adverse Effect. |
| (b) | No Contract to which the Company or any of its Subsidiaries is a party contains a “change of control” provision with respect to the Company that could reasonably be expected to be engaged or triggered in connection with or as a result of the transactions contemplated by this Agreement and/or the exercise or conversion of the Convertible Debenture. |
| (12) | Compliance with Laws and Cannabis Authorizations. |
| (a) | Except as set out in Section 12(a) of the Disclosure Letter, the Company and each of its Subsidiaries: |
| (i) | is and at all relevant times has been in compliance with all Laws, in all material respects, including all Cannabis Laws to the extent such are applicable to the Company’s and its Subsidiaries’ business, affairs and operations, and, in the case of the Company, with the by-laws, rules and regulations of the TSX; |
| A - 4 |
| (ii) | has not received any correspondence or notice from any Governmental Authority alleging or asserting any material non-compliance with Laws, including Cannabis Laws; |
| (iii) | possesses all Cannabis Authorizations required to conduct the business, affairs and operations of the Company and its Subsidiaries as now operated and such Cannabis Authorizations are valid and in full force and effect and the Company and its Subsidiaries are not in violation of any material term of any such Cannabis Authorization in any material respect; |
| (iv) | is in material compliance with the terms and conditions of all Cannabis Authorizations, and have made all notifications, certifications and filings with all applicable Governmental Authorities in connection with the Cannabis Authorizations necessary to keep the Cannabis Authorizations in good standing; |
| (v) | has not received notice of any pending or threatened Claim, suit, proceeding, charge, hearing, enforcement, audit, investigation, arbitration or other action from any Governmental Authority or third party alleging that any operation or activity of the Company and its Subsidiaries or any of their respective directors, officers and/or employees is in violation of any Laws or Cannabis Authorizations, or asserting any noncompliance with any Laws or Cannabis Authorizations, that could reasonably be expected to have a Material Adverse Effect, and has no knowledge that any such Governmental Authority or third party is considering or would have reasonable grounds to consider any such Claim, suit, proceeding, charge, hearing, enforcement, audit, investigation, arbitration or other action; |
| (vi) | has not received notice that any Governmental Authority has taken, is taking, or intends to take action to limit, suspend, modify or revoke or to not renew any Cannabis Authorizations, and has no knowledge or reason to believe that any such Governmental Authority is considering taking or would have reasonable grounds to take such action, or that the Company or any of its Subsidiaries does not hold a required Cannabis Authorization; and |
| (vii) | has, or has had on its behalf, filed, declared, obtained, maintained or submitted all material reports, documents, forms, notices, applications, records, Claims, submissions and supplements or amendments as required by applicable Laws, including Cannabis Laws, or Cannabis Authorizations to keep the Authorizations in good standing and that all such reports, documents, forms, notices, applications, records, Claims, submissions and supplements or amendments were complete and correct in all material respects on the date filed (or were corrected or supplemented by a subsequent submission). |
| (b) | Except as disclosed in Section 12(b) of the Disclosure Letter, all Cannabis and Cannabis products sold by the Company and its Subsidiaries or in inventory at the Company or its Subsidiaries: |
| (i) | meets the applicable specifications for the product; |
| A - 5 |
| (ii) | is fit for the purpose for which it is intended by the Company or its Subsidiaries, and of merchantable quality; |
| (iii) | has been cultivated, processed, packaged, labelled, imported, tested, stored, transported and delivered in accordance with applicable Authorizations and Laws; |
| (iv) | is not adulterated, tainted or contaminated and does not contain any substance not permitted by applicable Laws; and |
| (v) | has been cultivated, processed, packaged, labelled, imported, tested, stored and transported in facilities authorized by the applicable Authorization in accordance with the terms thereof, |
except in each case where a failure would not reasonably be expected to result in a Material Adverse Effect. All of the marketing and promotion activities of the Company and its Subsidiaries relating to its Cannabis and Cannabis products, within the past three years, complies with all applicable Laws in all material respects.
| (c) | Except as would not, individually or in the aggregate, have a Material Adverse Effect, neither the Company nor any Subsidiary has ever received any notice or communication from any customer or Governmental Authority alleging a material defect, any issue requiring a withdrawal, recall or quarantine of product (whether voluntary, required or otherwise) or claim in respect of any products supplied or sold by the Company or any of its Subsidiaries to a customer and, to the Company’s knowledge, there are no circumstances that would give rise to any reports, recalls, public disclosure, announcements or customer communications that are required to be made by the Company or any of its Subsidiaries in respect of any products supplied or sold by any of them. |
| (d) | The Company and its Subsidiaries have only carried on business, affairs or operations or maintained any activities in Canada, the United States or Israel and only to the extent such business, affairs or operations or activities are legal in such jurisdictions and have not engaged in the production, cultivation, marketing, distribution or sale of Cannabis or any products derived from or intended to be used in connection with Cannabis or services intended to relate to Cannabis in any jurisdiction to the extent such activities are prohibited under Law. |
| (e) | The Company and each of its Subsidiaries has implemented, maintains, regularly audits (as required by the terms of such policies and programs) and complies in all material respects with internal compliance policies and programs, including with respect to governance matters, and those designed to detect and prevent violations of any Cannabis Laws, periodically reviews and updates such internal compliance policies and programs to account for any changes in Laws and/or standards applicable to the Company’s and its Subsidiaries’ business, affairs and operations, as needed, employs or engages internal personnel and third party consultants to perform routine audits to test the effectiveness of the Company’s and its Subsidiaries’ internal compliance policies and programs, and processes and controls related thereto. All directors, officers, internal personnel and third party consultants of the Company and any of its Subsidiaries have, where reasonably required by the position and services rendered by such Persons, sufficient knowledge of Cannabis Laws which are applicable to the Company’s and its Subsidiaries’ business, affairs and operations and all such Persons have all qualifications, including security clearances, required by applicable Cannabis Laws and, appropriate training, experience and technical knowledge required by applicable Cannabis Laws. The Company has taken commercially reasonable steps for the purpose of ensuring that its employees responsible for the Company’s or its Subsidiaries’ internal compliance programs have sufficient training including ensuring that, where reasonably required by the position and services rendered by such Persons, they are adequately informed on: (i) to the extent applicable, the Cannabis Laws applicable to the Company’s and its Subsidiaries business, operations and affairs, and any changes thereto; and (ii) the Company’s and its Subsidiaries’ internal compliance programs and controls related thereto. |
| A - 6 |
| (f) | Each of the Company and its Subsidiaries’ facilities used for the cultivation, processing production, packaging and labelling of Cannabis or related products complies in all material respects with applicable good production and/or manufacturing practices, processes, standards and procedures as required by Governmental Authorities applicable Cannabis Laws and Cannabis Authorizations. |
| (g) | No individual employed by or associated with the Company and its Subsidiaries is required to hold security clearance under applicable Cannabis Laws in order to maintain Cannabis Authorizations. |
| (h) | The transactions contemplated by the Transaction Agreements will not, subject to compliance with the term thereof by the Purchaser, have any adverse impact on the Cannabis Authorizations or require the Company, any of its Subsidiaries or any entity in which the Company has an interest to obtain any new Cannabis Authorization other than, if applicable, security clearances related to any proposed director nominees nominated by the Purchaser. |
| (13) | Money Laundering. The operations of the Company and each of its Subsidiaries are, and have been since January 1, 2018, conducted in compliance in all respects with all applicable financial recordkeeping and reporting requirements and money laundering Laws and the rules and regulations thereunder and any related or similar Laws, rules, regulations or guidelines, issued, administered or enforced by any Governmental Authority relating to money laundering (collectively, “Money Laundering Laws”), and no action, suit or proceeding by or before any court or Governmental Authority involving the Company and any of its Subsidiaries with respect to Money Laundering Laws is pending or, to the knowledge of the Company, threatened. |
| (14) | Corrupt Practices. |
| (a) | Neither the Company, any of its Subsidiaries nor, to the knowledge of the Company, its or their respective Representatives, in each case whilst acting on behalf of the Company or any of its Subsidiaries, has committed a Business Sustainability Breach. |
| (b) | Neither the Company, any of its Subsidiaries nor, to the knowledge of the Company, any of its or their Representatives has been investigated (or is being investigated or is subject to a pending or threatened investigation) or is involved in an investigation (as a witness or suspect) in relation to an actual or alleged Business Sustainability Breach by any Governmental Authority or any customer or supplier, or has admitted to, or been found by a court in any jurisdiction to have engaged in, any Business Sustainability Breach, or been debarred from bidding for any contract or business, and to the knowledge of the Company, there are no circumstances which are likely to give rise to any such investigation, admission, finding or disbarment. |
| A - 7 |
| (c) | Neither the Company nor any of its Subsidiaries has conducted (or is conducting) an internal investigation in relation to any allegations in respect of Business Sustainability Breach and no Representative of the Company or any of its Subsidiaries has reported a violation or suspected violation in respect of any such Business Sustainability Breach to the Company. |
| (d) | The Company and each of its Subsidiaries has conducted due diligence prior to acquiring any business or company, or has conducted post-acquisition due diligence, in either case which would be reasonably deemed adequate to seek to identify any Business Sustainability Breach previously committed by the acquired business or company. Any reasonably likely Business Sustainability Breach identified by such due diligence have been fully investigated and disclosed to the Purchaser together with sufficient information to enable the Purchaser to assess the business and legal risks associated with such Business Sustainability Breach. |
| (e) | Due diligence has been conducted prior to the recruitment, hiring or appointment of any Representative of the Company and each of its Subsidiaries, which would be reasonably deemed adequate to seek to identify any Business Sustainability Breach committed by those individuals or entities. |
| (f) | All officers, employees and agents and representatives of the Company and each of its Subsidiaries have been given adequate training or have adequate knowledge of Anti-Corruption Laws and the Human Trafficking Laws in relation to business conduct and ethics. |
| (15) | Sanctions. None of the Company, any of its Subsidiaries or any of its or their respective directors or officers or employees (a) is or has been targeted with any Sanctions; (b) is violating or has violated any applicable Sanctions; or (c) is conducting or has conducted any activities (i) targeted by Sanctions, (ii) with or for the benefit of any Sanctioned Person, or (iii) in or with any Sanctioned Country. |
| (16) | Public Disclosure, Securities Laws and TSX Matters. |
| (a) | Upon issuance of the Convertible Debenture, the Convertible Debenture will represent, upon conversion of the entire aggregate principal amount of the Convertible Debenture, 19.9% of the voting and economic interest in the Company as of the date hereof. |
| (b) | The Company is a reporting issuer in the United States and in each of the Qualifying Jurisdictions and is not in default in any material respect under the Securities Laws, is not on the list of defaulting issuers maintained by the applicable Securities Regulators, and has not taken any action to cease to be a reporting issuer in any of those jurisdictions or received notification from any Securities Regulator seeking to revoke the reporting issuer status of the Company. The Company is not in default of any requirement of Securities Laws or the applicable rules and requirements of the TSX, except where such default would not have a Material Adverse Effect. |
| A - 8 |
| (c) | The Company is in compliance in all material respects with its timely and continuous disclosure obligations under all Securities Laws and the policies, rules and regulations of the TSX and, without limiting the generality of the foregoing, there is no material fact, and there has not occurred any material change (actual, anticipated, contemplated, threatened, financial or otherwise), relating to the assets, liabilities (contingent or otherwise), business, affairs, operations, prospects, capital or control of the Company and its Subsidiaries, taken as a whole, which has not been publicly disclosed on a non-confidential basis in accordance with the requirements of Securities Laws and the policies, rules and regulations of the TSX, and, except as may have been corrected by subsequent disclosure, all the statements set forth in all documents publicly filed by or on behalf of the Company were true, correct, and complete in all material respects and did not contain any material Misrepresentation as of the date of such statements and the Company has not filed any confidential material change reports which remain confidential. |
| (d) | Each of the documents filed or furnished on SEDAR as part of the Disclosure Record since January 1, 2018 and prior to the execution and delivery of this Agreement has complied in all material respects with any applicable guidance set out in Staff Notice 51-357 of the Canadian Securities Regulators, if applicable. Each of the documents filed or furnished on EDGAR as part of the Disclosure Record since January 1, 2018 and prior to the execution and delivery of this Agreement has complied in all material respects with the rules and regulations of the United States Securities and Exchange Commission, if applicable. |
| (e) | Odyssey Trust Company, at its principal office in Calgary, Alberta, has been duly appointed as the registrar and transfer agent of the Company with respect to the Common Shares. |
| (f) | The Company has not withheld any material facts relating to the Company or any of its Subsidiaries. |
| (g) | The Company has not otherwise completed any “significant acquisition” or “significant disposition”, nor are there any “probable acquisitions” (as such terms are used in NI 44-101 and Form 44-101F1) that would require the filing of a business acquisition report pursuant to the Securities Laws of the Qualifying Jurisdictions other than those that are part of the Disclosure Record. |
| (h) | No Order, ruling or determination having the effect of suspending the sale or ceasing the trading in any securities of the Company has been issued by any Governmental Authority or the TSX and is continuing in effect and no proceedings for that purpose have been instituted or, to the knowledge of the Company, are pending, contemplated or threatened by any Governmental Authority or the TSX. |
| (i) | The Common Shares are listed and posted for trading on the TSX. |
| A - 9 |
| (j) | The TSX Conditional Approval and all other Regulatory Approvals have been obtained by the Company. Subject to the satisfaction of the conditions set forth in the TSX Conditional Approval, the Underlying Shares shall be duly approved for listing and trading on the TSX. |
| (17) | Financial Statements. |
| (k) | The Financial Statements (i) have been prepared in accordance with GAAP, applied on a consistent basis throughout the periods specified, except as may be expressly stated in the notes thereto, (ii) contain no material Misrepresentations, (iii) present fairly, in all material respects, the financial condition of the Company on a consolidated basis (so as to include the applicable Subsidiaries at the relevant time) as at such dates and the financial performance and cash flows of the Company on a consolidated basis (so as to include the applicable Subsidiaries at the relevant time) for the periods then ended, (iv) contain and reflect adequate provisions or allowance for all reasonably anticipated liabilities, expenses and losses of the Company on a consolidated basis (so as to include the applicable Subsidiaries at the relevant time) that are required to be disclosed in the Financial Statements and (v) other than as disclosed in Section 17(a) of the Disclosure Letter or the Financial Statements, there has been no material change in accounting policies or practices of the Company since the Financial Statements Date. There are no material liabilities of the Company or any of its Subsidiaries whether direct, indirect, absolute, contingent or otherwise, required to be disclosed in the Financial Statements which are not disclosed or reflected in the Financial Statements. |
| (l) | The financial books, records and accounts of the Company and each of its Subsidiaries in all material respects have been maintained in accordance with GAAP or the accounting principles generally accepted in the country of domicile of each such entity on a basis consistent with prior years. |
| (18) | Auditor Independence. Ernst & Young LLP is independent with respect to the Company within the meaning of the Rules of Professional Conduct of the Institute of Chartered Professional Accountants and is an independent registered public accounting firm within the meaning of Securities Laws and the Public Company Accounting Oversight Board (United States). No “reportable event” (within the meaning of NI 51-102) has occurred with such accountants with respect to audits of the Company, its Subsidiaries or its predecessors. |
| (19) | Disclosure Controls and Internal Controls over Financial Reporting. |
| (a) | The Company and its Subsidiaries maintain a system of internal accounting and other controls sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company and its Subsidiaries; (ii) are designed to provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP; (iii) are designed to provide reasonable assurance that receipts and expenditures of the Company and its Subsidiaries are being made only in accordance with authorizations of management and directors of the Company; and (iv) are designed to provide reasonable assurance regarding prevention or timely detection of an unauthorized acquisition, use or disposition of the assets of the Company and its Subsidiaries that could have a material effect on the Financial Statements. The Company believes that the Company’s internal control over financial reporting (as such term is defined under Securities Laws) is effective. Since the end of the Company’s most recent fiscal year, there have been no new material deficiencies or weaknesses in the Company’s internal control over financial reporting (whether or not remediated) and there have been no changes in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company is in compliance with the certification requirements under NI 52-109 and Rule 13a-15 and 15d-15 under the United States Securities Exchange Act of 1934 with respect to the Company’s annual and interim filings with the Securities Regulators. |
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| (b) | The Company has established and maintains disclosure controls and procedures (as defined in Securities Laws) that: (i) are designed to provide reasonable assurance that information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted by it under Securities Laws is recorded, processed, summarized and reported within the time periods specified in Securities Laws, and include controls and procedures designed to ensure that information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted under Securities Laws is accumulated and communicated to the Company’s management, including its certifying officers, as appropriate to allow timely decisions regarding required disclosure; (ii) have been evaluated by management of the Company for effectiveness as of the end of the Company’s most recent fiscal quarter; and (iii) are effective in all material respects to perform the functions for which they were established. |
| (20) | Absence of Material Changes. |
| (a) | Since the Financial Statements Date, the Company and its Subsidiaries have conducted their respective businesses in the Ordinary Course. |
| (b) | Since the Financial Statements Date, there has not occurred a Material Adverse Effect. |
| (21) | Material Contracts. |
| (a) | Other than as set out in Section 21(a) of the Disclosure Letter, as of the date of this Agreement, neither the Company nor any of its Subsidiaries is a party to or bound by, without duplication: |
| (i) | other than Contracts with employees, any Contract that is reasonably expected to require, during the remaining term of such Contract, either (A) annual payments to or from the Company and its Subsidiaries of more than US$3,500,000 or (B) aggregate payments to or from the Company and its Subsidiaries of more than US$7,000,000; |
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| (ii) | any Contract relating to Indebtedness for borrowed money or the deferred purchase price of property (in either case, whether incurred, assumed, guaranteed or secured by any asset) in excess of US$5,000,000; |
| (iii) | any Contract related to any compromise or settlement of any material Claims; |
| (iv) | any partnership, joint venture or other similar agreement or arrangement relating to the formation, creation, operation, management or control of any partnership or joint venture material to the Company or any of its Subsidiaries or in which the Company or any of its Subsidiaries owns more than a 9.9% voting or economic interest, or any interest valued at more than US$10,000,000; without regard to percentage voting or economic interest, except for any such agreements or arrangements solely between the Company and its wholly-owned Subsidiaries or solely among the Company’s wholly-owned Subsidiaries; |
| (v) | any Contract relating to the direct or indirect acquisition or disposition of any assets or business (whether by merger, sale of stock, sale of assets or otherwise), excluding such Contracts that are in the Ordinary Course; |
| (vi) | any Contract that contains a put, call, right of first refusal, right of first offer or similar right or obligation or any other obligation pursuant to which the Company or any of its Subsidiaries would be required to purchase or sell, as applicable, any equity interests or assets of any Person; |
| (vii) | any Contract that prohibits the payment of dividends or distributions in respect of the shares, membership interests, partnership interests or other equity interests of the Company or any of its Subsidiaries, the pledging of the shares, membership interests, partnership interests or other equity interests of the Company or any of its Subsidiaries or the incurrence of Indebtedness by the Company or any of its Subsidiaries; |
| (viii) | any Contract that is material to the conduct of the business of the Company and its Subsidiaries that (A) restricts the ability of the Company or any of its Affiliates or, at or after the Closing, would restrict the Purchaser or any of its Affiliates from (I) engaging in any business or competing in any business with any Person, or (II) operating its business in any manner or location, or (B) would require the disposition of any assets or line of business of the Company or its Affiliates or acquisition of any assets or line of business of any Person or, at or after the Closing, the Purchaser or any of its Affiliates; |
| (ix) | any Contract that is material to the conduct of the business of the Company and its Subsidiaries that contains an exclusivity, “most favoured nation” or other similar provision applicable to the Company, any of its Subsidiaries, or any of its or their respective businesses, assets, products, services or Intellectual Property, or any other provision that restricts the ability of the Company or any of its Subsidiaries to deal as it determines in its discretion with its or their respective businesses, assets, products, services or Intellectual Property (including the sale or licence thereof, as applicable); and |
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| (x) | any Material IP Contracts; |
| (xi) | any Contract that grants to any Person (other than the Company or any of its Subsidiaries) a first-refusal, first-offer or similar preferential right; and |
| (xii) | any other Contract or group of related Contracts not otherwise described in the foregoing clauses (i) through (xi) of this Section (21)(a) that are otherwise material to the Company or any of its Subsidiaries or are not made in the Ordinary Course (together with each Contract constituting any of the foregoing types of Contracts described in clauses (i) through (xi) of this Section (21)(a), a “Material Contract”). |
| (b) | A correct and complete copy of each Material Contract (including, for the avoidance of doubt, any amendments or supplements thereto) has been made available to the Purchaser in the “Project Cortland” virtual data room maintained by Intralinks at least three Business Days prior to the date of this Agreement. |
| (c) | Each Material Contract is valid and binding in accordance with its terms on the Company and/or one or more of its Subsidiaries, as the case may be, and, to the knowledge of the Company, each other party thereto, and is in full force and effect, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. |
| (d) | As of the date of this Agreement, there is no breach or violation of or default under any Material Contract by the Company or any of its Subsidiaries or, to the knowledge of the Company, any other party thereto, and no event has occurred that with or without notice, lapse of time or both, would constitute or result in a breach or violation of or default under any such Material Contracts by the Company or any of its Subsidiaries or, to the knowledge of the Company, any other party thereto or would permit or cause the termination or modification thereof or acceleration or creation of any right or obligation thereunder in each case, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. |
| (22) | Non-Arm’s Length Transactions. Except as disclosed in Section 22 of the Disclosure Letter, neither the Company nor any of its Subsidiaries is indebted to any director, officer, or employee of the Company or any of its Subsidiaries or any of their respective Affiliates or associates (except for amounts due in the Ordinary Course or pursuant to any Law or Contract such as salaries, bonuses, director’s fees, the reimbursement of Ordinary Course expenses, or any similar payments). Except as disclosed in Section 22 of the Disclosure Letter, there are no Contracts (other than employment arrangements or other terms of engagement) with, or advances, loans, guarantees, liabilities or other obligations to, on behalf or for the benefit of, any officer or director of the Company or any of its Subsidiaries, or any of their respective Affiliates or associates. |
| (23) | Employment Matters. |
| (a) | Except as set out in Section 23(a) of the Disclosure Letter, for the past three years there has been no unfair labour practice charge or complaint, grievance or arbitration proceeding in progress or, to the knowledge of the Company, threatened against the Company or its Subsidiaries. |
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| (b) | Except as disclosed in Section 23(b) of the Disclosure Letter, no employee of the Company or any of its Subsidiaries has any agreement as to length of notice or severance payment required to terminate his or her employment (other than such as results by Law from the employment of an employee without an agreement as to notice or severance), nor are there any change of control payments or severance payments or agreements with employees of the Company or any of its Subsidiaries providing for cash or other compensation or benefits upon the consummation of, or relating to, the Investment or any other transaction contemplated by this Agreement, including the exercise or conversion of the Convertible Debenture. |
| (c) | In the past three years, there has been no strike, lockout, slowdown, other concerted work stoppage or other material labour dispute, pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries. The Company and each of its Subsidiaries is, and has been in the past three years, in compliance in all material respects with all Laws regarding labour, employment and employment practices, terms and conditions of employment, wages and hours (including classification of independent contractors or employees, classification as exempt/non-exempt and equitable pay practices), pay equity, human rights, privacy, discrimination, harassment (including sexual harassment), layoffs, mass termination, overtime and vacation pay, workplace safety, and occupational safety and health, immigration, employee leave, and employment record retention, and in the past three years, there have been no pending or threatened claims, charges complaints, investigations or Orders under any such Laws and, to the knowledge of the Company, there is no basis for any such claim, complaint, charge, investigation or Order. |
| (d) | Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or other agreement with a labour union, labour organization, works council or similar organization, and to the knowledge of the Company, there are no threatened or pending union organizing activities involving any employees and have been no such organizing activities in the past five years. |
| (e) | Section 23(e) of the Disclosure Letter contains a complete and accurate list of any of the material business support measures or government programs (including any supplemental employment plan or wage subsidy program) the Company and its Subsidiaries have applied for with any Governmental Authority as a result of the COVID-19 pandemic (each, a “COVID Program”), including the date of the application and status of the application. The Company and its Subsidiaries have performed all of the obligations required to be performed by them in all material respects and are entitled to all benefits pursuant to such COVID Programs. There exists no actual, alleged or anticipated default or event of default or event or condition (including the transaction contemplated by this Agreement) which would with the giving of notice, the lapse of time, or both, or the happening of any other event or condition, result in (i) the Company or any of its Subsidiaries no longer being eligible for the relevant COVID Program, or (ii) a breach, default or violation of any Law related to the relevant COVID Program by the Company or any of its Subsidiaries. |
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| (f) | There are no material outstanding assessments, penalties, fines, liens, charges, surcharges, or other amounts due or owing pursuant to any workplace safety and insurance Laws, and neither the Company nor any of its Subsidiaries has been reassessed in any material respect under such Law during the past three years and, to the knowledge of the Company, no audit of the Company is currently being performed pursuant to any workplace safety and insurance Laws. |
| (g) | There are no charges pending under occupational health and safety legislation (“OHSA”) in respect of the Company or any of its Subsidiaries. Each of the Company and its Subsidiaries is, and has been in the past three years, in compliance with any orders issued under OHSA and there are no appeals of any orders under OHSA currently outstanding. |
| (h) | The Company and its Subsidiaries have promptly and thoroughly investigated all relevant occupational health and safety issues related to the COVID-19 pandemic. With respect to each relevant occupational health and safety issue related to the COVID-19 pandemic, the Company and its Subsidiaries have taken prompt corrective action that is reasonably calculated to prevent further spread of COVID-19 within the workplace. |
| (i) | There are no pending or anticipated layoffs, furloughs, or terminations of employment in respect of any of the Company’s or any of its Subsidiaries’ employees as a result of the COVID-19 pandemic and there have been no such layoffs, furloughs or terminations of employment as a result of the COVID-19 pandemic since March 2020. |
| (j) | Section 23(j) of the Disclosure Letter lists each plan, program, policy, agreement or arrangement providing for compensation, benefits, retirement, pension, bonus, stock purchase, profit sharing, stock option or other equity plan or award, deferred compensation, severance or termination pay, insurance, medical, hospital, dental, vision care, drug, sick leave, disability, salary continuation, legal benefits, unemployment benefits, vacation, incentive or otherwise sponsored, maintained or contributed to, or required to be sponsored, maintained or contributed to, by the Company or its Subsidiaries for the benefit of any current or former director, officer, employee, independent contractor or consultant of the Company or any of its Subsidiaries (the “Employee Plans”). Each Employee Plan has been established, registered (where required), administered, maintained and funded in all material respects with its terms and with the requirements prescribed by any and all statutes, Orders, rules and regulations that are applicable to such Employee Plans. |
| (k) | Copies of the following materials have been delivered or made available to the Purchaser: (i) all current plan documents for each Employee Plan or, in the case of an unwritten Employee Plan, a description thereof, (ii) all determination letters from the IRS with respect to any of the Employee Plans, (iii) all current and prior summary plan descriptions, summaries of material modifications, annual reports, and summary annual reports, and (iv) all current and prior trust agreements, insurance contracts, and other documents relating to the funding or payment of benefits under any Employee Plan. |
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| (l) | All material accruals for unpaid vacation pay, premiums for unemployment insurance, health premiums, pension plan premiums, accrued wages, salaries and commissions and employee benefit plan payments of the Company and its Subsidiaries have been recorded in accordance with GAAP and are reflected on the books and records of the Company and its Subsidiaries. There are no material Claims or proceedings pending or, to the knowledge of the Company, threatened by any Governmental Authority, any Person or by any employee or dependent or beneficiary thereof by, on behalf of, in respect of or against any Employee Plan (except routine claims for benefits payable under the Employee Plans) and there exists no state of facts which could reasonably be expected to give rise to any such Claim or proceeding, including with respect to coverage for long-term disability benefits. |
| (m) | Except as disclosed in Section 23(m) of the Disclosure Letter, no Employee Plan provides health insurance, life insurance, death benefits or other health and welfare benefits to current or former employees of the Company or any of its Subsidiaries beyond their retirement or other termination of service, other than as required by Law. No Employee Plan provides supplemental retirement income benefits. |
| (n) | Neither the execution and delivery of this Agreement or any other Transaction Agreement, nor the consummation of the transactions contemplated hereby and thereby (including the exercise or conversion of the Convertible Debenture), will: (i) entitle any current or former employee, officer, director or independent contractor of the Company or any of its Subsidiaries to any payment or benefit (or result in the funding of any such payment or benefit) under any Employee Plan; (ii) increase the amount of any compensation or benefits otherwise payable by the Company or any of its Subsidiaries under any Employee Plan; (iii) result in the acceleration of the time of payment, funding or vesting of any compensation or benefits under any Employee Plan; or (iv) limit or restrict the right of the Company or any of its Subsidiaries to merge, amend or terminate any Employee Plan. |
| (o) | Except as disclosed in Section 23(o) of the Disclosure Letter, neither the Company nor any member of the Controlled Group currently has, and at no time in the past has had, an obligation to contribute to a “defined benefit plan” as defined in Section 3(35) of ERISA, a pension plan subject to the funding standards of Section 302 of ERISA or Section 412 of the Code, a “multiemployer plan” as described in Section 3(37) of ERISA or Section 414(f) of the Code or a “multiple employer plan” within the meaning of Section 210(a) of ERISA or Section 413(c) of the Code. |
| (p) | Neither the Company nor any of its Subsidiaries has any liability with respect to an Employee Plan which is a “registered pension plan” or a “retirement compensation arrangement” as defined in the Tax Act. No Employee Plan contains or has ever contained a “defined benefit provision” as such term is defined in subsection 147.1(1) of the Tax Act. |
| (24) | Real Property. |
| (a) | Section 24(a) of the Disclosure Letter sets forth a correct and complete list of all Owned Real Property and Leased Real Property, together with (i) a description of the principal functions conducted at each parcel of Owned Real Property and material Leased Real Property and (ii) a correct street address and such other information as is reasonably necessary to identify each parcel of Owned Real Property and Leased Real Property. |
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| (b) | Except as would not, individually or in the aggregate, reasonably be expected to be material to the Company or its Subsidiaries, with respect to Owned Real Property, (i) the Company and its Subsidiaries, as applicable, has sufficient title to such property, free and clear of any Encumbrance, and (ii) there are no outstanding options or rights of first refusal to purchase such property, or any portion thereof or interest therein. |
| (c) | Except as would not, individually or in the aggregate, reasonably be expected to be material to the Company and its Subsidiaries, with respect to Leased Real Property: (i) the lease or sublease for such property is valid, legally binding, enforceable and in full force and effect in accordance with its terms; (ii) there is no breach or violation of or default under any such leases or subleases by the Company or any of its Subsidiaries or, to the knowledge of the Company, any other party thereto, and no event has occurred that with or without notice, lapse of time or both, would constitute or result in a breach or violation of or default under any such leases or subleases by the Company or any of its Subsidiaries or, to the knowledge of the Company, any other party thereto or would permit or cause the termination or modification thereof or acceleration or creation of any right or obligation thereunder; (iii) no event has occurred that with or without notice, lapse of time or both, would prevent or materially impair the consummation of the transactions contemplated by this Agreement; (iv) the Company or its Subsidiaries, as applicable, has obtained any and all head landlord consents required to enter into sublease agreements; (v) the Purchaser has been provided complete and accurate copies of all documents with respect to the Leased Real Property; and (vi) there are no written or oral subleases, concessions or other Contracts or arrangements granting to any Person other than the Company or its Subsidiaries the right to use or occupy any such property. |
| (d) | The current use of the Owned Real Property and the Leased Real Property complies, in all material respects, with applicable Laws. The Company and its Subsidiaries have not received any written notice from a Governmental Authority to the effect that the Owned Real Property or the Leased Real Property or the buildings, works or fixtures thereon, violates in any material respect any provision of any Law, including planning, zoning and building codes, fire regulations, or other restrictions relating to the use or construction of the Owned Real Property or the Leased Real Property. |
| (25) | Environmental Matters. (a) Each of the Company and the Subsidiaries and their respective assets and properties and the business, affairs and operations of each of the Company and the Subsidiaries have been and are in compliance in all material respects with all Environmental Laws; (b) neither the Company nor the Subsidiaries are in violation in any material respect of any regulation relating to the release or threatened release of Hazardous Materials; (c) no property currently owned or operated by the Company nor any of its Subsidiaries (including soils, groundwater, surface water, buildings and surface and subsurface structures) is contaminated with any Hazardous Materials which would reasonably be expected to require remediation or other action pursuant to any Environmental Law; (d) each of the Company and its Subsidiaries has complied in all material respects with all reporting and monitoring requirements under all Environmental Laws; (e) neither the Company nor its Subsidiaries has ever received any notice of any non-compliance in respect of any Environmental Laws; (f) there are no events or circumstances that might reasonably be expected to form the basis of an order for clean up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting the Company and its Subsidiaries relating to Hazardous Materials or any Environmental Laws; (g) there are no licences required pursuant to any applicable Environmental Laws necessary to conduct the business, affairs and operations of each of the Company and its Subsidiaries; and (h) neither the Company nor any of its Subsidiaries is subject to any Order or other agreement with any Governmental Authority or any indemnity or other agreement with any third party relating to obligations or liabilities under any Environmental Law. |
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| (26) | Intellectual Property. |
| (a) | Other than as set out in Section 26(a) of the Disclosure Letter, the Company and its Subsidiaries own or have sufficient rights to use in connection with the conduct of their respective businesses all of the Company Intellectual Property. |
| (b) | Section 26(b) of the Disclosure Letter sets forth a true, correct, and complete list of all registered Company Intellectual Property owned by the Company or any of its Subsidiaries and all pending applications for registration of any Company Intellectual Property owned by the Company or any of its Subsidiaries, including listing (i) the jurisdictions in which each such item of Company Intellectual Property has been issued, registered, otherwise arises or in which any such application for such issuance and registration has been filed , (ii) the owners of each such item of Company Intellectual Property, and (iii) the registration or application numbers and dates, as applicable (“Registered Company Intellectual Property”). All of such Registered Company Intellectual Property has been properly maintained and renewed in accordance with all Laws and has not been maintained, used or enforced, or failed to be maintained, used or enforced, in a manner that would result in the abandonment, cancellation or unenforceability thereof. Section 26(b) further sets forth a true, correct, and complete list of all unregistered Company Intellectual Property owned by the Company or any of its Subsidiaries that is material to the Company and/or its Subsidiaries. All Company Intellectual Property owned by the Company or any of its Subsidiaries that is material to the conduct of their respective businesses is subsisting, valid and enforceable. Except as disclosed in Section 26(b) of the Disclosure Letter, neither the Company nor any of its Subsidiaries has, within the six years prior to the date of this Agreement, received any unresolved written claim contesting the validity, enforceability or ownership of any Registered Company Intellectual Property owned by the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries is aware that any Company Intellectual Property owned by the Company or any of its Subsidiaries is being used by third parties other than under terms of a written licence from the Company or its Subsidiaries. The Company and each of its Subsidiaries has a valid license to use, in connection with the conduct of their respective business, all Company Intellectual Property that is material to the conduct of their respective businesses and is not owned by the Company or any of its Subsidiaries, in each case subject only to the terms of the Material IP Contracts. |
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| (c) | Except as disclosed in Section 26(c) of the Disclosure Letter, and except as has not resulted in, and would not reasonably be expected to result in, material liability to the Company or any of its Subsidiaries, within the six years prior to the date of this Agreement, (i) the Company’s and its Subsidiaries’ conduct of their respective businesses has not, infringed, misappropriated or otherwise violated any Intellectual Property of any Person, and (ii) neither the Company nor any of its Subsidiaries has received any written third party claim alleging any such infringement, misappropriation or other violation. To the knowledge of the Company, no Person has infringed, misappropriated or violated or is infringing, misappropriating or otherwise violating any Company Intellectual Property owned by the Company or any of its Subsidiaries. |
| (d) | The Company and its Subsidiaries have taken commercially reasonable measures to protect the confidentiality of their trade secrets, proprietary know-how, non-public Information and Confidential Information included in Company Intellectual Property, and, to the Company's knowledge, none of their respective trade secrets, proprietary know-how, non-public Information and Confidential Information included in Company Intellectual Property have been disclosed to or discovered by any third party other than pursuant to reasonable terms of non-disclosure. |
| (e) | Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, (i) the information technology assets owned or used by the Company and its Subsidiaries operate and perform as required by the Company and its Subsidiaries in connection with their respective businesses and (ii) the Company and its Subsidiaries have implemented commercially reasonable backup and disaster recovery technology and procedures in a manner that is substantially consistent with applicable industry practices. |
| (f) | Except as would not reasonably be expected to have a Material Adverse Effect, none of the software owned by the Company or any of its Subsidiaries or any software products distributed by the Company or any of its Subsidiaries incorporates or is comprised of or distributed with any Publicly Available Software in a manner which: (i) requires the distribution of the software source code in connection with the distribution of such software in object code form; (ii) materially limits the Company or any of its Subsidiaries’ freedom to seek full compensation in connection with making, using, marketing, licensing and/or distributing such software; or (iii) allows a Person or requires that a Person have the right to decompile, disassemble or otherwise reverse engineer such software. |
| (g) | The Company and each of its Subsidiaries have no pending Claim, nor, to the knowledge of the Company, is there any threatened proceeding Claim against it or any of its Subsidiaries with respect to the Company’s or each of its Subsidiaries’ use of Intellectual Property or the validity, enforceability or ownership of Company Intellectual Property. |
| (h) | There are no outstanding judgments, orders, decrees, stipulations or Laws that restrict the use of Company Intellectual Property. |
| (i) | All Persons that have been involved in the creation or development of Company Intellectual Property purported to be owned by the Company or one of its Subsidiaries have irrevocably assigned all of their right, title and interest in and to that Intellectual Property to the Company or one of its Subsidiaries and irrevocably waived any authors’ moral rights that they may have in any such Intellectual Property in favour of the Company and its Subsidiaries. |
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| (27) | No Undisclosed Liabilities. Except for obligations and liabilities (a) reflected or reserved against in the Financial Statements, (b) incurred in the Ordinary Course since the date of the Financial Statements that are not material, or (c) incurred in connection with actions taken pursuant to the terms of this Agreement, there are no obligations or liabilities of the Company or any of its Subsidiaries, whether or not accrued, contingent or otherwise and whether or not required to be disclosed or any other facts or circumstances that, to the knowledge of the Company, would reasonably be expected to result in any claims against, or obligations or liabilities of, the Company or any of its Subsidiaries that is required by GAAP to be set forth in a consolidated statement of financial position of the Company, except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. |
| (28) | Taxes. |
| (a) | All Taxes due and payable by the Company and its Subsidiaries have been duly and timely paid, except as would not, individually or in the aggregate, reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole. All Tax Returns required to be filed by the Company and its Subsidiaries have been duly and timely filed with all appropriate authorities and all such returns, declarations, remittances and filings are complete and accurate and no fact or facts have been omitted therefrom which would make any of them misleading, except as would not, individually or in the aggregate, reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole. No audit or examination of any Tax Return of the Company or any of its Subsidiaries is currently in progress and there are no issues or disputes outstanding with any Governmental Authority respecting any Taxes that have been paid, or may be payable, by the Company and any of its Subsidiaries, except as would not, individually or in the aggregate, reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole. No material Tax refunds or credits have been claimed or received by the Company and its Subsidiaries to which they are not entitled. |
| (b) | The Company and, as applicable, each of its Subsidiaries, have established on their books and records reserves that are adequate for the payment of all Taxes not yet due and payable and there are no Encumbrances for Taxes on the assets of the Company or any of its Subsidiaries other than for Taxes not yet due and payable, and, to the knowledge of the Company, there are no audits, examinations, investigations or administrative or judicial proceedings concerning any Tax matters with respect to the Company or any of its Subsidiaries pending or being conducted or, to the knowledge of the Company, that have been threatened in writing. There are no Claims which have been or, to the knowledge of the Company, may be asserted relating to any Tax Returns of the Company or any of its Subsidiaries (whether federal, state, provincial, local or foreign). No written claim has been made by any Governmental Authority in a jurisdiction where the Company or any of its Subsidiaries has not filed a Tax Return that the Company or any of its Subsidiaries are or may be subject to Tax by such jurisdiction. Other than as disclosed in Section 28(b) of the Disclosure Letter, neither the Company nor any of its Subsidiaries is or has been subject to Tax in any jurisdiction other than its jurisdiction of incorporation by virtue of having a permanent establishment or other place of business or taxable presence in that jurisdiction. All Taxes that the Company or any of its Subsidiaries are obligated to withhold from amounts paid or owing to any employee, independent contractor, creditor, stockholder, non-resident or other third party have been duly and timely withheld and remitted to the appropriate taxing authority, and all applicable forms with respect thereto have been properly completed and timely filed or provided to the payee (in each case, as required by Law). The Company and its Subsidiaries have charged, collected and remitted on a timely basis all Taxes as required by Law (including under Part IX of the Excise Tax Act (Canada) and any analogous provincial legislation) on any sale, supply or deliver whatsoever made by each of the Company and its Subsidiaries. There is no outstanding waiver or extension of any statute of limitations with respect to the assessment or collection of material Taxes from the Company or any of its Subsidiaries. |
| A - 20 |
| (c) | Neither the Company nor any of its Subsidiaries is a party to or bound by any Tax allocation or Tax sharing agreement or similar agreement with any Person, other than any such agreements solely between or among the Company and its Subsidiaries (excluding, in each case, any commercial agreement entered into in the Ordinary Course and not principally related to Taxes, such as a lease or credit agreement). Neither the Company nor any of its Subsidiaries (i) has been a member of any affiliated, consolidated, combined, unitary or other group for Tax purposes (other than a group of which the Company is the common parent) or (ii) has any liability for Taxes of any Person (or in connection with previously being, or ceasing to be, a member of any affiliated, consolidated, combined, unitary or other group for Tax purposes), as transferee (including for purposes of section 160 of the Tax Act), successor or otherwise. |
| (d) | Neither the Company nor any of its Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) beginning after the date hereof as a result of (i) any change in method of accounting for a taxable period (or portion thereof) ending on or before the date hereof or (ii) any action taken or transaction entered into before the date hereof. Neither the Company nor any of its Subsidiaries has received or applied for a Tax ruling from any Governmental Authority or entered into any closing agreement or other written agreement with a Governmental Authority regarding Taxes or Tax matters. The Company and each of its Subsidiaries has complied with all applicable rules regarding transfer pricing, including the execution and maintenance of documentation required to substantiate transfer pricing practices of the Company and its Subsidiaries. |
| (e) | There are no circumstances existing which could result in the application of section 17, section 78 or sections 80 to 80.04 of the Tax Act, or any equivalent provision under Canadian provincial Law, to the Company or any of its Subsidiaries. Other than in the Ordinary Course, the Company and its Subsidiaries have not claimed nor will they claim any reserve under any provision of the Tax Act or any equivalent provincial provision, if any amount could be included in the income of the Company or its Subsidiaries for any period ending after the Closing. |
| A - 21 |
| (f) | The Convertible Debenture will not be “taxable Canadian property” for purposes of the Tax Act at the time it is issued. |
| (29) | Litigation. |
| (a) | Other than as disclosed in Section 29 of the Disclosure Letter, there are not, and since January 1, 2018 there have not been, any Claims pending, resolved, settled or, to the knowledge of the Company, threatened against or relating to the Company or any of its Subsidiaries, the business of the Company or of any of its Subsidiaries or affecting any of their respective current or former properties or assets nor, to the knowledge of the Company are there any events or circumstances which could reasonably be expected to give rise to any such Claim. |
| (b) | The Company or its Subsidiaries are not subject to any judgment, Order, writ, injunction, decree or award of any Governmental Authority. |
| (30) | No Brokers. Except for Lazard Ltd, no investment banker, dealer, broker, finder, financial advisor or other intermediary has been retained by or is authorized to act on behalf of the Company or any of its Subsidiaries or is entitled to any fee, commission or other payment from the Company or any of its Subsidiaries in connection with this Agreement or any other transaction contemplated by the other Transaction Agreements. |
| (31) | Privacy and Data Protection. |
| (a) | Each of the Company and its Subsidiaries is, and has been, conducting its business in compliance in all material respects with all Data Protection Laws. |
| (b) | There have been no material breaches, security incidents, misuse of or unauthorized access to or disclosure of, or any instances of accidental or unlawful destruction, loss or alteration of, any Personal Data in the possession or control of the Company or any of its Subsidiaries and, to the knowledge of the Company, there is no fact or matter which may give rise to the occurrence of any of the foregoing. None of the Company or any of its Subsidiaries has received any written or other notice of any claims or investigations related to alleged violations of Data Protection Laws, applicable privacy policies or Contracts with respect to Personal Data, and, to the knowledge of Company, there are no facts or circumstances which could form the basis for any such claim or investigation. |
| (c) | True, correct and complete copies of all material correspondence between the Company or any of its Subsidiaries, on the one hand, and any Data Protection Authority, on the other hand, have been provided to the Purchaser. |
| (32) | Anti-Spam Laws. Each of the Company and its Subsidiaries is, and has been, conducting its business in compliance with all Anti-Spam Laws, other than acts of non-compliance which individually or in the aggregate are not material. |
| A - 22 |
Schedule
B
Representations and Warranties and Acknowledgements
of the Purchaser
| (1) | Incorporation and Organizational Matters. The Purchaser is a valid and subsisting company existing under the Laws of its jurisdiction of formation and no steps or proceedings have been taken by any Person, voluntary or otherwise, requiring or authorizing the dissolution or winding up of the Purchaser. |
| (2) | Corporate Authorization and Power. The Purchaser has all requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform under this Agreement and each of the other Transaction Agreements to which it is or will be a party and to consummate the transactions contemplated hereby and thereby. |
| (3) | Execution and Binding Obligations. |
| (k) | This Agreement has been duly authorized, executed and delivered by the Purchaser and constitutes a legal, valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms, subject to Bankruptcy Laws, and will not violate or conflict with the constating documents of the Purchaser or the terms of any restriction or Contract to which the Purchaser is subject. |
| (l) | Each of the other Transaction Agreements has been or will be duly authorized, executed and delivered by the Purchaser and such Affiliates (as applicable) that is or will be a party thereto and shall constitute a legal, valid and binding obligation of the Purchaser and each of its applicable Affiliates enforceable against such of them in accordance with its terms, subject to Bankruptcy Laws, and will not violate or conflict with the constating documents of the Purchaser and its applicable Affiliates or the terms of any restriction or Contract to which the Purchaser or its applicable Affiliates is subject. |
| (4) | No Bankruptcy. There has not been a Bankruptcy Event with respect to the Purchaser. The Purchaser has sufficient funds to satisfy its obligations under this Agreement. |
| (5) | Securities Laws Matters. |
| (a) | The Purchaser is an “accredited investor” as defined in NI 45-106. |
| (b) | The Purchaser is purchasing as principal or is deemed to be purchasing as principal in accordance with Securities Laws, for its own account and not as agent for the benefit of another Person. |
| (c) | The Purchaser was not created or used solely to purchase or hold securities in reliance on the exemption from the prospectus requirement in Section 2.10 of NI 45-106. |
| (6) | Security Ownership. The Purchaser currently holds no securities in the capital of the Company. |
| (7) | Offering Memorandum. The Purchaser has not been provided with, has not requested, and does not need to receive an offering memorandum as defined in applicable Securities Laws. |
Exhibit 10.2
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THIS SECURITY NOR THE SECURITIES ISSUABLE UPON THE CONVERSION OF THIS SECURITY BEFORE MARCH 15, 2023.
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR U.S. STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN COMPLIANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE U.S. SECURITIES ACT PROVIDED THAT THE HOLDER HAS, PRIOR TO SUCH TRANSFER, FURNISHED TO THE BORROWER AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE borrower
CHARLOTTE’s WEB HOLDINGS, INC.
CONVERTIBLE DEBENTURE
EFFECTIVE
AS OF NOVEMBER 14, 2022
(the “Effective Date”)
PRINCIPAL AMOUNT: $75,341,080
DEBENTURE CERTIFICATE NUMBER: 1
Charlotte’s Web Holdings, Inc., a corporation incorporated under the laws of British Columbia (the “Borrower”), for value received, hereby acknowledges itself indebted and promises to pay to BT DE Investments Inc. (hereinafter referred to as the “Lender” or the “Debentureholder” and, together with the Borrower, the “Parties”), the principal amount of seventy five million three hundred forty one thousand and eighty dollars ($75,341,080) as such amount may be adjusted from time to time (the “Principal Amount”) in lawful money of Canada in the manner hereinafter provided at the address of the Lender provided in Schedule A appended hereto, or at such other place or places as the Lender may designate by notice in writing to the Borrower, on November 14, 2029, or such earlier date as the Principal Amount may become due and payable, and to pay interest to the Lender on the Principal Amount outstanding from time to time owing hereunder as provided in Schedule A appended hereto.
The Debentureholder has the right, from time to time and at any time prior to 5:00 p.m. (Eastern time) on the earlier of: (i) the Business Day (as defined herein) immediately preceding the Maturity Date (as defined herein); and (ii) the Business Day prior to any redemption of the Debenture in
[Certain information indicated by [***] has been excluded from this Exhibit 10.2 because it is private or confidential and not material.]
accordance with terms hereof, to convert all or (subject to the terms and conditions set forth below) any portion of the outstanding Principal Amount and accrued and unpaid interest owing thereon into Common Shares (as defined herein) at a price equal to the Conversion Price and the Interest Conversion Price (each as defined herein), as applicable.
Unless the Lender exercises the conversion rights attached to this Debenture, the Principal Amount owing, or the portion of the Principal Amount which has yet to be converted, together with any accrued and unpaid interest owing thereon and all other amounts now or hereafter payable hereunder (collectively, the “Obligations”), shall be due and payable on the Maturity Date in accordance with the terms hereof. This Debenture is issued subject to the terms and conditions appended hereto as Schedule A.
(See terms and conditions attached hereto)
IN WITNESS WHEREOF, the Borrower has caused this Debenture to be executed by a duly authorized officer as of the date first written above.
| CHARLOTTE’S WEB HOLDINGS, INC. | |
| By: | /s/ Jacques Tortoroli |
|
Name: Jacques Tortoroli | |
Schedule
A -Terms And Conditions For
Convertible Debenture
Article 1 - INTERPRETATION
| Section 1.1 | Definitions |
In this Debenture, the following terms shall have the following meanings:
| (1) | “Affiliate” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such specified Person; provided, that, with respect to the Lender, “Affiliate” shall also include (1) BAT Parent and (2) all entities in which BAT Parent owns, directly or indirectly, an equity ownership of at least 50%; |
| (2) | “Anti-Corruption Laws” means the Corruption of Foreign Public Officials Act (Canada), the UK Bribery Act 2010 (United Kingdom), the Foreign Corrupt Practices Act of 1977 (United States) and any other analogous Laws; |
| (3) | “Authorization” means, with respect to any Person, any Order, license, permit, certification, approval, registration, consent, authorization, clearance, franchise, qualification, filing, privilege, variance or exemption issued or granted by, or any Contract with, any Governmental Authority having jurisdiction over such Person and/or any of its assets or any applicable stock exchange on which securities of such Person are listed, as the same may have been, or may from time to time be, amended, supplemented or replaced. |
| (4) | “BAT Group” means, collectively, the Lender, BAT Parent and its Affiliates; |
| (5) | “BAT Parent” means British American Tobacco plc.; |
| (6) | “Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in Toronto, Ontario, New York City, New York or London, United Kingdom are authorized or required by Law to close; |
| (7) | “Business Sustainability Breach” means, in respect of private business dealings or in dealings with the public or government sector (whether in relation to the affairs of the Borrower or any of its Subsidiaries), whether directly or indirectly, any of: |
| (a) | giving, making, offering or receiving or agreeing to give, make, offer or receive any payment, gift or other advantage which would violate any Anti-Corruption Laws; |
| (b) | receiving, agreeing or attempting to receive the benefits of or profits from a crime or agreeing to assist any Person to retain the benefits of or profits from a crime; and |
| A-1 |
| (c) | involvement in or attempted involvement in modern slavery or human trafficking or agreeing or attempting to assist any Person that is involved in modern slavery or human trafficking in any activity which would violate Human Trafficking Laws; |
| (8) | “Canadian Securities Laws” means, collectively, the applicable securities Laws of each of the provinces and territories of Canada and the respective regulations, instruments and rules made under those securities Laws, together with all applicable published policy statements, notices, blanket orders and rulings of the securities commissions or securities regulatory authorities of Canada and of each of the provinces and territories; |
| (9) | “Cannabis” means (i) all living or dead material, plants, seeds, plant parts or plant cells from any cannabis species or subspecies (including sativa, indica and ruderalis), including wet and dry material, derivatives, trichomes, oil and extracts from cannabis (including cannabinoid or terpene extracts from the cannabis plant); and (ii) biologically or synthetically synthesized analogs of cannabinoids extracted from the cannabis plant using micro-organisms, including: (a) cannabis and marijuana or marihuana (as defined under Law, including the Cannabis Act and Section 802 of Title 21 of the United States Code); and (b) “hemp” or “industrial hemp” (as defined in the Industrial Hemp Regulations issued under the Cannabis Act, Section 1639o of Title 7 of the United States Code, or other applicable Laws); |
| (10) | “Cannabis Act” means the Cannabis Act (Canada); |
| (11) | “Cannabis Authorizations” means all Authorizations issued or granted, or required to be issued or granted, to a Person under or pursuant to Cannabis Laws, including all Contracts with Governmental Authorities thereunder or relating thereto. |
| (12) | “Cannabis Laws” means all Laws and other statutory requirements relating to Cannabis, including the Cannabis Act, and all Cannabis Authorizations. |
| (13) | “Capital Reorganization” has the meaning attributed thereto in Section 4.3(5); |
| (14) | “CBD” means cannabidiol, a phytocannabinoid derived from the Cannabis plant; |
| (15) | “Change of Control” means: |
| (a) | Any, direct or indirect, acquisition, purchase, subscription or sale (or any lease, long-term supply agreement, exclusive licensing agreement or other arrangement having the same economic effect as an acquisition, purchase or sale) of: |
| (i) | assets of the Borrower and/or one or more of its Subsidiaries that, individually or in the aggregate, constitute 50% or more of the consolidated assets or contribute 50% or more of the consolidated revenue of the Borrower and its Subsidiaries, taken as a whole; or |
| A-2 |
| (ii) | 50% or more of any voting or equity securities of the Borrower or any of its Subsidiaries (or rights or interests in such voting or equity securities, including convertible securities that, if exercised or converted would result in a Person or group of Persons beneficially owning 50% or more of any class of voting or equity securities of the Borrower or one or more of its Subsidiaries); |
| (b) | any direct or indirect take-over bid, tender offer, exchange offer, treasury issuance or similar transaction or series of transactions that, if consummated, would result in a Person or group of Persons beneficially owning 50% or more of any class of voting or equity securities of the Borrower or one or more of its Subsidiaries; |
| (c) | any plan of arrangement, merger, amalgamation, consolidation, share exchange, share reclassification, business combination, reorganization, recapitalization, liquidation, dissolution, winding up or other similar transaction or series of transactions involving the Borrower or any of its Subsidiaries that, if consummated, would result in a Person or group of Persons beneficially owning 50% or more of any class of voting or equity securities of the Borrower or one or more of its Subsidiaries or any successor entity upon completion; or |
| (d) | any other transaction or series of related or unrelated transactions involving the Borrower and/or any of its Subsidiaries that has a substantially similar effect as any of the foregoing. |
| (8) | “Common Shares” means, subject to adjustment by application of Section 4.3, the common shares in the capital of the Borrower; |
| (9) | “Communication” has the meaning attributed thereto in Section 9.2; |
| (10) | “Competitor of the Borrower” means those Persons in the cannabis-based wellness industry, as set forth on Schedule D attached hereto; |
| (11) | “Contract” means any agreement, indenture, contract, lease, deed of trust, license, option, instruments, arrangement, obligation, understanding or other commitment, in each case whether written or oral. |
| (12) | “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or partnership or other interests, by Contract or otherwise. The terms “Controlling” and “Controlled by” shall have correlative meanings. |
| (13) | “Conversion Cap” has the meaning attributed thereto in Section 2.3(1); |
| A-3 |
| (14) | “Conversion Notice” has the meaning attributed thereto in Section 4.2; |
| (15) | “Conversion Price” means $2.00, subject to adjustment in accordance with the provisions of Section 4.3, in which case it shall mean the adjusted price in effect at such time after such adjustment; |
| (16) | “Conversion Right” has the meaning attributed thereto in Section 4.1; |
| (17) | “Debenture” means this convertible debenture; |
| (18) | “Debenture Tranche” has the meaning attributed thereto in Section 4.4(1); |
| (19) | “Employee Plan” means each plan, program, policy, agreement or arrangement providing for compensation, benefits, retirement, pension, bonus, stock purchase, profit sharing, stock option or other equity plan or award, deferred compensation, severance or termination pay, insurance, medical, hospital, dental, vision care, drug, sick leave, disability, salary, continuation, legal benefits, unemployment benefits, vacation, incentive or otherwise sponsored, maintained or contributed to, or required to be sponsored, maintained or contributed to, by the Borrower or its Subsidiaries from time to time for the benefit of any director, officer, employee, independent contractor or consultant of the Borrower or any of its Subsidiaries (including any former director, officer, employee, independent contractor or consultant of the Borrower or any of its Subsidiaries); |
| (20) | “Event of Default” has the meaning attributed thereto in Section 7.1(1); |
| (21) | “Exchange” means the Toronto Stock Exchange or such other national stock or securities exchange in the United States or Canada on which the Common Shares are principally traded; |
| (22) | “Exempt Offering” has the meaning attributed thereto in Section 4.4(2); |
| (23) | “Exempt Offering Amount” has the meaning attributed thereto in Section 4.4(2); |
| (24) | “Exempt Offering Election Notice” has the meaning attributed thereto in Section 4.4(2); |
| (25) | “Exempt Offering Notice” has the meaning attributed thereto in Section 4.4(2); |
| (26) | “Exempt Offering Share Amount” has the meaning attributed thereto in Section 4.4(2); |
| (27) | “Federal Regulation” means the date that federal laws in the United States permit, authorize or do not prohibit the use of CBD as an ingredient in food products and dietary supplements; |
| (28) | “Governmental Authority” means (i) any domestic or foreign government, whether national, federal, provincial, state, regional, territorial, municipal or local (whether administrative, legislative, executive or otherwise); (ii) any domestic or foreign agency, authority, ministry, department, regulatory authority, court, central bank, bureau, board or other instrumentality having legislative, judicial, taxing, regulatory, prosecutorial or administrative powers or functions of, or pertaining to, government, including Health Canada, the United States Food and Drug Administration, the United States Department of Agriculture, the United States Drug Enforcement Agency and any other applicable regulatory authorities, whether national, federal, provincial, state, regional, territorial, municipal or local (whether administrative, legislative, executive or otherwise), with oversight of the Cannabis industry and any business or operations within the Cannabis industry generally; and (iii) any court, commission, individual, arbitrator, arbitration panel or other body having adjudicative, regulatory, judicial, quasi-judicial, administrative or similar functions, including the securities commissions or securities regulatory authorities of Canada and of each of the provinces and territories and, if applicable, the United States Securities and Exchange Commission; |
| A-4 |
| (29) | “Human Trafficking Laws” means the Modern Slavery Act 2015 (United Kingdom), the Criminal Code of Canada and the Immigration and Refugee Protection Act (Canada) and any other analogous Laws; |
| (30) | “Indebtedness” has the meaning attributed thereto in Section 7.1(1)(h); |
| (31) | “Interest Conversion Price” means (i) if the Common Shares are listed on the Exchange on the applicable date of determination, the five-day volume-weighted average price of the Common Shares on the Exchange as of the trading day prior to the date of the applicable Conversion Notice, or (ii) if the Common Shares are not listed on the Exchange at the time of conversion, the fair market value (as determined by an independent financial advisor selected by the Borrower and approved by the Lender) of the Common Shares at conversion; provided, that the applicable date of determination of the Interest Conversion Price shall be (x) if determined in connection with a payment of interest on the Maturity Date, the Business Day immediately prior to the Maturity Date, and (y) if determined in connection with a conversion, the date of the Conversion Notice; |
| (32) | “Investor Rights Agreement” means the Investor Rights Agreement entered into between the Borrower and the Lender as of the Effective Date; |
| (33) | “Issue Date” has the meaning attributed thereto in Section 4.2; |
| (34) | “Law” means any and all applicable: (i) foreign or domestic constitution, treaty, law, statute, regulation, code, ordinance, principle of common law or equity, rule, municipal by law, order, directive, judgment, decree, injunction, decision, ruling, award or writ of any Governmental Authority or other requirement having the force of law; (ii) policy, practice, protocol, standard or guideline of any Governmental Authority which, although not necessarily having the force of law, is regarded by such Governmental Authority as requiring compliance as if it had the force of law; and (iii) rules of the Exchange; |
| A-5 |
| (35) | “Lien” means, with respect to any Person, any mortgage, lien, hypothec, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or capital lease, upon or with respect to any property of such Person; |
| (36) | “Market Price” of the Common Shares means, at any date, the volume weighted average price per Common Share at which the Common Shares have traded: |
| (a) | on the Exchange; or |
| (b) | if the Common Shares are not listed on the Exchange, on any other stock exchange upon which the Common Shares are listed as may be selected for this purpose by the board of directors of the Borrower, acting reasonably; or |
| (c) | if the Common Shares are not listed on any stock exchange, then on any over-the-counter market on which the Common Shares are trading, as may be selected for this purpose by the board of directors of the Borrower, acting reasonably, |
during the 20 consecutive trading days ending the third trading day before such date, and the volume weighted average price shall be determined by dividing the aggregate sale price of all Common Shares sold in board lots on the exchange or market, as the case may be, during the 20 consecutive trading days by the number of Common Shares sold or, if not traded on any recognized market or exchange, as determined by the board of directors of the Borrower, acting reasonably. Whenever the Market Price is required to be determined hereunder, the Borrower shall deliver to the Lender a certificate of the Borrower specifying such Market Price and setting out the details of its calculation;
| (8) | “Material Compliance Breach” means a breach of Section 6.1(2)(a), Section 6.2(2) or Section 6.2(3); |
| (9) | “Maturity Date” has the meaning attributed thereto in Section 2.1; |
| (10) | “MCB Redemption Amount” means 100% of the Principal Amount plus accrued and unpaid interest thereon through to but excluding the date of redemption; |
| (11) | “Order” means any order, directive, judgment, decree, injunction, decision, ruling, award or writ of any Governmental Authority. |
| (12) | “Original Principal Amount” has the meaning attributed thereto in Section 4.4(1); |
| (13) | “Payment Account” means the bank account of the Lender as the Lender may from time to time advise the Borrower in writing, however if such bank account details are not provided, the issue of a certified cheque in the name of the registered holder shall satisfy any requirement to make payment to a Payment Account; |
| A-6 |
| (14) | “Per Share Cost” has the meaning attributed thereto in Section 4.3(2); |
| (15) | “Per Share Value” has the meaning attributed thereto in Section 4.4(2); |
| (16) | “Percentage Ownership Value” means an amount, calculated as of the date on which an election to effect a redemption pursuant to Section 3.2 is made by the Lender, equal to (a) the number of Common Shares into which the Principal Amount and any accrued interest would be issuable upon conversion of the Debenture at the Conversion Price and Interest Conversion Price, as applicable, multiplied by (b) the Interest Conversion Price; |
| (17) | “Person” means an individual, corporation, partnership, limited partnership, firm, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Authority or other entity; |
| (18) | “Preemptive Rights Amount” has the meaning attributed thereto in Section 4.4(1); |
| (19) | “Preemptive Rights Election Notice” has the meaning attributed thereto in Section 4.4(1); |
| (20) | “Preemptive Rights Notice” has the meaning attributed thereto in Section 4.4(1); |
| (21) | “Preemptive Rights Share Amount” has the meaning attributed thereto in Section 4.4(1); |
| (22) | “Proportionate Voting Shares” means the proportionate voting shares in the capital of the Borrower; |
| (23) | “Pro Rata Share” has the meaning attributed thereto in Section 4.4(1); |
| (24) | “RA Redemption Amount” means the lesser of (i) the MCB Redemption Amount, and (ii) the Percentage Ownership Value; |
| (25) | “Regulatory Approvals” means, collectively, any consent, waiver, permit, exemption, review, order, decision, notice or approval of, or any registration and/or filing with, any Governmental Authority or the Exchange, or the expiry, waiver or termination of any waiting period imposed by Law or a Governmental Authority, in each case, required in connection with the transactions contemplated under this Debenture, as determined by the Lender, acting reasonably; |
| (26) | “Representative” means, with respect to any Person, such Person’s directors, officers, employees, agents, consultants, insurers, financing sources, legal counsel, accountants, advisors and other representatives; |
| (27) | “Restricted Activity” means any line of business concerning Cannabis in which the Borrower does not operate as of the Effective Date and where such operations or activities are not legal under the Laws of the jurisdiction in which such operations or activities are carried out; |
| A-7 |
| (28) | “Rights Offering” has the meaning attributed thereto in Section 4.3(2); |
| (29) | “Rights Period” has the meaning attributed thereto in Section 4.3(2); |
| (30) | “Sanctioned Country” means a country or territory that is the subject of comprehensive country-wide or territory-wide Sanctions from time to time. As of the date hereof, Sanctioned Country means each of the following: Cuba, Iran, North Korea, Syria and the so-called Donetsk People’s Republic, the so-called Luhansk People’s Republic, and the territory of Crimea; |
| (31) | “Sanctioned Person” means a Person that is: (a) listed on a Sanctions List; (b) ordinarily resident or located in, or organised under the Laws of, a Sanctioned Country; and/or (c) 50% or more owned, directly or indirectly, individually or in the aggregate, or controlled by, or acting on behalf or at the direction of, a Person referred to in (a) or (b); |
| (32) | “Sanctions” means any trade, anti-terrorism, economic or financial sanctions Laws, regulations, embargoes or restrictive measures administered, enacted or enforced from time to time by a Sanctions Authority; |
| (33) | “Sanctions Authority” means: (1) the United States; (2) the European Union; (3) the United Kingdom; (4) the United Nations; (5) Canada; and (6) any government and official institution or agency of the foregoing, including the Office of Foreign Assets Control of the Department of Treasury of the United States, the U.S. Department of State, His Majesty's Treasury, the Minister of Foreign Affairs (Canada) and the Governor in Council (Canada); |
| (34) | “Sanctions List” means the Specially Designated Nationals and Blocked Persons List and the Sectoral Sanctions Identification List maintained by the Office of Foreign Assets Control of the Department of Treasury of the United States, the Consolidated List of Financial Sanctions Targets maintained by His Majesty’s Treasury, regulations made under the Special Economic Measures Act (Canada), the United Nations Act (Canada), Special Economic Measures Act (Canada), the Justice for Victims of Corrupt Foreign Officials Act (Canada), the Freezing Assets of Corrupt Foreign Officials Act (Canada) or any similar list maintained by, or public announcement of a Sanctions designation made by, a Sanctions Authority; |
| (35) | “Secured Debt” means, with respect to any Person, any obligation of such Person for borrowed money that is secured in any manner by any Lien on any real or personal property of such Person; |
| (36) | “Significant Subsidiary” means any direct or indirect Subsidiary of the Borrower that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the U.S. Securities Act. |
| A-8 |
| (37) | “Special Distribution” has the meaning attributed thereto in Section 4.3(3); |
| (38) | “Subordinated Debt” means any and all indebtedness incurred or assumed by the Borrower or its Subsidiaries in respect of which all obligations of payment and performance, together with all security interests or collateral granted as security for payment and performance, are postponed and subordinated to the indebtedness owed to and security held by the holder of this Debenture. |
| (39) | “Subscription Agreement” means the Subscription Agreement entered into between the Borrower and the Lender as of the Effective Date; |
| (40) | “Subsidiary” means, with respect to any Person, any other Person with respect to which the first Person (i) has the right to elect a majority of the board of directors or other Persons performing similar functions or (ii) beneficially owns more than 50% of the voting stock (or of any other form of voting or Controlling equity interest in the case of a Person that is not a corporation), in each case, directly or indirectly through one or more other Persons; |
| (41) | “Taxes” means any and all: (i) taxes, duties, fees, premiums, assessments, imposts, levies, expansion fees and other charges of any kind whatsoever imposed by any Governmental Authority, including all interest, penalties, fines, additions to tax or other additional amounts imposed by any Governmental Authority in respect thereof, and including those levied on, or measured by, or referred to as, income, gross receipts, profits, windfall, royalty, capital, transfer, land transfer, sales, goods and services, harmonized sales, use, value-added, excise, stamp, withholding, business, franchising, property, development, occupancy, employer health, payroll, employment, health, social services, education and social security taxes, all surtaxes, all customs duties and import and export taxes, countervail and anti-dumping, all license, franchise and registration fees and all employment insurance, health insurance and other pension plan premiums or contributions imposed by any governmental authority; (ii) interest, penalties, fines, additions to tax or other additional amounts imposed by any Governmental Authority on or in respect of amounts of the type described in clause (i) or this clause (ii); (iii) any liability for the payment of any amounts of the type described in clauses (i) or (ii) as a result of being a member of an affiliated, consolidated, combined or unitary group for any period; and (iv) any liability for the payment of any amounts of the type described in clauses (i) or (ii) as a result of any express or implied obligation to indemnify any other Person or as a result of being a transferee or successor in interest to any Person; |
| (42) | “trading day” means a day on which the Exchange is open for trading; |
| (43) | “Tranche Cap” has the meaning attributed thereto in Section 4.4(3); |
| (44) | “Tranche Conversion Price” has the meaning attributed thereto in Section 4.4(1); |
| A-9 |
| (45) | “Transaction Agreements” means, collectively, this Debenture, Subscription Agreement, the Investor Rights Agreement and all agreements, certificates and other instruments delivered pursuant hereto and thereto; and |
| (46) | “Transferability Event” means (i) an Event of Default (while such Event of Default continues to exist), (ii) a change in Law which gives rise to a reasonable prospect of the Lender’s continued holding of this Debenture being in breach of applicable Law, or (iii) in accordance with the requirements of Section 3.2(1) and Section 3.2(2), the Borrower entering into, or commencing operations or activities in, a Restricted Activity. |
| Section 1.2 | Headings, etc. |
The division of this Debenture into Articles and Sections and the insertion of headings are for convenience of reference only and do not affect the construction or interpretation of this Debenture.
| Section 1.3 | Non-Business Days |
Whenever payments are to be made, or an action is to be taken on a day which is not a Business Day, such payment shall be made, or such action shall be taken, on or not later than the next succeeding Business Day.
| Section 1.4 | Currency |
All references in this Debenture to dollars or to $ are expressed in the currency of Canada unless otherwise specifically indicated.
| Section 1.5 | Statutes |
Except as otherwise provided in this Debenture, any reference in this Debenture to a statute refers to such statute, and all rules and regulations made thereunder, as the same may have been, or may from time to time be, amended, re-enacted or replaced.
| Section 1.6 | Common Shares |
Any determination required by this Debenture of the number or percentage of Common Shares outstanding shall assume the conversion of all then-outstanding Proportionate Voting Shares.
| Section 1.7 | Persons and Agreements |
Any reference in this Debenture to a Person includes its heirs, administrators, executors, legal representatives, successors and permitted assigns, as applicable. Except as otherwise provided in this Debenture, the term “Debenture” and “Agreement” and any reference to this Debenture, or to any other agreement, document or other instrument, includes, and is a reference to, this Debenture or such other agreement, document or other instrument, as the same may have been, or may from time to time be, amended, restated, replaced, supplemented or novated, and includes all schedules hereto.
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| Section 1.8 | Gender and Number |
Any reference in this Debenture to gender includes all genders. Words importing the singular number only include the plural and vice versa.
| Section 1.9 | Severability |
If any provision of this Debenture is determined to be illegal, invalid or unenforceable by an arbitrator or any court of competent jurisdiction, that provision will be severed from this Debenture, and the remaining provisions will remain in full force and effect. Upon any such determination, the Lender and the Borrower shall negotiate in good faith to modify this Debenture so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Debenture be consummated as originally contemplated to the greatest extent possible.
| Section 1.10 | Borrower Covenants |
All covenants or agreements contained in this Debenture on the part of the Borrower shall also apply to its Subsidiaries, mutatis mutandis, and each such covenant or agreement shall be construed as a covenant by the Borrower to cause (to the fullest extent permitted by Law) such Subsidiary to perform or not perform the required action, as applicable, in accordance with the terms of such covenant or agreement, mutatis mutandis.
| Section 1.11 | Schedules |
The Schedules attached to this Debenture form an integral part of this Debenture for all purposes hereof.
| Section 1.12 | No Presumption |
This Debenture is the product of negotiation by the Parties having the assistance of counsel and other advisers. It is the intention of the Parties that neither Party shall be presumed to be the drafter hereof and that this Debenture not be construed more strictly with the regard to one Party than to the other Party.
| Section 1.13 | Entire Agreement |
This Debenture and the other Transaction Agreements constitute the entire agreement among the Parties and their respective Affiliates with respect to the transactions contemplated hereby and thereby, and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties and their respective Affiliates with respect to such transactions.
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Article 2 - PAYMENT OF PRINCIPAL, INTEREST AND OTHER CONSIDERATIONS
| Section 2.1 | Repayment of Principal |
Subject to the terms and conditions hereof, the Principal Amount outstanding under this Debenture, together with any accrued and unpaid interest owing thereon, as well as any and all other sums then payable to the Lender, shall be repaid by the Borrower to the Lender on November 14, 2029 or such earlier time that the Obligations become due and payable under the terms of this Debenture (the “Maturity Date”).
| Section 2.2 | Interest Payable |
Subject to the terms and conditions hereof, interest on the Principal Amount outstanding under this Debenture shall be at the rate of 5.00% per annum, accrued from and including the Effective Date to but excluding the Maturity Date; provided, that the rate shall be reduced to 1.5% per annum upon and following Federal Regulation, if applicable. Accrued interest on the Principal Amount outstanding under this Debenture shall be compounded annually and due and payable on the Maturity Date. The interest owing for any stub period for the year in which the Maturity Date occurs shall be calculated on a proportionate basis for such number of days of interest owing based off a 365-day year. For greater certainty, such interest shall be payable before, during or after default, maturity, and judgment until the date of repayment in full.
| Section 2.3 | Payment of Interest and Overdue Interest |
Payment of interest under this Debenture shall be made on the Maturity Date or date of earlier conversion (including with respect to the interest payment), through: (a) the issuance by the Borrower to the Lender of a number of Common Shares equal to the amount of accrued interest divided by the Interest Conversion Price; or (b) upon mutual agreement of the Borrower and the Lender (each acting reasonably and in good faith), the payment of cash equal to the amount of accrued interest. Unless the Borrower has obtained the requisite approval of the holders of the Common Shares, which the Borrower shall not be obligated to obtain, the Lender shall not convert this Debenture, in whole or in part, if and to the extent that, as a result of such conversion, the Lender or Affiliates, together with any joint actors, would beneficially own or exercise control or direction over in excess of 19.9% of the number of Common Shares outstanding immediately after giving effect to such conversion (such limit, the “Conversion Cap”). For purposes of the foregoing sentence, “beneficial ownership” shall be calculated in accordance with National Instrument 62-104 – Take-Over Bids and Issuer Bids (or any successor national instrument). Any purported delivery of Common Shares upon conversion of this Debenture shall be void ab initio and have no effect if and to the extent that such delivery would result in the Lender exceeding the Conversion Cap, and the Lender shall, upon becoming aware of any such Common Shares so delivered, notify the Borrower of same, and thereafter, or otherwise upon written demand from the Borrower, surrender to the Borrower such number of Common Shares that exceed the Conversion Cap, and the Borrower shall deliver to the Lender the principal amount of Debentures in respect thereof, which principal amount, may, at the Borrower’s option upon 30 calendar days’ prior written notice to the Lender, be repaid in cash.
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The Borrower shall, on demand, pay to the Lender by depositing to the Payment Account, interest on all overdue payments in connection with this Debenture from the date any such payment becomes overdue and for so long as such amount remains unpaid at a rate per annum which is equal to the applicable interest rate. Interest at the applicable interest rate on overdue amounts shall be calculated daily, compounded monthly on the last Business Day of the month, and shall be payable both before and after default, maturity, and judgment.
| Section 2.4 | Compliance with the Interest Act (Canada) |
For the purposes of this Debenture, whenever any interest is calculated on the basis of a period of time other than a calendar year, the annual rate of interest to which each rate of interest determined pursuant to such calculation is equivalent for the purposes of the Interest Act (Canada) is such rate as so determined multiplied by the actual number of days in the calendar year in which the same is to be paid and divided by the number of days used in the basis of such determination.
| Section 2.5 | Method of Paying of Principal, Interest and other Amounts |
Payments of principal, accrued and unpaid interest, fees and all other amounts payable by the Borrower pursuant to this Debenture shall be paid at or before 5:00 p.m. (Eastern time) on the day such amount is due. All cash payments to the Lender shall be made to the Payment Account. All cash payments to the Borrower shall be made as directed by the Borrower.
| Section 2.6 | Prepayment |
Except as otherwise contemplated in this Debenture or if agreed to by the Lender, the Borrower shall not be permitted to prepay the Principal Amount outstanding on this Debenture or any accrued and unpaid interest owing thereon in whole or in part.
| Section 2.7 | Ranking |
This Debenture constitutes the senior unsecured Obligations of the Borrower and will rank in right of payment of principal and interest (regardless of their actual date or terms of issue) in priority to all Subordinated Debt of the Borrower and is subordinated in right of payment to the prior payment in full of any Secured Debt of the Borrower to the extent of the value of the collateral securing such Secured Debt.
Article 3 - REDEMPTION OR PURCHASE OF DEBENTURE
| Section 3.1 | Redemption if Material Compliance Breach |
Upon the occurrence of any event constituting a Material Compliance Breach (other than a Material Compliance Breach that is also a Restricted Activity, in which case Section 3.2 shall apply), the Borrower shall, upon becoming aware of the same, give prompt written notice to the Lender of such Material Compliance Breach. In the event the Lender becomes aware of a Material Compliance Breach prior to receiving such notice, the Lender may give written notice to the Borrower of such Material Compliance Breach. The Borrower shall have 20 Business Days following the receipt of any such notice by the Lender or the Borrower, as applicable, to cure such Material Compliance Breach to the extent such breach is capable of being cured without loss to, or liability for, the Lender or its Affiliates. To the extent such Material Compliance Breach is not cured within the foregoing time period or is not capable of being cured, the Lender shall have the right, in its sole discretion, to require the Borrower to immediately redeem this Debenture for an amount of lawful money of Canada equal to the MCB Redemption Amount. In the event the Lender elects to exercise the right to redeem pursuant to the foregoing sentence, the Borrower shall promptly (but in any event within 10 Business Days) transfer an amount of lawful money of Canada equal to the MCB Redemption Amount into the Payment Account.
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| Section 3.2 | Redemption if Restricted Activity |
In the event the Borrower enters into, or commences operations or activities in, any Restricted Activity, the Borrower shall give prompt written notice to the Lender of the commencement of such Restricted Activity. The Lender shall have 120 calendar days after written notification from the Borrower to the Lender of the relevant Restricted Activity or, if the Lender becomes aware of a Restricted Activity prior to receiving such notification, 120 calendar days after written notification from the Lender of the relevant Restricted Activity, to give written notice to the Borrower in the event that the Lender wishes to exit the arrangements contemplated by the Transaction Agreements and the Parties will negotiate in good faith for 30 calendar days to identify a resolution that is mutually acceptable.
In the event a resolution is not achieved in the foregoing time period, the Lender shall have the right, in its sole discretion, to, as promptly as practicable (but in no event later than 90 calendar days following the end of the set negotiation period), either: (i) require the Borrower to redeem the Debenture for an amount of lawful money of Canada equal to the RA Redemption Amount, or (ii) sell or otherwise transfer the Debenture. The Borrower shall have 60 calendar days following any required redemption pursuant to the foregoing sentence to transfer an amount of lawful money of Canada equal to the RA Redemption Amount into the Payment Account.
| Section 3.3 | Result of Redemption |
Following any redemption pursuant to this Article 3: (i) the Debenture shall no longer be considered outstanding, (ii) the Borrower shall be deemed to have discharged all of its Obligations under this Debenture, and (iii) the Lender shall not be entitled to any further remedies, damages or payments hereunder in respect of Obligations under this Debenture.
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Article 4 - CONVERSION
| Section 4.1 | Conversion Right |
Upon and subject to the terms and conditions set forth in this Debenture, including Section 2.3 and the receipt of Exchange approval, the Lender shall have the right (the “Conversion Right”), but not the obligation, at any time, and from time to time, up to and including the earlier of: (i) the Business Day immediately preceding the Maturity Date; and (ii) the Business Day prior to any redemption of the Debenture in accordance with terms hereof, to notify the Borrower in writing that it wishes to exchange or convert, for no additional consideration, all or any part of the Principal Amount of this Debenture (and the applicable amount of accrued and unpaid interest on the Principal Amount being converted) into fully paid and non-assessable Common Shares. Any part of the Principal Amount of this Debenture being converted shall be converted at the Conversion Price and the applicable amount of accrued and unpaid interest on such Principal Amount being converted shall be converted at the Interest Conversion Price. For greater certainty, if the Lender is electing to convert all or a portion of the Principal Amount, then the applicable amount of accrued and unpaid interest up to, but excluding, the applicable Issue Date (as defined below) on the Principal Amount being converted must also be converted in accordance with the foregoing sentence.
| Section 4.2 | Conversion Procedure |
The Conversion Right may be exercised by the Lender in accordance with Section 4.1 or 4.3(4) by completing and signing the notice of conversion (the “Conversion Notice”) attached hereto as Schedule B, and delivering the Conversion Notice and this Debenture to the Borrower. The Conversion Notice shall provide that the Conversion Right is being exercised and shall specify the Principal Amount being converted. Following delivery of the Conversion Notice by the Borrower, each Party shall use commercially reasonable efforts, and will cooperate with each other, to promptly take all required actions and obtain all Regulatory Approvals. Subject to Section 4.8, the Common Shares shall be issued no later than five Business Days following the date that all Regulatory Approvals have been obtained (the date of such issuance, the “Issue Date”). The conversion shall be deemed to have been effected immediately prior to the close of business on the Issue Date and the Common Shares issuable upon conversion shall be deemed to be issued as fully paid and non-assessable at such time. Within 10 Business Days after the Issue Date, the Borrower shall cause (i) a share certificate or certificates (or such other evidence of the issuance of the Common Shares from the Borrower’s transfer agent, including notices under a non-certificated registry) for the appropriate number of Common Shares acquired to be delivered to the Lender, and (ii) the Common Shares acquired to be registered in the name of the Lender or as the Lender may otherwise direct in the Conversion Notice. If less than all of the Principal Amount of this Debenture is the subject of the exercise of such Conversion Right, then within five Business Days after the Issue Date, the Borrower shall deliver to the Lender a replacement Debenture in the form hereof in the principal amount of the unconverted principal balance hereof, and this Debenture shall be cancelled. If the Conversion Right is being exercised in respect of the entire Principal Amount of this Debenture, this Debenture shall be automatically cancelled on the Issue Date following the issuance of all Common Shares required to be issued hereunder. Notwithstanding anything else provided for in this Article 4 (other than Section 4.8), in the event that any Regulatory Approvals with respect to an exercised Conversion Right are not obtained or do not allow for the conversion of the full amount of the Principal Amount (and the applicable amount of accrued and unpaid interest on such amount) subject to the exercised Conversion Right, then only such amount allowable under the Regulatory Approvals, if any, shall be converted and the Borrower shall immediately transfer an amount of lawful money of Canada equal to the Principal Amount for which the Regulatory Approvals are not obtained or allowed to be converted (and the applicable amount of accrued and unpaid interest on such amount) into the Payment Account.
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| Section 4.3 | Adjustment of Conversion Price |
The Conversion Price in effect at any date shall be subject to adjustment from time to time as follows:
| (1) | If and whenever at any time prior to the Maturity Date, the Borrower shall: |
| (a) | subdivide, re-divide or change the issued and outstanding Common Shares into a greater number of Common Shares; |
| (b) | reduce, combine or consolidate the issued and outstanding Common Shares into a smaller number of Common Shares; |
| (c) | issue Common Shares (or securities convertible into or exchangeable for Common Shares) to the holders of all or substantially all of the issued and outstanding Common Shares by way of a non-cash dividend; or |
| (d) | make a non-cash distribution on its issued and outstanding Common Shares payable in Common Shares or securities exchangeable for or convertible into Common Shares, |
then the Conversion Price in effect on the effective date of such subdivision, redivision, change, reduction, combination or consolidation or on the record date for such issue of Common Shares (or securities convertible into or exchangeable for Common Shares) by way of a non-cash dividend or other distribution, as the case may be, shall, in the case of the events referred to in Section 4.3(1)(a), (c) and (d) above, be decreased in proportion to the increase in the number of issued and outstanding Common Shares resulting from such subdivision, redivision, change, issue or dividend (including, in the case where securities convertible into or exchangeable for Common Shares are issued, the number of Common Shares that would have been outstanding had such securities been converted into or exchanged for Common Shares on such effective or record date) or shall, in the case of the events referred to in Section 4.3(1)(b) above, be increased in proportion to the decrease in the number of outstanding Common Shares resulting from such reduction, combination or consolidation on such effective or record date; in each case by multiplying the Conversion Price in effect on such effective date or record date by a fraction of which the numerator shall be the total number of Common Shares outstanding immediately prior to such date and the denominator shall be the total number of Common Shares outstanding immediately after such date. Any such issue of Common Shares (or securities convertible into or exchangeable for Common Shares) by way of a non-cash dividend or other distribution shall be deemed to have been made on the record date for the non-cash dividend or other distribution for the purpose of calculating the number of outstanding Common Shares under Section 4.3(2) and (3).
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(2) If and whenever at any time prior to the Maturity Date, the Borrower shall fix a record date for the issuance of rights, options or warrants to all or substantially all the holders of its outstanding Common Shares entitling them, for a period expiring not more than 45 calendar days after such record date (such period from the record date to the date of expiry being referred to in this Section 4.3(2) as the “Rights Period”), to subscribe for or purchase Common Shares (or securities convertible into or exchangeable for Common Shares) at a price per share less than 95% of the Market Price for Common Shares for the period ending on the third trading day prior to such record date (such subscription price per Common Share (inclusive of any cost of acquisition of securities exchangeable for or convertible into Common Shares in addition to any direct cost of Common Shares) being referred to in this Section 4.3(2) as the “Per Share Cost”), the Borrower shall give written notice to the Lender with respect thereto (any of such events herein referred to as a “Rights Offering”), and the Lender shall have 15 calendar days after receipt of such notice to elect to convert any or all of the Principal Amount of this Debenture into Common Shares at the then applicable Conversion Price and otherwise on terms and conditions set out in this Debenture. If the Lender elects to convert any or all of the Principal Amount of this Debenture, the Borrower shall not proceed with such Rights Offering until all Regulatory Approvals for such conversion are received and, upon the receipt of all such Regulatory Approvals, such conversion shall occur immediately prior to the record date for the issuance of such rights, options or warrants. If the Lender elects not to convert any of the Principal Amount of this Debenture, there shall continue to be an adjustment to the Conversion Price as a result of the issuance of such rights, options or warrants, in the manner hereinafter provided. The Conversion Price will be adjusted effective immediately after the end of the Rights Period to a price determined by multiplying the Conversion Price in effect immediately prior to the end of the Rights Period by a fraction:
| (a) | the numerator of which is the aggregate of: |
| (i) | the total number of Common Shares outstanding as of the record date for such Rights Offering; and |
| (ii) | the number determined by dividing the product of the Per Share Cost and: |
| (A) | where the event giving rise to the application of this Section 4.3(2) was the issue of rights, options or warrants to the holders of Common Shares under which such holders are entitled to subscribe for or purchase additional Common Shares, the number of Common Shares so subscribed for or purchased during the Rights Period, or |
| A-17 |
| (B) | where the event giving rise to the application of this Section 4.3(2) was the issue of rights, options or warrants to the holders of Common Shares under which such holders are entitled to subscribe for or purchase securities exchangeable for or convertible into Common Shares, the number of Common Shares for which those securities so subscribed for or purchased during the Rights Period could have been exchanged or into which they could have been converted during the Rights Period, |
by the Market Price of the Common Shares for the period ending on the third trading day prior to such record date for the commencement of the Rights Offering; and
| (iii) | the denominator of which is |
| (A) | in the case described in Section 4.3(2)(a)(ii)(A), the total number of Common Shares outstanding, or |
| (B) | in the case described in Section 4.3(2)(a)(ii)(B), the total number of Common Shares that would be outstanding if all the Common Shares described in Section 4.3(2)(a)(ii)(B) had been issued, |
| (b) | in each case, after giving effect to the Rights Offering and including the number of Common Shares actually issued or subscribed for during the Rights Period upon exercise of the rights, warrants or options under the Rights Offering. |
Any Common Shares owned by or held for the account of the Borrower or any Subsidiary of the Borrower will be deemed not to be outstanding for the purpose of any such computation. To the extent that any adjustment in the Conversion Price occurs pursuant to this Section 4.3(2) as a result of the fixing by the Borrower of a record date for the distribution of rights, options or warrants referred to in this Section 4.3(2), the Conversion Price will be readjusted immediately after the expiration of any relevant exchange, conversion or exercise right to the Conversion Price which would then be in effect based upon the number of Common Shares actually issued upon the exercise of such rights, options or warrants, as the case may be.
If the Lender has exercised its Conversion Right in accordance herewith during the Rights Period, the Lender will, in addition to the Common Shares to which it is otherwise entitled upon such exercise, be entitled to that number of additional Common Shares equal to the result obtained when the difference, if any, between the Conversion Price in effect immediately prior to, and the Conversion Price in effect immediately following the end of such Rights Offering pursuant to this Section 4.3(2), is multiplied by the number of Common Shares received upon the exercise of the Conversion Right during such period, and the resulting product is divided by the Conversion Price as adjusted for such Rights Offering pursuant to this Section 4.3(2); provided that no fractional Common Shares will be issued and shall be adjusted in the manner provided in Section 4.5. Such additional Common Shares will be deemed to have been issued to the Lender immediately following the end of the Rights Period and a certificate or notice of uncertificated ledger entries for such additional Common Shares will be delivered to the Lender within 10 Business Days following the end of the Rights Period (subject to the prior receipt of all Regulatory Approvals).
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(3) If and whenever at any time prior to the Maturity Date, the Borrower shall fix a record date for the making of a distribution to all or substantially all the holders of its outstanding Common Shares of (a) shares of any class other than Common Shares (or other than securities convertible into or exchangeable for Common Shares), or (b) rights, options or warrants (other than rights, options or warrants referred to in Section 4.3(2)), or (c) evidences of its indebtedness, or (d) assets (including cash) or property of the Borrower, or (e) cash dividends or distributions, then, in each such case, the Borrower shall give written notice to the Lender with respect thereto, and the Lender shall have 15 calendar days after receipt of such notice to elect to convert any or all of the Principal Amount of this Debenture into Common Shares at the then applicable Conversion Price and otherwise on terms and conditions set out in this Debenture. If the Lender elects to convert any or all of the Principal Amount of this Debenture, the Borrower shall not proceed with such distribution until all Regulatory Approvals for such conversion are received and, upon the receipt of all such Regulatory Approvals, such conversion shall occur immediately prior to the record date for the making of such distribution. If the Lender elects not to convert any of the Principal Amount of this Debenture, there shall continue to be an adjustment to the Conversion Price as a result of the making of such distribution, (herein referred to as a “Special Distribution”) determined in the manner hereafter set out.
The Conversion Price will be adjusted effective immediately after such record date to a price determined by multiplying the Conversion Price in effect on such record date by a fraction:
| (a) | the numerator of which is: |
| (i) | the product of the number of Common Shares outstanding on such record date and the Market Price of the Common Shares for the period ending on such record date; less |
| (ii) | the aggregate fair market value (as determined by action by the Board of Directors of the Borrower, acting reasonably) to the holders of the Common Shares of such securities or property or other assets so issued or distributed in the Special Distribution; and |
| (b) | the denominator of which is the number of Common Shares outstanding on such record date multiplied by the Market Price of the Common Shares for the period ending on such record date. |
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Any Common Shares owned by or held for the account of the Borrower or any Subsidiary of the Borrower will be deemed not to be outstanding for the purpose of any such computation.
(4) In the case of any reclassification of, or other change in, the outstanding Common Shares pursuant to a Change of Control, the Lender may elect, prior to the effective date of such Change of Control, to convert all or any part of the Principal Amount of this Debenture into Common Shares at the then applicable Conversion Price and otherwise on terms and conditions set out in this Debenture. To exercise such right the Lender must provide a notice in writing to the Borrower no later than five Business Days prior to the effective date of such Change of Control (provided the Borrower has provided the Lender five Business Days prior written notice of such Change of Control), failing which (i) the Lender’s right to convert this Debenture as a consequence of such Change of Control shall cease and (ii) if such Change of Control results in (A) a successor entity upon completion of an arrangement, amalgamation, consolidation or merger involving the Borrower, (B) another entity carrying on the business of the Borrower, or (C) the Borrower becoming a wholly-owned subsidiary of another entity, and the Lender has failed to elect to convert all of the Principal Amount of this Debenture into Common Shares pursuant to this Section 4.3(4), the Borrower shall be required to prepay the Principal Amount outstanding on this Debenture and any accrued and unpaid interest owing thereon in cash within seven days of the effective date of such Change of Control. The Borrower shall not proceed with such Change of Control unless written notice of such Change of Control that includes a description of the material terms of such Change of Control and expected timing has been provided by the Borrower to the Lender no fewer than 30 days prior to the effective date of such Change of Control.
(5) If and whenever at any time after the date hereof there is a reclassification or redesignation of the Common Shares outstanding at any time or change of the Common Shares into other shares or into other securities (other than as set out in Section 4.3(1), (2), (3) or (4)), or a consolidation, amalgamation or merger of the Borrower with or into any other corporation or other entity (other than a consolidation, amalgamation or merger which does not result in any reclassification or redesignation of the outstanding Common Shares or a change of the Common Shares into other shares and other than as set forth in Section 4.3(4)), or a transfer of the undertaking or assets of the Borrower as an entirety or substantially as an entirety to another corporation or other entity (any of such events being called a “Capital Reorganization”), the Lender, upon the exercising the Conversion Right, after the effective date of such Capital Reorganization, will be entitled to receive in lieu of the number of Common Shares to which the Lender was theretofore entitled upon such exercise, the aggregate number of shares, other securities or other property of the Borrower or of the body corporate, trust, partnership or other entity resulting from such Capital Reorganization, if any, which the Lender would have been entitled to receive as a result of such Capital Reorganization if, on the effective date thereof, the Lender had been the holder of the number of Common Shares to which such Lender was theretofore entitled upon exercise of the Conversion Right. If determined appropriate by written resolution of the board of directors of the Borrower, acting reasonably and in good faith, appropriate adjustments will be made as a result of any such Capital Reorganization in the application of the provisions set forth in this Section 4.3 with respect to the rights and interests thereafter of the Lender to the end that the provisions set forth in this Section 4.3 will thereafter correspondingly be made applicable as nearly as may reasonably be in relation to any shares, other securities or other property thereafter deliverable upon the exercise of the Conversion Right. Any such adjustment must be made by and set forth in an amendment to this Debenture approved by written resolution of the board of directors of the Borrower, acting reasonably and in good faith.
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(6) If, in the opinion of the board of directors of the Borrower, acting reasonably and in good faith, the provisions of this Section 4.3 are not strictly applicable, or if strictly applicable would not fairly protect the rights of the Lender in accordance with the intent and purposes hereof, the Conversion Price shall be adjusted in such manner, if any, and at such time, as the board of directors of the Borrower determines to be appropriate, acting reasonably and in good faith, on a basis consistent with the intent of this Section 4.3; provided that if at any time a dispute arises with respect to adjustments provided for in this Article 4, such dispute will be conclusively determined by an independent financial advisory or investment banking firm mutually acceptable to the Borrower and the Lender, at the cost of the Borrower, and any such determination will be binding on the Borrower and the Lender. The Borrower will provide such financial advisory or investment banking firm with access to all necessary records of the Borrower.
(7) In any case in which this Section 4.3 shall require that an adjustment shall become effective immediately after a record date for an event referred to herein, the Borrower may defer, until the occurrence of such event, issuing to the Lender before the occurrence of such event, the additional Common Shares issuable upon such conversion by reason of the adjustment required by such event before giving effect to such adjustment; provided, however, that the Borrower shall deliver to the Lender an appropriate instrument evidencing the Lender’s right to receive such additional Common Shares upon the occurrence of the event requiring such adjustment and the right to receive any distributions made on such additional Common Shares declared in favour of holders of record of Common Shares on and after the Issue Date or such later date as the Lender would, but for the provisions of this Section 4.3(6), have become the holder of such additional Common Shares pursuant to Section 4.3(2).
(8) The adjustments provided for in this Section 4.3 are cumulative and shall apply to successive subdivisions, redivisions, reductions, combinations, consolidations, distributions, issues or other event resulting in any adjustment under the provisions of this Section 4.3.
| Section 4.4 | Adjustments Pursuant to Preemptive or Top-Up Rights |
(1) If the Borrower shall, at any time or from time to time prior to the Business Day immediately preceding the Maturity Date, issue or sell any Common Shares (other than pursuant to an Exempt Offering), then no later than five Business Days prior to the commencement of such offering, the Borrower shall provide written notice to the Lender (the “Preemptive Rights Notice”) specifying the expected timing and material terms (including sale price) of such offering. Within 10 Business Days of receipt of the Preemptive Rights Notice, the Lender may, so long as the number of Common Shares issuable upon conversion of this Debenture or otherwise beneficially owned by the Lender or its Affiliates immediately prior to completion of such offering would represent 10% or more of the number of Common Shares outstanding immediately prior to completion of such offering, through written notice to the Borrower (a “Preemptive Rights Election Notice”), elect to participate in such offering up to its pro rata share (measured by reference to the number of Common Shares issuable upon conversion of this Debenture relative to the number of Common Shares outstanding immediately prior to such conversion, in each case immediately prior to the completion of such offering (“Pro Rata Share”)) of such offering through payment by the Lender of an amount (the “Preemptive Rights Amount”) equal to (i) the purchase price per Common Share in such offering, multiplied by (ii) the number of Common Shares (up to the Pro Rata Share) set forth in the Preemptive Rights Election Notice (the “Preemptive Rights Share Amount”). Immediately upon completion of an offering of Common Shares for which the Lender has exercised its right to purchase up to its Pro Rata Share pursuant to Section 4.4(1), the Preemptive Rights Amount paid by the Lender to the Borrower shall form a subsequent tranche of this Debenture (the “Debenture Tranche”) which shall (A) have a principal amount equal to the Preemptive Rights Amount then paid that corresponds to such Debenture Tranche, and (B) have a conversion price (the “Tranche Conversion Price”) equal to the quotient of (x) the Preemptive Rights Amount, divided by (y) the Preemptive Rights Share Amount (or if such Tranche Conversion Price is not permitted pursuant to applicable securities Laws or stock exchange rules, the lowest price permitted thereunder, adjusted upwards from such Tranche Conversion Price, for a private placement at such time).
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(2) If the Borrower shall, at any time or from time to time prior to the Business Day immediately preceding the Maturity Date, issue or sell any Common Shares in any “bought” financing, pursuant to an at-the-market program implemented by the Borrower pursuant to National Instrument 44-102 – Shelf Distributions or similar offerings implemented in accordance with applicable United States securities Laws, as consideration for any merger or acquisition of a bona fide business or assets or pursuant to any equity incentive plan approved by the Borrower’s board of directors that is substantially similar to the Employee Plan existing on the Effective Date (an “Exempt Offering”), then no later than five Business Days following completion of such Exempt Offering (other than in respect of the issuance of Common Shares pursuant to any equity incentive plan approved by the Borrower’s board of directors that is substantially similar to the Employee Plan existing on the Effective Date), the Borrower shall provide written notice to the Lender (the “Exempt Offering Notice”) specifying the amount of cash and the fair market value of any non-cash consideration (as determined in good faith by the Borrower’s board of directors) received per Common Share (the “Per Share Value”) by the Borrower in such Exempt Offering. Within 30 Business Days of receipt of the Exempt Offering Notice, the Lender may, so long as the number of Common Shares issuable upon conversion of this Debenture or otherwise beneficially owned by the Lender or its Affiliates immediately prior to completion of such Exempt Offering represented 10% or more of the number of Common Shares outstanding immediately prior to completion of such Exempt Offering, through written notice to the Borrower (an “Exempt Offering Election Notice”), elect to retain up to the Pro Rata Share through (a) payment by the Lender of an amount (the “Exempt Offering Amount”) equal to (i) the Per Share Value (or if such price is not permitted pursuant to applicable securities Laws or stock exchange rules, the lowest price permitted thereunder, adjusted upwards from the Per Share Value, for a private placement at such time) multiplied by (ii) the number of Common Shares (up to the Pro Rata Share) set forth in the Exempt Offering Election Notice (the “Exempt Offering Share Amount”). Immediately upon completion of an offering of Common Shares for which the Lender has exercised its right to purchase up to its Pro Rata Share pursuant to Section 4.4(2), the Exempt Offering Amount paid by the Lender to the Borrower shall form a subsequent Debenture Tranche, which shall (A) have a principal amount equal to the Exempt Offering Amount that corresponds to such Debenture Tranche and (B) have a Tranche Conversion Price equal to the quotient of (x) the Exempt Offering Amount, divided by (y) the Exempt Offering Share Amount (or if such Tranche Conversion Price is not permitted pursuant to applicable securities Laws or stock exchange rules, the lowest price permitted thereunder, adjusted upwards from the Tranche Conversion Price, for a private placement at such time).
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(3) Other than as set forth in this Section 4.4, any Debenture Tranche issued pursuant to Sections 4.4(1) or 4.4(2) of this Debenture shall be on the same terms, mutatis mutandis, as the initial Debenture issued on the date hereof. For greater certainty, unless the Borrower has obtained the requisite approval of the holders of the Common Shares, the Borrower shall not issue in respect of each Debenture Tranche greater than 25% of the Common Shares which are outstanding, on a non-diluted basis, prior to the date of issuance of each Debenture Tranche (each such limit, a “Tranche Cap”). For purposes of the foregoing sentence, “beneficial ownership” shall be calculated in accordance with National Instrument 62-104 – Take-Over Bids and Issuer Bids (or any successor national instrument). Any purported delivery of Common Shares upon conversion of any Debenture Tranche shall be void ab initio and have no effect if and to the extent that such delivery would result in the Lender exceeding the relevant Tranche Cap, and the Lender shall, upon becoming aware of any such Common Shares so delivered, notify the Borrower of same, and thereafter, or otherwise upon written demand from the Borrower, surrender to the Borrower such number of Common Shares that exceed the relevant Tranche Cap, and the Borrower shall deliver to the Lender the principal amount of the Debenture Tranche in respect thereof, which principal amount, may, at the Borrower’s option upon 30 calendar days’ prior written notice to the Lender, be repaid in cash pursuant to the terms of Section 2.3(2).
| Section 4.5 | No Requirement to Issue Fractional Common Shares |
The Borrower shall not be required to issue fractional Common Shares upon the conversion of the Debenture pursuant to this Article 4. If any fractional interest in a Common Share, would, except for the provisions of this Section 4.5, be deliverable upon the conversion of any amount hereunder, the number of Common Shares to be issued shall be rounded up to the nearest whole Common Share.
| Section 4.6 | Borrower to Reserve Common Shares |
The Borrower covenants with the Lender that it will at all times reserve and keep available out of its authorized Common Shares, solely for the purpose of issue upon exercise of the Conversion Right, and conditionally allot to the Lender, such number of Common Shares as shall then be issuable upon the conversion of this Debenture. The Borrower covenants with the Lender that all Common Shares which shall be so issuable shall be duly and validly issued as fully paid and non- assessable. The Borrower covenants with the Lender to cause the Common Shares and the certificate, as applicable, representing the Common Shares from time to time acquired pursuant to the exercise of the Conversion Right to be duly issued and delivered in accordance with the terms hereof.
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| Section 4.7 | Certificate as to Adjustment |
The Borrower shall from time to time, immediately after the occurrence of any event which requires an adjustment or readjustment as provided in Section 4.3, deliver an officer’s certificate to the Lender specifying the nature of the event requiring the same and the amount of the adjustment necessitated thereby and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Subject to the dispute resolution procedure in Section 4.3, such certificate shall be binding and determinative of the adjustment to be made, absent manifest error.
| Section 4.8 | Shareholder Vote |
The Parties will explore alternatives in the event the number of Common Shares issuable upon the conversion of the Debenture pursuant to this Article 4 results in a requirement (under the rules of the Exchange or applicable Law) for a vote of the shareholders of the Borrower, including the possibility of seeking such required shareholder vote or the Borrower paying to the Lender an amount equal to the minimum portion of the Principal Amount being converted (or the applicable amount of accrued and unpaid interest on the Principal Amount being converted) as obviates the requirement for said shareholder vote.
| Section 4.9 | Shareholder of Record |
For all purposes, on the Issue Date or the applicable date specified in Section 4.2, the Lender shall be deemed to have become the holder of record of the Common Shares into which the Principal Amount of this Debenture or a portion thereof (and the applicable amount of accrued and unpaid interest on the Principal Amount being converted) is converted in accordance with Section 4.2.
| Section 4.10 | Resale Restrictions, Legending and Disclosure |
By its acceptance hereof the Lender acknowledges that this Debenture and the Common Shares issuable upon conversion hereof will be subject to certain resale restrictions under applicable securities Laws, and the Lender agrees to comply with all such restrictions and Laws. The Lender further acknowledges and agrees that the certificate representing the Common Shares will bear the legend substantially in the form set forth on the face page hereof as well as any legends required by the Exchange, provided that such Canadian legend shall not be required on certificate representing the Common Shares issued at any time following four months plus one day after the date hereof. The Lender acknowledges that the Borrower will be required to provide to the applicable securities regulatory authorities the identity of the Lender and its principals and the Lender hereby agrees thereto.
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Article 5 - RIGHTS OF DEBENTUREHOLDER
| Section 5.1 | Distribution on Dissolution, Etc. |
Subject to applicable Law and the rights of any holder of any Secured Debt ranking ratably or in priority to the Lender, upon any sale, in one transaction or a series of transactions, of all, or substantially all, of the assets of the Borrower or distribution of the assets of the Borrower upon any dissolution or winding-up or total liquidation of the Borrower, whether in bankruptcy, liquidation, re-organization, insolvency, receivership or other similar proceedings or upon an assignment to or for the benefit of creditors of the Borrower or otherwise, any payment or distribution of assets of the Borrower, whether in cash, property or security, shall be paid or delivered by the trustee in bankruptcy, receiver, assignee of or for the benefit of creditors or other liquidating agent of the Borrower making such payment or distribution, directly to the holder of this Debenture or their representatives, to the extent necessary, to pay all Obligations pursuant to this Debenture in full.
| Section 5.2 | Certificate Regarding Creditors |
Upon any payment or distribution of assets of the Borrower referred to in Section 5.1, the Debentureholder shall be entitled to rely upon a certificate of the trustee in bankruptcy, receiver, assignee of or for the benefit of creditors or other liquidating agent of the Borrower making such payment or distribution, delivered to the Debentureholder, for the purpose of ascertaining the Persons entitled to participate in such distribution, and other indebtedness of the Borrower, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to Section 5.1.
| Section 5.3 | Rights of Debentureholder Reserved |
Nothing contained in this Article 5 or elsewhere in this Debenture is intended to or shall impair, as between the Borrower and the Debentureholder, the obligation of the Borrower, which is absolute and unconditional, to pay to the Debentureholder the Principal Amount and interest on the Debenture, as and when the same shall become due and payable in accordance with their terms, nor shall anything herein prevent the Debentureholder from exercising all remedies otherwise permitted by applicable Law upon default under this Debenture.
| Section 5.4 | Payment of Debenture Permitted |
Nothing contained in this Debenture shall:
| (a) | prevent the Borrower from making payments of the Principal Amount, interest and other amounts to the Debentureholder under this Debenture as herein provided; |
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| (b) | prevent the conversion of this Debenture into Common Shares as herein provided or as otherwise permitted according to Law, including in connection with a bankruptcy, reorganization, insolvency, or other arrangement with creditors of the Borrower; or |
| (c) | prevent the redemption of this Debenture by the Borrower as herein provided. |
Article 6 - COVENANTS OF THE BORROWER
| Section 6.1 | Positive Covenants |
The Borrower covenants and agrees, for as long this Debenture remains outstanding, that the Borrower shall:
| (1) | Maintain Corporate Existence. Maintain its corporate existence and the existence its Subsidiaries (other than dormant Subsidiaries), and preserve its and its Subsidiaries’ rights, powers, licenses and privileges, in each case which are necessary and material to the conduct of the business of the Borrower and its Subsidiaries; |
| (2) | Compliance. |
| (a) | Comply in all respects with applicable Cannabis Laws and in all material respects with all other applicable Laws; and |
| (b) | Use commercially reasonable efforts to comply with the BAT Group’s Standards of Business Conduct and International Marketing Principles in effect on the date hereof, as may be amended in a manner acceptable to the Borrower, acting reasonably; |
| (3) | Carry on Business. |
| (a) | Keep, and cause its Subsidiaries to keep, adequate and accurate records and books of account in which complete entries will be made reflecting all material financial transactions, and prepare its financial statements in accordance with generally accepted accounting principles; and |
| (b) | Maintain, and cause its Subsidiaries to maintain, all consents, permits, exemptions, approvals, registrations, filings, authorizations and licenses necessary and material to carry on the business of the Borrower and its Subsidiaries; |
| (4) | Payment of Taxes. Pay and discharge, and cause its Subsidiaries to pay and discharge, promptly all Taxes assessed or imposed upon the Borrower or such Subsidiaries or the Borrower’s or any such Subsidiary’s properties as and when the same become due and payable save and except where it contests in good faith the validity thereof by proper legal proceedings; |
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| (5) | Payment of Obligations. Pay all principal, interest and other amounts owing to the Lender hereunder promptly when due; |
| (6) | Performance of Covenants. Perform and satisfy all covenants and obligations to be performed by it under this Debenture; |
| (7) | Insurance. Maintain, and cause its Subsidiaries to maintain, insurance with respect to the Borrower’s or any such Subsidiary’s properties and business against such casualties and contingencies, of such types, on such terms and in such amounts as is customary in the case of entities engaged in the same or a similar business and similarly situated; |
| (8) | Maintain Listing. Maintain the listing of the Common Shares on an Exchange and to maintain the Borrower’s status as a “reporting issuer” not in default of the requirements of the Canadian Securities Laws or United States securities Laws; provided that the Borrower shall not be required to comply with the covenant in this Section 6.1(8) following a Change of Control; and |
| (9) | Notice of Event of Default. Promptly, and in any event within five Business Days after a responsible officer of the Borrower becoming aware, give notice to the Lender of the occurrence or existence of any Event of Default. |
| Section 6.2 | Negative Covenants |
The Borrower covenants and agrees that, without the prior written consent of the Lender, the Borrower shall not, and shall cause its Subsidiaries (and, in the case of Section 6.2(2), its or their respective Representatives acting on its or their behalf and, in the case of Section 6.2(3), its and their respective directors, officer and employees) not to:
| (1) | Dissolution. Liquidate, wind-up, dissolve themselves (or suffer any liquidation or dissolution), reorganize, make an assignment for the benefit of their creditors or file a petition, answer or consent to seeking a reorganization, take part in a plan of arrangement, or undergo a change of control or similar transaction to any of the foregoing; provided, that this Section 6.2(1) shall not apply to any Subsidiaries that are dormant as of the date hereof; |
| (2) | Business Sustainability Breach. Take any action that, individually or in the aggregate, would, or would reasonably be expected to, give rise to a Business Sustainability Breach; and |
| (3) | Sanctions. |
| (a) | Violate any applicable Sanctions; and |
| (b) | Conduct any activities (i) targeted by Sanctions, (ii) with or for the benefit of any Sanctioned Person, or (iii) in any Sanctioned Country. |
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Article 7 - EVENTS OF DEFAULT
| Section 7.1 | Events of Default |
(1) The occurrence of any of the following events shall constitute an event of default under this Debenture (each an “Event of Default”):
| (a) | if the Borrower fails to pay (i) any of the Principal Amount or interest when due, or (ii) any other amounts payable under this Debenture within 30 calendar days after the date such interest or other amount is due; |
| (b) | if the Borrower breaches, fails to make any payment or to observe, perform or comply with any material term, covenant, condition or obligation of the Borrower contained herein or is otherwise in default of any of the provisions contained herein (other than referred in subparagraph (a) of this Section 7.1) and such default, if capable of being remedied without loss to, or liability for, the Lender or its Affiliates, is not remedied within 20 Business Days after the Lender receives prompt written notice of such default from the Borrower or, if Lender becomes aware of a default prior to receiving such notice, within 20 Business Days after the Borrower receives a written notice of such default from the Lender; |
| (c) | if the Borrower breaches any of the provisions of the Transaction Agreements in any material respect; |
| (d) | if the Borrower or any of its Significant Subsidiaries shall generally fail to pay, or admit in writing its inability or unwillingness to pay, debts as they become due or if a decree or order of a court having jurisdiction is entered adjudging the Borrower or any of its Significant Subsidiaries as bankrupt or insolvent; |
| (e) | if the Borrower or any of its Significant Subsidiaries shall apply for, consent to or acquiesce in the appointment of a trustee, receiver, or other custodian for the Borrower or any of its Significant Subsidiaries or for a substantial part of the property thereof, or make a general assignment for the benefit of creditors; |
| (f) | if the Borrower or any of its Significant Subsidiaries shall in the absence of such application, consent or acquiescence, become subject to the appointment of a trustee, receiver, or other custodian for the Borrower or any of its Significant Subsidiaries or for a substantial part of the property thereof, or have a distress, execution, attachment, sequestration or other legal process levied or enforced on or against a substantial part of the property of the Borrower or any of its Significant Subsidiaries; |
| (g) | if the Borrower or any of its Significant Subsidiaries shall permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency Law, or any dissolution, winding up or liquidation proceeding, in respect of the Borrower or any of its Significant Subsidiaries and, if any such case or proceeding is not commenced by the Borrower or any of its Significant Subsidiaries, such case or proceeding, if contested by the Borrower or any of its Significant Subsidiaries is not dismissed within 30 calendar days; or |
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| (h) | any other notes, debentures, bonds or other indebtedness for money borrowed having an aggregate principal amount of at least US$10,000,000 (or its equivalent in any other currency or currencies determined at the then current exchange rate) or more (hereinafter called “Indebtedness”) of the Borrower or any of its Subsidiaries shall become prematurely repayable following default, or steps are taken to enforce any security therefor, or the Borrower or any of its Subsidiaries defaults in the repayment of any such Indebtedness at the maturity thereof or (in the case of Indebtedness due on demand) on demand, or, in either case, at the expiration of any applicable grace period therefor, (if any) or any guarantee of or indemnity in respect of any Indebtedness of others given by the Borrower or any of its Subsidiaries shall not be honored when due and called upon. |
(2) If an Event of Default described in (d), (e), (f), (g) or (h) above shall occur, all Obligations on this Debenture shall become immediately due and payable without any declaration or other act on the part of the Lender. Immediately upon the occurrence of any Event of Default described in (d), (e), (f), (g) or (h) above, or upon failure to pay this Debenture on the Maturity Date, the Lender, upon notice to the Borrower, may proceed to protect, enforce, exercise and pursue any and all rights and remedies available to the Lender under this Debenture, or at law or in equity.
(3) If an Event of Default described in (c) above shall occur, the Lender must first deliver a written notice to the Borrower specifying in reasonable detail all material breaches of covenants, representations and warranties or other matters in the Investor Rights Agreement which the Lender asserts as the basis for the Event of Default. After delivering such notice, provided the Borrower is proceeding diligently to cure such matter and such matter is capable of being cured without loss or liability for the Lender or any of its Affiliates, the Lender may not declare all Obligations of this Debenture to be due and payable until the date that is 30 calendar days following receipt of such notice by the Borrower if such matter has not been cured on or before such date, without loss or liability for the Lender or its Affiliates, to the satisfaction of the Lender.
(4) If any other Event of Default shall occur for any reason, whether voluntary or involuntary, and be continuing, the Lender may by notice to the Borrower declare all or any of the Obligations of this Debenture to be due and payable, whereupon the full unpaid amount of this Debenture which shall be so declared due and payable shall be and become immediately due and payable without further notice, demand or presentment, or transfer this Debenture in accordance with Section 9.7.
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| Section 7.2 | Remedies Not Exclusive |
No right, power or remedy herein conferred upon or reserved to the Lender is intended to be exclusive of any other right, power or remedy or remedies, and each and every right, power and remedy shall, to the extent permitted by applicable Law, be cumulative and shall be in addition to every other right, power or remedy given hereunder or now or hereafter existing at law, in equity or by statute. The Lender shall have the power to waive any Event of Default, provided such waiver is obtained in accordance with Section 9.5, and shall not constitute a waiver of any other or subsequent Event of Default. No delay or omission of the Lender in the exercise of any right, power or remedy accruing upon any Event of Default shall impair any such right, power or remedy or shall be construed to be a waiver of any such Event of Default or an acquiescence therein. Every right, power and remedy given to the Lender by this Debenture or under applicable Law may be exercised from time to time and as often as may be deemed expedient by the Lender. In case the Lender shall have proceeded to enforce any right under this Debenture and the proceedings for the enforcement thereof shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Lender, then and in every such case, the Borrower and the Lender shall, without any further action hereunder, to the full extent permitted by applicable Law, subject to any determination in such proceedings, severally and respectively, be restored to their former positions and rights hereunder and thereafter all rights, remedies and powers of the Lender shall continue as though no such proceeding had been taken.
| Section 7.3 | Application of Monies |
Subject to applicable Law, all monies collected or received by the Lender pursuant to or in exercise of any right or remedy shall be applied on account of the amounts outstanding hereunder in such manner as the Lender deems best or, at the option of the Lender, or released to the Borrower, all without prejudice to the liability of the Borrower or the rights of the Lender hereunder, and any surplus shall be accounted for as required by applicable Law.
Article 8 - MUTILATION, LOSS, THEFT OR DESTRUCTION OF DEBENTURE CERTIFICATE
In case this Debenture certificate shall become mutilated or be lost, stolen or destroyed, the Borrower, shall issue and deliver a new replacement debenture certificate upon surrender and cancellation of the mutilated Debenture certificate or, in the case of a lost, stolen or destroyed Debenture certificate, in lieu of and in substitution for the same. In the case of loss, theft or destruction, the applicant for a substituted debenture certificate shall furnish to the Borrower such evidence of the loss, theft or destruction of the Debenture certificate as shall be reasonably satisfactory to the Borrower. The applicant shall pay all reasonable and documented out-of-pocket third-party expenses incidental to the issuance of any substituted debenture certificate.
Article 9 - GENERAL
| Section 9.1 | Taxes, etc. |
All payments made by the Borrower to the Lender under this Debenture shall be made free and clear of, and without deduction for or on account of, any withholding Taxes now or hereafter imposed by any Governmental Authority in any jurisdiction. If any such withholding Taxes are required to be withheld or deducted from any amounts payable by the Borrower to the Lender hereunder, the Borrower shall:
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| (a) | within the time period for payment permitted by applicable Law, pay to the appropriate Governmental Authority the full amount of such withholding Taxes and any additional Taxes in respect of the payment required under Section 9.1(b) hereof and make such reports and filings in connection therewith in the manner required by applicable Law; and |
| (b) | pay to the Lender an additional amount which (after deduction of all withholding Taxes incurred by reason of the payment or receipt of such additional amount) will be sufficient to yield to the Lender the full amount which would have been received by it had no deduction or withholding been made. |
Upon the request of the Lender, the Borrower shall furnish to the Lender the original or a certified copy of a receipt for (or other satisfactory evidence as to) the payment of each of the withholding Taxes (if any) payable in respect of such payment. If the Lender receives a refund of any withholding Taxes with respect to which the Borrower has paid any additional amount under this Section 9.1, the Lender shall pay over such refund to the Borrower. Nothing herein is intended to require payment by the Borrower to or for the Lender in respect of any Taxes payable by the Lender in respect of Taxes on the Lender’s own income, capital, capital gains, dividends, or other earnings realized pursuant to payments made pursuant to the terms of this Debenture.
| Section 9.2 | Notice |
Any demand, notice, direction or other communication to be made or given hereunder (in each case, “Communication”) shall be in writing and shall be made or given by personal delivery, by courier or by email transmission, or sent by registered mail, charges prepaid, addressed to the respective Parties as follows:
| (a) | if to the Borrower: |
700 Tech Court
Louisville, CO 80027
United States
| Attention: | General Counsel |
| E-mail: | [* * *] |
with a copy (which shall not constitute notice) to:
DLA Piper (Canada) LLP
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Suite 6000, 1 First Canadian Place
PO Box 367, 100 King St W
Toronto, Ontario M5X 1E2
Canada
[***] Indicates material that has been excluded from this Exhibit 10.2 because it is private or confidential and not material.
Attention: Jarrod Isfeld
Russel W. Drew
Email: jarrod.isfeld@dlapiper.com
russel.drew@dlapiper.com
| (b) | if to the Lender: Globe House 4 Temple Pl London WC2R 2PG Attention: Juan Palacios Email: [* * *] and with a copy (which shall not constitute notice) to: Jones Day 250 Vesey Street New York, New York 10281 United States Attention: Randi C. Lesnick Bradley C. Brasser Email: rclesnick@jonesday.com bcbrasser@jonesday.com |
and with a copy (which shall not constitute notice) to:
Stikeman Elliott LLP
5300 Commerce Court West
199 Bay Street
Toronto, Ontario M5L 1B9
Canada
Attention: Colin Burn
Email: cburn@stikeman.com
or to such other address or email or facsimile number as any Party may from time to time designate in accordance with this Section 9.2. Any Communication made by personal delivery or by courier shall be conclusively deemed to have been given and received on the day of actual delivery thereof or if such day is not a Business Day, on the first Business Day thereafter. Any Communication made or given by email on a Business Day before 5:00 p.m. (local time of the recipient) shall be conclusively deemed to have been given and received on such Business Day and otherwise shall be conclusively deemed to have been given and received on the first Business Day following the
| A-32 |
[***] Indicates material that has been excluded from this Exhibit 10.2 because it is private or confidential and not material.
transmittal thereof. Any Communication that is mailed shall be conclusively deemed to have been given and received on the third Business Day following the date of mailing but if, at the time of mailing or within three Business Days thereafter, there is or occurs a labour dispute or other event that might reasonably be expected to disrupt delivery of documents by mail, any Communication shall be delivered or transmitted by any other means provided for in this Section 9.2.
| Section 9.3 | Change of Control of Borrower |
By its acceptance hereof, each of the Borrower and the Lender acknowledges and agrees that in the event a Change of Control occurs, then (a) all references herein to the Borrower shall extend to and include the entity resulting therefrom or which thereafter will carry on the business of the Borrower and (b) if such Change of Control results in (i) a successor entity upon completion of the arrangement, amalgamation, consolidation or merger, (ii) another entity carrying on the business of the Borrower, or (iii) the Borrower becoming a wholly-owned subsidiary of another entity, the following sections of the Debenture shall be deemed to be null and void upon the consummation of such Change of Control: Section 3.2, Section 4.4, Section 6.1(2)(b), Section 6.2(2), Section 7.1(1)(c) and Section 7.1(3).
| Section 9.4 | Amendments |
This Debenture may not be amended or otherwise modified except by an instrument in writing executed by the Borrower and the Lender.
| Section 9.5 | Waivers |
The Lender shall not, by any act, delay, omission or otherwise, be deemed to have expressly or impliedly waived any of its rights, powers and/or remedies unless such waiver shall be in writing and executed by an authorized officer of the Lender. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by the Lender of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which the Lender would otherwise have on any future occasion, whether similar in kind or otherwise.
| A-33 |
| Section 9.6 | Registration of Debentures |
The Borrower shall cause to be kept at the head office of the Borrower in the city of Louisville, Colorado, United States a register of debentures in which shall be entered the name and latest known address of the Lender and any other holders of debentures, if applicable. Such register shall at all reasonable times during regular business hours of the Borrower be open for inspection by the Lender. The Borrower shall not be charged with notice of or be bound to see to the performance of any trust, whether express, implied, or constructive, in respect of this Debenture and may act on the direction of the Lender, whether named as trustee or otherwise, as though the Lender were the beneficial owner of this Debenture.
| Section 9.7 | Transfer of Debenture |
This Debenture shall be transferable by the Lender only to an Affiliate of the Lender; provided, that following a Transferability Event this Debenture shall be freely transferable by the Lender to any Person other than a Competitor of the Borrower. Notwithstanding the foregoing, the Borrower shall be permitted to prepay the Principal Amount outstanding on this Debenture and any accrued and unpaid interest owing thereon in whole or in part in the event that this Debenture is transferred to a Person that is not an Affiliate of the Lender (the “Non-Affiliate Holder”). No transfer of this Debenture shall be valid unless made in accordance with applicable Law, including all applicable Canadian Securities Laws and United States securities Laws. Subject to the preceding two sentences, if the Lender intends to transfer this Debenture or any portion thereof, it shall deliver to the Borrower the transfer form attached to this Debenture as Schedule C, duly executed by the Lender. Upon compliance with the foregoing conditions and the surrender by the Lender of this Debenture, the Borrower shall execute and deliver to the applicable transferee a new Debenture registered in the name of the transferee. If less than the full Principal Amount of this Debenture is transferred, the Lender shall be entitled to receive, in the same manner, a new Debenture registered in its name evidencing the portion of the Principal Amount of this Debenture not so transferred. Prior to registration of any transfer of this Debenture, the Lender and the applicable transferee shall be required to provide the Borrower with necessary information and documents, including certificates and statutory declarations, as may be required to be filed under applicable Law. For greater certainty, upon the transfer of this Debenture to any Non-Affiliate Holder, (i) the transferee will not become a party to any of the Transaction Agreements (other than this Debenture), unless otherwise provided by the terms of the Transaction Agreements (other than this Debenture), and (ii) the following sections of the Debenture shall be deemed to be null and void upon the earlier to occur of (x) the Non-Affiliate Holder converting any portion of the outstanding Principal Amount or accrued and unpaid interest owing thereon into Common Shares, and (y) the prepayment of the Principal Amount pursuant to the terms of this Section 9.7: Section 3.2, Section 4.4, Section 6.1(2)(b), Section 6.2(2), Section 7.1(1)(c) and Section 7.1(3).
| Section 9.8 | Release and Discharge |
If the Lender exercises all conversion rights attached to this Debenture pursuant to Article 4 hereof or if the Borrower pays all of the Obligations to the Lender in full pursuant to Article 2, Article 3 or Article 7, the Lender shall release this Debenture and the Borrower shall be, and shall be deemed to have, discharged of all its Obligations under this Debenture.
| A-34 |
| Section 9.9 | Successors and Assigns |
This Debenture shall inure to the benefit of the Lender and its successors and assigns, and shall be binding upon the Borrower and its successors and permitted assigns.
| Section 9.10 | Time |
Time shall be of the essence of this Debenture.
| Section 9.11 | Governing Law |
This Debenture shall be governed by, and construed and interpreted in accordance with, the Laws of the Province of Ontario and the federal Laws of Canada applicable therein, without regard to conflict of Laws principles. The Borrower and, by its acceptance hereof, the Lender each hereby irrevocably attorns and submits to the exclusive jurisdiction of the Ontario courts situated in the City of Toronto (and appellate courts therefrom), and waives objection to the venue of any proceeding in such court or that such court provides an inappropriate forum in connection with this Debenture.
| Section 9.12 | Expenses |
Except as otherwise expressly provided in this Debenture or any other Transaction Agreement, each Party will pay for its own costs and expenses incurred in connection with this Debenture and the transactions contemplated hereby. The fees and expenses referred to in this Section 9.12 are those which are incurred in connection with the negotiation, preparation, execution and performance of this Debenture, and the transactions contemplated hereby, including the fees and expenses of legal counsel, accountants and other advisors.
| Section 9.13 | Further Assurances |
Each Party shall forthwith, at its own expense and from time to time, do or file, or cause to be done or filed, all such things and shall execute and deliver all such documents, agreements, opinions, certificates and instruments reasonably requested by the other Party or its counsel as may be necessary or desirable to complete the transactions contemplated by this Debenture and carry out its provisions and intention.
| A-35 |
Schedule B – Conversion Notice
TO: CHArLOTTE’S WEB HOLDINGS, INC. (the “Borrower”)
Pursuant to the Convertible Debenture (the “Debenture”) of the Borrower issued to the undersigned on ____________, 2022, the undersigned hereby notifies you that $____________ of the principal amount outstanding under the Debenture, shall be converted into Common Shares of the Borrower in accordance with the terms of the Debenture.
In addition to the above, the applicable amount of accrued and unpaid interest on the principal amount being converted through but excluding the Issue Date with respect to this Conversion Notice, shall be converted into Common Shares of the Borrower in accordance with the terms of the Debenture.
The certificate or uncertificated ledger entry representing the Common Shares to be issued shall be registered as follows:
| Name | Registered Address | Address for Delivery |
DATED this ______ day of ____________, __________.
|
BT DE INVESTMENTS INC.
| ||
| By: | ||
| Name: | ||
| Title: | ||
| B-1 |
Schedule C – Form Of Transfer
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to:
| (Name) |
| (Address) |
(the “Transferee”), of $____________ principal amount of the Convertible Debenture of Charlotte’s Web Holdings, Inc. issued on November 14, 2022 (the “Debenture”), registered in the name of the undersigned on the register of Debentures represented by the attached Debenture, and irrevocably appoints _________________ as the attorney of the undersigned to transfer to the Transferee the said principal amount of the Debenture on the books or register of transfer, with full power of substitution.
DATED this ______ day of ____________, __________.
|
BT DE INVESTMENTS INC.
| ||
| By: | ||
| Name: | ||
| Title: | ||
Note to Debentureholder: In order to transfer the Debenture, this transfer form must be delivered to Charlotte’s Web Holdings, Inc.
| C-1 |
Schedule D – Competitors of the Borrower
[* * *]
[***] Indicates material that has been excluded from this Exhibit 10.2 because it is private or confidential and not material.
| C-2 |
Execution Version
Exhibit 10.3
INVESTOR RIGHTS AGREEMENT
between
BT DE INVESTMENTS INC.
and
CHARLOTTE’S WEB HOLDINGS, INC.
NOVEMBER 14, 2022
[Certain information indicated by [***] has been excluded from this Exhibit 10.3 because it is private or confidential and not material.]
TABLE OF CONTENTS
Article 1
DEFINITIONS AND INTERPRETATION
| Section 1.1 | Definitions. | 1 |
| Section 1.2 | Gender and Number. | 8 |
| Section 1.3 | Headings, etc. | 8 |
| Section 1.4 | Currency. | 8 |
| Section 1.5 | Certain Phrases, etc. | 8 |
| Section 1.6 | Accounting Terms. | 9 |
| Section 1.7 | Schedules. | 9 |
| Section 1.8 | References to Persons and Agreements. | 9 |
| Section 1.9 | Statutes. | 9 |
| Section 1.10 | Non-Business Days. | 9 |
| Section 1.11 | No Presumption. | 9 |
Article 2
NOMINATION RIGHTS
| Section 2.1 | Board of Directors. | 9 |
| Section 2.2 | Reserved. | 10 |
| Section 2.3 | Board Nomination Rights. | 10 |
| Section 2.4 | Board Committees. | 12 |
| Section 2.5 | Nomination Procedures. | 12 |
| Section 2.6 | Replacement Appointment. | 13 |
| Section 2.7 | Director Compensation. | 14 |
| Section 2.8 | Director Insurance and Indemnification. | 14 |
| Section 2.9 | Permitted Disclosure. | 14 |
| Section 2.10 | Termination of Board Nomination Rights. | 14 |
Article 3
INFORMATION RIGHTS AND ACCESS; CONFIDENTIALITY
| Section 3.1 | Information Rights and Access. | 14 |
| Section 3.2 | Confidentiality. | 14 |
Article 4
BAT GROUP REPRESENTATIVE
| Section 4.1 | BAT Group Representative. | 16 |
Article 5
PRE-EMPTIVE RIGHT AND TOP-UP RIGHT
| Section 5.1 | Pre-Emptive Right. | 16 |
| Section 5.2 | Top-Up Right. | 17 |
| Section 5.3 | Required Approvals. | 19 |
Article 6
REGISTRATION RIGHTS
| Section 6.1 | Demand Registration Rights. | 19 |
| Section 6.2 | Piggyback Registration Rights. | 21 |
| Section 6.3 | Underwriters’ Cutback. | 21 |
| Section 6.4 | Registered Distribution in the United States | 22 |
| Section 6.5 | Withdrawal of Registrable Securities. | 23 |
| Section 6.6 | Expenses. | 23 |
| ( i ) |
Article 7
DUE DILIGENCE; INDEMNIFICATION
| Section 7.1 | Preparation; Reasonable Investigation. | 24 |
| Section 7.2 | Indemnification by the Company. | 24 |
| Section 7.3 | Defence of Claim. | 25 |
| Section 7.4 | Contribution. | 26 |
| Section 7.5 | Survival. | 26 |
| Section 7.6 | Participating Shareholder as Trustee. | 26 |
Article 8
OTHER COVENANTS
| Section 8.1 | Standstill. | 27 |
| Section 8.2 | Transfer of Common Shares. | 28 |
| Section 8.3 | Compliance Matters. | 28 |
| Section 8.4 | Certain Protective Provisions. | 28 |
| Section 8.5 | Reserved Board Matters. | 29 |
| Section 8.6 | Additional Relationships | 31 |
Article 9
REPRESENTATIONS AND WARRANTIES
| Section 9.1 | Representations and Warranties. | 31 |
Article 10
GENERAL PROVISIONS
| Section 10.1 | No Obligation to Finance. | 31 |
| Section 10.2 | Governing Law and Jurisdiction. | 31 |
| Section 10.3 | Share Buybacks. | 32 |
| Section 10.4 | All Common Shares Subject to this Agreement. | 32 |
| Section 10.5 | Changes in Capital of the Company. | 32 |
| Section 10.6 | BAT Group Permitted Holders Agreement to be Bound. | 32 |
| Section 10.7 | Constating Documents. | 32 |
| Section 10.8 | Term and Termination. | 32 |
| Section 10.9 | Dividends and Distributions. | 33 |
| Section 10.10 | Notices. | 33 |
| Section 10.11 | Time of the Essence. | 35 |
| Section 10.12 | Expenses. | 35 |
| Section 10.13 | Severability. | 35 |
| Section 10.14 | Entire Agreement. | 35 |
| Section 10.15 | Successors and Assigns. | 35 |
| Section 10.16 | Third Party Beneficiaries. | 35 |
| Section 10.17 | Amendments. | 36 |
| Section 10.18 | Waiver. | 36 |
| Section 10.19 | Injunctive Relief. | 36 |
| Section 10.20 | Further Assurances. | 36 |
| Section 10.21 | Counterparts. | 36 |
| ( ii ) |
ADDENDA
Schedule A Registration Rights Procedures
Schedule B Competitors of the Company
Schedule C Competitors of the Security Holder
| ( iii ) |
INVESTOR RIGHTS AGREEMENT
This INVESTOR RIGHTS AGREEMENT dated November 14, 2022 (this “Agreement”) is made by and between BT DE INVESTMENTS INC., a corporation existing under the Laws of the State of Delaware (the “Security Holder”), and CHARLOTTE’S WEB HOLDINGS, INC., a corporation existing under the Laws of the Province of British Columbia (the “Company”).
RECITALS:
| A. | The Security Holder wishes to subscribe for a Convertible Debenture (as defined below), pursuant to a subscription agreement dated as of the date hereof (the “Subscription Agreement”) by and between the Security Holder and the Company (the “Investment”). |
| B. | In connection with the closing of the Investment, the Security Holder and the Company wish to set forth their agreements regarding the Security Holder’s rights as a securityholder of the Company. |
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged by the Parties, the Parties hereby agree as follows:
Article 1
DEFINITIONS AND INTERPRETATION
Section 1.1 Definitions.
Whenever used in this Agreement, the following terms shall have the meanings set forth below:
“Act” means the Business Corporations Act (British Columbia).
“Affiliate” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person; provided, that, with respect to the Security Holder, “Affiliate” shall also include (1) BAT Parent and (2) all entities in which BAT Parent owns, directly or indirectly, an equity ownership of at least 50%.
“Agreement” has the meaning ascribed to such term in the preamble to this Agreement.
“At-the-Market Distribution” means a distribution of Common Shares pursuant to an at-the-market program implemented by the Company pursuant to NI 44-102 or similar offerings implemented in accordance with applicable United States securities Laws.
“Available Nominees” means, at any time, the maximum number of Directors based on the size of the Board at such time.
“Audit Committee” means the Audit Committee of the Board, as the same may be constituted from time to time.
“Authorization” means, with respect to any Person, any Order, license, permit, certification, approval, registration, consent, authorization, clearance, franchise, qualification, filing, privilege, variance or exemption issued or granted by, or any Contract with, any Governmental Authority having jurisdiction over such Person and/or any of its assets or any applicable stock exchange on which securities of such Person are listed, as the same may have been, or may from time to time be, amended, supplemented or replaced.
“BAT Group Representative” has the meaning ascribed to such term in Section 4.1(1).
| - 2 - |
“BAT Group” means, collectively, BAT Parent and its Affiliates, and “member of the BAT Group” means any one of them, as the context requires.
“BAT Group Permitted Holders” means, collectively, the Security Holder and any other member of the BAT Group.
“BAT Parent” means British American Tobacco plc.
“Board” means the board of directors of the Company, as the same may be constituted from time to time.
“Board Observer” means each of the individuals designated as an observer of the Board pursuant to Section 2.3(5).
“Bought Deal Distribution” means a public offering of securities as described in the definition of “bought deal agreement” in Section 7.1 of National Instrument 44-101 - Short Form Prospectus Distributions or similar offerings implemented in accordance with applicable United States securities Laws.
“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in Toronto, Ontario, New York City, New York or London, United Kingdom are authorized or required by Law to close.
“Cannabis” means (1) all living or dead material, plants, seeds, plant parts or plant cells from any cannabis species or subspecies (including sativa, indica and ruderalis), including wet and dry material, derivatives, trichomes, oil and extracts from cannabis (including cannabinoid or terpene extracts from the cannabis plant); and (2) biologically or synthetically synthesized analogs of cannabinoids extracted from the cannabis plant using micro-organisms, including (a) cannabis and marijuana or marihuana (as defined under Law, including the Cannabis Act and Section 802 of Title 21 of the United States Code) and (b) “hemp” or “industrial hemp” (as is defined in the Industrial Hemp Regulations issued under the Cannabis Act, Section 1639(o) of Title 7 of the United States Code, or other applicable Laws).
“Cannabis Act” means the Cannabis Act (Canada).
“Cannabis Authorizations” means all Authorizations issued or granted, or required to be issued or granted, to a Person under or pursuant to Cannabis Laws, including all Contracts with Governmental Authorities thereunder or relating thereto.
“Cannabis Laws” means all Laws and other statutory requirements relating to Cannabis, including the Cannabis Act, and all Cannabis Authorizations.
“Committee” means each of the Audit Committee, Compensation Committee, the Corporate Governance and Nominating Committee and any other committee of the Board established by the Board from time to time.
“Common Shares” means the common shares in the capital of the Company.
“Company” has the meaning ascribed to such term in the preamble to this Agreement.
“Company Initiated Prospectus Distribution” has the meaning ascribed to such term in Section 6.3(1)(a).
“Company Shareholders” means, collectively, all Persons that own and/or control, directly or indirectly, Common Shares.
“Compensation Committee” means the Compensation Committee of the Board, as the same may be constituted from time to time.
“Competitor” means (1) with respect to the Company, the entities listed on Schedule B attached hereto (as such Schedule may be amended or supplemented from time to time by Company with the consent of the BAT Group Representative (which consent shall not be unreasonably withheld, conditioned or delayed) and (2) with respect to the Security Holder, the entities listed on Schedule C attached hereto (as such Schedule may be amended or supplemented from time to time by the BAT Group Representative with the consent of the Company (which consent shall not be unreasonably withheld, conditioned or delayed).
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“Conditions” has the meaning ascribed to such term in Section 2.5.
“Confidential Information” means, with respect to the Company and its Subsidiaries, on the one hand, and the Security Holder and its Affiliates, on the other hand, all confidential or proprietary information, intellectual property and confidential facts relating to the business and affairs of the Company and its Subsidiaries, on the one hand, or the Security Holder and its Affiliates, on the other hand, respectively, including their respective customers, products, services, technology, trade secrets, know-how, systems and operations; provided, that “Confidential Information” does not include any information that: (1) is or becomes generally available to the public other than as a result of disclosure, directly or indirectly, by the Security Holder or any of its Affiliates or any of their respective Representatives, on the one hand, or the Company or any of its Subsidiaries or any of their respective Representatives, on the other hand, in violation of Section 3.2; (2) is or becomes available to the Security Holder or its Affiliates or any of their respective Representatives, on the one hand, or the Company or any of its Subsidiaries or any of their respective Representatives, on the other hand, on a non-confidential basis from a source other than the other or any of its Representatives, as applicable, unless the applicable Person knew, after reasonable inquiry, that such source was prohibited from disclosing the information to it by a contractual, fiduciary or other legal obligation; or (3) the Security Holder, on the one hand, or the Company, on the other hand, can show was independently acquired or developed by or on behalf of the Security Holder or any of its Affiliates or any of their respective Representatives, on the one hand, or by the Company or any of its Subsidiaries or any of their respective Representatives, on the other hand, prior to the disclosure by or on behalf of the other of, and without the use of any, Confidential Information.
“Constating Documents” means, collectively, the notice of articles and articles of the Company, or other similar formation documents, as applicable and other constating documents of the Company and its Subsidiaries, in each case, as the same may be amended, restated, replaced, modified and/or supplemented from time to time.
“Contract” means any agreement, indenture, contract, lease, deed of trust, license, option, instruments, arrangement, obligation, understanding or other commitment, in each case whether written or oral.
“control” means the possession, directly or indirectly, of the power to direct, or cause the direction of, the affairs, management and policies of a Person, whether through the ownership of voting securities or partnership or other interests, by Contract or otherwise. The terms “controlling” and “controlled by”, shall have correlative meanings.
“Convertible Debenture” means the convertible debenture due on the seventh anniversary of the date hereof, in an aggregate principal amount of $75,341,080 issued on and dated as of the date hereof, as the same may hereafter be amended.
“Convertible Securities” means any securities in the capital of the Company or any of its Subsidiaries that are convertible into, exercisable or exchangeable for, or otherwise grant the right to acquire, Common Shares (for greater certainty, including the Convertible Debenture, any warrants, stock options, subscription receipts and any equity grants issued pursuant to the Equity Incentive Plans from time to time).
“Corporate Governance and Nominating Committee” means the Corporate Governance and Nominating Committee of the Board, as the same may be constituted from time to time.
“Demand Registration” has the meaning ascribed to such term in Section 6.1(1).
“Director” means a director on the Board.
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“Director Nominees” means, collectively, the Nominees designated as such, by the BAT Group Representative pursuant to Section 2.5, and “BAT Director Nominee” means any one of them, as the context requires.
“Directors Election Meeting” means any meeting of Company Shareholders at which individuals are proposed for election as Directors.
“Distributed Securities” means any Common Shares or Convertible Securities distributed or issued pursuant to a Distribution.
“Distribution” means any distribution or issuance by the Company or any of its Subsidiaries of Common Shares and/or Convertible Securities (for greater certainty, including any Prospectus Distribution and the payment of any dividend in Common Shares and/or Convertible Securities), other than any (1) Exempt Distribution and (2) issuance of Common Shares upon exercise or vesting of Convertible Securities in the Ordinary Course pursuant to the Equity Incentive Plans.
“Distribution Notice” has the meaning ascribed to such term in Section 5.1(2).
“Equity Incentive Plans” means, collectively, all plans of the Company and/or any of its Subsidiaries in effect from time to time pursuant to which securities of the Company and/or any of its Subsidiaries may be issued, or options or other securities convertible or exercisable into, or exchangeable for, securities of the Company and/or any of its Subsidiaries may be granted, to the Persons set out therein, including the equity incentive plan approved by the Company Shareholders at the annual general and special meeting of the Company Shareholders held on June 9, 2021 and any equity incentive plan of the Company approved by the Board that is substantially similar to such plan.
“Exempt Distribution” means any distribution or issuance by the Company or any of its Subsidiaries approved by the Board of: (1) Convertible Securities issued, and Common Shares issued on the exercise, conversion or exchange of such Convertible Securities, in each case pursuant to the Equity Incentive Plans in accordance with the terms thereof; (2) Common Shares pursuant to the exercise, conversion or exchange of any issued and outstanding Convertible Securities on the date hereof, including the Convertible Debenture, in accordance with the terms thereof, as applicable; (3) Common Shares pursuant to the exercise, conversion or exchange of Convertible Securities in accordance with the terms thereof, in each case, where such Convertible Securities were issued pursuant to the Pre-Emptive Right in accordance with Section 5.1 or Top-Up Rights in accordance with Section 5.2; (4) Common Shares as purchase price consideration in connection with any business acquisition by the Company or any of its Subsidiaries, whether structured as a purchase of shares or assets and/or effected pursuant to an amalgamation, arrangement, merger or other business combination transaction; (5) Common Shares as de minimis equity kickers to bona fide third party debt financing sources of the Company or any of its Subsidiaries; (6) Common Shares pursuant to any At-the-Market Distribution or Bought Deal Distribution; (7) distributions or issuances which, pursuant to Securities Laws and applicable United States securities Laws, would require shareholder approval (but only to the extent that the participation of the BAT Group Permitted Holders triggers such requirement); (8) Common Shares issued pursuant to any employee share purchase plan in effect; (9) securities issuable pursuant to any contractual obligation existing as of the date hereof; and (10) Common Shares issuable by way of a dividend to all existing Company Shareholders.
“GAAP” means United States generally accepted accounting principles.
“Governmental Authority” means (1) any domestic or foreign government, whether national, federal, provincial, state, regional, territorial, municipal or local (whether administrative, legislative, executive or otherwise); (2) any domestic or foreign agency, authority, ministry, department, regulatory authority, court, central bank, bureau, board or other instrumentality having legislative, judicial, taxing, regulatory, prosecutorial or administrative powers or functions of, or pertaining to, government, including Health Canada, the United States Food and Drug Administration, the United States Department of Agriculture, the United States Drug Enforcement Agency and any other applicable regulatory authorities, whether national, federal, provincial, state, regional, territorial, municipal or local (whether administrative, legislative, executive or otherwise), with oversight of the Cannabis industry and any business or operations within the Cannabis industry generally; and (3) any court, commission, individual, arbitrator, arbitration panel or other body having adjudicative, regulatory, judicial, quasi-judicial, administrative or similar functions, including the Canadian Securities Regulators.
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“Indemnified Person” has the meaning ascribed to such term in Section 7.3.
“Initiating Notice” has the meaning ascribed to such term in Section 6.1(1).
“Investment” has the meaning ascribed to such term in the recitals to this Agreement.
“Law” means any and all applicable: (1) foreign or domestic constitution, treaty, law, statute, regulation, code, ordinance, principle of common law or equity, rule, municipal bylaw, Order or other requirement having the force of law; (2) policy, practice, protocol, standard or guideline of any Governmental Authority which, although not necessarily having the force of law, is regarded by such Governmental Authority as requiring compliance as if it had the force of law; and (3) rules of the TSX or such other national stock or securities exchange on which the Common Shares are principally traded.
“Lock-Up Period” has the meaning ascribed to such term in Section 8.2(1).
“Minimum Price” has the meaning ascribed to such term in Section 6.1(6).
“NI 44-102” means National Instrument 44-102 - Shelf Distributions.
“Nomination Letter” has the meaning ascribed to such term in Section 2.5.
“Nominee Cure Period” has the meaning ascribed to such term in Section 2.3(2).
“Nominees” means, collectively, the nominees that are proposed for election as Directors by the Company and included in a management information circular of the Company relating to the election of Directors at a Directors Election Meeting, and “Nominee” means any one of them, as the context requires.
“Notice” has the meaning ascribed to such term in Section 10.10(1).
“Order” means any order, directive, judgment, decree, injunction, decision, ruling, award or writ of any Governmental Authority.
“Ordinary Course” means, with respect to an action taken by a Person, that such action is consistent with the past practices of such Person (including with respect to quantity, subject to reasonable adjustment for inflation, and frequency) and is taken in the ordinary course of normal operations of such Person. For the avoidance of doubt, any extraordinary actions taken in response to the COVID-19 pandemic are not “ordinary course” for purposes of this definition.
“Partially Diluted Ownership Percentage” means, at any time, the direct and/or indirect aggregate ownership interest of the BAT Group Permitted Holders in the Company, expressed as a percentage, calculated as follows: (1)(a) the aggregate number of issued and outstanding Common Shares owned and/or controlled by the BAT Group Permitted Holders at such time, plus (b) the aggregate number of Common Shares represented by any issued and outstanding Convertible Securities owned and/or controlled by the BAT Group Permitted Holders at such time, if applicable (assuming the conversion, exercise and/or exchange thereof); divided by (2)(a) the aggregate number of issued and outstanding Common Shares at such time, plus (b) the aggregate number of Common Shares represented by any issued and outstanding Convertible Securities owned and/or controlled by the BAT Group Permitted Holders at such time, if applicable (assuming the conversion, exercise and/or exchange thereof) and excluding, for greater certainty, any Common Shares represented by any other issued and outstanding Convertible Securities owned and/or controlled by any other Person at such time.
| - 6 - |
“Participating Shareholders” means the BAT Group Permitted Holders exercising their rights under Section 6.1 or Section 6.2, as the case may be, and a “Participating Shareholder” means any of them;
“Parties” means, collectively, the Security Holder and the Company, and “Party” means any one of them, as the context requires.
“Person” means any individual, corporation, partnership, limited partnership, firm, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Authority or other entity.
“Piggyback Shareholder” has the meaning ascribed to such term in Section 6.2.
“Piggyback Notice” has the meaning ascribed to such term in Section 6.2.
“Piggyback Registration” has the meaning ascribed to such term in Section 6.2.
“Pre-Emptive Right” has the meaning ascribed to such term in Section 5.1(1).
“Pre-Emptive Right Subscription Notice” has the meaning ascribed to such term in Section 5.1(3).
“Prospectus” means a prospectus (as such term is used in National Instrument 41-101 - General Prospectus Requirements), as varied in accordance with National Instrument 44-102, as the same may be required under applicable Canadian Securities Laws.
“Prospectus Distribution” means a distribution of Common Shares to the public under Canadian Securities Laws by way of a Prospectus in one or more Qualifying Jurisdictions, except for any At-the-Market Distribution.
“Qualification Expenses” has the meaning ascribed to such term in Section 6.6.
“Qualifying Jurisdictions” means, collectively, all of the provinces and territories of Canada.
“Representative” means, with respect to any Person, such Person’s directors, officers, employees, agents, consultants, insurers, financing sources, legal counsel, accountants, advisors and other representatives; provided, that, with respect to the Security Holder and each other member of the BAT Group for purposes of Section 3.2, “Representative” shall also include a prospective purchaser of Common Shares or Convertible Securities from the Security Holder (or any other BAT Group Permitted Holder) that agrees to be bound by the provisions of Section 3.2(1), mutatis mutandis.
“Registrable Securities” means: (1) any Common Shares owned and/or controlled by the Security Holder or any Affiliate; (2) any Common Shares issuable upon the exercise, conversion or exchange of any Convertible Securities owned and/or controlled by the Security Holder or any Affiliate, in each case, to the extent exercisable, convertible or exchangeable; and (3) all Common Shares directly or indirectly issued or issuable with respect to the securities referred to in the foregoing (1) and (2) by way of share dividend or share split, or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization (it being understood that a Person shall be deemed to be a holder of Registrable Securities whenever such Person has the right to then acquire or obtain any Registrable Securities, whether or not such acquisition has actually been effected).
“Securities Act” means the Securities Act (Ontario).
“Securities Laws” means, collectively, the United States federal securities Laws and the securities Laws of each of the provinces and territories of Canada and any other jurisdictions in which the Common Shares are listed, and the respective regulations, instruments and rules made thereunder, together with all applicable published policy statements, notices, blanket orders, “no action” letters and rulings of the applicable Securities Regulators and the securities commissions or other securities regulatory authorities of each other jurisdiction in which the Common Shares are listed, including the applicable rules and requirements of the TSX.
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“Securities Regulators” means, collectively, the United States Securities and Exchange Commission and the securities commissions or other securities regulatory authorities in each of the Qualifying Jurisdictions.
“Security Holder” has the meaning ascribed to such term in the preamble to this Agreement.
“Share Buyback” has the meaning ascribed to such term in Section 10.3.
“Subscription Agreement” has the meaning ascribed to such term in the recitals to this Agreement.
“Subsidiaries” means, with respect to any Person, any other Person with respect to which the first Person (i) has the right to elect a majority of the board of directors or other Persons performing similar functions or (ii) beneficially owns more than 50% of the voting stock (or of any other form of voting or controlling equity interest in the case of a Person that is not a corporation), in each case, directly or indirectly through one or more other Persons.
“Taxes” means any and all: (i) taxes, duties, fees, excises, premiums, assessments, imposts, levies, expansion fees and other charges of any kind whatsoever imposed by any Governmental Authority, including all interest, penalties, fines, additions to tax or other additional amounts imposed by any Governmental Authority in respect thereof, and including those levied on, or measured by, or referred to as, income, gross receipts, profits, gains, windfall, royalty, capital, transfer, land transfer, sales, goods and services, harmonized sales, use, value-added, excise, special assessment, stamp, withholding, business, franchising, property, real or personal property, development, occupancy, employee health, payroll, employment, workers’ compensation, employment or unemployment, severance, health, social services, education, utility and social security taxes, all surtaxes, all customs duties and import and export taxes, countervail and anti-dumping, all license, franchise and registration fees and all employment insurance, health insurance and other pension plan premiums or contributions imposed by any Governmental Authority; (ii) interest, penalties, fines, additions to tax or other additional amounts imposed by any Governmental Authority on or in respect of amounts of the type described in clause (i) or this clause (ii); (iii) any liability for the payment of any amounts of the type described in clauses (i) or (ii) as a result of being a member of an affiliated, consolidated, combined or unitary group for any period; and (iv) any liability for the payment of any amounts of the type described in clauses (i) or (ii) as a result of any express or implied obligation to indemnify any other Person or as a result of being a transferee or successor in interest to any Person.
“Top-Up Exempt Distribution” means an Exempt Distribution, but excluding from the definition of Exempt Distribution: (1) Common Shares issued on the exercise, conversion or exchange of Convertible Securities issued pursuant to the Equity Incentive Plans, in accordance with the terms thereof; (2) Common Shares pursuant to the exercise, conversion or exchange of any issued and outstanding Convertible Securities on the date hereof, including the Convertible Debenture, in accordance with the terms thereof, as applicable; (3) Common Shares issued pursuant to any employee share purchase plan then in effect; (4) Common Shares issuable by way of a dividend to all existing Company Shareholders; and (5) any other issuance of Common Shares that results in an adjustment to the Conversion Price (as defined in the Convertible Debenture) of the Convertible Debenture such that the Partially Diluted Ownership Percentage of the BAT Group Permitted Holders following such adjustment remains the same as the Partially Diluted Ownership Percentage of the BAT Group Permitted Holders immediately prior to such issuance of Common Shares.
“Top-Up Notice” has the meaning ascribed to such term in Section 5.2(3).
“Top-Up Right” has the meaning ascribed to such term in Section 5.2(1).
“Top-Up Right Subscription Notice” has the meaning ascribed to such term in Section 5.2(3).
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“Transaction Agreements” means, collectively, this Agreement, the Convertible Debenture, the Subscription Agreement and all agreements, certificates and other instruments delivered pursuant hereto and thereto.
“Transfer” has the meaning ascribed to such term in Section 8.2(1).
“TSX” means the Toronto Stock Exchange.
“underwriter” and all terms which are derivatives thereof shall be deemed to include “best efforts agent” and all terms which are derivatives thereof, as appropriate.
“Underwriters’ Cutback” has the meaning ascribed to such term in Section 6.3.
“Valid Business Reason” has the meaning ascribed to such term in Section 6.1(3)(c).
Section 1.2 Gender and Number.
Any reference in this Agreement to gender includes all genders. Words importing the singular number only include the plural and vice versa.
Section 1.3 Headings, etc.
The provision of a Table of Contents, the division of this Agreement into Articles and Sections, and the insertion of headings, are for convenience of reference only and do not affect the interpretation of this Agreement.
Section 1.4 Currency.
All references in this Agreement to dollars or to $ are expressed in Canadian currency unless otherwise specifically indicated.
Section 1.5 Certain Phrases, etc.
In this Agreement, unless otherwise specified:
| (1) | the words “including”, “includes” and “include” mean “including (or includes or include) without limitation”; |
| (2) | the phrase “the aggregate of”, “the total of”, “the sum of” or a phrase of similar meaning means “the aggregate (or total or sum), without duplication, of”; |
| (3) | the words “Article”, “Section” and “Schedule” followed by a number mean and refer to the specified Article, Section or Schedule of this Agreement; and |
| (4) | 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”. |
Section 1.6 Accounting Terms.
All accounting terms not specifically defined in this Agreement are to be interpreted in accordance with GAAP.
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Section 1.7 Schedules.
The Schedules attached to this Agreement form an integral part of this Agreement for all purposes hereof.
Section 1.8 References to Persons and Agreements.
Any reference in this Agreement to a Person includes its heirs, administrators, executors, legal representatives, successors and permitted assigns, as applicable. Except as otherwise provided in this Agreement, the term “Agreement” and any reference to this Agreement, or to any other agreement, document or other instrument, includes, and is a reference to, this Agreement or such other agreement, document or other instrument, as the same may have been, or may from time to time be, amended, restated, replaced, supplemented or novated, and includes all schedules hereto.
Section 1.9 Statutes.
Except as otherwise provided in this Agreement, any reference in this Agreement to a statute refers to such statute, and all rules and regulations made thereunder, as the same may have been, or may from time to time be, amended, re-enacted or replaced.
Section 1.10 Non-Business Days.
Whenever payments are to be made, or an action is to be taken, on a day which is not a Business Day, such payment shall be made, or such action shall be taken, on or not later than the next succeeding Business Day.
Section 1.11 No Presumption.
This Agreement is the product of negotiation by the Parties having the assistance of counsel and other advisers. It is the intention of the Parties that neither Party shall be presumed to be the drafter hereof and that this Agreement not be construed more strictly with the regard to one Party than to the other Party.
Article 2
NOMINATION RIGHTS
Section 2.1 Board of Directors.
On the date hereof, the Company’s Board consists of five Directors, which Directors are: John Held (Independent Chair), Jacques Tortoroli, Jean Birch, Susan Vogt and Thomas Lardieri. The Company will take all action necessary or proper to increase the size of the Board in the event the Security Holder elects to nominate one or more Director Nominees pursuant to this Article 2.
Section 2.2 Reserved.
Section 2.3 Board Nomination Rights.
| (1) | Prior to the first Directors Election Meeting held following the date hereof, the Board shall appoint to the Board a nominee designated by the BAT Group Representative no fewer than 30 days following such designation; provided, that no such appointment shall be required if such nominee does not satisfy the Conditions, in which case the BAT Group Representative shall be entitled to designate alternative nominee(s). |
| (2) | From and after the date of this Agreement, the BAT Group Permitted Holders shall be entitled to designate in accordance with the nomination procedures contained in Section 2.5: |
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| (a) | 20% of the Available Nominees, rounding up or down to the nearest whole member (e.g., 2 of 10), for so long as the Partially Diluted Ownership Percentage of the BAT Group Permitted Holders is at least 15%; and |
| (b) | 10% of the Available Nominees, rounding up or down to the nearest whole member (e.g., 1 of 10), for so long as the Partially Diluted Ownership Percentage of the BAT Group Permitted Holders is at least 10% (but less than 15%); |
provided, that in the event the Partially Diluted Ownership Percentage of the BAT Group Permitted Holders falls below any threshold set forth in (a) or (b) above, the BAT Group Permitted Holders may, during the 90-day period following such event (or, if such event results from a Top-Up Exempt Distribution or Bought Deal Distribution, during the 90-day period following receipt by the BAT Group Representative of a Top-Up Notice relating to such Top-Up Exempt Distribution or Bought Deal Distribution (the “Nominee Cure Period”), acquire Common Shares or Convertible Securities to allow the Partially Diluted Ownership Percentage of the BAT Group Permitted Holders to exceed such threshold (in which case such Common Shares or Convertible Securities would be deemed to be beneficially owned by the BAT Group Permitted Holders as of immediately prior to the first day of such Nominee Cure Period).
| (3) | In the event that the number of Director Nominees serving on the Board exceeds the number of Nominees that the BAT Group Permitted Holders are entitled to nominate under Section 2.3(1), Section 2.3(2)(a) or Section 2.3(2)(b), as the case may be, due to the Partially Diluted Ownership Percentage of the BAT Group Permitted Holders being less than the applicable minimum percentage thresholds for a period equal to 120 days following the expiration of the Nominee Cure Period set forth in Section 2.3(2), provided that (i) if a Top-Up Right is then exercisable, the period shall not end prior to the expiry of the period for exercise thereof, and (ii) if there is a blackout period imposed by the Company during such 120-day period, the period shall not expire until the 120th day following the expiry of the last such blackout: |
| (a) | the BAT Group Permitted Holders shall notify the Company promptly thereof; |
| (b) | upon the written request of the Company, the BAT Group Permitted Holders shall cause such number of the Director Nominee(s) in excess of the number of Nominee(s) that BAT Group Permitted Holders are entitled to nominate to forthwith resign; and |
| (c) | if no such request is made by the Company, the Director Nominee(s) shall continue until his, her or their term expires at the next Directors Election Meeting, as applicable, or, if earlier, such Director Nominee(s) otherwise resign(s), become(s) incapacitated, die(s) or cease(s) to be qualified to act as a Director. |
| (4) | In the event that the BAT Group Permitted Holders have designated fewer Director Nominees than the total number of Nominees that the BAT Group Permitted Holders are entitled to designate pursuant to Section 2.3(1), Section 2.3(2)(a) or Section 2.3(2)(b), as the case may be, then the BAT Group Permitted Holders shall have the right, at any time and from time to time, to designate such additional Director Nominee(s) to which they are entitled hereunder, in which case, the Company and the Directors shall take all necessary corporate action, to the fullest extent permitted by Law (for greater certainty, not including the calling of a meeting of Company shareholders other than the next regularly scheduled annual or special Company shareholder meeting), to promptly: |
| (a) | enable the BAT Group Permitted Holders to designate and effect the election or appointment of such additional Director Nominee(s); and |
| (b) | appoint such Director Nominee(s) to fill any available vacancies or, to the extent not so permitted, nominate any such Director Nominee for election as a Director at the next Directors Election Meeting in accordance with Section 2.5. |
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| (5) | The BAT Group Permitted Holders may, at any time and from time to time, upon written notice to the Company, designate any or all of the Director Nominees as non-voting Board Observers. In such an event, the BAT Group Permitted Holders shall use commercially reasonable efforts to cause such Director Nominee(s) to resign from the Board and the Company shall record such resignation(s) in the Company’s books and records. All non-voting Board Observers designated as such by the BAT Group Permitted Holders shall be entitled to the following rights and obligations: |
| (a) | The Board Observers appointed by the BAT Group Permitted Holders will receive from the Company written notice of and be invited to attend and observe all Board meetings with notice provided in the same form and at the same time as the Directors. The Board Observers will be entitled to participate in all meetings of the Board absent written advice from outside counsel to the Company that participation by such Board Observers would give rise to a conflict of interest and then, only following notice to the Board Observers that such advice has been rendered and after providing each Board Observer with an opportunity to respond to the Board regarding such advice. Board Observers will have no right to vote on any matter presented to the Board for a vote but will, subject to each Board Observer’s entry into a commercially reasonable confidentiality agreement, be entitled to receive all information, correspondence or materials provided to the Board contemporaneously with delivery of such information or materials to the members of the Board and the Board Observers will have an express right to consult with members of the Board with respect to material matters raised at any such meetings. The Board Observers will also be entitled to copies of all written actions circulated to the members of the Board and no written action of the Board will be deemed effective unless the Board Observers have been provided with a reasonable opportunity to review such proposed action and an opportunity to discuss it with members of the Board. |
| (b) | No Board Observer will be entitled to compensation from the Company for service as a Board Observer. Attendance of a Board Observer at any meeting of the Board will not count towards any quorum requirement for the Board for the purposes of any Board meeting and no Board Observer will hold any of the legal responsibilities attributable to Directors under Law. |
| (c) | The right to appoint Board Observers is personal to the BAT Group Permitted Holders and not transferable to any Person that is not a BAT Group Permitted Holder. |
| (6) | For greater certainty, the selection of Nominees other than the Director Nominees designated by the BAT Group Permitted Holders pursuant to this Section 2.3, shall rest with the Board, or the Corporate Governance and Nominating Committee, if so determined by the Board. |
| (7) | If the Company is at any time a Subsidiary of another body corporate, then the BAT Group Permitted Holders shall have the right to representation on the board of directors or other similar governing body of such body corporate in the same proportion as their representation on the Board under Section 2.3(1), Section 2.3(2)(a) or Section 2.3(2)(b), as the case may be, subject to the terms and conditions of this Article 2, mutatis mutandis. For greater certainty, this Section 2.3(7) shall not apply to the board of directors or other similar governing body of a third party, if such third party acquires more than 50% of the Common Shares from time to time. |
Section 2.4 Board Committees.
| (1) | For so long as the BAT Group Permitted Holders have the right to designate at least one Nominee pursuant to Section 2.3(1) or Section 2.3(2), as applicable, the BAT Group Permitted Holders shall have the right to designate one non-voting observer to any Committee to the extent that a Director Nominee is not already a voting member of such Committee. All non-voting Committee observers shall be entitled to attend all Committee meetings, and to receive all notices, correspondence and materials associated therewith, as if such non-voting Committee observers were members of the applicable Committee; provided, that they shall not: (a) hold any voting authority attributable to Committee members whatsoever; (b) count towards the quorum of the Committee for the purposes of any Committee meeting; or (c) hold any of legal responsibilities attributable to Committee members under Law. |
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| (2) | All Director Nominees shall be eligible to be appointed to any of the Committees from time to time as may be determined by the Board; provided, that each such individual (a) has the expertise for the applicable Committee and (b) meets applicable independence standards, in each case, required by Securities Laws. |
Section 2.5 Nomination Procedures.
| (1) | The Company shall notify the BAT Group Representative (on behalf of the BAT Group Permitted Holders having a right to designate one or more Nominees under Section 2.3) of any Directors Election Meeting at least 60 days prior to the date of such Directors Election Meeting. |
| (2) | At least 45 days, and no more than 75 days, before each Directors Election Meeting, the BAT Group Representative (on behalf of the BAT Group Permitted Holders having a right to designate one or more Director Nominees) will deliver to the Company (c/o the Corporate Governance and Nomination Committee) in writing the name of its respective Nominee(s) together with the information regarding such Nominee(s) (including the number of Common Shares beneficially owned or controlled by such Nominee) that the Company is required by the Act and applicable Securities Laws to include in a management information circular of the Company to be sent to Company Shareholders in respect of such Directors Election Meeting, and such other information, including a biography of such Nominee(s), that is consistent with the information the Company intends to publish about Nominees as Directors of the Company in such management information circular (the “Nomination Letter”). In the event that the Company, acting reasonably, requires additional information regarding the Nominee, the BAT Group Representative shall promptly provide any such requested information. |
| (3) | If the BAT Group Representative (on behalf of the BAT Group Permitted Holders) fails to deliver the Nomination Letter to the Company at least 45 days before the Directors Election Meeting, the BAT Group Representative shall be deemed to have designated (i) the same BAT Director Nominee that serves (or each of the same Director Nominees that serve) as a Director of the Company at such time, subject to such individual(s) satisfying the Conditions for re-election to the Board or (ii) no Director Nominees, if there is no BAT Director Nominee serving at such time. |
| (4) | Notwithstanding anything to the contrary in this Agreement, each Director Nominee shall, at all times while serving on the Board, (i) meet the qualification requirements to serve as a Director under the Act, applicable Securities Laws and the Constating Documents, (ii) comply with applicable provisions of the Act, and (iii) comply with the written terms of reference or policies approved in effect with respect of the conduct or the Board and applicable Committee’s (e.g. Company Blackout Policy) (collectively, the “Conditions”). No Director Nominee may be an individual who: (a) has been convicted of a felony or a crime involving moral turpitude; or (b) is not acceptable to the TSX, any other securities exchange on which the Common Shares are listed, any of the Canadian Securities Regulators, securities commissions or other securities regulatory authorities of any other jurisdiction in which the Common Shares are listed or to which the Company is subject, or the Company (acting reasonably). |
| (5) | The Director Nominee(s) shall be nominated by or at the direction of the Board or an authorized officer of the Company, including pursuant to a notice of meeting, to stand for election to the Board at the Directors Election Meeting and the Company shall solicit proxies from the holders of Common Shares in respect thereof, which solicitation obligation will be satisfied by delivery of a form of proxy to the holders of Common Shares following standard procedures and, where applicable, consistent with past practice. |
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| (6) | The Company shall: (a) nominate for election and include in any management information circular relating to any Directors Election Meeting (or submit to Company Shareholders by written consent, if applicable) each individual designated as a Director Nominee under Section 2.2 in accordance with this Section 2.5; (b) recommend (and reflect such recommendation in any management information circular relating to any Directors Election Meeting or in any written consent submitted to Company Shareholders for the purpose of electing Directors of the Company) that the Company Shareholders vote to elect such Director Nominee(s) as a Director for a term of office expiring at the closing of the subsequent annual meeting of the Company Shareholders; (c) use commercially reasonable efforts to solicit and obtain proxies in favour of and otherwise support the election of such Nominee(s) at the applicable Directors Election Meeting, each in a manner no less favourable than the manner in which the Company supports its own Nominees for election at the applicable Directors Election Meeting; (d) take all steps which may be reasonably necessary or appropriate to recognize, enforce and comply with the rights of the BAT Group Permitted Holders under this Article 2; and (e) subject to compliance with applicable Law and stock exchange requirements, not take, authorize or approve any action, including the adoption of any amendments to any of its Constating Documents, that would or would reasonably be expected to, individually or in the aggregate, eliminate, limit or otherwise frustrate in any way the rights of the BAT Group Permitted Holders under this Article 2. |
Section 2.6 Replacement Appointment.
| (1) | In the event of the resignation, death or incapacity of a Director Nominee that is serving on the Board, or in the event that a Director Nominee that is serving on the Board at any time ceases to satisfy any of the Conditions, the BAT Group Permitted Holders shall be entitled to designate an individual satisfying each of the Conditions to replace such Director Nominee to serve on the Board by delivery of a written notice by the BAT Group Representative to the Company within 45 days after the Director Nominee resigns, dies or becomes incapacitated, or ceases to satisfy any of the Conditions, as applicable, and to the extent permitted by the Act and the Constating Documents, the Board shall promptly appoint such individual as a Director, or to the extent not so permitted, nominate such individual for election as a Director at the next Directors Election Meeting in accordance with Section 2.5. |
| (2) | For the avoidance of doubt, for so long as the BAT Group Permitted Holders have the right to designate at least one Nominee pursuant to Section 2.3(1) or Section 2.3(2), as applicable, without the BAT Group Representative’s prior written consent, the Company shall ensure that no action is taken, authorized or approved by or on behalf of the Company or the Board, to remove a Director Nominee from the Board, other than in the event (a) of the resignation, death or incapacity of a Director Nominee that is serving on the Board, or (b) that a Director Nominee that is serving on the Board at any time ceases to satisfy any of the Conditions, in each of which case the provisions of Section 2.6(1) shall apply. |
Section 2.7 Director Compensation.
No Director Nominee who is an officer, employee or consultant of the BAT Group will be entitled to any compensation for his or her service as a Director or member of any Committee.
Section 2.8 Director Insurance and Indemnification.
| (1) | The Company shall obtain and maintain customary directors’ and officers’ liability insurance on commercially reasonable terms. |
| (2) | The Company and each Director Nominee that has been elected or appointed to the Board, as the case may be, shall, upon request from such Director Nominee, enter into a customary director indemnity agreement. |
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Section 2.9 Permitted Disclosure.
Each Director Nominee and Board Observer shall be permitted to disclose to any member of the BAT Group information about the Company and its Subsidiaries that he or she receives as a result of being a Director or Board Observer, as applicable; provided, that the recipient of such disclosure is directed to keep confidential and not disclose any Confidential Information, in each case, in accordance with Section 3.2.
Section 2.10 Termination of Board Nomination Rights.
The Board observation and nomination rights contained in this Article 2 are personal to the BAT Group Permitted Holders and not transferable to any Person that is not a BAT Group Permitted Holder. If the Partially Diluted Ownership Percentage of the BAT Group Permitted Holders does not meet or exceed the threshold set forth in Section 2.3(2)(b) above following the expiration of the Nominee Cure Period, the Board observation and nomination rights contained in this Article 2 shall terminate and be of no further force and effect.
Article 3
INFORMATION RIGHTS AND ACCESS; CONFIDENTIALITY
Section 3.1 Information Rights and Access.
Subject to compliance with anti-trust Laws, the Company shall provide to the Security Holder (or such other member of the BAT Group that so requests): (1) any financial or other information relating to the Company, its Subsidiaries and their respective businesses and operations; and (2) reasonable access to the books, records, properties, employees and management of the Company and its Subsidiaries during normal business hours, upon reasonable advance notice, and without causing undue interference to the operation of the Company’s and its Subsidiaries’ business in the Ordinary Course, in each case, as is necessary or reasonably required by the BAT Group in order to: (a) comply with the legal, regulatory and/or tax obligations, returns or filings of the BAT Group; (b) review the Company’s and its Subsidiaries’ compliance with the Transaction Agreements and (c) conduct reasonable due diligence on the Company and its Subsidiaries prior to and in connection with any conversion (in whole or in part) of the Convertible Debenture to Common Shares. Notwithstanding the foregoing, in no situation shall the Company be required to disclose to the Security Holder any information that (i) could adversely affect the attorney-client privilege between the Company and its counsel or (ii) that the Company has reasonably determined could not be provided to a Director Nominee because of conflict of interest concerns.
Section 3.2 Confidentiality.
| (1) | The Security Holder (and each other member of the BAT Group that receives Confidential Information of the Company and/or any of its Subsidiaries), on the one hand, and the Company (and each of its Affiliates that receives Confidential Information of the BAT Group), on the other hand, shall keep confidential and not disclose such Confidential Information in any manner whatsoever, in whole or in part, except as permitted by this Section 3.2. |
| (2) | Notwithstanding Section 3.2(1): |
| (a) | the Security Holder may disclose Confidential Information to (i) each other member of the BAT Group and (ii) its and their respective Representatives; provided, that prior to making any disclosure to a Representative, each such Representative has been informed of the confidential nature of the Confidential Information and has been directed to hold the Confidential Information in accordance with this Section 3.2; and, provided, further, that the Security Holder shall remain responsible for the compliance by such other members of the BAT Group with the requirements of this Article 3 in the event of a permitted assignment pursuant to Section 10.15(2) hereof; |
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| (b) | the Company may disclose Confidential Information to (i) each of its Subsidiaries and (ii) its and their respective Representatives; provided, that prior to making any disclosure to a Representative, each such Representative has been informed of the confidential nature of the Confidential Information and has been directed to hold the Confidential Information in accordance with this Section 3.2; and, provided, further, that the Company and shall remain responsible for the compliance by each of its Subsidiaries with the requirements of this Article 3; and |
| (c) | the Security Holder (and each other member of the BAT Group that receives Confidential Information of the Company and/or any of its Subsidiaries), on the one hand, and the Company (and each of its Subsidiaries that receives Confidential Information of the BAT Group), on the other hand, shall use commercially reasonable efforts to cause each of its Representatives that receives Confidential Information to observe the terms of this Section 3.2 in respect thereof; provided, that the Security Holder will remain liable for any damages arising out of an failure by a prospective purchaser of Common Shares or Convertible Securities from the Security Holder to keep such Confidential Information confidential in accordance with the provisions of this Section 3.2 unless such prospective purchaser has entered into a confidentiality agreement enforceable by the Company. |
| (3) | The disclosure restrictions contained in Section 3.2(1) do not apply to disclosure that is required by Law, any Order or any other legally binding document discovery requests. Prior to making any such disclosure, the applicable Party that received Confidential Information (or which Party’s Subsidiary, Affiliate and/or Representative received Confidential Information, as applicable) shall, to the extent not prohibited by the Law, Order or legally binding request: (a) give the other Party prompt written notice of the requirement and the proposed content of any disclosure; and (b) at the other Party’s request and expense, co-operate with the other Party in limiting the extent of the disclosure and in obtaining an appropriate protective order or pursuing such legal action, remedy or assurance as the other Party deems necessary to preserve the confidentiality of the Confidential Information. If a protective order or other remedy is not obtained or the other Party fails to waive compliance with Section 3.2(1), the applicable Party that received Confidential Information (or which Party’s Subsidiary, Affiliate and/or Representative received Confidential Information, as applicable) may disclose only that portion of the Confidential Information that it is required to disclose and exercise commercially reasonable efforts to obtain reliable assurance that confidential treatment is given to the Confidential Information disclosed. |
| (4) | For the avoidance of doubt, the disclosure restrictions contained in Section 3.2(1) do not apply to disclosure that is made by a Party with the prior written consent of the other Party. |
Article 4
BAT GROUP REPRESENTATIVE
Section 4.1 BAT Group Representative.
| (1) | The Security Holder (for and on behalf of the BAT Group Permitted Holders), hereby appoints Juan Palacios as its representative (together with any replacement representative appointed in accordance with this Section 4.1, the “BAT Group Representative”) to act in its name and on its and their behalf: |
| (a) | with respect to all matters relating to this Agreement, including exercising any rights of the BAT Group Permitted Holders under this Agreement, executing and delivering any amendment, restatement, supplement or modification to or of this Agreement, and any waiver of any claim or right arising out of this Agreement; and |
| (b) | in general, to do all other things and to perform all other acts, including executing and delivering all agreements, certificates, receipts, instructions and other instruments, contemplated by, or deemed advisable in connection with, this Agreement. |
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| (2) | The Company will be entitled to rely upon any document or other instrument delivered by the BAT Group Representative as being authorized or directed to be delivered by each of the BAT Group Permitted Holders, and the Company will not be liable to the BAT Group Permitted Holders for any action taken or omitted to be taken based on such reliance. |
| (3) | The BAT Group Permitted Holders shall be entitled to replace the BAT Group Representative at any time, and from time to time, by delivering a written notice to the Company signed by each BAT Group Permitted Holder that is at the applicable time a Company Shareholder. |
Article 5
PRE-EMPTIVE RIGHT AND TOP-UP RIGHT
Section 5.1 Pre-Emptive Right.
| (1) | In connection with any Distribution following the conversion of the Convertible Debenture into Common Shares (in whole or in part), all or any of the BAT Group Permitted Holders shall have the right, but not the obligation (the “Pre-Emptive Right”), exercisable in accordance with Section 5.1(3), to subscribe for up to an aggregate number of Distributed Securities, on the same terms and conditions as all other participants in the Distribution (including the same price but, in each case, excluding any underwriting commissions and discounts, to the extent not payable by the Company in relation to the securities issued on the exercise of the Pre-Emptive Right, it being agreed that the Company shall use its commercially reasonable efforts to have such charges not apply to the BAT Group Permitted Holders), mutatis mutandis, determined in accordance with the following formula: |
A = B X C
For purposes of the foregoing formula, the following definitions shall apply:
| A | means the aggregate number of Distributed Securities for which the BAT Group Permitted Holders have the right to subscribe pursuant to the Pre-Emptive Right, expressed as a positive number; |
| B | means the Partially Diluted Ownership Percentage of the BAT Group Permitted Holders, together with any joint actors, calculated as of immediately prior to the closing of the Distribution (for greater certainty, expressed for purposes of this formula as a number - e.g., 19.9% shall be expressed as 0.1999), subject to a limit of 19.9%; and |
| C | means the aggregate number of Distributed Securities to be issued in connection with the Distribution (assuming the conversion, exercise and/or exchange of any Convertible Securities issued pursuant thereto, if applicable), expressed as a positive number. |
| (2) | The Company shall deliver to the BAT Group Representative a notice in writing, as soon as practicable following a determination by the Company to effect a Distribution and in no event less than 5 Business Days prior to closing of any proposed Distribution (a “Distribution Notice”), which Distribution Notice shall: (a) specify the total number and type of Distributed Securities which are being offered in the Distribution, to the extent known; (b) specify the rights, privileges, restrictions, terms and conditions of such Distributed Securities; (c) specify the price at which the Distributed Securities are being offered in the Distribution, to the extent known; (d) specify the maximum number of Distributed Securities for which the BAT Group Permitted Holders have the right to subscribe pursuant to Section 5.1(1) and the aggregate subscription price therefor, to the extent known; (e) specify the date (which shall not be less than 5 Business Days after the date on which the Distribution Notice is delivered) on which the Distribution is to be completed; (f) state the reasons for the issuance of the Distributed Securities; and (g) specify the resulting dilution to the BAT Group Permitted Holders if pre-emptive rights are not exercised, to the extent known. |
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| (3) | The BAT Group Permitted Holders shall have the right, exercisable by the BAT Group Representative (for and on behalf of the BAT Group Permitted Holders) within 3 Business Days after receipt by the BAT Group Representative of a Distribution Notice pursuant to Section 5.1(2), by delivering a subscription notice to the Company (the “Pre-Emptive Right Subscription Notice”) setting out the number of Distributed Securities for which each applicable BAT Group Permitted Holder wishes to subscribe. |
| (4) | In the event that the Company expects to complete the applicable Distribution and the BAT Group Representative has delivered a Pre-Emptive Right Subscription Notice, no later than three Business Days prior to the expected closing date thereof, the Company shall deliver a written notice to the BAT Group Representative confirming: (a) the expected closing date thereof; and (b) the number of Distributed Securities allocated to the applicable BAT Group Permitted Holders and the aggregate subscription price therefor. The BAT Group Representative (for and on behalf of the BAT Group Permitted Holders) shall, on or prior to the closing date of the Distribution, deliver or cause to be delivered to the Company (or as the Company may otherwise direct) a certified cheque, bank draft or wire transfer of immediately available funds in the amount of the aggregate subscription price for the Distributed Securities allocated to the BAT Group Permitted Holders, and the Company shall issue, or shall cause the issuance of, such Distributed Securities to the applicable BAT Group Permitted Holders concurrently with the closing of the Distribution. |
| (5) | The BAT Group Permitted Holders shall have the right to the Pre-Emptive Right set forth in this Section 5.1 from the date hereof through the date on which the Partially Diluted Ownership Percentage of the BAT Group Permitted Holders falls below 10%. |
Section 5.2 Top-Up Right.
| (1) | In connection with any Top-Up Exempt Distribution in respect of which the BAT Group Representative (for and on behalf of the BAT Group Permitted Holders) did not deliver a Pre-Emptive Right Subscription Notice pursuant to Section 5.1(3) prior to the execution of a definitive bought deal letter in respect thereof, in each case following conversion of the Convertible Debenture into Common Shares (in whole or in part), all or any of the BAT Group Permitted Holders shall have the right, but not the obligation (the “Top-Up Right”), exercisable in accordance with Section 5.2(3), to subscribe for up to an aggregate number of Common Shares and/or Convertible Securities, as applicable, on the same terms and conditions as all other participants in the Top-Up Exempt Distribution (including for any Top-Up Exempt Distribution, at the same price or, if such price is not permitted pursuant to applicable Securities Laws or stock exchange rules, at the lowest price permitted thereunder for a private placement at such time, but excluding any underwriting commissions and discounts to the extent not payable by the Company in relation to the securities issued on the exercise of the Top-Up Right, it being agreed that the Company shall use its commercially reasonable efforts to have such charges not apply to the BAT Group Permitted Holders), mutatis mutandis, determined in accordance with the following formula: |
A = [B / (1 - C)] - B
For purposes of the foregoing formula, the following definitions shall apply:
| A | means the aggregate number of Common Shares and/or Convertible Securities for which the BAT Group Permitted Holders have the right to subscribe pursuant to the Top-Up Right, expressed as a positive number; |
| B | means the aggregate number of Common Shares and/or Convertible Securities issued in connection with the Top-Up Exempt Distribution, expressed as a positive number; and |
| C | means the Partially Diluted Ownership Percentage of the BAT Group Permitted Holders, together with any joint actors, calculated as of immediately prior to the closing of the Top-Up Exempt Distribution (for greater certainty, expressed for purposes of this formula as a number - e.g., 19.9% shall be expressed as 0.1999), subject to a limit of 19.9%. |
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| (2) | Concurrently with and, in any event, no later than two Business Days following: |
| (a) | each six month period following the time of initial conversion of the Convertible Debenture into Common Shares (in whole or in part); or |
| (b) | if the Partially Diluted Ownership Percentage of the BAT Group Permitted Holders is reduced by more than 1% in the aggregate solely as a result of one or more Top-Up Exempt Distributions contemplated in Section 5.2(1) that have been completed since the end of the most recent calendar quarter, the closing of the most recent Top-Up Exempt Distribution; or |
| (c) | if applicable Securities Laws do not permit the exercise in full of the Top-Up Right until the passage of a prescribed period of time, the later of: (i) the time implied by (a) and (b) above; and (ii) 20 Business Days prior to the expiry of such prescribed period of time, as applicable, |
the Company shall deliver to the BAT Group Representative a notice (“Top-Up Notice”), which Top-Up Notice shall: (A) specify the total number and type of Common Shares and/or Convertible Securities which were issued in connection with the Top-Up Exempt Distribution, as applicable; (B) specify the rights, privileges, restrictions, terms and conditions of such Common Shares and/or Convertible Securities; (C) specify the price at which such Common Shares and/or Convertible Securities were issued; (D) specify the maximum number of Common Shares and/or Convertible Securities for which the BAT Group Permitted Holders have the right to subscribe pursuant to Section 5.2(1) and the aggregate subscription price therefor; (E) in the case of a Top-Up Exempt Distribution, state with reasonable supporting details the specific clause of the definition of “Top-Up Exempt Distribution” hereunder applicable thereto; and (F) specify the resulting dilution to the BAT Group Permitted Holders if Top-Up Rights are not exercised.
| (3) | The BAT Group Permitted Holders shall have the right, exercisable by the BAT Group Representative (for and on behalf of the BAT Group Permitted Holders) within 30 Business Days after receipt by the BAT Group Representative of a Top-Up Notice pursuant to Section 5.2(2), by delivering a subscription notice to the Company (the “Top-Up Right Subscription Notice”) setting out: (a) the number of Common Shares and/or Convertible Securities for which the BAT Group Permitted Holders wish to subscribe; and (b) the desired closing date for the issuance of such Common Shares and/or Convertible Securities (which date shall not be earlier than five Business Days after receipt by the Company of the Top-Up Right Subscription Notice and not earlier than, if applicable, the passage of the prescribed period of time referenced in Section 5.2(2)). |
| (4) | The BAT Group Representative (for and on behalf of the BAT Group Permitted Holders) shall, on or prior to the desired closing date for the issuance of the Common Shares and/or Convertible Securities set out in the Top-Up Right Subscription Notice, deliver or cause to be delivered to the Company (or as the Company may otherwise direct) a certified cheque, bank draft or wire transfer of immediately available funds in the amount of the aggregate subscription price in respect of such Common Shares and/or Convertible Securities, and the Company shall issue, or shall cause the issuance of, such Common Shares and/or Convertible Securities to the applicable BAT Group Permitted Holders on the desired closing date for such issuance as set out in the Top-Up Right Subscription Notice. |
| (5) | The BAT Group Permitted Holders shall have the right to the Top-Up Right set forth in this Section 5.2 from the date hereof through the date on which the Partially Diluted Ownership Percentage of the BAT Group Permitted Holders falls below 10%. |
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Section 5.3 Required Approvals.
In the event that the approval of the TSX, any Governmental Authority or other applicable stock exchange on which the Common Shares are listed is required in connection with (1) any exercise by the BAT Group Representative (for and on behalf of the BAT Group Permitted Holders) of the Pre-Emptive Right or the Top-Up Right, or (2) any issuance of Common Shares and/or Convertible Securities by the Company or any of its Subsidiaries to the BAT Group Permitted Holders pursuant thereto, the Company shall use its commercially reasonable efforts to obtain any such approval as promptly as practicable.
Article 6
REGISTRATION RIGHTS
Section 6.1 Demand Registration Rights.
| (1) | At any time and from time to time from and after the Lock-Up Period, the BAT Group Permitted Holders, as a group, may, subject to the limitations set forth in this Article 6, require the Company to file a Prospectus under applicable Securities Laws and take such other steps as may be necessary to facilitate a secondary offering in Canada of all or any portion of the Registrable Securities held by the BAT Group Permitted Holders (a “Demand Registration”), by giving written notice of such Demand Registration to the Company (the “Initiating Notice”). |
| (2) | The Company shall, subject to the limitations set forth in this Article 6 and applicable Securities Laws, use commercially reasonable efforts to as expeditiously as reasonably practicable, but in any event no more than 60 days after the Company’s receipt of the Initiating Notice, prepare and file a preliminary Prospectus under applicable Securities Laws and promptly thereafter take such other steps as may be necessary in order to effect the Prospectus Distribution in Canada of all or any portion (as may be reduced pursuant to Section 6.3) of the Registrable Securities of the BAT Group Permitted Holders requested to be included in such Demand Registration. The Company and the BAT Group Permitted Holders shall cooperate in a timely manner in connection with any such Prospectus Distribution and the procedures in Schedule A shall apply to such Prospectus Distribution. |
| (3) | The Company shall not be obliged to effect a Demand Registration: |
| (a) | at the request of the BAT Group Permitted Holders in any 12 month period after having complied with one Demand Registration request from the BAT Group Permitted Holders during such 12 month period pursuant to this Section 6.1; |
| (b) | after having complied with three Demand Registration requests from the BAT Group Permitted Holders in total under this Agreement; |
| (c) | in the event the Board reasonably determines in its good faith judgment that either: (A) the effect of the filing of a Prospectus would impede the ability of the Company to consummate a pending or proposed material financing, acquisition, corporate reorganization, merger or other material transaction involving the Company or would have a material adverse effect on the business of the Company; or (B) there exists at the time material non-public information relating to the Company the disclosure of which would be detrimental to the Company (each of (A) and (B) being a “Valid Business Reason”), then in either case, the Company’s obligations under this Section 6.1 will be deferred for a period of not more than 90 days from the date of receipt of the Initiating Notice; provided, however, that: (i) the Company shall give written notice to the BAT Group’s Representative: (1) of its determination to postpone filing of the Prospectus and, subject to compliance by the Company with applicable Securities Laws, of the facts giving rise to the Valid Business Reason; and (2) of the time at which it determines the Valid Business Reason to no longer exist; and (ii) the Company shall not qualify for public distribution any securities offered by the Company for its own account during such period; |
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| (d) | if the anticipated gross aggregate offering price of the Registrable Securities to be qualified in connection with such Demand Registration, including the value of any Common Shares which may be included in the Prospectus Distribution pursuant to Section 6.2, is less than $25,000,000; or |
| (e) | until the date that is 90 days after the date on which a receipt was issued for a Prospectus for securities offered by the Company, provided that the Company has complied with its obligations pursuant to Section 6.2 in connection with the Prospectus Distribution relating to such Prospectus. |
| (4) | An Initiating Notice shall: |
| (a) | specify the number of Registrable Securities that the BAT Group Permitted Holders intend to offer and sell; |
| (b) | express the intention of the BAT Group Permitted Holders to offer or cause the offering of such Registrable Securities; |
| (c) | describe the nature or methods of the proposed offer and sale thereof and the provinces and/or territories of Canada in which such offer shall be made; |
| (d) | contain the undertaking of the BAT Group Permitted Holders to provide all such information regarding its holdings and the proposed manner of distribution thereof as may be required in order to permit the Company to comply with all Securities Laws; and |
| (e) | specify whether such offer and sale shall be made by an underwritten offering. |
| (5) | In the case of an underwritten public offering initiated pursuant to this Section 6.1, the BAT Group Permitted Holders shall have the right to select the managing underwriter or underwriters to effect the Prospectus Distribution in connection with such Demand Registration, provided, however, that such selection shall also be satisfactory to the Company, acting reasonably. The Company shall have the right to retain counsel of its choice to assist it in fulfilling its obligations under this Article 6. |
| (6) | The Company shall be entitled to include Common Shares which are not Registrable Securities in any Demand Registration. Notwithstanding the foregoing, if the managing underwriter or underwriters shall impose a limitation on the number or kind of securities which may be included in any such Prospectus Distribution because, in its reasonable judgment, the inclusion of securities requested to be included in such Prospectus Distribution exceeds the number of securities which can be sold in an orderly manner in such offering within a price range reasonably acceptable to the BAT Group Permitted Holders (the “Minimum Price”), then the BAT Group Permitted Holders shall be obligated to include in such Prospectus Distribution such portion of the Common Shares that have been requested to be included in such Prospectus Distribution as is determined in good faith by such managing underwriter or underwriters in the priority provided in Section 6.3(1)(b). |
| (7) | In the case of an underwritten Demand Registration, the BAT Group Permitted Holders and its representatives may participate with the Company and its representatives in the negotiation of the terms of any underwriting agreement. Such participation in, and the Company’s completion of, the underwritten Demand Registration is conditional upon each of the BAT Group Permitted Holders and the Company agreeing that the terms of any underwriting agreement are satisfactory to it, in its reasonable discretion. |
| (8) | The Company shall not sell, offer to sell, announce any intention to sell, grant any option for the sale of, or otherwise dispose of any Common Shares or securities convertible into Common Shares other than pursuant to the Company’s equity incentive plans or other plans to purchase Common Shares or any other securities in favour of the management, directors, employees or consultants of the Company, to acquire securities of the Company, whether for its own account or for the account of another securityholder, from the date of an Initiating Notice until such date that is not later than 90 days from the closing of the sale of the Registrable Securities in accordance with a Demand Registration (unless the BAT Group Permitted Holders withdraw its request for qualification of its Registrable Securities pursuant to such Demand Registration in accordance with Section 6.5(1)). |
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Section 6.2 Piggyback Registration Rights.
If, at any time and from time to time from and after the date hereof, the Company proposes to make a Prospectus Distribution, whether for its own account or for the account of any Company Shareholders (or both), the Company shall, at that time, promptly give the BAT Group Representative written notice (the “Piggyback Notice”) of the proposed Prospectus Distribution, which Piggyback Notice shall include the proposed timing of, and the price and number of Common Shares subject to, the proposed Prospectus Distribution. Upon the written request of the BAT Group Representative to the Company specifying that the BAT Group Permitted Holders wish to include all or a specified portion of the Registrable Securities held by the BAT Group Permitted Holders (each, a “Piggyback Shareholder”) in the Prospectus Distribution, which request must be delivered by the BAT Group Representative to the Company within 20 Business Days after receipt of the Piggyback Notice (provided, that if the Company proposes to effect the Prospectus Distribution as a Bought Deal Distribution, the BAT Group Representative shall undertake commercially reasonable efforts to respond consistent with the customary time periods for bought deal transactions), the Company will cause the Registrable Securities requested to be qualified by such Piggyback Shareholders to be included in the Prospectus Distribution (a “Piggyback Registration”), and the procedures in Schedule A shall apply to any Piggyback Registration.
Section 6.3 Underwriters’ Cutback.
| (1) | If, in connection with a Demand Registration or a Piggyback Registration, the managing underwriter or underwriters shall impose a limitation on the number or kind of securities which may be included in any such Prospectus Distribution because, in its reasonable judgment, the inclusion of securities requested to be included in such offering exceeds the number of securities which can be sold in an orderly manner in such offering within the Minimum Price (an “Underwriters’ Cutback”), then the Company shall be obligated to include in such Prospectus Distribution such securities as is determined in good faith by such managing underwriter or underwriters in the following priority: |
| (a) | in the case of a Prospectus Distribution which was initiated by the Company and not any securityholder (a “Company Initiated Prospectus Distribution”): |
| (i) | first, such securities offered by the Company for its own account; and |
| (ii) | second, if there are any additional securities that may be underwritten at no less than the Minimum Price after allowing for the inclusion of all of the securities required under (i) above, such Registrable Securities requested to be qualified by the BAT Group Permitted Holders, provided that if any Registrable Securities requested to be qualified by the BAT Group Permitted Holders are not otherwise included in such Prospectus Distribution, such Registrable Securities that are not so included shall be included, to the fullest extent possible, in an over-allotment option which shall be granted to the underwriters in connection with such Prospectus Distribution for such amount of securities requested to be qualified by the BAT Group Permitted Holders that were not otherwise included in such Prospectus Distribution, up to an aggregate maximum number as is equal to 15% of the securities referred to in Section 6.3(1)(a)(i); and |
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| (b) | in the case of a Prospectus Distribution other than a Company Initiated Prospectus Distribution: |
| (i) | first, such Registrable Securities requested to be qualified by the BAT Group Permitted Holders; and |
| (ii) | second, if there are any additional Common Shares that may be underwritten at no less than the Minimum Price after allowing for the inclusion of all of the Registrable Securities required under (i) above, such Common Shares offered by the Company for its own account, provided that, if any Common Shares requested to be qualified by the Company are not otherwise included in the Prospectus Distribution, such Common Shares that are not so included shall be included in an over-allotment option which shall be granted to the underwriters in connection with such Prospectus Distribution for such amount of Common Shares requested to be qualified by the Company that were not otherwise included in such Prospectus Distribution, up to an aggregate maximum number as is equal to 15% of the Registrable Securities referred to in Section 6.3(1)(a)(i). |
Section 6.4 Registered Distribution in the United States
If the Company proposes to file a registration statement for the distribution of Common Shares (or American depositary receipts in respect thereof) to the public in the United States (or otherwise proposes to cause the Common Shares (or American depositary receipts in respect thereof) to be listed on a United States national securities exchange or inter-dealer quotation system), the Parties shall, prior to such distribution or listing taking place, supplement this Agreement so as to provide the BAT Group Permitted Holders with registration rights enabling Distribution of Registrable Securities to the public in the United States that are substantially equivalent to the registration rights provided under this Agreement, including, without limitation, demand registration rights and piggyback registration rights upon terms and conditions substantially equivalent to the terms and conditions set forth in Section 6.1 and Section 6.2, respectively, and provisions relating to payment of expenses and indemnification upon terms and conditions substantially equivalent to the terms and conditions set forth in Section 6.6 and Article 7, respectively.
Section 6.5 Withdrawal of Registrable Securities.
| (1) | Each Participating Shareholder will have the right to withdraw its request for inclusion of all or any portion of its Registrable Securities in any Demand Registration or Piggyback Registration pursuant to Section 6.1 or Section 6.2, as applicable, by the BAT Group Representative (for and on behalf of the applicable Participating Shareholder(s)) providing written notice to the Company of such request to withdraw; provided, that: |
| (a) | subject to Section 6.5(2), such written notice must be delivered by the BAT Group Representative prior to the execution of the definitive bought deal letter or underwriting agreement, as applicable, with respect to such Prospectus Distribution; and |
| (b) | such withdrawal will be irrevocable and, after making such withdrawal, such Participating Shareholder will no longer have any right to include such withdrawn Registrable Securities in the Prospectus Distribution pertaining to which such withdrawal was made. |
| (2) | In the event a Participating Shareholder validly withdraws all of its Registrable Securities from a Demand Registration or Piggyback Registration, as applicable, in accordance with Section 6.3(1) prior to the filing of a Prospectus in respect of the applicable Prospectus Distribution, as applicable, such Participating Shareholder shall be deemed not to have participated in or requested such Demand Registration or Piggyback Registration, as applicable; provided, that this provision shall only apply to one such withdrawal in a calendar year and thereafter, subsequent withdrawals in such calendar year will count as an exercise of the Demand Registration or Piggyback Registration, as applicable. |
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| (3) | Notwithstanding Section 6.5(1)(a), if a Participating Shareholder becomes aware of a material adverse change in the condition, business and/or prospects of the Company and its Subsidiaries at any time prior to the closing of the applicable Prospectus Distribution to which a Demand Registration or Piggyback Registration, as applicable, relates, such Participating Shareholder will have the right to withdraw its request for inclusion of all or any portion of its Registrable Securities in such Demand Registration or Piggyback Registration, as applicable, providing written notice to the Company of such request to withdraw at any time prior to the closing of such Prospectus Distribution. If a Participating Shareholder validly withdraws its request for inclusion of all of its Registrable Securities from a Demand Registration or Piggyback Registration, as applicable, such Participating Shareholder shall be deemed not to have participated in or requested such Demand Registration or Piggyback Registration, as applicable. |
| (4) | The Company shall, and shall cause its Subsidiaries to, provide notice in writing to the BAT Group Representative promptly upon becoming aware of any material adverse change in the condition, business and/or prospects of the Company and/or any of its Subsidiaries in order to enable the Participating Shareholders to properly exercise their withdrawal rights pursuant to Section 6.5(2). |
Section 6.6 Expenses.
All fees and expenses incurred in connection with a Demand Registration or Piggyback Registration pursuant to Section 6.1 or Section 6.2, as applicable, (excluding underwriters’ discounts and commissions attributable to the Participating Shareholders’ Registrable Securities sold in the Prospectus Distribution, if any, applicable transfer taxes attributable to the Participating Shareholders’ Registrable Securities sold in the Prospectus Distribution, if any, and all fees and disbursements of counsel to the Participating Shareholders) shall be borne by the Company, including: (1) Canadian Securities Regulators, the TSX, registration, listing and filing fees relating to the Registrable Securities; (2) fees and expenses of compliance with Securities Laws; (3) printing and copying expenses; (4) messenger and delivery expenses; (5) expenses incurred in connection with any road show and marketing activities; (6) fees and disbursements of counsel to the Company; (7) fees and disbursements of all independent public accountants (including the expenses of any audit and/or “comfort” letter), and fees and expenses of any other special experts retained by or on behalf of the Company; (8) translation expenses; and (9) any other fees and disbursements of underwriters customarily paid by issuers or sellers of securities (collectively, the "Qualification Expenses"). If a Distribution is not completed solely as a result of a default by the Participating Shareholder under this Agreement or under an underwriting agreement or other enforceable agreement with the underwriters in respect of the Distribution, all Qualification Expenses shall be borne by the Participating Shareholder.
Article 7
DUE DILIGENCE; INDEMNIFICATION
Section 7.1 Preparation; Reasonable Investigation.
In connection with the preparation and filing of any Prospectus in connection with a Demand Registration or Piggyback Registration pursuant to Section 6.1 or Section 6.2, as applicable, the Company shall give the Participating Shareholders and the underwriter(s) of such Prospectus Distribution, if any, and their respective counsel, auditors and other representatives, the opportunity to participate in the preparation of the Prospectus and all related documents (including each amendment thereof or supplement thereto), and shall insert therein such material furnished to the Company in writing, which in the reasonable judgment of the Company and its counsel should be included, and shall give them such reasonable and customary (1) access to the Company’s books and records, (2) opportunity to discuss the business of the Company and its Subsidiaries with its officers and auditors, and (3) opportunity to conduct all due diligence which the underwriter(s), if any, and their respective counsel may reasonably require in order to conduct an investigation to enable such underwriter(s) to execute any certificate required to be executed by it or them for inclusion in the Prospectus and all related documents; provided, that the underwriter(s), if any, agree to maintain the confidentiality of such information in accordance with Section 3.2.
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Section 7.2 Indemnification by the Company.
| (1) | In connection with any Demand Registration or Piggyback Registration pursuant to Section 6.1 or Section 6.2, as applicable, the Company will indemnify and hold harmless, to the fullest extent permitted by Law, each Participating Shareholder and its Affiliates, and each of their respective directors, officers, employees, agents, shareholders, partners and underwriters, from and against any loss, liability, claim, damage and expense whatsoever (including legal fees and expenses), including any amounts paid in settlement of any investigation, order, litigation, proceeding or claim, joint or several, incurred, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Prospectus or any amendment or supplement thereto, including all documents incorporated therein by reference, or any omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or as incurred, arising out of or based upon any failure to comply with Securities Laws (other than any failure to comply with Securities Laws by such Participating Shareholder or underwriter, as applicable); provided, that the Company shall not be liable under this Section 7.2(1) for any settlement of any action effected without its written consent (which consent shall not be unreasonably withheld, conditioned or delayed); and, provided, further, that the indemnity provided for in this Section 7.2(1) in respect of a Participating Shareholder or underwriter shall not apply to any loss, liability, claim, damage or expense to the extent incurred, arising out of or based upon any untrue statement or omission, or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company by such Participating Shareholder or underwriter stating that such information is being provided for use in the Prospectus. Any amounts advanced by the Company to an Indemnified Person pursuant to this Section 7.2(1) as a result of such losses will be returned to the Company if it is finally determined by a court of competent jurisdiction in a judgment not subject to appeal or final review that such Indemnified Person was not entitled to indemnification by the Company hereunder. For greater certainty, the rights to indemnification provided in this Section 7.2(1) may be exercised by each Participating Shareholder individually and separately from the rights to indemnification of the other Participating Shareholders provided in this Section 7.2(1), and shall not be affected in any way by the exercise, non-exercise or waiver, in whole or in part, by any other Participating Shareholder of such rights to indemnification. |
| (2) | In connection with any Demand Registration or Piggyback Registration pursuant to Section 6.1 or Section 6.2, as applicable, the Participating Shareholder will indemnify and hold harmless, to the fullest extent permitted by Law, the Company and its Affiliates, and each of their respective directors, officers, employees, agents, shareholders, partners and underwriters, from and against any loss, liability, claim, damage and expense whatsoever (including legal fees and expenses), including any amounts paid in settlement of any investigation, order, litigation, proceeding or claim, joint or several, incurred, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Prospectus or any amendment or supplement thereto, including all documents incorporated therein by reference, or any omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or as incurred, arising out of or based upon any failure to comply with Securities Laws (other than any failure to comply with Securities Laws by the Company or such underwriter, as applicable), in each case to the extent but only to the extent, that such loss, claim, damage, cost, expense or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Prospectus, or amendment or supplement thereto, caused by information relating solely to the Participating Shareholder and its Affiliates in reliance upon and in conformity with written information furnished by or on behalf of the Participating Shareholder to the Company in writing specifically for use therein; provided, that such Participating Shareholder shall not be liable under this Section 7.2(2) for any settlement of any action effected without its written consent (which consent shall not be unreasonably withheld, conditioned or delayed). Any amounts advanced by such Participating Shareholder to an Indemnified Person pursuant to this Section 7.2(2) as a result of such losses will be returned to such Participating Shareholder if it is finally determined by a court of competent jurisdiction in a judgment not subject to appeal or final review that such Indemnified Person was not entitled to indemnification by such Participating Shareholder hereunder. The Participating Shareholder shall reimburse any legal or other expenses reasonably incurred by the Company or any such director or officer in connection with investigating or defending any such loss, claim, damage, judgment, fine, penalty, charge, liability or action. In no event shall any indemnification obligation by the Participating Shareholder hereunder exceed the net aggregated proceeds received by the Participating Shareholder from the sale of Registerable Securities covered by such Prospectus. |
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Section 7.3 Defence of Claim.
Each Person entitled to indemnification under Section 7.2 (each, an “Indemnified Person”) shall give or cause to be given written notice to the indemnifying party promptly after such Indemnified Person becomes aware of any claim in respect of which indemnification may be sought under Section 7.2; provided, that the failure or delay to so notify the indemnifying party shall not relieve the indemnifying party from any liability which it may have to the Indemnified Person pursuant to Section 7.2 except to the extent that the indemnifying party is prejudiced by such failure or delay, as applicable. The indemnifying party shall assume the defence of any claim, action or other proceeding giving rise to any such claim for indemnification, including the engagement of counsel selected by the indemnifying party (to the reasonable satisfaction of the Indemnified Person) and the payment of all costs, fees and expenses relating thereto. The Indemnified Person will have the right to engage its own counsel in connection with any such claim, action or proceeding, at the expense of the Indemnified Person unless the engagement of such counsel is (1) authorized in writing by the indemnifying party in connection with the defence of such claim, action or proceeding, (2) the indemnifying party shall not have engaged counsel to take charge of the defence of such claim, action or proceeding in a reasonably timely manner, or (3) the Indemnified Person reasonably determines, based on the advice of counsel, that there may be defences available to it which are different from, or in addition to or conflict with, those available to the indemnifying party, that such claim, action or proceeding involves or could have an effect upon matters beyond the scope of the indemnity provided hereunder or such claim, action or proceeding seeks an injunction or equitable relief against the Indemnified Person or involves actual or alleged criminal activity (in which case the indemnifying party shall not have the right to direct the defence of such claim, action or proceeding on behalf of the Indemnified Person), in any of which events the costs, fees and expenses of such counsel will be borne by the indemnifying party; provided, that in no event shall the indemnifying party be required to pay the costs, fees and expenses of more than one law firm as counsel for all Indemnified Persons pursuant to this Section 7.3, unless in the reasonable judgment of any Indemnified Person a conflict of interest may exist between such Indemnified Person and any other of such Indemnified Person with respect to such claim, action or proceeding. The indemnifying party shall not, in the defence of any claim, action or proceeding assumed by the indemnifying party pursuant to this Section 7.3, except with the prior written consent of each Indemnified Person (which may not be unreasonably withheld, conditioned or delayed), consent to the entry of any judgment, or enter into any settlement, which does not include as an unconditional term thereof the giving by the claimant or plaintiff, as applicable, to such Indemnified Person of a full and final release from all liability in respect to such claim, action or proceeding.
Section 7.4 Contribution.
If the indemnification provided for in Section 7.2 is unavailable to a Person that would have been an Indemnified Person under Section 7.2 in respect of any losses, liabilities, claims, damages and/or expenses referred to in this Article 7, then the indemnifying party shall, in lieu of indemnifying such Indemnified Person, contribute to the amount paid or payable by such Indemnified Person as a result of such losses, liabilities, claims, damages and/or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and such Indemnified Person, on the other hand, in connection with the statement or omission which resulted in such losses, liabilities, claims, damages and/or expenses, as well as any other relevant equitable considerations; provided, that the maximum amount of liability for such a Person who would have been an Indemnified Person shall be limited to an amount equal to the net proceeds (after underwriting fees, commissions or discounts) actually received by such Person from the sale of Registrable Securities effected pursuant to the relevant Demand Registration or Piggyback Registration, as applicable. The relative fault will be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact, or the omission or alleged omission to state a material fact, relates to information supplied by the indemnifying party or such Indemnified Person, and their relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. The amount paid or payable by a Person under this Section 7.4 as a result of the losses, liabilities, claims, damages and/or expenses referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such Person in connection with any investigation or proceeding. The Company and the Participating Shareholder agree that it would not be just and equitable if contribution pursuant to this Section 7.4 were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to above in this Section 7.4.
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Section 7.5 Survival.
The indemnification provided for under this Article 7 will survive the expiration or termination of this Agreement, and will remain in full force and effect regardless of any investigation made by or on behalf of any Indemnified Person, or any officer, director or controlling Person of such Indemnified Person, and will survive any transfer of Common Shares and/or Convertible Securities held by such Indemnified Person or any of its Affiliates.
Section 7.6 Participating Shareholder as Trustee.
The Company hereby acknowledges and agrees that, with respect to this Article 7, each Participating Shareholder is contracting on its own behalf and as agent for the other Indemnified Persons referred to in this Article 7. In this regard, each Participating Shareholder will act as trustee for such Indemnified Persons of the covenants of the Company under this Article 7 with respect to such Indemnified Persons and accepts these trusts, and will hold and enforce those covenants, on behalf of such Indemnified Persons.
Article 8
OTHER COVENANTS
Section 8.1 Standstill.
| (1) | From the date hereof until the second anniversary of the date hereof, the Security Holder will not, and will cause its Affiliates not to, directly or indirectly, whether individually or by acting jointly or in concert with any other Person, without the express prior written consent of the Company: |
| (a) | purchase, offer or agree to purchase any voting or equity securities of the Company or any of its Subsidiaries that would result in ownership by the BAT Group Permitted Holders, together with any joint actors, of 19.9% or more of the voting or equity securities of the Company or any of its Subsidiaries (or rights or interests in such voting or equity securities, including convertible securities that, if exercised or converted, would result in ownership by the Security Holder or any of its Affiliates, whether acting jointly or in concert with any other Person, of 19.9% or more of the voting or equity securities of the Company or any of its Subsidiaries), calculated assuming conversion of the Convertible Securities held by the BAT Group Permitted Holders; |
| (b) | enter into, offer, or agree to enter into any acquisition of, or other business combination involving, the Company or any of its Subsidiaries; |
| (c) | solicit or join in or in any way participate in a solicitation of proxies from the Company Shareholders or otherwise attempt to influence the conduct of the Company Shareholders, other than in connection with the election of the Director Nominees to the Board from time to time; |
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| (d) | make any public announcement with respect to any of the foregoing; or |
| (e) | advise, assist or encourage any other Person to do, or take any action inconsistent with, any of the foregoing. |
| (2) | The restrictions contained in Section 8.1(1) shall automatically lapse and be of no further force or effect, and nothing contained in Section 8.1(1) or any other provision of this Agreement or any other Transaction Agreement, shall prohibit any of the actions contained in Section 8.1(1) by the Security Holder or any of its Affiliates in the event that, without any breach of Section 8.1(1) on the part of the Security Holder or any of its Affiliates the Company publicly announces a transaction whereby a third party, together with any Persons acting jointly or in concert with such third party: (i) has agreed to purchase, all of the issued and outstanding Common Shares of the Company; or (ii) has agreed to acquire substantially all of the assets of the Company; provided, that, in each case, the Board publicly supports and/or approves the purchase, offer, agreement or acquisition by such third party, as the case may be. |
| (3) | For the avoidance of doubt, (i) nothing contained in Section 8.1(1) or any other provision of this Agreement or any other Transaction Agreement shall prohibit or otherwise restrict the Security Holder or any of its Affiliates from subscribing for and purchasing Common Shares from treasury; and (ii) the restrictions contained in Section 8.1(1) shall not apply to the Security Holder acquiring Common Shares (x) in accordance with the Pre-Emptive Rights or Top-Up Rights set forth in Section 5.1 and Section 5.2 of this Agreement, (y) pursuant to an acquisition that does not constitute a take-over bid (exempt or otherwise), or (z) by way of conversion of the Convertible Debenture (in whole or in part). |
Section 8.2 Transfer of Common Shares.
| (1) | From the date the Convertible Debenture is converted into Common Shares until the date that is 18 months following the conversion date (the “Lock-Up Period”), the Security Holder shall not offer, pledge, sell, assign, transfer, grant any option or contract to purchase, or otherwise dispose of (collectively, a “Transfer”), directly or indirectly, Common Shares to any Person, other than: |
| (a) | Transfers to Affiliates; provided, that the Security Holder shall remain responsible for the covenants, agreements and obligations of the Security Holder under this Agreement notwithstanding any such Transfer and, following such Transfer, such Affiliate shall also become responsible for the covenants, agreements and obligations of the Security Holder; |
| (b) | Transfers: (i) by way of deposit under a bona fide take-over bid in respect of the Common Shares made in compliance with Securities Laws; or (ii) in connection with a statutory plan of arrangement or other business combination involving the Company; |
| (c) | in the event that the Company and/or any of its Affiliates engage in any Restricted Activity (as defined in the Convertible Debenture) or otherwise breaches any of the covenants set forth in this Agreement (including but not limited to the covenants set forth in Section 8.3) and such breach is not cured within the applicable cure period set forth herein, Transfers to any Person following ten Business Days’ prior written notice to the Company following expiration of such cure period to provide the Company with an opportunity to identify a prospective purchaser of the Common Shares; or |
| (d) | in the event that a change in Law or interpretation thereof gives rise to a reasonable prospect that the Security Holder’s continued holding of Common Shares will be in breach of such Law, Transfers to any Person following ten Business Days’ prior written notice to the Company to provide the Company with an opportunity to identify a prospective purchaser of the Common Shares. |
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| (e) | For the avoidance of doubt, (i) the Security Holder will have the right but not the obligation to sell any or all of its Common Shares to any purchaser identified by the Company in the ten Business Day period following notice from the Security Holder to the Company in (c) above and (ii) the Company will shall use reasonable best efforts to maintain the confidentiality of any potential sale by the Security Holder contemplated above. |
Section 8.3 Compliance Matters.
| (1) | From and after the date hereof, the Company shall and shall cause its Subsidiaries to: |
| (a) | comply in all respects with applicable Cannabis Laws and in all material respects with all other applicable Laws; and |
| (b) | use commercially reasonable efforts to comply with the BAT Group’s Standards of Business Conduct and International Marketing Principles in effect on the date of the Convertible Debenture (true, correct and complete copies of which have been provided by or on behalf of the Security Holder to the Company prior to the date hereof), as may be amended in a manner acceptable to the Company, acting reasonably. |
Section 8.4 Certain Protective Provisions.
| (1) | From and after the date hereof, the Company shall not and shall cause each of its Subsidiaries (as applicable) not to, without the prior written consent of the BAT Group Representative: |
| (2) | Adopt any plan or proposal for complete or partial liquidation, dissolution or winding-up of the Company or any of its Subsidiaries (other (a) than dormant Subsidiaries or (b) a liquidation, dissolution or winding-up of any such entity in connection with which all of such entity’s assets are transferred to the Company and/or one or more of its Subsidiaries), or reorganize, make an assignment for the benefit of creditors or file a petition, answer or consent to seeking a reorganization, insolvency proceeding or suffer any other bankruptcy event or commit to any of the foregoing; |
| (3) | Create, issue or cause to be issued any class or series of equity or equity-linked securities that rank senior to the Common Shares or have any rights attaching to them that are more favorable to the holder thereof than the rights attaching to the Common Shares held by the Security Holder, including, without limitation, any rights with respect to voting, representation on the Board, liquidation or other preference); and |
| (4) | Voluntarily delist from any trading market (unless the Company is then concurrently listed on another national exchange) or take any other action that would reasonably be expected to result in the Company ceasing to be listed on a national exchange, other than in connection with a change of control of the Company. |
Section 8.5 Reserved Board Matters.
| (1) | From and after the date hereof, the Company shall not and shall cause each of its Subsidiaries not to take any of the following actions without the requisite approval of the Board (or a Committee where applicable authority has been properly so delegated): |
| (2) | Issue, sell or grant any shares of its capital stock or other equity securities or voting interests, or any securities or rights convertible into or exchangeable or exercisable for, or evidencing the right to subscribe for any shares of capital stock or other equity or voting securities, other than (A) pursuant to the conversion of the Convertible Debenture or Equity Incentive Plans, (B) the issue or grant of securities to the Company or another wholly-owned subsidiary of the Company, as applicable or (C) the issue or grant of securities pursuant to the Gronk Agreement and MLB Subscription Agreement (each as defined in Disclosure Letter as defined in and delivered pursuant to the Subscription Agreement); |
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| (3) | Redeem, purchase or otherwise acquire any of its outstanding shares of capital stock or other equity or voting interests, or any rights, warrants or options to acquire any shares of its capital stock or other equity or voting interests; |
| (4) | Establish a record date for, declare, set aside for payment or pay any dividend on, or make any other distribution in respect of, any shares of its capital stock or other equity or voting interests other than dividends and distributions made by Subsidiaries to the Company or other Subsidiaries, as applicable; |
| (5) | Split, combine, subdivide or reclassify any shares of its capital stock or other equity or voting interests; |
| (6) | Amend the Constating Documents in a manner that would adversely affect the Security Holder; |
| (7) | Make any acquisition (including by plan of arrangement) of all or substantially all of the capital stock or any other equity interest or all or substantially all of the assets of any other Person at a cost of greater than $5,000,000; |
| (8) | Sell, license or lease to any Person, in a single transaction or series of related transactions, any of its properties or assets, except (i) dispositions of inventory in the Ordinary Course and dispositions of obsolete, surplus or worn out assets or assets that are no longer used or useful in the conduct of the business of the Company or any of its Subsidiaries, (ii) transfers among the Company and its wholly-owned Subsidiaries, (iii) leases and subleases of immaterial real property owned by the Company or its Subsidiaries, or (iv) non-exclusive licenses, in each case in the Ordinary Course; |
| (9) | Sell, assign, lease, exclusively license, abandon or permit to lapse, transfer or otherwise dispose of any intellectual property that is material to the Company and its Subsidiaries taken as a whole; |
| (10) | Implement or adopt any material change in its financial accounting principles or its methods, other than as may be required by GAAP or applicable Law; |
| (11) | Incur, assume, endorse, guarantee or otherwise become liable for any indebtedness for borrowed money or issue any debt securities or any rights to acquire any debt securities, except for (A) any indebtedness for borrowed money among the Company and/or its wholly owned Subsidiaries or among wholly owned Subsidiaries of the Company, (B) guarantees by the Company of indebtedness for borrowed money of wholly owned Subsidiaries of the Company or guarantees by wholly owned Subsidiaries of the Company of indebtedness for borrowed money of the Company or any of its other wholly owned Subsidiaries, which indebtedness is incurred in compliance with this clause (10) or is outstanding on the date hereof, (C) indebtedness incurred pursuant to the Convertible Debenture; |
| (12) | Create, assume or permit to exist any lien on any material assets or property, other than (a) such liens as existed on the date hereof, (b) liens imposed by any Governmental Authority for any Taxes, special assessments or other governmental charges not yet due and payable or delinquent or which are being contested in good faith, (c) liens granted after the date hereof to secure indebtedness for borrowed money approved by the Board, (d) statutory liens and deposits or pledges made in connection with, or to secure payment of, worker's compensation, employment insurance, programs mandated under Law and for which appropriate accruals have been established in accordance with GAAP; (e) undetermined or inchoate encumbrances imposed or permitted by Law and incurred in the Ordinary Course and in the operation of real property, such as builder's liens, construction liens, materialmens' liens and other liens, privileges or other charges of a similar nature that relate to obligations not due; (f) security given in the Ordinary Course to a public utility or any municipality or governmental or public authority in connection with the operation of the business or the real property; (g) all permits, servitudes and easements (including conservation easements and public trust easements, rights-of-way, road use agreements, covenants, conditions, restrictions, reservations, licences, other surface agreements and other matters of record) and zoning by-laws and restrictions, ordinances and other restrictions as to the use of real property; |
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| (13) | Settle any claim, assessment or dispute with respect to Taxes for an amount materially in excess of the amount reserved in respect thereof; |
| (14) | Commence, waive, release, compromise, pay, discharge, settle or satisfy any material claim, dispute or litigation; |
| (15) | Enter into any Equity Incentive Plan not in effect on the date hereof; |
| (16) | Enter into any (a) material new line of business or (b) geographical markets unless the Company has received an opinion of counsel stating that any such activity in any such geographical market is permissible under applicable Cannabis Laws; |
| (17) | List any of the Company’s securities on a securities exchange other than the TSX; or |
| (18) | Authorize any of, or agree or commit to do any of, the foregoing, |
| (19) | provided, that, any matters previously approved by the Board (or a Committee where applicable authority has been properly so delegated) after the date hereof shall not require any additional approval. |
Section 8.6 Additional Relationships
| (1) | The Parties acknowledge that the relationship between the Parties shall be a non-exclusive relationship that allows each Party to independently carry out its own commercial activities and pursue third-party commercial partnerships; provided, that, to the extent permitted under applicable Laws, neither Party will, without the prior written consent of the other Party, invest in or participate in any joint venture with the other Party’s Competitors. Notwithstanding the foregoing, nothing shall preclude a Party from entering into any transaction for the sale of all or substantially all of its equity securities with a competitor of the other Party provided any such transaction is subject to the receipt of shareholder approval of the transacting party. |
Article 9
REPRESENTATIONS AND WARRANTIES
Section 9.1 Representations and Warranties.
Each Party represents and warrants to the other Party that:
| (1) | it is duly formed and organized and validly existing under the Laws of its jurisdiction of incorporation, and has the corporate power and capacity to own its assets, and to enter into and perform its obligations under this Agreement in accordance with the terms hereof; |
| (2) | this Agreement has been duly authorized, and duly executed and delivered by, such Party and constitutes a legal, valid and binding obligation of such Party enforceable against such Party in accordance with its terms (assuming the due authorization, execution and delivery thereof by the other Party), subject to all bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors’ rights generally; and |
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| (3) | the execution, delivery and performance of this Agreement does not and will not contravene the provisions of such Party’s constating or other organizational documents, or the provisions of any Contract to which such Party is a party or by which such Party or any of its assets may be bound. |
Article 10
GENERAL PROVISIONS
Section 10.1 No Obligation to Finance.
None of the BAT Group Permitted Holders shall have any obligation to provide any financing to the Company, its Subsidiaries or any of its or their respective Affiliates, or otherwise to guarantee the fulfillment of any of their respective obligations to any other Person.
Section 10.2 Governing Law and Jurisdiction.
This Agreement shall be governed by, and construed and interpreted in accordance with, the Laws of the Province of Ontario and the federal Laws of Canada applicable therein, without regard to conflict of Laws principles. Each Party irrevocably attorns and submits to the exclusive jurisdiction of the Ontario courts situated in the City of Toronto (and appellate courts therefrom), and waives objection to the venue of any proceeding in such court or that such court provides an inappropriate forum.
Section 10.3 Share Buybacks.
The Company shall not, without the prior written consent of the BAT Group Representative, acting reasonably, redeem, repurchase or otherwise acquire for cancellation, or offer to redeem, repurchase or otherwise acquire for cancellation, any Common Shares (a “Share Buyback”), where such Share Buyback would be reasonably likely to result in the BAT Group Permitted Holders beneficially owning and/or controlling, directly or indirectly and assuming conversion of the Convertible Debenture in full, 20% or more of the voting rights attached to all of the issued and outstanding Common Shares.
Section 10.4 All Common Shares Subject to this Agreement.
The Security Holder (for and on behalf of itself and each BAT Group Permitted Holder) agrees that it shall be bound by the terms of this Agreement with respect to all Common Shares owned and/or controlled, directly or indirectly, by the Security Holder and each other BAT Group Permitted Holder from time to time.
Section 10.5 Changes in Capital of the Company.
At all times after the occurrence of any event which results in a change to the Common Shares and/or Convertible Securities, this Agreement will forthwith be amended and modified as necessary in order that it will apply with full force and effect, with appropriate changes, to all new securities into which the Common Shares and/or Convertible Securities are so changed, and the Parties will execute and deliver a supplemental agreement giving effect to and evidencing such necessary amendments and modifications.
Section 10.6 BAT Group Permitted Holders Agreement to be Bound.
Each BAT Group Permitted Holder that becomes a Company Shareholder or securityholder must concurrently with becoming a Company Shareholder or securityholder execute and deliver to the Company a counterpart copy of this Agreement, or a written agreement in form and substance satisfactory to the Parties, agreeing to be bound by this Agreement.
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Section 10.7 Constating Documents.
In the event of any conflict or inconsistency between the terms of this Agreement, on the one hand, and the Constating Documents, on the other hand, the terms of this Agreement shall prevail to the extent of the conflict or inconsistency.
Section 10.8 Term and Termination.
| (1) | This Agreement shall come into force and effect as of the date set out on the first page of this Agreement and, except as provided below, shall continue in full force and effect until the earlier of: |
| (a) | the date on which the Convertible Debenture is repaid in full; |
| (b) | upon a Change of Control (as defined in the Convertible Debenture) of the Company, if such Change of Control results in (A) a successor entity upon completion of an arrangement, amalgamation, consolidation or merger involving the Company, (B) another entity carrying on the business of the Company, or (C) the Company becoming a wholly-owned subsidiary of another entity; |
| (c) | the date on which the BAT Group Permitted Holders cease to hold the Convertible Debenture and/or any Common Shares issuable upon the exercise, conversion or exchange of any Convertible Securities; |
| (d) | the date on which this Agreement is terminated by the mutual consent of the Parties; or |
| (e) | the dissolution or liquidation of the Company. |
| (2) | Notwithstanding the valid termination of this Agreement pursuant to Section 10.8(1): |
| (a) | the provisions of Article 1, Section 3.2, Article 7 and Sections 10.1, 10.2, 10.7, 10.8 and 10.1 through 10.21 and, if the Company or the Security Holder reasonable believe that the BAT Group Permitted Holders would beneficially own and/or control, directly or indirectly and assuming conversion of the Convertible Debenture in full, 20% or more of the voting rights attached to all of the issued and outstanding Common Shares following any Share Buyback, Section 10.3 shall survive such termination and continue in full force and effect in accordance with their terms; and |
| (b) | any rights or obligations which have accrued or arisen under the provisions of Article 7 of this Agreement prior to the effective time of such termination shall survive such termination unimpaired in accordance with the terms hereof. |
Section 10.9 Dividends and Distributions.
| (1) | The Company shall provide reasonable prior written notice to the BAT Group Representative, in advance of the timelines required under Securities Laws, of the proposed declaration of any dividend or other distribution on or in respect of the Common Shares, including the applicable record and payment dates and the proposed form of dividend or other distribution (i.e., cash, Common Shares and/or other property). |
| (2) | The Parties shall discuss in good faith the manner by which the BAT Group Permitted Holders may defer their receipt of all or a portion of any dividends or other distributions declared on or in respect of the Common Shares held by them from time to time. |
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| (3) | The Company shall ensure that any payments made to the BAT Group Permitted Holders are not made from funds which are derived from any conduct defined as “specified unlawful activity” under Section 1956(c)(7) of Title 18 of the United States Code. Any such funds shall be held by the Company in a segregated bank account. |
Section 10.10 Notices.
| (1) | Any notice, direction or other communication given regarding the matters contemplated by this Agreement (each, a “Notice”) must be in writing, sent by personal delivery, courier or email, and addressed: |
| (a) | to the Company, at: |
700 Tech Court
Louisville, CO 80027
United States
| Attention: | General Counsel |
| E-mail: | [* * *] |
with a copy (which shall not constitute notice) to:
DLA Piper (Canada) LLP
Suite 6000, 1 First Canadian Place
PO Box 367, 100 King St W
Toronto, Ontario M5X 1E2
Canada
| Attention: | Jarrod Isfeld and Russel W. Drew |
| Email: | jarrod.isfeld@dlapiper.com and russel.drew@dlapiper.com |
| (b) | to the BAT Group Representative, at: |
Globe House
4 Temple Pl
London WC2R 2PG
| Attention: | Juan Palacios |
| Email: | [* * *] |
with a copy (which shall not constitute notice) to:
Jones Day
250 Vesey Street, 33rd Floor
New York, New York 10281
| Attention: | Randi Lesnick |
| Brad Brasser | |
| Email: | rclesnick@jonesday.com |
| bcbrasser@jonesday.com |
Stikeman Elliott LLP
5300 Commerce Court West
199 Bay Street
Toronto, Ontario M5L 1B9
[***] Indicates material that has been excluded from this Exhibit 10.3 because it is private or confidential and not material.
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| Attention: | Evan Marcus and Colin Burn |
| Email: | emarcus@stikeman.com and cburn@stikeman.com |
| (2) | A Notice is deemed to be given and received on the date of delivery if it is a Business Day and the delivery was made prior to 4:00 p.m. (local time in place of receipt), and otherwise on the next Business Day. A Party may change its address for service from time to time by providing a Notice in accordance with the foregoing. Any subsequent Notice must be sent to the Party at its changed address. Any element of a Party’s address that is not specifically changed in a Notice will be assumed not to be changed. |
Section 10.11 Time of the Essence.
Time is of the essence in this Agreement.
Section 10.12 Expenses.
Except as otherwise expressly provided in this Agreement, each Party will pay for its own costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby. The fees and expenses referred to in this Section 10.12 are those which are incurred in connection with the negotiation, preparation, execution and performance of this Agreement and the transactions contemplated hereby, including the fees and expenses of legal counsel, accountants and other advisors.
Section 10.13 Severability.
If any provision of this Agreement is determined to be illegal, invalid or unenforceable by an arbitrator or any court of competent jurisdiction, that provision will be severed from this Agreement, and the remaining provisions will remain in full force and effect. Upon any such determination, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement be consummated as originally contemplated to the greatest extent possible.
Section 10.14 Entire Agreement.
This Agreement and the Subscription Agreement, and the other Transaction Agreements by and among the Parties and certain of their respective Affiliates contemplated hereby and thereby, constitute the entire agreement among the Parties and their respective Affiliates with respect to the transactions contemplated hereby and thereby, and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties and their respective Affiliates with respect to such transactions. There are no representations, warranties, covenants, conditions or other agreements, express or implied, collateral, statutory or otherwise, among the Parties in connection with the subject matter of this Agreement and the Subscription Agreement, and the other Transaction Agreements contemplated hereby and thereby, except as specifically set forth herein and therein. The Parties have not relied and are not relying on any other information, discussion or understanding in entering into and completing the transactions contemplated by this Agreement.
Section 10.15 Successors and Assigns.
| (1) | This Agreement becomes effective only when executed by the Parties. After that time, it is binding on and enures to the benefit of the Parties and their respective successors and permitted assigns, as applicable. |
| (2) | Neither this Agreement, nor any of the rights or obligations hereunder, may be assigned or transferred, in whole or in part, by either Party without the prior written consent of the other Party; provided, that the Security Holder may assign this Agreement, or any of its rights and/or obligations hereunder, to any of its Affiliates; provided further, that the Security Holder shall remain responsible for the covenants, agreements and obligations of the Security Holder under this Agreement notwithstanding any such assignment. |
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Section 10.16 Third Party Beneficiaries.
Except as expressly provided in this Agreement (including Article 7), the Parties intend that: (1) this Agreement will not benefit or create any right or cause of action in favour of any Person other than (a) the BAT Group Permitted Holders, and (b) the Company; and (2) no Person other than the BAT Group Permitted Holders, on the one hand, and the Company, on the other hand, shall be entitled to rely on the provisions of this Agreement in any action, suit, proceeding, hearing or other forum. The Parties reserve their right to vary or rescind the rights granted by or under this Agreement to any Person that is not a Party, at any time and in any way whatsoever, without notice to or consent of that Person.
Section 10.17 Amendments.
This Agreement may only be amended, supplemented or otherwise modified by written agreement signed by both Parties.
Section 10.18 Waiver.
No waiver of any of the provisions of this Agreement will constitute a waiver of any other provision (whether or not similar). No waiver will be binding unless executed in writing by the Party to be bound by the waiver. A Party’s failure or delay in exercising any right under this Agreement will not operate as a waiver of that right. A single or partial exercise of any right will not preclude a Party from any other or further exercise of that right or the exercise of any other right.
Section 10.19 Injunctive Relief.
The Parties agree that irreparable harm would occur for which money damages alone would not be an adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, the Parties agree that, in the event of any breach or threatened breach of this Agreement by a Party, the non-breaching Party will be entitled, without the requirement of posting a bond or other security, to equitable relief, including injunctive relief and specific performance, and the Parties shall not object to the granting of injunctive or other equitable relief on the basis that there exists an adequate remedy at law. Such remedies will not be the exclusive remedies for any breach of this Agreement but will be in addition to all other remedies available at law or equity to each of the Parties.
Section 10.20 Further Assurances.
Each Party shall promptly do, make, execute, deliver, or cause to be done, made, executed or delivered, all such further acts, documents and things as the other Party may reasonably require from time to time for the purpose of giving effect to this Agreement, and the transactions contemplated hereby, and shall use commercially reasonable efforts, and take all such steps as may be reasonably within its power, to implement to their full extent the provisions of this Agreement in accordance with the terms hereof.
Section 10.21 Counterparts.
This Agreement may be executed (including by electronic means) in any number of counterparts, each of which (including any electronic transmission of an executed signature page), is deemed to be an original, and such counterparts together constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be on the date first above written.
| CHARLOTTE’S WEB HOLDINGS, INC. | |||
| By: | /s/ Jacques Tortoroli | ||
| Name: Jacques Tortoroli | |||
| Title: Chief Executive Officer | |||
| BT DE INVESTMENTS INC. | |||
| By: | /s/ Valerie Solomon | ||
| Name: Valerie Solomon | |||
| Title: Director | |||
Schedule A
Registration Rights Procedures
1.1 Registration Procedures.
| (1) | In connection with the Demand Registration and Piggyback Registration obligations pursuant to the Agreement, the Company will use commercially reasonable efforts in accordance with the Agreement to effect the qualification for the offer and sale or other disposition or Prospectus Distribution of Registrable Securities of the BAT Permitted Group Holders in one or more Canadian jurisdictions as directed by the BAT Permitted Group Holders, and in pursuance thereof the Company will as expeditiously as possible: |
| (a) | to the extent not already prepared and filed, prepare and file in the English language and, if required, French language, with the Canadian Securities Regulators a Prospectus in compliance with Securities Laws, relating to the Demand Registration or Piggyback Registration, as applicable, including all exhibits, financial statements and such other related documents required by the Canadian Securities Regulators to be filed therewith, and use its commercially reasonable efforts to cause the applicable Canadian Securities Regulator or Canadian Securities Regulators to issue a receipt for such Prospectus, if applicable; and the Company will furnish to the Participating Shareholders and the lead underwriter or underwriters, if any, copies of such Prospectus and any amendments or supplements thereto in the form filed with the Canadian Securities Regulators, promptly after the filing of such Prospectus and any amendment or supplement thereto; |
| (b) | prepare and file with the Canadian Securities Regulators such amendments or supplements to the Prospectus as may be necessary to complete the Prospectus Distribution of all such Registrable Securities and as required under the Securities Act or under any applicable provisions of Securities Laws; |
| (c) | notify the Participating Shareholders and the lead underwriter or underwriters, if any, and (if requested) confirm such advice in writing, as soon as practicable after notice thereof is received by the Company: (i) when the Prospectus or any amendment or supplement thereto has been filed or a receipt has been issued, and furnish to the Participating Shareholders and lead underwriter or underwriters, if any, with copies thereof; (ii) of any request by the Canadian Securities Regulators for amendments to the Prospectus or for additional information; (iii) of the issuance by the Canadian Securities Regulators of any stop order or cease trade order relating to the Prospectus or any order preventing or suspending the use of any Prospectus or the initiation or threatening of any proceedings for such purposes; and (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for offering or sale in jurisdiction or the initiation or threatening of any proceeding for such purpose; |
| (d) | promptly notify the Participating Shareholders and the lead underwriter or underwriters, if any, when the Company becomes aware of the happening of any event as a result of which the Prospectus contains any untrue statement of a material fact or omits to state a material fact necessary to make the statement therein (in the case of the Prospectus in light of the circumstances under which they were made) when such Prospectus was delivered not misleading, fails to constitute full, true and plain disclosure of all material facts regarding the Registrable Securities when such Prospectus was delivered or if for any other reason it will be necessary during such time period to amend the Prospectus in order to comply with Securities Laws and, in either case as promptly as practicable, prepare and file with the Canadian Securities Regulators, and furnish to the Participating Shareholders and the managing underwriters or underwriters, if any, a supplement or amendment to such Prospectus which will correct such statement or omission or effect such compliance; |
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| (e) | use commercially reasonable efforts to obtain the withdrawal of any stop order, cease trade order or other order against the Company or affecting the securities of the Company suspending the use of any Prospectus or suspending the qualification of any Registrable Securities covered by the Prospectus, or the initiation or the threatening of any proceedings for such purposes; |
| (f) | furnish to the Participating Shareholders and each lead underwriter or underwriters, if any, without charge, one executed copy and as many conformed copies as they may reasonably request, of the Prospectus, including financial statements and schedules and all documents incorporated therein by reference, and provide the Participating Shareholders and their respective counsel with a reasonable opportunity to review and provide comments to the Company on the Prospectus; |
| (g) | deliver to the Participating Shareholders and the underwriters, if any, without charge, as many commercial copies of the Prospectus and any amendment or supplement thereto as such Persons may reasonably request (it being understood that the Company consents to the use of the Prospectus or any amendment or supplement thereto by each of the Participating Shareholders and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto) and such other documents as the Participating Shareholders may reasonably request in order to facilitate the disposition of the Registrable Securities by such Person; |
| (h) | on or prior to the date on which a receipt is issued for the Prospectus by the applicable Canadian Securities Regulators, use commercially reasonable efforts to qualify, and cooperate with the Participating Shareholders, the lead underwriter or underwriters, if any, and their respective counsel in connection with the qualification of, such Registrable Securities for offer and sale under the Securities Laws of each Qualifying Jurisdiction, as any such Person or underwriter reasonably requests in writing provided that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process in any such jurisdiction where it is not then so subject; |
| (i) | in connection with any underwritten offering enter into customary agreements, including an underwriting or agency agreement with the underwriter or underwriters, such agreements to contain such representations and warranties by the Company and such other terms and provisions as are customarily contained in underwriting or agency agreements, as applicable, with respect to secondary distributions and indemnification provisions and/or agreements substantially consistent with Article 5 of the Agreement, but in any event, which agreements will contain provisions for the indemnification by the underwriter or underwriters in favour of the Company with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Prospectus included in reliance upon and in conformity with written information furnished to the Company by any underwriter in writing; |
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| (j) | as promptly as practicable after filing with the Canadian Securities Regulators any document which is incorporated by reference into the Prospectus, provide copies of such document to the Participating Shareholders and their respective counsel and to the lead underwriter or underwriters, if any; |
| (k) | file, and to not withdraw, a notice declaring its intention to be qualified to file a short form prospectus as soon as permitted by Securities Laws; |
| (l) | use its commercially reasonable efforts to obtain a customary legal opinion, in the form and substance as is customarily given by external company counsel in securities offerings, addressed to the Participating Shareholders and the underwriters, if any, and such other Persons as the underwriting agreement may reasonably specify, and a customary “comfort letter” from the Company’s auditor and/or the auditors of any financial statements included or incorporated by reference in a Prospectus; |
| (m) | furnish to the Participating Shareholders and the lead underwriter or underwriters, if any, and such other Persons as the Participating Shareholders may reasonably specify, such corporate certificates, satisfactory to the Participating Shareholders acting reasonably, as are customarily furnished in securities offerings, and, in each case, covering substantially the same matters as are customarily covered in such documents in the relevant jurisdictions and such other matters as the Participating Shareholders may reasonably request; |
| (n) | provide and cause to be maintained a transfer agent and registrar for such Common Shares not later than the date a receipt is issued for the final Prospectus by the applicable Canadian Securities Regulators and use its best efforts to cause all Common Shares covered by the Prospectus to be listed on each securities exchange or automated quotation system on which similar securities issued by the Company are then listed; |
| (o) | participate in such marketing efforts as the Participating Shareholders or lead underwriter or underwriters, if any, determine are reasonably necessary, such as “roadshows”, institutional investor meetings and similar events; |
| (p) | take such other actions and execute and deliver such other documents as may be reasonably necessary to give full effect to the rights of each Participating Shareholder under the Agreement; and |
| (q) | take no direct or indirect action prohibited by OSC Rule 48-501 - Trading during Distributions, Formal Bids and Share Exchange Transactions; provided, that, to the extent that any prohibition is applicable to the Company, the Company will take all reasonable action to make any such prohibition inapplicable. |
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1.2. Participating Shareholders’ Obligations.
| (1) | The Company may require the Participating Shareholders to furnish to the Company such information regarding the Prospectus Distribution of such Registrable Securities and such other information relating to the Participating Shareholders and their respective beneficial ownership of Common Shares as the Company may from time to time reasonably request in writing in order to comply with Securities Laws in each jurisdiction in which a Demand Registration or Piggyback Registration, as applicable, is to be effected. The Participating Shareholders agree to furnish such information to the Company and to cooperate with the Company as necessary to enable the Company to comply with the provisions of the Agreement and Securities Laws. The Participating Shareholders will promptly notify the Company when a Participating Shareholder becomes aware of the happening of any event (insofar as it relates to such Participating Shareholder or information provided by such Participating Shareholder in writing for inclusion in the applicable Prospectus) as a result of which the Prospectus contains any untrue statement of a material fact or omits to state a material fact necessary to make the statement therein (in the case of the Prospectus in light of the circumstances under which they were made) when such Prospectus was delivered not misleading or, if for any other reason it will be necessary during such time period to amend or supplement the Prospectus in order to comply with Securities Laws. |
| (2) | Each Participating Shareholder, if requested by the underwriter or underwriters of such Prospectus Distribution, if any, agrees to become bound by and to execute and deliver a lock-up agreement restricting such Participating Shareholder’s right, for a period of time not to exceed 90 days, to: (a) transfer, directly or indirectly, any Common Shares or any securities convertible into or exercisable or exchangeable for such Common Shares; or (b) enter into any swap or other arrangement that transfers to another any of the economic consequences of beneficially ownership of Common Shares. Notwithstanding the foregoing, such lock-up agreement shall not apply to: (i) transfers to an Affiliate; provided, however, that in any such case, it shall be a condition to the transfer that such transferee execute an agreement stating that the transferee is receiving and holding such Common Shares subject to the provisions of the lock-up agreement; (ii) conversions of Common Shares into other classes of shares without change of beneficial ownership; (iii) transactions relating to Registrable Securities in open market transactions after the date hereof; or (iv) any Registrable Securities sold pursuant to a Prospectus for such Prospectus Distribution. |
| (3) | In addition, the Participating Shareholders shall, if required under Securities Laws, execute any certificate forming part of a Prospectus to be filed with the applicable Canadian Securities Regulators. |
| (4) | In connection with any underwritten offering in connection with a Demand Registration or Piggyback Registration, as applicable, the Participating Shareholder shall enter into customary agreements, including an underwriting or agency agreement with the lead underwriter or underwriters, such agreements to contain such representations and warranties by the Participating Shareholder and such other terms and provisions as are customarily contained in underwriting or agency agreements, as applicable, with respect to secondary distributions and indemnification provisions and/or agreements substantially consistent with Article 7, but in any event, which agreements will contain provisions for the indemnification by the underwriter or underwriters in favour of the Participating Shareholder with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Prospectus included in reliance upon and in conformity with written information furnished to the Company by the underwriter in writing. |
Schedule B
Competitors of the Company
[* * * ]
[***] Indicates material that has been excluded from this Exhibit 10.3 because it is private or confidential and not material.
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Schedule C
Competitors of the Security Holder
[* * *]
[***] Indicates material that has been excluded from this Exhibit 10.2 because it is private or confidential and not material.