SNDL Inc 6-K, filed Aug 31, 2022
SNDL Inc. (SNDL)
About this 6-K
SNDL Inc filed this 6-K on August 31, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the month of August 2022
Commission File Number 001-39005
SNDL INC.
(Registrant’s name)
#300, 919 - 11 Avenue SW
Calgary, AB T2R 1P3
Tel.: (403) 948-5227
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
INCORPORATION BY REFERENCE
This report on Form 6-K shall be deemed to be incorporated by reference in SNDL Inc.’s registration statements on Form F-3 (File No. 333-253169 and File No. 333-253813) and Form S-8 (File No. 333-233156 and File No. 333-262233) and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished.
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.
| SNDL INC. | ||||||
| Date: August 31, 2022 | By: | /s/ Jim Keough | ||||
| Name: | Jim Keough | |||||
| Title: | Chief Financial Officer | |||||
EXHIBIT
Exhibit 99.1
FORM 51-102F3
MATERIAL CHANGE REPORT
| ITEM 1 | Name and Address of Company | |
| SNDL Inc. (“SNDL” or the “Purchaser”) 919 – 11 Avenue SW, Suite 300 Calgary, AB T2R 1P3 | ||
| ITEM 2 | Date of Material Change | |
| August 22, 2022 | ||
| ITEM 3 | News Release | |
| A press release was issued and disseminated through Cision Newswire on August 22, 2022. The press release was subsequently filed on SNDL’s SEDAR profile at www.sedar.com. | ||
| ITEM 4 | Summary of Material Change | |
| On August 22, 2022, SNDL announced that it entered into an arrangement agreement (the “Arrangement Agreement”) with The Valens Company Inc. (“Valens” or the “Company”, and together with SNDL, the “Parties”) pursuant to which SNDL has agreed to acquire all of the issued and outstanding common shares in the capital of the Company (“Company Shares”), other than those owned by SNDL or any of its subsidiaries, by way of a statutory plan of arrangement under section 192 of the Canada Business Corporations Act (the “Arrangement”). The Arrangement Agreement provides that, pursuant to the Arrangement, holders of Company Shares (“Company Shareholders”), other than SNDL or any of its subsidiaries that hold Company Shares, will receive, in exchange for each Company Share held, 0.3334 common shares of SNDL (“Purchaser Shares”), representing an implied value of $1.26 per Company Share and total consideration of approximately $138 million (the “Purchase Price”). The Arrangement is expected to be completed in January 2023. | ||
| Concurrent with the signing of the Arrangement Agreement, Valens’ existing secured non-revolving term loan (the “Term Loan”) was assigned from 2361380 Ontario Limited (the “Original Lender”) to the Purchaser and its terms were amended pursuant to an amended and restated credit agreement between the Purchaser and the Company (the “Amended and Restated Credit Agreement”). Pursuant to the Amended and Restated Credit Agreement, the Term Loan was refinanced and upsized with an additional $14.3 million of incremental capital net of debt repayment fees, increasing the principal amount of the Term Loan to $60 million. | ||
| ITEM 5.1 | Full Description of Material Change | |
| The following description is a summary of the Arrangement Agreement and the Amended and Restated Credit Agreement and is subject to and qualified in its entirety by the full text of the Arrangement Agreement and the Amended and Restated Credit Agreement, which are available on SNDL’s SEDAR profile at www.sedar.com. | ||
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| The Arrangement | ||
| On August 22, 2022, the Purchaser and the Company entered into the Arrangement Agreement. The Arrangement Agreement provides that the Purchaser will acquire all of the issued and outstanding Company Shares under the Arrangement, pursuant to which Company Shareholders (other than SNDL and its subsidiaries that own Company Shares) will receive, in exchange for each Company Share held, 0.3334 (the “Exchange Ratio”) Purchaser Shares (the “Consideration”). | ||
| Pursuant to the Arrangement, existing stock options of the Company entitling the holder thereof to receive Company Shares (“Company Options”) will be exchanged for an option (a “Replacement Option”) to purchase from the Purchaser the number of Purchaser Shares of the Purchaser (rounded down to the nearest whole number) equal to: (A) the Exchange Ratio multiplied by: (B) the number of Company Shares subject to such Company Option, at an exercise price per Purchaser Share (rounded up to the nearest whole cent) equal to: (C) the exercise price per Company Share otherwise purchasable pursuant to such Company Option, divided by (D) the Exchange Ratio, exercisable until the original expiry date of such Company Option, as applicable. | ||
| The Arrangement also provides that holders of each outstanding warrant to purchase Company Shares (“Company Warrants”), shall be entitled to receive upon the exercise of such holder’s Company Warrant, in lieu of Company Shares to which such holder was theretofore entitled upon such exercise, and for the same aggregate consideration payable therefor, the Consideration which the holder would have been entitled to receive as a result of the Arrangement if, immediately prior to the Arrangement, such holder had been the registered holder of the number of Company Shares to which such holder would have been entitled if they had exercised their Company Warrants immediately prior to the Arrangement. | ||
| The Arrangement is subject to certain customary conditions as summarized below; however, reference should be made to the full text of the Arrangement Agreement. The Arrangement is expected to be completed in January 2023, and in any event prior to the Outside Date (as defined below). | ||
| Assuming the Arrangement is completed, the Company will become a wholly-owned subsidiary of the Purchaser and the Company Shares will be de-listed from the Toronto Stock Exchange (“TSX”) and the Nasdaq Capital Market (“NASDAQ”). | ||
| Conditions to Completion of the Arrangement | ||
| To be effective, the Arrangement must be approved by: (i) not less than two-thirds of the votes cast in respect of the special resolution to approve the Arrangement, substantially in the form set out in Schedule B to the Arrangement Agreement (the “Arrangement Resolution”), by Company Shareholders present in person or represented by proxy at the special | ||
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| meeting of the Company Shareholders, which is expected to be held on or about November 30, 2022, to consider the Arrangement (the “Company Meeting”); and (ii) if required under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”), a simple majority of the votes cast on the Arrangement Resolution by the Company Shareholders (other than those the votes of which are required to be excluded from the “minority approval” vote under MI 61-101) present in person or represented by proxy at the Company Meeting. | ||
| The Arrangement is also subject to certain other conditions, including, among others: (i) the receipt of an Interim Order and Final Order from the Ontario Superior Court of Justice (Commercial List) (the “Court”); (ii) the receipt of all regulatory approvals (including, without limitation, the approval under the Competition Act (Canada) and the applicable provincial liquor and cannabis regulators necessary to complete the Arrangement) (the “Regulatory Approvals”); (iii) approval of the listing on the NASDAQ of the Purchaser Shares to be issued to Company Shareholders as consideration pursuant to the Arrangement; (iv) Company Shareholders shall not have validly exercised their dissent rights in connection with the Arrangement with respect to more than 10% of the outstanding Company Shares; (v) no law binding or applicable to the Parties or the Arrangement shall have been enacted, issued, promulgated, enforced, made, entered, issued or applied and no proceeding will otherwise have been taken by any governmental entity that makes the Arrangement illegal or otherwise cease trades, enjoins, restrains or otherwise prohibits completion of the Arrangement; and (vi) certain other customary conditions. | ||
| Representations, Warranties and Covenants | ||
| The Arrangement Agreement contains customary representations and warranties made by each of the Company and the Purchaser and also contains customary covenants, including among others, agreements in respect of business conduct during the period between the execution of the Arrangement Agreement and the closing date of the Arrangement, to maintain applicable material contracts and to not engage in certain kinds of transactions or take certain actions during this period unless consented to in writing by the other party or as permitted under the Arrangement Agreement. | ||
| In addition, subject to the terms and conditions of the Arrangement Agreement, the Parties have agreed to use commercially reasonable efforts to obtain and maintain the Regulatory Approvals so as to enable the closing of the Arrangement to occur as soon as reasonably practicable and in any event no later than February 28, 2023, or such later date as may be agreed to in writing by the Parties (the “Outside Date). | ||
| Non-Solicitation and Termination Fee | ||
| The Arrangement Agreement provides for, among other things, customary support and non-solicitation covenants from the Company, including customary “fiduciary out” provisions that allow the Company to accept a Superior Proposal (as defined in the Arrangement Agreement) in certain circumstances and subject to a five business day “right to match period” in | ||
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| favour of the Purchaser. The Arrangement Agreement may be terminated prior to the completion of the Arrangement by one or both of the Parties for various customary reasons. The Arrangement Agreement also provides for the payment of a termination fee of $8 million payable by the Company in the event the Arrangement is terminated in certain specified circumstances. If the Arrangement Agreement is terminated or otherwise not completed under certain specified circumstances, the Company has agreed to pay the Purchaser reasonable documented out-of-pocket costs and expenses in connection with the Arrangement. | ||
| Approval by Valens’ Board of Directors | ||
| Valens’ board of directors has unanimously approved the Arrangement after receiving the unanimous recommendation of a special committee of independent directors of Valens (the “Special Committee”) to approve the Arrangement. Valens’ board of directors has unanimously resolved to recommend that Company Shareholders vote in favour of the Arrangement. | ||
| Fairness Opinion | ||
| Cormark Securities Inc. has provided a fairness opinion to the Special Committee of Valens that, subject to the assumptions, limitations and qualifications set out in such fairness opinion, the consideration to be received by Company Shareholders pursuant to the Arrangement is fair, from a financial point of view, to Company Shareholders. | ||
| Voting Support Agreements | ||
| All directors and executive officers of Valens (the “Supporting Shareholders”) have entered into voting support agreements (the “Support Agreements”) with SNDL pursuant to which, among other things, the Supporting Shareholders thereto have agreed to vote their Company Shares in favour of the Arrangement. | ||
| The description of the Support Agreements above is subject to and qualified in its entirety by the full text of the form of Support Agreement, which is available under SNDL’s SEDAR profile at www.sedar.com. | ||
| Shareholder Meeting | ||
| A full description of the Arrangement will be set forth in the management information circular of the Company, which will be mailed to Company Shareholders in connection with the Company Meeting. The Company Meeting is expected to be held on or about November 30, 2022. The Arrangement is expected to be completed in January 2023. | ||
| The Amended and Restated Credit Agreement | ||
| Concurrent with the signing of the Arrangement Agreement, Valens’ existing Term Loan with the Original Lender initially advanced under a credit agreement dated December 15, 2021 between the Original Lender and Valens, was assigned to the Purchaser and is terms were amended pursuant | ||
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| to the Amended and Restated Credit Agreement among the Purchaser and Valens. Pursuant to the Amended and Restated Credit Agreement and among certain other changes, the Term Loan was refinanced and upsized with an additional $14.3 million of incremental capital net of debt repayment fees, increasing the principal amount of the Term Loan to $60 million. Subject to the Arrangement Agreement and its terms, in the event the Company or a Subsidiary of the Company enters into a Superior Proposal Agreement (as defined in the Arrangement Agreement), the Company may cause the Purchaser to assign the Amended and Restated Credit Agreement to the Superior Proposal Agreement counter-party, with such counter-party’s consent (the “Debt Assignment”), provided that, such Debt Assignment shall be conditional upon the payment in full by the Superior Proposal counter-party to the Purchaser of all amounts owing under the Amended and Restated Credit Agreement. | ||
| The description of the Amended and Restated Credit Agreement above is subject to and qualified in its entirety by the full text of the Amended and Restated Credit Agreement, which is available under SNDL’s SEDAR profile at www.sedar.com. | ||
| ITEM 5.2 | Disclosure for Restructuring Transactions | |
| N/A. | ||
| ITEM 6 | Reliance on subsection 7.1(2) of National Instrument 51-102 | |
| Not applicable. | ||
| ITEM 7 | Omitted Information | |
| None. | ||
| ITEM 8 | Executive Officer | |
| For further information, contact Sophie Pilon, Director, Investor Relations and Communications, by telephone at 1-587-327-2017 or 1-403-815-7340, or by email at spilon@sndl.com. | ||
| ITEM 9 | Date of Report | |
| August 31, 2022 | ||
Forward-Looking Statements
This material change report includes “forward-looking information” within the meaning of applicable securities laws. Forward-looking information is typically, but not always, identified by the use of words such as “will”, “expected”, “projected”, “to be” and similar words, including negatives thereof, or other similar expressions concerning matters that are not historical facts. Forward-looking information in this material change report includes, but is not limited to, statements regarding: the completion of the Arrangement on the current terms thereof; the expected date of the Company Meeting and the anticipated receipt of required approvals of the Company Shareholders, the anticipated receipt of any Regulatory Approval, court approval, stock exchange (including NASDAQ) or other approvals; the ability of the Parties to satisfy the other conditions to the closing of the Arrangement; the expected time of completion of the Arrangement; the de-listing of the Company Shares from the TSX and NASDAQ; and the market value of the consideration to be received by the Company Shareholders.
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Such forward-looking information is based on various assumptions and factors that may prove to be incorrect, including, but not limited to, factors and assumptions with respect to: the Arrangement being completed on the timelines and on the terms currently anticipated or at all; all necessary Company Shareholder, Court, stock exchange and regulatory approvals being obtained on the timelines and in the manner currently anticipated; the anticipated benefits of the Arrangement; the business and operations of both SNDL and Valens, including that each business will continue to operate in a manner consistent with past practice and pursuant to certain industry and market conditions; the ability of Valens to successfully implement its strategic plans and initiatives and whether such strategic plans and initiatives will yield the expected benefits; and the receipt by Valens of necessary retail liquor and retail cannabis licenses, approvals and authorizations (as applicable) from regulatory authorities, and the timing thereof.
The Purchaser cautions that all forward-looking information is inherently subject to change and uncertainty and that actual results may differ materially from those expressed or implied by the forward-looking information. Actual results could differ materially from those currently anticipated due to a number of factors and risks including, but not limited to: the risk that the Arrangement is not completed as anticipated or at all, including the timing thereof, and if completed, that the benefits thereof will not be as anticipated; the risk that necessary Company Shareholder, Court, stock exchange or regulatory approvals are not obtained as anticipated or at all, and the timing thereof; the risk that the conditions to closing of the Arrangement are not satisfied or waived; risks associated with general economic conditions; adverse industry events; future legislative, tax and regulatory developments, including developments that may impact the completion of the Arrangement as anticipated or at all; conditions in the liquor and cannabis industries; the risk that Valens does not receive the necessary retail liquor or cannabis approvals and/or authorizations; the ability of management to execute its business strategy, objectives and plans; the availability of capital to fund the build-out and opening of additional retail liquor or cannabis stores; and the impact of general economic conditions and the COVID-19 pandemic in Canada; risks inherent in the liquor retail and cannabis industries; as well as other factors described under the heading “Risk Factors” in Valens’ annual information form for the year ended November 30, 2021 and under the heading “ Item 3D Risk Factors” in SNDL’s annual report on form 20-F for the year ended December 31, 2021, each of which are located on SEDAR. In addition, if the Arrangement is not completed, and the Parties continue as independent entities, there are risks that the announcement of the Arrangement and the dedication of substantial resources of each of the Parties to the completion of the Arrangement could have an impact on either of the Parties’ business relationships, and could have a material adverse effect on the current and future operations, financial conditions and prospects of either of the Parties. Readers are cautioned that this list of risk factors should not be construed as exhaustive. Accordingly, the Purchaser warns readers to exercise caution when considering statements containing forward-looking information and that it would be unreasonable to rely on such statements as creating legal rights regarding our future results or plans. The Purchaser cannot guarantee that any forward-looking information will materialize and readers are cautioned not to place undue reliance on this forward-looking information. Any forward-looking information contained in this material change report represent expectations as of the date of this material change report and are subject to change after such date. However, the Purchaser is under no obligation (and the Purchaser expressly disclaims any such obligation) to update or alter any statements containing forward-looking information, the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law. All of the forward-looking information in this material change report is qualified by the cautionary statements herein.
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Exhibit 99.2
SNDL INC.
and
THE VALENS COMPANY INC.
ARRANGEMENT AGREEMENT
August 22, 2022
TABLE OF CONTENTS
| Article 1 INTERPRETATION |
4 | |||||
| Section 1.1 |
Defined Terms | 4 | ||||
| Section 1.2 |
Certain Rules of Interpretation | 19 | ||||
| Article 2 THE ARRANGEMENT AND COMPANY MEETING |
20 | |||||
| Section 2.1 |
Arrangement | 20 | ||||
| Section 2.2 |
Interim Order | 20 | ||||
| Section 2.3 |
The Company Meeting | 21 | ||||
| Section 2.4 |
The Company Circular | 23 | ||||
| Section 2.5 |
Final Order | 24 | ||||
| Section 2.6 |
Court Proceedings | 24 | ||||
| Section 2.7 |
Articles of Arrangement and Effective Date | 24 | ||||
| Section 2.8 |
Payment of Consideration | 25 | ||||
| Section 2.9 |
Adjustments to Consideration | 25 | ||||
| Section 2.10 |
Amendments to Company RSUs and Company DSUs | 25 | ||||
| Section 2.11 |
Company Incentive Securities | 25 | ||||
| Section 2.12 |
Withholding Taxes | 26 | ||||
| Section 2.13 |
Post-Effective Time Dividends and Distributions | 26 | ||||
| Section 2.14 |
Applicable U.S. Securities Laws | 26 | ||||
| Section 2.15 |
U.S. Tax Matters | 28 | ||||
| Section 2.16 |
List of Company Shareholders | 28 | ||||
| Section 2.17 |
Termination of Letter of Intent | 28 | ||||
| Article 3 REPRESENTATIONS AND WARRANTIES |
29 | |||||
| Section 3.1 |
Representations and Warranties of the Company | 29 | ||||
| Section 3.2 |
Representations and Warranties of the Purchaser | 29 | ||||
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| Article 4 COVENANTS |
29 | |||||
| Section 4.1 |
Conduct of Business of the Company | 29 | ||||
| Section 4.2 |
Interim Period Consents | 33 | ||||
| Section 4.3 |
Conduct of Business of the Purchaser | 33 | ||||
| Section 4.4 |
Covenants Relating to the Arrangement | 33 | ||||
| Section 4.5 |
Regulatory Approvals | 34 | ||||
| Section 4.6 |
Access to Information; Confidentiality | 36 | ||||
| Section 4.7 |
Public Communications | 36 | ||||
| Section 4.8 |
Notice and Cure Provisions | 37 | ||||
| Section 4.9 |
Insurance and Indemnification | 37 | ||||
| Section 4.10 |
Stock Exchange Delistings | 38 | ||||
| Section 4.11 |
Amended and Restated Credit Agreement | 38 | ||||
| Article 5 ADDITIONAL COVENANTS REGARDING NON-SOLICITATION |
39 | |||||
| Section 5.1 |
Non-Solicitation | 39 | ||||
| Section 5.2 |
Notification of Acquisition Proposals | 40 | ||||
| Section 5.3 |
Responding to an Acquisition Proposal | 40 | ||||
| Section 5.4 |
Right to Match | 41 | ||||
| Article 6 CONDITIONS |
42 | |||||
| Section 6.1 |
Mutual Conditions Precedent | 42 | ||||
| Section 6.2 |
Additional Conditions Precedent to the Obligations of the Purchaser | 43 | ||||
| Section 6.3 |
Additional Conditions Precedent to the Obligations of the Company | 44 | ||||
| Section 6.4 |
Satisfaction of Conditions | 44 | ||||
| Article 7 TERM AND TERMINATION |
45 | |||||
| Section 7.1 |
Term | 45 | ||||
| Section 7.2 |
Termination | 45 | ||||
| Section 7.3 |
Effect of Termination/Survival | 46 | ||||
| Section 7.4 |
Assignment of Amended and Restated Credit Agreement | 47 | ||||
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| Article 8 GENERAL PROVISIONS |
47 | |||||
| Section 8.1 |
Amendments | 47 | ||||
| Section 8.2 |
Termination Amount | 47 | ||||
| Section 8.3 |
Expenses | 49 | ||||
| Section 8.4 |
Acknowledgment | 49 | ||||
| Section 8.5 |
Notices | 49 | ||||
| Section 8.6 |
Time of the Essence | 50 | ||||
| Section 8.7 |
Injunctive Relief | 50 | ||||
| Section 8.8 |
Third Party Beneficiaries | 51 | ||||
| Section 8.9 |
Waiver | 51 | ||||
| Section 8.10 |
Entire Agreement | 51 | ||||
| Section 8.11 |
Successors and Assigns | 51 | ||||
| Section 8.12 |
Severability | 51 | ||||
| Section 8.13 |
Governing Law | 52 | ||||
| Section 8.14 |
Rules of Construction | 52 | ||||
| Section 8.15 |
No Liability | 52 | ||||
| Section 8.16 |
Counterparts | 52 | ||||
SCHEDULES
| SCHEDULE A | PLAN OF ARRANGEMENT | |
| SCHEDULE B | ARRANGEMENT RESOLUTION | |
| SCHEDULE C | REPRESENTATIONS AND WARRANTIES OF THE COMPANY | |
| SCHEDULE D | REPRESENTATIONS AND WARRANTIES OF THE PURCHASER |
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ARRANGEMENT AGREEMENT
THIS AGREEMENT is made as of August 22, 2022,
AMONG:
SNDL INC., a corporation existing under the laws of the Province of Alberta
(the “Purchaser”)
- and -
THE VALENS COMPANY INC., a corporation existing under the laws of Canada
(the “Company”, and together with the Purchaser, the “Parties”, and each is a “Party”)
NOW THEREFORE, in consideration of the covenants and agreements herein contained, the Parties agree as follows:
ARTICLE 1
INTERPRETATION
Section 1.1 Defined Terms
As used in this Agreement, the following terms have the following meanings:
“Acquisition Proposal” means, other than the transactions contemplated by this Agreement, any proposal, expression or indication of interest, inquiry or offer from, or public announcement of an intention by, any Person, or group of Persons “acting jointly or in concert” within the meaning of National Instrument 62-104 – Take-Over Bids and Issuer Bids, whether or not in writing and whether or not delivered to the Company, or the Company Shareholders or any other securityholder of the Company (including any take-over bid initiated by advertisement or circular) and whether or not subject to due diligence or other conditions, or whether in one transaction or a series of transactions, that relates to, or may reasonably be expected to relate to:
| (a) | any direct or indirect sale, issuance or acquisition of shares or other securities (or securities convertible or exercisable for shares or other securities) of the Company that, when taken together with the shares and other securities of the Company held by the proposed acquiror and any Person acting jointly or in concert with such acquiror, represent 20% or more of any class of equity or voting securities of the Company or rights or interests therein and thereto; |
| (b) | any direct or indirect acquisition or purchase of 20% or more of the assets (or any sale, disposition, joint venture, lease, long-term supply agreement, licence, royalty or other arrangement having the same economic effect) of the Company and the Company’s Subsidiaries taken as a whole (and, for greater certainty, assets shall include shares of the Company’s Subsidiaries); |
| (c) | an amalgamation, arrangement, plan of arrangement, scheme of arrangement, share exchange, merger, business combination, joint venture, consolidation, recapitalization, liquidation, dissolution, winding-up, reorganization or other similar transaction involving the Company or any of its Subsidiaries; |
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| (d) | any take-over bid, tender offer, issuer bid, exchange offer or similar transaction involving the Company or any of its Subsidiaries; or |
| (e) | any transaction that would or could reasonably be expected to materially reduce the benefits to the other Party of the Arrangement or would or could reasonably be expected to impede, interfere with, prevent or delay the transactions contemplated by this Agreement or the Arrangement. |
“Affected Securityholders” means, collectively, the Company Shareholders, the Company Optionholders and the Company Warrantholders.
“affiliate” has the meaning ascribed thereto in National Instrument 45-106 – Prospectus Exemptions.
“Agreement” means this arrangement agreement, as it may be amended, modified or supplemented from time to time in accordance with the terms hereof.
“Amended and Restated Credit Agreement” means the non-revolving term loan between the Company, as borrower, and the Purchaser as lender, dated as of the date hereof, providing for secured debt financing of up to $63,000,000.
“Appurtenances” means with respect to any real property: (a) all buildings, structures, fixtures, improvements and appurtenances located on or forming part of that real property, including those under construction; and (b) all rights of way, licenses, rights of occupation easements or other similar rights appurtenant to and for the benefit of that real property.
“Arrangement” means the arrangement under Section 192 of the CBCA on the terms and subject to the conditions set out in the Plan of Arrangement, subject to any amendments or variations to the Plan of Arrangement made in accordance with the terms of this Agreement and the Plan of Arrangement or made at the direction of the Court in the Final Order with the prior written consent of the Company and the Purchaser, each acting reasonably.
“Arrangement Resolution” means the special resolution approving the Plan of Arrangement to be considered at the Company Meeting by Company Shareholders, substantially in the form set out in Schedule B.
“Articles of Arrangement” means the articles of arrangement of the Company to be filed in respect of the Arrangement required by subsection 192(6) of the CBCA to give effect to the Arrangement, such articles to be filed with the Director after the Final Order has been granted and all other conditions precedent to the Arrangement have been satisfied or waived in accordance with the terms of this Agreement, which shall include the Plan of Arrangement and the Final Order and otherwise be in a form and content satisfactory to the Company and the Purchaser, each acting reasonably.
“Australian Cannabis Licences” means all licences, certifications, permits and/or other authorizations issued by a Governmental Entity having competent jurisdiction within Australia in respect of cannabis, products containing cannabis and/or any activities related thereto, including but not limited to: (a) the license to import substances specified in Schedule 4 of the Customs (Prohibited Imports) Regulations 1956 (Australia) issued to Valens Australia Pty Ltd. on [Date Redacted], (b) the license to export substances specified in Schedule 8 of the Customs (Prohibited Exports) Regulations 1958 (Australia) issued to Valens Australia Pty Ltd. on [Date Redacted].
“Authorization” means with respect to any Person, any order, permit, approval, consent, waiver, licence or similar authorization of any Governmental Entity having jurisdiction over the Person, whether by expiry or termination of an applicable waiting period or otherwise, that is binding upon or applicable to such Person, or its business, assets or securities, including the Australian Cannabis Licences, the Canadian Cannabis Licences and the U.S. CBD Licences.
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“Award” means any judgment, decree, injunction, ruling, award, decision or order of any Governmental Entity.
“Board” means the board of directors of the Company as constituted from time to time.
“Board Recommendation” has the meaning ascribed thereto in Section 2.4(2).
“Books and Records” means books and records of the Company and its Subsidiaries, including books of account, Tax records, sales and purchase records, customer and supplier lists, technical documents including specifications, bills of materials and business reports, whether in written or electronic form.
“Breaching Party” has the meaning ascribed thereto in Section 4.8(3).
“Business Day” means any day of the year, other than a Saturday, Sunday or any day on which major banks are closed for business in Toronto, Ontario or Calgary, Alberta.
“Canadian Cannabis Licences” means (a) the standard processing and cultivation license issued to Valens Agritech Ltd. under the Cannabis Regulations (Canada) on [Date Redacted]; (b) the analytical testing licence issued to Valens Agritech Ltd. under the Cannabis Regulations (Canada) issued on [Date Redacted]; (c) the research licence issued to Valens Agritech Ltd. under the Cannabis Regulations (Canada) issued on [Date Redacted]; (d) the micro-processing licence issued to Southern Cliff Brands Inc. under the Cannabis Regulations (Canada) on [Date Redacted]; (e) the standard processing, cultivation and sale for medical purposes licence issued to Experion Biotechnologies Inc. under the Cannabis Regulations (Canada) on [Date Redacted]; and (f) the standard processing license issued to LYF Food Technologies Inc. under the Cannabis Regulations (Canada) on [Date Redacted].
“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, 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 but not limited to cannabis and marijuana, as defined pursuant to applicable Law, including the Cannabis Act (Canada).
“Cannabis Laws” means, collectively: (i) the Laws of Canada and each of the provinces and territories therein applicable to the production, manufacture, cultivation, importation, exportation, advertisement, marketing, promotion, sale and/or distribution of cannabis, cannabis products and/or related products, including, without limitation, the Cannabis Act (Canada), the Cannabis Regulations (Canada), the Industrial Hemp Regulations (Canada) and the Excise Act, 2001 (Canada); and (ii) the respective regulations and rules made and forms prescribed under such laws, together with all applicable and legally enforceable published policy statements, orders and rulings of the applicable Governmental Entity in each such jurisdiction.
“Cannabis Licences” means the Australian Cannabis Licences, the Canadian Cannabis Licences and the U.S. CBD Licences.
“cannabis product” has the meaning given to such term in the Cannabis Regulations (Canada).
“CASL” 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).
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“CBCA” means the Canada Business Corporations Act, as amended, together with the regulations promulgated thereunder.
“CBD” means cannabidiol, including but not limited to cannabidiol derived from hemp as defined by the United States Agriculture Improvement Act of 2018, Pub. L. 115-334 (the “U.S. Farm Bill”), codified at 7 U.S.C. 1639o and derived from industrial hemp as defined by the Industrial Hemp Regulations (Canada).
“Certificate of Arrangement” means the certificate of arrangement to be issued by the Director pursuant to subsection 192(7) of the CBCA in respect of the Articles of Arrangement.
“Change in Recommendation” has the meaning ascribed thereto in Section 7.2(1)(d)(ii).
“Closing” has the meaning ascribed thereto in Section 2.7(2).
“COBRA” means the United States Consolidated Omnibus Budget Reconciliation Act of 1985, as amended and as codified in Section 4980B of the U.S. Tax Code and Section 601 et seq. of ERISA.
“Commissioner” means the Commissioner of Competition appointed under the Competition Act or any Person duly authorized to perform duties on behalf of the Commissioner of Competition.
“Company” has the meaning ascribed thereto in the preamble hereto.
“Company Awardholder” means a holder of Company RSUs and/or Company DSUs.
“Company Circular” means the notice of the Company Meeting and accompanying management information circular, including all schedules, appendices and exhibits to, and information incorporated by reference in, such management information circular, to be sent to Company Shareholders in connection with the Company Meeting, as amended, supplemented or otherwise modified from time to time in accordance with the terms of this Agreement.
“Company Disclosure Letter” means the disclosure letter dated the date of this Agreement and all schedules, exhibits and appendices thereto, delivered by the Company to the Purchaser with this Agreement.
“Company DSUs” means the outstanding deferred share units of the Company issued pursuant to the Company Incentive Award Plan, each entitling the holder thereof to receive Company Shares or a certain cash amount, subject to the terms and conditions of the Company Incentive Award Plan.
“Company Employees” means the officers and employees of the Company and its Subsidiaries.
“Company Filings” means all documents publicly filed by or on behalf of the Company on SEDAR and/or EDGAR since January 1, 2020.
“Company Incentive Award Plan” means the Company’s omnibus long term incentive plan adopted by the Board on May 11, 2020 and approved by the Shareholders on June 12, 2020.
“Company IT Systems” means those computer systems, hardware, servers, databases, software, networks, platforms, telecommunications systems and related infrastructure and other related systems, including any outsourced systems or processes, used by or on behalf of the Company or any of its Subsidiaries in connection with the operation of their respective businesses.
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“Company Material Adverse Effect” means any change, event, occurrence, effect or circumstance that, individually or in the aggregate with other such changes, events, occurrences, effects or circumstances, is or would reasonably be expected to have a durationally significant impact that is material and adverse to the business, affairs, operations, financial condition or results of operations of the Company and its Subsidiaries, taken as a whole, or will, or would reasonably be expected to, prevent, materially delay or materially impair the ability of the Parties to consummate the transactions contemplated by this Agreement, except any such change, event, occurrence, effect or circumstance arising out of, relating to, resulting from or attributable to:
| (a) | any change, development or condition generally affecting any of the industries in jurisdictions in which the Company or any of its Subsidiaries operate; |
| (b) | any change, development or condition in or relating to global, national or regional political conditions (including strikes, lockouts, riots or facility takeover for emergency purposes) or in general political, economic, business, banking, regulatory, currency exchange, interest rate, rates of inflation or market conditions or in national, United States or global financial or capital markets; |
| (c) | any epidemic, pandemic or outbreaks of illness (provided that, in the case of the COVID-19 pandemic, any escalation of such COVID-19 pandemic from the date of this Agreement) or other health crisis or public health event; |
| (d) | any change, development or condition resulting from any act of sabotage or terrorism or any outbreak of hostilities or declared or undeclared war, or any escalation or worsening of such acts of sabotage, terrorism, hostilities or war; |
| (e) | any change in applicable generally accepted accounting principles, including IFRS, or changes in regulatory accounting requirements applicable to cannabis businesses, the cannabis industry and the business of manufacturing cannabis and cannabis products; |
| (f) | any earthquake, flood, climatic and other natural events or conditions (including drought, any other weather conditions) or other natural disaster; |
| (g) | any change in the price of cannabis (on a current or go forward basis); |
| (h) | any adoption, proposal, implementation or change in Law or any interpretation, application or non-application of any Laws by any Governmental Entity; |
| (i) | any action taken (or omitted to be taken) by the Company or any of its Subsidiaries which is required or expressly permitted to be taken (or omitted to be taken) pursuant to this Agreement or that is consented to or expressly requested by the Purchaser in writing; |
| (j) | any matter which has been disclosed by the Company in the Company Disclosure Letter or in the Company Filings prior to the date hereof; |
| (k) | the execution, announcement, pendency or performance of this Agreement or consummation of the Arrangement; |
| (l) | the failure of the Company to meet any internal, published or public projections, forecasts, guidance or estimates, including without limitation of revenues, earnings or other financial performance or cash flows (it being understood that the causes underlying such failure may be taken into account in determining whether a Company Material Adverse Effect has occurred, provided that such causes are not referred to in clauses (a)-(k) above); or |
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| (m) | any change in the market price or trading volume of any securities of the Company (it being understood that the causes underlying such change in market price or trading volume may be taken into account in determining whether a Company Material Adverse Effect has occurred, provided that such causes are not referred to in clauses (a)-(l) above), or any suspension of trading in securities generally on any securities exchange on which any securities of the Company trade; |
provided, however, (i) if an effect referred to in clauses (a) through to and including (f) above, has a materially disproportionate effect on the Company and its Subsidiaries, taken as a whole, relative to other comparable companies and entities operating in the industries in which the Company or any of its Subsidiaries operate, such effect may be taken into account in determining whether a Company Material Adverse Effect has occurred; and (ii) references in certain Sections of this Agreement to dollar amounts are not intended to be, and shall not be deemed to be, illustrative for purposes of determining whether a “Company Material Adverse Effect” has occurred.
“Company Meeting” means the special meeting of Company Shareholders, including any adjournment or postponement thereof in accordance with the terms of this Agreement, to be called and held in accordance with the Interim Order to consider the Arrangement Resolution and for any other purpose as may be set out in the Company Circular and agreed to in writing by the Purchaser, acting reasonably.
“Company Options” means the outstanding stock options of the Company granted pursuant to the Company Incentive Award Plan entitling the holder thereof to receive Company Shares, subject to the terms and conditions of the Company Incentive Award Plan.
“Company Optionholder” means a holder of Company Options and/or Legacy Options.
“Company PSUs” means the outstanding performance share units of the Company granted pursuant to the Company Incentive Award Plan entitling the holder thereof to receive Company Shares, subject to the terms and conditions of the Company Incentive Award Plan.
“Company RSUs” means the outstanding restricted award units of the Company granted pursuant to the Company Incentive Award Plan entitling the holder thereof to receive Company Shares, subject to the terms and conditions of the Company Incentive Award Plan.
“Company Share” means a common share in the capital of the Company.
“Company Shareholders” means the registered and/or beneficial holders of the Company Shares, as the context requires.
“Company Warrant Indenture” means a warrant indenture under which any of the outstanding Company Warrants were issued.
“Company Warrantholders” means a holder of Company Warrants.
“Company Warrants” means the outstanding warrants to purchase Company Shares, which, for greater certainty, includes all outstanding broker warrants entitling the holder thereof to purchase Company Shares.
“Company’s Constating Documents” means the articles of continuance and by-laws of the Company and all amendments to such articles or by-laws.
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“Competition Act” means the Competition Act (Canada).
“Competition Act Approval” means, with respect to the transactions contemplated by the Arrangement, (i) that the Commissioner shall have issued (and not rescinded or amended) to the Purchaser an advance ruling certificate under Section 102 of the Competition Act, or (ii) that (a) the waiting period under Section 123 of the Competition Act shall have expired or been terminated or the notification requirement shall have been waived pursuant to Section 113(c) of the Competition Act, and, unless such requirement is waived in writing by the Purchaser, (b) the Commissioner shall have issued (and not rescinded or amended) to the Purchaser a No Action Letter.
“Confidentiality Agreement” means the confidentiality agreement between the Company and the Purchaser dated June 28, 2022.
“Consideration” means, with respect to each Company Share, 0.3334 of a Purchaser Share issuable pursuant to the Plan of Arrangement.
“Consideration Shares” means the Purchaser Shares to be issued in connection with the Arrangement.
“Contract” means any legally binding agreement, commitment, engagement, contract, licence, lease, obligation, note, mortgage, indenture, franchise, arrangement, understanding, undertaking, joint venture, or other right or obligation (written or oral) to which a Party or any of its Subsidiaries is a party or by which a Party or any of its Subsidiaries is bound or affected or to which any of their respective properties or assets is subject, other than the Employee Plans.
“Court” means the Ontario Superior Court of Justice (Commercial List) located in Toronto, Ontario, or other court as applicable.
“Data Room” means the materials contained in the virtual data room established by the Company as at 2:00 p.m. (Toronto time) August 21, 2022.
“Depositary” means such Person as the Company may appoint to act as depositary in relation to the Arrangement, with the approval of the Purchaser, acting reasonably.
“Director” means the Director appointed pursuant to Section 260 of the CBCA.
“Dissent Rights” means the rights of dissent in respect of the Arrangement described in the Plan of Arrangement.
“EDGAR” means the SEC’s Electronic Data Gathering, Analysis, and Retrieval system.
“Effective Date” means the date shown on the Certificate of Arrangement giving effect to the Arrangement.
“Effective Time” has the meaning ascribed thereto in the Plan of Arrangement.
“Employee Plans” means each employee benefit plan, including, without limitation, any group health and welfare insurance (including medical, hospitalization, vision, prescription drug, accidental death and dismemberment, critical illness, emergency travel, life, short term disability, and long term disability coverage), mortgage insurance, employee loan, employee assistance, education assistance, automobile, housing, supplemental unemployment, post-employment, post-retirement, bonus, profit sharing, stock option, stock purchase, stock appreciation, incentive compensation, performance, equity, equity-based, phantom, deferred compensation, severance, termination pay or salary continuation (other than as required pursuant to applicable employment standards legislation), pension, supplemental pension, retirement, savings, supplemental
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retirement, change in control, material fringe benefit, paid time off, vacation or other similar plan, program, practice, policy, agreement, arrangement or undertaking (whether written or unwritten, funded or unfunded, registered or unregistered, insured or self-insured) in each case (i) that is established, administered, funded, contributed to or required to be contributed to by the Company or its Subsidiaries and/or ERISA Affiliates for the benefit of one or more current or former Company Employees or directors of the Company or its Subsidiaries (or the spouse, dependents, beneficiaries, or survivors of such Persons), or (ii) in respect of which the Company or its Subsidiaries have any actual or contingent liability or obligation, but, for the avoidance of doubt, shall not include (A) the Canada Pension Plan, Québec Pension Plan, Employment Insurance, Québec Parental Insurance Plan, or (B) any health, drug, or workers’ compensation plan established and administered by a Governmental Entity.
“Environmental Laws” means all Laws and agreements with Governmental Entities and all other statutory requirements relating to public health and safety, noise control, pollution, Hazardous Substances, remediation, reclamation or the protection of the environment, and all Authorizations issued pursuant to such Laws.
“ERISA” means the United States Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means any Person controlling, controlled by or under common control with the Company within the meaning of Section 414(b), (c), (m), or (o) of the U.S. Tax Code and the regulations issued thereunder.
“Expense Reimbursement” has the meaning ascribed thereto in Section 8.3.
“Fairness Opinion” means the opinion of Cormark Securities Inc. to the effect that, as of the date of this Agreement, the Consideration to be paid to the Company Shareholders, is fair, from a financial point of view, to such Company Shareholders.
“Final Order” means the order of the Court approving the Arrangement, as such order may be amended by the Court (with the consent of each of the Parties, acting reasonably) at any time prior to the Effective Date or as such order may be affirmed or amended on appeal (provided that any such amendment is satisfactory to each of the Parties, acting reasonably).
“Governmental Action” means, with respect to any Person, any litigation, legal action, lawsuit, claim, audit, investigation, hearing, contractual dispute resolution process or other proceeding (whether civil, administrative, contractual, quasi-criminal or criminal) before any Governmental Entity against or involving such Person or its business or affecting its assets.
“Governmental Entity” means (i) any international, multinational, national, federal, provincial, state, territorial, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, commissioner, board, bureau, minister, ministry, governor in council, cabinet, agency or instrumentality, domestic or foreign, (ii) any subdivision, agency, commission, board, agent or authority of any of the foregoing, (iii) any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing, (iv) any stock exchange or (v) any arbitration panel or arbitrator deciding or resolving contractual disputes or interpreting any provisions of a Contract.
“Green Roads Operations” means all operations of the business conducted within the United States of America by Green Roads, Inc. and each of its Subsidiaries.
“Hazardous Substance” means any substance that is defined or regulated under any Environmental Law as a hazardous substance, contaminant, toxic substance, hazardous waste, special waste, or pollutant.
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“IFRS” means generally accepted accounting principles as set out in the CPA Canada Handbook – Accounting for an entity that prepares its financial statements in accordance with International Financial Reporting Standards, at the relevant time, applied on a consistent basis.
“Intellectual Property” means any and all intellectual property and intellectual property rights which may exist under the Laws of any jurisdiction in the world, including: (i) trademarks, service marks, trade names, brand names, logos, trade dress and similar designations of source or origin (including any registrations or applications for registration, as well as common law rights in any of the foregoing), together with all goodwill related to the foregoing; (ii) pending or issued patents and industrial designs (including any continuations, continuations in part, renewals, divisionals, provisionals, extensions and applications for any of the foregoing); (iii) copyrights (including any registrations and applications therefor and whether registered or unregistered) and works of authorship; (iv) internet domain names; (v) social media handles and all goodwill associated therewith; (vi) proprietary rights in software, including object code and source code; (vii) proprietary rights in data and databases; and (viii) trade secrets and other confidential information, including know-how, technology, proprietary processes, formulae, algorithms, models, user interfaces, inventions, discoveries, concepts, ideas, techniques, methods, methodologies, industrial property rights and research and development information.
“Interim Order” means the interim order of the Court providing for, among other things, the calling and holding of the Company Meeting, as such order may be amended by the Court with the consent of the Company and the Purchaser, each acting reasonably.
“Law” means, with respect to any Person, any and all applicable law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, Award, order, injunction, judgment, decree, direction, decision, ruling, notice or other similar requirement, whether domestic or foreign, enacted, adopted, promulgated, rendered, issued, ordered or applied by a Governmental Entity that is binding upon or applicable to such Person or its business, undertaking, property or securities, and to the extent that they have the force of law, policies, guidelines, notices and protocols of any Governmental Entity, as amended unless expressly specified otherwise.
“Leased Properties” means all real property or Appurtenances leased or subleased by the Company or any of its Subsidiaries in whole or in part.
“Legacy Option” means the outstanding stock options of the Company granted pursuant to the Legacy Option Plan, entitling the holder thereof to receive Company Shares, subject to the terms and conditions of the Legacy Option Plan.
“Legacy Option Plan” means the Company’s former incentive plan authorized by the Board on May 18, 2017, and approved by the Shareholders on August 4, 2017 and again on October 5, 2018, as amended.
“Licensed Intellectual Property” means all Intellectual Property owned by Persons other than the Company or any of its Subsidiaries to which the Company or any of its Subsidiaries has been granted a license in or to or has otherwise received or acquired any right to exploit.
“Liens” means any mortgage, charge, pledge, encumbrance, hypothec, security interest, prior claim or lien (statutory or otherwise), in each case, whether contingent or absolute.
“Matching Period” has the meaning ascribed thereto in Section 5.4(1)(d).
“Material Contract” means (i) any Contract that if terminated or modified or if it ceased to be in effect, would reasonably be expected to have a Company Material Adverse Effect, including, without limitation; (ii) any Contract relating directly or indirectly to the guarantee of any liabilities or obligations or to indebtedness for borrowed money in excess of [Amount Redacted] in the
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aggregate; (iii) any Contract under which indebtedness in excess of [Amount Redacted] is or may become outstanding, other than any such Contract between two or more wholly-owned Subsidiaries of the Company or between the Company and one or more of its wholly-owned Subsidiaries; (iv) any Contract under which the Company or any of its Subsidiaries is obligated to make or expects to receive payments in excess of [Amount Redacted] annually or [Amount Redacted] over the remaining term; (v) any Contract that creates an exclusive dealing arrangement or right of first offer or refusal; (vi) any Contract providing for the purchase, sale or exchange of, or option to purchase, sell or exchange, any property or asset where the purchase or sale price or agreed value or fair market value of such property or asset exceeds [Amount Redacted], other than any leases or subleases relating to Leased Properties; (vii) any Contract that limits or restricts in any material respect (A) the ability of the Company or any Subsidiary to engage in any line of business or carry on business in any geographic area, or (B) the scope of Persons to whom the Company or any of its Subsidiaries may sell products, or (viii) any Contract providing for the establishment, investment in, organization or formation of any joint venture, partnership or other revenue sharing arrangements.
“MI 61-101” means Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions.
“Misrepresentation” has the meaning ascribed thereto under Securities Laws.
“Nasdaq” means the Nasdaq Capital Market of The Nasdaq Stock Market LLC.
“No Action Letter” means written confirmation from the Commissioner confirming that the Commissioner does not, at that time, intend to make an application under section 92 of the Competition Act in respect of the transactions contemplated by the Arrangement.
“Ordinary Course” means, with respect to an action taken by the Company or its Subsidiaries, that such action is taken in the ordinary course of the normal day-to-day operations of the business of the Company and its Subsidiaries consistent with past practice, as the same may be varied, in good faith and on a commercially reasonable basis, to take into account any applicable guidelines, recommendations or measures of a Governmental Entity in response to the actual or reasonably anticipated effect of the COVID-19 pandemic.
“Outside Date” means February 28, 2023, or such later date as may be agreed to in writing by the Parties.
“Owned Intellectual Property” means all Intellectual Property that is owned by or purported to be owned by the Company or its Subsidiaries.
“Owned Real Property” means all real property that is owned in fee simple by the Company or any of its Subsidiaries.
“Parties” has the meaning ascribed thereto in the preamble.
“Permitted Liens” means, as of any particular time and in respect of any Person, each of the following Liens:
| (a) | the reservations, limitations, provisos and conditions expressed in the original grant from the Crown and recorded against title and any statutory exceptions to title; |
| (b) | inchoate or statutory liens of contractors, subcontractors, mechanics, workers, suppliers, materialmen, carriers and others in respect of the construction, maintenance, repair or operation of real or personal property; |
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| (c) | registered easements, servitudes, restrictions, restrictive covenants, party wall agreements, rights of way, licenses, permits and other similar rights in real property (including, without limiting the generality of the foregoing, easements, rights of way and agreements for sewers, drains, gas and water mains or electric light and power or telephone, telecommunications or cable conduits, poles, wires and cables) that do not, individually or in the aggregate, materially and adversely impair the current use and operation thereof (assuming its continued use in the manner in which it is currently used); |
| (d) | encroachments that do not materially impair or affect the current use or value of any real property and minor defects or irregularities in title to any real property; |
| (e) | Liens for Taxes not yet due or in respect of which an applicable reserve has been made; |
| (f) | Liens imposed by Law and incurred in the Ordinary Course for obligations, including in respect of pledges or deposits under workers’ compensation, social security or similar Laws, for amounts not yet due or delinquent, or that are otherwise being contested in good faith by appropriate proceedings and in respect of which an applicable reserve has been made; |
| (g) | zoning and building by-laws and ordinances, airport zoning regulations, regulations made by public authorities and other restrictions affecting or controlling the use or development of any real property; |
| (h) | registered agreements affecting real property with any municipal, provincial or federal governments or authorities and any public utilities, including (without limitation) subdivision agreements, development agreements, and site control agreements, in each case that do not, individually or in the aggregate, materially and adversely impair the current use and operation thereof (assuming its continued use in the manner in which it is currently used); |
| (i) | any leases or notices of leases registered on title and licenses of occupation, provided there is actual occupation thereunder; |
| (j) | Liens as listed and described in Section 1.1 of the Company Disclosure Letter; |
| (k) | purchase money liens and liens securing rental payments under capital lease arrangements; and |
| (l) | such other imperfections or irregularities of title or Lien that, in each case, do not individually or in the aggregate materially adversely affect the use of the properties or assets subject thereto or otherwise materially adversely impair business operations of such properties. |
“Person” includes any individual, partnership, association, body corporate, organization, trust, estate, trustee, executor, administrator, legal representative, government (including Governmental Entity), syndicate or other entity, whether or not having legal status.
“Personal Information” means any data or information, in any medium whatsoever, about an identifiable individual or which can be used alone or in conjunction with any other data or information to identify an individual, and includes any data or information that constitutes “personal information”, as such term is defined in applicable Privacy Laws.
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“Plan of Arrangement” means the plan of arrangement, substantially in the form set out in Schedule A, subject to any amendments or variations to such plan made in accordance with this Agreement and the Plan of Arrangement or made at the direction of the Court in the Final Order with the prior written consent of the Company and the Purchaser, each acting reasonably.
“Prior Credit Agreement” means the non-revolving term loan dated December 15, 2021 between the Company, as borrower, and 2361380 Ontario Limited for secured debt financing of up to $40,000,000, which was assigned to the Purchaser on the date hereof.
“Privacy Laws” means the Personal Information Protection and Electronic Documents Act (Canada), the Personal Information Protection Act (Alberta), the Personal Information Protection Act (British Columbia), and an Act respecting the protection of personal information in the private sector (Québec), and any other Law governing the collection, use, disclosure, processing and protection of Personal Information.
“Proceeding” means litigation, legal action, lawsuit, claim, action, suit, demand, arbitration, charge, hearing, demand letter, arbitration, contractual dispute resolution process or other similar proceeding.
“Purchaser” has the meaning ascribed thereto in the preamble hereto.
“Purchaser Board” means the board of directors of the Purchaser, as the same is constituted from time to time;
“Purchaser Filings” means all documents publicly filed by or on behalf of the Purchaser on SEDAR and/or EDGAR since January 1, 2020.
“Purchaser Material Adverse Effect” means any change, event, occurrence, effect or circumstance that, individually or in the aggregate with other such changes, events, occurrences, effects or circumstances, is or would reasonably be expected to have a durationally significant impact that is material and adverse to the business, affairs, operations, financial condition or results of operations of the Purchaser and its Subsidiaries, taken as a whole, or will, or would reasonably be expected to, prevent, materially delay or materially impair the ability of the Parties to consummate the transactions contemplated by this Agreement, except any such change, event, occurrence, effect or circumstance arising out of, relating to, resulting from or attributable to:
| (a) | any change, development or condition generally affecting any of the industries in jurisdictions in which the Purchaser or any of its Subsidiaries operate; |
| (b) | any change, development or condition in or relating to global, national or regional political conditions (including strikes, lockouts, riots or facility takeover for emergency purposes) or in general political, economic, business, banking, regulatory, currency exchange, interest rate, rates of inflation or market conditions or in national, United States or global financial or capital markets; |
| (c) | any epidemic, pandemic or outbreaks of illness (provided that, in the case of the COVID-19 pandemic, any escalation of such COVID-19 pandemic from the date of this Agreement) or other health crisis or public health event; |
| (d) | any change, development or condition resulting from any act of sabotage or terrorism or any outbreak of hostilities or declared or undeclared war, or any escalation or worsening of such acts of sabotage, terrorism, hostilities or war; |
| (e) | any change in applicable generally accepted accounting principles, including IFRS, or changes in regulatory accounting requirements applicable to cannabis businesses, the cannabis industry and the business of manufacturing cannabis and cannabis products; |
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| (f) | any earthquake, flood, climatic and other natural events or conditions (including drought, any other weather conditions) or other natural disaster; |
| (g) | any change in the price of cannabis (on a current or go forward basis); |
| (h) | any adoption, proposal, implementation or change in Law or any interpretation, application or non-application of any Laws by any Governmental Entity; |
| (i) | any action taken (or omitted to be taken) by the Purchaser or any of its Subsidiaries which is required or expressly permitted to be taken (or omitted to be taken) pursuant to this Agreement or that is consented to or expressly requested by the Company in writing; |
| (j) | any matter which has been disclosed by the Purchaser in the Purchaser Filings prior to the date hereof; |
| (k) | the execution, announcement, pendency or performance of this Agreement or consummation of the Arrangement; |
| (l) | the failure of the Purchaser to meet any internal, published or public projections, forecasts, guidance or estimates, including without limitation of revenues, earnings or other financial performance or cash flows (it being understood that the causes underlying such failure may be taken into account in determining whether a Purchaser Material Adverse Effect has occurred, provided that such causes are not referred to in clauses (a)-(k) above); or |
| (m) | any change in the market price or trading volume of any securities of the Purchaser (it being understood that the causes underlying such change in market price or trading volume may be taken into account in determining whether a Purchaser Material Adverse Effect has occurred, provided that such causes are not referred to in clauses (a)-(l) above), or any suspension of trading in securities generally on any securities exchange on which any securities of the Purchaser trade; |
provided, however, (i) if an effect referred to in clauses (a) through to and including (f) above, has a materially disproportionate effect on the Purchaser and its Subsidiaries, taken as a whole, relative to other comparable companies and entities operating in the industries in which the Purchaser or any of its Subsidiaries operate, such effect may be taken into account in determining whether a Purchaser Material Adverse Effect has occurred; and (ii) references in certain Sections of this Agreement to dollar amounts are not intended to be, and shall not be deemed to be, illustrative for purposes of determining whether a “Purchaser Material Adverse Effect” has occurred.
“Purchaser Share” means a common share in the capital of the Purchaser.
“Purchaser Subsidiaries” means the Purchaser’s wholly-owned Subsidiaries.
“Real Property” or “Real Properties” means collectively, the Owned Real Property and the Leased Properties.
“Regulatory Approvals” means any consent, waiver, permit, exemption, review, order, decision or approval of, or any registration and filing with, any Governmental Entity, or the expiry, waiver or termination of any waiting period imposed by Law or a Governmental Entity, in each case required in connection with the transactions that are the subject of the Arrangement, including, without limitation, the Competition Act Approval.
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“Replacement Options” has the meaning ascribed thereto in the Plan of Arrangement.
“Representatives” has the meaning ascribed thereto in Section 5.1(1).
“Section 3(a)(10) Exemption” has the meaning ascribed thereto in Section 2.13.
“Securities Authority” means (i) the Ontario Securities Commission and any other applicable securities commissions or securities regulatory authority of a province or territory of Canada and (ii) the United States Securities and Exchange Commission (the “SEC”).
“Securities Laws” means (i) the Securities Act (Ontario), the Securities Act (Alberta) and any other applicable Canadian provincial and territorial securities Laws, rules, regulations and published policies thereunder and (ii) United States federal and state securities Laws.
“Security Clearance” means a security clearance granted under section 67 of the Cannabis Act (Canada).
“Security Clearance Eligible Individual” means any officer, director, individual described in paragraphs 50(b)(i), (ii) or (iii) of the Cannabis Regulations (Canada), responsible person, quality assurance person, master grower, head of security, alternative for any of the foregoing (where applicable) or other individual who requires a Security Clearance and is therefore eligible under section 51 of the Cannabis Regulations (Canada) to apply for a Security Clearance;
“SEDAR” means the System for Electronic Document Analysis and Retrieval.
“Subsidiary” has the meaning ascribed thereto in Section 1.1 of National Instrument 45-106 – Prospectus Exemptions.
“Superior Proposal” means any bona fide written Acquisition Proposal to acquire, directly or indirectly, not less than all of the outstanding Company Shares or all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis that did not result from a breach of Article 5 and: (i) that is reasonably capable of being completed, without undue delay, taking into account all financial, legal, regulatory and other aspects of such Acquisition Proposal; (ii) that is not subject to a financing condition and in respect of which it has been demonstrated to the satisfaction of the Board after receipt of advice from its financial advisors and outside legal counsel, that adequate arrangements have been made in respect of any financing required to complete such Acquisition Proposal; (iii) that is not subject to a due diligence condition; and (iv) in respect of which the Board determines, in its good faith judgment, after receiving the advice of its outside legal counsel (with respect to the Board’s fiduciary duties) and its financial advisors, that it would, if consummated in accordance with its terms (but without assuming away the risk of non-completion), result in a transaction which is more favourable, from a financial point of view, to the Company Shareholders than the Arrangement (including any amendments to the terms and conditions of the Arrangement proposed by the Purchaser pursuant to Section 5.4(2)).
“Superior Proposal Agreement” means a written agreement (other than a confidentiality agreement permitted by and in accordance with Section 5.3) with respect to a Superior Proposal entered into by the Company and the party making the Superior Proposal in accordance with Section 5.4.
“Superior Proposal Agreement Counter-Party” means the party or parties with whom the Company enters into the Superior Proposal Agreement.
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“Superior Proposal Notice” has the meaning ascribed thereto in Section 5.4(1)(b).
“Support Agreements” means voting support agreement dated as of the date hereof between the Purchaser and each of the Supporting Shareholders.
“Supporting Shareholders” means Tyler Robson, Sunil Gandhi, Jeff Fallows, Chantel Popoff, Adam Shea, Everett Knight, Ashley McGrath, Andrew Cockwell, Karin A. Mcaskill, Drew Wolff, Guy Beaudin.
“Tax Act” means the Income Tax Act (Canada) and the regulations promulgated thereunder, as may be amended from time to time.
“Tax Returns” means any and all returns, reports, declarations, elections, notices, forms, designations, filings, statements (including estimated tax returns and reports, withholding tax returns and reports, and information returns and reports) and other documents (whether in tangible, electronic or other form) and including any amendments, schedules, attachments, supplements, appendices and exhibits thereto, made, prepared, filed or required to be made, prepared or filed in respect of Taxes.
“Taxes” means (i) any and all taxes, duties, fees, excises, premiums, assessments, imposts, levies and other charges or assessments of any kind whatsoever imposed by any Governmental Entity, whether computed on a separate, consolidated, unitary, combined or other basis, including those levied on, or measured by, or described with respect to, income, gross receipts, profits, gains, windfalls, capital, capital stock, production, recapture, transfer, land transfer, license, gift, occupation, wealth, environment, net worth, indebtedness, surplus, sales, goods and services, harmonized sales, use, value-added, excise, special assessment, stamp, withholding, business, franchising, real or personal property, health, employee health, payroll, workers’ compensation, employment or unemployment, severance, social services, social security, education, utility, surtaxes, customs, import or export, and including all license and registration fees and all Employment Insurance, Canada Pension Plan, health insurance and government pension plan premiums or contributions; (ii) all interest, penalties, fines, additions to tax or other additional amounts imposed by any Governmental Entity on or in respect of amounts of the type described in clause (i) above or this clause (ii); (iii) any liability for the payment of any amounts of the type described in clauses (i) or (ii) for or to or in respect of any other Person, including as a result of being a member of an affiliated, consolidated, combined or unitary group for any period or by virtue of any statute (including under sections 159 and 160 of the Tax Act); and (iv) any liability for the payment of any amounts of the type described in clauses (i) or (ii) or 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 party.
“Terminating Party” has the meaning ascribed thereto in Section 4.8(3).
“Termination Amount” has the meaning ascribed thereto in Section 8.2(1).
“Termination Notice” has the meaning ascribed thereto in Section 4.8(3).
“Third Party Beneficiaries” has the meaning ascribed thereto in Section 8.8(1).
“U.S. CBD Licences” means all licences, certifications, permits and/or other authorizations issued by a Governmental Entity having competent jurisdiction within the United States of America necessary to process or manufacture CBD, including but not limited to the following: (i) Annual Food Permit, Hemp Food Establishment, Permit Number [Permit Number Redacted], issued to The Valens Company by the Florida Department of Agriculture and Consumer Services Division of Food Safety (expiring [Date Redacted]); (ii) Annual Food Permit, Hemp Food Establishment, Permit Number [Permit Number Redacted], issued to Green Roads Inc. by the Florida
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Department of Agriculture and Consumer Services Division of Food Safety (expiring [Date Redacted]); (iii) Green Roads’ Industrial Hemp Product Registration issued by the Utah Department of Agriculture & Food; (iv) Green Roads’ Registered Hemp Product Certifications issued by West Virginia Department of Agriculture (expiring [Date Redacted]); (v) Green Roads’ Consumable Hemp Manufacturer Registration issued by the Iowa Food and Consumer Safety Department of Inspections and Appeals (expiring [Date Redacted]); (vi) Green Roads of Florida LLC’s Cannabinoid Hemp Distributor Permit issued by the New York State Office of Cannabis Management (expiring [Date Redacted]); (vii) Green Roads’ Cannabinoid Hemp Distributor Permit issued by the New York State Office of Cannabis Management (expiring [Date Redacted]); (viii) Green Roads’ Batch Endorsement Approval Notices issued by the Alaska Division of Agriculture (expiring [Date Redacted]); and (ix) Green Roads’ Retailer Registration issued by the Alaska Division of Agriculture (expiring [Date Redacted])
“U.S. Exchange Act” means the United States Securities Exchange Act of 1934, as amended, including the rules and regulations promulgated thereunder.
“U.S. Investment Company Act” means the United States Investment Company Act of 1940, as amended, including the rules and regulations promulgated thereunder.
“U.S. Securities Act” means the United States Securities Act of 1933, as amended, including the rules and regulations promulgated thereunder.
“U.S. Securities Laws” means U.S. federal securities laws, including the U.S. Securities Act and the U.S. Exchange Act, and any applicable U.S. state securities laws.
“U.S. Tax Code” means the United States Internal Revenue Code of 1986, as amended.
“U.S. Treasury Regulations” means the treasury regulations promulgated under the U.S. Tax Code.
“wilful breach” means a material breach of this Agreement that is a consequence of any act undertaken by the breaching Party with the actual knowledge that the taking of such act would, or would be reasonably expected to, cause a material breach of this Agreement.
Section 1.2 Certain Rules of Interpretation
In this Agreement, unless otherwise specified:
| (a) | 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 convenient reference only and do not affect the construction or interpretation of this Agreement. |
| (b) | Currency. All references to dollars or to $ are references to Canadian dollars, unless specified otherwise. |
| (c) | Gender and Number. Any reference to gender includes all genders. Words importing the singular number only include the plural and vice versa. |
| (d) | Phrasing. The words (i) “including”, “includes” and “include” mean “including (or includes or include) without limitation,” (ii) “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,” and (iii) unless stated otherwise, “Article”, “Section”, “paragraph” and “Schedule” followed by a number or letter mean and refer to the specified Article, Section paragraph of or Schedule to this Agreement. The term “Agreement” and any reference in this Agreement to this Agreement or any other agreement or document includes, and is a reference to, this Agreement or such other agreement or document as it may have been, or may from time to time be, amended, restated, replaced, supplemented or novated and includes all schedules to it. The term “made available” means (i) copies of the subject materials were included in the Data Room, or (ii) the subject material was listed in the Company Disclosure Letter or referred to in the Data Room and copies were provided to the Purchaser. |
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| (e) | Capitalized Terms. All capitalized terms used in any Schedule or in the Company Disclosure Letter have the meanings ascribed to them in this Agreement. |
| (f) | Knowledge. Where any representation or warranty is expressly qualified by reference to the knowledge of the Company, it is deemed to refer to the actual knowledge of Tyler Robson, Sunil Gandhi, Jeff Fallows and Everett Knight after due and reasonable diligent inquiry. Where any representation or warranty is expressly qualified by reference to knowledge of the Purchaser, it is deemed to refer to the actual knowledge of Zachary George and Jim Keough, after due and reasonable diligent inquiry. |
| (g) | Statutes. Any reference to a statute refers to such statute and all rules, resolutions and regulations made under it, as it or they may have been or may from time to time be amended or re-enacted, unless stated otherwise. |
| (h) | Computation of Time. A period of time is to be computed as beginning on the day following the event that began the period and ending at 4:30 p.m. (Calgary time) on the last day of the period, if the last day of the period is a Business Day, or at 4:30 p.m. (Calgary time) on the next Business Day if the last day of the period is not a Business Day. If the date on which any action is required or permitted to be taken under this Agreement by a Person is not a Business Day, such action shall be required or permitted to be taken on the next succeeding day which is a Business Day. |
| (i) | Time References. References to time are to local time, Toronto, Ontario, unless otherwise stated. |
| (j) | Schedules. The schedules attached to this Agreement and the Company Disclosure Letter form an integral part of this Agreement for all purposes of it. |
| (k) | Company Disclosure Letter. The Company Disclosure Letter itself and all information contained in it is confidential information and may not be disclosed unless (i) it is required to be disclosed pursuant to Law unless such Law permits the Parties to refrain from disclosing the information for confidentiality or other purposes or (ii) a Party needs to disclose it in order to enforce or exercise its rights under this Agreement. |
ARTICLE 2
THE ARRANGEMENT AND COMPANY MEETING
Section 2.1 Arrangement
The Company and the Purchaser agree that the Arrangement will be implemented in accordance with and subject to the terms and conditions of this Agreement and the Plan of Arrangement.
Section 2.2 Interim Order
Subject to the terms and conditions of this Agreement, as soon as reasonably practicable after the date of this Agreement, the Company shall apply in a manner reasonably acceptable to the Purchaser pursuant to Section 192(3) of the CBCA and, in cooperation with the Purchaser, prepare, file and diligently pursue an application for the Interim Order, which must provide, among other things:
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| (a) | for the classes of Persons to whom notice is to be provided in respect of the Arrangement and the Company Meeting and for the manner in which such notice is to be provided; |
| (b) | that the required level of approval for the Arrangement Resolution shall be (i) two-thirds of the votes cast on such resolution by the Company Shareholders present in person or represented by proxy at the Company Meeting; and (ii) if required under MI 61-101, a majority of the votes cast on such resolution by the Company Shareholders (other than those the votes of which are required to be excluded from the “minority approval” vote under MI 61-101) present in person or represented by proxy at the Company Meeting; |
| (c) | that the record date for the Company Shareholders entitled to receive notice of and to vote at the Company Meeting will not change in respect or as a consequence of any adjournment(s) or postponement(s) of the Company Meeting, unless required by Law or as agreed to in writing between the Parties, each acting reasonably; |
| (d) | that, in all other respects, the terms, restrictions and conditions of the Company’s Constating Documents, including quorum requirements and all other matters, shall apply in respect of the Company Meeting; |
| (e) | for the grant of Dissent Rights to those Company Shareholders who are registered Company Shareholders as contemplated in the Plan of Arrangement; |
| (f) | for the notice requirements with respect to the presentation of the application to the Court for the Final Order; |
| (g) | that it is the Purchaser’s intention to rely upon the Section 3(a)(10) Exemption with respect to the issuance of the Purchaser Shares and the Replacement Options pursuant to the Arrangement, based and conditioned upon the Court’s approval of the Arrangement and determination that the Arrangement is substantially and procedurally fair to Company Shareholders entitled to receive the Consideration and the Company Optionholders entitled to receive the Replacement Options pursuant to or in connection with the Arrangement, following a hearing and after considering of the substantive and procedural terms and conditions thereof; |
| (h) | that the Company Meeting may be adjourned or postponed from time to time by the Company in accordance with the terms of this Agreement without the need for additional approval of the Court; and |
| (i) | for such other matters as the Purchaser may reasonably require, subject to obtaining the prior consent of the Company, acting reasonably. |
Section 2.3 The Company Meeting
Subject to the terms of this Agreement and receipt of the Interim Order, the Company shall:
| (a) | convene and conduct the Company Meeting in accordance with the Interim Order, the Company’s Constating Documents and applicable Law as soon as reasonably practicable and shall use commercially reasonable efforts to convene and conduct the Company Meeting on or before November 30, 2022 and in any event, subject to the Purchaser’s compliance with Section 2.4(4), not later than January 5, 2023 or such other date as the Parties hereto otherwise agree in writing each acting reasonably (provided that it shall be deemed reasonable for a Party to refuse to agree to another date if a later date is requested by the other Party as a result of an |
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| event that was not outside the reasonable control of such other Party), and set the record date for the Shareholders entitled to vote at the Company Meeting as promptly as practicable, and not adjourn, postpone or cancel (or propose the adjournment, postponement or cancellation of) the Company Meeting without the prior written consent of the Purchaser, except as required or permitted under Section 4.8(3) or Section 5.4(5) or as required for quorum purposes (in which case, the Company Meeting shall be adjourned and not cancelled) or as required by Law or by a Governmental Entity, provided that (i) upon the reasonable request of the Purchaser, the Company shall adjourn or postpone the Company Meeting to a date specified by the Purchaser, provided that the Company Meeting, so adjourned or postponed, shall not be later than 10 Business Days after the date on which the Company Meeting was originally scheduled and in any event shall not be later than the date that is 20 Business Days prior to the Outside Date, and (ii) the Company shall be entitled to adjourn or postpone the Company Meeting to a date that is not later than 10 Business Days after the date on which the Company Meeting was originally scheduled and in any event, shall be no later than the date that is 20 Business Days prior to the Outside Date, in each case for the purposes of attempting to obtain the level of approval of the Company Shareholders required by the Interim Order; |
| (b) | subject to the terms of this Agreement and compliance by the directors and officers of the Company with their fiduciary duties, use commercially reasonable efforts to solicit proxies in favour of the approval of the Arrangement Resolution and against any resolution submitted by any Person that is inconsistent with the Arrangement Resolution and the completion of any of the transactions contemplated by this Agreement, including, if so requested by the Purchaser, and at the expense of the Purchaser and/or any of its affiliates, using proxy solicitation services firms to solicit proxies in favour of the approval of the Arrangement Resolution; |
| (c) | provide the Purchaser with copies of or access to information regarding the Company Meeting generated by any proxy solicitation services firm retained by the Company, as requested from time to time by the Purchaser; |
| (d) | give notice to the Purchaser of the Company Meeting and allow the Purchaser’s representatives and legal counsel to attend the Company Meeting; |
| (e) | as promptly as reasonably practicable, advise the Purchaser, at such times as the Purchaser may reasonably request and at least on a daily basis on each of the last 10 Business Days prior to the date of the Company Meeting, and promptly following receipt of proxy tallies over the last three (3) Business Days prior to the date of the Company Meeting, as to the aggregate tally of the proxies received by the Company in respect of the Arrangement Resolution; |
| (f) | as promptly as reasonably practicable, advise the Purchaser of any material communication (written or oral) from or claims brought by (or threatened to be brought by) any Person in opposition to the Arrangement and any purported exercise or withdrawal of Dissent Rights by Company Shareholders; |
| (g) | not make any payment or settlement offer, or agree to any payment or settlement with respect to Dissent Rights, without the prior written consent of the Purchaser, acting reasonably. The Company shall make any payments or settlements with respect to Dissent Rights solely out of its own funds. No funds will be supplied by the Purchaser, nor will the Purchaser directly or indirectly reimburse the Company, for any payments with respect to Dissent Rights; and |
| (h) | not change the record date for the Company Shareholders entitled to vote at the Company Meeting in connection with any adjournment or postponement of the Company Meeting unless required by Law or except as set out in the Interim Order and consented to in writing by the Purchaser, acting reasonably. |
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Section 2.4 The Company Circular
| (1) | Subject to the Purchaser’s compliance with Section 2.4(4), the Company shall as promptly as reasonably practicable prepare and complete, in consultation with the Purchaser as contemplated by this Section 2.4, the Company Circular together with any other documents required by applicable Law in connection with the Company Meeting, and the Company shall, promptly after obtaining the Interim Order, cause the Company Circular and such other documents to be filed and sent to each Company Shareholder and other Persons as required by the Interim Order and applicable Law, in each case so as to permit the Company Meeting to be held by the date specified in Section 2.3. |
| (2) | The Company shall ensure that the Company Circular complies in all material respects with applicable Law, does not contain any Misrepresentation (provided that the Company shall not be responsible for the accuracy of any information furnished by the Purchaser for purposes of inclusion in the Company Circular pursuant to Section 2.4(4)) and provides the Company Shareholders with sufficient information to permit them to form a reasoned judgement concerning the matters to be placed before the Company Meeting. Without limiting the generality of the foregoing, the Company Circular must include: (i) a copy of the Fairness Opinion; (ii) a statement that the Board has, after receiving legal and financial advice, determined that the Arrangement is in the best interests of the Company and is fair to the Company Shareholders and unanimously recommends that Company Shareholders vote in favour of the Arrangement Resolution (the “Board Recommendation”), and (iii) a statement that each executive officer who owns Company Shares and each director of the Company who owns Company Shares intends to vote all of such Person’s Company Shares (including any Company Shares issued upon the vesting and settlement of any Company DSUs and Company RSUs) in favour of the Arrangement Resolution, subject to the other terms of this Agreement and the corresponding Support Agreements; and (iv) a statement that the Supporting Shareholders have each entered into their respective Support Agreements. |
| (3) | The Company shall give the Purchaser and its legal counsel a reasonable opportunity to review and comment on drafts of the Company Circular and other related documents, and shall give reasonable consideration to any comments made by the Purchaser and its legal counsel, and agrees that all information relating solely to the Purchaser and/or any of its affiliates included in the Company Circular must be in a form and content satisfactory to the Purchaser, acting reasonably. |
| (4) | The Purchaser shall provide to the Company all information regarding the Purchaser, its affiliates and the Purchaser Shares as required by the Interim Order or applicable Law for inclusion in the Company Circular or in any amendments or supplements to such Company Circular. The Purchaser shall also use commercially reasonable efforts to obtain any necessary consents from its auditors and any other advisors to the use of any financial or other expert information required to be included in the Company Circular and to the identification in the Company Circular of each such advisor. The Purchaser shall ensure that all such information contemplated in this Section 2.4(4) provided by the Purchaser does not include any Misrepresentation. |
| (5) | The Purchaser shall indemnify and save harmless the Company and its Representatives from and against any and all liabilities, claims, demands, losses, costs, damages and expenses to which the Company or any of its Representatives may be subject or which the Company or any of its Representatives may suffer as a result of, or arising from, any Misrepresentation or alleged Misrepresentation contained in any information included in the Company Circular that was furnished by the Purchaser, its affiliates and their respective representatives for inclusion in the Company Circular, including any order made, or any inquiry, investigation or Governmental Action instituted by any Securities Authority or other Governmental Entity based on such a Misrepresentation or alleged Misrepresentation. |
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| (6) | Each Party shall promptly notify the other Party if it becomes aware that the Company Circular contains a Misrepresentation, or otherwise requires an amendment or supplement. The Parties shall co-operate in the preparation of any such amendment or supplement as required or appropriate, and the Company shall promptly mail, file or otherwise publicly disseminate any such amendment or supplement to the Company Shareholders and, if required by the Court or by Law, file the same with the Securities Authorities or any other Governmental Entity. |
Section 2.5 Final Order
If the Interim Order is obtained and the Arrangement Resolution is passed at the Company Meeting as provided for in the Interim Order, subject to the terms and conditions of this Agreement, the Company shall take all steps necessary or desirable to submit the Arrangement to the Court and diligently pursue an application for the Final Order pursuant to Section 192 of the CBCA, as soon as reasonably practicable, but in any event not later than five (5) Business Days after the Arrangement Resolution is passed at the Company Meeting or such other date as may be agreed to in writing between the Parties, each acting reasonably.
Section 2.6 Court Proceedings
In connection with all Court proceedings relating to obtaining the Interim Order and the Final Order, the Company shall diligently pursue, and cooperate with the Purchaser in diligently pursuing, the Interim Order and the Final Order, and the Company will provide the Purchaser and its legal counsel with reasonable opportunity to review and comment upon drafts of all materials to be filed with the Court in connection with the Arrangement, prior to the service and filing of such materials, and will accept the reasonable comments of the Purchaser and its legal counsel with respect to any information required to be supplied by the Purchaser and included in such materials. The Company will ensure that all material filed with the Court in connection with the Arrangement is consistent in all material respects with the terms of this Agreement and the Plan of Arrangement. In addition, the Company will not object to legal counsel to the Purchaser making such submissions on the application for the Interim Order and the Final Order as such counsel considers appropriate, acting reasonably, provided the Purchaser advises the Company of the nature of any such submissions prior to the hearing and such submissions are consistent with this Agreement and the Plan of Arrangement. The Company will also provide legal counsel to the Purchaser with copies of any notice and evidence served on the Company or its legal counsel in respect of the application for the Final Order or any appeal therefrom, and any notice, written or oral, indicating the intention of any Person to appeal, or oppose the granting of, the Interim Order or Final Order. Subject to Law, the Company shall also oppose any proposal from any party that the Final Order contain any provision inconsistent with this Agreement and the Plan of Arrangement and, if at any time after the issuance of the Final Order and prior to the Effective Date, the Company is required by the terms of the Final Order or by Law to return to Court with respect to the Final Order, it shall do so after notice to, and in consultation and cooperation with, the Purchaser.
Section 2.7 Articles of Arrangement and Effective Date
| (1) | The Articles of Arrangement shall implement the Plan of Arrangement. The Articles of Arrangement shall include the Plan of Arrangement. |
| (2) | Unless another time or date is agreed to in writing by the Parties, the completion of the Arrangement (the “Closing”) will take place on the second Business Day after the satisfaction, or where not prohibited, the waiver by the applicable Party or Parties in whose favour the condition is, of the conditions set out in Article 6 (excluding conditions that, by their terms, are to be satisfied on the Effective Date, but subject to the satisfaction, or where not prohibited, the waiver by the applicable Party or Parties in whose favour the condition is, of those conditions as of the Effective Date) at the offices of McCarthy Tétrault LLP, 66 Wellington Street West, Suite 5300, Toronto, Ontario M5K 1E6, at 8:00 a.m. (Toronto time), unless another time or date is agreed to in writing by the Parties. The Company shall file the Articles of Arrangement with the Director on the day of Closing. |
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Section 2.8 Payment of Consideration
The Purchaser shall, prior to the filing by the Company of the Articles of Arrangement with the Director in accordance with Section 2.7(2), provide or cause to be provided to the Depositary with an irrevocable direction for the issuance of Purchaser Shares (the terms and conditions of such escrow and direction to be satisfactory to the Company and the Purchaser, acting reasonably), in order to issue and deliver the Consideration Shares in respect of the aggregate Consideration as provided in the Plan of Arrangement (other than with respect to Company Shareholders exercising Dissent Rights as provided in the Plan of Arrangement).
Section 2.9 Adjustments to Consideration
In the event that after the date hereof and prior to the Closing the Purchaser changes the number of Purchaser Shares issued and outstanding as a result of a reclassification, stock split (including a reverse stock split), stock dividend or stock distribution, or engages in a dividend, distribution, recapitalization, subdivision, or other similar transaction or makes a return of capital in respect of the Purchaser Shares (each an “Adjustment Transaction”), the Consideration shall be equitably adjusted to eliminate the effects of such event on the Consideration; provided that the Purchaser shall have provided the Company advance notice of the applicable Adjustment Transaction.
In addition, if on or after the date hereof, the Company declares, sets aside or pays any dividend or other distribution prior to the Effective Time or sets any record date therefor prior to the Effective Time, in each case in respect of the Company Shares, then the Company and the Purchaser shall make a corresponding reduction to the value of the Consideration issuable to the Company Shareholders under the Arrangement on a dollar-for-dollar basis.
Section 2.10 Amendments to Company RSUs and Company DSUs
The Company shall cause the terms of the all Company RSUs and Company DSUs that are outstanding prior to the Effective Time to be amended in accordance with the terms and conditions of the Company Incentive Award Plan and applicable Securities Laws such that:
| (a) | the vesting of such Company RSUs and Company DSUs shall be accelerated to the moment immediately preceding the Effective Time; and |
| (b) | such Company RSUs and Company DSUs shall be required to be settled, and shall be settled, in the form of Company Shares pursuant to the Company Incentive Award Plan. |
Section 2.11 Company Incentive Securities
| (1) | The Parties acknowledge that the outstanding Company Options, Legacy Options and the Company Warrants shall be treated in accordance with the provisions of the Plan of Arrangement and that the Company RSUs and Company DSUs shall be treated in accordance with the terms hereof, and the Company shall take all such reasonable steps as may be necessary or desirable to give effect to the foregoing, including assuming all of the covenants and obligations of the Company under the Company Incentive Award Plan, the Legacy Option Plan and the Warrant Indentures, as applicable. |
| (2) | The Purchaser covenants to take all commercially reasonable steps and actions as may be necessary to ensure that as at and from the Effective Time the Company Optionholders shall be able to access, manage and exercise their Replacement Options through the Shareworks equity compensation platform in a manner that is the same or substantially similar to the manner in which Company Optionholders are able to access, manage and exercise their vested Company Options on the date hereof, in each case, until the earlier of (i) the exercise of all outstanding Replacement Options; and (ii) expiry of all such Replacement Options. |
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| (3) | The Parties shall take all such reasonable steps as may be necessary or desirable to give effect to this Section 2.11. |
Section 2.12 Withholding Taxes
The Purchaser, the Company, the Depositary, and any other Person shall be entitled to deduct and withhold from any consideration otherwise payable or otherwise deliverable to any Affected Securityholder or Company Awardholder under the Plan of Arrangement or this Agreement such amounts as the Purchaser, the Company, the Depositary, or such other Person is required or directed to deduct and withhold from such consideration under any provision of any Laws in respect of Taxes. Any such amounts will be deducted, withheld and remitted from the consideration issuable or otherwise payable pursuant to the Plan of Arrangement or this Agreement and shall be treated for all purposes under this Agreement as having been paid to the Affected Securityholder in respect of which such deduction, withholding and remittance was made. Each of the Purchaser, the Company, the Depositary and any other Person that makes a payment or delivery to any Affected Securityholder or Company Awardholder hereunder shall be authorized to sell or otherwise dispose of such portion of the Purchaser Shares otherwise deliverable to such Affected Securityholder or Company Awardholder (if any) as is necessary to provide sufficient funds to enable it to comply with its deducting or withholding requirements and such party shall notify the applicable Affected Securityholder or Company Awardholder and remit any unapplied balance of the net proceeds of such sale to such Affected Securityholder.
Section 2.13 Post-Effective Time Dividends and Distributions
All dividends and distributions made after the Effective Time with respect to any Purchaser Shares allotted and issued pursuant to this Arrangement but for which a certificate has not been issued shall be paid or delivered to the Depositary to be held by the Depositary in trust for such Person. Subject to this Section 2.13, the Depositary shall pay and deliver to any such holder, as soon as reasonably practicable after application therefor is made by such holder to the Depositary in such form as the Depositary may reasonably require, such dividends and distributions and any interest thereon to which such holder is entitled pursuant to the Arrangement, net of any applicable withholding and other taxes.
Section 2.14 Applicable U.S. Securities Laws
The Parties agree that the Arrangement will be carried out with the intention that all Consideration issued to Company Shareholders and the Replacement Options will be issued by the Purchaser upon completion of the Arrangement in reliance on the exemption from the registration requirements of the U.S. Securities Act provided by Section 3(a)(10) thereunder (the “Section 3(a)(10) Exemption”) and pursuant to exemptions from applicable U.S. state securities laws. In order to ensure the availability of the Section 3(a)(10) Exemption, the Parties agree that the Arrangement will be carried out on the following basis:
| (a) | the Arrangement will be subject to the approval of the Court and the Court will hold a hearing before approving the fairness of the terms and conditions of the Arrangement to the Company Shareholders and the Company Optionholders; |
| (b) | the Court will be advised as to the intention of the Parties to rely on the Section 3(a)(10) Exemption prior to the hearing required to issue the Interim Order; |
| (c) | prior to the issuance of the Interim Order, the Company will file with the Court a copy of the proposed text of the Company Circular together with any other documents required by applicable Law in connection with the Company Meeting; |
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| (d) | the Court will be required to satisfy itself as to the substantive and procedural fairness of the terms and conditions of the Arrangement to the Company Shareholders and the Company Optionholders, subject to the Arrangement; |
| (e) | the Company will ensure that each person entitled to receive Consideration and the Company Optionholders on completion of the Arrangement will be given adequate notice advising them of their right to attend the hearing of the Court to give approval of the Arrangement and providing them with sufficient information necessary for them to exercise that right; |
| (f) | the Company Shareholders entitled to receive Consideration and the Company Optionholders entitled to receive the Replacement Options will be advised that such securities issued pursuant to the Arrangement have not been and will not be registered under the U.S. Securities Act or any applicable U.S. state securities laws and will be issued by the Purchaser in reliance on the Section 3(a)(10) Exemption and in accordance with exemptions under any applicable U.S. state securities laws; |
| (g) | each Company Shareholder and each Company Optionholder will be advised that with respect to securities issued to any Person that the Purchaser reasonably determines is an “affiliate” (as such term is defined in Rule 144 under the U.S. Securities Act) of the Purchaser or has been an “affiliate” of the Purchaser within three months prior to the date of issuance of the Purchaser Shares, such securities will be treated as “restricted securities” (as defined in Rule 144 under the U.S. Securities Act) and may not be offered, sold or otherwise transferred absent registration under the U.S. Securities Act or an available exemption therefrom; |
| (h) | the Final Order approving the Arrangement that is obtained from the Court will expressly state that the Arrangement is approved by the Court as being substantially and procedurally fair to the Company Shareholders entitled to receive the Consideration and the Company Optionholders entitled to receive the Replacement Options pursuant to or in connection with the Arrangement; |
| (i) | Company Optionholders entitled to receive Replacement Options pursuant to the Arrangement will be advised that the Replacement Options issued pursuant to the Arrangement have not been registered under the U.S. Securities Act and will be issued and exchanged by the Purchaser in reliance on the Section 3(a)(10) Exemption, but that such exemption does not exempt from the registration requirements of the U.S. Securities Act the issuance of any securities upon the exercise of such Replacement Options; therefore, the Purchaser Shares issuable upon exercise of the Replacement Options may only be issued pursuant to a then-available exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws and, consequently, such Purchaser Shares may be deemed to be “restricted securities” (as defined in Rule 144 under the U.S. Securities Act); |
| (j) | the Interim Order approving the Company Meeting will specify that each Company Shareholder and each Company Optionholder will have the right to appear before the Court at the hearing of the Court to give approval of the Arrangement so long as they enter an appearance within a reasonable time and in accordance with the requirements of the Section 3(a)(10) Exemption; |
| (k) | the Court will hold a hearing before approving the fairness of the terms and conditions of the Arrangement and issuing the Final Order; and |
| (l) | the Company shall request that the Final Order shall include a statement to substantially the following effect: |
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“This Order will serve as a basis of a claim to an exemption, pursuant to Section 3(a)(10) of the United States Securities Act of 1933, as amended, from the registration requirements otherwise imposed by that Act, regarding the distribution of securities of the Purchaser pursuant to the Plan of Arrangement.”
Section 2.15 U.S. Tax Matters
| (1) | The Arrangement is intended to qualify as a reorganization within the meaning of Section 368(a) of the U.S. Tax Code and the U.S. Treasury Regulations promulgated thereunder, and this Agreement, together with the Plan of Arrangement, is intended to be, and is hereby adopted as a “plan of reorganization” within the meaning of the U.S. Treasury Regulations promulgated under Section 368 of the U.S. Tax Code. Each Party agrees to treat the Arrangement as a reorganization within the meaning of Section 368(a) of the U.S. Tax Code for all United States federal income tax purposes, to treat this Agreement, together with the Plan of Arrangement, as a “plan of reorganization” within the meaning of the U.S. Treasury Regulations promulgated under Section 368 of the U.S. Tax Code, and to not take any position on any Tax Return or otherwise take any Tax reporting position inconsistent with such treatment. Within 45 days after the Effective Date, the Purchaser shall complete and post on its website an IRS Form 8937 reporting the Arrangement as a tax-deferred reorganization under Section 368(a) of the U.S. Tax Code. |
| (2) | Each Party agrees to act in good faith, consistent with the intent of the Parties and the intended treatment of the Arrangement as set forth herein and to use commercially reasonable efforts to not take any action, or knowingly fail to take any action, if such action or failure to act would reasonably be expected to prevent the Arrangement from qualifying as a reorganization within the meaning of Section 368(a) of the U.S. Tax Code. |
| (3) | Neither Party makes any representation, warranty, or covenant to the other Party or to any Company Shareholder, Purchaser Shareholder or any other Person regarding the United States tax treatment of the Arrangement, including, but not limited to, whether the Arrangement will qualify as a reorganization within the meaning of Section 368(a) of the U.S. Tax Code or as a tax-deferred transaction for purposes of any United States state or local income tax Law, and the tax-free treatment of the Arrangement and the performance of the covenants contained in Section 2.15(2) shall not be a condition to the Closing. |
Section 2.16 List of Company Shareholders
At the reasonable request of the Purchaser from time to time, the Company shall, as soon as reasonably practicable, provide the Purchaser with a list (in both written and electronic form) of the registered Company Shareholders, together with their addresses and respective holdings of Company Shares, with a list of the names and addresses and holdings of all Persons having rights issued by the Company to acquire Company Shares (including holders of Company Options, Legacy Options, Company DSUs and Company RSUs), a list of all other Affected Securityholders and a list of non-objecting beneficial owners of Company Shares, together with their addresses and respective holdings of Company Shares, all as of a date that is as close as reasonably practicable prior to the date of delivery of such lists. The Company shall from time to time require that its registrar and transfer agent furnish the Purchaser with such additional information, including updated or additional lists of Company Shareholders and lists of holdings and other assistance as the Purchaser may reasonably request.
Section 2.17 Termination of Letter of Intent
The Letter of Intent between the Purchaser and the Company dated June 28, 2022, as amended, is hereby null, void and of no further force and effect.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of the Company
| (1) | Except as disclosed in the Company Filings or the Company Disclosure Letter (which disclosure shall apply against any representations and warranties to which it is reasonably apparent it should relate), the Company represents and warrants to the Purchaser as set forth in Schedule C and acknowledges and agrees that the Purchaser is relying upon such representations and warranties in connection with the entering into of this Agreement. |
| (2) | Except for the representations and warranties set forth in this Agreement, neither the Company nor any other Person has made or makes any other express or implied representation and warranty, either written or oral, on behalf of the Company. |
| (3) | The representations and warranties of the Company contained in this Agreement shall not survive the completion of the Arrangement and shall expire and be terminated at the Effective Time. This Section 3.1 will not limit any covenant or agreement of the Parties, which, by its terms, contemplates performance after the Effective Date or the date on which this Agreement is terminated, as the case may be. |
Section 3.2 Representations and Warranties of the Purchaser
| (1) | The Purchaser represents and warrants to the Company as set forth in Schedule D and acknowledges and agrees that the Company is relying upon such representations and warranties in connection with the entering into of this Agreement. |
| (2) | Except for the representations and warranties set forth in this Agreement, neither the Purchaser nor any other Person has made or makes any other express or implied representation and warranty, either written or oral, on behalf of the Purchaser. |
| (3) | The representations and warranties of the Purchaser contained in this Agreement shall not survive the completion of the Arrangement and shall expire and be terminated at the Effective Time. This Section 3.2 will not limit any covenant or agreement of the Parties, which, by its terms, contemplates performance after the Effective Date or the date on which this Agreement is terminated, as the case may be. |
ARTICLE 4
COVENANTS
Section 4.1 Conduct of Business of the Company
| (1) | The Company covenants and agrees that, during the period from the date of this Agreement until the earlier of the Effective Time and the time that this Agreement is terminated in accordance with its terms, except: (i) with the prior written consent of the Purchaser, such consent not to be unreasonably withheld, delayed or conditioned; (ii) as required or permitted by this Agreement; (iii) as required by Law or a Governmental Entity; (iv) in respect of reasonable payments to legal and financial advisors in connection with the Company’s response to an Acquisition Proposal in accordance with the terms of this Agreement; or (v) as contemplated by the Company Disclosure Letter, the Company shall, and shall cause each of its Subsidiaries to, conduct its business in the Ordinary Course and in accordance with applicable Law, and the Company shall use commercially reasonable efforts to maintain and preserve its and its Subsidiaries’ business organization, assets, properties, employees, goodwill and business relationships with customers, suppliers, partners and other Persons with which the Company or any of its Subsidiaries has material business relations. |
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| (2) | Without limiting the generality of Section 4.1(1), the Company covenants and agrees that, during the period from the date of this Agreement until the earlier of the Effective Time and the time that this Agreement is terminated in accordance with its terms, except: (i) with the prior written consent of the Purchaser, such consent not to be unreasonably withheld, delayed or conditioned; (ii) as required or permitted by this Agreement; (iii) as required by Law or a Governmental Entity; or (iv) as contemplated by the Company Disclosure Letter, the Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly: |
| (a) | amend any of the Company’s Constating Documents or the articles of incorporation, articles of amalgamation, by-laws or similar organizational documents of any of its Subsidiaries; |
| (b) | split, combine, reclassify or amend the terms of any shares of the Company or of any Subsidiary thereof; |
| (c) | amend the terms of any outstanding securities of the Company that are exercisable or exchangeable for, or convertible into, Company Shares; |
| (d) | reduce the stated capital of the Company or any of its Subsidiaries; |
| (e) | except with the consent of the Purchaser, declare, pay or issue any dividend in respect of the Company Shares; |
| (f) | redeem, repurchase, or otherwise acquire or offer to redeem, repurchase or otherwise acquire any shares of capital stock of the Company or any of its Subsidiaries; |
| (g) | issue, grant, deliver, sell, pledge or otherwise encumber, or authorize the issuance, grant, delivery, sale, pledge or other encumbrance of, any shares of capital stock of the Company or any of its Subsidiaries or any options, warrants or similar rights exercisable or exchangeable for or convertible into such capital stock of the Company or any of its Subsidiaries, or for or into cash, except for the issuance of Company Shares issuable upon the vesting and settlement of the currently outstanding Company Options, Legacy Options, Company DSUs and Company RSUs; |
| (h) | acquire (by merger, consolidation, acquisition of stock or assets or otherwise), directly or indirectly, in one transaction or in a series of related transactions, any assets, securities, properties, interests or businesses having a cost, on a per transaction or series of related transactions basis, in excess of [Amount Redacted] for all such transactions, other than Ordinary Course acquisitions of inventory or Ordinary Course acquisitions under procurement contracts; |
| (i) | sell, lease or otherwise transfer, directly or indirectly, in one transaction or in a series of related transactions, any of the Company’s or its Subsidiaries’ assets which have a value greater than [Amount Redacted] in the aggregate, other than the sale, lease, disposition or other transfer of inventories or other assets in the Ordinary Course; |
| (j) | other than as incurred in connection with this Agreement and the transactions contemplated herein, and other than in the Ordinary Course or to ensure the maintenance of the Company’s current standard of operations, make any capital expenditure or commitment to do so which individually exceeds [Amount Redacted] or in the aggregate exceeds [Amount Redacted]; |
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| (k) | reorganize, amalgamate or merge the Company or any such Subsidiary; |
| (l) | adopt a plan of liquidation or resolutions providing for the liquidation or dissolution of the Company or any such Subsidiaries; |
| (m) | prepay any long-term indebtedness (including indebtedness outstanding under medium term notes) before its scheduled maturity, other than repayments of indebtedness under credit facilities, provided that no material breakage or other costs or penalties are payable in connection with any such prepayment; |
| (n) | create, incur, assume, drawdown under current credit facilities or otherwise become liable, in one transaction or in a series of related transactions, with respect to any indebtedness for borrowed money or guarantees thereof in an amount, on a per transaction or series of related transactions basis, in excess of [Amount Redacted]; |
| (o) | make any loan or advance to, or assume, guarantee or otherwise become liable with respect to the liabilities or obligations of, any Person; |
| (p) | make any material change in the Company’s accounting principles, except as required by concurrent changes in IFRS, or pursuant to written instructions, comments or orders of a Securities Authority; |
| (q) | enter into any collective agreement or union agreement or amend, modify, terminate or agree to any such amendment, modification, termination or waiver of rights; |
| (r) | except as required by the terms of any Employee Plan, any written employment Contracts disclosed in the Company Disclosure Letter, or in the Ordinary Course (unless contrary to Section 4.1(2)(g)): (A) grant, accelerate, or increase any severance, change of control or termination pay to (or amend any existing arrangement relating to the foregoing with) any current or former Company Employee or any director of the Company or any of its Subsidiaries; (B) grant, accelerate, or increase any payment, award (equity or otherwise) or other benefits payable to, or for the benefit of, any current or former Company Employee or any director of the Company or any of its Subsidiaries; (C) accelerate or increase the coverage, contributions, funding requirements or benefits available under any Employee Plan; (D) except as described in the Company Disclosure Letter, increase salaries, compensation (in any form), bonus levels or make retention or success payments or other benefits payable to any current or former consultant, Company Employee or officer of the Company or any of its Subsidiaries; (E) enter into or amend any employment, deferred compensation or other similar Contract (or amend any such existing Contract) with any director or officer of the Company or its Subsidiaries; (F) make any material determination under any Employee Plan that is not in the Ordinary Course; or (G) except as described in the Company Disclosure Letter subject to a maximum amount in the aggregate per calendar month of [Amount Redacted], make any bonus or profit sharing distribution or similar payment of any kind; |
| (s) | adopt or establish any employee benefit plan that would become an Employee Plan upon being adopted or established, or terminate, amend or modify, in any material way, an existing Employee Plan; |
| (t) | commence, waive, release, assign, settle or compromise any Proceeding in excess of an amount of [Amount Redacted] in the aggregate or which would reasonably be expected to impede, prevent or delay the consummation of the transactions contemplated by this Agreement; |
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| (u) | amend or modify in any material respect or terminate or waive any material right under any Material Contract or enter into any contract or agreement that would be a Material Contract if in effect on the date hereof; |
| (v) | except as contemplated herein, amend, modify, terminate, cancel or let lapse any material insurance (or re-insurance) policy of the Company or any Subsidiary in effect on the date of this Agreement; or |
| (w) | amend, modify or terminate any Material Contract; |
| (x) | enter into any Material Contract, other than Contracts with respect to the purchase and sale of cannabis biomass in the Ordinary Couse; or |
| (y) | authorize, agree, resolve or otherwise commit to do any of the foregoing. |
| (3) | The Company covenants and agrees that until the earlier of the Effective Date and the termination of this Agreement in accordance with Article 7, the Company and its Subsidiaries will (i) duly and timely file with the appropriate Governmental Entity all Tax Returns required to be filed by it as such become due, which shall be correct and complete in all material respects, (ii) pay, withhold, collect and remit to the appropriate Governmental Entity in a timely fashion all amounts required to be so paid, withheld, collected or remitted and (iii) not without prior written consent of Purchaser, which consent shall not be unreasonably withheld, conditioned or delayed, or except as required by applicable Law (A) make, change, or rescind any Tax material election, file any material information schedule, return or designation, or settle or compromise any material Tax claim, assessment, reassessment or liability, (B) file any amended Tax Return, file any notice of appeal or otherwise initiate any Action with respect to Taxes, (C) enter into, cancel or modify any agreement with a Governmental Entity with respect to Taxes, (D) surrender any right to claim a Tax abatement, reduction, deduction, exemption, credit or refund, (E) consent to the extension or waiver of the limitation period applicable to any Tax matter, (F) amend or change any of its methods of reporting income, deductions or accounting for income Tax purposes except as may be required by Law, (G) enter into any tax sharing, tax allocation or tax indemnification agreement, or (H) make a request for a tax ruling to any Governmental Entity. |
| (4) | The Company shall keep the Purchaser reasonably informed of any material events, discussions, notices or changes with respect to any Tax or regulatory investigation or any other investigation by a Governmental Entity or action involving the Company or any of its Subsidiaries (other than Ordinary Course communications which could not reasonably be expected to be material to the Company). The Company will consider in good faith any reasonable requests by the Purchaser that the Company or its Subsidiaries take any action regarding Tax filing matters, including the filing of notices of appeal and other actions in respect of notices of assessment from the Canada Revenue Agency (provided that, for greater certainty, the Company shall be obligated pursuant to Section 4.1(3) not to take any action regarding such matters without the consent of the Purchaser). The Purchaser may request that the Company take or cause its Subsidiaries to take any action referred to in Section 4.1(3) where such action is necessary to preserve the Company or relevant Subsidiary’s rights (including, without limitation, due to the potential expiry of any limitation or statute-barring period). The Company may only refuse such requests where, acting reasonably (and providing evidence of the same to the Purchaser) such actions would be illegal or harm the Company. |
| (5) | Notwithstanding anything to the contrary in this Agreement, nothing in this Agreement is intended to allow the Purchaser to exercise material influence over the operations of the Company or any Subsidiary prior to the Effective Time. |
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Section 4.2 Interim Period Consents
The Purchaser will, promptly following the date hereof, designate two individuals from either of whom the Company may seek approval to undertake any actions not permitted to be taken under Section 4.1, and will ensure that such persons will respond, on behalf of the Purchaser, to the Company’s requests in an expeditious manner.
Section 4.3 Conduct of Business of the Purchaser
The Purchaser covenants and agrees that, during the period from the date of this Agreement until the earlier of the Effective Time and the time that this Agreement is terminated in accordance with its terms, the Purchaser shall not, directly or indirectly:
| (a) | split, combine, reclassify or amend the terms of the Purchaser Shares; |
| (b) | without the prior written consent of the Company, not to be unreasonably withheld, delayed or conditioned, declare, pay or issue any dividend or other distribution, or make a return of capital, in respect of the Purchaser Shares; |
| (c) | amend its articles of amalgamation, by-laws or other constating documents in any manner that would have a material and adverse impact on the value of the Purchaser Shares; |
| (d) | adopt a plan of liquidation or resolutions providing for the liquidation or dissolution of the Purchaser; or |
| (e) | authorize, agree, resolve or otherwise commit to do any of the foregoing. |
Section 4.4 Covenants Relating to the Arrangement
| (1) | Subject to Law, from the date hereof until the earlier of the Effective Time or the termination of this Agreement, each of the Company and the Purchaser shall use its commercially reasonable efforts to take, or cause to be taken, all actions and to do or cause to be done all things required or advisable under Law to consummate and make effective, as soon as reasonably practicable, the transactions contemplated by this Agreement, including: |
| (a) | to satisfy, or cause the satisfaction of, all conditions precedent in this Agreement and take all steps set forth in the Interim Order and Final Order applicable to it and comply promptly with all requirements imposed by Law on it or its Subsidiaries with respect to this Agreement or the Arrangement; |
| (b) | to obtain, as soon as practicable following execution of this Agreement, and maintain all third party or other consents, waivers, permits, exemptions, orders, approvals, agreements, amendments or confirmations that are (i) necessary to be obtained under the Material Contracts in connection with the Arrangement or this Agreement, or (ii) required in order to maintain the Material Contracts in full force and effect following completion of the Arrangement, in each case, on terms that are reasonably satisfactory to the Purchaser; |
| (c) | using commercially reasonable efforts to effect all necessary registrations, filings and submissions of information required by Governmental Entities from it and its Subsidiaries relating to this Agreement or the Arrangement; |
| (d) | using commercially reasonable efforts to oppose, lift or rescind any Award seeking to restrain, enjoin or otherwise prohibit or delay or otherwise adversely affect the consummation of the Arrangement and defend, or cause to be defended, any Governmental Actions and Proceeding to which it is a party or brought against it or its directors or officers challenging the Arrangement or this Agreement; and |
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| (e) | not taking any action, or refrain from taking any commercially reasonable action, or permitting any action to be taken or not taken, which would reasonably be expected to prevent, materially delay or otherwise impede the consummation of the Arrangement or the transactions contemplated by this Agreement. |
| (2) | The Company shall promptly notify the Purchaser in writing of: |
| (a) | any Company Material Adverse Effect; |
| (b) | any notice or other written communication from any Person (A) alleging that the consent (or waiver, permit, exemption, order, approval, agreement, amendment or confirmation) of such Person (or another Person) is or may be required in connection with this Agreement or the Arrangement, or (B) to the effect that such Person is terminating or otherwise materially adversely modifying its relationship with the Company or any of its Subsidiaries as a result of the Arrangement or this Agreement; or |
| (c) | any material filings, actions, suits, claims, investigations or proceedings commenced or, to its knowledge, threatened against, relating to or involving the Company or any of its Subsidiaries that relate to this Agreement or the Arrangement. |
| (3) | The Purchaser shall promptly notify the Company in writing of: |
| (a) | any Purchaser Material Adverse Effect; |
| (b) | any notice or other written communication from any Person: (i) alleging that the consent (or waiver, permit, exemption, order, approval, agreement, amendment or confirmation) of such Person (or another Person) is or may be required in connection with this Agreement or the Arrangement; or (ii) terminating or otherwise materially adversely modifying its relationship with the Purchaser or any Purchaser Subsidiary as a result of the Arrangement or this Agreement; or |
| (c) | any material filings, actions, suits, claims, investigations or proceedings commenced or, to its knowledge, threatened against, relating to or involving the Purchaser or any of its Subsidiaries that relate to this Agreement or the Arrangement. |
Section 4.5 Regulatory Approvals
| (1) | As soon as reasonably practicable after the date hereof, the Purchaser and the Company shall make all required or advisable notifications, registrations, filings, applications and submissions with Governmental Entities, shall promptly respond to any information requests by a Governmental Entity, and shall use their commercially reasonable efforts to obtain and maintain the Regulatory Approvals, so as to enable the Closing to occur as soon as reasonably practicable (and in any event no later than the Outside Date). |
| (2) | Without limiting the generality of the foregoing, and unless the Purchaser and the Company agree otherwise: |
| (a) | within 10 Business Days of the date of this Agreement, the Purchaser and the Company shall file with the Commissioner a request for an advance ruling certificate pursuant to section 102 of the Competition Act or, in the alternative, a No Action Letter; and |
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| (b) | within 10 Business Days of the date of this Agreement, the Purchaser and the Company shall file with the Commissioner their respective complete pre-merger notification forms pursuant to section 114 of the Competition Act. |
| (3) | With respect to obtaining the Regulatory Approvals and the other matters identified in this Section 4.5, each of the Purchaser and the Company shall cooperate with one another and shall provide such assistance as the other Party may reasonably request in connection with obtaining the Regulatory Approvals as soon as reasonably practicable from the date of this Agreement. In particular: |
| (a) | no Party shall extend or consent to any extension of any applicable waiting or review period or enter into any agreement with a Governmental Entity not to consummate the transactions contemplated by the Arrangement, except upon the prior written consent of the other Party (consent not to be unreasonably withheld, conditioned or delayed); |
| (b) | the Parties shall exchange drafts of all submissions, material correspondence, filings, notifications, presentations, applications, plans and undertakings to be made or submitted to or filed with any Governmental Entity in respect of the transactions contemplated by the Arrangement, and to the extent not precluded by such Governmental Entity, give the other Party a reasonable opportunity to review and will consider in good faith any suggestions made by the other Party and its counsel and will provide the other Party and its counsel with final copies of all such submissions, material correspondence, filings, notifications, presentations, applications, plans and undertakings submitted to or filed with any Governmental Entity in respect of the transactions contemplated by the Arrangement, provided that (i) submissions, material correspondence, filings, notifications, presentations, applications, plans and undertakings to or with any Governmental Entity may be redacted as necessary before sharing with the other Party to address reasonable solicitor-client or other privilege or competitively sensitive information, provided that the Party must provide on an external counsel-only basis un-redacted versions of such written materials with any Governmental Entity on the basis that the redacted information will not be shared with the other Party, (ii) no Party shall be required to share with any other Party or their external counsel any highly commercially sensitive information, and (iii) the Parties shall restrict access to the filings required by Section 4.5(2) to their employees and outside counsel who have a need to know; |
| (c) | each Party will keep the other Party and their respective counsel fully apprised of all substantive written (including email) and oral communications and all meetings with any Governmental Entity and their staff in respect of the Regulatory Approvals, and, unless participation by a Party is prohibited by Law or by such Governmental Entity, shall provide the other Party with a reasonable opportunity to participate in such meetings; and |
| (d) | the Purchaser and the Company shall each contest and resist any action, including any administrative or judicial action, and seek to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order (whether temporary, preliminary or permanent) which has the effect of making the transactions contemplated by the Arrangement illegal or otherwise prohibiting consummation of the transactions contemplated by the Arrangement. |
| (4) | Notwithstanding any requirement in this Agreement, in the case of a disagreement between the Parties over the strategy, tactics or decisions relating to obtaining the Regulatory Approvals, the Purchaser shall, while considering the views and input of the Company in good faith and acting reasonably, have the final and ultimate authority over the appropriate strategy, tactics and decisions related to obtaining the Regulatory Approvals. |
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| (5) | The Purchaser shall pay all filing fees (including any Taxes thereon) payable to any Governmental Entity in connection with any Regulatory Approvals. |
Section 4.6 Access to Information; Confidentiality
| (1) | From the date hereof until the earlier of the Effective Time and the termination of this Agreement, subject to Law and the terms of any existing Contracts, the Company shall: (i) give to the Purchaser and its Representatives reasonable access to the Books and Records and Material Contracts of the Company and its Subsidiaries and subject to Section 4.6(3), its personnel, during normal business hours and in such manner as not to interfere unreasonably with the conduct of the business of the Company and its Subsidiaries; and (ii) furnish to the Purchaser and its representatives such financial and operating data and other information as such Persons may reasonably request. |
| (2) | Neither the Purchaser nor any of its representatives will contact any Company Employees, or any contractual counterparts of the Company or its Subsidiaries (in their capacity as such), except after consultation with and the approval of the Chief Executive Officer of the Company and a director of the Company, which shall not be unreasonably withheld. |
| (3) | Notwithstanding any provision of this Agreement, the Company shall not be obligated to provide access to, or to disclose, any information to the Purchaser if the Company reasonably determines that such access or disclosure would jeopardize any attorney client or other privilege claim by the Company or any of its Subsidiaries. |
| (4) | Investigations made by or on behalf of the Purchaser, whether under this Section 4.6(1) or otherwise, will not waive, diminish the scope of, or otherwise affect any representation or warranty made by the Company in this Agreement. |
| (5) | For greater certainty, the Purchaser and its affiliates shall treat, and shall cause its representatives to treat, all information furnished to the Purchaser or any of its affiliates or representatives in connection with the transactions contemplated by this Agreement or pursuant to the terms of this Agreement in accordance with the terms of the Confidentiality Agreement. Without limiting the generality of the foregoing, the Purchaser acknowledges and agrees that the Company Disclosure Letter and all information contained in it is confidential and shall be treated in accordance with the terms of the Confidentiality Agreement. |
Section 4.7 Public Communications
Except as required by Law, a Party must not issue any press release or make any other public statement or disclosure with respect to this Agreement or the Arrangement without the consent of the other Party (which consent shall not be unreasonably withheld or delayed); provided that any Party that, upon the advice of its legal counsel, is required to make disclosure by Law shall use its commercially reasonable efforts to give the other Party prior oral or written notice and a reasonable opportunity to review and comment on the disclosure. The Party making such disclosure shall give reasonable consideration to any comments made by the other Party or its counsel, and if such prior notice is not possible, shall give such notice immediately following the making of such disclosure. Prior to filing any document relating to the Arrangement on SEDAR or EDGAR, the Parties agree to consult with each other in order to agree on the version of the document to be filed and any necessary redaction to be made to the document.
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Section 4.8 Notice and Cure Provisions
| (1) | Each Party shall promptly notify the other Party of the occurrence, or failure to occur, of any event or state of facts which occurrence or failure would, or would be reasonably likely to: |
| (a) | cause any of the representations or warranties of such Party contained in this Agreement to be untrue or inaccurate in any material respect at any time from the date of this Agreement to the Effective Time; or |
| (b) | result in the failure to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by such Party under this Agreement. |
| (2) | Notification provided under this Section 4.8 will not affect the representations, warranties, covenants, agreements or obligations of the Parties (or remedies with respect thereto) or the conditions to the obligations of the Parties under this Agreement. |
| (3) | The Purchaser may not elect to exercise its right to terminate this Agreement pursuant to Section 7.2(1)(d)(i) and the Company may not elect to exercise its right to terminate this Agreement pursuant to Section 7.2(1)(c)(i), unless the Party seeking to terminate this Agreement (the “Terminating Party”) has delivered a written notice (“Termination Notice”) to the other Party (the “Breaching Party”) specifying in reasonable detail all breaches of covenants, representations and warranties or other matters which the Terminating Party asserts as the basis for termination. After delivering a Termination Notice, provided the Breaching Party is proceeding diligently to cure such matter and such matter is capable of being cured prior to the Outside Date, the Terminating Party may not exercise such termination right until the earlier of (a) the Outside Date, and (b) the date that is 10 Business Days following receipt of such Termination Notice by the Breaching Party, if such matter has not been cured by such date. If the Terminating Party delivers a Termination Notice prior to the date of the Company Meeting or the making of the application for the Final Order, unless the Parties mutually agree otherwise, the Company shall postpone or adjourn the Company Meeting or delay making the application for the Final Order, or both, to the earlier of (a) 10 Business Days prior to the Outside Date and (b) the date that is 10 Business Days following receipt of such Termination Notice by the Breaching Party. |
Section 4.9 Insurance and Indemnification
| (1) | Prior to the Effective Date, the Company may purchase customary “tail” or “run off” policies of directors’ and officers’ liability insurance from insurers providing protection no less favourable in the aggregate than the protection provided by the policies maintained by the Company and its Subsidiaries which are in effect immediately prior to the Effective Date and providing protection in respect of claims arising from facts or events which occurred on or prior to the Effective Date and the Purchaser will, or will cause the Company and its Subsidiaries to maintain such tail policies in effect without any reduction in scope or coverage for six (6) years from the Effective Date; provided that, for the avoidance of doubt, the Purchaser will not be required to pay any amounts in respect of such coverage prior to the Effective Time. |
| (2) | As an alternative to the arrangements contemplated in 4.9(1), the Company may, for the benefit of the current and former directors and officers of the Company, prior to the Effective Time: |
| (a) | transfer for nominal consideration to an entity to be owned or controlled by certain directors or officers of the Company (the “D&O Run Off Entity”), all rights and obligations under the Contracts that are currently in place with TVC Bermuda Ltd (“TVC”) and Universal Re-Insurance Company Limited (“UR”) regarding captive insurance for the benefit of current and former the directors and officers of the Company (the “Captive Insurance”); and |
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| (b) | fund the D&O Run Off Entity prior to the Effective Time with [Amount Redacted] (the “Administrative Amount”) (for use as set forth in Section 4.9 of the Company Disclosure Letter) to be used by the D&O Run Off Entity to fund and maintain the Captive Insurance for a period of not less than 6 years following the Effective Time (the “Run Off Period”), |
all on terms acceptable to the Company, acting reasonably.
At the end of the later of the Run Off Period and the settlement of all claims made under the Captive Insurance, the D&O Run Off Entity will cause any remaining cash maintained by UR for purposes of the Captive Insurance (the “Captive Insurance Funds”), and any remaining funds relating to the Administrative Amount, to be transferred to the Purchaser.
| (3) | The Purchaser shall, from and after the Effective Time, honour all rights to indemnification or exculpation now existing in favour of present and former employees, officers and directors of the Company and its Subsidiaries and acknowledges that such rights shall survive the completion of the transactions set forth in the Plan of Arrangement and shall continue in full force and effect in accordance with their terms for a period of not less than six (6) years from the Effective Date. |
| (4) | If the Purchaser, the Company or any of its Subsidiaries or any of their respective successors or assigns (i) consolidates with or merges into any other Person and is not a continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers all or substantially all of its properties and assets to any Person, the Purchaser shall ensure that any such successor or assign (including, as applicable, any acquirer of substantially all of the properties and assets of the Company or its Subsidiaries) assumes all of the obligations set forth in this Section 4.9. |
Section 4.10 Stock Exchange Delistings
Subject to Laws, the Purchaser and the Company shall use their commercially reasonable efforts to cause the Company Shares to be de-listed from the TSX and Nasdaq with effect immediately following the acquisition by Purchaser of the Company Shares pursuant to the Arrangement.
Section 4.11 Amended and Restated Credit Agreement
Concurrent with the entering into of this Agreement, the Prior Credit Agreement was assigned from 2361380 Ontario Limited to the Purchaser, following which the Prior Credit Agreement was amended to become the Amended and Restated Credit Agreement with the increase of the principal amount of debt financing thereunder to $60,000,000 and certain other changes. Notwithstanding any other term or provision of this Agreement, where the Company has used reasonable good faith efforts to perform its covenants and obligations under the Amended and Restated Credit Agreement, no breach or default of the Company under the Amended and Restated Credit Agreement, or failure of the Company to perform any such covenant or obligation, shall: (i) constitute a Company Material Adverse Effect, (ii) be deemed to be the cause of a failure to satisfy any condition contained in Article 6; or (iii) give the Purchaser a right to terminate this Agreement under Article 7. Notwithstanding the foregoing, the limitations and exclusions set forth in this Section 4.11 shall not apply to any breach or default of the Company under the Amended and Restated Credit Agreement, or any failure of the Company to perform any covenant or obligation of the Company under the Amended and Restated Credit Agreement, that also independently constitutes a breach or default of the Company under this Agreement.
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ARTICLE 5
ADDITIONAL COVENANTS REGARDING NON-SOLICITATION
Section 5.1 Non-Solicitation
| (1) | Except as expressly provided in this Article 5, the Company shall not, directly or indirectly, through any director, Company Employee, representative (including any financial or other adviser) or agent of the Company or of any of its Subsidiaries (collectively “Representatives”): |
| (a) | solicit, initiate, knowingly encourage or otherwise knowingly facilitate (including by way of furnishing or providing copies of, access to, or disclosure of, any confidential information, properties, facilities, books or records of the Company or any Subsidiary) any inquiry, proposal or offer that constitutes or may reasonably be expected to constitute, an Acquisition Proposal; |
| (b) | enter into or otherwise engage or participate in any negotiations or meaningful discussions with any Person (other than with the Purchaser or any Person acting jointly or in concert with the Purchaser) regarding any inquiry, proposal or offer that constitutes or may reasonably be expected to constitute, an Acquisition Proposal, provided that the Company may (i) advise any Person of the restrictions of this Agreement, (ii) contact the Person for the purposes of seeking clarification of the terms of such Acquisition Proposal, and (iii) advise any Person making an Acquisition Proposal that the Board has determined that such Acquisition Proposal does not constitute a Superior Proposal, in each case, if, in so doing, no other information that is prohibited from being communicated under this Agreement is communicated to such Person; |
| (c) | make a Change in Recommendation; |
| (d) | accept, approve, endorse or recommend, or publicly propose to accept, approve, endorse or recommend any Acquisition Proposal, or take no position or remain neutral with respect to any publicly announced Acquisition Proposal (it being understood that publicly taking no position or a neutral position with respect to an Acquisition Proposal for a period of no more than five (5) Business Days following the formal announcement of such Acquisition Proposal will not be considered to be in violation of this Article 5 provided the Board has rejected such Acquisition Proposal or affirmed the Board Recommendation, as the case may be, by or before the end of such five (5) Business Day period); or |
| (e) | approve, recommend or enter into (other than a confidentiality agreement permitted by and in accordance with Section 5.3) or publicly propose to enter into any agreement in respect of an Acquisition Proposal. |
| (2) | Except as expressly provided in this Article 5, the Company shall, and shall cause its Subsidiaries and its Representatives to, immediately cease and terminate, and cause to be terminated, any solicitation, encouragement, discussion or negotiations with any Person (other than with the Purchaser) with respect to any inquiry, proposal or offer that would reasonably be expected to constitute an Acquisition Proposal, and in connection therewith, the Company will: |
| (a) | discontinue access to and disclosure of all information, including any data room and any confidential information, properties, facilities, books and records of the Company or of any of its Subsidiaries; and |
| (b) | request, and exercise all rights it has to require the return or destruction of all copies of any confidential information regarding the Company or any Subsidiary provided to any Person other than the Purchaser in connection with such potential Acquisition Proposal (including before the date of this Agreement), including using its commercially reasonable efforts to ensure that such requests are fully complied with in accordance with the terms of such rights or entitlements. |
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| (3) | The Company covenants and agrees not to release any Person from, or waive such Person’s obligations respecting the Company, under any confidentiality, standstill or similar agreement or restriction to which the Company is a party (it being acknowledged by the Purchaser that the automatic termination or release of any restrictions of any such agreements as a result of entering into and announcing this Agreement shall not be a violation of this Section 5.1(3)), except to allow such Person to make an Acquisition Proposal confidentially to the Board that constitutes, or could reasonably be expected to constitute or lead to, a Superior Proposal, provided that the remaining provisions of this Article 5 are complied with, and the Company undertakes to seek to enforce, or cause it Subsidiaries to seek to enforce, all confidentiality, standstill, or similar agreements or restrictions that it or any of its Subsidiaries have entered into prior to the date hereof or enter into after the date hereof. |
Section 5.2 Notification of Acquisition Proposals
If after the date of this Agreement the Company or any of its Subsidiaries or any of their respective Representatives, receives any inquiry, proposal or offer that constitutes or may reasonably be expected to constitute an Acquisition Proposal, or any request for copies of, access to, or disclosure of, confidential information relating to the Company or any Subsidiary, including but not limited to information, access, or disclosure relating to the properties, facilities, Books or Records of the Company or any Subsidiary, in connection with such an Acquisition Proposal, the Company shall promptly notify the Purchaser, at first orally, and then within 24 hours, in writing, of such Acquisition Proposal, inquiry, proposal, offer or request, including a description of its material terms and conditions and the identity of all Persons making such Acquisition Proposal.
Section 5.3 Responding to an Acquisition Proposal
| (1) | Notwithstanding Section 5.1 or any other provision of this Agreement, or any other agreement between the Parties or between the Company and any other Person, if at any time prior to obtaining the approval of the Company Shareholders of the Arrangement Resolution, the Company receives an Acquisition Proposal, the Company may engage in or participate in discussions or negotiations with such Person regarding such Acquisition Proposal, and, subject to the Company (i) entering into a confidentiality and standstill agreement with such Person (if one has not already been entered into) containing terms that are no less favourable to the Company in the aggregate than those contained in the Confidentiality Agreement and may not restrict the Company from complying with this Article 5 (it being understood and agreed that such confidentiality and standstill agreement need not restrict the making of an Acquisition Proposal or related communications to the Company or the Board), and (ii) concurrently providing the Purchaser with access to any information that was provided to such Person and not previously provided to the Purchaser and (iii) promptly providing the Purchaser with a true, complete and final executed copy of such confidentiality and standstill agreement (if entered into after the date hereof), may provide copies of, access to or disclosure of information, properties, facilities, Books or Records of the Company or its Subsidiaries, if: |
| (a) | the Board first determines in good faith, after consultation with its financial advisors and its outside legal counsel, that such Acquisition Proposal constitutes or could reasonably be expected to constitute or lead to a Superior Proposal; and |
| (b) | the Company has been, and continues to be, in compliance with its obligations under this Article 5. |
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Section 5.4 Right to Match
| (1) | If the Company receives an Acquisition Proposal that constitutes a Superior Proposal prior to the approval of the Arrangement Resolution by the Company Shareholders the Board may, or may cause the Company to, make a Change in Recommendation and approve, recommend or enter into a definitive agreement with respect to such Superior Proposal, if and only if: |
| (a) | the Company has been, and continues to be, in compliance with its obligations under this Article 5; |
| (b) | the Company or its Representatives have delivered to the Purchaser a written notice of the determination of the Board that it has received a Superior Proposal and of the intention to approve, recommend or enter into a definitive agreement with respect to such Superior Proposal, including a notice as to the value in financial terms that the Board has, in consultation with its financial advisors, determined should be ascribed to any non-cash consideration offered under the Superior Proposal (the “Superior Proposal Notice”); |
| (c) | the Company or its Representatives have provided to the Purchaser a copy of any proposed definitive agreement for the Superior Proposal; |
| (d) | at least five (5) Business Days (the “Matching Period”) have elapsed from the date that is the later of the date on which the Purchaser received the Superior Proposal Notice and the date on which the Purchaser received a copy of the definitive agreement for the Superior Proposal; |
| (e) | after the Matching Period, the Board has determined in good faith, after consultation with its legal counsel and financial advisors, that such Acquisition Proposal continues to constitute a Superior Proposal (and, if applicable, compared to the terms of the Arrangement as proposed to be amended by the Purchaser under Section 5.4(2)); and |
| (f) | prior to or concurrently with making a Change in Recommendation or entering into such definitive agreement the Company terminates this Agreement pursuant to Section 7.2(1)(c)(ii) and pays the Termination Amount pursuant to Section 8.2(2). |
| (2) | During the Matching Period, or such longer period as the Company may approve in writing for such purpose: (a) the Board shall review any offer made by the Purchaser to amend the terms of this Agreement and the Arrangement in good faith, after consultation with outside legal and financial advisors, in order to determine whether such proposal would, upon acceptance, result in the Acquisition Proposal previously constituting a Superior Proposal ceasing to be a Superior Proposal; and (b) the Company shall negotiate in good faith with the Purchaser to make such amendments to the terms of this Agreement and the Arrangement as would enable the Purchaser and/or its affiliates to proceed with the transactions contemplated by this Agreement on such amended terms. If as a consequence of the foregoing the Board determines that such Acquisition Proposal would cease to be a Superior Proposal, the Company shall promptly so advise the Purchaser and the Company and the Purchaser shall amend this Agreement to reflect such offer made by the Purchaser, and shall take and cause to be taken all such actions as are necessary to give effect to the foregoing. |
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| (3) | Each successive amendment to any Acquisition Proposal that results in an increase in, or modification of, the consideration (or value of such consideration) to be received by the Company Shareholders or other material terms or conditions thereof shall constitute a new Acquisition Proposal for the purposes of this Section 5.4, provided that the Matching Period in respect of such new Acquisition Proposal shall extend only until the later of the end of the initial five (5) Business Day Matching Period and 36 hours after the Purchaser received the Superior Proposal Notice for the new Acquisition Proposal. |
| (4) | Nothing in this Agreement shall prohibit the Board from responding through a directors’ circular or otherwise as required by applicable Securities Laws to an Acquisition Proposal that it determines is not a Superior Proposal. Further, nothing in this Agreement shall prevent the Board from making any disclosure to the Company Shareholders if the Board, acting in good faith and upon the advice of its outside legal and financial advisors, shall have determined that the failure to make such disclosure would be inconsistent with the fiduciary duties of the Board or such disclosure is otherwise required under Law; provided, however, that, notwithstanding the Board shall be permitted to make such disclosure, the Board shall not be permitted to make a Change in Recommendation, other than as permitted by Section 5.4(1). |
| (5) | If the Company provides a Superior Proposal Notice to the Purchaser after a date that is less than five (5) Business Days before the Company Meeting, the Company shall be entitled to, and shall upon request from the Purchaser, postpone the Company Meeting to a date that is not more than fifteen (15) Business Days after the scheduled date of the Company Meeting (and, in any event, prior to the Outside Date). |
ARTICLE 6
CONDITIONS
Section 6.1 Mutual Conditions Precedent
The Parties are not required to complete the Arrangement unless each of the following conditions is satisfied, which conditions may only be waived, in whole or in part, by the mutual consent of the Purchaser and the Company:
| (1) | Arrangement Resolution. The Arrangement Resolution has been approved and adopted by the Company Shareholders at the Company Meeting in accordance with the requirements of the Interim Order and MI 61-101, as applicable. |
| (2) | Interim Order and Final Order. Each of the Interim Order and the Final Order have each been obtained on terms consistent with this Agreement, and have not been set aside or modified in a manner unacceptable to either the Company or the Purchaser, each acting reasonably, on appeal or otherwise. |
| (3) | Nasdaq Listing. The Purchaser Shares to be issued to Company Shareholders pursuant to the Arrangement shall have been approved for listing on Nasdaq, subject to official notice of issuance. |
| (4) | Regulatory Approvals. Each of the Parties shall have obtained all consents, waivers, permissions and approvals, including all Regulatory Approvals, necessary to complete the Arrangement by or from all relevant Governmental Entities, including, for greater certainty the Competition Act Approval, on terms and conditions satisfactory to the Parties, acting reasonably. |
| (5) | Canadian Securities Law Matters. The distribution of the Consideration Shares shall be exempt from the prospectus and registration requirements of applicable Securities Laws in Canada either by virtue of exemptive relief from the securities regulatory authorities of each of the provinces of Canada or by virtue of exemptions under applicable Securities Laws in Canada and shall not be subject to resale restrictions under applicable Securities Laws in Canada (other than as applicable to control persons or pursuant to Section 2.6 of National Instrument 45-102 – Resale of Securities). |
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| (6) | U.S. Securities Law Matters. All necessary actions (including the obtaining of the Final Order which will serve as a basis of a claim to the Section 3(a)(10) Exemption regarding the distribution of the Consideration) shall have been taken with respect to the Arrangement so that the Consideration Shares and the Replacement Options shall be exempt from the registration requirements of the U.S. Securities Act and exempt under any applicable U.S. state securities laws. |
| (7) | No Illegality. No Law will have been enacted, issued, promulgated, enforced, made, entered, issued or applied and no Proceeding will otherwise have been taken under any Laws or by any Governmental Authority (whether temporary, preliminary or permanent) that makes the Arrangement illegal or otherwise directly or indirectly cease trades, enjoins, restrains or otherwise prohibits completion of the Arrangement (unless such Law has been subsequently resolved such that the Arrangement is no longer illegal or cease traded, enjoined, restrained or otherwise prohibited). |
The conditions in this Section 6.1 are for the mutual benefit of the Parties and may be asserted by either Party regardless of the circumstances and may be waived by the mutual written consent of the Parties, in whole or in part, at any time and from time to time without prejudice to any other rights that the Parties may have, including the right of the Parties to rely on any other of such conditions.
Section 6.2 Additional Conditions Precedent to the Obligations of the Purchaser
The Purchaser and/or its affiliates will not be required to complete the Arrangement unless each of the following conditions is satisfied, which conditions are for the exclusive benefit of the Purchaser and may only be waived, in whole or in part, by the Purchaser in its sole discretion:
| (1) | Representations and Warranties. The representations and warranties of the Company set forth in this Agreement are true and correct as of the Effective Time (except for representations and warranties made as of a specified date, the accuracy of which shall be determined as of such specified date), except to the extent that the failure or failures of such representations and warranties to be so true and correct, individually or in the aggregate, would not have a Company Material Adverse Effect (and, for this purpose, any reference to “material”, “Company Material Adverse Effect” or other concepts of materiality in such representations and warranties shall be ignored); and the Company has delivered a certificate confirming same to the Purchaser, executed by two senior officers of the Company (in each case on behalf of the Company and without personal liability) addressed to the Purchaser and dated the Effective Date. |
| (2) | Performance of Covenants. The Company has fulfilled or complied in all material respects with each of the covenants of the Company contained in this Agreement to be fulfilled or complied with by it on or prior to the Effective Time, and the Company has delivered a certificate confirming same to the Purchaser, executed by two senior officers of the Company (in each case on behalf of the Company and without personal liability) addressed to the Purchaser and dated the Effective Date. |
| (3) | Dissent Rights. Company Shareholders shall not have exercised their Dissent Rights in connection with the Arrangement with respect to more than 10% of the outstanding Company Shares. |
| (4) | Material Adverse Effect. Since the date of this Agreement, there shall not have occurred, or have been disclosed to the public (if previously undisclosed to the public), a Company Material Adverse Effect and the Company shall have provided to the Purchaser a certificate of two senior officers of the Company to that effect (on the Company’s behalf and without personal liability). |
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Section 6.3 Additional Conditions Precedent to the Obligations of the Company
The Company is not required to complete the Arrangement unless each of the following conditions is satisfied, which conditions are for the exclusive benefit of the Company and may only be waived, in whole or in part, by the Company in its sole discretion:
| (1) | Representations and Warranties. The representations and warranties of the Purchaser set forth in this Agreement are true and correct as of the Effective Time (except for representations and warranties made as of a specified date, the accuracy of which shall be determined as of such specified date), except to the extent that the failure or failures of such representations and warranties to be so true and correct, individually or in the aggregate, would not have a Purchaser Material Adverse Effect (and, for this purpose, any reference to “material”, “Purchaser Material Adverse Effect” or other concepts of materiality in such representations and warranties shall be ignored); and the Purchaser has delivered a certificate confirming same to the Company, executed by two senior officers of the Purchaser (in each case on behalf of the Purchaser and without personal liability) addressed to the Company and dated the Effective Date. |
| (2) | Performance of Covenants. The Purchaser has fulfilled or complied in all material respects with each of the covenants of the Purchaser contained in this Agreement to be fulfilled or complied with by it on or prior to the Effective Time, and the Purchaser has delivered a certificate confirming same to the Company, executed by two senior officers of the Purchaser (on behalf of the Purchaser and without personal liability) addressed to the Company and dated the Effective Date. |
| (3) | Deposit of Consideration Shares. The Purchaser shall have complied with its obligations under Section 2.8 and deposited or caused to be deposited with the Depository in escrow in accordance with Section 2.8, the Consideration Shares required to effect payment in full of the aggregate Consideration to be paid pursuant to the Plan of Arrangement and the Depository shall have confirmed to the Company the receipt of the same. |
| (4) | Material Adverse Effect. Since the date of this Agreement, there shall not have occurred, or have been disclosed to the public (if previously undisclosed to the public), a Purchaser Material Adverse Effect and the Purchaser shall have provided to the Company a certificate of two senior officers of the Purchaser to that effect (on the Purchaser’s behalf and without personal liability). |
| (5) | Resale Restrictions. The distribution of the Purchaser Shares pursuant to the Arrangement shall be exempt from the prospectus and registration requirements of applicable Securities Laws in Canada either by virtue of exemptive relief from the securities regulatory authorities of each of the provinces of Canada or by virtue of exemptions under applicable Securities Laws in Canada and shall not be subject to resale restrictions under applicable Securities Laws in Canada (other than as applicable to control persons or pursuant to Section 2.6 of National Instrument 45-102 – Resale of Securities). |
Section 6.4 Satisfaction of Conditions
The conditions precedent set out in Section 6.1, Section 6.2 and Section 6.3 will be conclusively deemed to have been satisfied, waived or released when the Certificate of Arrangement is issued by the Director. For greater certainty, and notwithstanding the terms of any escrow agreement entered into between the Purchaser and the Depositary, all funds and any irrevocable direction for the issuance of the Purchaser Shares held in escrow by the Depositary pursuant to Section 2.8 shall be deemed to be released from escrow when the Certificate of Arrangement is issued by the Director.
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ARTICLE 7
TERM AND TERMINATION
Section 7.1 Term
This Agreement shall be effective from the date hereof until the earlier of the Effective Time and the termination of this Agreement in accordance with its terms.
Section 7.2 Termination
| (1) | This Agreement may be terminated prior to the Effective Time by: |
| (a) | the mutual written agreement of the Parties; or |
| (b) | either the Company or the Purchaser if: |
| (i) | the Company Meeting is duly convened and held and the Arrangement Resolution is voted on by Company Shareholders and not approved by the Company Shareholders as required by the Interim Order and the requirements of MI 61-101, as applicable; |
| (ii) | after the date of this Agreement, any Law is enacted, made, enforced or amended, as applicable, that makes the consummation of the Arrangement illegal or otherwise prohibits or enjoins the Company or the Purchaser and/or its affiliates from consummating the Arrangement, and such Law has, if applicable, become final and non-appealable, provided that a Party seeking to terminate this Agreement pursuant to this Section 7.2(1)(b)(ii) is not then in breach of this Agreement so as to directly or indirectly cause any condition in Section 6.2(1) [Company Representations and Warranties], Section 6.3(1) [Purchaser Representations and Warranties], Section 6.2(2) [Company Performance of Covenants] or Section 6.3(2) [Purchaser Performance of Covenants], as applicable, not to be satisfied; or |
| (iii) | the Effective Time does not occur on or prior to the Outside Date, provided that a Party may not terminate this Agreement pursuant to this Section 7.2(1)(b)(iii) if the failure of the Effective Time to so occur has been caused by, or is a result of, a breach by such Party of any of its representations or warranties or the failure of such Party to perform any of its covenants or agreements under this Agreement; or |
| (c) | the Company if: |
| (i) | a breach of any representation or warranty or failure to perform any covenant or agreement on the part of the Purchaser under this Agreement occurs that would cause any condition in Section 6.3(1) [Purchaser Representations and Warranties Condition] or Section 6.3(2) [Purchaser Covenants Condition] not to be satisfied, and such breach or failure is incapable of being cured or is not cured in accordance with the terms of Section 4.8(3); provided that any wilful breach shall be deemed to be incapable of being cured and the Company is not then in breach of this Agreement so as to directly or indirectly cause any condition in Section 6.2(1) [Company Representations and Warranties Condition] or Section 6.2(2) [Company Covenants Condition] not to be satisfied; or |
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| (ii) | prior to the approval by the Company Shareholders of the Arrangement Resolution, the Board makes a Change in Recommendation or the Company or a Subsidiary of the Company enters into a written agreement (other than a confidentiality agreement permitted by and in accordance with Section 5.3) with respect to a Superior Proposal in accordance with Section 5.4, provided the Company is then in compliance with Article 5 and that prior to or concurrent with such termination the Company pays the Termination Amount in accordance with Section 8.2(2); |
| (iii) | there has occurred a Purchaser Material Adverse Effect which is incapable of being cured on or prior to the Outside Date; |
| (d) | the Purchaser if: |
| (i) | a breach of any representation or warranty or failure to perform any covenant or agreement on the part of the Company under this Agreement occurs that would cause any condition in Section 6.2(1) [Company Representations and Warranties Condition] or Section 6.2(2) [Company Covenants Condition] not to be satisfied, and such breach or failure is incapable of being cured or is not cured in accordance with the terms of Section 4.8(3); provided that any wilful breach shall be deemed to be incapable of being cured and the Purchaser is not in breach of this Agreement so as to directly or indirectly cause any condition in Section 6.3(1) [Purchaser Representations and Warranties Condition] or Section 6.3(2) [Purchaser Covenants Condition] not to be satisfied; |
| (ii) | prior to the approval by the Company Shareholders of the Arrangement Resolution, (A) the Board fails to unanimously recommend, withdraws, amends, modifies or qualifies in a manner that has substantially the same effect, the approval or recommendation of the Arrangement or the Arrangement Resolution (a “Change in Recommendation”) (it being understood that publicly taking no position or a neutral position with respect to an Acquisition Proposal for a period of no more than five (5) Business Days after the formal announcement thereof shall not be considered a Change in Recommendation); or (B) the Board approves, recommends or authorizes the Company to enter into a written agreement (other than a confidentiality agreement permitted by and in accordance with Section 5.3) concerning a Superior Proposal or (C) the Company breaches Section 5.1(1) in any material respect; |
| (iii) | the condition set forth in Section 6.2(3) [Dissent Rights] is not being satisfied by the Outside Date; or |
| (iv) | there has occurred a Company Material Adverse Effect which is incapable of being cured on or prior to the Outside Date. |
| (2) | The Party desiring to terminate this Agreement pursuant to this Section 7.2 (other than pursuant to Section 7.2(1)(a)) shall give notice of such termination to the other Party, specifying in reasonable detail the basis for such Party’s exercise of its termination right. |
Section 7.3 Effect of Termination/Survival
If this Agreement is terminated pursuant to Section 7.1 or Section 7.2, this Agreement shall become void and of no further force or effect without liability of any Party (or any Company Shareholder, director, officer, employee, agent, consultant or representative of such Party) to any other Party to this Agreement, except
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that: (a) in the event of termination under Section 7.1 as a result of the Effective Time occurring, Section 4.9 and shall survive for a period of six (6) years following such termination; and (b) in the event of termination under Section 7.2, this Section 7.3, and Section 8.2 through to and including Section 8.16, Section 4.6(5) and the provisions of the Confidentiality Agreement (in the case of the Confidentiality Agreement, pursuant to the terms set out therein) shall survive, and provided further that, subject to Section 8.4, nothing herein shall relieve any Party from any liability for any failure to consummate the transactions contemplated by this Agreement if required to pursuant to this Agreement and no Party shall be relieved of any liability for any wilful breach by it of this Agreement.
Section 7.4 Assignment of Amended and Restated Credit Agreement
In the event that the Company or a Subsidiary of the Company enters into a Superior Proposal Agreement, then the Company shall have the right, but not the obligation, to cause the Purchaser to assign the Amended and Restated Credit Agreement to the Superior Proposal Agreement Counter-Party (the “Debt Assignment”), with the consent of the Superior Proposal Agreement Counter-Party, by written notice of the Company to the Purchaser, provided that, such Debt Assignment shall be conditional upon the payment in full by the Superior Proposal Agreement Counter-Party to the Purchaser of all amounts owing under the Amended and Restated Credit Agreement. In the event that the Company sends such written notice of assignment, then the Purchaser will cooperate with the Company and the Superior Proposal Agreement Counter-Party to promptly document and effect the assignment of the Amended and Restated Credit Agreement to the Superior Proposal Agreement Counter-Party on terms that are consistent with those in respect of which the Prior Credit Agreement was assigned to the Purchaser, mutatis mutandis.
ARTICLE 8
GENERAL PROVISIONS
Section 8.1 Amendments
This Agreement and the Plan of Arrangement may, at any time and from time to time before or after the holding of the Company Meeting but not later than the Effective Time: (1) be amended in any way provided for in the Plan of Arrangement; or (2) be amended by mutual written agreement of the Parties, without further notice to or authorization on the part of the Company Shareholders, and any such amendment may, subject to the Interim Order and Final Order and Laws, without limitation:
| (a) | change the time for performance of any of the obligations or acts of the Parties; |
| (b) | modify any representation or warranty contained in this Agreement or in any document delivered pursuant to this Agreement; |
| (c) | modify any of the covenants contained in this Agreement and waive or modify performance of any of the obligations of the Parties; and/or |
| (d) | modify any mutual conditions contained in this Agreement. |
Section 8.2 Termination Amount
| (1) | Despite any other provision in this Agreement relating to the payment of fees and expenses, including the payment of brokerage fees if a Company Termination Amount Event occurs, the Company shall pay to the Purchaser the Termination Amount in accordance with Section 8.2(2) as proceeds of disposition of the Purchaser’s rights under this Agreement. |
For the purposes of this Agreement:
| (a) | “Termination Amount” means $8,000,000; |
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| (b) | “Company Termination Amount Event” means the termination of this Agreement: |
| (i) | by the Purchaser, pursuant to Section 7.2(1)(d)(ii)(A) or Section 7.2(1)(d)(ii)(B) [Change in Recommendation]; |
| (ii) | by the Company, pursuant to Section 7.2(1)(c)(ii) [Superior Proposal]; |
| (iii) | by (A) the Company or the Purchaser pursuant to Section 7.2(1)(b)(i) [Failure of Company Shareholders to Approve], or Section 7.2(1)(b)(iii) [Occurrence of Outside Date], or (B) the Purchaser pursuant to Section 7.2(1)(d)(i) [Company Breach of Representation or Warranty or Failure to Perform Covenant] due to a wilful breach or fraud of the Company, if: |
| (A) | following the date hereof and prior to such termination, an Acquisition Proposal is made or publicly announced by any Person (other than the Purchaser or any of its affiliates or any Person acting jointly or in concert with any of the foregoing); and |
| (B) | within twelve (12) months following the date of such termination, (i) an Acquisition Proposal is consummated by the Company or any of its Subsidiaries, or (ii) the Company or any of its Subsidiaries, directly or indirectly, in one or more transactions, enters into a Contract (other than a confidentiality or standstill agreement) in respect of an Acquisition Proposal and such Acquisition Proposal is later consummated (whether or not within twelve (12) months after such termination); or |
| (iv) | by the Purchaser pursuant to Section 7.2(1)(d)(ii)(C) [Material Breach of Non-Solicit], if, within twelve (12) months following the date of such termination, (i) an Acquisition Proposal is consummated by the Company or any of its Subsidiaries, or (ii) the Company or any of its Subsidiaries, directly or indirectly, in one or more transactions, enters into a Contract (other than a confidentiality or standstill agreement) in respect of an Acquisition Proposal and such Acquisition Proposal is later consummated (whether or not within twelve (12) months after such termination). |
For purposes of the foregoing, the term “Acquisition Proposal” shall have the meaning assigned to such term in Section 1.1, except that references to “20% or more” shall be deemed to be references to “50% or more”.
| (2) | If a Company Termination Amount Event occurs due to a termination of this Agreement by the Company pursuant to Section 7.2(1)(c)(ii), the Termination Amount shall be paid prior to or concurrently with the occurrence of such Company Termination Amount Event. If a Company Termination Amount Event occurs due to a termination of this Agreement by the Purchaser pursuant to Section 7.2(1)(d)(ii)(A) or (B) the Termination Amount shall be paid within two (2) Business Days following such Termination Amount Event. If a Company Termination Amount Event occurs in the circumstances set out in Section 8.2(1)(b)(iii) or Section 8.2(1)(b)(iv), the Termination Amount shall be paid upon the consummation of the Acquisition Proposal in respect of the Company referred to therein. Any Termination Amount shall be paid (less any applicable withholding Tax) by the Company to the Purchaser (or as the Purchaser may direct by notice in writing), by wire transfer in immediately available funds to an account designated by the Purchaser. For greater certainty, in no event shall the Company be obligated to pay the Termination Amount on more than one occasion. |
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Section 8.3 Expenses
If this Agreement is terminated by the Purchaser pursuant to (i) Section 7.2(1)(d)(i) [Company Breach of Representation or Warranty or Failure to Perform Covenant] resulting from a breach of a covenant or (ii) Section 7.2(1)(d)(ii)(C) [Material Breach of Non-Solicit], then the Company will, within two Business Days of such termination, reimburse the Purchaser for all of its reasonable documented out-of-pocket costs and expenses incurred in connection with the transactions contemplated hereby up to an aggregate amount of $1,000,000 (“Expense Reimbursement”). The Company shall only be obligated to pay the Expense Reimbursement to the Purchaser once. No Expense Reimbursement pursuant to this Section 8.3 shall be payable by the Company to the Purchaser if the Company has paid the Termination Fee, and the Company shall only be required to pay the difference between the Termination Fee and the Expense Reimbursement if, after the Company has paid the Expense Reimbursement to the Purchaser, the Company becomes obligated to pay the Termination Fee.
Except as otherwise expressly provided in this Agreement, the Parties agree that all out-of-pocket expenses of the Parties relating to this Agreement or the transactions contemplated hereby, including legal fees, accounting fees, financial advisory fees, regulatory filing fees, stock exchange fees, all disbursements of advisors and printing and mailing costs, shall be paid by the Party incurring such expenses. For greater certainty, nothing in this Agreement will prevent or limit the Company from paying the reasonable fees and disbursements (plus applicable Taxes, if any) of its legal, accounting and financial advisors which are incurred by the Company in connection with the transactions contemplated hereby.
Section 8.4 Acknowledgment
Each Party acknowledges that the agreements contained in Section 8.2 and Section 8.3 are an integral part of the transactions contemplated by this Agreement, and that without these agreements the other Party would not enter into this Agreement, and that the amounts set out in Section 8.2 and Section 8.3 represent liquidated damages which are a genuine pre-estimate of the damages, including opportunity costs, which either Party will suffer or incur as a result of the event giving rise to such damages and resultant termination of this Agreement, and is not a penalty. Each Party irrevocably waives any right it may have to raise as a defence that any such liquidated damages are excessive or punitive. In the event the amounts set out in Section 8.2 and Section 8.3 are paid to the Purchaser (or as it directs), no other amounts will be due and payable as damages or otherwise by the Company, and the Purchaser accepts that such payments are the maximum aggregate amount that the Company shall be required to pay in lieu of any damages or any other payments or remedy which the Purchaser may be entitled to in connection with this Agreement or the transactions contemplated by this Agreement; provided, however, that this limitation shall not apply in the event of a wilful breach by the Company of its representations, warranties, covenants or agreements set forth in this Agreement (which breach and liability therefore shall not be affected by termination of this Agreement or any payment of the amount set out in Section 8.2 and Section 8.3, as applicable).
Section 8.5 Notices
Any notice, or other communication given regarding the matters contemplated by this Agreement must be in writing, sent by personal delivery, courier or facsimile (but not by electronic mail) and addressed:
to the Purchaser at:
SNDL Inc.
919 - 11 Avenue SW, Suite 200
Calgary, AB T2R 1P3
Attention: [Notice Information Redacted]
Email: [Email Address Redacted]
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with a copy to:
McCarthy Tétrault LLP
66 Wellington Street West, Suite 5300
Toronto, ON M5K 1E6
Attention: Ranjeev Dhillon and Rami Chalabi
Email: rdhillon@mccarthy.ca and rchalabi@mccarthy.ca
to the Company at:
The Valens Company Inc.
96 Spadina Ave, Suite 400
Toronto ON, M5V 2J6
Attention: [Notice Information Redacted]
Email: [Email Address Redacted]
with a copy to:
Stikeman Elliott LLP
5300 Commerce Court West
199 Bay Street
Toronto, OM M5L 1B9
Attention: Donald Belovich
Email: dbelovich@stikeman.com
Any notice or other communication is deemed to be given and received (i) if sent by personal delivery or same day courier, 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, (ii) if sent by overnight courier, on the Business Day following the date it was sent, (iii) if sent by facsimile, on the date of the confirmation of transmission by the originating facsimile, if such confirmation is made prior to 4:00 p.m. (local time in place of receipt) and otherwise on the next Business Day, or (iv) if sent by electronic mail, when the sender receives an email from the recipient acknowledging receipt, provided that an automatic “read receipt” does not constitute acknowledgment of an email for purposes of this Section 8.5. Sending a copy of a notice or other communication to a Party’s legal counsel as contemplated above is for information purposes only and does not constitute delivery of the notice or other communication to that Party. The failure to send a copy of a notice or other communication to legal counsel does not invalidate delivery of that notice or other communication to a Party.
Section 8.6 Time of the Essence
Time is of the essence in this Agreement.
Section 8.7 Injunctive Relief
The Parties agree that irreparable harm would occur for which money damages 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. It is accordingly agreed that the Parties shall be entitled to injunctive and other equitable relief to prevent breaches or threatened breaches of this Agreement, and to enforce compliance with the terms of this Agreement, without any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or other equitable relief, this being in addition to any other remedy to which the Parties may be entitled at Law or in equity.
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Section 8.8 Third Party Beneficiaries
| (1) | Except as provided in Section 2.4(5) and Section 4.9 which, without limiting their terms, are intended as stipulations for the benefit of the third parties mentioned in such provisions (such third parties referred to in this Section 8.8 as the “Third Party Beneficiaries”) and except for the rights of the Affected Securityholders to receive the applicable consideration following the Effective Time pursuant to the Arrangement (for which purpose the Company hereby confirms that it is acting as agent on behalf of the Affected Securityholders), the Parties intend that this Agreement will not benefit or create any right or cause of action in favour of any Person, other than the Parties and that 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. |
| (2) | Despite the foregoing, the Parties acknowledge to each of the Third Party Beneficiaries their direct rights against the applicable Party under Section 2.4(5) and Section 4.9, which are intended for the benefit of, and shall be enforceable by, each Third Party Beneficiary, his or her heirs and his or her legal representatives, and for such purpose, the Company confirms that it is acting as agent on their behalf, and agrees to enforce such provisions on their behalf. |
Section 8.9 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 8.10 Entire Agreement
This Agreement, together with the Company Disclosure Letter and the Confidentiality Agreement, constitute the entire agreement between the Parties with respect to the transactions contemplated by this Agreement and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties. There are no representations, warranties, covenants, conditions or other agreements, express or implied, collateral, statutory or otherwise, between the Parties in connection with the subject matter of this Agreement, except as specifically set forth in this Agreement. 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 8.11 Successors and Assigns
| (1) | This Agreement becomes effective only when executed by the Company and the Purchaser. After that time, it will be binding upon and enure to the benefit of the Company, the Purchaser and their respective successors and permitted assigns. |
| (2) | Neither this Agreement nor any of the rights or obligations under this Agreement are assignable or transferable by any Party without the prior written consent of the other Party, except that the Purchaser may assign all or any portion of its rights and obligations under this Agreement to any of its direct or indirect wholly-owned Subsidiaries provided that such assignment does not delay the consummation of the transactions contemplated by this Agreement, but no such assignment shall relieve the Purchaser of its obligations hereunder. |
Section 8.12 Severability
If any provision of this Agreement is determined to be illegal, invalid or unenforceable by any court of competent jurisdiction, that provision will be severed from this Agreement and the remaining provisions shall remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, 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 an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible.
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Section 8.13 Governing Law
| (1) | This Agreement will be governed by and interpreted and enforced in accordance with the Laws of the Province of Ontario and the federal Laws of Canada applicable therein. |
| (2) | Each Party irrevocably attorns and submits to the non-exclusive jurisdiction of the Ontario courts situated in the City of Toronto and waives objection to the venue of any proceeding in such court or that such court provides an inconvenient forum. |
Section 8.14 Rules of Construction
The Parties to this Agreement waive the application of any Law or rule of construction providing that ambiguities in any agreement or other document shall be construed against the party drafting such agreement or other document.
Section 8.15 No Liability
No director or officer of the Purchaser shall have any personal liability whatsoever to the Company under this Agreement or any other document delivered in connection with the transactions contemplated hereby on behalf of the Purchaser. No director or officer of the Company or any of its Subsidiaries shall have any personal liability whatsoever to the Purchaser under this Agreement or any other document delivered in connection with the transactions contemplated hereby on behalf of the Company or any of its Subsidiaries.
Section 8.16 Counterparts
This Agreement may be executed in any number of counterparts (including counterparts by facsimile) and all such counterparts taken together shall be deemed to constitute one and the same instrument. The Parties shall be entitled to rely upon delivery of an executed facsimile or similar executed electronic copy of this Agreement, and such facsimile or similar executed electronic copy shall be legally effective to create a valid and binding agreement between the Parties.
[Remainder of page intentionally left blank. Signature pages follow.]
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IN WITNESS WHEREOF the Parties have executed this Agreement as of the date first written above.
| SNDL INC. | ||
| By: | (signed) “Zachary George” | |
| Name: Zachary George Title: Chief Executive Officer | ||
| THE VALENS COMPANY INC. | ||
| By: | (signed) “Ashley McGrath” | |
| Name: Ashley McGrath Title: Independent Director | ||
SCHEDULE A
PLAN OF ARRANGEMENT
(See Attached.)
A-1
PLAN OF ARRANGEMENT
UNDER SECTION 192
OF THE
CANADA BUSINESS CORPORATIONS ACT
ARTICLE 1
INTERPRETATION
Section 1.1 Definitions
Unless indicated otherwise or there is something in the subject matter or context inconsistent therewith, where used in this Plan of Arrangement, capitalized terms used but not defined shall have the meanings specified in the Arrangement Agreement and the following terms shall have the following meanings (and grammatical variations of such terms shall have corresponding meanings):
“Affected Securityholder” has the meaning specified in Section 7.3.
“Arrangement” means the arrangement under section 192 of the CBCA on the terms and subject to the conditions set out in this Plan of Arrangement, subject to any amendments or variations to this Plan of Arrangement made in accordance with the terms of the Arrangement Agreement and this Plan of Arrangement or made at the direction of the Court in the Final Order with the prior written consent of the Company and the Purchaser, each acting reasonably.
“Arrangement Agreement” means the arrangement agreement made as of August 22, 2022 between the Company and the Purchaser as it may be amended, supplemented or otherwise modified from time to time in accordance with its terms and, where applicable, to the Schedules thereto and the Company Disclosure Letter.
“Arrangement Resolution” means the special resolution to approve this Plan of Arrangement to be considered at the Company Meeting by the Company Shareholders, substantially in the form set out in Schedule B to the Arrangement Agreement.
“Articles of Arrangement” means the articles of arrangement of the Company to be filed in respect of the Arrangement required by subsection 192(6) of the CBCA to give effect to the Arrangement, such articles to be filed with the Director after the Final Order has been granted and all other conditions precedent to the Arrangement have been satisfied or waived in accordance with the terms of the Arrangement Agreement, which shall include this Plan of Arrangement and Final Order otherwise be in a form and content satisfactory to the Company and the Purchaser, each acting reasonably.
“Business Day” means any day of the year, other than a Saturday, Sunday or any day on which major banks are closed for business in Toronto, Ontario or Calgary, Alberta.
“CBCA” means the Canada Business Corporations Act.
“Certificate of Arrangement” means the Certificate of Arrangement to be issued by the Director pursuant to subsection 192(7) of the CBCA in respect of the Articles of Arrangement giving effect to the Arrangement.
“Company” means The Valens Company Inc., a corporation existing under the laws of Canada.
“Company Circular” means the notice of the Company Meeting and accompanying management information circular, including all schedules, appendices and exhibits to, and information incorporated by reference in, such management information circular, to be sent to Company Shareholders in connection with the Company Meeting, as amended, supplemented or otherwise modified from time to time in accordance with the terms of the Arrangement Agreement.
A-2
“Company Incentive Award Plan” means the Company’s omnibus long term incentive plan adopted by the Board and effective as of May 11, 2020 and approved by the Shareholders on June 12, 2020.
“Company Meeting” means the special meeting of Company Shareholders, including any adjournment or postponement thereof in accordance with the terms of the Arrangement Agreement, to be called and held in accordance with the Interim Order to consider the Arrangement Resolution and for any other purpose as may be set out in the Company Circular and agreed to in writing by the Purchaser, acting reasonably.
“Company Optionholder” means a holder of Company Options and/or Legacy Options.
“Company Options” means the outstanding stock options of the Company granted pursuant to the Company Incentive Award Plan entitling the holder thereof to receive Company Shares, subject to the terms and conditions of the Company Incentive Award Plan.
“Company Share” means a common share in the capital of the Company.
“Company Shareholders” means the registered and/or beneficial holders of the Company Shares, as the context requires.
“Company Warrant Indenture” means a warrant indenture under which any of the outstanding Company Warrants were issued.
“Company Warrantholder” means a holder of Company Warrants.
“Company Warrants” means the outstanding warrants to purchase Company Shares, which, for greater certainty, includes all outstanding broker warrants entitling the holder thereof to purchase Company Shares.
“Consideration” means, with respect to each Company Share, 0.3334 of a Purchaser Share issuable pursuant to this Plan of Arrangement.
“Court” means the Superior Court of Ontario (Commercial List), or other court as applicable.
“Depositary” means such Person as the Company may appoint to act as depositary in relation to the Arrangement, with the approval of the Purchaser, acting reasonably.
“Director” means the Director appointed pursuant to section 260 of the CBCA.
“Dissent Rights” has the meaning specified in Section 6.1(a).
“Dissenting Holder” means any registered Company Shareholder who is entitled to and does duly and validly exercise its Dissent Rights and has not withdrawn or been deemed to have withdrawn such exercise of Dissent Rights, but only in respect of the Company Shares in respect of which Dissent Rights are validly exercised by such registered Company Shareholder.
“Effective Date” means the date shown on the Certificate of Arrangement giving effect to the Arrangement.
“Effective Time” means 12:01 a.m. (Toronto time) on the Effective Date, or such other time as the Parties agree to in writing before the Effective Date.
“Exchange Ratio” means 0.3334.
“Final Order” means the order of the Court, in a form acceptable to the Parties, each acting reasonably, approving the Arrangement pursuant to subsection 192(3) of the CBCA, after a hearing upon the procedural and substantive fairness of the terms and conditions of the Arrangement, as such order may be amended by the Court (with the consent of each of the Parties, acting reasonably) at any time prior to the Effective Date or as such order may be affirmed or amended on appeal (provided that any such amendment is satisfactory to each of the Parties, acting reasonably).
A-3
“Governmental Entity” means (i) any international, multinational, national, federal, provincial, state, territorial, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, commissioner, board, bureau, minister, ministry, governor in council, cabinet, agency or instrumentality, domestic or foreign, (ii) any subdivision, agency, commission, board, agent or authority of any of the foregoing, (iii) any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing, (iv) any stock exchange or (v) any arbitration panel or arbitrator deciding or resolving contractual disputes or interpreting any provisions of a Contract.
“Interim Order” means the interim order of the Court providing for, among other things, the calling and holding of the Company Meeting, as such order may be amended by the Court with the consent of the Company and the Purchaser, each acting reasonably.
“Law” means, with respect to any Person, any and all applicable law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, Award, order, injunction, judgment, decree, direction, decision, ruling, notice or other similar requirement, whether domestic or foreign, enacted, adopted, promulgated, rendered, issued, ordered or applied by a Governmental Entity that is binding upon or applicable to such Person or its business, undertaking, property or securities, and to the extent that they have the force of law, policies, guidelines, notices and protocols of any Governmental Entity, as amended unless expressly specified otherwise.
“Legacy Option” means the outstanding stock options of the Company granted pursuant to the Legacy Option Plan, entitling the holder thereof to receive Company Shares, subject to the terms and conditions of the Legacy Option Plan.
“Legacy Option Plan” means the Company’s former incentive plan authorized by the Board on May 18, 2017, and approved by the Shareholders on August 4, 2017 and again on October 5, 2018, as amended.
“Letter of Transmittal” means the letter of transmittal to be sent by the Company to Company Shareholders in connection with the Arrangement in the form enclosed with the Company Circular pursuant to which the Company Shareholders are required to deliver the certificates representing the Company Shares in order to receive the Consideration in accordance with this Plan of Arrangement.
“Lien” means any mortgage, charge, pledge, encumbrance, hypothec, security interest, prior claim or lien (statutory or otherwise), in each case, whether contingent or absolute.
“Parties” means, collectively, the Company and the Purchaser and “Party” means either of them.
“Person” includes any individual, partnership, association, body corporate, organization, trust, estate, trustee, executor, administrator, legal representative, government (including Governmental Entity), syndicate or other entity, whether or not having legal status.
“Plan of Arrangement” means this Plan of Arrangement proposed under section 192 of the CBCA, and any amendments or variations to this Plan of Arrangement made in accordance with the Arrangement Agreement or Section 8.1 of this Plan of Arrangement or made at the direction of the Court in the Final Order with the prior written consent of the Company and the Purchaser, each acting reasonably.
“Purchaser” means SNDL Inc., a corporation existing under the laws of Alberta.
“Purchaser Share” means a common share in the capital of the Purchaser.
“Replacement Option” has the meaning specified in Section 3.1(b).
A-4
“Tax Act” means the Income Tax Act (Canada) and the regulations promulgated thereunder, as may be amended from time to time.
“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.
“U.S. Securities Act” means the United States Securities Act of 1933, as amended, including the rules and regulations promulgated thereunder.
“U.S. Tax Code” means the United States Internal Revenue Code of 1986, as amended.
“U.S. Treasury Regulations” means the treasury regulations promulgated under the U.S. Tax Code.
Section 1.2 Currency
All references to dollars, or to $, are expressed in Canadian currency except as otherwise indicated.
Section 1.3 Gender and Number
Any reference to gender includes all genders. Words importing the singular number only shall include the plural and vice versa.
Section 1.4 Phrasing
The words (i) “including”, “includes” and “include” mean “including (or includes or include) without limitation”, (ii) “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,” and (iii) unless stated otherwise “Article” and “Section” followed by a number mean and refer to the specified Article or Section of this Plan of Arrangement.
Section 1.5 References to Persons
Any reference to a Person includes its heirs, administrators, executors, legal personal, representatives, successors and permitted assigns.
Section 1.6 Statutes
Any reference to a statute refers to such statute and all rules and regulations made under it, as it or they may have been or may from time to time be amended or re-enacted, unless stated otherwise.
Section 1.7 Non-Business Days
A period of time is to be computed as beginning on the day following the event that began the period and ending at 4:30 p.m. (Toronto time) on the last day of the period, if the last day of the period is a Business Day, or at 4:30 p.m. (Toronto time) on the next Business Day if the last day of the period is not a Business Day. If the date on which any action is required or permitted to be taken under this Agreement by a Person is not a Business Day, such action shall be required or permitted to be taken on the next succeeding day which is a Business Day.
Section 1.8 Time References
References to time are to local time, Toronto, Ontario, unless otherwise specified.
A-5
Section 1.9 Time
Time is of the essence in this Plan of Arrangement in every matter or action contemplated hereunder.
ARTICLE 2
BINDING EFFECT
Section 2.1 Arrangement Agreement
This Plan of Arrangement is made pursuant and subject to the provisions of and forms part of the Arrangement Agreement.
Section 2.2 Binding Effect
This Plan of Arrangement and the Arrangement, upon the filing of the Articles of Arrangement and the issuance of the Certificate of Arrangement, will become effective, and be binding on the Purchaser, the Company, all Company Shareholders, including Dissenting Holders, Company Optionholders, Company Warrantholders, the registrar and transfer agent of the Company, the Depositary and all other Persons, in each case, at and after, the Effective Time without any further act or formality required on the part of any Person, except as expressly provided herein. No portion of this Plan of Arrangement shall take effect with respect to any party or Person until the Effective Time.
Section 2.3 Filing of the Articles of Arrangement
The Articles of Arrangement and the Certificate of Arrangement shall be filed with the Director and issued, respectively, with the purpose and intent that none of the provisions of this Plan of Arrangement shall become effective unless all of the provisions of this Plan of Arrangement become effective in the sequence provided herein with respect to the Arrangement in its entirety. The Certificate of Arrangement shall be conclusive evidence that the Arrangement has become effective and that each of the provisions of Article 3 has become effective in the sequence set forth herein.
Section 2.4 The Arrangement
Commencing at the Effective Time, each of the steps, events or transactions set out below shall, except for steps, events or transactions deemed to occur concurrently with other steps, events or transactions as set out below, occur and shall be deemed to occur consecutively in two minute intervals in the following order (or in such other manner, order or times as the Parties may agree in writing) without any further act or formality, except as otherwise provided herein.
ARTICLE 3
ARRANGEMENT
Section 3.1 Arrangement
Pursuant to the Arrangement, commencing at the Effective Time, the following transactions shall occur and shall be deemed to occur without any further authorization, act or formality in the following order:
| (a) | at the Effective Time, all Company Shares held by Dissenting Holders shall be deemed to have been transferred (free and clear of all Liens) to the Company and cancelled in consideration for a debt claim against the Company (to be settled by the Company with its own available funds on hand and not funds directly or indirectly provided by the Purchaser or any affiliate of the Purchaser) for the amount determined under Section 6.1, |
A-6
| (i) | such Dissenting Holders shall cease to be the holders of such Company Shares and to have any rights as Company Shareholders other than the right to be paid the fair value for such Company Shares as set out in Section 6.1; and |
| (ii) | the name of each such Dissenting Holder shall be removed as Company Shareholder, as applicable, from the registers of Company Shareholders, as applicable, maintained by or on behalf of Company in respect of such Company Shares and such Company Shares shall be cancelled and cease to be outstanding; and |
| (b) | each Company Share held by a Company Shareholder (other than (i) a Dissenting Holder or (ii) the Purchaser or any of its Subsidiaries) shall, without any further action by or on behalf of a Company Shareholder, be transferred (free and clear of all Liens) to the Purchaser in consideration for the Consideration; |
| (c) | notwithstanding the terms of the Company Incentive Award Plan or the Legacy Option Plan and subject to Section 7.1(g), each Company Option and Legacy Option outstanding at the Effective Time, whether vested or unvested, shall be deemed to be vested to the fullest extent, shall be exchanged for an option (a “Replacement Option”) to purchase from the Purchaser the number of Purchaser Shares (rounded down to the nearest whole number) equal to: (A) the Exchange Ratio multiplied by: (B) the number of Company Shares subject to such Company Option or Legacy Option, as applicable, immediately prior to the Effective Time, at an exercise price per Purchaser Share (rounded up to the nearest whole cent) equal to: (C) the exercise price per Company Share otherwise purchasable pursuant to such Company Option or Legacy Option, as applicable, immediately prior to the Effective Time, divided by (D) the Exchange Ratio, exercisable until the original expiry date of such Company Option or Legacy Option, as applicable. Except as set out above, all other terms and conditions of such Replacement Option, including the conditions to and manner of exercising, will be the same as the Company Option or Legacy Option, as applicable, so exchanged, and shall be governed by the terms of the Company Incentive Award Plan or the Legacy Option Plan, as applicable, as assumed by the Purchaser, and any document evidencing a Company Option or Legacy Option, as applicable, shall thereafter evidence and be deemed to evidence such Replacement Option; |
Section 3.2 U.S. Tax Matters
| (a) | The Arrangement is intended to qualify as a reorganization within the meaning of section 368(a) of the U.S. Tax Code and the U.S. Treasury Regulations promulgated thereunder, and this Plan of Arrangement together with the Arrangement Agreement, is intended to be, and is hereby adopted as a “plan of reorganization” within the meaning of the U.S. Treasury Regulations promulgated under section 368 of the U.S. Tax Code. Each Party agrees to treat the Arrangement as a reorganization within the meaning of section 368(a) of the U.S. Tax Code for all United States federal income tax purposes, to treat the Arrangement Agreement, together with this Plan of Arrangement, as a “plan of reorganization” within the meaning of the U.S. Treasury Regulations promulgated under section 368 of the U.S. Tax Code, and to not take any position on any Tax Return or otherwise take any Tax reporting position inconsistent with such treatment. |
| (b) | Neither Party makes any representation, warranty, or covenant to the other Party or to any Company Shareholder, Purchaser Shareholder or any other Person regarding the United States tax treatment of the Arrangement, including, but not limited to, whether the Arrangement will qualify as a reorganization within the meaning of section 368(a) of the U.S. Tax Code or as a tax-deferred transaction for purposes of any United States state or local income tax Law. |
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ARTICLE 4
ARRANGEMENT MECHANICS
Section 4.1 Transfer of Securities
With respect to the Company Shareholders (other than (i) Dissenting Holders or (ii) the Purchaser or any of its Subsidiaries) immediately before the Effective Time, upon and at the time of the transfer of Company Shares effected pursuant to Section 3.1(b):
| (a) | each such Company Shareholder shall cease to be a Company Shareholder and to have any rights other than the right to receive the Consideration issuable to such Company Shareholder under this Plan of Arrangement, and the name of each such Company Shareholder shall be removed from the register of Company Shareholders maintained by or on behalf of Company; |
| (b) | the Purchaser shall become the transferee (free and clear of all Liens) of the Company Shares transferred to the Purchaser by each such Company Shareholder and shall be added to the register of Company Shareholders maintained by or on behalf of Company; and |
| (c) | the Purchaser shall cause to be issued, paid and delivered the aggregate Consideration issuable, payable and deliverable to each such Company Shareholder, and the name of each such Company Shareholder shall be added to the register of holders of Purchaser Shares maintained by or on behalf of Purchaser, as the case may be. |
Section 4.2 No Fractional Purchaser Shares
In no event shall a Company Shareholder be entitled to a fractional Purchaser Share. Where the aggregate number of Purchaser Shares to be issued to a Company Shareholder pursuant to this Plan of Arrangement would otherwise result in a fraction of a Purchaser Share being issuable, the number of Purchaser Shares to be received by such Company Shareholder shall be rounded down to the next lesser whole number of Purchaser Shares. In calculating such fractional interests, all Company Shares registered in the name of a Company Shareholder or its nominee shall be aggregated.
ARTICLE 5
COMPANY WARRANTS
Section 5.1 Company Warrants
| (a) | In accordance with the terms of each of the Company Warrants and the applicable Warrant Indenture, each holder of a Company Warrant shall be entitled to receive (and such holder shall accept) upon the exercise of such holder’s Company Warrant, in lieu of Company Shares to which such holder was theretofore entitled upon such exercise, and for the same aggregate consideration payable therefor, the Consideration which the holder would have been entitled to receive as a result of the transactions contemplated by this Arrangement if, immediately prior to the Effective Time, such holder had been the registered holder of the number of Company Shares to which such holder would have been entitled if such Warrant Holder had exercised such holder’s Company Warrants immediately prior to the Effective Time. Each Company Warrant shall continue to be governed by and be subject to the terms of the applicable Company Warrant certificate and the applicable Warrant Indenture, subject to any supplemental exercise documents issued by the Purchaser to holders of Company Warrants to facilitate the exercise of the Company Warrants and the payment of the corresponding portion of the exercise price thereof. Upon the exercise of a Company Warrant following the Effective Time, the Purchaser shall deliver the Purchaser Shares needed to settle such exercise. Holders of Company Warrants will be advised that |
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| securities issuable upon the exercise of the Company Warrants, if any, will be “restricted securities” within the meaning of Rule 144 under the U.S. Securities Act, and may only be offered, sold or otherwise transferred pursuant to an effective registration statement or a then available exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws, if any. |
| (b) | Upon any exercise of a Company Warrant following the Effective Time, the Purchaser shall deliver the applicable number of Purchaser Shares required to settle such exercise. |
ARTICLE 6
RIGHTS OF DISSENT
Section 6.1 Rights of Dissent
| (a) | Registered Company Shareholders may exercise dissent rights with respect to the Company Shares held by such holders (“Dissent Rights”) in connection with the Arrangement pursuant to and in the manner set forth in section 190 of the CBCA, as modified by the Interim Order and this Section 6.1; provided that, notwithstanding subsection 190(5) of the CBCA, the written objection to the Arrangement Resolution referred to in subsection 190(5) of the CBCA must be received by the Company not later than 5:00 p.m. (Calgary time) five (5) Business Days immediately preceding the date of the Company Meeting (as it may be adjourned or postponed from time to time). |
| (b) | Dissenting Holders who duly exercise their Dissent Rights shall be deemed to have transferred the Company Shares held by them and in respect of which Dissent Rights have been validly exercised to the Company free and clear of all Liens, as provided in Section 3.1(a), and if they: |
| (i) | ultimately are entitled to be paid fair value for such Company Shares: (A) they shall be deemed not to have participated in the transactions in Article 3 (other than Section 3.1(a)); (B) will be entitled to be paid an amount equal to the fair value of such Company Shares by the Company (with Company funds and not funds directly or indirectly provided by the Purchaser or any affiliate of the Purchaser), which fair value shall be determined as of the close of business on the Business Day before the Arrangement Resolution was adopted; and (C) will not be entitled to any other payment or consideration, including any payment that would be payable under the Arrangement had such Dissenting Holder not exercised their Dissent Rights in respect of such Company Shares; or |
| (ii) | ultimately are not entitled, for any reason, to be paid fair value for such Company Shares, they shall: (A) be deemed to have participated in the Arrangement, commencing at the Effective Time, on the same basis as a non-Dissenting Holder of Company Shares. |
Section 6.2 Recognition of Dissenting Holders
| (a) | In no circumstances shall the Purchaser, the Company or any other Person be required to recognize a Person exercising Dissent Rights unless such Person is the registered holder of those Company Shares in respect of which such Dissent Rights are sought to be exercised. |
| (b) | For greater certainty, in no case shall the Purchaser, the Company or any other Person be required to recognize Dissenting Holders as holders of Company Shares in respect of which Dissent Rights have been validly exercised after the completion of the transfer under Section 3.1(a), and the names of such Dissenting Holders shall be deemed to be removed |
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| from the registers of holders of the Company Shares in respect of which Dissent Rights have been validly exercised at the same time as the events described in Section 3.1(a) occurs. In addition to any other restrictions under section 190 of the CBCA, Company Shareholders who vote or have instructed a proxyholder to vote such Company Shares in favour of the Arrangement Resolution (but only in respect of such Company Shares) shall not be entitled to exercise Dissent Rights. |
ARTICLE 7
PAYMENT AND CERTIFICATES
Section 7.1 Payment and Delivery of Purchaser Shares
| (a) | Prior to the Effective Time, and prior to the filing of the Articles of Arrangement with the Director, the Purchaser shall deposit or cause to be deposited with the Depositary certificates representing, or other evidence regarding the issuance of, the aggregate Consideration that the Company Shareholders are entitled to receive under the Arrangement (calculated without reference to whether any Company Shareholder has exercised Dissent Rights). |
| (b) | Forthwith following the Effective Time, the Purchaser shall cause to be issued to each Company Shareholder the number of Purchaser Shares required by Section 3.1(b). The Depositary shall deliver the Consideration in respect of those Company Shares that were transferred or deemed to be transferred pursuant to Section 3.1(b) which are held on a book-based basis, less any amounts withheld pursuant to Section 6.3, in accordance with normal industry practice for payments relating to securities held on a book-based only basis. With respect to Company Shares not held on a book-based only basis, upon the surrender to the Depositary of a certificate, letter or other instrument, as applicable which, immediately prior to the Effective Time, represented outstanding Company Shares that were transferred or deemed to be transferred pursuant to Section 3.1(b), together with a duly completed and executed Letter of Transmittal and such additional documents and instruments as the Depositary may reasonably require, each Company Share represented by such surrendered certificate(s), letter(s) or other instrument(s) shall be entitled to receive in exchange therefor, and the Depositary shall deliver to the applicable Company Shareholder as directed in the Letter of Transmittal, as soon as practicable and in accordance with Section 4.1(c), the Consideration that such Company Shareholder is entitled to receive under this Plan of Arrangement, in each case less any amounts withheld pursuant to Section 7.3, and any certificate(s) so surrendered shall forthwith be cancelled. |
| (c) | Until surrendered as contemplated by this Section 7.1, each certificate that immediately prior to the Effective Time represented outstanding Company Shares (other than Shares held by the Purchaser or any of its Subsidiaries) shall be deemed, immediately after the completion of the transactions contemplated in Section 4.1(c) to represent only the right to receive upon such surrender the Consideration in lieu of such certificate as contemplated in Section 4.1(c). Subject to any applicable Laws relating to unclaimed personal property, any such certificate, letter or other instrument, as applicable, formerly representing outstanding Company Shares that is not duly surrendered on or before the sixth (6th) anniversary of the Effective Date shall cease to represent a claim by or interest of any former Company Shareholder of any kind or nature against or in the Purchaser or the Company. |
| (d) | Any payment made by way of cheque by the Depositary or by the Company pursuant to the Arrangement that has not been deposited or has been returned to the Depositary or the Company or that otherwise remains unclaimed, in each case, on or before the sixth (6th) anniversary of the Effective Time, and any right or claim to payment hereunder that remains outstanding on the sixth (6th) anniversary of the Effective Time shall cease to represent a right or claim of any kind or nature and the right of any Company Shareholder to receive the Consideration for any Company Shares pursuant to the Arrangement shall terminate and be deemed to be surrendered and forfeited to the Purchaser or the Company, as applicable, for no consideration. |
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| (e) | No Company Shareholder shall be entitled to receive any consideration with respect to Company Shares other than the Consideration to which such Company Shareholder is entitled to receive in accordance with Section 3.1 and no such Company Shareholder shall be entitled to receive any interest, dividends, premium or other payment in connection therewith, other than any declared but unpaid dividends with a record date prior to the Effective Date. No dividend or other distribution declared or made after the Effective Time with respect to Company Shares or with a record date on or after the Effective Date shall be delivered to the holder of any unsurrendered certificate, letter or other instrument which, immediately prior to the Effective Date, represented outstanding Company Shares. |
| (f) | All dividends payable with respect to any Purchaser Shares allotted and issued pursuant to this Plan of Arrangement for which a certificate, letter or other instrument has not been issued shall be paid or delivered to the Depositary to be held by the Depositary in trust for the registered holder thereof. All monies received by the Depositary shall be invested by it in interest-bearing trust accounts upon such terms as the Depositary may reasonably deem appropriate. The Depositary shall pay and deliver to any such registered holder, as soon as reasonably practicable after application therefor is made by the registered holder to the Depositary in such form as the Depositary may reasonably require, such dividends and any interest thereon to which such holder is entitled, net of applicable withholding and other taxes. |
| (g) | Notwithstanding Section 3.1(b), if it is determined in good faith that the excess of the aggregate fair market value of the Purchaser Shares subject to a Replacement Option immediately after the issuance of the Replacement Option over the aggregate option exercise price for such Purchaser Shares pursuant to the Replacement Option (such excess referred to as the “In the Money Amount” of the Replacement Option) would otherwise exceed the excess of the aggregate fair market value of the Company Shares subject to the Company Option in exchange for which the Replacement Option was issued over the aggregate option exercise price for such Company Shares pursuant to the Company Option (such excess referred to as the “In the Money Amount” of the Company Options or the Legacy Options, as applicable), the provisions of Section 3.1(b) shall be modified, with effect from the Effective Time, so that the In the Money Amount of the Replacement Option does not exceed the In the Money Amount of the Company Option in accordance with subsection 7(1.4) of the Tax Act but only to the extent necessary to eliminate such excess and in a manner that does not otherwise adversely affect the holder of the Replacement Option. |
Section 7.2 Lost Certificates
In the event any certificate, letter or other instrument which immediately prior to the Effective Time represented one or more outstanding Company Shares that were transferred pursuant to this Plan of Arrangement shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such certificate, letter or other instrument to be lost, stolen or destroyed, the Depositary will pay and deliver, in exchange for such lost, stolen or destroyed certificate, letter or other instrument, the Consideration which such holder is entitled to receive pursuant to the Arrangement (and any dividends or distributions with respect thereto) as determined in accordance with the Arrangement, net of amounts required to be withheld pursuant to Section 7.3, deliverable in accordance with such holder’s Letter of Transmittal. When authorizing such payment and delivery in exchange for any lost, stolen or destroyed certificate, letter or other instrument, the Person to whom the payment is made shall, as a condition precedent to the delivery thereof, give a bond satisfactory to each of the Company, the Purchaser and the Depositary (each acting reasonably) in such sum as the Purchaser may direct (acting reasonably) or otherwise indemnify the Purchaser, the Company and the Depositary in a manner satisfactory to the Purchaser, the Company and the Company (each acting reasonably) against any claim that may be made against the Purchaser, the Company or the Depositary with respect to the certificate, letter or other instrument alleged to have been lost, stolen or destroyed.
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Section 7.3 Withholding Rights
The Company, the Purchaser, the Depositary and any other Person shall be entitled to deduct and withhold from any consideration otherwise payable or otherwise deliverable to a Company Shareholder, including a Dissenting Holder, a Company Optionholder or a Company Warrantholder (each an “Affected Securityholder”), under this Plan of Arrangement or the Arrangement Agreement such amounts as the Company, the Purchaser, the Depositary or such other Person is permitted or required to deduct and withhold with respect to such payment under the Tax Act or any provision of any Laws in respect of Taxes. Any such amounts will be deducted, withheld and remitted from the consideration payable pursuant to this Plan of Arrangement and shall be treated for all purposes as having been paid to the Affected Securityholder, as applicable, in respect of which such deduction, withholding and remittance was made. Each of the Purchaser, the Company, the Depositary and any other Person that makes a payment or delivery to any Affected Securityholder hereunder shall be authorized to sell or otherwise dispose of such portion of the Purchaser Shares otherwise deliverable to such Affected Securityholder (if any) as is necessary to provide sufficient funds to enable it to comply with its deducting or withholding requirements and such party shall notify the applicable Affected Securityholder and remit any unapplied balance of the net proceeds of such sale to such Affected Securityholder.
Section 7.4 No Liens
Any exchange or transfer of securities pursuant to this Plan of Arrangement shall be free and clear of any Liens or other claims of third parties of any kind.
Section 7.5 Paramountcy.
From and after the Effective Time: (a) this Plan of Arrangement shall take precedence and priority over any and all Company Shares, Company Options, Legacy Options and Company Warrants issued or outstanding prior to the Effective Time, (b) the rights and obligations of the Company Shareholders, Company Optionholders, Company Warrantholders, the Company, the Purchaser, the Depositary and any transfer agent or other depositary therefor in relation thereto, shall be solely as provided for in this Plan of Arrangement, and (c) all actions, causes of action, claims or proceedings (actual or contingent and whether or not previously asserted) based on or in any way relating to any Company Shares, Company Options, Legacy Options and Company Warrants shall be deemed to have been settled, compromised, released and determined without liability except as set forth in this Plan of Arrangement.
ARTICLE 8
AMENDMENTS
Section 8.1 Amendments to Plan of Arrangement
In addition:
| (a) | The Company and the Purchaser may amend, modify and/or supplement this Plan of Arrangement at any time and from time to time prior to the Effective Time, provided that each such amendment, modification and/or supplement must (i) be set out in writing, (ii) be approved by the Company and the Purchaser, each acting reasonably, (iii) be filed with the Court and, if made following the Company Meeting, approved by the Court, and (iv) be communicated to the Company Shareholders if and as required by the Court. |
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| (b) | Any amendment, modification or supplement to this Plan of Arrangement may be proposed by the Company or the Purchaser at any time prior to the Company Meeting (provided that the Company or the Purchaser, as applicable, shall have consented thereto in writing) with or without any other prior notice or communication, and if so proposed and accepted by the Persons voting at the Company Meeting (other than as may be required under the Interim Order), shall become part of this Plan of Arrangement for all purposes. |
| (c) | Any amendment, modification or supplement to this Plan of Arrangement that is approved or directed by the Court following the Company Meeting shall be effective only if (i) it is consented to in writing by each of the Company and the Purchaser (in each case, acting reasonably), and (ii) if required by the Court, it is consented to by some or all of the Company Shareholders voting in the manner directed by the Court. |
| (d) | Any amendment, modification or supplement to this Plan of Arrangement may be made following the Effective Date unilaterally by the Purchaser, provided that it concerns a matter which, in the reasonable opinion of the Purchaser, is of an administrative nature required to better give effect to the implementation of this Plan of Arrangement and is not adverse to the financial or economic interests of any former Company Shareholders, Company Optionholder or Company Warrantholder. |
ARTICLE 9
FURTHER ASSURANCES
Section 9.1 Further Assurances
Notwithstanding that the transactions and events set out in this Plan of Arrangement shall occur and shall be deemed to occur in the order set out in this Plan of Arrangement without any further act or formality, each of the Parties shall make, do and execute, or cause to be made, done and executed, all such further acts, deeds, agreements, transfers, assurances, instruments or documents as may reasonably be required by either of them in order to further document or evidence any of the transactions or events set out in this Plan of Arrangement.
ARTICLE 10
U.S. SECURITIES LAW EXEMPTIONS
Section 10.1 U.S. Securities Law Exemptions
Notwithstanding any provision herein to the contrary, the Company and the Purchaser each agree that the Plan of Arrangement will be carried out with the intention that, and they will use their commercially reasonable best efforts to ensure that, all Consideration to be issued in exchange for Company Shares and all Replacement Options to be issued in exchange for Company Options, whether in the United States, Canada or any other country, will be issued by the Purchaser in reliance on the exemption from the registration requirements of the U.S. Securities Act provided by section 3(a)(10) thereof and available exemptions under applicable U.S. state securities laws, and pursuant to the terms, conditions and procedures set forth in the Arrangement Agreement and this Plan of Arrangement. In this regard, the implementation of this Plan of Arrangement shall be conditional upon the fulfillment, satisfaction or waiver of the conditions precedent set forth in the Arrangement Agreement, in each case in accordance with the terms thereof, including, without limitation, that (i) all necessary actions shall have been taken with respect to the Arrangement so that the issuance and distribution of the Consideration issued in exchange for Company Shares and the Replacement Options issued in exchange for Company Options pursuant to this Plan of Arrangement shall be exempt from registration under the U.S. Securities Act pursuant to the provisions of section 3(a)(10) of the U.S. Securities Act, and (ii) the Final Order will, if granted, after the Court considers the substantive and procedural fairness of the Arrangement to the Company Shareholders and the Company Optionholders constitute a basis for the exemption from the registration requirements of the U.S. Securities Act provided by section 3(a)(10) thereof with respect to the Consideration to be received by Company Shareholders in exchange for their Company Shares and the Replacement Options to be issued in exchange for Company Options pursuant to the Arrangement.
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SCHEDULE B
ARRANGEMENT RESOLUTION
BE IT RESOLVED THAT:
| 1. | The arrangement (the “Arrangement”) under Section 192 of the Canada Business Corporations Act involving, inter alios, the Valens Company Inc (the “Company”) and SDNL Inc. (“Sundial”), as more particularly described and set forth in the management information circular (the “Circular”) of the Company dated [•], 2022 accompanying the notice of special meeting of the shareholders of the Company (as the Arrangement may be amended, modified or supplemented in accordance with the arrangement agreement made as of August 22, 2022 between the Company and Sundial (the “Arrangement Agreement”)), is hereby authorized, approved and adopted. |
| 2. | The plan of arrangement of the Company (as it has been or may be amended, modified or supplemented in accordance with the Arrangement Agreement (the “Plan of Arrangement”)), the full text of which is set out in Appendix “[•]” to the Circular, is hereby authorized, approved and adopted. |
| 3. | The (i) Arrangement Agreement and all the transactions contemplated therein, (ii) actions of the directors of the Company in approving the Arrangement Agreement, and (iii) actions of the directors and officers of the Company in executing and delivering the Arrangement Agreement, and any amendments, modifications or supplements thereto, are hereby ratified and approved. |
| 4. | The Company be and is hereby authorized to apply for a final order from the Ontario Superior Court of Justice (Commercial List) (the “Court”) to approve the Arrangement on the terms set forth in the Arrangement Agreement and the Plan of Arrangement (as they may be amended, modified or supplemented and as described in the Circular or in accordance with the Interim Order (as defined in the Arrangement Agreement)). |
| 5. | Notwithstanding that this resolution has been passed (and the Arrangement adopted) by the shareholders of the Company or that the Arrangement has been approved by the Court, the directors of the Company are hereby authorized and empowered to, without notice to or approval of the shareholders of the Company, (i) amend, modify or supplement the Arrangement Agreement or the Plan of Arrangement to the extent permitted by the Arrangement Agreement and the Plan of Arrangement and (ii) subject to the terms of the Arrangement Agreement, not to proceed with the Arrangement and related transactions. |
| 6. | Any officer or director of the Company is hereby authorized and directed for and on behalf of the Company to execute and deliver for filing with the Director in accordance with the Canada Business Corporations Act, articles of arrangement and such other documents as are necessary or desirable to give effect to the Arrangement in accordance with the Arrangement Agreement, such determination to be conclusively evidenced by the execution and delivery of such articles of arrangement and any such other documents. |
| 7. | Any officer or director of the Company is hereby authorized and directed for and on behalf of the Company to execute or cause to be executed and to deliver or cause to be delivered all such other documents and instruments and to perform or cause to be performed all such other acts and things as such person determines may be necessary or desirable to give full effect to the foregoing resolution and the matters authorized thereby, such determination to be conclusively evidenced by the execution and delivery of such document or instrument or the doing of any such act or thing. |
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SCHEDULE C
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
| 1. | Organization and Qualification. The Company is a corporation duly incorporated and validly existing under the Laws of Canada and has the corporate power and authority to own and operate its assets and conduct its business as now owned and conducted. The Company is duly qualified, licensed or registered to carry on business and is in good standing in each jurisdiction in which its assets are located or it conducts business, except where the failure to be so qualified, licensed, registered or in good standing would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect. |
| 2. | Corporate Authorization. |
| (i) | The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement. The execution, delivery and performance by the Company of its obligations under this Agreement have been duly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or the consummation of the Arrangement other than: (A) approval by the Board of the Company Circular; (B) the Arrangement Resolution being approved and adopted by the Company Shareholders at the Company Meeting in accordance with the Interim Order and applicable Law; (C) filings with the Court in respect of the Arrangement; and (D) filing of the Articles of Arrangement with the Director. |
| (ii) | The Board has received the Fairness Opinion (true and complete copies of which, when executed and delivered in writing, will be delivered to the Purchaser by the Company), and as at the date of this Agreement, after receiving advice of outside legal and financial advisors, the Board has unanimously: (A) determined that the Consideration to be received by the Company Shareholders pursuant to the Arrangement is fair to such holders and that the Arrangement is in the best interests of the Company; (B) resolved to recommend that the Company Shareholders vote in favour of the Arrangement Resolution; and (C) authorized the entering into of this Agreement and the performance by the Company of its obligations under this Agreement, and no action has been taken to amend, or supersede such determinations, resolutions, or authorizations. |
| 3. | Execution and Binding Obligation. This Agreement has been duly executed and delivered by the Company, and constitutes a legal, valid and binding agreement of the Company enforceable against it in accordance with its terms subject only to any limitation under bankruptcy, insolvency or other Law affecting the enforcement of creditors’ rights generally and the discretion that a court may exercise in the granting of equitable remedies such as specific performance and injunction. |
| 4. | Governmental Authorization. The Company is not required to obtain any Authorization or other action by or in respect of, or filing with, or notification to, any Governmental Entity in connection with the execution, delivery and performance by the Company of its obligations under this Agreement and the consummation by the Company of the Arrangement other than: (i) the Interim Order and any approvals required by the Interim Order; (ii) the Final Order; (iii) filings with the Director under the CBCA; (iv) any actions or filings with the Securities Authorities, the Nasdaq or the TSX; (v) Authorization or other action by or in respect of, or filing with, or notification to, Governmental Entities; (vi) receipt of the Competition Act Approval; and (vii) any consents, waivers, approvals, actions or filings or notifications, including any Regulatory Approvals, the absence of which would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect. |
| 5. | Non-Contravention. The execution, delivery and performance by the Company of its obligations under this Agreement and the consummation of the Arrangement do not and will not (or would not with the giving of notice, the lapse of time or the happening of any other event or condition): |
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| (i) | contravene, conflict with, or result in any violation or breach of the Company’s Constating Documents; |
| (ii) | assuming compliance with the matters referred to in paragraph 4 above, contravene, conflict with or result in a violation or breach of any Law applicable to the Company; or |
| (iii) | except as disclosed in the Company Disclosure Letter, allow any Person to exercise any rights, require any consent or notice under or other action by any Person, or constitute a default under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which the Company or any of its Subsidiaries is entitled (including by triggering any rights of first refusal or first offer, change in control provisions or other restrictions or limitations) under any Material Contract or any material Authorization to the which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; |
with such exceptions, in the case of each of clauses (ii) and (iii) as would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect.
| 6. | Capitalization. |
| (i) | The authorized capital of the Company consists of an unlimited number of Company Shares and an unlimited amount of preferred shares. As of the close of business on August 19, 2022, there were 80,621,300 Company Shares, and no preferred shares of the Company outstanding. All outstanding Company Shares have been duly authorized and validly issued and are fully paid and non-assessable. |
| (ii) | The Company Disclosure Letter contains a list, as of the close of business on August 19, 2022, of the number of outstanding Company Options and the vesting dates of such Company Options. All of the Company Shares issuable upon the vesting and valid exercise of Company Options under the Company Incentive Award Plan, have been duly authorized and, upon issuance in accordance with their respective terms, will be validly issued as fully paid and non-assessable and are not and will not be subject to or issued in violation of, any pre-emptive rights. |
| (iii) | The Company Disclosure Letter contains a list, as of the close of business on August 19, 2022, of the number of outstanding Legacy Options and the vesting dates of such Legacy Options. All of the Company Shares issuable upon the vesting and valid exercise of Legacy Options under the Legacy Option Plan, have been duly authorized and, upon issuance in accordance with their respective terms, will be validly issued as fully paid and non-assessable and are not and will not be subject to or issued in violation of, any pre-emptive rights. |
| (iv) | The Company Disclosure Letter contains a list, as of the close of business on August 19, 2022, of the number of outstanding Company DSUs. |
| (v) | The Company Disclosure Letter contains a list, as of the close of business on August 19, 2022, of the number of outstanding Company RSUs and the vesting dates of such Company RSUs. All of the Company Shares issuable upon the vesting and settlement of rights under the Company Incentive Award Plan, including outstanding Company RSUs, have been duly authorized and, upon issuance in accordance with their respective terms, will be validly issued as fully paid and non-assessable and are not and will not be subject to or issued in violation of, any pre-emptive rights. |
| (vi) | There are currently no Company PSUs issued and outstanding and none will be issued at or before to the Effective Time. |
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| (vii) | The Company Disclosure Letter contains a list, as of the close of business on August 19, 2022, of the number of outstanding equity awards issuable pursuant to employment agreements or consulting agreements and the vesting dates of such equity awards. All of the Company Shares issuable upon the vesting and settlement of equity awards under an employment agreement or consulting agreement, have been duly authorized and, upon issuance in accordance with their respective terms, will be validly issued as fully paid and non-assessable and are not and will not be subject to or issued in violation of, any pre-emptive rights. |
| (viii) | The Company Disclosure Letter contains a list, as of the close of business on August 19, 2022, of the number of outstanding Company Warrants and the expiry dates of such Company Warrants. All of the Company Shares issuable upon exercise of the Company Warrants, have been duly authorized and, upon issuance in accordance with their respective terms, will be validly issued as fully paid and non-assessable and are not and will not be subject to or issued in violation of, any pre-emptive rights. |
| (ix) | Except for outstanding rights governed by the (A) Company Incentive Award Plan (B) Legacy Option Plan and pursuant to the Company Warrants, there are no issued, outstanding or authorized options, equity-based awards, warrants, calls, conversion, pre-emptive, redemption, repurchase, stock appreciation or other rights, or any other agreements, arrangements, instruments or commitments of any kind that obligate the Company or any of its Subsidiaries to, directly or indirectly, issue or sell any securities of the Company or any of its Subsidiaries, or give any Person a right to subscribe for or acquire, any securities of the Company or any of its Subsidiaries. |
| (x) | All outstanding securities of the Company have been issued in compliance with all Laws. |
| (xi) | There are no bonds, debentures or other evidences of indebtedness of the Company or any of its Subsidiaries outstanding having the right to vote (or that are convertible or exercisable for securities having the right to vote) with Company Shareholders on any matter. |
| (xii) | There are no issued, outstanding or authorized obligations on the part of the Company to repurchase, redeem or otherwise acquire any securities of the Company, or qualify securities for public distribution in Canada, the United States or elsewhere, or with respect to the voting or disposition of any securities of the Company. |
| (xiii) | All dividends or distributions on the voting or equity securities of the Company that have been declared or authorized have been paid in full. |
| 7. | Subsidiaries. |
| (i) | The Company Disclosure Letter sets forth a complete and accurate list as of the date of this Agreement of all Persons in which Company owns or controls, directly or indirectly, any material equity or proprietary interest indicating: (A) the name and jurisdiction of incorporation, organization or formation of such Person, and (B) the percentage owned directly or indirectly by the Company. |
| (ii) | Each Subsidiary of the Company is a corporation, partnership, trust or limited partnership, as the case may be, duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation, organization or formation, as the case may be, and has all requisite corporate, trust or partnership power and authority, as the case may be, to own, and operate its assets and conduct its business as now owned and conducted, except where the failure to be so organized, validly existing, qualified or in good standing, would not, individually or in the aggregate, be reasonably expected to have a Company Material Adverse Effect. |
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| (iii) | The Company is, directly or indirectly, the registered and beneficial owner of all of the outstanding shares of capital stock or other equity interests of each of its Subsidiaries, in each case free and clear of any Liens (other than Permitted Liens). All such shares of capital stock or other equity interests so owned by the Company have been validly issued and are fully paid and non-assessable, as the case may be. |
| 8. | Securities Law Matters. |
| (i) | The Company is a “reporting issuer” under applicable Securities Laws in the Provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador (the “Company Reporting Jurisdictions”). The Company Shares are posted and listed for trading on the TSX and Nasdaq. The Company is not in default of any requirements of any Securities Laws or the rules and regulations of the TSX or the Nasdaq. |
| (ii) | As of the date of this Agreement, the Company has not taken any action to cease to be a reporting issuer in any of the Company Reporting Jurisdictions nor has the Company received notification from any Securities Authority seeking to revoke the reporting issuer status of the Company. As of the date of this Agreement, no delisting, suspension of trading or cease trade or other order or restriction with respect to any securities of the Company is pending or, to the knowledge of the Company, threatened. |
| (iii) | The Company has, in all material respects, filed with the Securities Authorities all material forms, reports, schedules, statements and other documents required to be filed under Securities Laws since November 30, 2021. The documents comprising the Company Filings complied as filed in all material respects with applicable Law and did not, as of the date filed (or, if amended or superseded by a subsequent filing prior to the date of this Agreement, on the date of such subsequent filing), contain any Misrepresentation or any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading. The Company has not filed any confidential material change report which at the date of this Agreement remains confidential. To the knowledge of the Company, neither the Company nor any of the Company Filings is subject of an ongoing audit, review, comment or investigation by any Securities Authority, the TSX or the Nasdaq. |
| (iv) | The Company Shares are registered pursuant to Section 12(b) of the U.S. Exchange Act. The Company is a “foreign private issuer” as that term is defined under Rule 405 and Rule 3b-4 promulgated under the U.S. Securities Act and U.S. Exchange Act, respectively. The Company is not required to register as an “investment company” under the U.S. Investment Company Act. |
| 9. | Financial Statements. The Company’s audited consolidated financial statements for the year ended November 30, 2021 (including any of the notes or schedules thereto, the auditor’s report thereon and the related management’s discussion and analysis) and the unaudited consolidated interim financial statements filed since that date (including any of the notes or schedules thereto and related management’s discussion and analysis included in the Company Filings (collectively, the “Company Financial Statements”)) were prepared in accordance with IFRS (except (a) as otherwise indicated in such financial statements and the notes thereto or, in the case of audited financial statements, in the related report of the Company’s independent auditors, or (b) in the case of unaudited interim statements, are subject to normal period-end adjustments and may omit notes which are not required by applicable Laws in the unaudited statements), and fairly present in all material respects the consolidated statement of income, comprehensive income, financial position |
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| and cash flows of the Company and its Subsidiaries as of their respective dates and for the respective periods covered by such financial statements, subject to normal year-end adjustments and the absence of notes in the case of any interim financial statements. The Company does not intend to correct or restate, nor, to the knowledge of the Company is there any basis for any correction or restatement of, any aspect of any of the Company Financial Statements (other than any corrections or restatements required as a result of changes in IFRS that have retroactive application). There are no, nor are there any commitments to become a party to, any off-balance sheet transaction, arrangement, obligation (including contingent obligations) or other similar relationships of the Company or of any of its Subsidiaries with unconsolidated entities or other Persons. |
| 10. | Books and Records. Since the incorporation or amalgamation, as applicable, of the corresponding entity, all accounting and financial Books and Records have been maintained in all material respects in accordance with IFRS and fairly reflect, in all material respects in accordance with IFRS applied on a basis consistent with prior periods, the consolidated financial position of the Company and all the material transactions, acquisitions and dispositions of the Company and its Subsidiaries on a consolidated basis. |
| 11. | Disclosure Controls and Internal Control over Financial Reporting. Prior to the date of this Agreement: (A) there are no significant deficiencies in the design or operation of, or material weaknesses in, the internal controls over financial reporting of the Company that are reasonably likely to adversely affect the ability of the Company to record, process, summarize and report financial information, and (B) to the knowledge of the Company, there is no fraud, whether or not material, that involves management or other employees who have a significant role in the internal control over financial reporting of the Company. |
| 12. | Absence of Certain Changes. Since November 30, 2021, other than the transactions contemplated in this Agreement or as disclosed in the Company Filings, the business of the Company and its Subsidiaries has been conducted in the Ordinary Course consistent with past practices and there has not been any event, occurrence, development or state of circumstances or facts that has had or would be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect. |
| 13. | No Undisclosed Liabilities. There are no liabilities or obligations of the Company or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, other than liabilities or obligations: (i) disclosed in the audited consolidated financial statements of the Company for the years ended November 30, 2021 and 2020; (ii) incurred in the Ordinary Course since November 30, 2021; (iii) incurred in connection with the transactions contemplated in this Agreement; and (iv) that would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect. |
| 14. | Compliance with Laws. |
| (i) | The Company and each of its Subsidiaries is and has been in material compliance with all applicable Laws (including all Cannabis Laws) and including the U.S. Farm Bill and the U.S. Controlled Substances Act, 21 U.S.C. § 801, et. seq., specifically as interpreted by the U.S. Drug Enforcement Administration in information bulletins, letters, and sub-regulatory guidance and certain United States courts, except where violation of the Farm Bill or U.S. Controlled Substances Act individually or in the aggregate would be expected to have a Company Material Adverse Effect and, to the knowledge of the Company, none of the Company or the Subsidiaries is under any investigation with respect to, has been charged or threatened to be charged with, or has received notice of, any violation or potential violation of any Laws, except for failures to comply or violations that have not had or would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect. |
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| (ii) | None of the Company or its Subsidiaries have received any written notices or other written correspondence from any Governmental Entity (A) regarding any violation (or any investigation, inspection, audit, or other proceeding by any Governmental Entity involving allegations of any violation) of any Law (other than Environmental Laws), except for violations that have not had or would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect, or (B) of any circumstances that may have existed or currently exist which could lead to a loss, suspension, or modification of, or a refusal to issue, any material Authorization, other than where such correspondence would not reasonably be expected to have a Company Material Adverse Effect or significantly impact the ability of the Company to consummate the Arrangement. To the knowledge of the Company, no investigation, inspection, audit or other proceeding by any Governmental Entity involving allegations of any material violation of any Law (other than Environmental Laws) is threatened or contemplated. |
| (iii) | Other than the Green Roads Operations, neither the Company nor its Subsidiaries have engaged in the production, cultivation, manufacture, marketing, storage, handling, transportation, distribution or sale of cannabis (defined as “marihuana” in Section 802 of Controlled Substances Act, 21 U.S.C. §801, et seq. (the “CSA”)) or any products derived from or intended to be used in connection with cannabis or services intended to relate to cannabis in the United States of America or any other jurisdictions to the extent such activities remain prohibited under applicable Law (which, for greater certainty, will include the United States of America for so long as the production, cultivation, advertisement, marketing, promotion, sale or distribution of Cannabis or related products remains prohibited by federal Laws and irrespective of whether such activities are permitted under the Laws of certain states). |
| (iv) | Other than the Green Roads Operations, neither the Company nor any of its Subsidiaries, directly or indirectly, through any arrangement, agreement or understanding, is or has been engaged in: (i) the production, cultivation, manufacture, marketing, storage, handling, transportation, distribution or sale of cannabis or cannabis-related products in the United States in violation of the CSA; (ii) providing cannabis-related services or products to any Person in the United States in violation of the CSA. |
| (v) | Neither the Company, its Subsidiaries nor, to the knowledge of the Company, any of their directors, executives, representatives, agents or employees while acting in such capacity on behalf of the Company or its Subsidiaries (A) has used or is using any corporate funds for any illegal contributions, gifts, entertainment or other expenses relating to political activity that would be illegal, (B) has used or is using any corporate funds for any direct or indirect illegal payments to any foreign or domestic governmental officials or employees, (C) has violated or is violating any provision of the United States Foreign Corrupt Practices Act of 1977, the Corruption of Foreign Public Officials Act (Canada) or any similar Laws of other jurisdictions, (D) has established or maintained, or is maintaining, any illegal fund of corporate monies or other properties, or (E) has made any bribe, illegal rebate, illegal payoff, influence payment, kickback or other illegal payment of any nature. |
| (vi) | The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court of governmental authority or any arbitrator non-Governmental Entity involving the Company or any of its Subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened. |
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| 15. | Cannabis Matters. |
| (i) | The Company and its Subsidiaries are, and at all times have been, in compliance, in all respects, with all Laws applicable to the cultivation, ownership, testing, research, development, manufacture, packaging, processing, use, distribution, storage, import, export, sale or disposal of any product manufactured, distributed or sold by the Company and its Subsidiaries, including the Cannabis Laws. |
| (ii) | Neither the Company, nor any Subsidiary, nor, to the knowledge of the Company, any entity in which it has an interest, has received any inspection report, notice of adverse finding, warning letter, untitled letter or other correspondence or notice from any Governmental Entity alleging or asserting any material non-compliance with (i) any Cannabis Laws; or (ii) any Cannabis Licence. |
| (iii) | The Company and its Subsidiaries are, and at all times have been, in compliance in all material respects with the terms and conditions of all Cannabis Licences and all other material Authorizations required in connection with their respective businesses. The Company does not anticipate any variations or difficulties in continuing, obtaining, maintaining or renewing such Cannabis Licences or any other material Authorizations after the transactions contemplated by the Arrangement. |
| (iv) | The Company and its Subsidiaries have filed, declared, obtained, maintained or submitted all reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by any applicable Cannabis Law or Cannabis Licence and all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were materially complete and correct on the date filed (or were corrected or supplemented by a subsequent submission). |
| (v) | Neither the Company nor any Subsidiary has ever received any notice or communication from any customer or Governmental Entity (including Health Canada) alleging a material defect, an issue requiring a 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 Subsidiary 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 Subsidiary in respect of any products supplied or sold by any of them. |
| (vi) | Each of the Company’s and its Subsidiaries’ sites used for the cultivation and processing of cannabis and cannabis products complies in all respects with the requirements of the Cannabis Licences and other applicable Law. |
| (vii) | All product research and development activities, quality assurance, quality control, testing and research and analysis activities conducted by the Company and each Subsidiary in connection with their business are and have been conducted in accordance with prudent industry practices and in compliance, in all material respects, with all industry, laboratory safety, management and training standards applicable to the Company’s and its subsidiaries’ current and proposed business, including its own standard operating procedures, and all such processes, procedures and practices required in connection with such activities are in place as necessary and are being complied with in all material respects. |
| (viii) | Each Security Clearance Eligible Individual employed by or associated with the Company and the Subsidiaries that is required to hold a Security Clearance in order to maintain the Canadian Cannabis Licences holds, or has applied for, such Security Clearance and the Company and each subsidiary is not aware of any circumstance that would affect such Security Clearances. |
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| (ix) | To the knowledge of the Company, each entity in respect of which the Company or any Subsidiary has an investment, is, and at all times has been, in compliance, in all material respects, with applicable Cannabis Laws, the U.S. Farm Bill, U.S. Controlled Substances Act, (21 U.S.C. § 801, et. seq), Food Drug & Cosmetic Act (21 U.S.C. ch. 9 § 301 et seq.) and the Federal Trade Commission Act (15 U.S.C. §§ 41-58). |
| (x) | The Company is not, nor is any affiliate thereof, engaged in any activities related to cannabis in any jurisdiction other than Canada, Australia and the United States. |
| 16. | U.S. CBD Matters. The Company and its Subsidiaries are, and at all times have been, in compliance, in all material respects, with the U.S. Farm Bill, U.S. Controlled Substances Act, (21 U.S.C. § 801, et. seq), Food Drug & Cosmetic Act (21 U.S.C. ch. 9 § 301 et seq.) and the Federal Trade Commission Act (15 U.S.C. §§ 41-58), including any regulations promulgated thereunder, as well any applicable CBD Laws in the U.S. states or territories in which the Company and its Subsidiaries engage in the production, manufacture, marketing, storage, handling, transportation, distribution or sale of CBD products. |
| 17. | Licences. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) all Authorizations which are necessary for Company and its Subsidiaries to own its assets or conduct its business as presently owned or conducted have (as applicable) been obtained and are in full force and effect in accordance with their terms, (ii) the Company and its Subsidiaries have performed the obligations required to be performed by it to date under all such Authorizations, (iii) the Company and its Subsidiaries are not in breach of or default under any such Authorizations, (iv) the Company and its Subsidiaries have not received written, or to the knowledge of Company, other notice, of any alleged breach of or alleged default under any such Authorizations or of any intention of any Governmental Entity to revoke or not renew any such Authorizations, and (v) no proceedings are pending, or, to the knowledge of Company, threatened, which would reasonably be expected to result in the revocation of such Authorizations. |
| 18. | Litigation. As of the date of this Agreement, there are no Governmental Actions or Proceedings pending, or, to the knowledge of the Company, threatened, against the Company or any of its Subsidiaries or affecting any of their respective properties or assets that, if determined adverse to the interests of the Company or its Subsidiaries, (i) would have, or be reasonably expected to have a Company Material Adverse Effect; or (ii) would restrain, enjoin or otherwise prohibit or delay or otherwise adversely affect the consummation of the Arrangement. There is no Award outstanding against or binding on the Company or any of its Subsidiaries which would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. |
| 19. | Taxes. |
| (i) | All material Tax Returns required under Law to be filed with any Governmental Entity by, or on behalf of, the Company and any of its Subsidiaries have been filed in the prescribed manner when due in accordance with all Laws (taking into account any applicable extensions). All such Tax Returns are, or shall be at the time of filing, true, correct and complete in all material respects. |
| (ii) | Except as disclosed in the Company Disclosure Letter, the Company and each of its Subsidiaries, in all material respects, has paid, or has had paid on its behalf, or has collected, withheld and remitted to the appropriate Governmental Entity all Taxes due and payable by them on a timely basis, other than those Taxes being contested in good faith, and where payment is not yet due, has established in accordance with IFRS an adequate provisions for all Taxes through the end of the last period for which the Company and its Subsidiaries ordinarily record items on its financial statements.. The provisions for Taxes reflected in the Books and Records are sufficient to cover all liabilities for Taxes that have been assessed against the Company, whether or not disputed, or that are accruing due by the Company during the periods covered by the Books and Records and all prior periods. |
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| Since the date of such Books and Records except in the Ordinary Course, the Company and each of its Subsidiaries has not incurred any liability, whether actual or contingent, for Taxes or engaged in any transaction or event which would reasonably result in any liability, whether actual or contingent, for Taxes, other than in respect of Taxes that have been paid by the Company or provided for in the Books and Records of the Company to date. |
| (iii) | Except as disclosed in the Company Disclosure Letter, there are no material Governmental Actions or Proceedings pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries in respect of any Tax. Without limiting the generality of the foregoing, there are no reassessments of Taxes that have been issued and are outstanding, no Governmental Entity has challenged, disputed or questioned the Company or any of its Subsidiaries in respect of Taxes or any Tax Returns, the Company is not negotiating any draft assessment or reassessment with any Governmental Entity in respect of Taxes, the Company is not aware of any contingent liabilities of the Company or any of its Subsidiaries for Taxes or any grounds for an assessment or reassessment, the Company or any of its Subsidiaries has not received any written notification from any Governmental Entity that an audit, investigation, review or other examination of any Tax Return (or any other examination, claim, adjustment or other action relating to any Taxes) that is presently in progress, pending or threatened and that has not been resolved in full, and assessments under the Tax Act and all applicable provincial income tax legislation have been made with respect to the Company or any of its Subsidiaries covering all past periods before the date hereof. |
| (iv) | Neither the Company nor any of its Subsidiaries has requested, offered to enter into or entered into any agreements or other arrangements, or executed any waiver or election extending the statutory period of limitations applicable to, or providing for any extension of time within which (i) to file any Tax Return covering any Taxes for which it is or may be liable; (ii) to file any election relating to Taxes for which it is or may be liable; (iii) it is required to pay or remit any Taxes or amounts on account of Taxes; or (iv) any Governmental Entity may assess or collect Taxes for which it is or may be liable, in each case, which extension will remain in effect after the Effective Time. |
| (v) | No claim has been made by any Governmental Entity in a jurisdiction where the Company and any of its Subsidiaries does not file Tax Returns that the Company or such Subsidiary is or may be subject to Tax by that jurisdiction and neither of the Company nor any of its Subsidiaries carries on business, has a permanent establishment or other fixed place of business or is resident for Tax purposes in a jurisdiction in which it does not file a Tax Return in respect of income. |
| (vi) | There are no Liens for unpaid Taxes upon any of the assets of the Company or any of its Subsidiaries (other than statutory Liens for Taxes not yet due and payable). |
| (vii) | Neither the Company nor any of its Subsidiaries has made, prepared and/or filed any elections, designations, reserves or similar filings related to Taxes or entered into any agreement or other arrangement in respect of Taxes or Tax Returns that could, in and of itself, require an amount be included in the income of the Company and any of its Subsidiaries for any period ending after the Effective Date. |
| (viii) | There are no facts, circumstances or events that exist or have existed which have resulted or will result in the application of any debt forgiveness, debt parking or property seizure provisions under any Law relating to Taxes to the Company or any of its Subsidiaries, including for greater certainty, under sections 79, to 80.4 of the Tax Act (and the corresponding provisions of any applicable provincial Law) and similar provisions of any other applicable Law. |
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| (ix) | Neither the Company nor any of its Subsidiaries has entered into any agreement with, or provided any undertaking to, any Person, by reason of which the Company and any of its Subsidiaries has assumed liability for the payment of Taxes owing by another Person, and neither the Company nor any of its Subsidiaries is or may be liable for another Person’s Taxes, including under sections 159 or 160 of the Tax Act and similar provisions of any other applicable Law (including any tax sharing, tax allocation or tax indemnification agreement). |
| (x) | The Company and each of its Subsidiaries has properly and timely withheld and deducted from each payment made to any of its present or former employees, officers and directors, and to all other Persons, including Persons who are non-residents of Canada for the purposes of the Tax Act all amounts required by law to be withheld and deducted and will continue to do so until the Effective Date and has properly and timely remitted such Taxes and other amounts within the prescribed periods to the appropriate Governmental Entity. The Company and each of its Subsidiaries has remitted all Taxes payable by it in respect of its employees and has or will have remitted such amounts to the proper Governmental Entity within the time required by applicable law. The Company and each of its Subsidiaries has charged, collected and remitted on a timely basis all Taxes, including without limitation on any sale, supply or delivery whatsoever, made by it. |
| (xi) | The Company and each of its Subsidiaries is registered under the ETA and, where applicable, under any similar provincial or other jurisdiction’s value-added, sales tax or harmonized tax, (collectively, “GST/HST”) is duly registered under such applicable law. All input tax credits claimed by the Company and each of its Subsidiaries for GST/HST purposes were calculated in accordance with the applicable law. The Company and each of its Subsidiaries has complied with all registration, reporting, payment, collection and remittance requirements in respect of GST/HST and provincial or other sales tax of harmonized tax legislation. |
| (xii) | The Company and each of its Subsidiaries has complied in all material respects with section 247 of the Tax Act, including the contemporaneous documentation and disclosure requirements thereunder. The value of the consideration paid or received by the Company for the acquisition, sale, transfer or provision of property (including intangibles) or the provision of services (including financial transactions) from or to a person with whom the Company and each of its Subsidiaries was not dealing at arm’s length within the meaning of the Tax Act was equal to the estimated fair market value of such property acquired, provided or sold or services purchased or provided. |
| (xiii) | Neither the Company nor its Subsidiaries has made any payment, nor is it obligated to make any payment, and it is not a party to any agreement under which it could be obligated to make any payment that may not be deductible by virtue of section 78 of the Tax Act or any analogous provincial or similar provision under other applicable Law or may result in an income inclusion under section 78 of the Tax Act in a taxable period commencing on or after the Effective Date. |
| (xiv) | There are no circumstances which exist and would result in, or which have existed and resulted in, section 17 of the Tax Act applying to the Company and each of its Subsidiaries. |
| (xv) | The Company Disclosure Letter sets forth a true, complete, up-to-date and accurate list of all subsidies, government assistance and Tax refunds claimed or received by the Company and each of its Subsidiaries, including, for greater certainty, under section 125.7 and subsection 153(1.02) of the Tax Act, and all subsidies, government assistance and Tax refunds claimed or received were claimed and received in accordance with applicable Law. |
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| 20. | Employees. |
| (i) | The Company and its Subsidiaries are in compliance with all terms and conditions of employment and all Laws respecting employment, including employment standards (e.g. wages, hours of work, overtime, and vacation), human rights, workers’ compensation, Taxes, privacy, pay equity, accessibility, and occupational health and safety, as well as all Laws related to the classification of independent contractors engaged to perform services for the Company or its Subsidiaries. |
| (ii) | All amounts due or accrued due for all salary, wages, bonuses, commissions, overtime and vacation pay, have either been paid or are accurately reflected in the Books and Records of the Company and its Subsidiaries. |
| (iii) | The Company Disclosure Letter sets forth a true and complete list of (i) the names of all Company Employees; (ii) their position or title; (iii) status (i.e., full time, part time, seasonal, co-op student); (iv) their total annual remuneration, including, with respect to the Company and its Subsidiaries located in Canada, a breakdown of salary or wage rate and bonus or other incentive compensation); recognized start date (including any prior employment with the Company or its Subsidiaries that would affect calculation of years of service for any purpose); and (vi) whether any Company Employees are on any approved or statutory leave of absence, and, if so, the reason for such absence and the expected date of return, if known. |
| (iv) | The Company Disclosure Letter sets forth a true and complete list of all actual, pending, or threatened claims, complaints, investigations or orders under any Laws relating to the Company Employees or consultants of the Company or its Subsidiaries against the Company or any of is Subsidiaries by or before any Governmental Entity as of the date hereof and, except as disclosed in the Company Disclosure Letter, as of the date hereof, no such claims, complaints, investigations or orders would reasonably be expected to have a Company Material Adverse Effect. |
| (v) | Except as disclosed in the Company Disclosure Letter, there are no change of control payments, golden parachutes, severance payments, retention payments, Contracts or other agreements with current or former Company Employees or consultants of the Company or its Subsidiaries providing for cash or other compensation or benefits upon the consummation of, or relating to, the Arrangement, including a change of control of the Company or of any of its Subsidiaries. |
| (vi) | There are no outstanding assessments, penalties, fines, liens, charges, surcharges, or other amounts due or owing pursuant to any workplace safety, workers compensation or insurance legislation and none of the Company or any Subsidiary has been reassessed under such legislation during the past three years and, to the knowledge of the Company, no audit of the Company or any Subsidiary is currently being performed pursuant to any applicable workplace safety, workers compensation or insurance legislation. As of the date of this Agreement, there are no claims or potential claims which may adversely affect the Company and its Subsidiaries’ experience rating, premiums or costs. |
| (vii) | There are no pending, and in the past three (3) years, the Company has not been made aware of any allegations against any current or former Company Employees, consultants or other service provider of the Company or any of its Subsidiaries, and, to the Company’s knowledge, no current or former Company Employee, consultant or other service provider of the Company or any of its Subsidiaries has engaged in, harassment, sexual harassment, discrimination or retaliation, or breach of any policy of the Company relating to the foregoing, nor is any such allegation pending or, to the Company’s knowledge, threatened or has any such allegation been investigated, settled or subject to an out-of-court or pre-litigation arrangement or the subject of any proceeding against or involving the Company, any of its Subsidiaries and, to the Company’s knowledge, none which would have a Company Material Adverse Effect is reasonably anticipated. |
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| 21. | Employee Plans. |
| (i) | The Company Disclosure Letter sets forth each Employee Plan. |
| (ii) | The Company has delivered or otherwise made available to the Purchaser complete and up-to-date copies of each Employee Plan, or written descriptions of the material terms thereof if unwritten, including the following documentation, as applicable: (A) the most recent plan documents (as amended) and current employee booklets for the Employee Plans, (B) the current funding agreements, trust agreements, insurance policies, investment management agreements, subscription and participation agreements, benefit administration agreements, financial administration agreements, record keeping, and other service provider agreements; (C) the most recent annual information report and accompanying schedule(s) filed with a Governmental Entity; (D) the current summary plan description and any modifications thereto; (E) the most recent annual financial, accounting and actuarial statements (including, without limitation, the Form 5500 Series and all schedules and financial statements thereto, if any, required under ERISA or the Code); (F) material, non-routine correspondence between the Company or any of its Subsidiaries and/or ERISA Affiliates and all Governmental Entities for the previous three (3) years; (G) the most recent determination, opinion, notification or advisory letters issued by the Internal Revenue Service with respect to each Employee Plan that is intended to be qualified under Section 401(a) of the U.S. Tax Code; and (H) all pending applications for rulings, determinations, opinions, no action letters and similar or related matters filed with any Governmental Entities. |
| (iii) | Each Employee Plan is, and has been, established, registered, qualified, funded, invested, and administered, in all material respects, in accordance with all Laws (including, without limitation, ERISA and the U.S. Tax Code, as applicable), and in accordance with their terms. To the knowledge of the Company, no fact or circumstance exists which could reasonably be expected to adversely affect the registered status of any such Employee Plan. Each Employee Plan that is intended to qualify for Tax-preferred or Tax-exempt treatment has been duly registered in accordance with all Laws where so required, and, to the knowledge of the Company, no event has occurred with respect to any such Employee Plan that could reasonably be expected to result in the revocation of the Tax registration of such Employee Plan. |
| (iv) | Except as disclosed in the Company Disclosure Letter, all contributions, benefits, intercompany charges, premiums and Taxes required to be deducted, withheld, remitted, made or paid by the Company or its Subsidiaries and/or ERISA Affiliates in respect of each Employee Plan, have been deducted withheld, remitted, made or paid when or before coming due in accordance with Laws, the terms of the applicable Employee Plan, and all understandings between the Company or its Subsidiaries and/or ERISA Affiliates, on the one hand, and current or former Company Employees and directors of the Company or any of its Subsidiaries and/or ERISA Affiliates, on the other hand. All of the Employee Plans are fully funded in accordance with their terms and all Laws. All benefits accrued under any Employee Plan that are not required to be funded by the terms of such plan or any Law have been paid, accrued or are otherwise adequately reserved to the extent required by, and in accordance with, IFRS or other generally accepted accounting principles. The level of insurance reserves under any self-insured Employee Plan is reasonable and sufficient to provide for all incurred but not yet reported losses, damages, liabilities, costs, fines, penalties, fees or expenses. The costs of funding the Employee Plans are, in all material respects, reflected in the Company’s Books and Records and financial statements. |
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| (v) | No Employee Plan is subject to any actual or pending Governmental Action or Proceeding (other than routine claims for benefits), and, to the knowledge of the Company, there exists no state of facts which could reasonably be expected to give rise to any such Governmental Action or Proceeding. |
| (vi) | Except as disclosed in the Company Disclosure Letter or as provided in this Agreement, the execution, delivery and performance of this Agreement and the consummation of the Arrangement, whether individually or together with any other event (including termination of employment), will not (A) result in any payment (including, without limitation, bonus, golden parachute, retirement, severance, unemployment compensation, or other benefit or enhanced benefit) becoming due or payable to any current or former Company Employee or any current or former director of the Company or any of its Subsidiaries, (B) increase the compensation or benefits otherwise payable to any current or former Company Employee or any director of the Company or any of its Subsidiaries, or increase the funding obligations of the Company with respect to any Employee Plan, or (C) result in the acceleration of the time of payment or vesting of any benefits or entitlements otherwise available pursuant to any Employee Plan. Neither the Company nor any of its Subsidiaries has made any outstanding promise, commitment, or announcement, whether verbally or in writing, to (A) terminate, amend, or materially alter the amount or frequency of contribution, payment or funding requirements in respect of any Employee Plan, or (B) establish or adopt a material Employee Plan. |
| (vii) | Except as disclosed in the Company Disclosure Letter, none of the Employee Plans: provide post-employment or post-retirement medical, life or disability insurance benefits to any current or former Company Employee or director of the Company or any of its Subsidiaries and/or ERISA Affiliates (or the spouse, dependents, beneficiaries, or survivors of such Persons), except for any such Employee Plan that provides such coverage solely as is required by COBRA, any comparable state statute requiring continuing health care coverage, or applicable Canadian employment standards legislation. |
| (viii) | None of the Employee Plans: (A) is subject to federal or provincial pension standards legislation in Canada, (B) is a “retirement compensation arrangement”, as defined in Subsection 248(1) of the Tax Act, (C) is subject to Title IV of ERISA or Section 412 of the U.S. Tax Code and the Company and its ERISA Affiliates have no other liability under Title IV of ERISA, (D) is a “Multiemployer Plan” and no employer other than the Company or an ERISA Affiliate is permitted to participate or participates in any Employee Plan, or (E) is intended to be, has been drafted to be or has ever been alleged by a Governmental Entity to be a “salary deferral arrangement” within the meaning of Subsection 248(1) of the Tax Act. |
| (ix) | The Company has not established or contributed to, is required to contribute to or has or could have any liability with respect to any “voluntary employee beneficiary association” within the meaning of Section 501(c)(9) of the U.S. Tax Code, “welfare benefit fund” within the meaning of Section 419 of the U.S. Tax Code, “qualified asset account” within the meaning of Section 419A of the U.S. Tax Code or “multiple employer welfare arrangement” within the meaning of Section 3(40) of ERISA. |
| (x) | The Company is not required to pay, gross us, or otherwise indemnify any employee or contractor for any taxes, including potential taxes imposed under Section 409A or Section 4999 of the U.S. Tax Code. |
| (xi) | All data necessary to administer each Employee Plan is in the possession of the Company or an agent and is in a form which is sufficient for the proper administration of the Employee Plan in accordance with its terms and all Laws and such data is complete and, to the knowledge of the Company, correct. |
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| (xii) | The Company has not received notification from the U.S. Internal Revenue Service, via Letter 226-J or otherwise, that it is subject to material employer shared responsibility payments under Section 4980H of the U.S. Tax Code, and to the knowledge of the Company, no such notification is reasonably anticipated to be received. |
| 22. | Collective Agreements. |
| (i) | There are no collective bargaining agreement or union agreement applicable as at the date of this Agreement to the Company or any of its Subsidiaries nor is there any related letters or memoranda of understanding applicable to the Company or any of its Subsidiaries as at the date of this Agreement which impose obligations upon the Company or any of its Subsidiaries. |
| (ii) | No collective bargaining agreements or union agreements are currently being negotiated in respect of Company Employees or, to the knowledge of the Company, consultants of the Company or any of its Subsidiaries. |
| (iii) | To the knowledge of the Company, there are no actual, threatened or pending organizing activities of any trade union, council of trade unions, employee bargaining agency or affiliated bargaining agent involving any Company Employees or consultants of the Company or any of its Subsidiaries. There is no actual, pending or threatened, strike, work slowdown or stoppage, picketing, lock-out, hand-billing, boycott, or similar labour related disputes involving or pertaining to the Company or any of its Subsidiaries and, to the Company’s knowledge, no such event has occurred in the past three (3) years. |
| (iv) | No trade union, council of trade unions, employee bargaining agency or affiliated bargaining agent holds bargaining rights with respect to any of the Company Employees or consultants of the Company or any of its Subsidiaries by way of certification, interim certification, voluntary recognition, or succession rights, or has applied or, to the knowledge of the Company, threatened to apply to be certified as the bargaining agent of any Company Employees or consultants of the Company or any of its Subsidiaries, including applying to have the Company or any of its Subsidiaries declared a common, related or successor employer pursuant to applicable labour relations legislation. |
| (v) | There is no actual, pending or, to the Company’s knowledge, threatened unfair labour practice complaint, grievance or arbitration proceeding against the Company or any of its Subsidiaries. |
| (vi) | There are no outstanding labour board or tribunal proceedings which could result in certification, interim certification, voluntary recognition, or succession rights of a trade union, council of trade unions, employee bargaining agencies, affiliated bargaining agent or any other Person as bargaining agent for any Company Employees or any consultants of the Company or any of its Subsidiaries. |
| 23. | Environmental Matters. |
| (i) | The Company and each of its Subsidiaries are and have, in all material respects, carried on its businesses and operations in compliance with all applicable Environmental Laws. |
| (ii) | None of the Company or its Subsidiaries have received any order, request or written notice from any Person either alleging a material violation of any Environmental Law or requiring that the Company or any of its Subsidiaries carry out any work, incur any costs or assume any liabilities, related to a violation of Environmental Laws or to any agreements with any Governmental Entity with respect to or pursuant to Environmental Laws. |
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| (iii) | To the knowledge of the Company, there are no Hazardous Substances, or other conditions that would reasonably be expected to result in liability of or adversely affect the Company or any of its Subsidiaries under or related to any Environmental Law, located on, at, in, under or migrating from any of the Leased Properties (including the workplace environment) currently or, to the knowledge of the Company, previously owned, leased or operated by the Company or any of its Subsidiaries. |
| (iv) | To the knowledge of the Company, there are no above-ground or underground storage tanks, pits, lagoons, waste disposal sites, or assets containing asbestos or polychlorinated biphenyls located on any of the Leased Properties. |
| (v) | There are no pending claims or, to the knowledge of the Company, threatened claims, against the Company or any of its Subsidiaries arising out of any Environmental Laws. |
| 24. | Real Property. |
| (i) | The Company or its applicable Subsidiary has good, valid and marketable title in fee simple to all Owned Real Property, free and clear of all encumbrances other than Permitted Liens. The Company Disclosure Letter lists all of the Owned Real Property owned by the Company or its Subsidiaries. |
| (ii) | There do not exist any actual, pending, or, to the knowledge of the Company, threatened condemnation, expropriation or imminent domain proceedings that affect any Owned Real Property and neither the Company nor any of its Subsidiaries has received any written notice of any intention of any Governmental Entity other Person to take or use any Real Property. |
| (iii) | To the knowledge of the Company, none of the operations conducted by Company or its applicable Subsidiaries at or improvements on the Owned Real Property encroach on any adjacent real property or an area subject to any easement held by any other Person, nor do the operations or improvements of any other Person encroach on the Owned Real Property. Neither the Company nor any of its Subsidiaries has received any written notice that they have breached in any material respect the terms of any easement, and neither the Company nor any of its Subsidiaries have received any written notice: (i) alleging encroachment or disputing the location of any boundary line of the Owned Real Property; or (ii) from the holder of any easement alleging any encroachment or any other breach of the terms of the easement. |
| (iv) | To the knowledge of the Company, (A) the improvements located on or annexed to the Real Property and used or occupied by Company or its Subsidiaries are in good order and repair, subject to reasonable wear and tear, and are in good and safe condition free from material defects; and (B) all electrical, plumbing, heating and air-conditioning and exterior drainage systems and equipment, in or on the Real Property are in good condition and working order, subject to reasonable wear and tear and having regard to the age of the same. |
| (v) | The Company and its Subsidiaries have not received written notice alleging that any of the Owned Real Property or the current use thereof by Company or its Subsidiaries does not comply in any material respect with all applicable Laws, including subdivision, municipal, zoning or building codes or ordinances, or applicable restrictive covenants, without reliance on any “grandfather” exception. |
| (vi) | The Company has made available to the Purchaser copies of all leases, subleases, licenses to occupy, and agreements in the nature of a lease (including all amendments, renewals, extensions, assignments, occupancy agreements, subleases, agreements to |
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| lease and agreements to sublease) in respect of the Leased Properties (the “Leases”, each a “Lease”), whether as lessor or lessee. Except as set forth in material made available to the Purchaser, neither the Company nor its Subsidiaries are the lessor of or lessee of, nor have they agreed to acquire or lease, any real property or Appurtenances or any interest in, any real property or Appurtenances other than the Leased Properties. Other than the Real Properties, no other real property is used in connection with the conduct of Company’s business currently being conducted. |
| (vii) | The Company is not a party to, and has not agreed to enter into, any lease, sublease, license to occupy, agreement to lease, agreement to sublease or agreement in the nature of a lease in respect of any real property or Appurtenances, whether as lessor or lessee, other than the Leases. Each Lease is in full force and effect and unamended except as otherwise disclosed. Each Lease is in good standing; neither the Company nor, to the knowledge of the Company, any other party thereto is in default of or breach of any covenant, condition or obligation contained therein. There is no material dispute between the Company and any other party under any Lease. No amount is payable after Closing as a commission or finder’s fee under an agreement to which the Company is a party in respect of any of the Leases or any renewal or extension or exercise of any option or right pursuant to any of the Leases. In respect of those Leases where the Company is a sub-landlord, the Company confirms that there are no tenant allowances due and payable as of the date hereof. |
| (viii) | Except as described in the Company Disclosure Letter, and except where the Company or its Subsidiaries sublease the Leased Property to another party, the Company or its Subsidiaries, as applicable, occupy the Leased Property and has the exclusive right to possess, use and occupy the Leased Property during the term of the applicable Lease. |
| (ix) | The Company has adequate rights of ingress and egress for the operation of the business in the Ordinary Course and, to the knowledge of the Company, no facts or conditions which would result in the termination of the current access from the Real Property to any currently existing public roads adjoining or situated on the Real Property. Without limiting the generality of the foregoing: |
| (A) | all accounts for work and services performed and materials supplied, placed or furnished on or in respect of any Real Property at the request of the Company and for which the Company is liable have been fully paid and satisfied, and no Person is entitled to claim a lien or privilege under applicable Law against the Real Property or any part thereof in respect of any such work or services performed or materials supplied, placed or furnished on or in respect of any Real Property at the request of the Company and for which the Company is liable, other than current accounts in respect of which the payment due date has not yet passed; |
| (B) | there is nothing owing in respect of the Real Property by the Company to any municipal corporation or to any other corporation or commission owning or operating a public utility for water, gas, electrical power or energy, steam or hot water, or for the use thereof, other than current accounts in respect of which the payment due date has not yet passed; and |
| (C) | any arrangements or agreements by which the Company subleases, licenses, or otherwise grants access or occupancy of any portion of the Real Property to a third party who is not the landlord thereof together with all necessary approvals (if any) in respect thereof have, to the extent the same are not registered on title to the applicable Real Property, been made available to the Purchaser. |
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| (x) | Except as would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect, (A) the Company (or its applicable Subsidiary) has a valid and subsisting leasehold interest in the Leased Properties, subject to the terms and conditions of the applicable Lease, (B) each Lease is valid, legally binding, enforceable and in full force and effect (subject only to any limitation under bankruptcy, insolvency or other Law affecting the enforcement of creditors’ rights generally and the discretion that a court may exercise in the granting of equitable remedies such as specific performance and injunction), (C) none of the Company or any of its Subsidiaries is in breach of, or default under, such Lease and no event has occurred which, with notice, lapse of time, or both, would constitute a breach or default by the Company or any of its Subsidiaries or permit termination, modification, or acceleration by any counterparty to such Lease, and (D) to the knowledge of the Company, no third party has repudiated or has the right to terminate or repudiate any such Lease (except for termination rights specifically set out in such Leases and except for the normal exercise of remedies in connection with a default under the Lease) or any provision thereunder. |
| (xi) | To the knowledge of the Company, the Real Properties are adequately serviced by utilities (or well water with adequate septic systems, if any) having adequate capacities for the Ordinary Course operations of the Company’s and its Subsidiaries facilities. |
| (xii) | To the knowledge of the Company, the Company has not received written notice from any Governmental Entity of any scheduled and material road construction project within the immediate vicinity of any Real Property which would reasonably be expected to materially and adversely affect access or traffic flow to such Real Property, including, but not limited to, road construction projections on roadways adjacent to such Real Property or any main highway, tollway or other roadway artery in the immediate vicinity of such Real Property. |
| 25. | Personal Property. The Company and its Subsidiaries have valid, good and marketable title to all personal property owned by them, except as would not, individually or in the aggregate, be reasonably expected to have a Company Material Adverse Effect. |
| 26. | Intellectual Property and Information Technology. |
| (i) | The Company Disclosure Letter sets forth a true, complete and accurate list of all registered or applied-for Owned Intellectual Property (the “Registered Intellectual Property”). |
| (ii) | The Company or one of its Subsidiaries owns sole and exclusive right, title and interest in and to all Owned Intellectual Property, free and clear of any Liens, other than Permitted Liens. The Registered Intellectual Property (with the exception of any pending applications) is valid, subsisting, and enforceable. The Company and its Subsidiaries have not taken or failed to take any action which would prejudice the obtaining of registration for any Owned Intellectual Property for which the Company has made a decision to seek registration or the enforcement of any registrations included in the Registered Intellectual Property. |
| (iii) | In the past 3 years, the Company and its Subsidiaries have not assigned or otherwise transferred ownership of, or agreed to assign or otherwise transfer ownership of, or exclusively licensed or agreed to exclusively license rights to, any material Owned Intellectual Property to any Person. |
| (iv) | Except for non-exclusive licenses granted to third parties in the ordinary course of business, none of the Company or its Subsidiaries has granted nor is required to grant any license, assignment, Lien, consent, or undertaking in respect of the Owned Intellectual Property, nor has the Company agreed to any restriction on use of the Owned Intellectual Property or entered into any settlement agreement or co-existence agreement in respect of the Owned Intellectual Property. The Company and its Subsidiaries have not licensed the Owned Intellectual Property exclusively to any Person. |
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| (v) | The Company and its Subsidiaries, as applicable, have sole and exclusive right to bring proceedings for infringement, misappropriation, dilution, violation or unauthorized used of the Owned Intellectual Property without any obligation to obtain consent, joinder or to provide an accounting to any third party. Except as disclosed in the Company Disclosure Letter, no interferences, re-examinations, oppositions, cancellation proceedings, inter partes reviews, covered business method reviews, post-grant reviews, pre-issue submission, derivation proceedings or other proceedings pertaining to the Registered Owned Intellectual Property are pending or, to the knowledge of Company, threatened. Neither the Company nor any of its Subsidiaries is in material breach of or material default under any Contract relating to the Owned Intellectual Property or Licensed Intellectual Property and, to the knowledge of Company, no third party is in material breach or default under such Contacts. |
| (vi) | None of the Company, its Subsidiaries or the conduct of the businesses of the Company and its Subsidiaries as presently conducted, including use of the Owned Intellectual Property on its own or in combination with any Licensed Intellectual Property, infringes upon, misappropriates, or violates the Intellectual Property Rights of any Person, and no proceeding is pending or, to the knowledge of the Company, threatened (i) alleging that the Company and its Subsidiaries or the conduct of the businesses of the Company and its Subsidiaries as previously conducted or presently conducted, including use of the Owned Intellectual Property on its own or in combination with any Licensed Intellectual Property, infringes upon, misappropriates, dilutes or otherwise violates the Intellectual Property Rights of any Person. |
| (vii) | To the knowledge of the Company, no Person is currently engaging in any activity that infringes upon, misappropriates, dilutes or otherwise violates any Owned Intellectual Property. |
| (viii) | Neither the execution and delivery of this Agreement, nor the performance by the Company of any actions contemplated by this Agreement, will cause the termination of any Contract for Licensed Intellectual Property, or impair or restrict the rights of the Company or its relevant Subsidiaries to use, possess, sell, transfer, license, or exercise any rights in the Owned Intellectual Property. |
| (ix) | The Company and its Subsidiaries have taken commercially reasonable measures to maintain the confidentiality of all material confidential Owned Intellectual Property. There has been no unauthorized disclosure of any material confidential Owned Intellectual Property. |
| (x) | None of the Corporation or any of its Subsidiaries has received any funding from governments, universities, colleges, other educational institution or research centers for research and development projects that grants rights in the Owned Intellectual Property to the funding entity or that imposes any restrictions that are still in effect in respect of an assignment, license or any other disposition or grant of interest in the Owned Intellectual Property. |
| (xi) | All employees or contractors involved in the creation of material Owned Intellectual Property have assigned in writing or by operation of the Law to the Company or one of its Subsidiaries all right, title and interest in and to the applicable material Owned Intellectual Property, and have waived in writing their moral rights in and to the applicable material Owned Intellectual Property. |
| (xii) | The Owned Intellectual Property and the Licensed Intellectual Property constitutes all of the Intellectual Property used in or required for the operation of the businesses of the Company and its Subsidiaries as currently conducted. |
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| (xiii) | The Company IT Systems are reasonably sufficient for the immediate needs of the business of the Company and its Subsidiaries, as currently conducted. The Company IT Systems are in sufficiently good working condition to perform all information technology operations and include sufficient licensed capacity (whether in terms of authorized sites, units, users, seats, or otherwise) for all software, platforms and systems, in each of the foregoing cases, as necessary for the conduct of the respective businesses of the Company and its Subsidiaries as currently conducted. |
| (xiv) | The Company and its Subsidiaries have implemented commercially reasonable administrative, physical and technical safeguards (but in no event less than what is required by applicable Law (including, for certainty, Privacy Laws) or under any Material Contract) to: (A) protect the Company IT Systems and the confidentiality, integrity and security of Personal Information against unauthorized access, use, modification, disclosure or other misuse by any Person; (B) defend Company IT Systems against denial of service attacks, distributed denial of service attacks, hacking attempts, security threats, ransomware incidents, and like attacks and activities by any other Person; and (C) ensure the continued, uninterrupted, and error-free operation of Company IT Systems. |
| (xv) | To the knowledge of the Company, the Company IT Systems have had no material errors or defects that have not been materially remedied. To the knowledge of the Company, the Company IT Systems contain no device or code designed to, in any manner: (A) disrupt, disable, harm distort or otherwise impede or impair the legitimate, normal and authorized operation of or provide unauthorized access to such Company IT Systems (including what are sometimes referred to as “viruses”, “malware”, “spyware”, “ransomware”, “worms”, “time bombs,” “back doors” or “advanced persistent threats”); or (B) damage, destroy, or prevent the access to or use of any data or file without the user’s consent, in each of the foregoing cases, that has not been removed or fully remedied. The Company and its Subsidiaries have not experienced within the past three years: (1) any material disruption to, or material interruption in, the conduct of the business of the Company or its Subsidiaries attributable to a defect, bug, breakdown, unauthorized access, introduction of a virus or other malicious programming, or other failure or deficiency on the part of any computer software or Company IT Systems; or (2) to the knowledge of the Company, any other unauthorized access, use, intrusion, or breach of security, or material failure, breakdown, performance reduction, or other adverse event affecting any Company IT Systems. |
| 27. | Privacy. |
| (i) | The Company and its Subsidiaries have privacy policies regarding the collection, use and disclosure of personal information in connection with the operation of their respective businesses and are, and in the past three years have been, in material compliance with such privacy policies. True and complete copies of all privacy policies that have been used by the Company and its Subsidiaries in the past three years have been provided to Purchaser or are publicly available. Each of the Company and its Subsidiaries have in the past three years posted a privacy policy and any additional privacy notices, as required under applicable Privacy Laws, in a clear and conspicuous location on all websites owned or operated by the Company and its Subsidiaries. |
| (ii) | The Company and its Subsidiaries have taken reasonable commercial steps to comply with all applicable Privacy Laws regarding the collection, storage, retention, use, processing, disclosure, transfer and protection of Personal Information, and all cyber incident, information security and data breach notification and record-keeping requirements thereunder. |
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| (iii) | The execution, delivery and performance of this Agreement and the consummation of the contemplated transactions hereunder, including any transfer of Personal Information resulting from such transactions, will not violate: (A) any applicable Privacy Law, any of the privacy policies of the Company and its Subsidiaries (as it currently exists or as it existed at any time during which any applicable Personal Information was collected or obtained by or on behalf of the Company or any of its Subsidiaries); or (B) any other privacy and data security requirements imposed on the Company or any of its Subsidiaries under any Contracts. Upon the Closing, Purchaser will continue to have the right to use such Personal Information on identical terms and conditions as the Company (or the applicable Subsidiary) enjoyed immediately prior to Closing. |
| (iv) | Except as disclosed in the Company Disclosure Letter, the Company and each of its Subsidiaries have not, in the past three years, experienced any loss, damage, unauthorized access, disclosure or use of, or the breach of any security safeguards protecting, any Personal Information in the Company’s (or any of its Subsidiaries’) possession, custody or control, or otherwise held or processed on its behalf. |
| (v) | The Company and the Subsidiaries conducted their respective businesses in material compliance with CASL, including the provisions thereunder relating to: (A) the sending of commercial electronic messages (as such term is defined in CASL) only with express or implied consent and with the prescribed contact information and unsubscribe mechanism, and retains records sufficient to demonstrate such compliance; (B) the altering of transmission data (as such term is defined in CASL) only with express consent; and (C) the installation of computer programs on computer systems (as such terms are defined in CASL) only with express consent. |
| (vi) | The Company and the Subsidiaries have established and implemented policies, procedures and practices in material compliance with applicable Law (including Privacy Laws and CASL), and the Company and the Subsidiaries have operated in accordance, in all material respects, with such policies and procedures in the prior three years. |
| (vii) | No Person (including any Governmental Entity) has commenced or made, or, to the knowledge of Company, threatened to commence or make, any Governmental Action or Proceeding, complaint, investigation or inquiry relating to: (A) the Company’s (or any of its Subsidiaries’) information privacy or data security practices, including with respect to the collection, control, storage, use, access, processing, disclosure, transfer, destruction, disposal and safeguarding of Personal Information maintained by or on behalf of the Company or any of its Subsidiaries; or (B) the Company’s (or any of its Subsidiaries’) compliance with Privacy Laws or CASL. |
| 28. | Title to the Assets. |
| (i) | Except in connection with the Arrangement, no Person has any right of first refusal, undertaking or commitment or any right or privilege capable of becoming such, to purchase any of the material assets owned by the Company and its Subsidiaries, or any part thereof or interest therein. |
| (ii) | Except as would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect, no part of the Leased Properties has been taken, condemned or expropriated by any Governmental Entity nor has any written notice or proceeding in respect thereof been given or commenced nor, to the knowledge of the Company, does any Person have any intent or proposal to give such notice or commence any such proceedings. |
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| 29. | Material Contracts. Except as would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) each Material Contract is legal, valid, binding and in full force and effect and is enforceable by the Company or a Subsidiary as applicable, in accordance with its terms subject only to any limitation under bankruptcy, insolvency or other Law affecting the enforcement of creditors’ rights generally and the discretion that a court may exercise in the granting of equitable remedies such as specific performance and injunction, (ii) none of the Company or its Subsidiaries is in breach or default under any Material Contract, nor does the Company have knowledge of any condition that with the passage of time or the giving of notice or both would result in such a breach or default, and (iii) as of the date hereof, none of the Company or any of its Subsidiaries knows of, or has received any notice (whether written or oral) of, any breach, default, cancelation, termination, or no renewal under any Material Contract by any other party to any Material Contract. The Company Disclosure Letter sets out a complete and accurate list of all Material Contracts as of the date hereof. As of the date of this Agreement, no Material Contract that has been disclosed in the Data Room has, since such disclosure, been modified, rescinded or terminated, except in the Ordinary Course. |
| 30. | Insurance. Each of the Company and its Subsidiaries is, and has been continuously since November 30, 2021, insured by reputable and financially responsible insurers and the insurance policies are appropriate to the business of the Company in such amounts and against such risks as are customarily carried and insured against by prudent owners of comparable business. The insurance policies of the Company and its Subsidiaries are in full force and effect in accordance with their terms and in good standing. |
| 31. | Related Party Transactions. The Company or any of its Subsidiaries is not indebted to any director, officer, employee or agent of, or independent contractor to, the Company and its Subsidiaries or any of its respective affiliates or associates (except for amounts due in the Ordinary Course as salaries, consulting or contractor fees, bonuses and director’s fees or the reimbursement of Ordinary Course expenses). Except as set forth in the Company Disclosure Letter, there are no Contracts (other than employment or consulting arrangements) with, or advances, loans, guarantees, liabilities or other obligations to, on behalf or for the benefit of, any shareholder which is an “insider” (as defined in the Securities Act (Ontario)), officer or director of the Company or any of its Subsidiaries, or any of their respective affiliates or associates; provided, however, that in order to determine whether a shareholder is an “insider” of the Company, the Company may rely solely on disclosure filed on System for Electronic Disclosure by Insiders (SEDI). |
| 32. | Brokers. Except as set forth in the Company Disclosure Letter, there is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of the Company who might be entitled to any fee or commission from the Company in connection with the Arrangement. The Company has made full disclosure to the Purchaser of all fees to be paid to such brokers, finders, and/or other intermediaries under the terms of the agreements with the Company. |
| 33. | No “Collateral Benefit”. To the knowledge of the Company, no related party of the Company (within the meaning of MI 61-101) together with its associated entities, beneficially owns or exercises control or direction over 1% or more of the outstanding Company Shares, except for related parties who will not receive a “collateral benefit” (within the meaning of such instrument) as a consequence of the transactions contemplated by this Agreement, other than as disclosed in the Company Disclosure Letter. |
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SCHEDULE D
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
| 1. | Organization and Qualification. |
| (i) | The Purchaser is a corporation duly incorporated and validly existing under the Laws of the Province of Alberta and has the corporate power and authority to own and operate its assets and conduct its business as now owned and conducted. The Purchaser is duly qualified, licensed or registered to carry on business and is in good standing in each jurisdiction in which its assets are located or it conducts business, except where the failure to be so qualified, licensed, registered or in good standing would not be reasonably expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect. |
| (ii) | Each Subsidiary of the Purchaser is a corporation, partnership, trust or limited partnership, as the case may be, duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation, organization or formation, as the case may be, and has all requisite corporate, trust or partnership power and authority, as the case may be, to own, and operate its assets and conduct its business as now owned and conducted, except where the failure to be so organized, validly existing, qualified or in good standing, would not, individually or in the aggregate, be reasonably expected to have a Purchaser Material Adverse Effect. |
| (iii) | The Purchaser is a “Canadian corporation” as that term is defined in subsection 89(1) of the Tax Act. |
| 2. | Corporate Authorization. The Purchaser has the requisite corporate power and authority to enter into and perform its obligations under this Agreement. The execution, delivery and performance by the Purchaser of its obligations under this Agreement have been duly authorized by all necessary corporate action on the part of the Purchaser and no other corporate proceedings on the part of the Purchaser are necessary to authorize this Agreement or the consummation of the Arrangement. The payment of the Purchaser Shares comprising the Consideration have been duly authorized and, when issued, delivered and paid for pursuant to this Agreement, will be validly issued, fully paid and non-assessable, free and clear of all Liens and will be issued in compliance with Laws. |
| 3. | Execution and Binding Obligation. This Agreement has been duly executed and delivered by the Purchaser, and constitutes a legal, valid and binding agreement of the Purchaser enforceable against it in accordance with its terms subject only to any limitation under bankruptcy, insolvency or other Law affecting the enforcement of creditors’ rights generally and the discretion that a court may exercise in the granting of equitable remedies such as specific performance and injunction. |
| 4. | Governmental Authorization. The execution, delivery and performance by the Purchaser of its obligations under this Agreement and the consummation of the Arrangement do not require any Authorization or other action by or in respect of, or filing with, or notification to, any Governmental Entity other than: (i) the Interim Order and any approvals required by the Interim Order; (ii) the Final Order; (iii) filings with the Director under the CBCA; (iv) any actions or filings with the Securities Authorities and the Nasdaq; (v) receipt of the Competition Act Approval; and (vi) any consents, waivers, approvals, actions or filings or notifications, the absence of which would not be reasonably expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect. |
| 5. | Non-Contravention. The execution, delivery and performance by the Purchaser of its obligations under this Agreement and the consummation of the Arrangement do not and will not (or would not with the giving of notice, the lapse of time or the happening of any other event or condition): |
| (i) | contravene, conflict with, or result in any violation or breach of any of the articles, by-laws or other constating documents of the Purchaser; |
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| (ii) | assuming compliance with the matters referred to in paragraph 4 above, contravene, conflict with or result in a violation or breach of any Law applicable to the Purchaser; or |
| (iii) | allow any Person to exercise any rights, require any consent or notice under or other action by any Person, or constitute a default under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which the Purchaser or any of its Subsidiaries is entitled (including by triggering any rights of first refusal or first offer or other restrictions or limitations) under any material contract; |
with such exceptions, in the case of each of clauses (i) and (ii) as would not be reasonably expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect.
| 6. | Securities Law Matters. |
| (i) | The Purchaser is a “reporting issuer” under applicable Securities Laws in each of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, North West Territories, Yukon and Nunavut. The Purchaser Shares are registered under Section 12(b) of the U.S. Exchange Act and listed for trading on Nasdaq. The Purchaser is not in default of any material requirements of any Securities Laws or the Nasdaq listing rules. |
| (ii) | As of the date of this Agreement, the Purchaser has not taken any action to cease to be a reporting issuer in any province of Canada nor has the Purchaser received notification from any Securities Authority seeking to revoke the reporting issuer status of the Purchaser. As of the date of this Agreement, no delisting, suspension of trading or cease trade or other order or restriction with respect to any securities of the Purchaser is pending or, to the knowledge of the Purchaser, threatened. |
| (iii) | The Purchaser has filed with the Securities Authorities all material forms, reports, schedules, statements and other documents required to be filed under Securities Laws since January 1, 2020. The documents comprising the Purchaser Filings complied as filed in all material respects with Law and did not, as of the date filed (or, if amended or superseded by a subsequent filing prior to the date of this Agreement, on the date of such subsequent filing), contain any Misrepresentation or untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading. The Purchaser has not filed any confidential material change report which at the date of this Agreement remains confidential. To the knowledge of the Purchaser, neither the Purchaser nor any of the Purchaser Filings is subject of an ongoing audit, review, comment or investigation by any Securities Authority or the Nasdaq. |
| (iv) | The Purchaser is a “foreign private issuer” as that term is defined under Rule 405 and Rule 3b-4 promulgated under the U.S. Securities Act and the U.S. Exchange Act, respectively. The Purchaser is not, and will not be as a result of the Arrangement, required to register as an “investment company” under the U.S. Investment Company Act. |
| (v) | The Purchaser has never been an issuer subject to Rule 144(i) under the Securities Act. The Purchaser satisfies the current public information requirements of Rule 144(c) under the Securities Act. |
| (vi) | The Purchaser has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirement of the U.S. Exchange Act, at the time such filings were made they complied in all material respects with the requirements of the U.S. Exchange Act applicable to such filings and none of the filings contained any untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. |
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| (vii) | None of the Purchaser, its affiliates, nor any person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of the issuance of any of the Purchaser Shares to be issued pursuant to the Arrangement under the U.S. Securities Act, whether through integration with prior offerings or otherwise. |
| (viii) | Except as disclosed in the Purchaser’s Form 20-F filed on April 28, 2022, the Purchaser and its Subsidiaries are in compliance with any and all applicable requirements of the United States Sarbanes-Oxley Act of 2002 and the U.S. Exchange Act. |
| 7. | Purchaser Shares. As of the close of business on August 19, 2022, there were 237,993,119 Purchaser Shares issued and outstanding. All outstanding Purchaser Shares have been duly authorized and validly issued and are fully paid and non-assessable. The Purchaser Shares to be issued pursuant to the Arrangement, upon issuance, will be validly issued as fully paid and non-assessable, will be listed for trading on Nasdaq, and will not be issued in violation of any pre-emptive rights or subject to any contractual or other restrictions on transferability or voting, provided that Purchaser Shares issuable to any Person that the Purchaser reasonably determines is an “affiliate” (as such term is defined in Rule 144 under the U.S. Securities Act) of Purchaser or has been such an “affiliate” of Purchaser in the three months prior to the date of issuance of such Purchaser Shares will be treated as “restricted securities” (as defined in Rule 144 under the U.S. Securities Act) and may not be offered, sold or otherwise transferred absent registration under the U.S. Securities Act or an available exemption therefrom. |
| 8. | Security Ownership. Other than the common shares of the Company beneficially owned by the Purchaser, which, as of the close of business on August 19, 2022, do not amount to ten percent (10%) or more of the Company Shares issued and outstanding, the Purchaser does not beneficially own any securities of the Company or any of its affiliates, including its Subsidiaries. |
| 9. | Financial Statements. The Purchaser’s audited consolidated financial statements for the years ended December 31, 2021 and 2020 (including any of the notes or schedules thereto, the auditor’s report thereon and related management’s discussion and analysis) and the unaudited consolidated interim financial statements filed since that date (including any of the notes or schedules thereto and related management’s discussion and analysis included in the Company Filings (collectively, the “Purchaser Financial Statements”)) were prepared in accordance with IFRS (except (a) as otherwise indicated in such financial statements and the notes thereto or, in the case of audited financial statements, in the related report of the Company’s independent auditors, or (b) in the case of unaudited interim statements, are subject to normal period-end adjustments and may omit notes which are not required by applicable Laws in the unaudited statements) and fairly present in all material respects the consolidated statement of income, comprehensive income, financial position and cash flows of the Purchaser and its Subsidiaries as of their respective dates and for the respective periods covered by such financial statements, subject to normal year-end adjustments and the absence of notes in the case of any interim financial statements. The Purchaser does not intend to correct or restate, nor, to the knowledge of the Purchaser is there any basis for any correction or restatement of, any aspect of any of the Purchaser Financial Statements included (other than any corrections or restatements required as a result of changes in IFRS that have retroactive application). There are no, nor are there any commitments to become a party to, any off-balance sheet transaction, arrangement, obligation (including contingent obligations) or other similar relationships of the Purchaser or of any of its Subsidiaries with unconsolidated entities or other Persons. |
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| 10. | Books and Records. Since the incorporation or amalgamation, as applicable, of the corresponding entity, all accounting and financial Books and Records have been maintained in all material respects in accordance with IFRS and fairly reflect, in all material respects in accordance with IFRS applied on a basis consistent with prior periods, the consolidated financial position of the Purchaser and all the material transactions, acquisitions and dispositions of the Purchaser and the Purchaser Subsidiaries on a consolidated basis. |
| 11. | Absence of Certain Changes. Since December 31, 2021, other than the transactions contemplated in this Agreement or as disclosed in the Purchaser Filings, the business of the Purchaser and its Subsidiaries has been conducted in the Ordinary Course consistent with past practices and there has not been any event, occurrence, development or state of circumstances or facts that has had or would be reasonably expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect. |
| 12. | No Undisclosed Liabilities. There are no liabilities or obligations of the Purchaser or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, other than liabilities or obligations: (i) disclosed in the audited consolidated financial statements of the Purchaser for the years ended December 31, 2021 and 2020; (ii) incurred in the ordinary course since December 31, 2021; (iii) incurred in connection with the transactions contemplated in this Agreement; and (iv) that would not be reasonably expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect. |
| 13. | Compliance with Laws. |
| (i) | The Purchaser and each of its Subsidiaries is and has been in compliance with all applicable Laws (including all Cannabis Laws) and, to the knowledge of the Purchaser, none of the Purchaser or the Subsidiaries is under any investigation with respect to, has been charged or threatened to be charged with, or has received notice of, any violation or potential violation of any Laws, except for failures to comply or violations that have not had or would not be reasonably expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect. |
| (ii) | None of the Purchaser or its Subsidiaries have received any written notices or other written correspondence from any Governmental Entity (A) regarding any violation (or any investigation, inspection, audit, or other proceeding by any Governmental Entity involving allegations of any violation) of any Law, except for violations that have not had or would not be reasonably expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect, or (B) of any circumstances that may have existed or currently exist which could lead to a loss, suspension, or modification of, or a refusal to issue, any material Authorization, other than where such correspondence would not reasonably be expected to have a Purchaser Material Adverse Effect or significantly impact the ability of the Purchaser to consummate the Arrangement. To the knowledge of the Purchaser, no investigation, inspection, audit or other proceeding by any Governmental Entity involving allegations of any material violation of any Law is threatened or contemplated. |
| (iii) | Neither the Purchaser nor any of its Subsidiaries, directly or indirectly, conduct any cannabis-related activities in the United States, including but not limited to: (i) the sale, cultivation, distribution, transportation, storage or handling of cannabis-related products; (ii) providing cannabis-related services or products to any Person in the United States; or (iii) arrangements with any Person engaging in the business activities described in items (i) or (ii). |
| (iv) | Neither the Purchaser, its Subsidiaries nor, to the knowledge of the Purchaser, any of their directors, executives, representatives, agents or employees while acting in such capacity on behalf of the Purchaser or its Subsidiaries (A) has used or is using any corporate funds for any illegal contributions, gifts, entertainment or other expenses relating to political activity that would be illegal, (B) has used or is using any corporate funds for any direct or indirect illegal payments to any foreign or domestic governmental officials or employees, |
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| (C) has violated or is violating any provision of the United States Foreign Corrupt Practices Act of 1977, the Corruption of Foreign Public Officials Act (Canada) or any similar Laws of other jurisdictions, (D) has established or maintained, or is maintaining, any illegal fund of corporate monies or other properties or (E) has made any bribe, illegal rebate, illegal payoff, influence payment, kickback or other illegal payment of any nature. |
| (v) | The operations of the Purchaser and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court of governmental authority or any arbitrator non-Governmental Entity involving the Purchaser or any of its Subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Purchaser, threatened. |
| 14. | Disclosure Controls and Internal Control over Financial Reporting |
| (i) | The Purchaser has established and maintains a system of disclosure controls and procedures (as such term is defined in National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings and as such term is defined In Rule 13a-15(e) under the U.S. Exchange Act) that are designed to ensure that material information required to be disclosed by the Purchaser in its reports filed or submitted under Securities Laws is recorded, processed, and reported on a timely basis and accumulated and communicated to the Purchaser’s management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. |
| (ii) | The Purchaser has established and maintains a system of internal control over financial reporting (as such term is defined in National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings) that is designed to provide reasonable assurance regarding the reliability of the Purchaser’s financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. |
| (iii) | Based on the Purchaser’s most recent evaluation of internal controls prior to the date hereof, there is no material weakness (as such term is defined in National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings) relating to the design, implementation or maintenance of its internal control over financial reporting, or fraud, whether or not material, that involves management or other employees of the Purchaser who have a significant role in the internal control over financial reporting of the Purchaser. As of the date hereof, none of the Purchaser, any of its Subsidiaries or, to the Purchaser’s knowledge, any director, employee, auditor, accountant or representative of the Purchaser or any of its Subsidiaries has received or otherwise obtained knowledge of any complaint, allegation, assertion, or claim, whether written or oral, regarding accounting, internal accounting controls or auditing matters, including any complaint, allegation, assertion, or claim that the Purchaser or any of its Subsidiaries has engaged in questionable accounting or auditing practices, or any expression of concern from its employees regarding questionable accounting or auditing matters. |
| 15. | Litigation. As of the date of this Agreement, there are no Actions pending, or, to the knowledge of the Purchaser, threatened, against the Purchaser or any of its Subsidiaries or affecting any of their respective properties or assets that, if determined adverse to the interests of the Purchaser or its Subsidiaries, would have, or be reasonably expected to have a Purchaser Material Adverse Effect. |
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| 16. | Licences and Compliance. |
| (i) | Except as would not reasonably be expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect: (i) all Authorizations which are necessary for Purchaser and the Purchaser Subsidiaries to own their respective assets or conduct its respective business as presently owned or conducted have (as applicable) been obtained and are in full force and effect in accordance with their terms; (ii) the Purchaser and the Purchaser Subsidiaries, as applicable, have performed the obligations required to be performed to date under all such Authorizations, (iii) the Purchaser and the Purchaser Subsidiaries are not in breach of or default under any such Authorizations, (iv) the Purchaser and the Purchaser Subsidiaries have not received written, or to the knowledge of Purchaser, other notice, of any alleged breach of or alleged default under any such Authorizations or of any intention of any Governmental Entity to revoke or not renew any such Authorizations, and (v) no proceedings are pending, or, to the knowledge of Purchaser, threatened, which could reasonably be expected to result in the revocation of such Authorizations. |
| (ii) | There are no compliance reviews, reports, or outstanding action items from a Governmental Entity that contain material concerns or would require remediation that would be reasonably expected to have a Purchaser Material Adverse Effect. |
| 17. | Purchaser Board Approval. The Purchaser Board, at a meeting duly called and held, upon consultation with management of the Purchaser and legal and financial advisors, has unanimously determined that the Arrangement is in the best interests of the Purchaser and has unanimously approved the execution and delivery of this Agreement and the transactions contemplated by this Agreement. No action has been taken to amend, or supersede such determinations, resolutions or authorizations of the Purchaser Board. |
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Exhibit 99.3
AMENDED AND RESTATED CREDIT AGREEMENT
BETWEEN
THE VALENS COMPANY INC.,
as Borrower
AND
SNDL INC.
as Lender
MADE AS OF
AUGUST 22, 2022
MCCARTHY TÉTRAULT LLP
TABLE OF CONTENTS
| ARTICLE 1 – INTERPRETATION |
1 | |||||
| 1.01 |
Definitions |
1 | ||||
| 1.02 |
Headings |
25 | ||||
| 1.03 |
Accounting Practices |
25 | ||||
| 1.04 |
Permitted Encumbrances |
25 | ||||
| 1.05 |
Currency |
25 | ||||
| 1.06 |
Paramountcy |
25 | ||||
| 1.07 |
Non-Business Days |
26 | ||||
| 1.08 |
Interest Payments; Calculations and Other Payments |
26 | ||||
| 1.09 |
Determinations By the Borrower |
27 | ||||
| 1.10 |
Terms Generally; Extended Meanings |
27 | ||||
| 1.11 |
Divisions |
27 | ||||
| 1.12 |
[Redacted] |
27 | ||||
| 1.13 |
Amendment and Restatement |
27 | ||||
| ARTICLE 2 – THE TERM FACILITY |
28 | |||||
| 2.01 |
Term Facility |
28 | ||||
| 2.02 |
Purpose of Term Facility |
28 | ||||
| 2.03 |
Manner of Borrowing |
28 | ||||
| 2.04 |
Nature of the Term Facility |
28 | ||||
| 2.05 |
Notice Period for Drawdowns |
28 | ||||
| 2.06 |
Irrevocability |
28 | ||||
| 2.07 |
Accounts of Record |
29 | ||||
| ARTICLE 3 – DISBURSEMENT CONDITIONS |
29 | |||||
| 3.01 |
Conditions Precedent for Effectiveness of this Agreement |
29 | ||||
| 3.02 |
Waiver |
30 | ||||
| ARTICLE 4 – PAYMENTS OF PRINCIPAL, INTEREST AND FEES |
31 | |||||
| 4.01 |
Place of Payment of Principal, Interest and Fees |
31 | ||||
| 4.02 |
Interest on the Outstanding Amount; Default Interest Rate |
31 | ||||
| 4.03 |
No Set-Off, Deduction etc. |
31 | ||||
| 4.04 |
[Redacted] |
31 | ||||
| 4.05 |
Interest on Overdue Amounts |
31 | ||||
| 4.06 |
Payment in Kind (PIK) |
32 | ||||
| ARTICLE 5 – REPAYMENT |
32 | |||||
| 5.01 |
Mandatory Repayments of the Term Facility |
32 | ||||
| 5.02 |
Voluntary Prepayment of the Term Facility |
33 | ||||
| 5.03 |
Multiple on Invested Capital |
33 | ||||
| ARTICLE 6 – REPRESENTATIONS AND WARRANTIES |
34 | |||||
| 6.01 |
Representations and Warranties |
34 | ||||
| 6.02 |
Survival and Repetition of Representations and Warranties |
41 | ||||
| ARTICLE 7 – COVENANTS |
42 | |||||
| 7.01 |
Positive Covenants |
42 | ||||
| 7.02 |
Reporting Requirements |
47 | ||||
| 7.03 |
Negative Covenants |
48 | ||||
| ARTICLE 8 – SECURITY |
53 | |||||
| 8.01 |
Form of Security | 53 | ||||
| 8.02 |
Additional Guarantors | 54 | ||||
| 8.03 |
After Acquired Property and Further Assurances | 54 | ||||
| 8.04 |
Landlord Agreements for Material Leasehold Interests | 54 | ||||
| 8.05 |
Insurance | 54 | ||||
| 8.06 |
Security Charging Real Property | 54 | ||||
| 8.07 |
Application of Proceeds of Security | 54 | ||||
| ARTICLE 9 – DEFAULT |
55 | |||||
| 9.01 |
Events of Default | 55 | ||||
| 9.02 |
Acceleration and Termination of Rights | 57 | ||||
| 9.03 |
Remedies Cumulative and Waivers | 58 | ||||
| 9.04 |
Saving | 58 | ||||
| 9.05 |
Perform Obligations | 58 | ||||
| 9.06 |
Third Parties | 59 | ||||
| 9.07 |
Set-Off or Compensation | 59 | ||||
| 9.08 |
Realization of Security | 59 | ||||
| 9.09 |
Application of Payments | 59 | ||||
| 9.10 |
Consultant | 59 | ||||
| ARTICLE 10 – COSTS, EXPENSES AND INDEMNIFICATION |
60 | |||||
| 10.01 |
Indemnification by the Borrower | 60 | ||||
| 10.02 |
Waiver of Consequential Damages | 60 | ||||
| 10.03 |
Payments | 61 | ||||
| ARTICLE 11 – TAXES AND CHANGE OF CIRCUMSTANCES |
61 | |||||
| 11.01 |
Increased Costs | 61 | ||||
| 11.02 |
Taxes | 61 | ||||
| 11.03 |
Illegality | 63 | ||||
| ARTICLE 12 – GENERAL |
63 | |||||
| 12.01 |
Costs and Expenses | 63 | ||||
| 12.02 |
Addresses, Etc. for Notices | 64 | ||||
| 12.03 |
Governing Law and Submission to Jurisdiction | 64 | ||||
| 12.04 |
Judgment Currency | 65 | ||||
| 12.05 |
Benefit of this Agreement | 65 | ||||
| 12.06 |
No Assignment by the Credit Parties | 66 | ||||
| 12.07 |
Assignment by the Lender | 66 | ||||
| 12.08 |
Amendments and Waivers | 66 | ||||
| 12.09 |
Survival | 66 | ||||
| 12.10 |
Severability | 66 | ||||
| 12.11 |
Entire Agreement | 66 | ||||
| 12.12 |
Further Assurances | 67 | ||||
| 12.13 |
Waiver of Jury Trial | 67 | ||||
| 12.14 |
Counterparts; Integration; Effectiveness. | 67 | ||||
| 12.15 |
Electronic Execution of Loan Documents; Delivery by Electronic Transmission | 67 | ||||
| 12.16 |
Treatment of Certain Information; Confidentiality | 68 | ||||
| 12.17 |
Time of the Essence | 68 | ||||
| 12.18 |
Termination of Agreement and Loan Documents | 68 | ||||
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| 12.19 |
Anti-Money Laundering Legislation | 69 | ||||
| 12.20 |
Publicity | 69 | ||||
| 12.21 |
Lender Confirmation | 69 |
[Redacted]
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AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT is made as of August 22, 2022 between THE VALENS COMPANY INC., a corporation existing under the federal laws of Canada (the “Borrower”) and SNDL INC., in its capacity as lender (the “Lender”).
WHEREAS reference is made to the credit agreement dated as of December 15, 2021 (the “Original Credit Agreement”) among the Borrower and 2361380 Ontario Limited (the “Original Lender”), pursuant to which the Original Lender agreed to provide certain financial accommodations in favour of the Borrower;
AND WHEREAS pursuant to the assignment and assumption agreement dated as of the date hereof (the “Assignment and Assumption Agreement”) between, inter alios, the Original Lender and the Lender, the Original Lender has sold, assigned and transferred to the Lender, and the Lender purchased and assumed from the Original Lender, all of the rights, titles, interests and obligations of the Original Lender in, to and under the Original Credit Agreement and the other Loan Documents (as defined in the Original Credit Agreement);
AND WHEREAS the parties hereto wish to amend and restate the Original Credit Agreement on the terms hereof to be effective on the Closing Date.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants and agreements herein contained the parties hereto agree as follows:
ARTICLE 1 – INTERPRETATION
| 1.01 | Definitions |
In this Agreement unless something in the subject matter or context is inconsistent therewith:
“Acquisition” shall mean, with respect to any Person, any purchase or other acquisition by such Person after the Closing Date, regardless of how accomplished or effected (including any such purchase or other acquisition effected by way of amalgamation, merger, arrangement, business combination or other form of corporate reorganization or by way of purchase, lease or other acquisition arrangements), of: (a) any other Person (including any purchase or acquisition of such number of the issued and outstanding securities of, or such portion of an Equity Interest in, such other Person) such that such other Person becomes a Subsidiary of such Person or of any of its Subsidiaries; (b) all or substantially all of the Property of any other Person; or (c) all or any material portion of any division, business, or operation or undertaking of any other Person as a going concern.
“Affiliate” means, with respect to a specified Person, another Person that directly or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.
“Agreement” means this amended and restated credit agreement, the schedules and all amendments made hereto in accordance with the provisions hereof.
“AML Legislation” means the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) and the Criminal Code (Canada) and the regulations thereunder.
“Analytical Licence” means the analytical licence issued by Health Canada to Valens AgriTech Ltd. bearing licence no. [Redacted].
“Annual Business Plan” means the annual business plan of the Borrower for any particular Fiscal Year, prepared on a Consolidated basis, with financial projections and budgets for such Fiscal Year, in each case consisting of a balance sheet, statement of income, statement of cash flows, Capital Expenditures, and management discussion and analysis.
“Anti-Corruption Laws” has the meaning set forth in Section 6.01(33).
“Applicable Cannabis Laws” means Applicable Laws with respect to Cannabis Activities (other than Applicable Laws of general application), including, without limitation, the Cannabis Act, the Cannabis Regulations, the Controlled Substances Act (United States) and the Agriculture Improvement Act of 2018 (United States).
“Applicable Law” means: (a) any domestic or foreign statute, law (including common and civil law), treaty, code, ordinance, rule, regulation, restriction or by-law (zoning or otherwise); (b) any judgment, order, writ, injunction, decision, ruling, decree or award; or (c) any regulatory policy, practice, request, guideline or directive, in each case, binding on or affecting the Person referred to in the context in which the term is used or binding on or affecting the Property of such Person, in each case, whether or not having the force of law.
“Applicable Order” means any applicable domestic or foreign order, judgment, award or decree made by any court or Governmental Authority.
“Approved Currency” means, in respect of any Approved Jurisdiction, the legal tender of such Approved Jurisdiction.
“Approved Jurisdiction” means any jurisdiction in which the activities conducted, or to be conducted, by the Group Parties in connection with the Business (or any part thereof) comply with all Applicable Laws, including Applicable Cannabis Laws.
“Arrangement Agreement” means the arrangement agreement dated as of August 21, 2022 between the Lender and the Borrower.
“Arm’s Length” is defined in the definition of “Non-Arm’s Length”.
“Assignment and Assumption Agreement” has the meaning set forth in the recitals.
“Auditor” means the Borrower’s auditor, being KPMG LLP as of the date hereof, and includes its successors and any replacement auditor from time to time.
“Authorization” means, with respect to any Person, any authorization, order, permit, approval, grant, licence, consent, right, franchise, privilege, certificate, judgment, writ, injunction, award, determination, direction, decree, by-law, rule or regulation of any Governmental Authority having jurisdiction over such Person, having the force of law.
“Borrower” means The Valens Company Inc., a corporation continued under the federal laws of Canada, and includes any successors and permitted assigns.
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“Borrower’s Counsel” means Stikeman Elliott LLP or such other firm or firms of legal counsel as the Borrower may from time to time designate and any and all local agent counsel retained by Stikeman Elliott LLP or such other law firm, as applicable, for and on behalf of the Borrower or any Group Party.
“Business” means (a) the extraction of Cannabis oils from dried hemp or Cannabis; (b) the conduct of all Cannabis Activities; and (c) any other business or activity that is similar or otherwise including without limitation, any consumer-based products business that is not currently a Cannabis business, such as businesses in the food, health and wellness, beverages, vitamins, or cosmetics industries, reasonably related, ancillary or complementary thereto, including any future business that is consistent with the strategic objectives of the Borrower at such time, but shall not include any cultivation of any Cannabis.
“Business Authorizations” means, at any time, (a) all material Authorizations necessary for the Business; (b) each Health Canada Licence (other than the Analytical Licence) and (c) any export permit.
“Business Day” means any day, other than a Saturday or a Sunday, on which banks generally are open for business in Toronto, Ontario and Kelowna, British Columbia.
“Canadian Credit Party” means any Credit Party that is incorporated, formed or organized under the laws of Canada or any province or territory thereof.
“Canadian Dollars”, “Cdn. Dollars”, “Cdn.$” and “$” means the lawful money of Canada.
“Cannabis” means:
| (a) | any plant or seed, whether live or dead, from any species or subspecies of genus Cannabis, including Cannabis sativa, cannabis indica, and Cannabis ruderalis, Marijuana and Industrial Hemp and any part, whether live or dead, of the plant or seed thereof, including any stalk, branch, root, leaf, flower or trichome; |
| (b) | any material obtained, extracted, isolated, or purified from the plant or seed or the parts contemplated by clause (a) of this definition, including any oil, cannabinoid, terpene, genetic material or any combination thereof; |
| (c) | any organism engineered to biosynthetically produce the material contemplated by clause (b) of this definition, including any micro organism engineered for such purpose; |
| (d) | any biologically or chemically synthesized version of the material contemplated by clause (b) of this definition or any analog thereof, including any product made by any organism contemplated by clause (c) of this definition; and |
| (e) | any other meaning ascribed to the term “cannabis” under Applicable Law, including under the Cannabis Act and the Controlled Substances Act (United States). |
“Cannabis Act” means the Cannabis Act (Canada), as amended or replaced from time to time.
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“Cannabis Activities” means all activities (including advertising or promotional activities) relating to or in connection with the possession, exportation, importation, cultivation, production, processing, purchase, manufacturing, testing, distribution or sale of Cannabis or Cannabis products, whether such activities are for medical, scientific, recreational or any other purpose. Notwithstanding the foregoing, the acquisition of services or Property to facilitate such activities which are acquired or used in accordance with Applicable Laws shall not constitute “Cannabis Activities”. For the avoidance of doubt, Cannabis Activities may only be conducted in an Approved Jurisdiction.
“Cannabis Regulations” means the regulations made from time to time under the Cannabis Act and any other applicable statute with respect to Cannabis Activities.
“Capital Expenditures” means, without duplication, any expenditure (whether payable in cash or other property or accrued as a liability) that, in conformity with GAAP, would be required to be classified as a capital expenditure of any Credit Party on a Consolidated basis. For certainty, Capital Expenditures (i) include (A) the cost of personal Property acquired under leases and (B) expenditures for equipment which is purchased with the trade-in of existing equipment owned by any Credit Party, to the extent of the net purchase price of the purchased equipment after giving effect to such trade-in, and (ii) exclude (x) expenditures made in connection with the replacement, repair or restoration of buildings, fixtures or equipment to the extent reimbursed or financed from insurance or expropriation proceeds and (y) the cost of the acquisition of any business.
“CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act, as in effect on June 17, 2021 or any amended or successor version that is substantively comparable and not materially more adverse to the interest of the Lender.
“Cash Equivalents” means any one or more of the following:
| (a) | marketable direct obligations issued by, or unconditionally guaranteed by, the Government of Canada or of any Canadian province or any agency or instrumentality thereof, and backed by the full faith and credit of Canada, in each case, maturing within one year from the date of acquisition; |
| (b) | term deposits, certificates of deposit or overnight bank deposits having maturities of three months or less from the date of acquisition issued by any commercial bank organized under the laws of Canada or of any Canadian province having combined capital and surplus of not less than $1,000,000,000; |
| (c) | commercial paper of an issuer rated at least A-1+ or the equivalent thereof by Standard & Poor’s Ratings Services or at least P-1 or the equivalent thereof by Moody’s Investors Service Inc. or at least R-1 (High) or the equivalent thereof by DBRS Limited, and in each case maturing within three months from the date of acquisition; and |
| (d) | any other investment approved by the Lender. |
“Cash Management Obligations” means, with respect to the Credit Parties, corporate credit cards, commercial credit cards, stored value cards, purchasing cards, treasury management services, netting services, overdraft protections, check drawing services, automated payment services (including depository, overdraft, controlled disbursement, ACH transactions, return items and interstate depository network services), employee credit card programs, cash pooling services and any arrangements or services similar to any of the foregoing and/or otherwise in connection with cash management and deposit accounts.
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“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any Applicable Law, (b) any change in any Applicable Law or in the administration, interpretation or application thereof by any Governmental Authority; or (c) the making or issuance of any Applicable Law by any Governmental Authority.
“Change of Control” means:
| (a) | with respect to the Borrower, the occurrence of any of the following: (i) the acquisition by any Person (other than the Lender and/or any of its Affiliates) or group of Persons who are associates (as such term is defined in the Securities Act (Ontario)), or who act together in concert for such purpose (other than the Lender and/or any of its Affiliates), of (A) common shares or other voting securities of the Borrower to which are attached more than 50% of the votes that may be cast to elect the directors, or (B) the ability, through operation of law or otherwise, to elect or cause the election or appointments of a majority of the directors; and where control is exercised de-facto by contract or representation on the board of directors of the Borrower, any change in the foregoing relationship where a reasonable Person would deem control to have been acquired as a result of such change, will constitute a Change of Control; (ii) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger, plan of arrangement, amalgamation or consolidation), in one or a series of related transactions, of all or substantially all of the Property of the Borrower and its Subsidiaries, taken as a whole, to any Person or group of Persons acting jointly or in concert for purposes of such transaction (other than the Lender and/or any of its Affiliates); (iii) the adoption of a plan relating to the liquidation or dissolution of the Borrower, which is not otherwise permitted under this Agreement; or (iv) the first day on which a majority of the members of the board of directors of the Borrower are not Continuing Directors (other than as a result of the nomination of any directors to the board of directors of the Borrower made by the Lender and/or any of its Affiliates); or |
| (b) | at any time the Borrower ceases to Control any other Credit Party |
[Redacted]
“Clarity Labs” means Clarity Labs, LLC, a Florida limited liability company, a predecessor to Green Roads, Inc.
“Closing Date” means August 22, 2022 or such later date as may be agreed to by the parties hereto.
“Collateral” means all of the present and future Property of the Credit Parties (or, as applicable, any given Credit Party) or any other Person encumbered by the Security, together with all proceeds thereof, but excluding, at any time of determination, all Health Canada Licences, Material Licences and Material Contracts to the extent not assignable under Applicable Law at such time.
“Compliance Certificate” means the certificate required pursuant to Section 7.02(3), substantially in the form annexed hereto as Schedule C and signed by a Responsible Officer of the Borrower.
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“Confirmation” means an acknowledgement and confirmation agreement dated as of the date hereof from each Credit Party confirming the enforceability and effectiveness of the Loan Documents to which such Credit Party is a party.
“Consolidated” means, when used with respect to any financial term, financial covenant, financial ratio or financial statement, such financial term, financial covenant, financial ratio or financial statement calculated, prepared or determined, as applicable, for the Borrower, on a consolidated basis, in accordance with GAAP consistently applied.
“Contingent Obligation” means, as to any Person, any obligation, whether secured or unsecured, of such Person guaranteeing or indemnifying, or in effect guaranteeing or indemnifying, any liability (other than Debt) (the “primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including any obligation of such Person as an account party in respect of a letter of credit or letter of guarantee issued to assure payment by the primary obligor of any such primary obligation and any obligations of such Person, whether or not contingent: (a) to purchase any such primary obligation or any Property constituting direct or indirect security therefor; (b) to advance or supply funds for the purchase or payment of any such primary obligation or to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; (c) to purchase Property, securities or services primarily for the purpose of assuring the obligee under any such primary obligation of the ability of the primary obligor to make payment of such primary obligation; or (d) otherwise to assure or hold harmless the obligee under such primary obligation against loss in respect of such primary obligation; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business.
“Continuing Directors” means (a) any member of the board of directors who was a director (or comparable manager) of any Credit Party on the Closing Date, and (b) any individual who becomes a member of the board of directors of any Credit Party after the Closing Date if such individual was approved, appointed or nominated for election to the board of directors by a majority of the then Continuing Directors, but excluding any such individual originally proposed for election in opposition to the board of directors in office at the Closing Date in an actual or threatened election contest relating to the election of the directors (or comparable managers) of any Credit Party and whose initial assumption of office resulted from such contest or the settlement thereof.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have corresponding meanings.
“Control Agreement” means a control agreement, in form and substance reasonably satisfactory to the Lender, providing for springing dominion, executed and delivered by a Credit Party, the Lender and the applicable securities intermediary (with respect to a securities account) or bank (with respect to a deposit account).
“Credit Parties” means at any particular date of determination, collectively, the Borrower and the Guarantors at such time, and “Credit Party” means any one of them. As of the Closing Date, the Credit Parties consist of each of the Persons identified on Schedule D.
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“Debt” means, with respect to any Person, without duplication, the aggregate of the following amounts, at the date of determination:
| (a) | all indebtedness of such Person to any other Person for borrowed money; |
| (b) | all obligations of such Person for the deferred purchase price of Property or services which constitute indebtedness, including indebtedness in respect of Purchase Money Security Interests; |
| (c) | all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments; |
| (d) | all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to Property acquired by such Person (whether or not the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such Property); |
| (e) | all Lease Liabilities of such Person; |
| (f) | all reimbursement obligations, contingent or otherwise, of such Person under bankers’ acceptance, letters of credit and similar facilities; |
| (g) | all obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value any partnership or shareholder or other Equity Interests of such Person; |
| (h) | all guarantees or indemnities by such Person of Debt of others; |
| (i) | all obligations of such Person under any Hedge Arrangements on a net mark-to-market basis; |
| (j) | all Contingent Obligations of such Person; and |
| (k) | any other liabilities or obligations of such Person which would be classified as indebtedness of such Person in accordance with GAAP. |
Notwithstanding the foregoing, trade payables, customer deposits, accrued liabilities (including Taxes payable) incurred in the ordinary course of business, deferred revenues, tenant allowances, asset retirement obligations and straight line rent liabilities shall not, in each case, constitute Debt.
“Default” means any event or condition that would constitute an Event of Default except for satisfaction of any condition subsequent required to make the event or condition an Event of Default, including giving of any notice, passage of time, or both.
“Default Interest Rate” means an interest rate equal to 14% per annum on the Outstanding Amount.
“Defined Benefit Pension Plan” means a Pension Plan which contains a “defined benefit provision”, as defined in subsection 147.1(1) of the Income Tax Act (Canada).
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“Disposition” means any sale, assignment, transfer, conveyance, lease or other disposition of any asset of any Group Party in a single transaction or a series of related transactions and the word “Dispose” shall have a correlative meaning. For certainty, (a) the purchase and sale of Cash Equivalents and (b) the conversion of cash from one currency to another currency, in each case do not constitute Dispositions, (c) the sale, transfer or assignment of Equity Interests by a Group Party to a Person other than a Credit Party shall constitute a Disposition and (d) the issuance out of treasury of Equity Interests by a Group Party to a Person (other than a Credit Party) shall constitute a Disposition if such issuance would result in the Borrower owning directly or indirectly a lower percentage of the Equity Interests of such Group Party in which case the number of Equity Interests issued that results in, and solely to the extent of, such dilution shall be the Equity Interests deemed to have been Disposed of.
“Distribution” means, with respect to any Person, any payment, directly or indirectly, by such Person: (a) of any dividends or distributions on any Equity Interests, other than dividends or distributions payable in shares or other Equity Interests; (b) on account of, or for the purpose of setting apart any Property for a sinking or other analogous fund for, the purchase, redemption, retirement or other acquisition of any Equity Interests of such Person; (c) of any other distribution (other than distributions payable in shares or other Equity Interests) in respect of any Equity Interests of such Person, including a return of capital; (d) of any management, monitoring, consulting, advisory or similar fee or compensation (of any nature or kind) or any bonus payment or comparable payment, or by way of gift or other gratuity, to the extent such distributions are made in cash, to any Affiliate of such Person (including to a direct or indirect parent) or to any director, officer or member of the management of an Affiliate of such Person; (e) of any principal, interest or other amounts (other than payments in kind) on account of Subordinated Debt; or (f) of any Earn Out Obligations; provided that, payments by a Credit Party in the ordinary course of business to its directors, officers, employees and members of management of the Credit Parties (including expense reimbursements) shall not constitute Distributions hereunder.
“Drawdown” means the advance of the Loan hereunder.
“Drawdown Notice” means a notice of request for a Drawdown substantially in the form annexed hereto as Schedule A, to be given to the Lender by the Borrower pursuant to Section 2.05.
“Earn Out Obligations” means any amounts payable by a Group Party to any one or more vendors of applicable assets or Equity Interests following consummation of an Acquisition, whether based on working capital purchase price adjustments, future performance, future profitability or otherwise (provided, for certainty, reimbursement for expenses, payments in connection with indemnity claims (whether held in escrow or otherwise) and other similar payments shall not constitute Earn Out Obligations).
“Encumbrance” means, in respect of any Person, any mortgage, debenture, pledge, hypothec, lien, charge, assignment by way of security, hypothecation or security interest granted or permitted by such Person or arising by operation of law, in respect of any of such Person’s Property, or any consignment or lease of Property by such Person as consignee or lessee or any other security agreement, trust, deemed trust or arrangement having the effect of security for the payment of any debt, liability or obligation, and “Encumbrances” and “Encumbrancer” shall have corresponding meanings; provided, that in no event shall an operating lease be deemed to be an Encumbrance.
“Environmental Liability” means any liability of a Group Party arising from the breach of any Requirements of Environmental Law.
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“Equity Interest” means: (a) in the case of any corporation, all capital stock and any securities exchangeable for or convertible into capital stock; (b) in the case of an association or business entity, any and all shares, interests, participation rights or other equivalents of corporate stock (however designated) in or to such association or entity; (c) in the case of a partnership, limited liability company or unlimited liability company, partnership or membership interests (whether general or limited), as applicable; and (d) any other ownership interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distribution of assets of, the issuing Person, and including, in all of the foregoing cases described in clauses (a), (b), (c) or (d), any warrants, rights or other options to purchase or otherwise acquire any of the interests described in any of the foregoing cases.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974 (United States) (or any successor legislation thereto), as amended from time to time, and any regulations promulgated thereunder.
“ERISA Affiliate” shall mean, with respect to any Group Party, any trade or business (whether or not incorporated) which, together with such Group Party, is treated as a single employer within the meaning of Sections 414(b), (c), (m) or (o) of the US Tax Code.
“ERISA Event” shall mean, with respect to any Group Party or any ERISA Affiliate, (a) any “reportable event” described in Section 4043(c) of ERISA with respect to a Title IV Plan; (b) the withdrawal of any Group Party or ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the complete or partial withdrawal of any Group Party or any ERISA Affiliate from any US Multiemployer Plan; (d) the filing of a notice of intent to terminate a Title IV Plan or the treatment of a plan amendment as a termination under Section 4041 of ERISA; (e) the institution of proceedings to terminate a Title IV Plan or US Multiemployer Plan by the PBGC; (f) the failure by any Group Party or ERISA Affiliate to make when due required contributions to a US Multiemployer Plan or minimum required contributions to a Title IV Plan; (g) any event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Title IV Plan or US Multiemployer Plan or for the imposition of liability under Section 4069 or 4212(c) of ERISA; (h) the termination of a US Multiemployer Plan under Section 4041A of ERISA or the receipt by any Group Party or any of their respective ERISA Affiliates of notice from any US Multiemployer Plan that it is in insolvency pursuant to Section 4245 of ERISA, or that it is in “critical” or “endangered” status within the meaning of Section 305 of ERISA; or (i) the loss of a Qualified Plan’s qualification or tax exempt status.
“Event of Default” means any of the events or circumstances described in Section 9.01.
“Excluded Accounts” means, collectively, each of the lock boxes, deposit accounts, operating accounts, securities accounts and other bank accounts of each Credit Party that has a balance amount less than [Redacted] at all times; provided that (a) notwithstanding the foregoing, the main operating bank account of the Borrower maintained with Royal Bank of Canada shall constitute an Excluded Account so long as the balance therein does not exceed [Redacted] at any time, and (b) the aggregate balance in all Excluded Accounts shall not exceed [Redacted] at any time.
“Excluded Subsidiaries” means collectively, Valens GroWorks Inc., Valens Australia Pty. Ltd., What is CBD, LLC, Cannabis Life Franchising LLC, Free the Leaf, LLC, GR UK, Stave Lake Services Ltd., EFX Laboratories Inc., Kanabe Corp., G.R. Direct, LLC and TVC Bermuda Ltd.
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“Excluded Taxes” means, with respect to the Lender or any other recipient of any payment to be made by or on account of any obligation of a Credit Party hereunder or under any other Loan Document (each, a “Recipient”): (a) Taxes imposed on or measured by its net income, capital Taxes and franchise Taxes imposed on it, in each case, (i) by the jurisdiction (or any political subdivision thereof) under the laws of which such Recipient is organized or in which its principal office is located or, in the case of the Lender, in which its lending office is located, or (ii) that are Other Connection Taxes; (b) any branch profits Taxes or any similar Tax imposed by any jurisdiction described in clause (a) with respect to the Recipient; (c) Taxes imposed under FATCA; (d) any Tax that is directly attributable to such Recipient´s failure to comply with Section 11.02(6); (e) any Canadian withholding Taxes imposed on a payment by or on account of any obligation of a Credit Party hereunder or under any other Loan Document by reason of the Recipient not dealing at Arm’s Length with the Credit Party at the time of making such payment(other than where the Non-Arm’s Length relationship arises as a result of the Recipient having become a party to, performed its obligations under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document); and (f) any Taxes imposed on a Recipient by reason of such Recipient (i) being a “specified shareholder” (as defined in subsection 18(5) of the Income Tax Act (Canada)) of any Credit Party, or (ii) not dealing at Arm’s Length with a “specified shareholder” (as defined in subsection 18(5) of the Income Tax Act (Canada)) of any Credit Party (other than where the Recipient is a “specified shareholder” or does not deal at Arm’s Length with a “specified shareholder”, as a result of the Recipient having become a party to, performed its obligations under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document).
“Executive Order” has the meaning set forth in Section 6.01(34).
“FATCA” means Sections 1471 through 1474 of the Internal Revenue Code of 1986 of the United States of America (the “Code”) as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b)(i) of the Code, or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code, including the rules implemented by Canada pursuant to Part XVIII of the Income Tax Act (Canada).
“Financial Assistance” means, without duplication and with respect to any Person, all loans made by that Person and guarantees or Contingent Obligations granted or incurred by that Person for the purpose of or having the effect of providing financial assistance to another Person or Persons, including, without limitation, letters of guarantee, letters of credit, legally binding comfort letters or indemnities issued in connection therewith, endorsements of bills of exchange (other than for collection or deposit in the ordinary course of business), obligations to purchase assets regardless of the delivery or non-delivery thereof and obligations to make advances or otherwise provide financial assistance to any other Person and for greater certainty “Financial Assistance” shall include any guarantee of any third party lease obligations.
“Fiscal Quarter” means each quarter that ends on February 28th, May 31st, August 31st or November 30th of each calendar year.
“Fiscal Year” means a twelve-month period ending on November 30th of any year.
“Foreign Official” has the meaning set forth in Section 6.01(33).
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“GAAP” means those accounting principles that are from time to time approved by the Chartered Professional Accountants of Canada, or any successor institute (including, for certainty, the IFRS), as applicable.
“Governmental Authority” means the Government of Canada or any other nation, or of any political subdivision thereof, whether provincial, territorial, state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government, including any supra-national bodies such as the European Union or the European Central Bank and including Health Canada, a Minister of the Crown, the Superintendent of Financial Institutions or other comparable authority or agency.
“GR Acquisition” means the Acquisition by the Borrower of all of the Equity Interests of the GR Entities pursuant to the Green Roads SPA.
“GR Entities” means, collectively, Green Roads, Inc. (as the surviving entity from the merger of VGR Merger Sub, Inc. and Green Roads Founders LLC), and each of its Subsidiaries (other than GR UK).
“GR Florida” means Green Roads of Florida, LLC, a Florida limited liability company (a predecessor to Green Roads, Inc.).
“GR PPP Escrow Amounts” means the escrow amounts funded pursuant to Section 2.8(a) of the Green Roads SPA for purposes of settling the GR PPP Loans to the extent such GR PPP Loans are not forgiven in accordance with Applicable Law.
[Redacted]
“GR UK” means Green Roads World UK Ltd., a limited company formed under the laws of England and Wales with company number 11567499.
“Green Roads SPA” means the plan of merger and securities purchase agreement, dated as of April 26, 2021, between, among others, the Borrower, as parent, VGR Merger Sub, Inc., a Delaware corporation and a Wholly-Owned Subsidiary of the Borrower, as purchaser, Green Roads Founders LLC, a Delaware limited liability company, Green Roads Holdings LLC, a Delaware limited liability company, Clarity Labs, each of the sellers named therein and Dale Baker, as the representative of each seller thereunder.
“Group Parties” means, at any particular date of determination, collectively, the Credit Parties and all other Subsidiaries of the Credit Parties at such time, and “Group Party” mean any one of them.
“Guarantors” means, collectively: (a) as of the Closing Date, the Subsidiaries of the Borrower identified on Schedule D; (b) each Subsidiary (other than Excluded Subsidiaries) of the Borrower that is required to become a Guarantor pursuant to Section 7.01(12) from time to time; and (c) each other Subsidiary of the Borrower that delivers a guarantee and security to the Lender pursuant hereto.
“Hazardous Material” means any substance, product, waste, pollutant, material, chemical, contaminant, dangerous goods, hazardous waste, constituent or other material listed or regulated under any Requirements of Environmental Law, including damaged and friable asbestos, petroleum product or by-product, polychlorinated biphenyls and radon.
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“Health Canada Licences” means, collectively, all licences and other Authorizations issued by Health Canada to any of the Group Parties pursuant to Applicable Cannabis Laws or in respect of Cannabis Activities, including, without limitation, each of the licences and other Authorizations described on Schedule G applicable to the facility or location of such Group Party with respect to such licence or Authorization; and “Health Canada Licence” means any one of them.
“Hedge Arrangement” means, for any period, for any Group Party, any arrangement or transaction between such Group Party and a financial institution listed on Schedule I of the Bank Act (Canada), which is an interest rate swap transaction, basis swap, forward interest rate transaction, commodity swap, interest rate option, forward foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency interest rate swap transaction, currency option or any other similar transaction (including any option with respect to any of such transactions or arrangements) designed to protect or mitigate against risks in interest, currency exchange or commodity price fluctuations.
“IFRS” means the International Financial Reporting Standards, as used by the International Accounting Standards Board.
“IFRS 16” means the International Financial Reporting Standard 16: Leases.
“Indemnified Taxes” means Taxes other than Excluded Taxes.
“Indemnitee” has the meaning set forth in Section 10.01.
“Industrial Hemp” has the meaning ascribed to the term “hemp” or such other comparable term under Applicable Law, including the Industrial Hemp Regulations (Canada) issued under the Cannabis Act and the Agriculture Improvement Act of 2018 (United States).
“Insolvency Legislation” means the Bankruptcy Code (United States), the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada) and the Winding-Up and Restructuring Act (Canada), each as now and hereafter in effect, any successors to such statutes and any other applicable bankruptcy, liquidation, conservatorship, winding-up, administration, assignment for the benefit of creditors, moratorium, arrangement, rearrangement, receivership, insolvency, reorganization, or other similar debtor relief law of any jurisdiction, including any law of any jurisdiction affecting creditors’ rights or pursuant to which proceedings may be commenced seeking or imposing any stay, reorganization, arrangement, composition or readjustment of obligations or indebtedness (including the arrangement provisions under applicable corporate law statutes or any other similar legislation in any jurisdiction involving an arrangement of obligations or indebtedness, including, without limitation, the Canada Business Corporations Act).
“Intellectual Property” means the intellectual property in patents, patent applications, trade-marks, trade-mark applications, trade names, service marks, copyrights, copyright registrations and trade secrets (including, without limitation, customer lists and information and business opportunities), industrial designs, proprietary software, technology, recipes and formulae and other similar intellectual property rights.
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“Interest Payment Date” means the last Business Day of December, March, June and September in each calendar year.
“Interest Rate” means the interest rate equal to 10% per annum.
“Investment” means, as to any Person, any direct or indirect acquisition or investment (other than an Acquisition) by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests of another Person or (b) a loan, advance, Financial Assistance or capital contribution to, guarantee or assumption of Debt, or purchase or other acquisition of any other Debt or equity participation or interest, in another Person, including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor guarantees the debt of such other Person. In determining the amount of any Investment involving a transfer of any Property other than cash, such Property shall be valued at its fair market value at the time of such transfer.
“Joint Venture” means any arrangement, regardless of legal form, but including a corporation, partnership, joint venture, trust or contractual arrangement, formed or entered into between a Group Party and one or more other Persons (other than a Group Party) for the purpose of carrying on specific business or developing one or more specific projects together.
“Judgment Conversion Date” has the meaning set forth in Section 12.04(1)(b).
“Judgment Currency” has the meaning set forth in Section 12.04(1).
[Redacted]
“Landlord Agreement” means an agreement in form and substance satisfactory to the Lender, acting reasonably, given by the landlord of a Material Leasehold Interest in favour of the Lender, which shall include, without limitation, the following provisions (except to the extent otherwise agreed by the Lender): such landlord’s consent to the granting of an Encumbrance in the lease by a Credit Party which is a tenant thereunder in favour of the Lender, such landlord’s consent to the registration of notice of each lease of premises against title to the applicable real property for such Material Leasehold Interest; such landlord’s agreement to give written notice to the Lender in respect of and a reasonable opportunity to cure any default before terminating the lease, and such landlord’s agreement to waive (or subordinate and defer the enforcement of) its rights and remedies and any security it may hold in respect of any assets owned by such Credit Party located on the real property of such Material Leasehold Interest or affixed to such real property located at such Material Leasehold Interest which the tenant is entitled to remove under Applicable Law or pursuant to the terms of the lease.
“Lease Liability” means, with respect to any Person, any liability in respect of a Right of Use Asset that is required in accordance with GAAP to be recorded on the balance sheet of such Person in accordance with IFRS 16.
“Lender” means SNDL Inc., a corporation incorporated under the laws of the Province of Alberta, and includes any successors and permitted assigns.
“Lender’s Counsel” means McCarthy Tétrault LLP or such other firm of legal counsel as the Lender may from time to time designate and any and all local agent counsel retained by McCarthy Tétrault LLP or such other firm for and on behalf of the Lender.
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“Lender’s Payment Office” means the office of the Lender located at 919 - 11 Avenue SW, Suite 300, Calgary, AB T2R 1P3, or such other office that the Lender may from time to time designate by notice to the Borrower.
“Loan” means the advance of funds made by the Lender to the Borrower on the Closing Date, pursuant to this Agreement.
“Loan Documents” means (a) this Agreement, the Security, the Confirmation, all Control Agreements and each document, agreement and instrument, delivered to the Lender in connection herewith by or on behalf of a Credit Party or any other Person (in the case of any other Person, as required by the terms of this Agreement) on or after the Closing Date; and (b) all present and future security, agreements, documents, certificates and instruments delivered by any Credit Party or any other Person to the Lender pursuant to, or in respect of the agreements and documents referred to in clause (a), and “Loan Document” means any of the Loan Documents.
“Marijuana” or “Marihuana” has the meaning ascribed to the term “marihuana”, “marijuana” or such other comparable term under Applicable Law, including the Controlled Substances Act (United States).
“Material Adverse Effect” means a material adverse effect on: (a) the business, operations, properties, assets or condition (financial or otherwise) of the Credit Parties, taken as a whole; (b) the legality, validity or enforceability of any of the Loan Documents, including the validity, enforceability, perfection or priority of any Encumbrance created under any of the Security; (c) the ability of any Credit Party to pay or perform any of its debts, liabilities or obligations under any of the Loan Documents; or (d) the right, entitlement or ability of the Lender to enforce its rights or remedies under any of the Loan Documents.
“Material Contracts” means (a) each of the agreements identified in Schedule 6.01(22); and (b) any agreement, contract or legally binding arrangement entered into from time to time by a Group Party or to which any of its Property may be subject, for which breach, non-performance, cancellation, failure to renew, failure to replace, termination, revocation or lapse could reasonably be expected to have a Material Adverse Effect.
“Material Freehold Interest” means (a) each of the freehold interests of the Group Parties in any real property identified in Schedule 6.01(13) as a “Material Freehold Interest” (including the Kelowna Properties and the Mission Property); and (b) any freehold interest of a Group Party in real property that is (i) valued at fair market value in excess of [Redacted]; or (ii) which will be used in the Business for manufacturing, producing or packing products or storing of inventory with an inventory value in excess of [Redacted].
“Material Leasehold Interest” means (a) each of the leasehold interests of the applicable Group Parties in any real property identified in Schedule 6.01(13) as a “Material Leasehold Interest”, and (b) any other leasehold interest of any Group Party in any real property that is (i) material to, or necessary in, the operation of the Business (other than leased office space); or (ii) used in the Business for manufacturing, producing or packing products or storing of inventory with an inventory value in excess of [Redacted].
“Material Licences” means (a) each Business Authorization identified in Schedule 6.01(22); (b) each Health Canada Licence (other than the Analytical Licence); and (c) each other Business Authorization issued by any Governmental Authority to any Group Party from time to time, the breach or default in respect of which would reasonably be expected to result in a Material Adverse Effect.
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“Maturity Date” means the earlier of (a) December 15, 2023; and (b) the date on which the Term Facility is terminated pursuant to Section 9.02.
“Mission Property” means the real property municipally known as 12556 Stave Lake Road, Mission, British Columbia V2V 0A6, as more particularly described in Schedule 6.01(13).
“Multiple on Invested Capital” [Redacted].
“NCIB” means the normal course issuer bid by the Borrower in accordance with Applicable Law in relation to its common shares.
“Net Proceeds” means any one or more of the following:
| (a) | with respect to the receipt of proceeds under any insurance policy, the net amount equal to the aggregate amount received (or receivable) in cash by a Group Party in connection with such insurance proceeds less a provision for taxes payable by such Person attributable to such insurance proceeds; and |
| (b) | with respect to the issuance or incurrence of any Debt (other than Permitted Debt) by any Person, the net amount equal to the aggregate amount received in cash in connection with such issuance or incurrence of such Debt by such Person, less the sum of reasonable fees, including reasonable accounting, advisory and legal fees, commissions and other out-of-pocket expenses (as evidenced by supporting documentation provided to the Lender) actually incurred or paid for by such Person in connection with the issuance or incurrence of any such Debt by such Person. |
“Non-Arm’s Length” and similar phrases have the meaning attributed thereto for the purposes of the Income Tax Act (Canada); and “Arm’s Length” shall refer to any relationship that is not a Non-Arm’s Length relationship.
“Obligations” means, with respect to any Credit Party, all of its present and future indebtedness, liabilities and obligations of any and every kind, nature or description whatsoever (whether direct or indirect, joint or several or joint and several, absolute or contingent, matured or unmatured, in any currency and whether as principal debtor, guarantor, surety or otherwise, including without limitation any interest that accrues thereon after or would accrue thereon but for the commencement of any case, proceeding or other action, whether voluntary or involuntary, relating to the bankruptcy, insolvency or reorganization, whether or not allowed or allowable as a claim in any such case, proceeding or other action) to the Lender under, in connection with, relating to or with respect to any of the Loan Documents (including, without limitation, the Outstanding Amount and the Multiple on Invested Capital) and any unpaid balance thereof.
“OFAC” means The Office of Foreign Assets Control of the US Department of the Treasury.
“Organizational Documents” means, with respect to any Person, such Person’s articles or other charter documents, by-laws, shareholders agreement, partnership agreement, joint venture agreement, limited liability company agreement or trust agreement, as applicable, and all other similar agreements, documents and instruments relative to such Person.
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“Original Closing Date” means December 15, 2021.
“Original Credit Agreement” has the meaning set forth in the recitals.
“Other Connection Taxes” means, with respect to the Lender or any other recipient of any payment to be made by or on account of a Credit Party hereunder or under any other Loan Document, Taxes imposed as a result of a present or former connection between such person and the jurisdiction imposing such Tax (other than connections arising solely from such person having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, this Agreement or enforced this Agreement or any other Loan Document).
“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes or any other excise or Property Taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery, performance, registration or enforcement of, from the receipt or perfection of a security interest under, or otherwise with respect to, this Agreement or any other Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.
“Outstanding Amount” means, as of any date of determination, the sum of the outstanding principal amount of the Loan owing to the Lender as of such date, as the same may have been increased from time to time prior to such date as a result of the payment in kind provisions under Section 4.06, or decreased from time to time prior to such date as a result of any repayment or prepayment thereof pursuant hereto, as applicable.
“PBGC” shall mean the Pension Benefit Guaranty Corporation or any successor thereto.
“Pension Benefits Act” means the Pension Benefits Act (Ontario) or similar minimum standards pension legislation of another jurisdiction to the extent it applies to a Pension Plan.
“Pension Event” means: (a) the failure of a Group Party to make or remit any employer or employee contributions with respect to any Pension Plan required by Applicable Law or by the terms of such Pension Plan, except where such failure could not reasonably be expected to have a Material Adverse Effect ; (b) the revocation of registration by applicable Governmental Authorities of a Defined Benefit Pension Plan; (c) the material failure of a Pension Plan to comply with the provisions of Applicable Law or with the terms of such Pension Plan; (d)(i) the filing of a notice with a Governmental Authority to, (ii) the institution of proceedings by any Governmental Authority to, or (iii) the actual, termination or wind up of all or a part of a Defined Benefit Pension Plan; or (e) a trustee is appointed to administer a Defined Benefit Pension Plan.
“Pension Plan” means a “registered pension plan” as defined in subsection 248(1) of the Income Tax Act (Canada) and in respect of which the Group Party is an employer for the purposes of the Pension Benefits Act.
“Permitted Acquisition” means (i) any Acquisition between Credit Parties or any transfer from a Group Party to a Credit Party, or (ii) any Acquisition by a Group Party with respect to which all of the following conditions shall have been satisfied:
| (a) | the Persons acquired pursuant to the Acquisition shall operate in a business that includes all or any part of the Business and shall be organized and resident under the laws of an Approved Jurisdiction (or a province, state or territory thereof); |
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| (b) | at the time of such Acquisition, there exists no Default or Event of Default and there shall exist no Default or Event of Default after giving effect to the consummation of such Acquisition; |
| (c) | existing Debt, other than Permitted Debt, of Persons acquired pursuant to such Acquisition shall be repaid concurrently with such Acquisition, and all Encumbrances, other than Permitted Encumbrances, shall be discharged on consummation of such Acquisition; |
| (d) | the Borrower shall have Unrestricted Cash of not less than [Redacted] before and after consummation of such Acquisition; |
| (e) | in the case of a share purchase, immediately thereafter such Person will be a Subsidiary of the Borrower; |
| (f) | if Equity Interests of any Person are acquired by a Group Party pursuant to such Acquisition, the Lender shall receive the documents and agreements contemplated by Section 7.01(12) and Section 7.01(13) within 45 days after closing of such Acquisition (or within such longer period of time as the Lender may agree, acting reasonably); and |
| (g) | if a Group Party acquired any Material Freehold Interest pursuant to such Acquisition, the Lender shall receive the documents and agreements contemplated by Section 7.01(13) within 45 days after closing of such Acquisition (or within such longer period of time as the Lender may agree, acting reasonably). |
“Permitted Debt” means:
| (a) | Debt under this Agreement; |
| (b) | Debt in respect of Purchase Money Security Interests and Lease Liabilities in an outstanding principal amount not to exceed [Redacted] in the aggregate at any time; |
| (c) | Permitted Intercompany Debt; |
| (d) | Cash Management Obligations in an outstanding principal amount not to exceed [Redacted] in the aggregate at any time; |
| (e) | Subordinated Debt; |
| (f) | Debt owing to SoRSE Technology Corporation by the Borrower pursuant to the SoRSE Agreement; |
| (g) | Hedge Arrangements, so long as (i) such Hedge Arrangement complies with Section 7.03(19); and (ii) the net mark-to-market value of all Hedge Arrangements do not exceed [Redacted] in the aggregate at any time; and |
| (h) | Debt consented to in writing by the Lender from time to time. |
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“Permitted Disposition” means:
| (a) | any Disposition of inventory in the ordinary course of business; |
| (b) | any Disposition of used, surplus, obsolete or worn-out Property and equipment in the ordinary course of business for nominal consideration; |
| (c) | any Disposition of Property between Credit Parties; and |
| (d) | any other Disposition of Property of any Group Party on Arm’s Length terms and for fair market value, provided that no Default or Event of Default exists at the time of, or after giving effect to, such Disposition. |
“Permitted Distributions” means:
| (a) | any Distribution from any Person (including a Credit Party) to a Credit Party; |
| (b) | payments of Permitted Intercompany Debt; |
| (c) | Distributions payable only in Equity Interests of the Borrower to any of its directors, officers and employees pursuant to any employee incentive plan, stock option plan, long term incentive plan or other benefit plan of the Borrower in effect from time to time; |
| (d) | Distributions paid in Equity Interests of the Borrower in order to settle Earn Out Obligations; |
| (e) | Distributions to any Person described in paragraph (d) of the definition of “Distributions” that do not exceed [Redacted], in aggregate, in any Fiscal Year; and |
| (f) | any other Distribution (including a repurchase of common shares of the Borrower pursuant to the NCIB and any payment in cash of Earn Out Obligations) so long as the following conditions are satisfied (i) the Distribution is not a cash dividend or other Distribution to any holder of Equity Interests of the Borrower (ii) the Borrower shall have Unrestricted Cash of not less than [Redacted] before and after giving effect to such Distribution; and (iii) no Default or Event of Default exists at the time of, or after giving effect to, such Distributions, in each case, both prior to and after giving effect to such Distributions. |
“Permitted Encumbrances” means, with respect to any Person or Property, the following:
| (a) | Encumbrances for Taxes, assessments and other governmental charges or levies not yet due or for which installments have been paid based on reasonable estimates pending final assessments, or if due, the validity of which is being contested diligently and in good faith by appropriate proceedings by that Person and in respect of which reasonable reserves under GAAP are maintained; |
| (b) | inchoate or statutory Encumbrances of contractors, subcontractors, mechanics, workers, suppliers, material suppliers, carriers and others in respect of the construction, maintenance, repair or operation of Property, provided that such Encumbrances are related to obligations not due and delinquent, are not registered |
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| against title to the Property, or if registered, that Person is acting diligently to discharge or vacate same, written notices of which Encumbrances have not been received, or if received the Person is acting diligently to discharge or vacate same, and in respect of which adequate holdbacks are being maintained as required by Applicable Law provided that in any event, such registration or notice referred to above is discharged within 45 days of the initial registration, filing or service, as applicable; |
| (c) | reservations, limitations, provisos and conditions expressed in any original grants from the Crown or other grants of real or immovable Property, or interests therein; |
| (d) | zoning, land use and building restrictions, by-laws, regulations and ordinances of federal, provincial, state, municipal and other Governmental Authorities, licences, easements, rights-of-way and rights in the nature of easements (including, without limiting the generality of the foregoing, licences, restrictions, easements, servitudes, rights-of-way and rights in the nature of easements for railways, sidewalks, public ways, sewers, drains, gas, steam and water mains or electric light and power, or telephone and telegraph conduits, poles, wires and cables) which do not materially impair the use of the affected land for the purpose for which it is used by that Person; |
| (e) | title defects, encroachments or irregularities or other matters relating to title which are of a minor nature and which in the aggregate do not materially impair the use of the affected Property for the purpose for which it is used by that Person; |
| (f) | the right reserved to or vested in any municipality or other Governmental Authority by the terms of any lease, licence, franchise, grant or permit acquired by that Person or by any statutory provision to terminate any such lease, licence, franchise, grant or permit, or to require annual or other payments as a condition to the continuance thereof; |
| (g) | security given to a public utility or any municipality or Governmental Authority when required by such utility or authority in connection with the operations of that Person in the ordinary course of its business provided that such security does not materially impair the use of the affected Property for the purpose for which it is used by that Person; |
| (h) | subdivision, development, servicing and site plan agreements, undertakings and agreements made pursuant to applicable planning and development legislation, entered into with or made in favour of any Governmental Authority or public/private utility; |
| (i) | any Encumbrance resulting from the deposit of cash or securities in connection with contracts, tenders or expropriation proceedings, or to secure workers’ compensation, employment insurance, surety or appeal bonds, costs of litigation when required by law, Encumbrances and claims incidental to current construction, mechanics’, warehousemen’s, carriers’ and other similar Encumbrances, and public, statutory and other like obligations incurred in the ordinary course of business; |
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| (j) | any Encumbrance created by a judgment of a court of competent jurisdiction, as long as the judgment is being contested diligently and in good faith by appropriate proceedings or is promptly satisfied by that Person and does not result in an Event of Default; |
| (k) | the Security; |
| (l) | Purchase Money Security Interests and Lease Liabilities, provided that the Debt secured thereby is Permitted Debt described under paragraph (b) of the definition of Permitted Debt, so long as such Debt secured thereby does not exceed [Redacted] in the aggregate at any time. |
| (m) | Encumbrances arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of combination of accounts or similar rights in the ordinary course of conducting day-to-day banking business in relation to deposit accounts or other funds maintained with a creditor depository institution; |
| (n) | Encumbrances arising from the right of distress enjoyed by landlords or Encumbrances otherwise granted to landlords (including, without limitation, Encumbrances over rent deposits), in either case, to secure the payment of arrears of rent in respect of leased Properties; |
| (o) | Encumbrances in favour of other financial institutions arising in connection with a Credit Party’s deposit and/or securities accounts held at such institutions, provided that (i) the Lender has a perfected first priority security interest in the amounts held in such deposit and/or securities accounts; (ii) such accounts are permitted to be maintained pursuant to Section 7.03(26); and (iii) the Cash Management Obligations secured thereby does not exceed [Redacted] in the aggregate at any time, |
| (p) | such other Encumbrances as agreed to in writing by the Lender in accordance with this Agreement; and |
| (q) | any extension, renewal or replacement of any of the foregoing as permitted hereunder. |
“Permitted Intercompany Debt” means Debt owing by one Credit Party to another Credit Party.
“Person” means any natural person, corporation, limited liability company, unlimited liability company, trust (including a business trust), joint venture, association, company, general partnership, limited partnership, unincorporated organization, Governmental Authority or other entity.
“PIK Notice” has the meaning set forth in Section 4.06.
[Redacted]
“Property” means, with respect to any Person, all or any portion of its undertaking, property and assets, both real and personal, including, for greater certainty, all real property (including leasehold interest in real property), personal property, fixed assets, equipment, accounts receivable, inventory, intellectual property, any share in the capital of a corporation or ownership interest in any other Person and all other assets and undertaking of such Person.
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“Purchase Money Security Interest” means an Encumbrance created or assumed by a Credit Party securing Debt incurred to finance the unpaid acquisition price of personal Property (but, for certainty, excluding Equity Interests or in connection with an Acquisition) provided that in each case: (a) such Encumbrance is created prior to, or concurrently with, the acquisition of such personal Property; (b) such Encumbrance does not at any time encumber any Property other than the Property financed or refinanced (to the extent the principal amount is not increased) by such Debt and proceeds thereof; (c) the amount of Debt secured thereby is not increased subsequent to such acquisition; and (d) the principal amount of Debt secured by any such Encumbrance at no time exceeds 100% of the original acquisition price of such personal Property at the time it was acquired by such Credit Party, plus all costs and expenses incurred in connection therewith.
“Qualified Plan” shall mean a US Benefit Plan which is intended to be tax-qualified under Section 401(a) of the US Tax Code.
“Quarterly Interest Payment” means a payment of interest made in respect of the Outstanding Amount, calculated in accordance with Section 4.02, and payable in accordance with Section 4.02 or Section 4.06, as applicable, each such payment to be made on the applicable Interest Payment Date for the period from and including the date hereof, or the most recent Interest Payment Date prior to such applicable Interest Payment Date, as applicable to but excluding such applicable Interest Payment Date.
“Receivables” means the indebtedness and payment obligations of any Person to any Credit Party or acquired by any Credit Party (including obligations constituting an account or general intangible or evidenced by a note, instrument, contract, security agreement, chattel paper or other evidence of indebtedness or security) arising from a sale of merchandise or the provision of services by such Credit Party or the Person from which such indebtedness and payment obligation were acquired by such Credit Party, including (a) any right to payment for goods sold or for services rendered and (b) the right to payment of any interest, sales taxes, finance charges, returned check or late charges and other obligations of such Person with respect thereto.
“Recipient” is defined in the definition of “Excluded Taxes”.
“Related Parties” means, with respect to any Person, such Person’s Affiliates and the directors, officers, employees and agents of such Person and of such Person’s Affiliates.
“Relevant Jurisdiction” means, from time to time, with respect to a Person that is granting Security hereunder, any province or territory of Canada or any other country or political subdivision thereof, in which such Person has its jurisdiction of organization, chief executive office, registered office, place of domicile or principal place of business or has tangible Property (other than Property in transit) and, for greater certainty, at the Closing Date includes the jurisdictions set forth in Schedule 6.01(20).
“Repayment Date” means a date on which the Borrower makes a repayment of all of the Outstanding Amount (whether voluntary or mandatory).
“Repayment Notice” means a notice substantially in the form annexed hereto as Schedule B.
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“Requirements of Environmental Law” means all requirements of the common law or of statutes, regulations, by-laws, ordinances, treaties, judgments and decrees, and (to the extent that they have the force of law) rules, guidelines, orders, approvals, notices, permits and directives of any federal, territorial, provincial, state, regional, municipal or local judicial, regulatory or administrative agency, board or governmental authority in Canada and any other jurisdiction in which any Group Party has operations or assets, where such requirements relate to environmental or occupational health and safety matters (solely as they relate to exposure to a Hazardous Material) and the assets and undertaking of any Group Party and the intended uses thereof, including all such requirements relating to: (a) the protection, preservation or remediation of the natural environment (the air, land, surface water or groundwater); (b) solid, gaseous or liquid waste generation, handling, treatment, storage, disposal or transportation; (c) exposure to a Hazardous Material; and (d) the regulation of Hazardous Materials.
“Requirements of Law” means, as to any Person, the Organizational Documents of such Person, any Business Authorization, any Applicable Law, and any determination of a Governmental Authority having the force of law, in each case applicable to or binding upon such Person or any of its business or Property or to which such Person or any of its business or Property is subject.
“Responsible Officer” of any Person means any executive officer or chief financial officer, principal accounting officer, treasurer, assistant treasurer or controller of such Person and any other officer or similar official thereof responsible for the administration of the obligations of such Person in respect of this Agreement.
“Restricted Person” has the meaning set forth in Section 6.01(34).
“Retiree Welfare Plan” shall mean, at any time, a US Benefit Plan that is a “welfare plan” as defined in Section 3(1) of ERISA, that provides for continuing coverage or benefits for any participant or any beneficiary of a participant after such participant’s termination of employment, other than continuation coverage provided pursuant to Section 4980B of the US Tax Code and at the sole expense of the participant or the beneficiary of the participant.
“Right of Use Asset” means, with respect to any Person, any asset that is leased by such Person and that is required in accordance with GAAP to be recorded on the balance sheet of such Person as a “right of use asset” pursuant to IFRS 16.
“Sanction(s)” means any international economic sanction administered or enforced by the United States Government (including without limitation, OFAC and the U.S. Department of State), Canada, the European Union, Her Majesty’s Treasury or other relevant sanctions authority having jurisdiction over the parties to this Agreement.
“Security” means all security (including guarantees) held from time to time by the Lender securing or intended to secure directly or indirectly repayment of the Obligations and includes, without limitation, all security described in Article 8.
“Security Documents” means the documents referred to in Article 8.
“Solvent” and “Solvency” means, with respect to any Person on a particular date, that on such date (a) the Person is able to meet his obligations as they generally become due; (b) the Person has not ceased paying its current obligations in the ordinary course of business as they generally become due; and (c) the aggregate of the Person’s Property is, at a fair valuation, sufficient, or, if disposed of at a fairly conducted sale under legal process, would be sufficient to enable payment of all its obligations, due and accruing due. For the purposes of clause (c), the amount of the Contingent Obligations at any time shall be computed as the amount which, in light of all the facts and circumstances existing at the time, represents the amount which can reasonably be expected to become an actual or matured liability.
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“SoRSE Agreement” means the amended and restated manufacturing and sales license agreement dated December 12, 2019 between the Borrower and SoRSE Technology Corporation.
“SoRSE Royalty Payment” means a royalty payment obligation payable by the Borrower to SoRSE Technology Corporation pursuant to the SoRSE Agreement.
“Spot Rate” means, in relation to the conversion of one currency into another currency, the spot rate of exchange for such conversion as quoted by the Bank of Canada at the close of business on the immediately preceding Business Day.
“Subordinated Debt” means, with respect to any Person, at any time, indebtedness for borrowed money which is deeply subordinated and postponed to the Obligations pursuant to a subordination and postponement agreement in form and on terms and conditions satisfactory to the Lender, acting reasonably, and which terms and conditions provide, without limitation, that (a) the maturity of such Subordinated Debt will not be earlier than one year and 90 days after the Maturity Date of the Term Facility, (b) such Subordinated Debt is deferred, postponed and subordinated in all respects to the prior indefeasible payment in full of the Term Facility, the indefeasible payment in full of the Obligations, and the termination of this Agreement, (c) no payments of principal or interest or other amounts shall be made on account of the Subordinated Debt other than payments in kind and cash payments to the extent such cash amount would be permitted by the terms of the applicable subordination and postponement agreement, (d) the holder of the Subordinated Debt shall not take any steps whatsoever to enforce payment (including, without limitation, notice of default, demand for payment, rights of set-off, commencement of bankruptcy proceedings, foreclosure, sale, power of sale, taking of possession, giving in payment, appointing or making application to a court for an order appointing an agent or a receiver or receiver-manager by any other means of enforcement thereof) unless, prior to the taking of any such steps, the Term Facility and all Obligations owing thereunder have been indefeasibly paid in full and this Agreement has been terminated; (e) the Subordinated Debt shall be unsecured and not guaranteed by any Group Party; and (f) the holder of the Subordinated Debt shall not take any steps whatsoever to contest or challenge the priority or validity of the Obligations or the Security in favour of the Lender or the rights and remedies of the Lender under the Loan Documents.
“Subsidiary” means, at any time, with respect to any Person, any other Person, if at such time the first mentioned Person (a) owns, directly or indirectly, securities or other ownership interests in such other Person, having ordinary voting power to elect a majority of the board of directors or persons performing similar functions for such other Person, and (b) directly or indirectly, through the operation of any agreement or otherwise, the ability to elect or cause the election of a majority of the board of directors or other persons performing similar functions for such other Person or otherwise exercise control over the management and policies of such other Person, and in either case will include any other Person in like relationship to a Subsidiary of such first mentioned Person. Unless otherwise specific to the contrary herein or the context otherwise requires, Subsidiary shall refer to the Subsidiary of a Credit Party.
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“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“Term Facility” has the meaning set forth in Section 2.01.
“Title IV Plan” shall mean an employee pension benefit plan, as defined in Section 3(2) of ERISA (other than a US Multiemployer Plan), which is covered by Title IV of ERISA, and which any Group Party or ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them.
“Transactions” means the execution, delivery and performance by the Credit Parties of the Loan Documents, the borrowing of the Loan and the use of the proceeds thereof.
“United States Dollars”, “US Dollars”, and “US $” means the lawful money of the United States of America.
“Unrestricted Cash” means unrestricted cash and Cash Equivalents held by the Borrower that are subject to the valid, enforceable and first priority perfected Encumbrance in favour of the Lender and held in a deposit account or a securities account with Canadian Imperial Bank of Commerce (or another financial institution acceptable to the Lender) subject to a Control Agreement and free and clear of any Encumbrance, other than in favour of the Lender; provided that, the requirement of a Control Agreement shall not be required on the Closing Date, but will be required at all times on and after satisfaction of the post-closing covenant related thereto contained in Section 7.01(20).
“US Benefit Plan” shall mean, at any time, an employee benefit plan, as defined in Section 3(3) of ERISA, which any Group Party maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any Group Party (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be an employee benefit plan of such Group Party).
“US Multiemployer Plan” shall mean a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA, and to which any Group Party or ERISA Affiliate is making, is obligated to make, has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them.
“US Tax Code” means the Internal Revenue Code of 1986 (United States).
“Wholly-Owned Subsidiary” means, with respect to a Subsidiary of a Person, a Subsidiary of such Person all of the outstanding Equity Interests of which (other than (a) director’s qualifying shares and (b) nominal shares issued to foreign nationals to the extent required by Applicable Laws) are owned by such Person and/or by one or more wholly-owned Subsidiaries of such Person.
“Withholding Agent” means any Credit Party or the Lender, as applicable.
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| 1.02 | Headings |
The division of this Agreement into Articles and Sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement.
| 1.03 | Accounting Practices |
All accounting terms not specifically defined in this Agreement shall be interpreted in accordance with GAAP as in effect on the date of this Agreement. The Borrower shall not change its reporting to a different reporting standard. If any accounting changes occur and such changes result in a material change in the standards or terms used in this Agreement, then the Borrower and the Lender agree to enter into negotiations in order to amend such provisions of this Agreement, so as to equitably reflect such accounting changes with the desired result that the criteria for evaluating the applicable entity’s financial condition shall be the same after such accounting changes as if such accounting changes had not been made; provided, however, that the agreement of the Lender to any required amendments of such provisions shall be sufficient to bind the Lender. If the Borrower and the Lender agree upon the required amendments, then after appropriate amendments have been executed and the underlying accounting change with respect thereto has been implemented, any reference to GAAP contained in this Agreement or in any other Loan Document shall, only to the extent of such accounting change, refer to GAAP, consistently applied after giving effect to the implementation of such accounting change. If the Borrower and the Lender cannot agree upon the required amendments within 30 days following the date of implementation of any accounting change, then all standards and terms in this Agreement and the other Loan Documents shall continue to be prepared, delivered and made without regard to the underlying accounting change.
| 1.04 | Permitted Encumbrances |
The inclusion of reference to Permitted Encumbrances in any Loan Document is not intended to subordinate and shall not subordinate, and shall not be interpreted as subordinating, any Encumbrance created by any of the Security to any Permitted Encumbrance.
| 1.05 | Currency |
Unless otherwise specified in this Agreement, all references to dollar amounts (without further description) will mean Canadian Dollars.
| 1.06 | Paramountcy |
In the event of a conflict in or between the provisions of this Agreement and the provisions of any Schedule annexed hereto or any of the other Loan Documents then, notwithstanding anything contained in such Schedule or other Loan Document, the provisions of this Agreement will prevail and the provisions of such Schedule or other Loan Document will be deemed to be amended to the extent necessary to eliminate such conflict. In particular, if any act or omission of a Group Party is expressly permitted under this Agreement but is expressly prohibited under any Schedule annexed hereto or another Loan Document, such act or omission shall be permitted. If any act or omission is expressly prohibited under any Schedule annexed hereto or a Loan Document (other than this Agreement), but this Agreement does not expressly permit such act or omission, or if any act is expressly required to be performed under such Schedule or such Loan Document but this Agreement does not expressly relieve the applicable Group Party from such performance, such circumstance shall not constitute a conflict in or between the provisions of this Agreement and the provisions of such Schedule or Loan Document.
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| 1.07 | Non-Business Days |
Unless otherwise expressly provided in this Agreement, whenever any payment is stated to be due on a day other than a Business Day, the payment will be made on the immediately following Business Day. Unless otherwise expressly provided in this Agreement, whenever any action to be taken is stated or scheduled to be required to be taken on, or (except with respect to the calculation of interest or fees) any period of time is stated or scheduled to commence or terminate on, a day other than a Business Day, the action will be taken or the period of time will commence or terminate, as the case may be, on the immediately following Business Day.
| 1.08 | Interest Payments; Calculations and Other Payments |
(1) All interest payments to be made under this Agreement will be paid without allowance or deduction for deemed re-investment or otherwise, both before and after maturity and before and after default and/or judgment, if any, until payment of the amount on which such interest is accruing, and interest will accrue on overdue interest, if any.
(2) Unless otherwise stated, wherever in this Agreement reference is made to a rate of interest or rate of fees “per annum” or a similar expression is used, such interest or fees will be calculated on the basis of a calendar year of 365 days or 366 days, as the case may be, and using the nominal rate method of calculation, and will not be calculated using the effective rate method of calculation or on any other basis that gives effect to the principle of deemed re-investment of interest.
(3) For the purposes of the Interest Act (Canada) and disclosure under such Act, whenever interest to be paid under this Agreement is to be calculated on the basis of a year of 365 days or any other period of time that is less than a calendar year, the yearly rate of interest to which the rate determined pursuant to such calculation is equivalent is the rate so determined multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by either 365 or such other period of time, as the case may be.
(4) Unless expressly agreed otherwise under this Agreement, the Lender shall calculate all fees and interest which calculations shall be prima facie evidence of the amounts so owing, absent manifest error. For greater certainty all such calculations shall be without duplication of any day such that neither interest nor fees shall be calculated in respect of the same day twice.
(5) Notwithstanding anything herein to the contrary, in no event shall any interest rate or rates referred to herein (together with other fees payable hereunder which are construed by a court of competent jurisdiction to be interest or in the nature of interest) exceed the maximum interest rate permitted by Applicable Law. If such maximum interest rate would be exceeded by the terms hereof, the rates of interest payable hereunder shall be reduced to the extent necessary so that such rates (together with other fees which are construed by a court of competent jurisdiction to be interest or in the nature of interest) equal the maximum interest rate permitted by Applicable Law, and any overpayment of interest received by the Lender theretofore shall be applied, forthwith after determination of such overpayment, to pay all then outstanding interest, and thereafter to pay outstanding principal, as if the same were a prepayment of principal and treated accordingly hereunder.
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| 1.09 | Determinations By the Borrower |
All provisions contained herein requiring the Borrower to make a determination or assessment of any event or circumstance or other matter to the knowledge of a Responsible Officer of the Borrower shall be deemed to require the Borrower to make all inquiries and investigations as it determines are reasonable in the circumstances before making any such determination or assessment.
| 1.10 | Terms Generally; Extended Meanings |
The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise: (a) any definition of or reference to any agreement, instrument or other document herein (including this Agreement) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented, restated or otherwise modified (subject to any restrictions on such amendments, supplements, restatements or modifications set forth herein); (b) any reference herein to any Person shall be construed to include such Person’s successors and permitted assigns; (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof; (d) unless otherwise expressly stated, all references in this Agreement to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement; (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time; and (f) the words “asset” and “Property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and Properties, including cash, securities, accounts and contract rights.
| 1.11 | Divisions |
For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its Equity Interests at such time.
| 1.12 | [Redacted] |
| 1.13 | Amendment and Restatement |
Upon the execution and delivery of this Agreement and the satisfaction of each of the conditions precedent set forth in Section 3.01, (a) this Agreement is and shall for all purposes be deemed to be an amendment and restatement of the provisions of the Original Credit Agreement, and (b) all obligations of the Borrower outstanding under the Original Credit Agreement shall continue as the Obligations outstanding under this Agreement subject to the terms and conditions of this Agreement. This Agreement does not constitute a novation of any of any indebtedness, liability or obligation of the Borrower or any other Credit Party under the Original Credit Agreement or any other Loan Document or any of the Obligations hereunder or thereunder.
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ARTICLE 2 – THE TERM FACILITY
| 2.01 | Term Facility |
Subject to the terms and conditions of this Agreement, the Lender hereby establishes in favour of the Borrower a non-revolving term loan facility (the “Term Facility”) in the principal amount of $60,000,000. The Term Facility was partially advanced in the amount of $40,000,000 (the “Existing Term Loan”) by the Original Lender (and the right to repayment thereof has been assigned to the Lender, as successor in interest to the Original Lender) to the Borrower on the Original Closing Date pursuant to the terms and conditions of the Original Credit Agreement.
| 2.02 | Purpose of Term Facility |
The Loan under the Term Facility shall only be used for general corporate purposes and working capital purposes, including the payment of related fees and expenses.
| 2.03 | Manner of Borrowing |
The Borrower may, subject to the terms hereof, make one Drawdown on the Closing Date under the Term Facility in Canadian Dollars (the proceeds of which shall be funded into a deposit account of the Borrower that is subject to a Control Agreement) for the purposes described in Section 2.02.
| 2.04 | Nature of the Term Facility |
The Term Facility is a non-revolving credit facility and, accordingly, no amounts repaid under the Term Facility may be reborrowed and the limits of the Term Facility will be automatically and permanently reduced by the amount of any such repayment so made. Any amount not borrowed by the Borrower on the Closing Date under the Term Facility shall be cancelled and may not thereafter be borrowed by the Borrower.
| 2.05 | Notice Period for Drawdowns |
(1) Subject to the provisions of this Agreement, and provided that no Default or Event of Default has occurred and is continuing (without having been cured or waived as provided in this Agreement), the Borrower may make a Drawdown under the Term Facility.
(2) The Lender hereby waives any requirement for the Borrower to deliver a Drawdown Notice.
| 2.06 | Irrevocability |
A Drawdown Notice or a Repayment Notice, as the case may be, given by the Borrower hereunder shall be irrevocable and shall oblige the Borrower to take the action contemplated on the date specified therein.
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| 2.07 | Accounts of Record |
The Lender shall open and maintain books of account evidencing the Loan, the Outstanding Amount and all other Obligations owing by the Borrower to the Lender hereunder. The Lender shall enter in the foregoing accounts details of all amounts from time to time owing, paid or repaid by the Borrower hereunder. Absent manifest error, the information entered in the foregoing accounts shall constitute prima facie evidence of the Obligations of the Borrower to the Lender hereunder with respect to the Loan, the Outstanding Amount and all other amounts owing by the Borrower to the Lender under the Loan Documents. After a request by the Borrower, the Lender shall promptly advise the Borrower of such entries made in the Lender’s books of account.
ARTICLE 3 – DISBURSEMENT CONDITIONS
| 3.01 | Conditions Precedent for Effectiveness of this Agreement |
This Agreement shall be effective on the Closing Date upon the following conditions being satisfied:
| (a) | this Agreement and each of the other Loan Documents to be delivered on the Closing Date shall have been executed and delivered by all parties thereto; |
| (b) | to the extent not existing prior to, and assigned to the Lender on, the Closing Date, duly executed copies of the Security Documents required to be delivered on the Closing Date pursuant to Section 8.01 shall have been delivered to the Lender (along with certificates, if any, representing all shares or other securities pledged, together with related stock powers duly executed in blank or duly executed pledge endorsements, as applicable) and such financing statements or other registrations of the Security, or notice thereof, shall have been filed and/or registered, entered or recorded in all offices of public record necessary or desirable in the opinion of the Lender to preserve or protect the charges and security interests created thereby, in each case, that are required to be delivered on the Closing Date; |
| (c) | the Arrangement Agreement shall have been duly executed and delivered by the parties thereto and the transactions contemplated thereunder shall have been consummated in accordance with the terms of the Arrangement Agreement; |
| (d) | arrangements satisfactory to the Lender for repayment in full of all Debt that is not Permitted Debt owing by any Credit Party to any other Person (other than another Credit Party or the Original Lender) concurrently with the Drawdown under the Term Facility; |
| (e) | releases, discharges, estoppels and postponements that are required (if any) in the discretion of the Lender (in registerable form where necessary) with respect to all Encumbrances affecting the Collateral that are not Permitted Encumbrances, if any, will have been delivered to the Lender; |
| (f) | the Borrower shall have Unrestricted Cash in a minimum amount of [Redacted] on the Closing Date; |
| (g) | the Lender will have completed its financial, accounting, tax, business, environmental and legal due diligence with respect to Group Parties and the Transactions and the results of such due diligence will be satisfactory to the Lender in its sole discretion; |
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| (h) | the Lender, acting reasonably, shall be satisfied with the corporate and capital structure of the Borrower on the Closing Date; |
| (i) | the corporate organizational chart of the Group Parties and any Joint Ventures shall be as set forth in Schedule 6.01(19); |
| (j) | the representations and warranties deemed to be made pursuant to Section 6.01 will be true and correct; |
| (k) | no Default or Event of Default will have occurred and be continuing on the Closing Date, or would result from any Credit Party’s entry into this Agreement or the transactions contemplated hereunder; |
| (l) | no Material Adverse Effect will have occurred since November 30, 2021; provided that, the events in respect of the COVID-19 pandemic shall not constitute an event which has had, or could reasonably be expected to have, a Material Adverse Effect for the purposes of this Section 3.01(l); |
| (m) | the Lender will have received copies of all shareholder, regulatory, governmental and other approvals required in order for the Credit Parties to enter into the Loan Documents to which it is a party and to perform its obligations thereunder and to complete the Transactions; |
| (n) | to the extent not delivered prior to the Closing Date, the Lender shall have received certified copies of the Health Canada Licences held by the Group Parties; |
| (o) | the Lender shall have received a solvency certificate, substantially in the form set forth in Schedule E from the chief financial officer (or other officer with equivalent duties) of the Borrower; and |
| (p) | all fees required to be paid on the Closing Date pursuant to this Agreement and reasonable and documented out-of-pocket expenses (including legal fees) required to be paid on the Closing Date pursuant to this Agreement, shall have been paid, or an arrangement satisfactory to the Lender has been made for the payment of such expenses, |
provided that all documents delivered pursuant to this Section 3.01 shall be in full force and effect, and in form and substance satisfactory to the Lender acting reasonably.
| 3.02 | Waiver |
The conditions set forth in Section 3.01 are inserted for the sole benefit of the Lender and may be waived by the Lender in whole or in part (with or without terms or conditions).
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ARTICLE 4 – PAYMENTS OF PRINCIPAL, INTEREST AND FEES
| 4.01 | Place of Payment of Principal, Interest and Fees |
All payments by the Borrower under any Loan Document, unless otherwise expressly provided in such Loan Document, shall be made to the Lender at the Lender’s Payment Office, or at such other location as may be agreed upon by the Lender and the Borrower, for the account of the Lender, not later than 12:00 p.m. (Toronto time) for value on the date when due, and shall be made in immediately available funds without set-off or counterclaim.
| 4.02 | Interest on the Outstanding Amount; Default Interest Rate |
(1) In respect of the Outstanding Amount, interest shall accrue from the Closing Date and the Borrower agrees to be liable for and pay interest on the Outstanding Amount at the Interest Rate in accordance with the terms hereof. Interest in respect of the Outstanding Amount shall be due and payable by way of a Quarterly Interest Payment on each and every Interest Payment Date during which the Outstanding Amount remains outstanding, on the Maturity Date and on each Repayment Date, as applicable. The initial Interest Payment Date will be September 30, 2022.
(2) Upon the occurrence and during the continuance of any Event of Default, the Borrower shall pay the Lender interest on the Outstanding Amount, and such interest shall accrue daily, be calculated and compounded quarterly and be payable on demand, after as well as before maturity, and judgment, at a rate per annum that is equal to the Default Interest Rate.
| 4.03 | No Set-Off, Deduction etc. |
Except with respect to Taxes (which are governed by Section 11.02), all payments (whether interest or otherwise) to be made by the Borrower or any other party pursuant to this Agreement are to be made in freely transferable, immediately available funds and without set-off or deduction of any kind whatsoever (whether for deemed re-investment or otherwise) except to the extent required by Applicable Law, and if any such set-off or deduction is so required and is made, the Borrower or any other party will, as a separate and independent obligation to the Lender, be obligated to immediately pay to the Lender all such additional amounts as may be required to fully indemnify and save harmless the Lender from such set-off or deduction and will result in the effective receipt by the Lender of all the amounts otherwise payable to it in accordance with the terms of this Agreement.
| 4.04 | [Redacted] |
| 4.05 | Interest on Overdue Amounts |
Notwithstanding any other provision hereof, in the event that any amount due from the Borrower hereunder (including, without limitation, any interest payment) is not paid when due (whether by acceleration or otherwise), the Borrower shall pay interest on such unpaid amount (including, without limitation, interest on interest), if and to the fullest extent permitted by Applicable Law, from the date that such amount is due until the date that such amount is paid in full (but excluding the date of such payment if the payment is received for value at the required place of payment on the date of such payment), and such interest shall accrue daily, be calculated and compounded quarterly and be payable on demand, after as well as before maturity, and judgment, at a rate per annum that is equal to the Default Interest Rate.
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| 4.06 | Payment in Kind (PIK) |
Provided that there is not then existing a Default or an Event of Default which is continuing, the Borrower may, upon providing at least three Business Days’ prior written notice to the Lender (substantially in the form attached hereto as Schedule F, each, a “PIK Notice”), elect on two occasions prior to the Maturity Date, to pay all or any portion of a Quarterly Interest Payment in kind (and not in cash), without penalty, and the amount so paid in kind shall be added to the Outstanding Amount on the applicable Interest Payment Date and shall thereafter be deemed to be, and shall be treated for all purposes hereunder at all times thereafter as, part of the Outstanding Amount. Each PIK Notice shall be in writing and shall set out the applicable Quarterly Interest Payment. For greater certainty, interest shall accrue and be payable on interest capitalized pursuant to this Section 4.06 in the same manner and form and at the same time as the balance of the Outstanding Amount, no matter how it may arise.
ARTICLE 5 – REPAYMENT
| 5.01 | Mandatory Repayments of the Term Facility |
(1) Subject to Section 9.02, the Borrower shall repay or pay, as the case may be, to the Lender, the Outstanding Amount and the other Obligations in full on or before the Maturity Date.
(2) The Outstanding Amount plus all other Obligations, fees and reasonable out-of-pocket expenses and other amounts due hereunder (including the Multiple on Invested Capital) shall be paid in full on the date on which all or substantially all of the assets of the Borrower and its Subsidiaries are sold or transferred to a Person (other than a Credit Party).
(3) Upon the occurrence of a Change of Control the Lender reserves the right, in its sole discretion, to require the Borrower to repay the Outstanding Amount (together with all other Obligations, including without limitation, the Multiple on Invested Capital) in full on the date such Change of Control occurs.
(4) If any Group Party receives Net Proceeds from the issuance or incurrence of Debt (other than Permitted Debt), an amount equal to the lesser of (i) such Net Proceeds and (ii) the outstanding Obligations as of such date shall be paid by the Borrower (irrespective as to which Group Party issued or incurred such Debt) to the Lender within five Business Days after such Net Proceeds are received by any Group Party and such amount shall be applied by the Lender against the outstanding Obligations.
(5) If any Group Party receives Net Proceeds from any insurance policy in an amount greater than [Redacted], an amount equal to the lesser of (i) such Net Proceeds, and (ii) the outstanding Obligations as of such date shall be paid by the Borrower (irrespective as to which Group Party received such Net Proceeds) to the Lender within five Business Days after receipt of such Net Proceeds by a Group Party and such amount shall be applied by the Lender against the outstanding Obligations; provided that, the Borrower may, if no Default or Event of Default exists, commit within 180 days following receipt thereof to apply such Net Proceeds to replace, repair or rebuild the applicable Property to which such Net Proceeds relate. If following such 180 day period, no Group Party has committed to spend such Net Proceeds on the replacement, repair or rebuilding of such Property or if such commitment to spend has been made but the replacement, repair or rebuilding of such Property has not commenced within an additional 180 days following such commitment to spend, an amount equal to the lesser of (i) such Net Proceeds, and (ii) the outstanding Obligations as of such date shall immediately be paid by the Borrower (irrespective as to which Group Party issued or incurred such Debt) to the Lender and such amount shall be applied by the Lender against the outstanding Obligations.
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(6) For clarity, any mandatory repayment of outstanding Obligations made pursuant to this Section 5.01 shall include payment of the Multiple on Invested Capital determined in the manner as set forth in Section 5.03.
| 5.02 | Voluntary Prepayment of the Term Facility |
The Borrower may, at any time and from time to time, on any Business Day commencing six months following the Closing Date, prepay all, or any part, of the Outstanding Amount to the Lender together with the applicable Multiple on Invested Capital (determined in the manner as set forth in Section 5.03); provided that,
(a) the Borrower shall give a Repayment Notice to the Lender not later than 10:00 a.m. (Toronto time) on a Business Day that is not less than five Business Days’ prior to the date of the proposed repayment; and
(b) repayments made pursuant to this Section 5.02 may only be made on a Business Day.
| 5.03 | Multiple on Invested Capital |
(1) If the Borrower makes a repayment (whether voluntary or mandatory) of all or any part of the Outstanding Amount, the Borrower shall also pay the applicable Multiple on Invested Capital in respect thereof to the Lender; provided that, for certainty, notwithstanding any other provision of this Agreement, (i) the total amount in respect of principal and interest paid hereunder by the Borrower shall not in any event exceed, in aggregate, the Outstanding Amount as of the Closing Date (after giving effect to the Drawdown of $60,000,000 (inclusive of the Existing Term Loan) on the Closing Date) and (ii) the aggregate amount paid in respect of the Multiple on Invested Capital shall not exceed [Redacted].
(2) Payment of the Multiple on Invested Capital under this Article 5 constitutes liquidated damages, not unmatured interest or a penalty, as the actual amount of damages to the Lender as a result of the relevant triggering event, prepayment or repayment would be impracticable and extremely difficult to ascertain. Accordingly, the Multiple on Invested Capital is provided by mutual agreement of the Borrower and the Lender as a reasonable estimation and calculation of such actual lost profits and other actual damages of the Lender. Without limiting the generality of the foregoing, it is understood and agreed that upon the occurrence of the Loan becoming due and payable prior to the Maturity Date for any reason (whether due to acceleration pursuant to this Agreement, by operation of law or otherwise), the Multiple on Invested Capital shall be automatically and immediately due and payable. The Multiple on Invested Capital shall also be automatically and immediately due and payable if the Outstanding Amount is satisfied or released by realization on the Collateral or otherwise. THE BORROWER HEREBY EXPRESSLY WAIVES (TO THE FULLEST EXTENT IT MAY LAWFULLY DO SO) THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE OR OTHER LAW THAT PROHIBITS OR MAY PROHIBIT THE COLLECTION OF THE FOREGOING APPLICABLE PREMIUM IN CONNECTION WITH ANY SUCH EVENTS. The Borrower and the other Credit Parties expressly agree (to the fullest extent it and they may lawfully do so) that with respect to the Multiple on Invested Capital payable under the terms of this Agreement: (a) the Multiple on Invested Capital is reasonable and is the
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product of an Arm’s Length transaction between sophisticated business parties, ably represented by counsel; (b) the Multiple on Invested Capital shall be payable notwithstanding the then-prevailing market rates at the time payment is made; (c) there has been a course of conduct between the Lender and the Credit Parties giving specific consideration in this transaction for such agreement to pay the Multiple on Invested Capital; and (c) the Credit Parties shall be estopped hereafter from claiming differently than as agreed to in this Section. The Borrower expressly acknowledges that its agreement to pay the Multiple on Invested Capital as herein described is a material inducement to the Lender to provide the commitment to establish the Term Facility and to make the Loan available to the Borrower.
ARTICLE 6 – REPRESENTATIONS AND WARRANTIES
| 6.01 | Representations and Warranties |
The Borrower represents and warrants to the Lender and acknowledges and confirms that the Lender is relying upon such representations and warranties:
(1) Existence and Qualification. Each Group Party: (a) has been duly incorporated, established, formed, amalgamated, merged or continued, as the case may be, and is validly subsisting and in good standing as a corporation, company, limited partnership or partnership, under the laws of its jurisdiction of formation, amalgamation, merger or continuance, as the case may be (or in the case of Group Parties which are not corporations or companies, has been duly created or established as a partnership or other applicable entity and validly exists under and is in good standing under the laws of the jurisdiction in which it has been created or established); (b) is duly licensed, registered and qualified to carry on its business and is in good standing in each jurisdiction in which it carries on business or owns assets; and (c) has all required Material Licences. To the Borrower’s knowledge, all suppliers to, and customers of, the Group Parties are duly and properly licensed and authorized to engage in Industrial Hemp-related activities pursuant to and to the extent required by Applicable Cannabis Laws.
(2) Power and Authority. Each Credit Party has the corporate, company or partnership power and authority, as the case may be: (a) to enter into, and to exercise its rights and perform its obligations under, the Loan Documents to which it is a party and all other instruments and agreements delivered by it pursuant to any of the Loan Documents; (b) to have implemented and completed the Transactions and to enter into, and to exercise, its rights and perform its obligations under all instruments and agreements delivered by it in connection with the Transactions; and (c) to own its Property and carry on its business as currently conducted and as currently proposed to be conducted by it.
(3) Execution, Delivery, Performance and Enforceability of Documents. The execution, delivery and performance of each of the Loan Documents to which any Credit Party is a party, and every other instrument or agreement delivered by a Credit Party pursuant to any Loan Document or in connection with the Transactions, has been duly authorized by all corporate, company or partnership actions required, and each of such documents has been duly executed and delivered by it. Each Loan Document to which any Credit Party is a party constitutes the legal, valid and binding obligations of such Credit Party, enforceable against such Credit Party in accordance with its terms (except, in any case, as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally and by principles of equity).
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(4) Loan Documents Comply with Applicable Laws, Organizational Documents and Contractual Obligations. None of the execution or delivery of, the consummation of the Transactions contemplated in, or the compliance with the terms, conditions and provisions of any of, the Loan Documents by any Credit Party that is party thereto conflicts with or will conflict with or results or will result in any breach of or constitutes a default under or contravention of, (a) any Requirement of Law (including such Credit Party’s Organizational Documents), or (b) any Material Contract or Material Licence or results or will result in the creation or imposition of any Encumbrance upon any of its Property, except for Permitted Encumbrances.
(5) Consent Respecting Loan Documents. Each Credit Party has obtained, made or taken, as applicable, all Authorizations, registrations, filings, notices and other actions whatsoever required (including from any Governmental Authority), (except for registrations or filings which may be required in respect of the Security Documents) to enable it to execute and deliver each of the Loan Documents to which it is a party and to consummate the transactions contemplated in the Loan Documents, to complete and implement the Transactions and to execute and deliver each of the instruments and agreements delivered by it in connection with the Transactions.
(6) Security Documents. Each Security Document (a) creates a valid and enforceable Encumbrance upon the Collateral described therein in favour of the Lender on the terms set forth therein, subject only to the terms of this Agreement and to Permitted Encumbrances; and (b) have been registered, filed or recorded in all places where registration, filing or recording is necessary or desirable to perfect and protect the charges and security interests created therein.
(7) Approvals, Licences and Authorizations. Each Group Party has all Business Authorizations of all Governmental Authorities that are required or necessary for the Group Parties to own any of its Property or carry on or operate the Business. Each Material Licence is valid, subsisting and in good standing and the Credit Parties are not in default or breach (except for immaterial breaches that do not allow for a right of termination of such licence) of any Material Licence and, to the knowledge of a Responsible Officer of the Borrower, no proceeding is pending or has been threatened in writing by the applicable Government Authority to revoke or limit any Material Licence. Without limiting the generality of the foregoing, the Group Parties and the Joint Ventures do not carry on any Cannabis Activities in any jurisdiction other than an Approved Jurisdiction and solely in facilities licensed or otherwise permitted by Governmental Authorities in Approved Jurisdictions.
(8) Taxes. Each Group Party has duly and timely filed (or caused to be filed) all material Tax returns required to be filed by it and has paid (or cause to be paid) when due all material Taxes levied or imposed upon the applicable Group Party or on or in respect of the Group Party’s Property, business, income or profits otherwise due and payable except for Taxes which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves are being maintained in accordance with GAAP, and except after the date of this Agreement as disclosed to the Lender in writing, there is no material action, suit, proceeding, investigation, audit or claim now pending, or to the knowledge of a Responsible Officer of the Borrower, threatened in writing by any Governmental Authority regarding any material Taxes nor has any Group Party agreed to waive or extend any statute of limitations with respect to the payment or collection of material Taxes.
(9) Judgments, Etc. No Group Party is subject to any material judgment, order, writ, injunction, decree or award or any restriction, rule or regulation which has not been stayed or of which enforcement has not been suspended, and which prohibits or delays the Transactions.
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(10) Absence of Litigation. As of the Closing Date, there are no actions, suits or proceedings pending or judgments existing or, to the knowledge of a Responsible Officer of the Borrower, threatened against or affecting any Group Party or its Property which could reasonably be expected to be determined adversely to any Group Party and, if so determined, to result in a liability in excess of $250,000, except for those actions set forth on Schedule 6.01(10).
(11) Title to Property. Each Group Party has good title to its Property, free and clear of all Encumbrances except Permitted Encumbrances and no Person has any agreement or right to acquire an interest in a material portion of such Property other than in the ordinary course of its business.
(12) Use of Real Property. All real property owned or leased by any Group Party may be used in all material respects by such Group Party pursuant to Applicable Law for the present use and operation of the material elements of the business conducted, or intended to be conducted, on such real property by such Group Party. All leased real property where the lessor is Non-Arm’s Length are on market terms and conditions and all lease agreements entered into by each Group Party are in full force and effect. All easements, licences, servitude and other agreements necessary for the operation and maintenance of each Material Freehold Interest and each Material Leasehold Interest in the manner in which it is currently being operated have been obtained and, to the best of each Group Party’s knowledge, are in good standing.
(13) Description of Real Property. Schedule 6.01(13) contains a description as of the Closing Date of (a) all real property owned by each Group Party (including municipal addresses, legal description (to the extent available), the name of the Person which owns such property and a brief description of such property and its use) and indicating which real property owned by the Group Parties is a Material Freehold Interest, (b) all real property leased by each Group Party (including municipal addresses, legal description (to the extent available), the name of the Person which leases such property, the name of the landlord, the term and any renewal rights under the applicable lease and a brief description of such property and its use) and indicating which real property leased by the Group Parties is a Material Leasehold Interest, and (c) all real property not owned or leased by a Group Party at which any of its inventory may from time to time be stored or located (including municipal addresses, the name of the Person which keeps inventory at such property and the name of the bailee or third party holding such inventory at such property).
(14) Zoning and Uses.
| (a) | To the knowledge of a Responsible Officer of the Borrower, the existing uses by the Group Parties of each Material Freehold Interest and each Material Leasehold Interest comply in all material respects with all Applicable Laws. |
| (b) | To the knowledge of a Responsible Officer of the Borrower, each Material Freehold Interest and each Material Leasehold Interest complies with all municipal, zoning and parking requirements under Applicable Laws in all material respects. |
| (c) | No Credit Party has received notice of any proposed rezoning of all or any part of any Material Freehold Interest or any Material Leasehold Interest. |
| (d) | No Credit Party has received notice of any expropriation of all or any part of any Material Freehold Interest or any Material Leasehold Interest. |
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(15) Insurance. Each Group Party (or the Borrower on behalf of itself and all other Group Parties) maintains insurance in compliance with Section 7.01(7). Schedule 6.01(15) lists all insurance policies maintained by the Group Parties as of the Closing Date.
(16) Labour Relations. Except as to matters that could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (a) no Group Party is aware that it is engaged in any unfair labour practice and there is no unfair labour practice complaint or complaint of employment discrimination pending against any Group Party or to the knowledge of a Responsible Officer of the Borrower, threatened against any Group Party, before any Governmental Authority; (b) no material grievance or arbitration arising out of or under any collective bargaining agreement is pending against any Group Party or to the knowledge of a Responsible Officer of the Borrower, threatened against any Group Party; and (c) no strike, significant labour dispute, slowdown or material work stoppage which in the opinion of management or to the knowledge of a Responsible Officer of any Group Party, threatened against any Group Party.
(17) Compliance with Laws. (a) Each Group Party and each Joint Venture is in compliance in all material respects with all Applicable Laws (other than Applicable Cannabis Laws) and Applicable Orders of each jurisdiction in which it owns Property or carries on business. (b) Each Group Party and each Joint Venture is in compliance with all Applicable Cannabis Laws.
(18) No Default or Event of Default. No Default or Event of Default has occurred and is continuing.
(19) Corporate Structure. The corporate structure of each Group Party and each Joint Venture as at the Closing Date, is set forth in Schedule 6.01(19), which Schedule contains:
| (a) | a complete and accurate corporate chart and list of all Group Parties and all Joint Ventures; |
| (b) | complete and accurate information respecting: |
| (i) | whether each such Person is the Borrower, a Guarantor, a Group Party, an Excluded Subsidiary and/or a party to a Joint Venture; |
| (ii) | each such Person’s full and correct legal name (including any French and English forms of name) and jurisdiction of incorporation, organization or formation; |
| (iii) | each such Person’s authorized and issued capital of each class of Equity Interests thereof and a list of the owner of such Equity Interests (except in the case of the Borrower); and |
| (iv) | the bank accounts of each Credit Party. |
(20) Relevant Jurisdictions. Schedule 6.01(20) identifies in respect of each Group Party (other than the Excluded Subsidiaries) the Relevant Jurisdictions including the full address (including postal code) of such Group Party’s chief executive office, registered office, principal place of business, all Approved Jurisdictions, and all places of business and, if different, the address at which the books and records of any Group Party (other than any Excluded Subsidiary) are located, the address at which senior management of any Group Party (other than any Excluded Subsidiary) are located and conduct their deliberations and make their decisions with respect to the business of any Group Party (other than any Excluded Subsidiary) and the addresses from which the invoices and accounts of any Group Party (other than any Excluded Subsidiary) are issued.
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(21) Intellectual Property. Each Group Party has rights sufficient for it to use all of the Intellectual Property reasonably necessary for the conduct of its business. All material patents, trade-marks, copyrights or industrial designs which have been either registered or in respect of which a registration application has been filed by it, as at the Closing Date, are listed on Schedule 6.01(21). No Group Party has received any notice of any claim of infringement or similar claim or proceeding relating to any of its Intellectual Property which, if determined against such Group Party, would reasonably be expected to have a Material Adverse Effect.
(22) Material Contracts and Material Licences.
| (a) | Schedule 6.01(22) (as amended from time to time after the Closing Date), contains a true and complete list of all Material Contracts and Material Licences. Schedule 6.01(22) shall be deemed to be amended to include each such Material Contract and Material Licence in respect of which the Lender has received notice pursuant to Section 7.01(9)(h). |
| (b) | a true and complete copy of each Material Contract and Material Licence existing at the Closing Date has been delivered to the Lender and each Material Contract and Material Licence is in full force and effect; |
| (c) | no event has occurred and is continuing which would constitute a breach of or a default under any Material Contract or Material Licence; and |
| (d) | each Material Contract to which a Group Party is a party is binding upon such Group Party and, to the knowledge of a Responsible Officer of the Borrower, is a binding agreement of each other Person who is a party to the Material Contract. |
(23) Financial Year End. Its financial year end is November 30.
(24) Financial Information. All of the monthly, quarterly and annual financial statements which have been furnished to the Lender, or any of them, in connection with this Agreement are complete in all material respects and such financial statements fairly present the results of operations and financial position of the Borrower as of the dates referred to therein and have been prepared in accordance with GAAP. All other financial information (including, without limitation, projections) provided to the Lender is complete in all material respects and based on reasonable assumptions and expectations.
(25) No Material Adverse Effect. Since the date of the Borrower’s most recent annual audited financial statements provided to the Lender pursuant to this Agreement, there has been no condition (financial or otherwise), event or change in its business, liabilities, operations, results of operations or Property which constitutes or has, or could reasonably be expected to constitute, or cause, a Material Adverse Effect.
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(26) Environmental. No Group Party is subject to any civil or criminal proceeding or investigation relating to Requirements of Environmental Laws, and no Group Party is aware of any threatened proceeding or investigation relating to Requirements of Environmental Laws, in either case the adverse determination of which could reasonably be expected to have a Material Adverse Effect; each Group Party currently operates its business and its Properties (whether owned, leased or otherwise occupied) in compliance in all material respects with all applicable Requirements of Environmental Laws; no Hazardous Materials are or have been stored or disposed of by any Group Party or otherwise used by any Group Party in violation of any applicable Requirements of Environmental Laws, except to the extent violation could not reasonably be expected to result in remedial obligations having a Material Adverse Effect; there has been no release of Hazardous Materials by any Group Party at, on or under any property now or previously owned or leased by the Borrower or any of its Subsidiaries except as permitted by any permits, licenses, registrations or other authorizations issued pursuant to the Requirements of Environmental Laws and, to the knowledge of a Responsible Officer of the Borrower no real property or groundwater in, on or under any property now or previously owned or leased by any Group Party is or has been during such Group Party’s ownership or occupation of such property (or prior to its ownership or occupation) contaminated by any Hazardous Materials except for any release or contamination that would not reasonably be expected to give rise to remedial obligations having a Material Adverse Effect nor, to the knowledge of a Responsible Officer of the Borrower, is any such property named in any list of hazardous waste or contaminated sites maintained under any Requirements of Environmental Law.
(27) Pension Plans. Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect: (i) each Pension Plan is registered under the Pension Benefits Act and the Income Tax Act (Canada); (ii) each Pension Plan is funded and administered in compliance in all material respects with all Applicable Laws and the respective requirements of the governing documents for such plan; (iii) there is no proceeding or claim pending or, to the knowledge of a Responsible Officer of the Borrower, threatened against any Credit Party with respect to any Pension Plan; (iv) no Credit Party maintains, administers, contributes to or has any liability in respect of a Defined Benefit Pension Plan; and (v) no Pension Event has occurred or is reasonably expected to occur.
(28) Solvency. Immediately after giving effect to the Transactions, and before and after giving effect to the Loan, the Credit Parties, on a Consolidated basis, are Solvent. No transfer of Property has been or will be made by any Credit Party and no obligation has been or will be incurred by any Credit Party in connection with the Transactions contemplated by this Agreement with the intent to hinder, delay, or defraud either present or future creditors of any Credit Party.
(29) Debt. There exists no Debt of any Group Party that is not Permitted Debt.
(30) Joint Ventures. All Joint Ventures and all agreements governing such Joint Ventures to which any Credit Party is a party as of the Closing Date are set forth in Schedule 6.01(30).
(31) Non-Arm’s Length Transactions. All agreements, arrangements or transactions between any Group Party on the one hand, and any Affiliate of or other Person not dealing at Arm’s Length with such Group Party (other than another Group Party and other than ordinary course arrangements with any employee, management or director of any Group Party), on the other hand, in existence as of the Closing Date are set forth on Schedule 6.01(31).
(32) Residency of Borrower. The Borrower is a resident of Canada for the purposes of the Income Tax Act (Canada).
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(33) Anti-Corruption Laws. No part of the proceeds of the Loan shall be used, directly or indirectly: (a) to offer or give anything of value to any official or employee of any foreign government department or agency or instrumentality or government-owned entity, to any foreign political party or party official or political candidate or to any official or employee of a public international organization, or to anyone else acting in an official capacity (collectively, “Foreign Official”), in order to obtain, retain or direct business by (i) influencing any act or decision of such Foreign Official in his official capacity, (ii) inducing such Foreign Official to do or omit to do any act in violation of the lawful duty of such Foreign Official, (iii) securing any improper advantage or (iv) inducing such Foreign Official to use his influence with a foreign government or instrumentality to affect or influence any act or decision of such government or instrumentality; (b) to violate the Corruption of Foreign Public Officials Act (Canada); or (c) to violate or to cause the Lender to violate any other anti-corruption law applicable to the Lender (all laws referred to in clauses (b) and (c) being “Anti-Corruption Laws”).
(34) Sanctions Laws. No Group Party and to the knowledge of a Responsible Officer of the Borrower, no Affiliate of a Group Party acting or benefiting in any direct capacity in connection with the Loan is any of the following (a “Restricted Person”): (a) a Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”); (b) a Person that is named as a “specially designated national and blocked person” on the most current list published by OFAC at its official website or any replacement website or other replacement official publication of such list or similarly named by any similar foreign governmental authority pursuant to Sanctions; (c) a Person that is owned 50 percent or more by any Person described in Section 6.01(34)(b); or (d) any other Person with which any Group Party is prohibited from dealing under any Sanctions laws applicable to such Group Party. Further, none of the proceeds from the Loan shall be used to finance or facilitate, directly or indirectly, any transaction with, investment in, or any dealing for the benefit of, any Restricted Person or in violation of any Sanctions.
(35) Anti-Money Laundering Laws. The business and operations of the Group Parties is in compliance, in all material respects, with all AML Legislation and other anti-money laundering, anti-terrorist financing, regulations and guidelines applicable to the Borrower and each of its Subsidiaries, whether within Canada or elsewhere and no part of the proceeds of the Loan shall be used, directly or indirectly by any Group Party or any Joint Venture in contravention of any such laws, regulations and guidelines. The Borrower has implemented and maintains in effect policies and procedures designed to ensure compliance by each Group Party and its directors, officers, employees and its other Related Parties with AML Legislation.
(36) Full Disclosure. All information provided in writing by a Credit Party to the Lender in connection with the Term Facility is, to the knowledge of a Responsible Officer of the Borrower, true and correct in all material respects as of the date on which such information is dated or certified, and, to the knowledge of a Responsible Officer of the Borrower, none of the documentation furnished to the Lender by or on behalf of such Credit Party, omits or will omit as of such time, a material fact necessary to make the statements contained therein not misleading in any material respect in light of the circumstances under which such statements were made (it being recognized by the Lender that any projections and forecasts provided by any Credit Party are based on good faith estimates and assumptions believed by such Credit Party to be reasonable as of the date of such projections or assumptions and that actual results during the period or periods covered by any such projections and forecasts may differ materially from such projected or forecasted results).
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(37) Excluded Subsidiaries. As of the date hereof, no Excluded Subsidiary (a) has any Debt, obligations or liabilities of any kind or nature that exceed, in aggregate, [Redacted]; (b) owns any assets; (c) carries on any business or activity that generates revenue in excess of [Redacted]; or (d) holds any Material Licence.
(38) ERISA.
| (a) | Schedule 6.01(38) lists and separately identifies all Title IV Plans, US Multiemployer Plans, and Retiree Welfare Plans sponsored or contributed to by any Group Party. Each US Benefit Plan is in compliance in all material respects with the applicable provisions of ERISA and the Code. Except as would not reasonably be expected to result in material liability to any Group Party, no Group Party or ERISA Affiliate has failed to make any contribution or pay any amount due as required by either Section 412 of the Code or Section 302 of ERISA or the terms of any US Benefit Plan. No Group Party or ERISA Affiliate has engaged in a prohibited transaction, as defined in Section 4975 of the Code, in connection with any US Benefit Plan, which would subject any Group Party to a material tax on prohibited transactions imposed by Section 4975 of the Code. |
| (b) | Except as would not reasonably be expected to have a Material Adverse Effect, (i) no ERISA Event or event described in Section 4062(e) of ERISA with respect to any Title IV Plan has occurred or is reasonably expected to occur, (ii) there are no pending, or to the knowledge of any Group Party, threatened claims (other than claims for benefits in the normal course), sanctions, actions or lawsuits, asserted or instituted against any US Benefit Plan or any Person as fiduciary or sponsor of any US Benefit Plan, and (iii) within the last five years, no Title IV Plan has been terminated by the plan sponsor thereof or the PBGC. |
(39) Investment Company Act. No Credit Party nor any other Group Party is required to be registered as an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
(40) Margin Stock. No Group Party is engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation T, U or X of the Board of Governors of the US Federal Reserve System), or extending credit for the purpose of purchasing or carrying margin stock, and no part of the proceeds of any Loan hereunder will be used to buy or carry any margin stock. Following the application of the proceeds of the Loan, not more than 25% of the value of the assets (either of the Borrower only or of the Borrower and its Subsidiaries on a Consolidated basis) will be margin stock.
| 6.02 | Survival and Repetition of Representations and Warranties |
The representations and warranties set forth in Section 6.01 survive the execution and delivery of this Agreement and all other Loan Documents and will be deemed to be repeated by the Credit Parties as of the Closing Date and the date of each Compliance Certificate, except in each case to the extent that on or prior to such date (a) the Credit Parties have advised the Lender in writing of a variation in any such representation or warranty, and (b) if such variation, in the opinion of the Lender, acting reasonably, is material to the property, liabilities, affairs, business, operations, prospects or condition (financial or otherwise) of the Credit Parties considered as a whole or could have, or be reasonably likely to result in, a Material Adverse Effect, the Lender have approved such variation.
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ARTICLE 7 – COVENANTS
| 7.01 | Positive Covenants |
So long as this Agreement is in force and except as otherwise permitted by the prior written consent of the Lender, the Borrower shall ensure that:
(1) Timely Payment. Each Credit Party shall make due and timely payment of the Loan and the other Obligations required to be paid by it under the Loan Documents on the dates, times and place specified thereunder.
(2) Conduct of Business, Maintenance of Existence, Compliance with Laws. Each Credit Party shall (a) engage in business of the same general type as now conducted by it; (b) carry on and conduct its business and operations in a proper, efficient and businesslike manner, in accordance with good business practice; maintain and preserve in all material respects all of its Property that is necessary for the conduct of its business in good working order and condition, ordinary wear and tear excepted, in accordance with prudent industry standards; (c) preserve, renew and keep in full force and effect its existence except as may otherwise be permitted pursuant to Section 7.03(3); (d) take all reasonable action to maintain all rights, title, privileges and franchises necessary or desirable in the normal conduct of its business; (e) comply in all material respects with all Material Contracts, Material Licences and Requirements of Law (other than Applicable Cannabis Laws); and (f) comply in all respects with Requirements of Law in respect of all Applicable Cannabis Laws.
(3) Further Assurances. Each Group Party shall provide the Lender with such other documents, opinions, consents, acknowledgements and agreements requested by the Lender, acting reasonably, as are within its control and reasonably necessary to implement this Agreement or the other Loan Documents from time to time.
(4) Books and Records and Access to Information. Each Group Party shall (a) maintain proper books and records in accordance with GAAP; (b) permit any representatives designated by the Lender, upon reasonable prior notice and during normal business hours and from time to time upon reasonable notice (but not more than once in any Fiscal Year, so long as no Default or Event of Default has occurred and is continuing), to visit and inspect its Property, to examine and make extracts from its financial books, accounts and records including but not limited to accounts and records stored in computer data banks and computer software systems, and to discuss its affairs, finances and condition with its officers and (in the presence of such of its representatives as it may designate), its Auditors. The Borrower shall promptly provide the Lender with all information reasonably requested by the Lender from time to time concerning the financial condition, business and Property of the Borrower and the Group Parties.
(5) Taxes and other Obligations. Each Group Party shall pay or discharge, or cause to be paid or discharged, before the same shall become delinquent (a) all Taxes imposed upon it or upon its income or profits or in respect of its business or Property and file all Tax returns and notices in respect thereof; (b) all lawful claims for labour, materials and supplies; (c) all required payments under any of its Debt; and (d) all other obligations, provided, however that it shall not be required to pay or discharge or to cause to be paid or discharged any such amount so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and an adequate reserve in accordance with GAAP and satisfactory to the Lender, acting reasonably, has been established in its books and records.
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(6) Use of Term Facility. Each Credit Party shall use the proceeds of the Term Facility as contemplated by Section 2.02.
(7) Insurance. Each Credit Party shall maintain or cause to be maintained with reputable insurers, in such amounts and coverage of such types as is customary for and would be maintained by a corporation with an established reputation engaged in the same or similar business in similar locations and provide to the Lender, upon the Lender’s request and not more frequently than on an annual basis, evidence of such coverage. The Borrower shall, on an annual basis prior to the expiry or replacement of any insurance policy, at the Lender’s request send copies of all renewed or replacement policies to the Lender. The Lender shall be indicated in all insurance policies, as applicable, as additional insured, first loss payee and mortgagee in respect of property insurance and additional insured in respect of liability insurance, and all property insurance policies shall contain such standard mortgage clauses as the Lender shall reasonably require.
(8) Notice of Litigation. Each Group Party shall promptly notify the Lender on becoming aware of the occurrence of any litigation, dispute, arbitration, proceeding or other circumstance the result of which if determined adversely would be a judgement or award against any Group Party (i) in excess of $250,000, or (ii) would result in a Material Adverse Effect, and from time to time provide the Lender with all reasonable information requested by the Lender concerning the status of any such proceeding.
(9) Other Notices. The Borrower shall promptly, upon any Group Party having knowledge, give notice to the Lender of:
| (a) | any notice of expropriation affecting any Group Party in which the value of the Property being expropriated exceeds $250,000; |
| (b) | any change to the material terms, coverage or amounts of any insurance; |
| (c) | any material damage to or destruction of any Property, real or personal, of any Group Party and the receipt of insurance proceeds in respect thereof by any Group Party; |
| (d) | any threatened or pending litigation or governmental, regulatory or arbitration proceeding or labour controversy or fine, penalty or other similar monetary obligation against or imposed upon any Group Party or any of their Property which could reasonably be expected to be determined adversely to the applicable Group Party and which, if so determined, could reasonably be expected to have a Material Adverse Effect; |
| (e) | any material document, letter or notice sent to any Group Party from Health Canada or any other Governmental Authority (it being acknowledged and agreed that any document, letter or notice from Health Canada or other Governmental Authority that identifies a material deficiency or constitutes a warning due to non-compliance by a Group Party with its obligations under Applicable Law or any Authorization shall be deemed to be material); provided that, the Borrower shall provide copies of any report issued to any Group Party by Health Canada or any other Governmental Authority requested by the Lender from time to time; |
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| (f) | any Group Party infringing or misappropriating or having been alleged in writing to be infringing or misappropriating, the Intellectual Property of any other Person in a manner that could reasonably be expected to have a Material Adverse Effect; |
| (g) | any violation of any Applicable Law which does or could reasonably be expected to have a Material Adverse Effect; |
| (h) | any Material Licences granted or Material Contracts entered into after the Closing Date, or any material adverse change in, or material amendment to, any Material Contract, together, in each case, with copies of each such Material Licence, Material Contract or material amendment; |
| (i) | any Material Freehold Interest acquired by any Group Party after the Closing Date, together with all Security in respect of such Material Freehold Interest required by the Lender in accordance with Section 7.01(13); |
| (j) | any Material Leasehold Interest leased or occupied by any Group Party after the Closing Date, together with all Security in respect of such Material Leasehold Interest required by the Lender in accordance with Section 7.01(13); |
| (k) | any termination prior to maturity of, or material default under, a Material Contract; |
| (l) | any termination, lapse, rescission, revocation or material default under a Material Licence; |
| (m) | any termination, lapse, rescission, revocation or default under the Analytical Licence; |
| (n) | the occurrence of any Pension Event that, individually or together with all other Pension Events that have occurred, could reasonably be expected to have a Material Adverse Effect; |
| (o) | the common shares of the Borrower cease to be listed on the Toronto Stock Exchange; |
| (p) | any Encumbrance other than a Permitted Encumbrance; |
| (q) | the existence of any Hazardous Material that could reasonably be expected to result in a liability generated or used by any Group Party or located on, above or below the surface of any land which it owns, leases, operates, occupies, uses or controls (except those being stored, used or otherwise handled in compliance with Requirements of Environmental Law), or contained in the soil, surface, water or groundwater on or beneath such land; the occurrence of any release, spill, leak, emission, discharge, leaching, dumping or disposal of Hazardous Materials that has occurred on or from such land that could reasonably be expected to result in a liability; or the existence of any other breach or potential breach of the Requirements of Environmental Law; provided that, in any of the foregoing events, such event is likely to result in a liability under Requirements of Environmental Law in excess of $250,000; |
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| (r) | any consolidation, amalgamation, merger, liquidation, winding-up or dissolution of any Group Party permitted by the last sentence of Section 7.03(3); |
| (s) | any Default or Event of Default; |
| (t) | any Material Adverse Effect; or |
| (u) | any potential or actual Change of Control, provided for certainty, notice of such Change of Control to be provided to the Lender at least 30 days prior to the effective date of such Change of Control. |
(10) Intellectual Property. Each Group Party shall maintain rights sufficient for it to use all Intellectual Property reasonably necessary for the conduct of the Business and not knowingly infringe or misappropriate in any material way the material Intellectual Property rights of any other Person.
(11) Environmental Compliance. Each Group Party shall operate its business in compliance in all material respects with applicable Requirements of Environmental Laws and operate all Property owned, leased or otherwise used by it such that no material obligation, including a clean-up or remedial obligation, will arise under any Requirements of Environmental Law, provided however, that if any such material obligation arises, the applicable Group Party shall promptly satisfy or contest such obligation at its own cost and expense.
(12) Additional Guarantors. Each Credit Party shall cause each Subsidiary (other than Excluded Subsidiaries) formed or otherwise acquired after the Closing Date, including pursuant to a Permitted Acquisition, within 45 days of the date of its formation, acquisition or designation, as applicable, to have its Equity Interests pledged in favour of the Lender and to become a Guarantor and to deliver a guarantee guaranteeing the due payment and performance to the Lender of all present and future Obligations and all Security required pursuant to Section 7.01(13), as if such Subsidiary had been a Guarantor and granted Security in favour of the Lender over its Collateral on the Closing Date.
(13) Security. With respect to the Security, each Credit Party shall:
| (a) | provide to the Lender the Security required from time to time pursuant to Article 8 in accordance with the provisions of such Article, accompanied by customary supporting resolutions, certificates and opinions in form and substance satisfactory to the Lender, acting reasonably; |
| (b) | do, execute and deliver all such things, documents, security, agreements and assurances as may from time to time reasonably be requested by the Lender to ensure that the Lender holds at all times valid, enforceable, perfected first priority Encumbrances (subject only to Permitted Encumbrances) from the Credit Parties meeting the requirements of Article 8; and |
| (c) | at its expense, take such steps as may be necessary or advisable to perfect the Security (or any part thereof) or to carry out the intent of this Agreement from time to time. |
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(14) Title. Each Group Party shall defend its title to all Property and every material part thereof reasonably necessary against all material claims of other persons and do, observe and perform all of its obligations and all things necessary to be done, observed or performed by virtue of any Applicable Law for the purpose of creating, maintaining and keeping maintained the Security constituted by the Loan Documents as valid and effective security with the priority required hereunder.
(15) Maintenance of Property. Each Group Party shall generally keep all Property necessary in its business in good working order and condition, normal wear and tear excepted, and maintain all registered Intellectual Property necessary to carry on its business, except for the lapse or abandonment of such Intellectual Property, or rights therein, in the reasonable business judgment of the applicable Group Party.
(16) Pension Plans. Each Group Party shall maintain any Pension Plan in compliance in all material respects with all Applicable Laws.
(17) Material Leasehold Interests. Each Group Party shall (a) use commercially reasonable efforts to deliver to the Lender a Landlord Agreement in respect of each Material Leasehold Interest to which it is a party; (b) use commercially reasonable efforts to register the notice of lease on title to such Material Leasehold Interest; and (c) upon receipt of the Landlord Agreement and registration of the notice of lease in respect of such Material Leasehold Interest, register the debenture described in Section 8.01(f) against such Material Leasehold Interest not more than 30 days thereafter.
(18) ERISA. Each Group Party shall:
| (a) | as soon as practicable, and in any event within five (5) Business Days after any Group Party enters into any Title IV Plan or US Multiemployer Plan, notice thereof and copies of the material agreements governing such Title IV Plan or US Multiemployer Plan; |
| (b) | promptly upon any Responsible Officer becoming aware of any of the following, written notice describing the same and the steps being taken by the applicable Group Party affected thereby with respect thereto: Except as would not reasonably be expected to result in a Material Adverse Effect, the occurrence of any ERISA Event, the failure of any Group Party to make a required contribution to any Title IV Plan or to any US Multiemployer Plan, or the taking of any action with respect to a Title IV Plan which could result in the requirement that any Group Party furnish a bond or other security to the PBGC or such Title IV Plan, or the occurrence of any event with respect to any US Benefit Plan, Title IV Plan or US Multiemployer Plan which could result in the incurrence by any Group Party or any ERISA Affiliate of any material liability, fine or penalty (including any claim or demand for withdrawal liability or partial withdrawal from any US Multiemployer Plan), or any material increase in the contingent liability of any Group Party with respect to any post-retirement welfare plan benefit, or any notice that any US Multiemployer Plan is in critical or endangered status, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of an excise tax, that any such plan is or has been funded at a rate less than that required under Sections 412 or 430 of the US Tax Code, that any such plan is or may be terminated, or that any such plan is or may become insolvent; and |
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| (c) | provide to the Lender promptly following receipt thereof, copies of any documents described in Sections 101(k) or 101(l) of ERISA that any Group Party or any ERISA Affiliate may request with respect to any US Multiemployer Plan; provided, that if the Group Parties or any of their ERISA Affiliates have not requested such documents or notices from the administrator or sponsor of the applicable US Multiemployer Plan, then, upon reasonable request of the Lender, the Group Parties and/or their ERISA Affiliates shall promptly make a request for such documents or notices from such administrator or sponsor and shall provide copies of such documents and notices to the Lender promptly after receipt thereof. |
(19) GR PPP Loans. Each Group Party shall (i) promptly (and in any event, within five Business Days) after any Group Party or any Responsible Officer of any Group Party obtains actual knowledge thereof, notify the Lender in writing of any notices received or sent, or filings made and responses thereto, in respect of any of the GR PPP Loans; (ii) to the extent all or any portion of the GR PPP Loans can be forgiven, promptly take all applicable actions to apply for forgiveness of the GR PPP Loans in accordance with the regulations implementing Section 1106 of the CARES Act (and promptly providing from time to time any documentation, and status, of such forgiveness (including any determination regarding the acceptance or denial (in whole or part) thereof) to the Lender upon its reasonable request), (iii) comply with the United States Small Business Administration’s terms and conditions applicable to the GR PPP Loans; (iv) keep all necessary and appropriate records relating to the use of the GR PPP Loans (and promptly provide such records to the Lender upon its reasonable request from time to time); (v) keep the GR PPP Escrow Amounts in escrow in accordance with the Green Roads SPA until it is determined that the related GR PPP Loan will not be forgiven in accordance with Applicable Law; and (v) in the event that the GR PPP Loans are not forgiven in accordance with Applicable Law, have the GR PPP Escrow Amounts released from escrow and applied to repay the GR PPP Loans and enforce its rights under the escrow arrangements entered into in connection with the GR Acquisition and promptly provide evidence of such application of escrow funds to the Lender from time to time.
(20) Post-Closing Covenants. Each Group Party shall deliver, or cause to be delivered, each of the documents, instruments and agreements and take each of the actions set forth on Schedule 7.01(20) within the time periods set forth therein (or such longer time periods as agreed by the Lender in its sole discretion) and otherwise in accordance with the terms thereof.
| 7.02 | Reporting Requirements |
So long as this Agreement is in force and except as otherwise permitted by the prior written consent of the Lender, the Borrower will deliver to the Lender (each in form and scope reasonably acceptable to the Lender):
(1) Annual Reports. As soon as available and in any event within 90 days after the end of each of the Borrower’s Fiscal Years, cause to be prepared and delivered to the Lender: (a) the annual audited Consolidated financial statements of the Group Parties including, in each case and without limitation, balance sheet, statement of income and statement of cash flows for such Fiscal Year, prepared in accordance with GAAP and all reported on by its Auditor without a going concern qualification or exception as to the scope of such audit; (b) a comparison of the consolidated financial results to the previous Fiscal Year; and (c) a management discussion and analysis with respect to such Consolidated financial results.
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(2) Quarterly Reports. As soon as available and in any event within 45 days of the end of each Fiscal Quarter (other than the last Fiscal Quarter in any Fiscal Year), cause to be prepared and delivered to the Lender as at the end of such Fiscal Quarter unaudited Consolidated financial statements of the Borrower prepared on a Consolidated basis including, in each case and without limitation, balance sheet, statement of income, statement of cash flows, which shall be prepared in accordance with GAAP, together with a comparison of such Consolidated financial results to the same period in the previous Fiscal Year and together with management discussion and analysis with respect to such consolidated financial results.
(3) Compliance Certificate. Together with the financial statements referred to in Section 7.02(1) and Section 7.02(2), provide the Agent with a Compliance Certificate, which shall (i) certify that no Default or Event of Default has occurred and is continuing; (ii) set forth any material financial events, including, without limitation, Dispositions, Distributions, Acquisitions, Investments, Financial Assistance and Capital Expenditures completed during the relevant fiscal period, and (iii) include a screenshot or copy of each bank account statement for each Group Party’s bank accounts, operating accounts, securities accounts or such similar accounts, which fairly represents the cash deposits or securities in such bank accounts.
(4) Annual Business Plan. As soon as available, and in any event no later than 90 days after the end of each Fiscal Year of the Borrower, a copy of the Annual Business Plan for the following Fiscal Year, such Annual Business Plan to be prepared by the Borrower in reasonable detail and in form approved by the directors of the Borrower and, following the consummation of any Acquisition which has a material effect on such Annual Business Plan, the Borrower shall use its commercially reasonable efforts to provide an update of the relevant Annual Business Plan, giving effect to such Acquisition, within a reasonable period following such Acquisition.
(5) Management Letters. Upon receipt thereof, copies of all “management letters” submitted by its Auditor in connection with its annual audited financial statements.
(6) Other Information. Such other information as the Lender may reasonably request from time to time respecting any Group Party.
| 7.03 | Negative Covenants |
So long as this Agreement is in force and except as otherwise permitted by the prior written consent of the Lender, the Borrower shall ensure that:
(1) Disposition of Property. Except for Permitted Dispositions, no Group Party shall Dispose of, in one transaction or a series of transactions, all or any part of its Property, whether now owned or hereafter acquired.
(2) Sale and Lease-Back Transactions. No Group Party shall enter into any arrangement, directly or indirectly, with any Person whereby the Borrower or any such other Group Party shall sell or transfer any property, whether now owned or hereafter acquired, and whereby the Borrower or any such other Group Party shall then or thereafter rent or lease as lessee such property or any part thereof or other property which the Borrower or any such other Group Party intends to use for substantially the same purpose or purposes as the property sold or transferred.
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(3) No Consolidation, Amalgamation, etc. No Group Party shall consolidate, amalgamate or merge with any other Person, export a corporation into a jurisdiction outside of Canada, enter into any corporate reorganization or other transaction intended to effect or otherwise permit a change in its type of existence, liquidate, wind-up or dissolve itself, or permit any liquidation, winding-up or dissolution, unless either (i) all Obligations owing to the Lender outstanding under the Loan Documents (including the Outstanding Amount and the Multiple on Invested Capital) as at the date of such transaction are to be repaid in full in connection with the completion of such transaction, or (ii) the prior written approval from the Lender has been received and such customary documentation as is required by Lender’s Counsel, acting reasonably, is delivered concurrently with such transaction. Notwithstanding the foregoing, (i) a Credit Party may consolidate, amalgamate or merge with another Credit Party, liquidate, wind-up or dissolve itself into another Credit Party so long as (A) to the extent that the Borrower is involved, the Borrower is the surviving entity and remains an entity constituted under the laws of Canada or a province or territory thereof; (B) no Default or Event of Default has occurred and is continuing at such time or will result from such transactions; and (C) the Borrower has provided the Lender with at least 10 Business Days’ prior written notice of such transaction; and (ii) a Group Party (other than an Excluded Subsidiary) may consolidate, amalgamate or merge with a Credit Party, liquidate, wind-up or dissolve into a Credit Party so long as (A) a Credit Party is the surviving entity; (B) no Default or Event of Default has occurred and is continuing at such time or will result from such transactions; ; and (C) the Borrower has provided the Lender with at least 10 Business Days’ prior written notice of such transaction; and (iii) an Excluded Subsidiary may consolidate, amalgamate or merge with, or liquidate, wind-up or dissolve itself into, any other Group Party.
(4) No Change of Name. No Credit Party shall change its name, adopt a French form of name or change its jurisdiction of incorporation or formation, its chief executive office, principal place of business or location at which it keeps records in respect of Receivables, in each case without providing the Lender with 10 Business Days’ prior written notice thereof (or such shorter period of time as the Lender may agree).
(5) No Debt. No Group Party shall create, incur, assume or permit any Debt to remain outstanding, other than Permitted Debt.
(6) No Encumbrances. No Group Party shall create, incur, assume or permit to exist any Encumbrance upon any of its Property, other than Permitted Encumbrances.
(7) No Investments. No Group Party shall make any Investments at any time when a Default or Event of Default has occurred or will occur as a result of making such Investment.
(8) No Financial Assistance. No Group Party shall give any Financial Assistance to any Person at any time when a Default or Event of Default has occurred or will occur as a result of giving the Financial Assistance.
(9) No Distributions. No Group Party shall make, declare or pay any Distribution, other than Permitted Distributions.
(10) Acquisitions. No Group Party shall make any Acquisitions, other than Permitted Acquisitions.
(11) No Change to Year End. No Credit Party shall make any change to its Fiscal Year without providing the Lender with 10 Business Days’ prior written notice thereof (or such shorter period of time as the Lender may agree).
(12) No Change to Business. No Group Party shall carry on any business other than the Business.
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(13) No Share Issuance; Certificated Securities.
| (a) | Other than the issuance of common shares of the Borrower and Permitted Distributions, no Group Party shall issue any Equity Interests to any Person, unless such Person to whom such Equity Interests are issued is a Credit Party and then only if the additional Equity Interests so issued are concurrently and validly pledged to the Lender under the Security and copies of all resolutions (corporate, shareholder or otherwise) required by the Lender, acting reasonably, in connection therewith are delivered to the Lender. |
| (b) | No Group Party (other than the Borrower) shall issue any certificate representing any Equity Interest of such Group Party (other than the Borrower), without (i) causing such certificate to be delivered to the Lender within five days of issuance of such certificate, along with a transfer power of attorney executed in blank, or other equivalent instrument of transfer acceptable to the Lender; and (ii) taking all steps and actions as the Lender reasonably deems necessary or appropriate in order to give the Lender “control” (as defined in the Securities Transfer Act, 2006 (Ontario)) of such Equity Interests (which “control” shall be in such manner as the Lender shall designate, acting reasonably). |
(14) Amendments to Organizational Documents. No Group Party shall amend, vary or alter any of its Organizational Documents in a manner that would be prejudicial to the interests of the Lender under the Loan Documents in any material respect.
(15) Amendments to Material Contracts. No Group Party shall amend, vary or alter any Material Contract or Material Licence in a manner that would be prejudicial to the interests of the Lender under the Loan Documents in any material respect.
(16) Restrictive Agreements. No Group Party shall directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits or restricts, or imposes any condition upon:
| (a) | the ability of any Group Party to create, incur or permit to exist any Encumbrance upon any of its Property; |
| (b) | the ability of any Group Party to pay dividends or other Distributions with respect to any Equity Interests or with respect to, or measured by, its profits or to repay loans or advances to any other Group Party or to provide a guarantee of any Debt of any other Group Party; |
| (c) | the ability of any Group Party to make any loan or advance to any other Group Party; or |
| (d) | the ability of any Group Party to sell, lease or transfer any of its Property to any other Group Party; |
provided that, (i) Section 7.03(16)(a) through 7.03(16)(d) shall not apply to restrictions and conditions imposed by Applicable Law or by any Loan Document, (ii) the foregoing shall not apply to restrictions and conditions existing on the date hereof identified on Schedule 7.03(16) (but shall apply to any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition), (iii) the foregoing shall not apply
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to customary restrictions and conditions contained in agreements relating to the Disposition of a Subsidiary pending such Disposition, provided such restrictions and conditions apply only to such Subsidiary Disposition and such Disposition is permitted hereunder, (iv) the foregoing shall not apply to customary provisions in joint venture agreements and other similar agreements in the ordinary course of business in connection with Joint Ventures permitted under this Agreement, (v) Section 7.03(16)(a) shall not apply to restrictions or conditions imposed by any agreement relating to secured Debt permitted by this Agreement if such restrictions or conditions apply only to the Property securing such Debt, (vi) Section 7.03(16)(a) shall not apply to customary provisions in leases and other ordinary course contracts restricting the assignment thereof, and (vii) Sections 7.03(16)(a) and 7.03(16)(b) shall not apply to customary restrictions and conditions contained in agreements relating to Debt permitted hereunder so long as such provisions permit all Property of the Group Parties (other than, at any time of determination, all Health Canada Licences, Material Licences and Material Contracts to the extent not assignable under Applicable Law at such time) to be provided as Collateral for the Obligations and all Group Parties to be a party to the Loan Documents.
(17) Transactions with Affiliates. No Credit Party shall effect any transactions with any Person (other than a Credit Party) not dealing at Arm’s Length with the transacting Credit Party, except any transaction on terms no less favourable to such Credit Party than would be obtainable in a comparable transaction with a Person which is at Arm’s Length with such Credit Party, as applicable.
(18) Auditor. No Credit Party shall change its Auditor unless any replacement auditor is a nationally recognized accounting firm.
(19) Hedge Arrangements. No Group Party shall enter into or permit to be outstanding at any time any Hedge Arrangement, other than Hedge Arrangements in the ordinary course of business (and not for speculative purposes) to hedge interest rate, foreign exchange and commodity risks.
(20) Cannabis Activities and Investments. None of the Group Parties and no Joint Venture shall, directly or indirectly, engage or participate in any Cannabis Activities, or make or hold an Investment in any Person which engages or participates in any Cannabis Activities, in any jurisdiction other than an Approved Jurisdiction and in accordance with Applicable Cannabis Laws therein.
(21) Sale or Discount of Receivables. No Credit Party shall discount or sell (with or without recourse) any of its income or revenues, including any Receivables, or rights in respect thereof, other than (a) transfers in connection with the collection thereof and (b) early payment discounts in the ordinary course of business.
(22) Unconditional Purchase Obligations. No Credit Party shall enter into or be a party to, any material contract for the purchase of materials, supplies or other property or services if such contract requires that payment be made by the Borrower or any other Credit Party regardless of whether or not delivery of such materials, supplies or other property or services is ever made.
(23) Location of Property in Other Jurisdictions. Except for any Property in transit in the ordinary course of business, no Credit Party shall acquire any Property outside of the jurisdictions identified in Schedule 6.01(20) or move any Property from one jurisdiction to another jurisdiction where the movement of such Property would cause the Encumbrance of the Security
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over such Property to cease to be perfected under Applicable Law, or suffer or permit in any other manner any of its Property to not be subject to the Encumbrance of the Security or to be or become located in a jurisdiction as a result of which the Encumbrance of Security over such Property is not perfected, unless (x) such Credit Party has first given 30 days’ prior written notice thereof to the Lender, and (y) the applicable Credit Party has first executed and delivered to the Lender all Security and all financing or registration statements in form and substance satisfactory to the Lender which the Lender or Lender’s Counsel, acting reasonably, from time to time deem necessary or advisable to ensure that the Security at all times constitutes a perfected first priority Encumbrance (subject only to Permitted Encumbrances) over such Property notwithstanding the movement or location of such Property as aforesaid, together with such supporting certificates, resolutions, opinions and other documents as the Lender may deem necessary or desirable in connection with such security and registrations.
(24) Anti-Money Laundering and Anti-Terrorism Finance Laws; Foreign Corrupt Practices Act; Sanctions Laws; Restricted Person. No Group Party shall (a) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or otherwise violates any anti-terrorism law, Anti-Corruption Laws, AML Legislation or Sanctions; (b) cause or permit any of the funds that are used to repay the Obligations to be derived from any unlawful activity with the result that the Lender or any Group Party would be in violation of any Applicable Law or Sanctions; or (c) use any part of the proceeds of the Loan, directly or indirectly, for any conduct that would violate any Sanctions. Notwithstanding anything in this Agreement, nothing in this Agreement shall require any Group Party or any director, officer, employee, agent, or Affiliate of any Group Party that is registered or incorporated under the laws of Canada or of a province or territory thereof to commit an act or omission that contravenes the Foreign Extraterritorial Measures (United States) Order, 1992.
(25) Pension Plans. No Group Party shall (a) except as could not reasonably be expected to result in a Material Adverse Effect, (i) terminate or wind-up or take any other action with respect to any Defined Benefit Pension Plan, (ii) fail to make full payment when due of all amounts which, under the terms of any Pension Plan or the Pension Benefits Act, such Group Party is required to pay as contributions thereto, or (b) establish, sponsor, administer, contribute to, participate in, or assume any liability (including any contingent liability) under any Defined Benefit Pension Plan.
(26) Accounts; Control Agreements. Subject to Section 7.01(20), no Credit Party shall maintain any lock box, deposit account, operating account, securities account or other bank account, unless such lock box, deposit account, operating account, securities account or bank account, as applicable, is (a) subject to a Control Agreement at all times thereafter or (b) an Excluded Account.
(27) Excluded Subsidiaries. After the date hereof, no Excluded Subsidiary shall (a) incur any Debt, obligations or liabilities of any kind or nature that exceed, in aggregate, $5,000; (b) own any assets; (c) carry on any business or activity that generates revenue in excess of $100,000, other than, in each case, to dissolve and wind itself up into a Group Party; or (d) hold any Material Licence.
(28) Unrestricted Cash. Its Unrestricted Cash is not at any time less than [Redacted].
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ARTICLE 8 – SECURITY
| 8.01 | Form of Security |
As continuing collateral security for the payment, performance and satisfaction of all Obligations to the Lender, on the Closing Date, the Borrower shall deliver or cause to be delivered to the Lender (to the extent not existing prior to, and assigned to the Lender on, the Closing Date) the following Security, all of which shall be in form and substance satisfactory to the Lender, acting reasonably:
| (a) | a guarantee from each Credit Party guaranteeing the due payment and performance to the Lender of all present and future Obligations; |
| (b) | a general security agreement from each Canadian Credit Party in favour of the Lender constituting a first-priority Encumbrance (subject only to Permitted Encumbrances) on all of its present and future personal Property, but excluding, at any time of determination, all Health Canada Licences, Material Licences and Material Contracts to the extent not assignable under Applicable Law at such time; |
| (c) | a securities pledge agreement from each Canadian Credit Party in favour of the Lender constituting a first-priority Encumbrance (subject to Permitted Encumbrances) on all Equity Interests (other than Equity Interests in Joint Ventures the terms of which prohibit such pledge in favour of the Lender, so long as such prohibition is not created in contemplation of such transaction); |
| (d) | certificates representing all certificated Equity Interests pledged by the Credit Parties listed on Schedule 8.01(d), and all certificates representing certificated Equity Interests held by any other Credit Party (other than an Excluded Subsidiary) together with duly executed stock powers of attorney in respect of such certificates; |
| (e) | an intellectual property security agreement from by each Canadian Credit Party (that owns any registrable Intellectual Property) in favour of the Lender; |
| (f) | a [Redacted] fixed charge debenture from each applicable Canadian Credit Party in favour of the Lender constituting a first-priority Encumbrance (subject only to Permitted Encumbrances) on all Material Freehold Interests and all Material Leasehold Interests, subject to obtaining consent(s) from the applicable landlord(s), together with the lender’s title insurance policy issued by a title insurer reasonably satisfactory to the Lender, in form and substance and in an amount in each case, reasonably satisfactory to the Lender ensuring that the debenture is a valid and enforceable first priority Encumbrance on the respective Material Freehold Interest and Material Leasehold Interest, as applicable, free and clear of all Encumbrances (other than Permitted Encumbrances) and a copy of any available surveys of such real estate and any available “Phase I” environmental site assessment (and, if not available and if requested by the Lender, obtain a “Phase I” environmental site assessment for such real estate and provide a copy to the Lender together with a reliance letter for such assessment); |
| (g) | an assignment of insurance by the Canadian Credit Parties in favour of the Lender with respect to all insurance policies maintained by the Canadian Credit Parties; and |
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| (h) | such other security deemed appropriate by the Lender, acting reasonably (and consistent with the foregoing), to perfect the Lender’s first priority Encumbrance (subject only to Permitted Encumbrances) over all assets of the Credit Parties. |
| 8.02 | Additional Guarantors |
Any Person that is required pursuant to Section 7.01(12) or as otherwise may from time to time become a Guarantor in accordance with this Agreement shall execute and deliver each of the applicable Security Documents, as determined by the Lender, described in Section 7.01(13) as though such Person had become a Guarantor and granted Security in favour of the Lender over the Collateral on the Closing Date.
| 8.03 | After Acquired Property and Further Assurances |
Each Credit Party shall from time to time, at the reasonable request of the Lender, execute and deliver all such further deeds or other instruments of conveyance, assignment, transfer, mortgage, pledge or charge in connection with any of its Property, whether now existing or acquired by any Credit Party after the date hereof and intended to be subject to the security interests created hereby including any insurance thereon.
| 8.04 | Landlord Agreements for Material Leasehold Interests |
The Borrower agrees to use commercially reasonable efforts to obtain and deliver to the Lender from time to time a Landlord Agreement in respect of each Material Leasehold Interest, unless advised by the Lender in writing to not be required.
| 8.05 | Insurance |
Each Credit Party (if blanket insurance policies are held, the appropriate Credit Party) will cause the Lender to be shown as a loss payee, as its interest may appear, with respect to all insurance on the Property of each Credit Party.
| 8.06 | Security Charging Real Property |
Notwithstanding anything to the contrary contained in any Loan Document, to the extent that the charges and security interests created by the Security charge real property or any interest therein, such charges and security interests on such real property shall secure interest after the occurrence of an Event of Default at the same rates as those in effect prior to such occurrence, in compliance with Section 8 of the Interest Act (Canada); provided that, any charge or security interest in any other Property (other than real property) shall secure interest after the occurrence of an Event of Default which is continuing at the Default Interest Rate in accordance with this Agreement.
| 8.07 | Application of Proceeds of Security |
The Lender holds the Security to secure all of the Obligations and upon the acceleration of Obligations under Section 9.02, shall distribute the proceeds of realization in accordance with Section 9.09.
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ARTICLE 9 – DEFAULT
| 9.01 | Events of Default |
The occurrence of any one or more of the following events (each such event being herein referred to as an “Event of Default”) shall constitute a default under this Agreement:
| (a) | if the Borrower fails to pay the Outstanding Amount when due; |
| (b) | if the Borrower fails to pay any interest, fees or other Obligations (other than the Outstanding Amount) when due and payable, and such non-payment continues for a period of three Business Days; |
| (c) | if any Group Party fails to observe or perform any of the covenants in (i) Section 7.01(2)(f) (Compliance with Cannabis Laws) in any material respect (as determined by the Lender, acting reasonably); or (ii) Section 7.03 (Negative Covenants); |
| (d) | if any Group Party fails to observe or perform any of the covenants in Section 7.01(2)(f) (Compliance with Cannabis Laws) in any respect, and to the extent such failure is capable of being remedied, the Borrower shall fail to remedy such default within 10 days from the date of such non-compliance; |
| (e) | if any Group Party neglects to observe or perform any covenant or obligation contained in this Agreement or any other Loan Document (other than a covenant or condition whose breach or default in performance is specifically dealt with elsewhere in this Section 9.01) and the Borrower shall fail to remedy such default within 30 days from the date of such non-compliance; |
| (f) | if any representation or warranty made by any Credit Party in this Agreement, any Loan Document or in any certificate or other document at any time delivered hereunder or thereunder to the Lender shall prove to have been incorrect in any material respect on and as of the date thereof and the Borrower shall fail to remedy such default within 30 days of such non-compliance; |
| (g) | if any Group Party: (i) fails to make any payment when such payment is due and payable to any Person in relation to any Debt (other than or Permitted Intercompany Debt) which in the aggregate principal amount then outstanding is in excess of [Redacted] and such payment is not made within any applicable cure or grace period; (ii) defaults in the observance or performance of any other agreement or condition in relation to any such Debt (other than Permitted Intercompany Debt) to any Person which in the aggregate principal amount then outstanding is in excess of [Redacted] or contained in any instrument or agreement evidencing, securing or relating thereto and such default is not waived or cured within any applicable cure or grace period; or (iii) any other event shall occur or condition exist, the effect of which default or other condition is to cause, or to permit the holder of such Debt (other than Permitted Intercompany Debt) to cause, such Debt to become due prior to its stated maturity date; |
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| (h) | if any Group Party denies, to any material extent, its obligations under any Loan Document or claims any of the Loan Documents to be invalid or withdrawn in whole or in part; |
| (i) | if any of the Loan Documents or any material provision of any of them becomes unenforceable, unlawful or is changed in a manner which is adverse to the Lender by virtue of legislation or by a Government Authority, if any Credit Party does not, within 10 Business Days after receipt of notice of such Loan Document or material provision becoming unenforceable, unlawful or being changed, replace such Loan Document with a new agreement that is in form and substance satisfactory to the Lender, or amend such Loan Document to the satisfaction of the Lender; |
| (j) | if a decree or order of a court of competent jurisdiction is entered adjudging a Group Party a bankrupt or insolvent or approving as properly filed a petition seeking the winding-up of a Group Party under any Insolvency Legislation or any other bankruptcy, insolvency or analogous laws or issuing sequestration or process of execution against any substantial part of the assets of a Group Party or ordering the winding-up or liquidation of its affairs, and any such decree or order continues unstayed and in effect for a period of 10 Business Days; |
| (k) | if any Group Party becomes insolvent, makes any assignment in bankruptcy or makes any other similar assignment for the benefit of creditors, makes any proposal under any Insolvency Legislation, is adjudged bankrupt, files a petition or proposal to take advantage of any act of insolvency, consents to or acquiesces in the appointment of a trustee, receiver, receiver and manager, interim receiver, custodian, sequestrator or other Person with similar powers of itself or of all or any substantial portion of its Property, or files a petition or otherwise commences any proceeding seeking any reorganization, arrangement, composition, readjustment, winding-up or liquidation of its affairs under any applicable bankruptcy, insolvency, moratorium, reorganization or other similar law affecting creditors’ rights or consents to, or acquiesces in, the filing of such a petition; |
| (l) | if an Encumbrancer takes possession by appointment of a receiver, receiver and manager or otherwise, of all or a substantial portion of the Property of any Group Party; |
| (m) | if an execution, writ of seizure and sale, sequestration or decree for the payment of money due shall have been obtained or entered against any Group Party in an amount in excess of [Redacted] (individually or in the aggregate for all Group Parties) and such execution, writ of seizure and sale, sequestration or decree shall not have been vacated, satisfied, discharged or stayed within 30 days (pending appeal within the applicable appeal period) and in any event at least five days prior to the date on which such execution, writ of seizure and sale, sequestration or decree can be acted on; |
| (n) | if a final judgement not covered by insurance (exclusive of any deductible) shall have been obtained or entered against any Group Party in an amount in excess of [Redacted] (individually or in the aggregate for all Group Parties) and such judgement shall not have been vacated, satisfied, discharged or stayed within 30 days (pending appeal within the applicable appeal period) and in any event at least five days prior to the date on which such judgement can be acted on; |
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| (o) | if any of the Security ceases to constitute a valid and perfected first priority security interest over the Collateral (subject only to Permitted Encumbrances), in accordance with its terms, and the Borrower has failed to remedy such default within five Business Days of becoming aware of such fact; |
| (p) | if a Material Contract is terminated prior to its stated maturity date, and such Material Contract is not reinstated on comparable terms or replaced within 30 days of its termination; |
| (q) | if a Material Licence is terminated, cancelled, revoked, expired or rescinded and such Material Licence is not immediately replaced, renewed or reinstated on comparable terms; |
| (r) | if Health Canada terminates, cancels, revokes or rescinds the Analytical Licence and the Analytical Licence is not immediately replaced, renewed or reinstated on comparable terms; |
| (s) | if any Group Party ceases or threatens to cease to carry on in the ordinary course its business, or to carry on a substantial part thereof, except as a result of a reorganization permitted by the Lender or as permitted in Section 7.03(3); |
| (t) | if a Change of Control shall occur; |
| (u) | if a Material Adverse Effect shall occur; |
| (v) | if the Cannabis Act is repealed and is not immediately replaced with substantially similar legislation; |
| (w) | if a Pension Event shall have occurred that when taken either alone or together with all other Pension Events, could reasonably be expected to result in a Material Adverse Effect; or |
| (x) | if an ERISA Event occurs with respect to a Title IV Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of any Group Party under Title IV of ERISA to the Title IV Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of [Redacted], or (b) the Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan and as a result the Borrower incurs liability in an aggregate amount in excess of [Redacted], or (c) an increase of more than [Redacted] in the contingent liability of the Borrower or any other Group Party with respect to any Retiree Welfare Plan. |
| 9.02 | Acceleration and Termination of Rights |
If any Event of Default shall occur and be continuing, all Obligations shall, at the option of the Lender, become immediately due and payable with interest thereon at the rate or rates determined as herein provided, to the date of actual payment thereof, all without notice, presentment, protest, demand, notice of dishonour or any other demand or notice whatsoever, all of which are hereby expressly waived by each Credit Party; provided, if any Event of Default described in Section 9.01(j) or Section 9.01(k) with respect to the Borrower shall occur, the
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Outstanding Amount and all other Obligations shall automatically be and become immediately due and payable. In such event the Lender may exercise any right or recourse and/or proceed by any action, suit, remedy or proceeding against any Credit Party authorized or permitted by law for the recovery of all the Obligations and proceed to exercise any and all rights hereunder and under the Security and no such remedy for the enforcement of the rights of the Lender shall be exclusive of or dependent on any other remedy but any one or more of such remedies may from time to time be exercised independently or in combination.
| 9.03 | Remedies Cumulative and Waivers |
For greater certainty, it is expressly understood and agreed that the respective rights and remedies of the Lender hereunder or under any other Loan Document or instrument executed pursuant to this Agreement are cumulative and are in addition to and not in substitution for any rights or remedies provided by law or by equity; and any single or partial exercise by the Lender of any right or remedy for a default or breach of any term, covenant, condition or agreement contained in this Agreement or other document or instrument executed pursuant to this Agreement shall not be deemed to be a waiver of or to alter, affect or prejudice any other right or remedy or other rights or remedies to which the Lender may be lawfully entitled for such default or breach. Any waiver by the Lender of the strict observance, performance or compliance with any term, covenant, condition or other matter contained herein and any indulgence granted, either expressly or by course of conduct, by the Lender shall be effective only in the specific instance and for the purpose for which it was given and shall be deemed not to be a waiver of any rights and remedies of the Lender under this Agreement or any other Loan Document or instrument executed pursuant to this Agreement as a result of any other default or breach hereunder or thereunder.
| 9.04 | Saving |
The Lender shall not be under any obligation to the Borrower or any other Person to realize any Collateral or enforce the Security or any part thereof or to allow any of the Collateral to be sold, dealt with or otherwise disposed of. The Lender shall not be responsible or liable to the Credit Parties or any other Person for any loss or damage upon the realization or enforcement of, the failure to realize or enforce the Collateral or any part thereof or the failure to allow any of the Collateral to be sold, dealt with or otherwise disposed of or for any act or omission on its part or on the part of any director, officer, agent, servant or adviser in connection with any of the foregoing, except that the Lender may be responsible or liable for any loss or damage arising from the wilful misconduct or negligence of the Lender.
| 9.05 | Perform Obligations |
If an Event of Default has occurred and is continuing and if the Borrower or any Credit Party has failed to perform any of its covenants or agreements in the Loan Documents, the Lender may perform any such covenants or agreements in any manner deemed fit by the Lender without thereby waiving any rights to enforce the Loan Documents. The reasonable expenses (including any legal costs) paid by the Lender in respect of the foregoing shall be an Obligation and shall be secured by the Security.
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| 9.06 | Third Parties |
No Person dealing with the Lender shall be required to inquire whether the Security has become enforceable, or whether the powers which the Lender are purporting to exercise have been exercisable, or whether any Obligations remain outstanding upon the security thereof, or as to the necessity or expediency of the stipulations and conditions subject to which any sale shall be made, or otherwise as to the propriety or regularity of any sale or other disposition or any other dealing with the Collateral charged by such Security or any part thereof.
| 9.07 | Set-Off or Compensation |
If an Event of Default has occurred and is continuing, the Lender and its Affiliates are hereby authorized at any time and from time to time to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by the Lender or any such Affiliate to or for the credit or the account of any Credit Party against any and all of the obligations of the Borrower now or hereafter existing under this Agreement or any other Loan Document to the Lender, irrespective of whether or not the Lender has made any demand under this Agreement or any other Loan Document and although such obligations of the Credit Party may be contingent or unmatured or are owed to the office of the Lender different from the branch or office holding such deposit or obligated on such indebtedness. The rights of the Lender and its respective Affiliates under this Section are in addition to other rights and remedies that the Lender or its Affiliates may have. The Lender shall promptly notify the Borrower after any such setoff or application, as applicable.
| 9.08 | Realization of Security |
The Lender holds the Security to secure all of the Obligations and upon the event of the occurrence and continuance of an Event of Default, the Lender shall deal with the net sale proceeds of realization of the Security in accordance with Section 9.09.
| 9.09 | Application of Payments |
Notwithstanding any other provision of this Agreement, the proceeds of realization of the Security or any portion thereof shall be distributed in the following order:
| (a) | first, in payment of all reasonable and documented costs and expenses incurred by the Lender in connection with such realization, including reasonable and documented legal, accounting and receivers’ fees and disbursements; |
| (b) | second, against the Obligations owing to the Lender; and |
| (c) | third, if all Obligations above have been paid and satisfied in full, any surplus proceeds of realization shall be paid to the Borrower unless otherwise required in accordance with Applicable Law. |
| 9.10 | Consultant |
The Borrower agrees that, at any time after the occurrence of and during the continuance of an Event of Default and upon written request delivered by the Lender, it shall appoint a financial consultant at the sole cost and expense of the Borrower (hereinafter referred to as the “Consultant”) for the purposes of reviewing the operations of the Credit Parties from time to time thereafter. The terms of the Consultant’s scope of duties, including appropriate covenants regarding confidentiality, shall be settled by the Lender with the consent of the Borrower, provided that such terms may be settled by the Lender if agreement with the Borrower is not reached within five days of the date of the Lender’s request. The Borrower consents, and shall cause each Credit Party to consent, at all times to a free exchange of information or the particulars of any such information exchanged at any time.
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ARTICLE 10 – COSTS, EXPENSES AND INDEMNIFICATION
| 10.01 | Indemnification by the Borrower |
The Borrower shall indemnify the Lender and each Related Party of the Lender (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the reasonable and documented fees, charges and disbursements of any counsel for any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any third party or by any Credit Party arising out of, in connection with, or as a result of: (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance or non-performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation or non-consummation of the transactions contemplated hereby or thereby; (ii) the Loan or the use or proposed use of the proceeds thereof, (iii) enforcement (including any workouts in connection with or in lieu of any enforcement) of its rights under the Loan Documents; (iv) any actual or alleged presence or release of Hazardous Materials in breach of the Requirements of Environmental Law on or from any property owned or operated by any Credit Party, or any Environmental Liability; or (v) any actual claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by a Credit Party and regardless of whether any Indemnitee is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses: (x) are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee or (y) result from a claim brought by the Borrower or any other Credit Party against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if such Credit Party has obtained a final and non-appealable judgment in its favour on such claim as determined by a court of competent jurisdiction, nor will an indemnity be available in respect of matters specifically addressed in Sections 11.01, 11.02 or 12.01. Notwithstanding the foregoing, this Section 10.01 shall not apply with respect to Taxes other than Taxes that represent losses, liability, claims, and damages arising from any non-Tax claim. The indemnity contained herein shall survive the termination of the Term Facility.
| 10.02 | Waiver of Consequential Damages |
To the fullest extent permitted by Applicable Law, neither the Credit Parties nor an Indemnitee shall assert, and each hereby waives, any claim against the other, on any theory of liability, for indirect, consequential, punitive, aggravated or exemplary damages (as opposed to direct damages) arising out of, in connection with, or as a result of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby (or any breach thereof), the transactions contemplated hereby or thereby, the Loan or the use of the proceeds thereof. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.
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| 10.03 | Payments |
All amounts due under this Section shall be payable promptly after demand therefor. A certificate of the Lender setting forth the amount or amounts owing to Lender or a sub-agent or Related Party, as the case may be, as specified in this Section, including reasonable detail of the basis of calculation of the amount or amounts, and delivered to the Borrower shall be conclusive absent manifest error.
ARTICLE 11 – TAXES AND CHANGE OF CIRCUMSTANCES
| 11.01 | Increased Costs |
If, from time to time, any Change in Law shall:
| (a) | impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against Property of, deposits with or for the account of, or credit extended or participated in by, the Lender; or |
| (b) | subject the Lender to any Tax of any kind whatsoever with respect to this Agreement or the Loan made by it, except for Indemnified Taxes or Other Taxes covered by Section 11.02 and any Excluded Tax; |
and the result of any of the foregoing shall be to increase the cost to the Lender of making or maintaining the Loan, or to increase the cost to the Lender, or to reduce the amount of any sum received or receivable by the Lender (whether of principal, interest or any other amount), then upon request of the Lender from time to time, the Borrower will pay to the Lender such additional amount or amounts as will compensate the Lender for such additional costs incurred or reduction suffered.
| 11.02 | Taxes |
(1) Payments Subject to Taxes. Any and all payments by or on account of any obligations of any Credit Party hereunder or under any Loan Document shall be made without deduction or withholding for any Taxes except as required by Applicable Law. If any Credit Party or the Lender is required by Applicable Law to deduct or withhold any Taxes for any such payment, then: (i) if such Tax is an Indemnified Tax (including any Other Tax), the sum payable shall be increased by that Credit Party when payable as necessary so that after making or allowing for all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section) the Lender, as the case may be, receives an amount equal to the sum it would have received had no such deductions or withholdings been required; (ii) the applicable Withholding Agent shall be entitled to make any such deductions or withholdings required to be made by it under Applicable Law; and (iii) the applicable Withholding Agent shall timely pay the full amount required to be deducted or withheld to the relevant Governmental Authority in accordance with Applicable Law.
(2) Payment of Other Taxes by the Borrower. Without limiting the provisions of paragraph (1) of this Section 11.02, the Credit Parties shall timely pay to the relevant Governmental Authority in accordance with Applicable Law, or at the option of the Lender, timely reimburse it for the payment of, any Other Taxes.
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(3) Indemnification by the Borrower. The Borrower shall indemnify the Lender, within 10 days after written demand therefor (specifying in reasonable detail the nature and the amount of the Indemnified Taxes or Other Taxes), for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Lender in respect of any payment by or on account of any obligation of a Credit Party hereunder or any other Loan Document and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by the Lender, shall be conclusive absent manifest error.
(4) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by a Credit Party to a Governmental Authority, the Credit Party shall deliver to the Lender the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Lender.
(5) Treatment of Certain Refunds and Tax Reductions. If the Lender determines that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which a Credit Party has paid additional amounts pursuant to this Section or that, because of the payment of such Taxes or Other Taxes, it has benefited from a reduction in Excluded Taxes otherwise payable by it, it shall pay to the applicable the Borrower or Credit Party, as applicable, an amount equal to such refund or reduction (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower or any Credit Party under this Section with respect to the Taxes or Other Taxes giving rise to such refund or reduction), net of all out-of-pocket expenses of the Lender, as the case may be, and without interest (other than any net after-Tax interest paid by the relevant Governmental Authority with respect to such refund). The Borrower or other Credit Party as applicable, upon the request of the Lender, agrees to repay the amount paid over to the Borrower or Credit Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Lender if the Lender is required to repay such refund or reduction to such Governmental Authority. Notwithstanding anything to the contrary in this Section 11.02(5), in no event will the Lender be required to pay any amount to the Borrower or a Credit Party pursuant to this Section 11.02(5) the payment of which would place the Lender in a less favourable after-Tax position than the Lender would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payment or additional amounts with respect to such Tax had never been paid. This paragraph shall not be construed to require the Lender to make available its tax returns (or any other information relating to its Taxes that it deems confidential) to the Borrower or any other Person, to arrange its affairs in any particular manner or to claim any available refund or reduction.
(6) Status of Lender. To the extent that withholdings apply to any payment to be made to the Lender that is entitled to an exemption from or reduction of any withholding Tax with respect to any payments hereunder or under any other Loan Document shall, to the extent it may lawfully do so, deliver to the Borrower and to the Lender, at the time or times reasonably requested by the Borrower or the Lender and at the time or times prescribed by Applicable Law, such properly completed and executed documentation reasonably requested by the Borrower or the Lender or prescribed by Applicable Law as will permit such payments to be made without withholding (including FATCA withholding, if applicable) or at a reduced rate of withholding. In addition, the Lender, if requested by the Borrower, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by the Borrower as will enable the Borrower to determine
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whether or not the Lender is subject to withholding, backup withholding or information reporting requirements (including, without limitation, FATCA). The Lender shall, from time to time after the initial delivery by the Lender of the documentation described above, at the request of the Borrower or if any form or certification it previously delivered expires or becomes obsolete or inaccurate: (a) deliver to the Borrower renewals, amendments or additional or successor forms, together with any other certificate or statement of exemption required in order to confirm or establish the Lender’s status or that the Lender is entitled to an exemption from or reduction in withholding tax; or (b) notify the Borrower in writing of its inability to deliver any such forms, certificates or other evidence. Solely for the purposes of this paragraph (6), “FATCA” shall include any amendments made to FATCA after the date of this Agreement and any non-U.S. legislation, rules or administrative guidance notes adopted by a Governmental Authority pursuant to an intergovernmental agreement entered into with the United States with respect to FATCA, or that give effect to the OECD Standard for Automatic Exchange of Financial Account Information in Tax Matters-the Common Reporting Standard.
(7) Survival. Each party’s obligations under this Section 11.02 shall survive the assignment of rights by the Lender, the termination of this Agreement and the repayment, satisfaction or discharge of the Term Facility, the Outstanding Amount and all other Obligations under any Loan Document.
| 11.03 | Illegality |
If the Lender determines that any Applicable Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for the Lender to make or maintain the Loan, then, on notice thereof by the Lender to the Borrower, any obligation of the Lender with respect to the activity that is unlawful will be suspended until the Lender notifies the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower will, upon demand from the Lender, prepay the Outstanding Amount in full (together with the Multiple on Invested Capital and all other Obligations outstanding under the Loan Documents) or take any necessary steps in order to avoid the activity that is unlawful.
ARTICLE 12 – GENERAL
| 12.01 | Costs and Expenses |
The Borrower will pay (i) all reasonable out of pocket expenses incurred by the Lender, including the reasonable fees, charges and disbursements of Lender’s Counsel, in connection with the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby will be consummated), and (ii) all reasonable out of pocket expenses incurred by the Lender including the reasonable fees, charges and disbursements of Lender’s Counsel, in connection with the enforcement or protection of its rights in connection with this Agreement and the other Loan Documents, including its rights under this Section 12.01, or in connection with the Loan made hereunder, including all such out of pocket expenses incurred during any workout, restructuring or negotiations in respect of the Loan.
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| 12.02 | Addresses, Etc. for Notices |
(1) Notice Address. The addresses and facsimile numbers for the purposes of notices and other communications to the Borrower and the Lender are set forth on the signatures pages and Schedules to this Agreement.
(2) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in Section 12.02(3)), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile to the addresses or facsimile numbers specified elsewhere in this Agreement or, if to a Credit Party other than the Borrower, in care of the Borrower. Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by facsimile shall be deemed to have been given when sent (except that, if not given on a Business Day between 9:00 a.m. and 5:00 p.m. local time where the recipient is located, shall be deemed to have been given at 9:00 a.m. on the next Business Day for the recipient). Notices delivered through electronic communications to the extent provided in Section 12.02(3) below shall be effective as provided in Section 12.02(3).
(3) Electronic Communications. Notices and other communications to any party may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Lender. The Lender or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications. Notices and other communications (i) sent to an email address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient; and (ii) posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.
(4) Change of Address, Etc. Any party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other parties hereto.
| 12.03 | Governing Law and Submission to Jurisdiction |
(1) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the Province of Ontario and the federal laws of Canada applicable therein.
(2) Submission to Jurisdiction. The Borrower, for and on behalf of itself and each Credit Party, irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the courts of the Province of Ontario, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such court. The Borrower, for and on behalf of itself and each
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Credit Party, agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or in any other Loan Document shall affect any right that the Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Credit Party or its Properties in the courts of any jurisdiction.
(3) Waiver of Venue. The Borrower, for and on behalf of itself and each Credit Party, irrevocably and unconditionally waives, to the fullest extent permitted by Applicable Law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement in any court referred to in Section 12.03(2). Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by Applicable Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
| 12.04 | Judgment Currency |
(1) If for the purpose of obtaining or enforcing judgment against a Credit Party in any court in any jurisdiction, it becomes necessary to convert into any other Approved Currency (such other Approved Currency being hereinafter in this Section 12.04 referred to as the “Judgment Currency”) an amount due in Canadian Dollars under this Agreement or any other Loan Document, the conversion will be made at the Spot Rate prevailing on the Business Day immediately preceding:
| (a) | the date of actual payment of the amount due, in the case of any proceeding in any jurisdiction that will give effect to such conversion being made on such date, or |
| (b) | the date on which the judgment is given, in the case of any proceeding in the courts of any other jurisdiction (the date as of which such conversion is made pursuant to this Section 12.04(1)(b) being hereinafter in this Section 12.04 referred to as the “Judgment Conversion Date”). |
(2) If, in the case of any proceeding in the court of any jurisdiction referred to in Section 12.04(1)(b), there is a change in the Spot Rate prevailing between the Judgment Conversion Date and the date of actual payment of the amount due, the Borrower will pay such additional amount (if any, but in any event not a lesser amount) as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the Spot Rate prevailing on the date of payment, will produce the amount of Canadian Dollars which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial order at the Spot Rate of exchange prevailing on the Judgment Conversion Date.
(3) Any amount due from a Credit Party under the provisions of Section 12.04(2) will be due as a separate debt and will not be affected by judgment being obtained for any other amounts due under or in respect of this Agreement or any other Loan Document.
| 12.05 | Benefit of this Agreement |
(1) This Agreement shall be binding upon the Borrower and each of the Credit Parties and their respective successors.
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(2) This Agreement will enure to the benefit of and will be binding upon the Lender and its successors and assigns.
| 12.06 | No Assignment by the Credit Parties |
No Credit Party may assign or otherwise transfer any of its rights or obligations under any Loan Document without the prior written consent of the Lender.
| 12.07 | Assignment by the Lender |
(1) The rights, benefits and obligations of the Lender under or in respect of this Agreement or any other Loan Document may, in whole or in part be assigned by the Lender with the prior written consent of the Borrower; provided however, if an Event of Default has occurred and is continuing, the Lender may assign or otherwise transfer its rights, benefits and obligations in respect of this Agreement or any other Loan Document to any Person, without the prior written consent of any Credit Party.
(2) An assignment by the Lender of its rights hereunder will not constitute a repayment, discharge, rescission, extinguishment or novation of the Loan or interest therein, and the obligations so assigned shall continue to be the same obligations and not new obligations.
| 12.08 | Amendments and Waivers |
No amendment to this Agreement will be valid or binding unless set forth in writing and duly executed by the Borrower and the Lender. No waiver of any breach of any provision of this Agreement and no consent required hereunder will be effective or binding unless made in writing and signed by the party purporting to give the same. Unless otherwise provided, any waiver or consent given hereunder will be limited to the specific breach waived or matter consented to, as the case may be, and may be subject to such conditions as the party giving such waiver or consent considers appropriate.
| 12.09 | Survival |
The provisions of Article 10 and Section 12.01 shall survive the repayment of the Loan, whether on account of principal, interest or fees, and the termination of this Agreement, unless a specific release of such provisions by the Lender is delivered to the Borrower.
| 12.10 | Severability |
Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions hereof and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
| 12.11 | Entire Agreement |
This Agreement (along with the other Loan Documents) constitutes the whole and entire agreement between the parties hereto and cancels and supersedes any prior agreements, undertakings, declarations, commitments, representations, written or oral, in respect thereof.
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| 12.12 | Further Assurances |
The Borrower and the Lender shall promptly cure any default by it in the execution and delivery of this Agreement, the Loan Documents or of any of the agreements provided for hereunder to which it is a party. At the sole cost and expense of the Borrower, the Borrower will, and will cause each other Credit Party to, promptly execute and deliver to the Lender, upon the reasonable request by the Lender, all such other and further documents, agreements, opinions, certificates and instruments in compliance with and required to give effect to the covenants and agreements of such Credit Party under the Loan Documents or to make any recording, file any notice or obtain any consent contemplated herein.
| 12.13 | Waiver of Jury Trial |
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
| 12.14 | Counterparts; Integration; Effectiveness. |
This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Except as provided in Section 3.01, this Agreement shall become effective when it has been executed by the parties hereto and when each other party has received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or facsimile or by sending a scanned copy by electronic mail shall be as effective as delivery of a manually executed counterpart of this Agreement.
| 12.15 | Electronic Execution of Loan Documents; Delivery by Electronic Transmission |
This Agreement and any other Loan Document may be signed by way of associating or otherwise appending an electronic signature or other facsimile signature of the applicable signatory and the words “execution”, “signed”, “signature”, and words of like import in this Agreement and any other Loan Document shall be deemed to include electronic signatures or other facsimile signatures, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature.
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| 12.16 | Treatment of Certain Information; Confidentiality |
(1) The Lender agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to the extent required by the order of any court or administrative agency in any pending legal, judicial or administrative proceeding or otherwise as required by Applicable Law (in which case, such Person shall, to the extent permitted by Applicable Law, notify the Borrower promptly thereof, in advance); (b) upon the request or demand of any regulatory authority purporting to have jurisdiction over such Person or its Affiliates (in which case, to the extent permitted by Applicable Law, such Person shall, except with respect to any audit or examination conducted by bank accountants or any governmental bank regulatory authority exercising examination or regulatory authority, promptly notify the Borrower in advance); (c) to its Affiliates and its Affiliates’ respective employees, directors, legal counsel, independent auditors, professionals and other experts or agents of such person on a “need to know” basis and who are informed of the confidential nature of such information and are or have been advised of their obligation to keep information of this type confidential; (d) to the extent any such information becomes publicly available other than by reason of disclosure by such Person in breach of this provision or is received by such Person from a third party that is not to such Person’s knowledge subject to confidentiality obligations to the Borrower or any of its Affiliates; (e) with the Borrower’s prior written consent; (f) to the extent independently developed by such Person or its Affiliates; (g) in protecting and enforcing the rights of the Lender with respect to this Agreement and the other Loan Documents including for the purposes of establishing a “due diligence” defense; and (h) on a confidential basis to any actual or prospective direct or indirect contractual counterparty to any swap or derivative transaction relating to the Borrower or any of its Subsidiaries; provided that the disclosure of any such information to any prospective lenders shall be made subject to Applicable Law and the acknowledgment and acceptance by such prospective lender that such information is being disseminated on a confidential basis (on substantially the terms set forth in this Section or as is otherwise reasonably acceptable to the Borrower). The Lender shall be liable for any violation of the confidentiality restrictions set forth herein by any of its employees or directors.
(2) For purposes of this Section, “Information” means all information received in connection with this Agreement from any Credit Party relating to any Credit Party or any of its Subsidiaries or any of their respective businesses, other than any such information that is available to the Lender on a non-confidential basis prior to such receipt. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
| 12.17 | Time of the Essence |
Time shall be of the essence of this Agreement.
| 12.18 | Termination of Agreement and Loan Documents |
(1) This Agreement and the Loan Documents shall terminate and shall be of no further effect, other than with respect to indemnities and the other provisions that are expressly stated to survive termination of this Agreement, and the Lender shall execute and deliver all discharges and termination statements requested by the Borrower and/or any other Credit Party (at the expense of the Borrower) upon indefeasible repayment in full of all Obligations owing to the Lender and its Affiliates, if any, and the termination of this Agreement.
(2) The Lender shall release the Security and execute related documents in connection with a termination as described in this Section 12.18 and the Lender shall execute and deliver all discharges and termination statements requested by the Borrower or any other Credit Party (at the expense of the Borrower) in connection with such termination.
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| 12.19 | Anti-Money Laundering Legislation |
(1) The Borrower acknowledges that, pursuant to the AML Legislation, the Trading with the Enemy Act (United States) and other federal, provincial, territorial, local or foreign laws relating to anti-money laundering, anti-terrorist financing and Sanctions, the Lender may be required to obtain, verify and record information regarding the Borrower, the Guarantors, their directors, authorized signing officers, direct or indirect shareholders or other Persons in control of the Borrower and the Guarantors, and the transactions contemplated hereby. The Borrower shall promptly provide all such information, including supporting documentation and other evidence, as may be reasonably requested by the Lender in order to comply with any applicable AML Legislation, whether now or hereafter in existence.
(2) The Borrower acknowledges and agrees that pursuant to the AML Legislation and other Sanctions and Anti-Corruption Laws, the Lender may be required to obtain, verify and record information with respect to the Credit Parties and the Borrower hereby agrees to cooperate with the Lender and provide it with all information that may be required in order to fulfil its obligations under such laws. Without limiting the generality of the foregoing, the Borrower agrees to use commercially reasonable efforts to obtain the consent of any of their respective officers, directors and employees whose consent to the disclosure of any such information is required under applicable privacy legislation in Canada.
| 12.20 | Publicity |
Each party hereto agrees that neither it nor any of its Affiliates shall now or in the future issue any press release or other public disclosure using the name of the other party or any of its Affiliates or referring to this Agreement or any other Loan Document without the prior written consent of such other party, except to the extent that such issuing party or its Affiliate is required to do so under Applicable Law (in which event such issuing party or its Affiliate shall consult with the other party before issuing such press release or other public disclosure). Notwithstanding any of the foregoing, this Agreement may be filed with the SEDAR or EDGAR in accordance with any Requirements of Law.
| 12.21 | Lender Confirmation |
The Lender confirms that it will not register any debenture or mortgage granted by any Credit Party in favour of the Lender in respect of any Material Leasehold Interest unless a Landlord Agreement in respect of such Material Leasehold Interest has been executed and delivered by the applicable landlord.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF the parties hereto have executed this Agreement.
BORROWER:
| Address: | THE VALENS COMPANY INC. | |||
| The Valens Company Inc. | ||||
| 230 Carion Road | Per: |
| ||
| Kelowna, BC V4V2K5 | Name: | |||
| Canada | Title: | |||
| [Redacted] | Per: |
| ||
|
With a copy to : |
Name: Title: | |||
| Stikeman Elliott LLP | ||||
| 5300 Commerce Court West | ||||
| 199 Bay Street | ||||
| Toronto, Ontario M5L 1B9 | ||||
| Canada | ||||
| [Redacted] | ||||
[SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT]
LENDER:
| Address: | SNDL Inc. | |||
| SNDL Inc. | ||||
| 919 - 11 Avenue SW, Suite 300 | Per: |
| ||
| Calgary, AB T2R 1P3 | Name: Title: | |||
| [Redacted] | ||||
With a copy to :
McCarthy Tétrault LLP
66 Wellington Street West, Suite 5300
Toronto, ON M5K 1E6
Canada
| Attention: | [Redacted] |
| Email: | [Redacted] |
[SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT]
Exhibit 99.4
VOTING SUPPORT AGREEMENT
THIS AGREEMENT made the 22nd day of August, 2022.
BETWEEN:
| (hereinafter called the “Shareholder”) | ||||
| - and - | ||||
| SNDL INC., a corporation existing under the laws of the Province of Alberta | ||||
| (hereinafter called the “Purchaser”, and together with the Shareholder, the “Parties”, and each is a “Party”), | ||||
WHEREAS the Purchaser is concurrently herewith entering into an arrangement agreement (the “Arrangement Agreement”) with The Valens Company Inc. (the “Company”) which provides for, among other things, a transaction whereby, among other things, all of the outstanding common shares of the Company (“Shares”) will be acquired by the Purchaser in accordance with the terms of the Arrangement Agreement (the “Arrangement”);
AND WHEREAS the Shareholder is the beneficial owner of the Shares and other securities of the Company described in Schedule A hereto and exercises voting rights attached to such Shares;
AND WHEREAS this Agreement sets out the terms and conditions of the agreement of the Shareholder (i) to vote or cause to be voted the Subject Securities (as defined below) in favour of the Arrangement and any other matter that could reasonably be expected to facilitate the Arrangement, and (ii) to abide by the restrictions and covenants set forth herein;
AND WHEREAS the Shareholder acknowledges that the Purchaser would not enter into the Arrangement Agreement but for the execution and delivery of this Agreement by the Shareholder;
NOW THEREFORE this Agreement witnesses that, in consideration of the premises and the covenants and agreement herein contained, the Parties agree as follows:
ARTICLE 1
INTERPRETATION
| 1.1 | All capitalized terms used but not otherwise defined herein shall have the respective meaning ascribed to them in the Arrangement Agreement. All references herein to the Arrangement Agreement or any portion thereof refer to the Arrangement Agreement as amended or restated from time to time as it may be. |
| 1.2 | For all purposes of this Agreement, the term “Subject Securities” shall include: (a) all Shares beneficially owned or over which control or direction, including voting rights, is exercised, directly or indirectly, by the Shareholder as of the date hereof, including the Shares listed on Schedule A; and (b) any Shares acquired or over which ownership, control or direction is acquired by the Shareholder after the date hereof, including Shares acquired as a result of any exercise or conversion of securities exercisable for or convertible into Shares, and all shares or other securities into or for which such Shares may be converted, exchanged or otherwise changed into in respect of which voting is or may become subsequent to the date hereof, directly or indirectly, controlled or directed by the Shareholder or any of its affiliates. |
ARTICLE 2
CERTAIN COVENANTS OF THE SHAREHOLDER
| 2.1 | The Shareholder hereby covenants and irrevocably agrees to and for the benefit of the Purchaser that the Shareholder shall, from the date hereof until the termination of this Agreement in accordance with its terms (the “Expiry Time”): |
| (a) | not sell, transfer, gift, assign, convey, tender, hedge, pledge, hypothecate, create or suffer to exist any Liens, option or otherwise dispose of any right or interest in any of the Subject Securities or enter into any agreement, arrangement, commitment or understanding in connection therewith, other than pursuant to the Arrangement or to one or more corporations directly or indirectly wholly-owned by the Shareholder without affecting beneficial ownership or control or direction over the Subject Securities; |
| (b) | other than as set forth herein, not grant or agree to grant any proxy, power of attorney or other right to vote the Subject Securities, or enter into any voting agreement, voting trust, vote pooling or other agreement with respect to the right to vote, call meetings of shareholders or give consents or approval of any kind with respect to any of the Subject Securities; |
| (c) | not requisition or join in the requisition of any meeting of any of the securityholders of the Company for the purpose of considering any resolution; |
| (d) | subject to Section 7.1 hereof, not take any other action of any kind, directly or indirectly, which might reasonably be regarded as likely to reduce the success of, or delay or interfere with the completion of, the Arrangement and the other transactions contemplated by the Arrangement Agreement and this Agreement; |
| (e) | not do indirectly that which the Shareholder may not do directly by the terms of this Section 2.1, including through any Person directly or indirectly owned, controlled or directed by the Shareholder; or |
| (f) | not take any action, or allow any other Person to take any action, that would cause any of the representations and warranties of the Shareholder in Section 4.1 to become untrue or incorrect. |
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| 2.2 | The Shareholder hereby covenants, undertakes and agrees from time to time, until the Expiry Time, to cause to be counted as present for purposes of establishing quorum and to vote (or cause to be voted) all the Subject Securities: |
| (a) | at any meeting of any of the securityholders of the Company at which the Shareholder or any beneficial owner of Subject Securities is entitled to vote, including the Company Meeting; and |
| (b) | in any action by written consent of the securityholders of the Company, |
in favour of the approval, consent, ratification and adoption of the Arrangement Resolution and the transactions contemplated by the Arrangement Agreement (and any actions required for the consummation of the transactions contemplated by the Arrangement Agreement). In connection with the foregoing, subject to this Section 2.2, the Shareholder hereby agrees to deposit (or cause to be deposited) a proxy, or voting instruction form, as the case may be, duly completed and executed in respect of all of the Subject Securities as soon as reasonably practicable following the mailing of the Company Circular and in any event at least 10 Business Days prior to the Company Meeting and as far in advance as reasonably practicable of every adjournment or postponement thereof, voting all the Subject Securities in favour of the Arrangement Resolution and any resolutions approving, consenting to, ratifying or adopting the transactions contemplated by the Arrangement Agreement (and any actions required for the consummation of the transactions contemplated by the Arrangement Agreement). The Shareholder hereby agrees that it will not take, nor permit any of its affiliates or any Person on its behalf to take, any action to withdraw, amend or invalidate any proxy or voting instruction form deposited pursuant to this Agreement without the prior written approval of the Purchaser, notwithstanding any statutory or other rights or otherwise which the Shareholder or such other Person might have, unless this Agreement has at such time been previously terminated in accordance with Article 6. If requested by the Purchaser, the Shareholder will provide copies of each such proxy or voting instruction form referred to above to the Purchaser at the address below concurrently with its delivery as provided for above.
| 2.3 | The Shareholder hereby revokes and will take all steps necessary to effect the revocation of any and all previous proxies granted or voting instruction forms or other voting documents delivered that may conflict or be inconsistent with the matters set forth in this Agreement and the Shareholder agrees from time to time, until the Expiry Time, not to, directly or indirectly, grant or deliver any other proxy, power of attorney or voting instruction form with respect to the matters set forth in this Agreement except as expressly required or permitted by this Agreement. |
| 2.4 | The Shareholder hereby covenants, undertakes and agrees from time to time, until the Expiry Time, subject to Section 7.1 hereof to cause to be counted as present for purposes of establishing quorum and to vote (or cause to be voted) the Subject Securtities against any proposed action by the Company, any securityholder of the Company, any of the Company’s Subsidiaries or any other Person: (i) in respect of any merger, take-over bid, amalgamation, plan of arrangement, business combination, reorganization, recapitalization, dissolution, liquidation, winding up or similar transaction involving the Company or any Subsidiary of the Company, other than the Arrangement; (ii) which would reasonably be regarded as being directed towards or likely to prevent, delay or reduce the likelihood of the successful completion of the Arrangement, including without limitation any amendment to the articles or by-laws of the Company or any of its subsidiaries or their respective corporate structures or capitalization; or (iii) any action or agreement that would result in a breach of any representation, warranty, covenant or other obligation of the Company under the Arrangement Agreement if such breach requires securityholder approval. |
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| 2.5 | Until the Expiry Time, the Shareholder, subject to Section 7.1 hereof, will not, and will ensure that its affiliates do not, directly or indirectly, through any officer, director, employee, representative or agent or otherwise: |
| (a) | solicit proxies or become a participant in a solicitation in opposition to or competition with the Purchaser in connection with the Arrangement; |
| (b) | assist any Person in taking or planning any action that would compete with, restrain or otherwise serve to interfere with or inhibit the Purchaser in connection with the Arrangement; |
| (c) | act jointly or in concert with another Person for the purpose of opposing or competing with the Purchaser in connection with the Arrangement; |
| (d) | solicit, initiate, encourage or otherwise knowingly facilitate, (including by way of furnishing or providing copies of, access to, or disclosure of, any confidential information, properties, facilities, books or records of the Company or any Subsidiary or entering into any form of agreement, arrangement or understanding) any inquiry, proposal or offer that constitutes or may reasonably be expected to constitute or lead to, an Acquisition Proposal; |
| (e) | participate in any discussions or negotiations with any Person (other than the Purchaser or any of its affiliates) regarding any inquiry, proposal or offer that constitutes or may reasonably be expected to constitute or lead to an Acquisition Proposal; |
| (f) | accept or enter into, or publicly propose to accept or enter into, any letter of intent, agreement, arrangement or understanding related to any Acquisition Proposal; or |
| (g) | cooperate in any way with, assist or participate in, knowingly encourage or otherwise facilitate or encourage any effort or attempt by any other Person to do or seek to do any of the foregoing. |
| 2.6 | The Shareholder will not, and the Shareholder will ensure that none of its affiliates will, (i) exercise any dissent rights in respect of the Arrangement; or (ii) subject to Section 7.1 hereof, take any other action of any kind that would reasonably be regarded as likely to adversely affect, reduce the success of, materially delay or interfere with the completion of the Arrangement or the transactions contemplated by the Arrangement Agreement. |
| 2.7 | At the request of the Purchaser or the Company, the Shareholder will, and will cause its applicable affiliates to, use all commercially reasonable efforts in its capacity, and their capacities, as a securityholder to assist the Company and the Purchaser to successfully complete the Arrangement and the other transactions contemplated by the Arrangement Agreement and this Agreement, including without limitation cooperating with the Purchaser and the Company to make all requisite regulatory filings, provided that the Shareholder shall not be obligated to incur any expense in providing such cooperation, including by participating in any claim, action, suit, proceeding or investigation whether civil, criminal, administrative, or investigative (each a “Proceeding”), unless the Purchaser advances such expenses to the Shareholder. |
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| 2.8 | The Shareholder will not bring, commence, institute, maintain, prosecute, participate in or voluntarily aid any action, claim or proceeding that (i) challenges the validity of or seeks to enjoin the operation of any provision of this Agreement and/or (ii) alleges that the execution and delivery of this Agreement and the irrevocable proxy granted pursuant to this Agreement breaches any fiduciary duty of the Board of Directors of the Company or any member thereof. |
| 2.9 | The Shareholder hereby consents to: |
| (a) | details of this Agreement being set out in any press release, information circular, including the Company Circular, and court documents produced by the Company, the Purchaser or any of their respective affiliates in connection with the transactions contemplated by this Agreement and the Arrangement Agreement; and |
| (b) | if required by Law, this Agreement being made publicly available, including by filing on SEDAR or EDGAR operated by the Securities Authorities. |
| 2.10 | Except as required by Law or applicable stock exchange requirements, the Shareholder will not, and will ensure that its affiliates do not, make any public announcement or statements with respect to the transactions contemplated herein or pursuant to the Arrangement Agreement without the prior written approval of the Purchaser. |
ARTICLE 3
GRANT OF IRREVOCABLE PROXY
In the event of material non-compliance with Section 2.2 hereof, the Shareholder shall be deemed to irrevocably grant to, and appoint, the Purchaser and each of its officers as proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of the Shareholder, to attend and act for and vote on behalf of the Shareholder with respect to the Subject Securities at the Company Meeting. The Shareholder hereby affirms that such irrevocable proxy shall be deemed coupled with an interest and may under no circumstances be revoked until the Expiry Time or the termination of this Agreement in accordance with its terms. For greater certainty, any grant of a proxy pursuant to this Article 3 has no impact on the ownership of the voting rights attaching to the Subject Securities, which continue to be held solely by the beneficiary of the Subject Securities.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
| 4.1 | The Shareholder represents, warrants and, where applicable, covenants to the Purchaser as follows and acknowledges that the Purchaser is relying upon these representations, warranties and covenants in connection with the entering into of this Agreement and the Arrangement Agreement: |
| (a) | The Shareholder has the legal capacity to execute and deliver this Agreement and to perform its obligations hereunder. |
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| (b) | This Agreement has been duly executed and delivered by the Shareholder and constitutes a legal, valid and binding agreement of the Shareholder enforceable against it in accordance with its terms subject only to any limitation under bankruptcy, insolvency or other Laws affecting the enforcement of creditors’ rights generally and the discretion that a court may exercise in the granting of equitable remedies such as specific performance and injunction. |
| (c) | The Shareholder exercises control or direction over, and at the Effective Time and at all times between the date hereof and the Effective Time, the Shareholder will control or direct, all of the Subject Securities. Other than the Subject Securities, neither the Shareholder nor any of its affiliates, beneficially own, or exercise control or direction over any additional securities, or any securities convertible or exchangeable into any additional securities, of the Company or any of its affiliates. |
| (d) | The Shareholder is, and immediately prior to the Effective Time will be, the sole legal and beneficial owner of the Subject Securities, with good and marketable title thereto, free and clear of all Liens. |
| (e) | The Shareholder has, and immediately prior to the Effective Time the Shareholder will continue to have, the sole right to sell, or direct the sale of, the Subject Securities and to vote or direct the voting of Shares listed on Schedule A. |
| (f) | Except for the Purchaser pursuant to the terms of the Arrangement Agreement, no Person has any agreement or option, or any right or privilege (whether by law, pre-emptive or contractual) capable of becoming an agreement or option, for the purchase, acquisition or transfer of any of the Subject Securities or any legal or economic interest therein or right thereto. |
| (g) | No material consent, approval, order or authorization of, or declaration or filing with, any Governmental Entity is required to be obtained by the Shareholder, or any affiliate of the Shareholder in connection with the execution and delivery of this Agreement by the Shareholder and the performance by the Shareholder of its obligations under this Agreement, other than those which are contemplated by the Arrangement Agreement. |
| (h) | There are no claims, actions, suits, audits, proceedings, investigations or other actions pending against or, to the knowledge of the Shareholder, threatened against or affecting the Shareholder, any affiliate of the Shareholder or any of their properties that, individually or in the aggregate, could reasonably be expected to impair, impede or otherwise have an adverse effect on the Shareholder’s ability to execute and deliver this Agreement and to perform its obligations contemplated by this Agreement without delay. |
| (i) | None of the Subject Securities is subject to any proxy, voting trust, vote pooling or other agreement, whether present or contingent, with respect to the right to vote, call meetings of any of the Company’s securityholders or give consents or approvals of any kind, except pursuant to this Agreement. |
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| (j) | None of the execution and delivery by the Shareholder of this Agreement or the compliance by the Shareholder with its obligations hereunder will violate, contravene, result in any breach of, or be in conflict with, or constitute a default under, or create a state of facts which after notice or lapse of time or both would constitute a default under, any term or provision of: (i) any constating document of the Shareholder, as applicable; (ii) any contract to which the Shareholder is a party or by which the Shareholder or by which the Shareholder is bound; (iii) to the knowledge of the Shareholder, any judgment, decree, order or award of any Governmental Entity; or (iv) any Law. |
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
| 5.1 | The Purchaser represents, warrants and, where applicable, covenants to the Shareholder as follows and acknowledges that the Shareholder is relying upon these representations, warranties and covenants in connection with the entering into of this Agreement: |
| (a) | The Purchaser is a corporation duly organized and validly existing under the laws of its jurisdiction of organization and has the requisite corporate power and authority to enter into and perform its obligations under this Agreement. |
| (b) | This Agreement has been duly executed and delivered by the Purchaser and constitutes a legal, valid and binding agreement of the Purchaser enforceable against the Purchaser in accordance with its terms subject only to any limitation under bankruptcy, insolvency or other Laws affecting the enforcement of creditors’ rights generally and the discretion that a court may exercise in the granting of equitable remedies such as specific performance and injunction. |
| (c) | None of the execution and delivery by the Purchaser of this Agreement or the compliance by the Purchaser with its obligations hereunder will violate, contravene, result in any breach of, or be in conflict with, or constitute a default under, or create a state of facts which after notice or lapse of time or both would constitute a default under, any term or provision of: (i) any constating documents of the Purchaser; (ii) any contract to which the Purchaser is a party or by which the Purchaser is bound; (iii) any judgment, decree, order or award of any Governmental Entity or (iv) any Law. |
| (d) | No material consent, approval, order or authorization of, or declaration or filing with, any Governmental Entity is required to be obtained by the Purchaser in connection with the execution and delivery of this Agreement, the performance by it of its obligations under this Agreement and the consummation by the Purchaser of the Arrangement, other than those which are contemplated by the Arrangement Agreement. |
| (e) | There are no claims, actions, suits, audits, proceedings, investigations or other actions pending against, or, to the knowledge of the Purchaser, threatened against or affecting the Purchaser or any of their respective properties that, individually or in the aggregate, could reasonably be expected to impair, impede or otherwise be expected to have an adverse effect on the Purchaser’s ability to execute and deliver this Agreement and to perform its obligations contemplated by this Agreement without delay. |
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ARTICLE 6
TERMINATION
| 6.1 | This Agreement shall automatically terminate at any time and be of no further force and effect upon the earliest to occur of: |
| (a) | the mutual agreement in writing of the Parties; |
| (b) | written notice by the Purchaser to the Shareholder if: |
| (i) | any representation or warranty of the Shareholder under this Agreement is untrue or incorrect in any material respect; or |
| (ii) | the Shareholder has not complied in any material respect with its covenants contained herein and such default has not been cured within five business days of written notice of such default being given by the Purchaser to the Shareholder; |
provided that at the time of such termination, the Purchaser is not in material default in the performance of its obligations under this Agreement;
| (c) | written notice by the Shareholder to the Purchaser if: |
| (i) | any representation or warranty of the Purchaser under this Agreement is untrue or incorrect in any material respect; or |
| (ii) | the Purchaser has not complied in any material respect with its covenants contained herein and such default has not been cured within five business days of written notice of such default being given by the Shareholder to the Purchaser; |
provided that at the time of such termination, the Shareholder is not in material default in the performance of its obligations under this Agreement;
| (d) | the Effective Time; and |
| (e) | the termination of the Arrangement Agreement in accordance with its terms. |
| 6.2 | If this Agreement is terminated in accordance with the provisions of Section 6.1, no Party will have any further liability to perform its obligations under this Agreement except as expressly contemplated by this Agreement, and provided that neither the termination of this Agreement nor anything contained in Section 6.1 will relieve any Party from any liability for any breach by it of this Agreement, including from any inaccuracy in its representations and warranties and any non-performance by it of its covenants made herein. |
ARTICLE 7
GENERAL
| 7.1 | Nothing herein (including, for greater certainty, any of the covenants set out in Article 2 hereof) shall in any way restrict or limit the Shareholder from taking any action to the extent required to be taken in the discharge of his or her fiduciary duty as a director or officer of the Company or that is otherwise permitted by, and done in compliance with, the terms of the Arrangement Agreement. |
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| 7.2 | The provisions of this Agreement will be binding upon and enure to the benefit of the Parties and their respective heirs, administrators, executors, legal representatives, successors and permitted assigns, provided that no Party may assign, delegate or otherwise transfer any of its rights, interests or obligations under this Agreement without the prior written consent of the other Party, provided that the Purchaser may assign all or part of its rights under this Agreement to, and its obligations under this Agreement may be assumed by, any of its affiliates, provided that if such assignment and/or assumption takes place, the Purchaser shall continue to be liable joint and severally with such affiliate for all of its obligations hereunder. |
| 7.3 | Time is of the essence in this Agreement. |
| 7.4 | The Parties will, with reasonable diligence, do all things and provide all such reasonable assurances as may be required to consummate the transactions contemplated by this Agreement, and each Party will provide such further documents or instruments required by the other Party as may be reasonably necessary or desirable to effect the purpose of this Agreement and carry out its provisions, whether before or after the Effective Time. |
| 7.5 | Any notice, consent, 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 electronic mail and addressed: |
| (a) | to the Shareholder at: |
[Notice Information Redacted]
Attention: [Personal Information Redacted]
Email: [Email Address Redacted]
| (b) | to the Purchaser at: |
SNDL Inc.
919 - 11 Avenue SW, Suite 200
Calgary, AB T2R 1P3
Attention: [Personal Information Redacted]
Email: [Email Address Redacted]
with a copy to:
McCarthy Tétrault LLP
66 Wellington Street West, Suite 5300
Toronto, ON M5K 1E6
Attention: Ranjeev Dhillon / Rami Chalabi
Email: rdhillon@mccarthy.ca / rchalabi@mccarthy.ca
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A Notice is deemed to be given and received (i) if sent by personal delivery, same day courier or electronic mail, 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, and (ii) if sent by overnight courier, 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 deemed not to be changed. Sending a copy of a Notice to a Party’s legal counsel as contemplated above is for information purposes only and does not constitute delivery of the Notice to that Party. The failure to send a copy of a Notice to legal counsel does not invalidate delivery of that Notice to a Party.
| 7.6 | This Agreement will be governed by, interpreted and enforced in accordance with the Laws of the Province of Ontario and the federal Laws of Canada applicable therein. Each Party irrevocably attorns and submits to the exclusive jurisdiction of the Courts situated in the City of Toronto and waives objection to the venue of any proceeding in such Court or that such Court provides an inconvenient forum. |
| 7.7 | Each Party will pay all costs and expenses (including the fees and disbursements of legal counsel and other advisers) it incurs in connection with the negotiation, preparation and execution of this Agreement and the transactions contemplated by this Agreement. |
| 7.8 | The Parties agree that irreparable harm would occur for which money damages 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. It is accordingly agreed that the Parties shall be entitled to injunctive and other equitable relief to prevent breaches or threatened breaches of this Agreement, without any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or other equitable relief, this being in addition to any other remedy to which the Parties may be entitled at law or in equity. |
| 7.9 | If any provision of this Agreement is determined to be illegal, invalid or unenforceable by any Court of competent jurisdiction from which no appeal exists or is taken, that provision will be severed from this Agreement and the remaining provisions shall remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, 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 an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible. |
| 7.10 | 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. |
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| 7.11 | This Agreement, constitutes the entire agreement between the Parties with respect to the transactions contemplated by this Agreement and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties. There are no representations, warranties, covenants, conditions or other agreements, express or implied, collateral, statutory or otherwise, between the Parties in connection with the subject matter of this Agreement, except as specifically set forth in this Agreement. 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. |
| 7.12 | Each of the Parties hereby acknowledges that it has been afforded the opportunity to obtain independent legal advice and confirms by the execution and delivery of this Agreement that they have either done so or waived their right to do so in connection with the entering into of this Agreement. |
| 7.13 | The Parties waive the application of any Law or rule of construction providing that ambiguities in any agreement or other document shall be construed against the Party drafting such agreement or other document. |
| 7.14 | No director or officer of the Purchaser shall have any personal liability whatsoever to the Shareholder under this Agreement or any other document delivered in connection with the transactions contemplated hereby on behalf of the Purchaser. |
| 7.15 | This Agreement may be executed in any number of counterparts (including counterparts by facsimile or electronic mail) and all such counterparts taken together shall be deemed to constitute one and the same instrument. The Parties shall be entitled to rely upon delivery of an executed facsimile or similar executed electronic copy of this Agreement, and such facsimile or similar executed electronic copy shall be legally effective to create a valid and binding agreement between the Parties. |
[Remainder of page intentionally left blank. Signature pages follow.]
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IN WITNESS WHEREOF the Parties have executed this Agreement as of the date first written above.
| By: |
| |
| Name: Title: | ||
| SNDL INC. | ||
| By: |
| |
| Name: Title: | ||
SCHEDULE A
OWNERSHIP OF SECURITIES OF COMPANY
| Name |
Number, Type and Class of Subject Securities Beneficially Owned |
Registered holder if different from beneficial owner |
||||
| Total Number of Each Type of Subject Securities Owned or Controlled |
— | |||||