Document:

10Q 14.6.30 - Q2 Ex 10.1 Schlumberger amendment - redacted

CERTAIN MATERIAL (INDICATED BY THREE ASTERISKS) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

EXHIBIT 10.1
2ND AMENDMENT TO SAND SUPPLY AGREEMENT
This amendment (the “Amendment”), dated June 10, 2014 (the “Amendment Effective Date”) is by and between Superior Silica Sands LLC (the “Supplier”) and Schlumberger Technology Corporation (the “Company”). Company and Supplier are sometimes hereinafter referred to individually as a “Party” and collectively as the “Parties.”
Company and Supplier entered into that certain Sand Supply Agreement dated May 31, 2011, as amended by that certain Amendment to Sand Supply Agreement dated November 15, 2012 (together, the “Agreement”), detailing and governing the Supplier’s products and/or services for Company. All capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement.
The Parties now wish to further amend the Agreement by modifying the Parties’ volume and pricing commitments as set forth in the Agreement as follows:
		
	1.
	Volume Commitments:

		
	a.
	Supplier agrees to use commercially reasonable best efforts to supply to Company, and Company agrees to use commercially reasonable best efforts to purchase from Supplier, the following volumes of the Product:

		
	i.
	For two (2) years immediately following the Amendment Effective Date, 2.5 million Tons per year.

		
	ii.
	Following the two (2) year period referenced above, upon sixty (60) days written notice to the other Party, Supplier or Company may reduce the volume commitment to 1 million Tons per year for the remainder of the Term; provided, however, that Company shall have the option to reject such reduction within fourteen (14) days of receiving notice from Supplier by giving written notice of the rejection to Supplier.

		
	b.
	Notwithstanding the volume commitments set forth above, from the Amendment Effective Date until the establishment of Supplier’s operations in Arland, Wisconsin, the annualized tonnage of Product to be supplied hereunder shall be 1.5 million Tons. Until establishment of Supplier’s Arland, Wisconsin operations, under no circumstances shall Supplier’s failure to supply more than 1.5 million Tons on an annualized basis be deemed a breach of its obligations under the Agreement.

		
	2.
	Pricing Commitment:

		
	a.
	Company agrees to pay Supplier the following prices for the Product for the remainder of the Agreement term:

1
*** Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

CERTAIN MATERIAL (INDICATED BY THREE ASTERISKS) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

	
		
	Grade
	Price Per Net Ton

	***
	***

Except as specifically amended herein, all provisions of the Agreement shall remain unchanged and in full force and effect. No representations, memoranda, agreements or other matters, oral or written, prior to the execution of this Amendment shall vary, alter or interpret the terms hereof
Agreed and valid as of the Amendment Effective Date:
	
			
	SCHLUMBERGER TECHNOLOGY
CORPORATION
	 
	SUPERIOR SILICA SANDS LLC

	 
	 
	 

	/s/ Robert Bergeron
	 
	/s/ Richard J. Shearer

	By
	 
	By

	 
	 
	 

	 
	 
	 

	Robert Bergeron
	 
	Richard J. Shearer

	Print Name
	 
	Print Name

	 
	 
	 

	 
	 
	 

	Vice President
	 
	President & CEO

	Title
	 
	Title

2
*** Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.glla_ex1015.htm

Exhibit 10.15

 

LOAN AGREEMENT

 

Loan agreement dated August 1, 2014 (this “Agreement”) between Gilla Inc. (the “Borrower”) and Sarasvati Investments Inc. (the “Lender”).

 

RECITALS

 

WHEREAS the Borrower desires that the Lender make available a revolving credit facility to the Borrower in the aggregate principal amount of $500,000;

 

AND WHEREAS the Lender is prepared to extend such a revolving credit facility to the Borrower subject to the terms and conditions set out herein;

 

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Borrower and the Lender agree as follows:

 

ARTICLE 1

INTERPRETATION

 

Section 1.1 Defined Terms.

 

As used in this Agreement, the following terms have the following meanings:

 

“Advance” means an extension of credit by the Lender to the Borrower pursuant to this Agreement.

 

“Applicable Rate” means, at any given time, the greater of: (a) 15% per annum; and (b) from the Closing Date up to and including the Maturity Date, the highest interest rate per annum paid, or payable, by the Borrower to any arm’s length commercial lender (or syndicate of lenders) pursuant to a financing arrangement with such lender (or lenders) for the purposes set out in Section 2.3 on terms and conditions equivalent to the terms and conditions of this Agreement.

 

“Borrower” means Gilla Inc. and its successors and permitted assigns.

 

“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.

 

“Closing Date” means the date on which this Agreement becomes effective.

 

“Default” means an event which, with the giving of notice or passage of time, or both, would constitute an Event of Default.

 

“Event of Default” has the meaning specified in Section 6.1.

 

“Funded Debt” of any Person means (i) all indebtedness of such Person for or in respect of, borrowed money, bankers acceptances, letters of credit or letters of guarantee, (ii) all indebtedness of such Person for the deferred purchase price of property or services represented by a note, bond, debenture or other evidence of indebtedness, (iii) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though 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), (iv) all current liabilities of such Person represented by a note, bond, debenture or other evidence of indebtedness, and (v) all obligations under leases which have been or should be, in accordance with U.S. GAAP, recorded as capital leases in respect of which such Person is liable as lessee.

 

 

  

2

  

 

“U.S. GAAP” means generally accepted accounting principles in the United States, as approved by the Financial Accounting Standards Board, as in effect from time to time.

 

“Governmental Entity” means (i) any international, multinational, national, federal, provincial, state, municipal, local or other governmental or public department, central bank, court, commission, board, bureau, agency or instrumentality, domestic or foreign, (ii) any subdivision or authority of any of the above, (iii) any stock exchange and (iv) any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the above.

 

“Indemnified Person” has the meaning specified in Section 7.4.

 

“Intercreditor and Subordination Agreement” means the intercreditor and subordination agreement dated the date hereof among Gravitas Financial Inc., the Lender and the Borrower, as amended, restated, amended and restated or replaced from time to time.

 

“Lender” means Sarasvati Investments Inc. and its successors and assigns.

 

”Loan” means the revolving credit facility in the aggregate principal amount not exceeding the Loan Limit to be made available to the Borrower by the Lender under this Agreement for the purposes set out in Section 2.3.

 

“Loan Limit” means $500,000.

 

“Lien” means any mortgage, charge, pledge, hypothecation, security interest, assignment, encumbrance, lien (statutory or otherwise), title retention agreement or arrangement, restrictive covenant or other encumbrance of any nature or any other arrangement or condition that in substance secures payment or performance of an obligation.

 

“Loan Documents” means this Agreement, the Intercreditor and Subordination Agreement, the Warrant, the Security Documents and all other documents to be executed and delivered to the Lender by the Borrower pursuant to or in connection with this Agreement.

 

“Material Adverse Effect” means a material adverse effect on the business, operations, results of operations, prospects, assets, liabilities or financial condition of the Borrower.

 

“Material Agreement” means any contract or agreement to which the Borrower is a party or by which it is bound, the termination or cancellation of which (prior to the scheduled termination date) could have a Material Adverse Effect.

 

“Maturity Date” means August 1, 2015.

 

 

  

3

  

 

“Permitted Liens” means, in respect of any Person, any one or more of the following:

 

	
(a)  

	
Liens for taxes, assessments or governmental charges or levies which are not delinquent or the validity of which is being contested at the time by the Person in good faith by proper legal proceedings if, in the Lender’s opinion, adequate provision has been made for payment;

 

	
(b)  

	
inchoate or statutory Liens of contractors, subcontractors, mechanics, workers, suppliers, materialmen, carriers and others in respect of construction, maintenance, repair or operation of assets of the Person, provided that such Liens are related to obligations not due or delinquent, are not registered against title to any assets of the Person and in respect of which adequate holdbacks are being maintained as required by applicable law or such Liens are being contested in good faith by appropriate proceedings and in respect of which there has been set aside a reserve (segregated to the extent required by U.S. GAAP) in an adequate amount and provided further that such Liens do not, in the Lender’s reasonable opinion, reduce the value of the asset so affected or materially interfere with the use of such asset in the operation of the business of the Person;

 

	
(c)  

	
the right reserved to or vested in any Governmental Entity by any statutory provision or by the terms of any lease, licence, franchise, grant or permit of the Person, to terminate any such lease, licence, franchise, grant or permit, or to require annual or other payments as a condition to the continuance thereof; and

 

	
(d)  

	
Liens in favour of the Lender created by the Security Documents.

 

“Person” means a natural person, partnership, corporation, joint stock company, trust, unincorporated association, joint venture or other entity or Governmental Entity and pronouns have a similarly extended meaning.

 

“Secured Inventory” means the secured inventory value and accounts due relating to any inventory.

 

“Security” means, at any time, the security interest in favour of the Lender, in those assets and properties of the Borrower securing its obligations under this Agreement and the other Loan Documents to which it is a party.

 

"Security Agreement” means the security agreement dated the date hereof by the Borrower in favour of the Lender.

 

“Security Documents” means the Security Agreement and any other security granted to the Lender, as security for the obligations of the Borrower under this Agreement and the other Loan Documents.

 

“Security Report” means a monthly security report, certified by the Borrower’s management and deliverable at the end of each month until the Maturity Date, indicating the outstanding Advances relative to the Secured Inventory value.

 

“Warrant” means the warrant granted by Borrower to Karen Gautam, containing terms acceptable to Karen Gautam in its sole and reasonable discretion, entitling Karen Gautam to purchase 250,000 common shares of the Borrower at an exercise price equal to US$0.30, which warrant is to remain in effect from the Closing Date until the date that is two (2) years following the Maturity Date.

 

 

  

4

  

 

Section 1.2       Gender and Number.

 

Any reference in the Loan Documents to gender includes all genders and words importing the singular number only include the plural and vice versa.

 

Section 1.3       Headings, etc.

 

The division of this Agreement into Articles and Sections and the insertion of headings are for convenient reference only and are not to affect the interpretation of this Agreement.

 

Section 1.4       Currency.

 

All references in the Loan Documents to dollars, unless otherwise specifically indicated, are expressed in Canadian currency.

 

Section 1.5       Certain Phrases, etc.

 

In any Loan Document (i) (a) the words “including” and “includes” mean “including (or includes) without limitation” and (b) the phrase “the aggregate of”, “the total of”, “the sum of”, or a phrase of similar meaning means “the aggregate (or total or sum), without duplication, of”, and (ii) in the computation of periods of time from a specified date to a later specified date, unless otherwise expressly stated, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding”.

 

Section 1.6       Accounting Terms.

 

All accounting terms not specifically defined in this Agreement shall be interpreted in accordance with U.S. GAAP.

 

Section 1.7       Conflict.

 

The provisions of this Agreement prevail in the event of any conflict or inconsistency between its provisions and the provisions of any of the other Loan Documents.

 

ARTICLE 2

CREDIT FACILITY

 

Section 2.1       Availability.

 

	
(1)  

	
The Lender agrees, on the terms and subject to the conditions of this Agreement, to make the Loan available from or after the Closing Date.

 

	
(2)  

	
The Loan shall be a revolving credit facility. For greater certainty, the Borrower shall be entitled to obtain Advances under the Loan from time to time and, subject to Section 2.5, repay all or any portion of the outstanding Advances under the Loan from time to time; provided that the outstanding Advances under the Loan shall not at any time exceed the Loan Limit.

 

 

  

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(3)  

	
The Lender shall maintain, in accordance with its usual practice, records evidencing the amounts owing under this Agreement; and the information entered into such records shall constitute conclusive evidence of such amounts owed absent manifest error.

 

Section 2.2      Notice.

 

The Borrower shall provide written notice to the Lender ten (10) Business Days prior to a proposed Advance.

 

Section 2.3      Purpose.

 

Advances shall be used by the Borrower for the exclusive purpose of purchasing inventory (together with related costs) for sale in the Borrower’s, or any of its subsidiaries’, ordinary course of business to the approved customers listed in Schedule “A” hereto as such schedule may be amended or replaced from time to time.

Section 2.4       Repayment of Principal, Interest Payments and Standby Fees.

 

	
(1)  

	
The principal amount of the outstanding Advances from time to time shall bear interest at the Applicable Rate.

 

	
(2)  

	
Interest shall accrue daily and shall be calculated and payable monthly, in arrears.

 

	
(3)  

	
a standby fee with respect to the unused portion of the Loan, calculated on a daily basis as being the difference between the Loan Limit and the outstanding Advances, multiplied by 3.5% and divided by 365 shall be payable in arrears on the last day of each month.

 

	
(4)  

	
Subject to Section 6.2, the outstanding principal amount of the Advances together with all accrued and unpaid interest thereon shall become due and payable on the Maturity Date.

 

Section 2.5       Repayments.

 

The Borrower shall have the right and privilege of repaying the whole or any portion of the Advances, without premium or penalty, at any time or times.

 

If any given Security Report indicates that the outstanding Advances is greater than the Secured Inventory value, the Lender shall have five (5) Business Days to request that the Borrower repay an amount up to the difference between the outstanding Advances and the Secured Inventory. Upon the Lender’s request for such repayment, the Borrower shall have five (5) Business Days to repay that portion of the Advances.

 

  

6

  

 

 

Section 2.6       Payments under this Agreement.

 

	
(1)  

	
Unless otherwise expressly provided in this Agreement or by the parties in writing, the Borrower shall make any payment required to be made by it to the Lender by depositing the amount of the payment to an account specified by the Lender not later than 10:00 a.m. (Toronto time) on the date the payment is due.

 

	
(2)  

	
All amounts owed by the Borrower to the Lender, which are not paid when due (whether at stated maturity, by acceleration or otherwise) shall bear interest (both before and after default and judgment), from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal to the Applicable Rate, plus 2%

 

Section 2.7       Computations of Interest.

 

	
(1)  

	
All computations of interest shall be made by the Lender taking into account the actual number of days occurring in the period for which such interest is payable, on the basis of a year of 365 days.

 

	
(2)  

	
For purposes of the Interest Act (Canada), (i) whenever any interest or fee under this Agreement is calculated using a rate based on a year of 365 days, the rate determined pursuant to such calculation, when expressed as an annual rate, is equivalent to (x) the applicable rate based on a year of 365 or 366 days, as the case may be, (y) multiplied by the actual number of days in the calendar year in which the period for which such interest or fee is payable (or compounded) ends, and (z) divided by 365 or 366 days, as the case may be, (ii) the principle of deemed reinvestment of interest does not apply to any interest calculation under this Agreement, and (iii) the rates of interest stipulated in this Agreement are intended to be nominal rates and not effective rates or yields.

 

Section 2.8       Security Report.

 

The Borrower shall provide to the Lender a monthly security report (each a “Security Report”), certified by the Borrower’s management and deliverable at the end of each month until the Maturity Date, indicating the outstanding Advances relative to the secured inventory value and accounts due relating to any inventory (the “Secured Inventory”).

 

ARTICLE 3

CONDITIONS OF LENDING

 

Section 3.1       Conditions Precedent to First Advance.

 

The Lender shall have no obligation to make the first Advance hereunder unless at the time of making such Advance the following terms and conditions shall have been satisfied:

 

	
(a)  

	
the Lender has received, in form, substance, scope and dated a date satisfactory to it and its counsel:

 

	
(i)  

	
an executed copy of each of the Loan Documents;

 

 

  

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(ii)  

	
evidence of registration of the Security Documents in such jurisdictions as the Lender may reasonably require, including all required consents to obtain such registrations; and

 

	
(b)  

	
the conditions precedent in Section 3.2 shall have been satisfied.

 

Section 3.2       Conditions Precedent to all Advances.

 

The Lender shall have no obligation to make the first Advance or any subsequent Advance unless at the time of making each such Advance the following terms and conditions shall have been satisfied:

 

	
(a)  

	
no Default or Event of Default has occurred or is continuing or would arise immediately after giving effect to or as a result of the Advance;

 

	
(b)  

	
the Advance will not violate any applicable law, order or judgment;

 

	
(c)  

	
(i) the Advance is to be used for the purposes identified in Section 2.3; (ii) the Borrower shall have provided the Lender with information reasonably satisfactory to the Lender with respect to the proposed use of the Advance; and (iii) the Lender, or its designate, shall have approved the proposed use of the Advance;

 

	
(d)  

	
the representations and warranties of the Borrower contained in Article 4 are true and correct on the date of the Advance as if such representations and warranties were made on that date; and

 

	
(e)  

	
the Borrower shall have delivered an Advance request to the Lender in accordance with the notice requirements provided in Section 2.2.

 

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

 

Section 4.1       Representations and Warranties.

 

The Borrower represents and warrants to the Lender, acknowledging and confirming that the Lender is relying on such representations and warranties without independent inquiry in entering into this Agreement and providing the Loan that:

 

	
(a)  

	
Incorporation and Qualification. The Borrower is a corporation duly incorporated, organized and validly existing under the laws of the State of Nevada. The Borrower is qualified, licensed or registered to carry on business under the laws applicable to it in all jurisdictions in which such qualification, licensing or registration is necessary or where failure to be so qualified would have a Material Adverse Effect;

 

	
(b)  

	
Corporate Power. The Borrower has all requisite corporate power and authority to (i) own, lease and operate its properties and assets and to carry on its business as now being conducted by it, and (ii) enter into and perform its obligations under the Loan Documents;

 

 

  

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(c)  

	
Conflict with Other Instruments. The execution and delivery by the Borrower and the performance by it of its obligations under, and compliance with the terms, conditions and provisions of, the Loan Documents will not (i) conflict with or result in a breach of any of the terms or conditions of (t) its constating documents, (u) any applicable law, rule or regulation, (v) any contractual restriction binding on or affecting it or its properties, or (w) any judgment, injunction, determination or award which is binding on it, or (ii) result in, require or permit (x) the imposition of any Lien in, on or with respect to any of its assets or property (except in favour of the Lender), (y) the acceleration of the maturity of any Funded Debt binding on or affecting the Borrower, or (z) any third party to terminate or acquire rights under any Material Agreement;

 

	
(d)  

	
Corporate Action, Governmental Approvals, etc. The execution and delivery of each of the Loan Documents by the Borrower and the performance by the Borrower of its obligations under the Loan Documents has been duly authorized by all necessary corporate action including, without limitation, the obtaining of all necessary shareholder consents. No authorization, consent, approval, registration, qualification, designation, declaration or filing with any Governmental Entity or other Person, is or was necessary in connection with the execution, delivery and performance of obligations under the Loan Documents except as are in full force and effect, unamended, at the date of this Agreement;

 

	
(e)  

	
Execution and Binding Obligation. This Agreement and the other Loan Documents have been duly executed and delivered by the Borrower and constitute legal, valid and binding obligations of the Borrower enforceable against it in accordance with its terms, subject only to any limitation under applicable laws relating to (i) bankruptcy, insolvency, arrangement or creditors’ rights generally, and (ii) the discretion that a court may exercise in the granting of equitable remedies;

 

	
(f)  

	
Authorizations, etc. The Borrower possesses all authorizations, permits, consents, registrations and approvals necessary to properly conduct its businesses and to enter into and perform its obligations under the Loan Documents and all such authorizations, permits, consents, registrations and approvals are in good standing and in full force and effect;

 

	
(g)  

	
Ownership and Use of Property. Except for Permitted Liens, the Borrower has good and marketable title to all the real and personal property reflected as assets in its books and records. The Borrower owns, leases or has the lawful right to use all of the assets necessary for the conduct of its businesses;

 

	
(h)  

	
Compliance with Laws. The Borrower is in compliance with all applicable laws, judgments and orders and rulings, guidelines and decisions having force of law;

 

	
(i)  

	
No Default. The Borrower is not in violation of its constating documents, or any shareholders’ agreement applicable to it or any Material Agreement; and

 

	
(j)  

	
No Material Adverse Agreements. The Borrower is not party to any agreement or instrument or subject to any restriction (including any restriction set forth in its constating documents, any shareholders’ agreement applicable to it or any Material Agreement) which has or may have a Material Adverse Effect.

 

 

  

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Section 4.2       Survival of Representations and Warranties.

 

The representations and warranties in this Agreement and in any certificates or documents delivered to the Lender shall not merge in or be prejudiced by and shall survive each Advance and shall continue in full force and effect so long as any amounts are owing by the Borrower to the Lender under this Agreement.

 

ARTICLE 5

COVENANTS OF THE BORROWER

 

Section 5.1       Affirmative Covenants.

 

So long as there remains any outstanding amount owing under the Loan or the Lender has any obligation under this Agreement, the Borrower shall:

 

	
(a)  

	
Corporate Existence. Preserve and maintain its corporate existence;

 

	
(b)  

	
Compliance with Laws, etc. Comply with the requirements of all applicable laws, judgments, orders, decisions, awards, Material Agreements and Loan Documents;

 

	
(c)  

	
Payment of Taxes and Claims. Pay when due, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon its income, sales, capital or profit or any other property belonging to, and (ii) all claims which, if unpaid, might by law become a Lien upon the assets, except any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings and in respect of which the Borrower has established adequate reserves in accordance with U.S. GAAP or which are Permitted Liens;

 

	
(d)  

	
Keeping of Books. Keep proper books of record and account, in which full and correct entries shall be made in respect of its business and operations;

 

	
(e)  

	
Ordinary Course. The Borrower shall conduct its business in a manner consistent with past practices, and in the ordinary course of its normal day-to-day operations; and

 

	
(f)  

	
Further Assurances. At its cost and expense, upon the reasonable request of the Lender, execute and deliver or cause to be executed and delivered to the Lender such further instruments, agreements and security documents and do and cause to be done such further acts as may be necessary or proper in the reasonable opinion of the Lender to carry out more effectually the provisions and purposes of the Loan Documents.

 

Section 5.2       Negative Covenants.

 

So long as there remains any outstanding amount owing under the Loan or the Lender has any obligation under this Agreement, the Borrower shall not create, incur, assume or suffer to exist any Lien on any of its property or assets covered by the Security other than Permitted Liens.

 

 

  

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ARTICLE 6

EVENTS OF DEFAULT

 

Section 6.1       Events of Default.

 

If any of the following events (each an “Event of Default”) occurs and is continuing:

 

	
(a)  

	
the Borrower fails to pay any amount under the Loan, any interest thereon or any other amounts due under any Loan Document when such amount becomes due and payable;

 

	
(b)  

	
any representation or warranty or certification made or deemed to be made by the Borrower or any of its respective directors or officers in any Loan Document shall prove to have been incorrect when made or deemed to be made;

 

	
(c)  

	
the Borrower fails to perform, observe or comply with any other term, covenant or agreement contained in any Loan Document to which it is a party and such failure remains unremedied for thirty (30) days;

 

	
(d)  

	
any judgment or order for the payment of money in excess of $1,000,000 (or the equivalent amount in any other currency) is rendered against the Borrower and either (i) enforcement proceedings have been commenced by a creditor upon the judgment or order, or (ii) there is any period of fifteen (15) consecutive days during which a stay of enforcement of the judgment or order, by reason of a pending appeal or otherwise, is not in effect; or

 

	
(e)  

	
the Borrower (i) becomes insolvent or generally not able to pay its debts as they become due, (ii) admits in writing its inability to pay its debts generally or makes a general assignment for the benefit of its creditors, (iii) institutes or has instituted against it any proceeding seeking (x) to adjudicate it a bankrupt or insolvent, (y) liquidation, winding-up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors including any plan of compromise or arrangement or other corporate proceeding involving or affecting its creditors, or (z) the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its properties and assets, and in the case of any such proceeding instituted against it (but not instituted by it), either the proceeding remains undismissed or unstayed for a period of forty-five (45) days, or any of the actions sought in such proceeding (including the entry of an order for relief against it or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its properties and assets) occurs, or (iv) takes any corporate action to authorize any of the above actions.

 

then the Lender may declare that the Loan, all accrued interest and fees and all other amounts payable under this Agreement to be immediately due and payable, without presentment, demand, protest or further notice of any kind, all of which are expressly waived by the Borrower.

 

  

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Section 6.2       Remedies Upon Default.

 

	
(1)  

	
Upon a declaration that the Loan is immediately due and payable pursuant to Section 6.1, the Lender may commence such legal action or proceedings as it, in its sole discretion, deems expedient, including, the commencement of enforcement proceedings under the Loan Documents all without any additional notice, presentation, demand, protest, notice of dishonour, entering into of possession of any property or assets, or any other action or notice, all of which are expressly waived by the Borrower.

 

	
(2)  

	
The rights and remedies of the Lender under the Loan Documents are cumulative and are in addition to, and not in substitution for, any other rights or remedies. Nothing contained in the Loan Documents with respect to the indebtedness or liability of the Borrower to the Lender, nor any act or omission of the Lender with respect to the Loan Documents or the Security shall in any way prejudice or affect the rights, remedies and powers of the Lender under the Loan Documents and the Security.

 

ARTICLE 7

MISCELLANEOUS

 

Section 7.1       Amendments, etc.

 

No amendment or waiver of any provision of any of the Loan Documents, nor consent to any departure by the Borrower or any other Person from such provisions, is effective unless in writing and approved by the Lender. Any amendment, waiver or consent is effective only in the specific instance and for the specific purpose for which it was given.

 

Section 7.2       Waiver.

 

	
(1)  

	
No failure on the part of the Lender to exercise, and no delay in exercising, any right under any of the Loan Documents shall operate as a waiver of such right; nor shall any single or partial exercise of any right under any of the Loan Documents preclude any other or further exercise of such right or the exercise of any other right.

 

	
(2)  

	
Except as otherwise expressly provided in this Agreement, the covenants, representations and warranties shall not merge on and shall survive each Advance and, notwithstanding such Advance or any investigation made by or on behalf of any party, shall continue in full force and effect. The closing of this transaction shall not prejudice any right of one party against any other party in respect of anything done or omitted under this Agreement or in respect of any right to damages or other remedies.

 

  

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Section 7.3       Notices, etc.

 

Any notice, direction or other communication to be given under this Agreement shall, except as otherwise permitted, be in writing and given by delivering it or sending it by facsimile or other similar form of recorded communication addressed:

 

	
(a)  

	
to the Lender at:

 

33 Kennedy Park Road

Toronto, Ontario

M6P 3H2

Karen.gautam@gmail.com (with a copy to rajeevuofw@gmail.com)

 

	
(b)  

	
to the Borrower at:

 

110 Yonge Street, Suite 1602

Toronto, Ontario, M5C 1T4

graham@gillainc.com

 

Any such communication shall be deemed to have been validly and effectively given if (i) personally delivered, on the date of such delivery if such date is a Business Day and such delivery was made prior to 4:00 p.m. (Toronto time), otherwise on the next Business Day, (ii) transmitted by facsimile or similar means of recorded communication on the Business Day following the date of transmission. Any party may change its address for service from time to time by notice given in accordance with the foregoing and any subsequent notice shall be sent to the party at its changed address.

 

Section 7.4       Costs, Expenses and Indemnity.

 

	
(1)  

	
The Borrower shall, whether or not the transaction contemplated by this Agreement is completed, indemnify and hold the Lender and its officers, directors, employees and agents (each an “Indemnified Person”) harmless from, and shall pay to such Indemnified Person on demand any amounts required to compensate the Indemnified Person for, any cost, expense, claim or loss suffered by, imposed on, or asserted against, the Indemnified Person as a result of, or arising out of (i) the preparation, execution and delivery of, preservation of rights under, enforcement of, or refinancing, renegotiation or restructuring of, the Loan Documents and any related amendment, waiver or consent, (ii) a Default (whether or not constituting a Default or an Event of Default), and (iii) any proceedings brought by or against the Indemnified Person, or in which the Indemnified Person otherwise participates, due to its entering into or being a party to any of the Loan Documents, or by reason of its exercising or performing, or causing the exercise or performance of, any right, power or obligation under any of the Loan Documents, whether or not such proceedings are directly related to the enforcement of any Loan Document, except to the extent caused by the gross negligence or wilful misconduct of the Indemnified Person.

 

 

  

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(2)  

	
The Borrower shall pay to the Lender all reasonable costs and expenses (including all legal fees and disbursements on a solicitor and own client basis) incurred by the Lender in connection with this Agreement and the other Loan Documents; provided that the aggregate amount payable by the Borrower to the Lender, pursuant to this Section 7.4(2), shall not exceed $15,000.

 

Section 7.5       Successors and Assigns.

 

	
(1)  

	
This Agreement shall become effective when executed by the Borrower and the Lender and after that time shall be binding upon and enure to the benefit of the Borrower and the Lender and their respective successors and permitted assigns.

 

	
(2)  

	
The Borrower shall not have the right to assign its rights or obligations under this Agreement or any interest in this Agreement without the prior consent of the Lender, which consent may not be unreasonably withheld.

 

Section 7.6       Right of Set-off.

 

Upon the occurrence and during the continuance of any Event of Default, the Lender is authorized at any time and from time to time, to the fullest extent permitted by law (including general principles of common-law), to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by it to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower under any of the Loan Documents, irrespective of whether or not the Lender has made demand under any of the Loan Documents and although such obligations may be unmatured or contingent. If an obligation is unascertained, the Lender may, in good faith, estimate the obligation and exercise its right of set-off in respect of the estimate, subject to providing the Borrower with an accounting when the obligation is finally determined. The Lender shall promptly notify the Borrower after any set-off and application is made by it, provided that the failure to give notice shall not affect the validity of the set-off and application. The rights of the Lender under this Section 7.6 are in addition to other rights and remedies (including all other rights of set-off) which the Lender may have.

 

Section 7.7       Entire Agreement

 

This Agreement, together with the Loan Documents, contain the entire agreement between the Lender and the Borrower with respect to the matters hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters.

 

Section 7.8       Governing Law.

 

This Agreement shall 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.

 

Section 7.9       Counterparts.

 

This Agreement may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.  Delivery of an executed counterpart of this Agreement by electronic means, including, without limitation, by facsimile transmission or by electronic delivery in portable document format (“.pdf”) or tagged image file format (“.tif”), shall constitute the valid and binding signature of such party with the same effect as if it were an original signature endorsed on this Agreement.

 

 

  

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Section 7.10 Language.

 

The parties hereto acknowledge that they have required and are satisfied that this Agreement and all communications to be delivered pursuant hereto be drawn in the English language.

 

Section 7.11 Syndication.

 

The Borrower acknowledges that the Lender is acting for and on behalf of itself and certain other Persons with respect to the establishment and maintenance of the Loan and that, except for the Warrant, the Loan Documents shall be granted in favour of and held by the Lender for and on behalf of itself and certain other Persons.

 

IN WITNESS WHEREOF the parties have executed this Agreement as of the date indicated above.

 

	 	 
GILLA INC.

	 
	 	 	 	 
	
 

	
By: 

	/s/ J. Graham Simmonds	 
	 	 	Authorized Signing Officer	 
	 	 	 	 
	 	 
SARASVATI INVESTMENTS INC.

	 
	 	 	 	 
	 	 
By: 

	/s/ Ashok Gautam	 
	 	 	Authorized Signing Officer	 

 

 

  

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SCHEDULE “A”

Approved Customers

[intentionally left blank]

 

 

 

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