Document:

tlry-ex1040_748.htm

 

Exhibit 10.40

 

Execution Version

 

 

 

1974568 ONTARIO LIMITED O/A APHRIA DIAMOND

as Borrower

 

- and -

 

APHRIA INC.

the “Parent” or “Limited Guarantor”

 

-and-

 

EACH OF THE SUBSIDIARIES OF THE BORROWER IDENTIFIED ON THE SIGNATURE PAGES HERETO AS GUARANTORS,

AND EACH ADDITIONAL SUBSIDIARY OF THE BORROWER PARTY HERETO FROM TIME TO TIME AS A GUARANTOR

collectively as Guarantors

 

- and -

 

BANK OF MONTREAL

AND THE ADDITIONAL LENDERS FROM TIME TO TIME PARTY TO THIS AGREEMENT

as Lenders

 

- and -

 

BANK OF MONTREAL

as Administrative Agent

 

-and-

 

BANK OF MONTREAL

as Sole Arranger and Sole Book Runner

 

 

 

 

 

 

CREDIT AGREEMENT

 

November 29, 2019

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

	
 
	
 
	
Page

	
 
	
 
	
 

	
ARTICLE I - INTERPRETATION
	
 

	
1.01
	
Definitions
	
1

	
1.02
	
Accounting Principles
	
25

	
1.03
	
Currency References
	
26

	
1.04
	
References to Statutes
	
26

	
1.05
	
Extended Meanings
	
26

	
1.06
	
Joint and Several Obligations
	
26

	
1.07
	
Exhibits and Schedules
	
26

	
ARTICLE II – FACILITY A (TERM FACILITY)

	
2.01
	
Establishment of Facility A
	
27

	
2.02
	
Purpose
	
27

	
2.03
	
Non-Revolving Nature
	
28

	
2.04
	
Repayment
	
28

	
2.05
	
Availment Options
	
29

	
2.06
	
Interest and Fees
	
29

	
2.07
	
Voluntary Cancellation; Voluntary Repayments
	
29

	
ARTICLE III - GENERAL CONDITIONS

	
3.01
	
Matters Relating to Interest
	
30

	
3.02
	
Notice Periods
	
31

	
3.03
	
Minimum Amounts, Multiples and Procedures re Draws, Conversions and Repayments
	
31

	
3.04
	
Place of Advances, Repayments
	
32

	
3.05
	
Evidence of Obligations (Noteless Advances)
	
32

	
3.06
	
Determination of Equivalent Amounts
	
32

	
3.07
	
Purchase of Bankers' Acceptances and BA Equivalent Notes
	
33

	
3.08
	
Provisions Regarding Bankers' Acceptances
	
33

	
3.09
	
Provisions regarding BA Equivalent Notes
	
34

	
3.10
	
No Repayment of Certain Availment Options
	
35

	
3.11
	
Illegality
	
36

	
3.12
	
Anti-Money Laundering
	
36

	
3.13
	
Terrorist Lists
	
36

	
ARTICLE IV - REPRESENTATIONS AND WARRANTIES

	
4.01
	
Representations and Warranties
	
37

	
4.02
	
Survival of Representations and Warranties
	
44

	
ARTICLE V - COVENANTS

	
5.01
	
Positive Covenants
	
45

	
5.02
	
Negative Covenants
	
48

	
5.03
	
Financial Covenants
	
53

	
5.04
	
Reporting Requirements
	
54

	
5.05
	
Anti-Money Laundering
	
55

	
5.06
	
Terrorist Lists
	
56

 

 

 

ii.

 

 

	
ARTICLE VI - SECURITY

	
6.01
	
Security to be Provided by the Credit Parties and Limited Recourse Guarantors
	
56

	
6.02
	
Security to be Provided by Others
	
58

	
6.03
	
General Provisions re Security; Registration
	
58

	
6.04
	
Opinions re Security
	
58

	
6.05
	
After-Acquired Property, Further Assurances
	
59

	
6.06
	
Insurance by Agent
	
59

	
6.07
	
Insurance Proceeds
	
59

	
6.08
	
Discharge of Certain Security
	
59

	
ARTICLE VII - CONDITIONS PRECEDENT

	
7.01
	
Conditions Precedent to First Advance
	
60

	
7.02
	
Conditions Precedent to all Advances
	
63

	
ARTICLE VIII - DEFAULT AND REMEDIES

	
8.01
	
Events of Default
	
64

	
8.02
	
Acceleration; Additional Interest
	
66

	
8.03
	
Acceleration of Certain Contingent Obligations
	
66

	
8.04
	
Combining Accounts, Set-Off
	
66

	
8.05
	
Appropriation of Monies
	
66

	
8.06
	
No Further Advances
	
68

	
8.07
	
Remedies Cumulative
	
68

	
8.08
	
Performance of Covenants by Agent
	
68

	
ARTICLE IX - THE AGENT AND THE LENDERS

	
9.01
	
Lenders' Decisions
	
68

	
9.02
	
Security
	
69

	
9.03
	
Application of Proceeds of Realization
	
70

	
9.04
	
Payments by Agent
	
71

	
9.05
	
Protection of Agent
	
72

	
9.06
	
Duties of Agent
	
73

	
9.07
	
Lenders' Obligations Several; No Partnership
	
74

	
9.08
	
Sharing of Information
	
74

	
9.09
	
Acknowledgement by Borrower
	
74

	
9.10
	
Amendments to ARTICLE IX
	
75

	
9.11
	
Deliveries, etc
	
75

	
9.12
	
Agency Fees
	
75

	
9.13
	
Non-Funding Lender
	
75

	
ARTICLE X - GUARANTEE

	
10.01
	
Guarantee
	
76

	
10.02
	
Nature of Guarantee
	
76

	
10.03
	
Liability Not Lessened or Limited
	
77

	
10.04
	
Agent not Bound to Exhaust Recourse
	
78

	
10.05
	
Enforcement
	
78

	
10.06
	
Guarantee in Addition to Other Security
	
78

	
10.07
	
Reinstatement
	
78

	
10.08
	
Waiver of Notice, etc
	
78

	
10.09
	
Subrogation Rights
	
78

	
10.10
	
Postponement and Subordination of Claims
	
79

	
10.11
	
Advances After Certain Events
	
79

 

iii.

 

	
ARTICLE XI - CBA MODEL PROVISIONS

	
11.01
	
CBA Model Provisions Incorporated by Reference
	
79

	
11.02
	
Inconsistencies with CBA Model Provisions
	
81

	
ARTICLE XII - GENERAL

	
12.01
	
Waivers
	
81

	
12.02
	
Expenses; Debit Authorization
	
82

	
12.03
	
General Indemnity
	
82

	
12.04
	
Environmental Indemnity
	
83

	
12.05
	
Survival of Certain Obligations despite Termination of Agreement
	
83

	
12.06
	
Interest on Unpaid Costs and Expenses
	
83

	
12.07
	
Notice
	
83

	
12.08
	
Severability
	
85

	
12.09
	
Further Assurances
	
85

	
12.10
	
Time of the Essence
	
85

	
12.11
	
Promotion and Marketing
	
85

	
12.12
	
Entire Agreement; Waivers and Amendments to be in Writing
	
85

	
12.13
	
Inconsistencies with Security
	
85

	
12.14
	
Confidentiality
	
85

	
12.15
	
Governing Law
	
86

	
12.16
	
Execution and Counterparts
	
86

	
12.17
	
Binding Effect
	
86

 

Exhibits

 

"A"-Lenders and Lenders' Commitments 

"B"-Draw Request

"C"-Rollover Notice 

"D"-Conversion Notice 

"E"-Repayment Notice

"F"-Compliance Certificate

"G"-Form of BA Equivalent Note 

"H"-CBA Model Provisions

"I"-Agreement and Acknowledgement to be bound – New Guarantor/Limited Recourse Guarantor

 

Schedules

 

4.01(b)-Corporate Information 

4.01(h)-Material Permits 

4.01(i)-Cannabis Investments

4.01(j)-Specific Permitted Liens 

4.01(k)-Owned Properties

4.01(l)-Material Leased Properties 

4.01(m)-Intellectual Property 

4.01(o)-Material Agreements 

4.01(p)-Labour Agreements 

4.01(q)-Environmental Matters 

4.01(r)-Litigation

4.01(s)-Pension Plans and Multi-employer Plans

 

 

 

 

 

CREDIT AGREEMENT

 

This Agreement dated as of November 29, 2019 is made among:

 

 

1974568 Ontario Limited

(as Borrower)

 

- and -

 

Aphria Inc. (the “Parent” or “Limited Guarantor”)

 

-and-

Each of the Subsidiaries of the Borrower identified in the signature pages hereto as Guarantors

and each other Subsidiary of the Borrower as may

become a party hereto as Guarantor from time to time pursuant to the terms hereof

collectively as Guarantors

 

- and -

 

BANK OF MONTREAL

AND THE ADDITIONAL LENDERS FROM TIME TO TIME PARTY TO THIS AGREEMENT

(as Lenders)

 

- and -

 

BANK OF MONTREAL

as Administrative Agent

 

-and-

 

BANK OF MONTREAL

as Sole Arranger and Sole Book Runner

 

 

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party, the parties agree as follows:

 

 

ARTICLE I - INTERPRETATION

 

1.01Definitions

 

In this Agreement, the words and phrases set out in the CBA Model Provisions (as hereinafter defined) shall have the respective meanings set forth therein (subject to Section

12.01hereof). In addition, the following words and phrases shall have the respective meanings set forth below:

“Acceleration Date" means the earlier of: (i) the occurrence of an Insolvency Event in respect of any Credit Party or Limited Recourse Guarantor; and (ii) the delivery by the Agent to the Borrower of a written notice that the Obligations are immediately due and payable, following the occurrence and during the continuation of an Event of Default other than an Insolvency Event.

 

 

 

2.

 

 

“Acceptable Appraisal” means an up-to-date appraisal (completed within six months of the Closing Date) in respect of the Project Property by an appraiser acceptable to the Agent in form and substance satisfactory to the Lenders which confirms the following approaches to value: fair market value, cost to complete approach and comparable transaction approach and alternate use value on a hypothetical best use facility basis; together with a transmittal letter from such appraiser addressed to the Agent which permits the Agent and the Lenders to rely thereon.

 

"Acquisition" means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person, or (b) the acquisition of in excess of fifty percent (50%) of the Equity Interests of any Person or otherwise causing any Person to become a Subsidiary of the Borrower

 

"Advance" means an extension of credit by one or more of the Lenders to the Borrower pursuant to this Agreement, including for greater certainty an extension of credit in the form of a Loan, a Bankers' Acceptance or a BA Equivalent Loan but for greater certainty does not include a Conversion or Rollover.

 

"Affiliate" is defined in the CBA Model Provisions.

 

“Agency Fee Agreement” means an agency fee agreement dated the date hereof between the Borrower and the Agent, respecting the payment of certain fees and other amounts to the Agent for its own account, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

 

"Agent" means BMO in its capacity as the administrative agent hereunder, and its successors in such capacity.

 

"Agreement" means this credit agreement (including the exhibits and schedules) as it may be further amended, supplemented, replaced or restated from time to time.

 

"AML Legislation" is defined in Section 5.05(a).

 

"Annual Business Plan" means a business plan in respect of the Companies for a Fiscal Year, disclosing all assumptions made in the formulation thereof, which shall include a detailed budget and projections on a quarterly basis in respect of profits, losses, revenue, expenses, cash flow, balance sheet items, Capital Expenditures, and compliance with all financial covenants in Section 5.03 herein, all in detail satisfactory to the Agent and the Lenders acting reasonably.

 

"Annual Excess Cash Flow" means, in respect of any Fiscal Year and in respect of any Person, consolidated EBITDA for such period of such Person less, without duplication,

(a)interest and scheduled principal payments in respect of Total Funded Debt for such period, and any voluntary or mandatory principal prepayments made in cash of Total Funded Debt, (b) Cash Taxes for such period, (c) Unfunded Capital Expenditures for such period, and (d) any cash expenses paid during such period to the extent previously deducted in computing net income in a prior period or which will be deducted in computing net income in a subsequent period.

 

"Applicable Law" is defined in the CBA Model Provisions.

 

“Applicable Margin” in respect of any Availment Option, the percentage in the column relating to such Availment Option in the following table which corresponds to the Total Funded Debt to EBITDA Ratio in the first column which shall be determined on a quarterly basis (subject to the exception below contained in this definition) based on the Borrower’s quarterly consolidated 

 

3.

 

financial statements for the prior Fiscal Quarter:

 

				
	
Level
	
Total Funded Debt to EBITDA Ratio
	
Prime Rate Advances
	
B/A

and B/A Equivalent Loan

	
I
	
<1.00:1
	
1.00%
	
2.25%

	
II
	
≥ 1.00 to < 1.50:1
	
1.25%
	
2.50%

	
III
	
≥ 1.50:1 to < 2.00:1
	
1.50%
	
2.75%

	
IV
	
≥ 2.0:1 to < 2.50:1
	
1.75%
	
3.00%

	
V
	
≥ 2.50:1
	
2.00%
	
3.25%

 

provided that:

	
 
	
(a)
	
the above rates per annum applicable to any Advance are, expressed on the basis of a year of 365 days or 366 days, as the case may be;
	
 

 

	
 
	
(b)
	
for the period from the Closing Date until the delivery by the Borrower of its financial statements in respect of the first Fiscal Quarter which includes the Conversion Date and the corresponding Compliance Certificate, the Applicable Margin shall be the rate applicable to Level V in the table set forth above;
	
 

 

	
 
	
(c)
	
subject to paragraph (b) above, changes in the Applicable Margin shall be effective on the date that the financial statements and Compliance Certificates required by Sections 5.04(a) and 5.04(c) are required to be delivered to the Agent, based upon the Total Funded Debt to EBITDA Ratio as of the end of the most recent Fiscal Quarter included in such financial statements so delivered, and shall remain in effect until the date immediately preceding the next required date of delivery of such financial statements and certificates indicating another such change;
	
 

 

	
 
	
(d)
	
if for any rolling period the Borrower’s EBITDA is zero, or if the Borrower fails to deliver any of the financial statements and Compliance Certificates as required in accordance with Sections 5.04(a) and 5.04(c) without the consent of the Agent, the Applicable Margin shall be deemed to be the rate applicable to Level V in the table set forth above, from the date that such financial statements and Compliance Certificates were due, until such financial statements and Compliance Certificates are delivered (or the date the same reflect a positive EBITDA, as applicable); and
	
 

 

	
 
	
(e)
	
with respect to Bankers’ Acceptances outstanding on the effective date of any such change in the Applicable Margin, changes in the Applicable Margin shall become applicable thereto upon the next rollover or conversion thereof after such change.
	
 

 

“Approved Jurisdiction” means a country in which it is legal in all political subdivisions therein (including for greater certainty on a federal, state and municipal basis) to undertake any Cannabis Activities provided that, with respect to the Companies only, in each case (i) such country has been approved in writing by the Required Lenders in their discretion and (ii) if required by the Agent, the ability to undertake Cannabis Activities to the extent permitted by Applicable Law therein is confirmed by a legal opinion provided by the Borrower's counsel in such jurisdiction, in form and substance satisfactory to the Agent. The Required Lenders may in their discretion from time to time (i) upon receipt of a written request by the Borrower, designate any jurisdiction an Approved Jurisdiction provided that the above criteria are satisfied; and (ii) revoke the designation 

 

4.

 

of any jurisdiction as an Approved Jurisdiction by written notice to the Borrower if such criteria are not satisfied. Canada is the sole Approved Jurisdiction with respect to the Companies as at the date of this Agreement.

 

"Associate" has the meaning ascribed thereto in the Business Corporations Act

(Ontario).

 

"Availment Option" means a method of borrowing which is available to the Borrower as provided herein.

 

"BA Equivalent Loan" means an Advance in Canadian Dollars made by a Non-BA Lender to the Borrower in respect of which the Borrower has issued a BA Equivalent Note.

 

"BA Equivalent Note" means a promissory note payable by the Borrower to a Non-BA Lender in the form of Exhibit "G" attached hereto.

 

"BA Lender" means a Lender identified in Exhibit "A" attached hereto as a Lender which will accept Bankers' Acceptances hereunder.

 

"Bankers' Acceptance" or “B/A” means a bill of exchange or a blank non-interest bearing depository bill as defined in the Depository Bills and Notes Act (Canada) drawn by the Borrower and accepted by a BA Lender in respect of which the Borrower becomes obligated to pay the face amount thereof to the holder (which may be a third party or such BA Lender) upon maturity.

 

"BIA" means the Bankruptcy and Insolvency Act (Canada).

 

"BMO" means the Bank of Montreal and its successors and permitted assigns.

 

“Borrower” means 1974568 Ontario Limited, a corporation subsisting under the laws of the Province of Ontario.

“Borrower Year-end Financial Statements” in respect of any Fiscal Year means the annual reviewed financial statements of the Borrower prepared in accordance with GAAP, in each case, in respect of such Fiscal Year.

 

“Business” means the business conducted by the Companies, being the business of cultivating Cannabis products in Approved Jurisdictions and all other ancillary activities related to the foregoing.

 

"Business Day" means any day on which the Agent is open for over-the-counter business in Toronto, Ontario, excluding Saturday, Sunday and any other day that is a statutory holiday in Toronto, Ontario.

 

"Canadian Dollars", "Dollars" and "CDN$" each means the lawful currency of Canada.

 

"Canadian Prime Rate" means the greater of the following: (i) the rate of interest announced from time to time by the Agent as its reference rate then in effect for determining rates of interest on Canadian Dollar loans to its customers in Canada and designated as its prime rate; and (ii) the thirty (30) day CDOR Rate plus one percent (1.0%) per annum.

 

"Canadian Prime Rate Loan" means a loan made by a Lender to the Borrower in Canadian Dollars in respect of which interest is determined by reference to the Canadian Prime Rate.

 

“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 
	
 

 

5.

 

	
 
		
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 the Cannabis Act, the Controlled Drugs and Substances Act (Canada).
	
 

 

“Cannabis Act” means the Cannabis Act, SC 2018, c. 16, as amended or replaced from time to time.

 

“Cannabis Activities” means any activities (including advertising or promotional activities) relating to or in connection with the possession, exportation, importation, cultivation, production, processing, purchase, distribution or sale of Cannabis or Cannabis products, whether such activities are for medical, scientific, recreational or any other purpose.

 

“Cannabis Authorizations” means, at any time, all Authorizations necessary for the conduct of Cannabis Activities by any Credit Party. For avoidance of doubt, each of the Health Canada Licences necessary for the conduct of Cannabis Activities by any Credit Party shall constitute a Cannabis Authorization.

 

“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 and the Controlled Drugs and Substances Act (Canada).

 

“Cannabis Regulations” means the regulations made from time to time under the Cannabis Act, the Controlled Drugs and Substances Act (Canada) and any other statute in an Approved Jurisdiction with respect to Cannabis Activities.

 

"Capital Expenditures" means expenditures made directly or indirectly which are considered to be in respect of the acquisition or leasing of capital assets in accordance with GAAP, including the acquisition or improvement of Land, plant, machinery or equipment, whether fixed or removable, but excluding (i) the portion of any expenditure for acquired equipment attributable to any trade-in which is made simultaneously with the purchase of the acquired equipment, (ii) 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 (iii) capital lease payments.

 

“Capital Lease" means a lease of assets which in accordance with GAAP is required to be capitalized on the balance sheet of the lessee.

 

“Cash Equivalents” means (i) securities issued or fully guaranteed by the government of Canada, any province or territory of Canada, or any agency or instrumentality of any thereof, (ii) term deposits, certificates of deposit or bankers’ acceptances of any Lender, or any bank that is not a Lender but is referred to in either Schedule I, II or III of the Bank Act (Canada) the short-

 

6.

 

term debt or deposits of which have been rated at least A-1 or the equivalent thereof by Standard & Poor’s Financial Services, LLC or at least P-1 or the equivalent thereof by Moody’s Investors Service, Inc. or which have been rated at least R-1 or the equivalent thereof by DBRS Limited, and (iii) commercial paper rated at least R1(mid) by DBRS Limited, in each case provided for in clause (i), (ii) and (iii) above, maturing within one hundred and eighty (180) days after the date of acquisition.

 

"Cash Taxes" in respect of any fiscal period means all amounts actually paid in cash by the Companies in such fiscal period in respect of income and capital Taxes (whether relating to such fiscal period or any other fiscal period).

"CBA Model Provisions" means the model credit agreement provisions attached hereto as Exhibit "H", which have been revised under the direction of the Canadian Bankers' Association Secondary Loan Market Specialist Group from provisions prepared by The Loan Syndications and Trading Association, Inc.

 

"CDOR Rate" means on any day the annual rate of interest which is the rate determined as being the arithmetic mean of the quotations of all institutions listed in respect of the rate for Canadian Dollar denominated bankers' acceptances for the relevant period displayed and identified as such on the "Reuters Screen CDOR Page" (as defined in the International Swap Dealer Association, Inc. definitions, as modified and amended from time to time) as of 10:00 A.M. Toronto, Ontario local time on such day and, if such day is not a Business Day, then on the immediately preceding Business Day (as adjusted by the Agent after 10:00 A.M. Toronto, Ontario local time to reflect any error in a posted rate of interest or in the posted average annual rate of interest with notice of such adjustment in reasonable detail evidencing the basis for such determination being concurrently provided to the Borrower); provided that if such rates are not available on the Reuters Screen CDOR Page on any particular day, then the CDOR Rate on that day shall be the average of the rates applicable to Canadian Dollar bankers' acceptances for the relevant period quoted for customers in Canada by the Agent as of 10:00 A.M. Toronto, Ontario local time on such day; or if such day is not a Business Day, then on the immediately preceding Business Day; and provided further that the CDOR Rate shall not be less than zero.

 

"Change of Control" means (a) the ownership, directly or indirectly, beneficially or of record, by any Person or group of Persons acting jointly or otherwise in concert, of Equity Interests representing a majority of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Parent, (b) the Parent ceases to Control the Borrower, (c) the Parent together with 2609733 Ontario Limited ceases to hold beneficially and of record one hundred percent (100%) of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower, (d) the ownership, directly or indirectly, beneficially or of record, by any Person or group of Persons other than the Borrower of one hundred percent (100%) of the Equity Interests of each Subsidiary of the Borrower, (e) the occupation of a majority of the seats (other than vacant seats) on the board of directors of any Credit Party by Persons who were neither (i) nominated by the board of directors of the Parent nor (ii) appointed by directors so nominated, and (f) Control of 2609733 Ontario Limited by any Person or group of Persons other than any of the existing direct and indirect shareholders of 2609733 Ontario Limited as at the Closing Date.

 

“Closing Date” means the date on which all conditions precedent listed in Section 7.01 have been satisfied or waived by the Lenders, as confirmed by the Agent to the Borrower in writing.

“Collateral” means all property, assets and undertaking of the Credit Parties, the Limited Recourse Guarantors, or any other Person encumbered by the Security, and all proceeds of the foregoing.

 

 

7.

 

 

"Commitment" means, in respect of any Lender, such Lender's commitment to make Advances to the Borrower under Facility A.

 

“Companies” means the Borrower and all of its Subsidiaries from time to time; and

“Company” means any of them as the context requires.

 

"Compliance Certificate" means a certificate delivered by a Senior Officer of the Borrower to the Agent in the form of Exhibit "F".

 

“Constating Documents” means, with respect to any Person, as applicable:

 

	
 
	
(a)
	
its certificate and/or articles of incorporation, association, amalgamation or continuance, memorandum of association, charter, declaration of trust, trust deed, partnership agreement, limited liability company agreement or other similar document;

 

	
 
	
(b)
	
its by-laws; and

 

	
 
	
(c)
	
all unanimous shareholder agreements and any amendments thereto, other shareholder agreements and any amendments thereto, voting trust agreements and similar arrangements applicable to the Person’s Equity Interests;
	
 

 

all as in effect from time to time.

 

"Control" is defined in the CBA Model Provisions.

 

"Conversion" means the substitution of one Availment Option for another, and does not constitute a fresh or new Advance.

 

"Conversion Date" means November 30, 2020 or such later date as may be mutually agreed to in writing by all of the Lenders and the Borrower; provided that as of the date of any extension of the then applicable Conversion Date, the Lenders shall be satisfied that no Default, Event of Default or Material Adverse Change shall have occurred and be continuing and the Borrower shall be in compliance with all terms and conditions herein, including all financial covenants which will apply after such date, and the Borrower shall have provided a certificate to the Agent on behalf of the Lenders confirming such compliance.

 

"Conversion Notice" means a notice substantially in the form of Exhibit "D" given by the Borrower to the Agent for the purposes of requesting a Conversion.

 

"Copyrights" means all rights, title and interests (and all related IP Ancillary Rights) arising under any requirement of law in copyrights and all mask work, database and design rights, whether or not registered or published, all registrations and recordations thereof and all applications in connection therewith.

 

"Credit Parties" means the Companies and the Limited Guarantor and "Credit Party" means any of them as the context requires.

 

"Currency Hedge Agreements" means agreements for the purpose of hedging currency risk, including a currency exchange agreement or a foreign exchange forward contract.

 

“Debt Service Deficiency Agreement” is defined in Section 6.01(d). "Default" is defined in the CBA Model Provisions.

“Defined Benefit Pension Plan” means any Pension Plan which contains a “defined benefit provision” as defined in subsection 147.1(1) of the Income Tax Act (Canada).

 

8.

 

"Distribution" means any amount paid, directly or indirectly, to or on behalf of the employees, directors, officers, shareholders, partners or unitholders of any of the Companies, or to any Related Party thereto, including for greater certainty amount paid by way of salary, bonus, commission, management fees, directors' fees, dividends, redemption of shares, distribution of profits, Investments or otherwise, and whether payments are made to such Persons in their capacity as shareholders, partners, unitholders, directors, officers, employees, owners or creditors of any of the Companies or otherwise, or any other direct or indirect payment in respect of the earnings or capital of any of the Companies; provided however that the payment of salaries, bonuses and commissions from time to time to the officers and employees of the Companies, the payment of directors' fees to the directors of the Companies, in each case in the ordinary course of business and at reasonable levels, and the repayment of the shareholder loan with the proceeds of the Advance on the Closing Date as contemplated in Section 2.02 shall not be considered Distributions.

 

"Domain Name" means all right, title and interest (and all related IP Ancillary Rights) in an internet domain name.

 

"Draw Request" means a notice in the form of Exhibit "B" given by the Borrower to the Agent for the purpose of requesting an Advance.

 

“EBITDA” means, for any period, and any Person, an amount equal to net income of such Person for such period minus, to the extent included in computing such net income (but without duplication):

 

	
 
	
(a)
	
any non-cash income and gains (including unrealized mark-to-market gains under Hedge Arrangements, fair valuation of financial instruments fair value credit adjustments on biological assets, non- cash income and gains from minority interests), except to the extent that such income or gains will inevitably result in future cash receipts;
	
 

 

	
 
	
(b)
	
any cash expenses and losses to the extent previously deducted in a prior period as a non-cash expense or loss under clause (g) below; and
	
 

 

	
 
	
(c)
	
any extraordinary or non-recurring income and gains unless approved by the Required Lenders;
	
 

 

plus, to the extent deducted from such net income (but without duplication):

 

	
 
	
(d)
	
Interest Expense;

 

	
 
	
(e)
	
all Taxes on income for such period, whether current or deferred and net of any incentive or similar tax credits;
	
 

 

	
 
	
(f)
	
the collective depreciation, depletion, impairment and amortization expense for such period;
	
 

 

	
 
	
(g)
	
all non-cash stock based compensation;

 

	
 
	
(h)
	
any extraordinary or non-recurring charges, expenses or losses approved by the Required Lenders; and
	
 

 

	
 
	
(i)
	
all transaction costs incurred in connection with the establishment of Facility A including all fees, costs and expenses payable on or before the Closing Date to the Agent and the Lenders, legal counsel for the Agent and the Companies and consultants retained by the Agent.
	
 

 

 

9.

 

 

provided that in respect of each entity which has become a Subsidiary of the Borrower in such fiscal period, EBITDA shall be determined as if such entity had been a Subsidiary during the entire fiscal period; and in respect of each entity which has ceased to be a Company in such fiscal period, EBITDA shall be determined as if such entity had not been a Company during the entire fiscal period.

 

"Equity Interest" means any share, interest, participation or other right to participate in the voting or equity ownership of a corporation and any equivalent ownership interest in any Person that is not a corporation, including any partnership or membership interest, and any warrant, option or other right which is exchangeable or convertible into any of the foregoing.

 

"Equivalent Amount" means, in relation to an amount in one currency, the amount in another currency that could be purchased by the amount in the first currency, determined by reference to the applicable Exchange Rate at the time of such determination.

 

"Event of Default" is defined in Section 8.01.

 

"Exchange Rate" means, in connection with the amount of any currency which is to be converted into another currency pursuant to this Agreement for any reason, the applicable rate of exchange for such conversion established by the Bank of Canada on the Business Day of such conversion (or on such other Business Day as may be specified herein); provided however that if a rate of exchange in respect of any currency is not published by the Bank of Canada, the rate of exchange for that currency shall be determined by the Agent in accordance with its usual practice.

 

"Facility A" is defined in Section 2.01. "Facility A Limit" is defined in Section 2.01.

"First-Ranking Security Interest" in respect of any Collateral means a Lien in such Collateral which is registered where necessary or desirable to record and perfect the charges contained therein (to the extent that such charges are capable of perfection under Applicable Law) and which ranks in priority to all other Liens in such Collateral except for any Permitted Liens which may have priority in accordance with Applicable Law.

 

"Fiscal Quarter" means a fiscal quarter of the Borrower and the Parent as the context requires ending on the last days of May, August, November, and February in each year.

 

"Fiscal Year" means a fiscal year of the Borrower or the Parent as the context requires ending on the last day of May in each year.

 

“Fixed Charges” means in respect of any period, the aggregate, without duplication, of:

(i) consolidated Interest Expense of the Borrower during such period; plus (ii) all scheduled principal payments on consolidated Total Funded Debt due (paid or accrued during such period) by the Borrower during such period except the portion of any final payment due in respect of such Total Funded Debt which constitutes a “balloon payment” and any amount paid in connection with the exercise of an option to purchase equipment under a Capital Lease; plus (iii) all payments made by the Borrower during such period in respect of Capital Lease Obligations; provided that for Fiscal Quarters ending within 12 months of the Conversion Date, Fixed Charges shall include a principal component for any period during which the Borrower was not required to make principal payments under this Agreement based upon the Borrower’s principal payment obligations accruing due for subsequent financial periods. For example, if the Conversion Date occurs at the end of a Fiscal Quarter, the calculation of Fixed Charges for that Fiscal Quarter shall include a principal component equal to the scheduled principal payments required under this Agreement for the following four Fiscal Quarters. The projected component will reduce as time 

 

10.

 

passes so that, using the above example, at the end of the third Fiscal Quarter following the Conversion Date, Fixed Charges for that Fiscal Quarter shall include three Fiscal Quarters of actual principal payments and one Fiscal Quarter of projected principal payments.

 

“Fixed Charge Coverage Ratio” means, as of the last day of any Fiscal Quarter and for the four rolling Fiscal Quarter period then ended, calculated on a consolidated basis, the ratio of: (a) consolidated EBITDA for the Borrower less the aggregate amount of consolidated Unfunded Capital Expenditures, Cash Taxes and cash Distributions made by the Borrower in respect of Equity Interests in the Borrower during such period, to (b) Fixed Charges.

 

“Former Lender” is defined in the definition of Hedging Obligations.

 

“Funded Debt” in respect of any Person means all obligations of such Person and its Subsidiaries which are considered to constitute debt in accordance with GAAP, including, without duplication (i) indebtedness for borrowed money, (ii) interest-bearing liabilities to the extent interest is due and not yet paid, (iii) obligations secured by Purchase-Money Security Interests, (iv) obligations under Capital Leases, (v) capitalized interest, (vi) obligations under Hedging Agreements (solely to the extent such obligations have become due and payable), (vii) the redemption price of any securities issued by such Person which are redeemable at the option of the holder, (viii) any vendor take back obligations, and (ix) such Person’s contingent liability under Guarantees given in respect of obligations of other Persons of the nature described in clauses (i) through (viii) above; but excluding accounts payable, short term non-interest bearing liabilities, future or deferred income taxes (both current and long-term), Subordinated Debt (provided the holder of such indebtedness pursuant to the terms of an Intercreditor Agreement may not receive any payments on account of principal or interest thereon prior to the Termination Date), and prepaid or deferred revenue.

 

"Funded Debt Service" means, in respect of any fiscal period, without duplication: (i) the aggregate amount of Interest paid or payable in respect of the Funded Debt of a Person on a consolidated basis in respect of such fiscal period (but for greater certainty, excluding any Interest which is capitalized and not paid or payable during such fiscal period); plus (ii) the aggregate amount of scheduled principal payments and scheduled Capital Lease payments paid or payable in respect of the Funded Debt of such Person on a consolidated basis in respect of such fiscal period, except the portion of any final payment due in respect of such Funded Debt which constitutes a "balloon payment" and any amount paid in connection with the exercise of an option to purchase equipment under a Capital Lease.

 

"GAAP" means generally accepted accounting principles in effect in Canada from time to time as set forth in the opinions and pronouncements of the relevant Canadian public and private accounting boards and institutes which are applicable to the relevant Person and the circumstances as of the date of determination, consistently applied including, without limitation, International Financial Reporting Standards adopted by the Accounting Standards Board of the Chartered Professional Accountants of Canada (which have been adopted by the Credit Parties).

 

"Governmental Authority" is defined in the CBA Model Provisions, and for greater certainty includes Health Canada.

 

"Guarantee" means any agreement by which any Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes liable upon, the obligation of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person or otherwise assures any creditor of such Person against loss, and shall include any contingent liability under any letter of credit or similar document or instrument, excluding endorsement of cheques and drafts for deposit or collection in the ordinary course of business.

 

11.

 

 

"Guarantors" means collectively (i) each Subsidiary of the Borrower on the date hereof, and (ii) each other Person who becomes a Subsidiary of the Borrower on and after the date hereof and is required by the Agent and each of the Lenders from time to time to become a Guarantor pursuant to Section 6.02(c) hereof; and "Guarantor" means any of them as the context requires. As of the Closing Date the Borrower has no Subsidiaries.

 

"Hazardous Materials" means any contaminant, pollutant, waste or substance that is likely to cause immediately or at some future time harm or degradation to the surrounding environment or risk to human health; and without restricting the generality of the foregoing, including any pollutant, contaminant, waste, hazardous waste or dangerous goods that is regulated by any Requirements of Environmental Law or that is designated, classified, listed or defined as hazardous, toxic, radioactive or dangerous or as a contaminant, pollutant or waste by any Requirements of Environmental Law.

 

“Health Canada Licence” means, the licence issued by Health Canada in respect of the Project and identified as licence #LIC-KX10UDSC08-2019 issued to the Borrower pursuant to the Cannabis Act and authorizing a minimum cultivation class for operations by the Borrower at the Project on the Project Property, and any other licence issued by Health Canada to any of the Companies in respect of its Cannabis Activities.

 

"Hedging Agreements" means Interest Rate Hedging Agreements and Currency Hedge Agreements.

 

"Hedging Obligations" means all obligations of the Borrower to (i) the Lenders or an Affiliate of a Lender pursuant to or arising in connection with Hedging Agreements made between the Borrower and any Lenders or any Affiliate of a Lender and (ii) any Person which was a Lender or an Affiliate of a Lender at the time of entering into a Hedging Agreement, but which is no longer a Lender (a “Former Lender”).

 

"Indemnitees" means the Lenders, the Agent and their respective successors and permitted assigns hereunder, any agent of any of them (specifically including a receiver or receiver-manager) and the respective officers, directors and employees of the foregoing.

 

“Industrial Hemp” has the meaning ascribed to such term or the term "hemp" (i) under the Applicable Law of any Approved Jurisdiction, including the Industrial Hemp Regulations (Canada) issued under the Cannabis Act; or (ii) under the Agricultural Marketing Act of 1946 (United States).

 

"Insolvency Event" means, in respect of any Person:

 

	
 
	
(a)
	
such Person ceases to carry on its business; or commits an act of bankruptcy or becomes insolvent (as such terms are used in the BIA); or makes an assignment for the benefit of creditors, files a petition in bankruptcy, makes a proposal or commences a proceeding under Insolvency Legislation; or petitions or applies to any tribunal for, or consents to, the appointment of any receiver, trustee or similar liquidator in respect of all or a substantial part of its property; or admits the material allegations of a petition or application filed with respect to it in any proceeding commenced in respect of it under Insolvency Legislation; or takes any corporate action for the purpose of effecting any of the foregoing; or
	
 

 

	
 
	
(b)
	
any proceeding or filing is commenced against such Person seeking to have an order for relief entered against it as debtor or to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding-up, reorganization, arrangement, adjustment or composition of it or its debts under any Insolvency Legislation, or seeking appointment of a receiver, trustee, 
	
 

 

12.

 

	
 
		
custodian or other similar official for it or any substantial part of its property; unless (i) such Person is diligently defending such proceeding in good faith and on reasonable grounds as determined by the Required Lenders acting reasonably; and (ii) such proceeding does not, in the reasonable opinion of the Required Lenders, materially adversely affect the ability of such Person to carry on its business and to perform and satisfy all of its obligations.
	
 

 

"Insolvency Legislation" means legislation in any applicable jurisdiction relating to reorganization, arrangement, compromise or re-adjustment of debt in insolvent circumstances, dissolution or winding-up, or any similar legislation, and specifically includes for greater certainty the BIA, the Companies' Creditors Arrangement Act (Canada), and the Winding-Up and Restructuring Act (Canada).

 

"Intellectual Property" means all rights, title and interests in intellectual property and all IP Ancillary Rights relating thereto, including all Copyrights, Patents, Trademarks, Domain Names, Trade Secrets, industrial designs, integrated circuit topographies, plant breeders' rights and rights under IP Licenses.

 

“Intercreditor Agreements” means any intercreditor, subordination or postponement agreement (including without limitation the Parent Subordination Agreement), that may be entered into from time to time which provides for the terms of subordination, ranking or priority and related customary intercreditor provisions of any other Funded Debt in relation to any of the Obligations and Security, which shall be in form and substance satisfactory to the Agent, acting reasonably.

 

"Interest" means interest on loans, stamping fees in respect of bankers' acceptances, the difference between the proceeds received by the issuers of bankers' acceptances and the amounts payable upon the maturity thereof, issuance fees in respect of letters of credit, and any other charges or fees in connection with the extension of credit which are determined by reference to the amount of credit extended, plus standby fees in respect of the unutilized portion of any credit facility; but for greater certainty "Interest" shall not include capitalized interest (for greater certainty, being interest which is accrued but not paid), agency fees, arrangement fees, structuring fees, fees relating to the granting of consents, waivers, amendments, extensions or restructurings, the reimbursement of costs and expenses, and any similar amounts which may be charged from time to time in connection with the establishment, administration or enforcement of Facility A.

 

“Interest Expense” means, in respect of any Person and in respect of any period, without duplication, the interest expense of such Person on Funded Debt (including that attributable to the interest component of payments under Capital Leases) including all commissions, discounts, and other fees paid or accrued during such period and all charges paid or accrued during such period with respect to letters of credit and letters of guarantee, all as determined in accordance with GAAP.

 

"Interest Rate Hedging Agreements" means agreements for the purpose of hedging interest rate risk, including interest rate exchange agreements (commonly known as "interest rate swaps") and forward rate agreements; and for greater certainty, including interest rate exchange agreements (commonly known as "cross-currency swaps").

 

"Interim Financial Statements" in respect of any Fiscal Quarter means (i) in the case of the Borrower, the unaudited financial statements of the Borrower on a consolidated basis, and (ii) in the case of the Parent, the unaudited financial statements of the Parent on a consolidated basis, and in each case the management prepared interim operating statements of the other Companies (in the case of the Borrower’s Interim Financial Statements) or the other Credit Parties (in the case of the Parent’s Interim Financial Statements), in each case in respect of such Fiscal Quarter 

 

13.

 

(and also on a year-to-date basis in respect of such Fiscal Quarter and all previous Fiscal Quarters in the same Fiscal Year), including (in the case of the Parent’s Interim Financial Statements) any management's discussion and analysis with respect thereto.

 

"Investment" means: (i) an investment made or held by a Person, directly or indirectly, in another Person (whether such investment was made by the first-mentioned Person in such other Person or was acquired from a third party); (ii) a contribution of capital; (iii) the acquisition or holding of common or preferred shares, debt obligations, partnership interests and interests in joint ventures; and (iv) the acquisition of all or substantially all of the assets used in connection with a business; provided however that if a transaction would constitute a "Capital Expenditure" as defined herein and would also constitute an "Investment" as defined herein, it shall be deemed to constitute an Investment and not a Capital Expenditure.

 

"IP Ancillary Rights" means, with respect to an item of Intellectual Property all foreign counterparts to, and all divisionals, reversions, continuations, continuations-in-part, reissues, re-examinations, renewals and extensions of, such Intellectual Property and all income, royalties, proceeds and liabilities at any time due or payable or asserted under or with respect to any of the foregoing or otherwise with respect to such Intellectual Property, including all rights to sue or recover at law or in equity for any past, present or future infringement, misappropriation, dilution, violation or other impairment thereof, and, includes in each case, all rights to obtain any other IP Ancillary Right.

 

"IP License" means all contractual obligations (and all related IP Ancillary Rights), whether written or oral, granting any right, title and interest in any Intellectual Property.

"Land" means real property (including a leasehold interest in land) and all buildings, improvements, fixtures and plant situated thereon.

"Landlord Agreement" means an agreement in form and substance satisfactory to the Agent given by the landlord of a Material Leased Property in favour of the Agent, which shall include the following provisions (except to the extent otherwise agreed by the Agent in its discretion): such landlord consents to the granting of a security interest in the lease by the Company which is a tenant thereunder in favour of the Agent, agrees to give written notice to the Agent in respect of a default and a reasonable opportunity to cure any default before terminating the lease, and agrees 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 Company located on such Material Leased Property or affixed to such Material Leased Property which the tenant is entitled to remove under Applicable Law or pursuant to the terms of the lease.

 

“Legal Reservations” means (i) the principle that equitable remedies may be granted or refused at the discretion of a court and the limitation of enforcement by laws relating to insolvency, reorganisation and other laws generally affecting the rights of creditors, (ii) the time barring of claims under the Limitation Act, 2002 (Ontario), as amended, or equivalent or analogous legislation of any other applicable jurisdiction, (ii) the possibility that an undertaking to assume liability for or indemnify a person against non-payment of Taxes may be void, (iv) defences of set-off or counterclaim, (v) similar principles, rights, defences or requirements under the laws of any applicable jurisdiction and (vi) any other matters which are set out as qualifications or reservations as to matters of law of general application accepted by the Required Lenders in any of the legal opinions delivered to the Lenders pursuant hereto.

 

“Lenders" means the lenders identified in Exhibit "A" attached hereto and any other Persons which may from time to time become lenders pursuant to this Agreement; and their respective successors and permitted assigns; and "Lender" means any of them as the context requires.

 

 

14.

 

 

"Lender-Related Distress Event" means, with respect to any Lender or any Person that directly or indirectly Controls such Lender (such Lender and each such Person being individually referred to in this definition as a "distressed person"), (i) the commencement of a voluntary or involuntary proceeding with respect to such distressed person under any Insolvency Legislation, (ii) the appointment of a custodian, conservator, receiver or similar official in respect of such distressed person or any substantial part of its assets,

(iii) a forced liquidation, merger, sale or other change of Control of such distressed person supported in whole or in part by Guarantees or other support (including, without limitation, the nationalization or assumption of ownership or operating control of such distressed person by any Governmental Authority), or (iv) such distressed person makes a general assignment for the benefit of its creditors or is otherwise adjudicated as, or determined by any Governmental Authority having regulatory authority over such distressed person or its assets to be, insolvent, bankrupt, or deficient in meeting any capital adequacy or liquidity standard of any such Governmental Authority.

 

"Lending Office" in respect of any Lender means the office of such Lender designated by it from time to time as the office from which it will make Advances hereunder.

 

"Lien" means: (i) a lien, charge, mortgage, pledge, security interest or conditional sale agreement; (ii) an assignment, lease, consignment, trust or deemed trust that secures payment or performance of an obligation; (iii) a garnishment; (iv) any other encumbrance of any kind; and (v) any commitment or agreement to enter into or grant any of the foregoing.

 

“Limited Guarantor” means the Parent.

 

“Limited Recourse Guarantee” is defined in Section 6.01(c).

 

“Limited Recourse Guarantors” means each shareholder of the Borrower (other than the Parent) from time to time. On the date hereof 2609733 Ontario Limited is the sole Limited Recourse Guarantor.

 

"Loan" means a Canadian Prime Rate Loan.

 

"Loan Documents" means this Agreement, the Security, the Agency Fee Agreement, the Parent Subordination Agreement and other agreements or letters entered into between the Borrower and the Agent in respect of fees payable to the Agent or the Lenders, any promissory notes issued by the Borrower to the Agent or the Lenders hereunder, any Intercreditor Agreements, all Hedging Agreements with a Lender or Affiliate of a Lender, all Service Agreements, and all other agreements, and instruments required or contemplated herein to be provided by the Credit Parties and other Persons in favour of the Agent or any of the Lenders and all amendments, restatements, supplements or other modifications thereto.

 

"Marijuana" has the meaning ascribed to such term under the Applicable Law in any Approved Jurisdiction.

 

"Material Adverse Change" means any change or event which: (i) constitutes a material adverse change in the business, operations, condition (financial or otherwise) or properties of the Parent or the Borrower on a consolidated basis; (ii) materially impairs the ability of the Parent or the Companies (taken as a whole) to timely and fully perform their respective obligations under the Loan Documents; (iii) materially impairs the validity or enforceability of any of the Loan Documents; (iv) materially impairs the ability of the Agent or the Lenders to enforce their rights and remedies under the Loan Documents; or

 

15.

 

(v) impairs the priority of any of the Security.

 

"Material Agreement" means an agreement made between a Company and another Person which (i) is, in the reasonable opinion of the Agent, material to the ownership, management and operation of the Business, including the Project and the Project Property, or (ii) if terminated would result, or would have a reasonable likelihood of resulting, in a Default, an Event of Default or a Material Adverse Change, specifically including, the Supply Agreement, and as at the date of this Agreement, each other agreement listed in Schedule 4.01(o).

 

"Material Leased Properties" means all Land leased by the Companies as tenants from time to time which if terminated would result, or would reasonably be expected to result, in an Event of Default or Material Adverse Change, specifically including as at the date of this Agreement the Land described in Schedule 4.01(l) attached hereto.

 

"Material Leases" means the leases relating to the Material Leased Properties.

 

"Material Permit" means a licence, permit, approval, registration or qualification granted to or held by a Company which if terminated would impair the ability of the Company to carry on the Business in the ordinary course, or would result, or would reasonably be expected to result, in an Event of Default or Material Adverse Change; specifically including, the Health Canada Licences and as of the date of this Agreement each other licence, permit, approval, registration or qualification listed in Schedule 4.01(h).

 

"Maturity Date" means the date which is three (3) years after the date of this Agreement.

 

“Minimum Equity Contribution” means a minimum equity injection in the Borrower by the Parent and other shareholders of the Borrower in an aggregate amount of not less than Twenty Million Dollars ($20,000,000) as shown on the balance sheet of the Borrower as at the Closing Date.

 

“Minimum Liquidity” means in respect of the Parent, unrestricted cash and Cash Equivalents held by the Parent less all current liabilities of the Parent determined in accordance with GAAP.

"Minor Title Defects" in respect of any parcel of Land means encroachments, restrictions, easements, rights-of-way, servitudes and defects or irregularities in the title to such Land which are of a minor nature and, in the case of Land material to the operation of the Business of the Companies taken as a whole, which, in the aggregate, will not materially impair the use of such Land for the purposes for which such Land is held by the owner thereof; it is acknowledged that the Project Property is material to the operation of the Business of the Companies taken as a whole.

 

“Multi-employer Plan” means a multi-employer pension plan within the meaning of the Pension Benefits Act (Ontario) or the pension benefits standards legislation of another province or jurisdiction in Canada and to which any Company is required to contribute pursuant to a collective agreement, participation agreement, any other agreement or statute or municipal by-law and which is not maintained or administered by such Company or its Affiliates.

 

"Non-BA Lender" means a Lender identified in Exhibit "A" attached hereto as a Lender which will make BA Equivalent Loans instead of accepting Bankers' Acceptances hereunder.

 

"Non-Funding Lender" means any Lender (i) that has failed to fund any payment or Advance required to be made by it hereunder or to purchase all participations required to be purchased by it hereunder and under the Loan Documents, or (ii) that has given oral or written notice to the Borrower, the Agent or any other Lender, or has otherwise publicly announced, that it believes 

 

16.

 

that it may be unable to fund advances under one or more credit agreements to which it is a party, or (iii) with respect to which one or more Lender-Related Distress Events has occurred, or (iv) with respect to which the Agent believes, acting reasonably, that such Lender has defaulted or may default in fulfilling its obligations (whether as an agent or lender) under one or more other credit agreements to which it is a party, or (v) with respect to which the Agent believes, acting reasonably, that there is a reasonable chance that such Lender will fail to fund any payment or Advance required to be made hereunder.

 

"Obligations" means, at any time and without duplication: (i) all direct and indirect, contingent and absolute indebtedness, obligations and liabilities of the Credit Parties to the Agent and the Lenders (or if the context requires, to any Lender) under or in connection with this Agreement and the Loan Documents (specifically including for greater certainty all Guarantees provided hereunder) at such time, specifically including the Outstanding Advances, all accrued and unpaid Interest thereon, and all fees, expenses and other amounts payable pursuant to this Agreement and the Loan Documents; plus (ii) the Hedging Obligations (if any) at such time; plus (iii) any obligations under Service Agreements at such time; provided that if otherwise specified or required by the context, "Obligations" shall mean any portion of the foregoing.

 

“Other Connection Taxes” means, with respect to the Lender, Taxes imposed as a result of a present or former connection between the Lender and the jurisdiction imposing such Tax (other than connections arising from such recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Advance or Loan Document).

 

“Outstanding Advances" means, at any time, the aggregate of all obligations of the Borrower to the Lenders (or if the context requires, to any Lender) in respect of all Advances made under Facility A which have not been repaid or satisfied at such time, determined as follows: (i) in the case of Canadian Prime Rate Loans, the principal amount thereof; and (ii) in the case of Bankers' Acceptances, BA Equivalent Notes, the face amount thereof.

 

"Owned Properties" means all Land owned by the Companies from time to time, including but not limited to the Project Property and any Land described in Schedule 4.01(k) attached hereto.

"Parent" means Aphria Inc. or any successor thereto including by way of amalgamation.

 

“Parent Subordinated Debt” means the unsecured indebtedness issued by the Borrower to the Parent in the principal amount of no less than Ninety-Eight Million Eight Hundred Thousand Dollars ($98,800,000), provided that such indebtedness is subject to the Parent Subordination Agreement.

 

“Parent Subordination Agreement” means the Intercreditor Agreement to be entered into by the Parent in favour of the Agent and the Lender on the Closing Date in form and substance satisfactory to the Lenders, as the same may be amended, restated, supplemented or replaced from time to time, pursuant to which the Parent agrees to subordinate and postpone the Parent Subordinated Debt to the Obligations and Security, which Intercreditor Agreement shall expressly permit the servicing of such Subordinated Debt only after the Conversion Date and in such case on account of interest on a monthly basis and principal on an annual basis subject to the prior Repayment required to be made pursuant to Section 2.04(c)(iv) (Annual Excess Cash Flow Sweep), and provided that immediately before and immediately after such Distribution, the Borrower shall be in pro forma compliance with the financial covenants in Section 5.03 and the Borrower shall have delivered a pro forma Compliance Certificate evidencing such compliance.

 

 

17.

 

 

"Parent Year-end Audited Financial Statements" in respect of any Fiscal Year means the audited consolidated financial statements of the Parent and the internally prepared financial statements of each of the other Credit Parties, in each case in respect of such Fiscal Year, including (in respect to the Parent audited consolidated financial statements) management’s discussion and analysis with respect thereto, from an accounting firm that is nationally recognized or major regional firm of chartered professional accountants.

 

"Patents" means all rights, title and interests (and all related IP Ancillary Rights) arising under any requirement of law in or relating to patents and applications therefor.

 

"Pension Plan" means each pension or superannuation plan that is a “registered pension plan” as defined in subsection 248(1) of the Income Tax Act (Canada) required to be registered under Canadian federal or provincial law that is maintained or contributed to by the Borrower for its employees or former employees, but does not include the Canada Pension Plan or the Quebec Pension Plan as maintained by the Government of Canada or the Province of Quebec, respectively or a Multi-employer Plan.

 

"Permitted Acquisition" means an Investment that is either an acquisition of Equity Interests in a Person (referred to herein as a "share purchase"), or an acquisition of assets of a Person not in the ordinary course of business (referred to herein as an "asset purchase"), in either case if all of the following criteria are satisfied (except to the extent otherwise agreed in writing by the Required Lenders in their discretion):

 

	
 
	
(a)
	
the Required Lenders acting reasonably shall have provided their prior written consent to such Acquisition after conducting such due diligence they may consider appropriate in the circumstances (for greater certainty, specifically including in respect of financial matters, the corporate and capital structure of such Person, key management, and business, environmental, regulatory, tax and legal matters, and the Borrower shall provide all information requested by the Required Lenders in connection with such due diligence at least fifteen (15) days prior to the proposed completion of such Acquisition);
	
 

 

	
 
	
(b)
	
such Person is engaged in a business similar to or vertically integrated with the Business conducted by the Borrower;
	
 

 

	
 
	
(c)
	
no portion of Facility A shall be used, directly or indirectly, in connection with the financing of the acquisition unless approved by the written consent of all of the Lenders in their discretion;
	
 

 

	
 
	
(d)
	
if the acquisition involves a hostile or unsolicited take-over, it must be approved by all Lenders in their discretion;
	
 

 

	
 
	
(e)
	
in the case of a share purchase, upon the completion of such acquisition (i) all Funded Debt (except Funded Debt which will constitute Permitted Funded Debt hereunder) of such Person shall be repaid and all Liens (except Liens which will constitute Permitted Liens hereunder) affecting the assets of such Person shall be released and discharged, in each case within thirty (30) days of the acquisition;
	
 

 

	
 
	
(f)
	
in the case of a share purchase, the Subsidiary acquired shall be a wholly owned Subsidiary of the Borrower and shall provide a Guarantee and all other Security required herein to be provided in accordance with the requirements of Section
	
 

7.01 (including registrations, searches, legal opinions and ancillary documentation);

	
 
	
(g)
	
in the case of an asset purchase, (i) upon the completion of such transaction, all Funded Debt (except Funded Debt which will constitute Permitted Funded Debt hereunder) 
	
 

 

18.

 

	
 
		
secured by the acquired assets shall be repaid within thirty (30) days following the completion of the acquisition; (ii) within thirty (30) days following the completion of such transaction, all Liens (except Liens which will constitute Permitted Liens hereunder) affecting such assets shall be released and discharged; (iii) within thirty (30) days following completion of such transaction, all Security required herein to be provided to the Agent in respect of such assets (including registrations, searches, legal opinions and ancillary documentation) shall be provided; and (iv) the asset purchase shall not involve the assumption of any material environmental liabilities, and all representations and warranties contained herein with respect to environmental matters shall be true and correct both immediately before and immediately after such acquisition in all material respects; and if, as a result of the acquisition, any Company will acquire ownership of any Real Property, the Borrower shall have provided an environmental questionnaire in form and substance satisfactory to the Agent in respect of such Real Property which evidences such material compliance with all such representations and warranties;
	
 

 

	
 
	
(h)
	
in the case of a share purchase, the acquired asset will only be located in an Approved Jurisdiction and used or useful in a business which is the same as or related, ancillary or complimentary to the Business carried on by the Companies;
	
 

 

	
 
	
(i)
	
in the case of a share purchase, if the target of a share purchase carries on any Cannabis Activities, the entity which will carry on the acquired business will own assets and carry on business only in one or more Approved Jurisdictions and the right to acquire Equity Interests shall be not exercisable until the earlier of: (i) the Cannabis Activities in which the target proposes to engage are legal at all required levels of government in the jurisdiction(s) in which the target is or proposes to operate, and (ii) the applicable Company has received approval to exercise such right from any stock;
	
 

 

	
 
	
(j)
	
the Borrower shall deliver a Compliance Certificate evidencing that it is in compliance in all material respects with all covenants and confirming the representations and warranties under this Agreement including the requirements in this definition of Permitted Acquisition and will remain in compliance in all material respects after giving effect to such acquisition; and no Default or Event of Default shall have occurred and be continuing or would result from the completion of such acquisition;
	
 

 

	
 
	
(k)
	
if the Borrower proposes to incur Subordinated Debt to finance all or any portion of such acquisition, the terms and conditions of such Subordinated Debt shall be satisfactory to the Required Lenders, and the holder(s) of such Subordinated Debt shall enter into a Intercreditor Agreement with the Agent containing terms and conditions contemplated in the definition of "Subordinated Debt" herein; and
	
 

 

	
 
	
(l)
	
if any such transaction would constitute both a Permitted Acquisition and a Capital Expenditure, it shall be deemed to constitute a Permitted Acquisition and not a Capital Expenditure.
	
 

 

"Permitted Funded Debt" means, without duplication: (i) the Obligations; (ii) indebtedness of any Company to another Company; (iii) Subordinated Debt; (iv) the Parent Subordinated Debt provided that the same constitutes Subordinated Debt, is unsecured, and is subject to the Parent Subordination Agreement; (v) Funded Debt of the Companies secured by Permitted Liens; (vi) obligations under any Guarantees which are considered to constitute Funded Debt, but only to the extent such Guarantees are permitted pursuant to this Agreement; (vii) Funded Debt in respect of corporate credit cards programs established by a financial institution other than BMO in an aggregate outstanding amount not to exceed Fifty Thousand Dollars ($50,000) (or equivalent in foreign currency), (viii) unsecured Funded Debt not referred to elsewhere in this definition in an aggregate outstanding amount not to exceed Two Million Dollars ($2,000,000); and (ix) any other Funded Debt consented to in writing by the Lenders.

 

 

19.

 

 

"Permitted Liens" means:

 

	
 
	
(a)
	
Statutory Liens (i) in respect of any amount which is not at the time overdue or (ii) in respect of any amount which may be past due but the quantum or validity of which is being diligently contested in good faith by appropriate proceedings and in respect of which any right of seizure or sale is stayed pending resolution of the dispute or (iii) that in the aggregate, not including those included in (i) or (ii) do not exceed $250,000 and in respect of which reserves (if any are required by GAAP) have been established to the extent required in accordance with GAAP;
	
 

 

	
 
	
(b)
	
Liens or rights of distress reserved in or exercisable under any lease of Land for rent and, in the case of Land material to the operation of the Business of the Companies taken as a whole, not at the time overdue or for compliance with the terms of such lease not at the time in default; and security deposits given in the ordinary course under leases of Land not in excess of six (6) months' rent; it is acknowledged that the Project Property is material to the operation of the Business of the Companies taken as a whole;
	
 

 

	
 
	
(c)
	
any obligations or duties affecting any Land due to any public utility or to any municipality or government, or to any statutory or public authority, with respect to any franchise, grant, licence or permit in good standing and any defects in title to structures or other facilities arising solely from the fact that such structures or facilities are constructed or installed on Land under government permits, leases or other grants in good standing; and if the Land subject thereto is material to the operation of the Business of the Companies taken as a whole, which obligations, duties and defects in the aggregate do not materially impair the use of such property, structures or facilities for the purpose for which they are held; it is acknowledged that the Project Property is material to the operation of the Business of the Companies taken as a whole;
	
 

 

	
 
	
(d)
	
Liens incurred or deposits of cash made or pledged to secure obligations under workers' compensation legislation or similar legislation, or in connection with contracts, bids, tenders or expropriation proceedings, surety or appeal bonds, costs of litigation when required by law, public and statutory obligations, and warehousemen's, storers', repairers', carriers' and other similar Liens and deposits;
	
 

 

	
 
	
(e)
	
security given to a public utility or any municipality or government or to any statutory or public authority to secure obligations incurred to such utility, municipality, government or other authority in the ordinary course of business and (i) not at the time overdue or (ii) which are past due, but the quantum or validity of such obligations is being diligently contested in good faith by appropriate proceedings and in respect of which any right of seizure or sale is stayed pending resolution of the dispute or (iii) that, in the aggregate, not including those referred to in (i) and (ii) do not exceed $250,000 and in respect of which reserves (if any are required by GAAP) have been established to the extent required in accordance with GAAP;
	
 

 

	
 
	
(f)
	
Liens and privileges arising out of judgments or awards (i) which are satisfied before they are executed upon and which do not constitute an Event of Default under Section 8.01(n) or (ii) in respect of which (A) an appeal or proceeding for review has been commenced; (B) a stay of execution pending such appeal or proceedings for review has been obtained; and (C) reserves (if any are required by GAAP) have been established to the extent required in accordance with GAAP;
	
 

 

	
 
	
(g)
	
Liens for taxes, customs duties, local improvement charges, levies, rates and assessments (i) not yet due or (ii) or which are past due but the quantum or validity of which is being contested diligently and in good faith by the Borrower by appropriate 
	
 

 

20.

 

	
 
		
proceedings and in respect of which any right of seizure or sale is stayed pending resolution of the dispute or (iii) that in the aggregate, not including those in (i) and (ii) for which a final assessment has not been received which do not exceed $250,000 and in respect of which reserves (if any are required by GAAP) have been established to the extent required in accordance with GAAP;
	
 

 

	
 
	
(h)
	
undetermined or inchoate Liens, charges and privileges incidental to current construction or current operations and statutory liens, charges, adverse claims, security interests or encumbrances of any nature whatsoever claimed or held by any Governmental Authority, provided the same are not of such nature as to create a Material Adverse Change or adversely affect in any material way the operations of the Business of the Companies taken as a whole;
	
 

 

	
 
	
(i)
	
any Lien arising in connection with the construction or improvement of any Land or arising out of the furnishing of materials or supplies therefor, provided that such Lien secures moneys (i) not at the time overdue or (ii) which are past due, but the quantum or validity thereof is being contested diligently and in good faith by appropriate proceedings and in respect of which any right of seizure or sale is stayed pending resolution of the dispute or (iii) that in aggregate, not including those referred to in (i) and (ii) do not exceed $250,000, and in respect of which a Lien has not been registered against title to such Land and in respect of which reserves (if any are required by GAAP) have been established to the extent required in accordance with GAAP;
	
 

 

	
 
	
(j)
	
common law rights of set-off, off-set or combinations of account, civil law rights of compensation or contractual rights of set-off, off-set or recourse to account balances incurred in the ordinary course (i) relating to the establishment of depository relations with a financial institution permitted hereunder and not given in connection with the issuance of Funded Debt, (ii) relating to pooled deposit or sweep accounts or cash pooling arrangements (including with respect to any joint and several liability provisions in relation thereto) permitted hereunder to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Borrower and any Subsidiary, (iii) relating to debit card or other payment services permitted hereunder or (iv) relating to purchase orders and other agreements (other than Funded Debt) entered into with customers in the ordinary course of business;
	
 

 

	
 
	
(k)
	
licences, easements, rights-of-way and rights in the nature of easements (including licences, easements, rights-of-way and rights in the nature of easements for sidewalks, public ways, sewers, drains, gas, steam and water mains or electric light and power, or telephone and telegraph conduits, poles, wires and cables) and zoning, land use and building restrictions, by-laws, regulations and ordinances of federal, provincial, municipal and other Governmental Authorities that, in the opinion of the Required Lenders, will not materially impair the use of the affected Land for the purpose for which it is used by that Person;
	
 

 

	
 
	
(l)
	
the right reserved to or vested in any Government Authority by the terms of any lease, licence, franchise, grant or permit 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;
	
 

 

	
 
	
(m)
	
the Lien resulting from the deposit of cash or securities in connection with contracts, tenders or expropriation proceedings, or to secure workers’ compensation, unemployment insurance, surety or appeal bonds, costs of litigation when required by law, liens and claims incidental to current construction, mechanics’, warehousemen’s, carriers’ and 
	
 

 

21.

 

	
 
		
other similar liens, and public, statutory and other like obligations incurred in the ordinary course, up to a maximum aggregate amount deposited at any time of $500,000 for all Companies;
	
 

 

	
 
	
(n)
	
Liens solely on any cash earnest money deposits made in connection with any letter of intent or purchase agreement permitted hereunder;
	
 

 

	
 
	
(o)
	
Minor Title Defects;

 

	
 
	
(p)
	
Permitted Purchase-Money Security Interests;

 

	
 
	
(q)
	
the Specific Permitted Liens; and

 

	
 
	
(r)
	
the Security

 

provided that the use of the term "Permitted Liens" to describe the foregoing Liens shall mean that such Liens are permitted to exist (whether in priority to or subsequent in priority to the Security, as determined by Applicable Law); and for greater certainty such Liens shall not be entitled to priority over the Security by virtue of being described in this Agreement as "Permitted Liens".

 

"Permitted Purchase-Money Security Interests" means Purchase-Money Security Interests incurred or assumed in compliance with the provisions of this Agreement in connection with the purchase, leasing or acquisition of capital equipment in the ordinary course of business, provided that the aggregate amount of the Companies’ liability thereunder is not at any time greater than Three Million Five Hundred Thousand Dollars ($3,500,000).

"Person" is defined in the CBA Model Provisions.

 

“PPSA” shall mean the Personal Property Security Act (Ontario); provided that if by reason of mandatory provisions of law, the perfection, the effect of perfection or non- perfection or the priority of the Liens of the Agent in any Collateral or any other matter relating to Collateral is governed by the Personal Property Security Act as in effect in a jurisdiction other than Ontario or the Civil Code of Quebec, the term “PPSA” shall mean such other legislation as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority or other matter.

 

"Proceeds of Realization", in respect of the Security or any portion thereof, means all amounts received by the Agent and any Lender under the Security in connection with:

 

	
 
	
(a)
	
any realization thereof, whether occurring as a result of enforcement or otherwise;
	
 

 

	
 
	
(b)
	
any sale, expropriation, loss or damage or other disposition of any Property subject to the Security or any portion thereof (other than a disposition of Property made pursuant to Section 5.02(c); and
	
 

 

	
 
	
(c)
	
the dissolution, liquidation, bankruptcy or winding-up of any Credit Party or any other distribution of its assets to creditors;
	
 

 

and all other amounts which are expressly deemed to constitute "Proceeds of Realization" in this Agreement.

 

“Project” means the greenhouse located on the Project Property to be used for cannabis cultivation and processing.

 

 

22.

 

 

“Project Property” means the Lands municipally known as 620 Essex County Road 14, Leamington, Ontario and legally described as:

 

PIN 75086-0239 LT

 

1STLY; PART OF LOT 6, CONCESSION 8 MERSEA, PARTS 1, 3, 5, 7, 8 AND 9 PLAN 12R26840 SAVE AND EXCEPT PARTS 1, 2 AND 3 PLAN 12R27357; S/T RESERVATIONS IN R1198184 AND R1198185; T/W R1198185 2NDLY;PT N1/2 LT 6 CON 8 MERSEA PT 1, 2, 3 12R1420 S/T R1394739; SUBJECT TO AN EASEMENT OVER PARTS 3 AND 8 PLAN 12R26840 AS IN MS36159; SUBJECT TO AN EASEMENT IN GROSS AS IN CE746822; MUNICIPALITY OF LEAMINGTON

 

“Project Property Lending Value” means, in respect of the single Advance under Facility A, the lending value attributed by the Lenders in their discretion to the Project Property immediately before such Advance, taking into consideration costs incurred and an Acceptable Appraisal on an "as completed" basis.

 

“Property” means, with respect to any Person, any or all of its present and future undertaking, property and assets, whether tangible or intangible, and includes rights under contracts and permits and all Owned Properties.

"Proportionate Share" in respect of any Lender means:

 

	
 
	
(a)
	
in the context of such Lender's obligation to make Advances under Facility A, such Lender's Commitment to make Advances under Facility A divided by the aggregate amount of all Lenders' Commitments to make Advances under Facility A;
	
 

 

	
 
	
(b)
	
subject to Section 9.03, in the context of any Lender's entitlement to receive payments of principal, interest or fees in respect of Facility A, the Outstanding Advances due to such Lender under Facility A divided by the aggregate amount of the Outstanding Advances due to all Lenders under Facility A; and
	
 

 

	
 
	
(c)
	
in any other context, such Lender's Commitment divided by the aggregate of all Lenders' Commitments.
	
 

 

"Purchase-Money Security Interest" means (i) a Capital Lease; or (ii) a Lien on any property or asset which is created, issued or assumed to secure the unpaid purchase price thereof, provided that such Lien is restricted to such property or asset (including all additions thereto, replacements thereof, insurance thereon and proceeds thereof) and secures an amount not in excess of the purchase price thereof (including any costs of shipping, assembly, installation, insurance, freight and transfer taxes) and any interest and fees payable in respect thereof.

 

"Real Property" means the Owned Properties and the Material Leased Properties and “Real Property” means any one of them.

 

"Related Party" is defined in the CBA Model Provisions.

 

"Repayment" means a repayment by the Borrower on account of the Outstanding Advances.

 

"Repayment Notice" means a notice delivered by the Borrower to the Agent committing it to make a Repayment, in the form of Exhibit "E".

 

"Required Lenders" means, (i) at any time prior to the occurrence of an Event of Default which is continuing, any two (2) or more Lenders which have issued Commitments hereunder representing two-thirds (2/3) or more of the aggregate amount of all Lenders' Commitments; and 

 

23.

 

(ii) at any time after the occurrence of an Event of Default which is continuing, any two (2) or more Lenders which have Outstanding Advances representing two-thirds (2/3) or more of the total amount of the Outstanding Advances under Facility A; provided however that if at any time there are only two (2) Lenders under this Agreement, "Required Lenders" shall mean both such Lenders, and if at any time there is only one (1) Lender under this Agreement, "Required Lenders" shall mean such Lender.

 

"Requirements of Environmental Law" means: (i) obligations under common law; (ii) requirements having the force of law imposed by or pursuant to statutes, regulations and by-laws whether presently or hereafter in force; (iii) requirements announced by a Governmental Authority as having immediate effect (provided that at the time of making such announcement the government also states its intention of enacting legislation to confirm such requirements retroactively); (iv) all directives, policies and guidelines issued or relied upon by any Governmental Authority to the extent such directives policies or guidelines have the force of law; (v) all permits, licenses, certificates and approvals from Governmental Authorities which are required in connection with air emissions, discharges to surface or groundwater, noise emissions, solid or liquid waste disposal, the use, generation, storage, transportation or disposal of Hazardous Materials; and (vi) all requirements imposed under any clean-up, compliance or other order made pursuant to any of the foregoing, in each and every case relating to environmental, health or safety matters including all such obligations and requirements which relate to (A) solid, gaseous or liquid waste generation, handling, treatment, storage, disposal or transportation of Hazardous Materials and (B) exposure to Hazardous Materials.

 

“Responsible Person” means, with respect to any Credit Party holding a Health Canada License, its person designated as such for the purposes of the Cannabis Act and the Cannabis Regulations.

 

"Rollover" means the renewal of an Availment Option upon its maturity in the same form.

 

"Rollover Notice" means a notice substantially in the form of Exhibit "C" given by the Borrower to the Agent for the purpose of requesting a Rollover.

“Sale-Leaseback” means an arrangement, transaction or series of arrangements or transactions under which title to any real property, tangible personal property or fixture is transferred by a Company (a “transferor”) to another Person which leases or otherwise grants the right to use such property to the transferor (or nominee of the transferor) and, whether or not in connection therewith, the transferor also acquires a right or is subject to an obligation to acquire such property or a material portion thereof, and regardless of the accounting treatment of such arrangement, transaction or series of arrangements or transactions.

 

“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 United Nations Security Council, the European Union, Her Majesty’s Treasury or other relevant sanctions authority.

 

“Sanctioned Entity” means (a) a country or a government of a country, (b) an agency of the government of a country, (c) an organization directly or indirectly controlled by a country or its government, or (d) a Person resident in or determined to be resident in a country, in each case, that is subject to a country sanctions program administered and enforced by OFAC, the US Department of State or any equivalent agency or body in Canada.

 

“Sanctioned Person” means a person named on the list of Specially Designated Nationals maintained by OFAC.

 

 

24.

 

 

"Security" means all Guarantees, security agreements, mortgages, debentures and other documents required to be provided to the Agent or the Lenders pursuant to ARTICLE VI and all other agreements required or contemplated herein to be delivered by the Credit Parties and other Persons to the Agent for the benefit of the Lenders from time to time as security for the payment and performance of the Obligations, and the security interests, assignments and Liens constituted by the foregoing.

"Senior Officer" means the President, Chief Financial Officer, Chief Executive Officer or corporate Secretary of the Borrower.

 

"Service Agreements" means all agreements from time to time made between any Company and BMO or any of its Affiliates (specifically including Harris N.A.) in respect of cash management, payroll, corporate credit cards or other banking services.

 

“Shareholders’ Agreement” means the Unanimous Shareholders Agreement dated February 16th, 2018 among the Parent, 2609733 Ontario Limited, Chris Mastronardi Benji Mastronardi, and the Borrower.

 

"Shareholders' Equity" means, in respect of any period, the consolidated shareholders' equity of the Parent for such period determined in accordance with GAAP.

 

"Solvent" means, with respect to any Credit Party as of the date of determination, (i) the aggregate property of such Credit Party is sufficient, if disposed of at a fairly conducted sale under legal process, to enable payment of all its obligations, due and accruing due;

	
 
	
(ii)
	
such Credit Party is able to meet its obligations as they generally become due; and

(iii)such Credit Party has not ceased paying its current obligations in the ordinary course of business as they generally become due; for purposes of this definition, the amount of any contingent obligation at such time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

 

"Specific Permitted Liens" means the Liens described in Schedule 4.01(j) as such Liens may be amended or replaced from time to time on substantially similar terms and conditions, provided that the principal amount of the indebtedness secured by each such Lien shall not be increased.

 

"Statutory Lien" means a Lien in respect of any Property a Credit Party created by or arising pursuant to any applicable legislation in favour of any Person (such as but not limited to a Governmental Authority), including, without limitation, a Lien for the purpose of securing such Credit Party's obligation to deduct and remit employee source deductions and goods and services tax pursuant to the Income Tax Act (Canada), the Excise Tax Act (Canada), the Canada Pension Plan (Canada), the Employment Insurance Act (Canada) and any legislation in any jurisdiction similar to or enacted in replacement of the foregoing from time to time.

 

"Subordinated Debt" means indebtedness of any Company to any Person which the Lenders in their sole discretion have consented to in writing and in respect of which the holder thereof has entered into a Intercreditor Agreement in favour of the Agent in form and substance satisfactory to the Agent and registered in all places where necessary or desirable to protect the priority of the Security, which shall provide (among other things) that: (i) the maturity date of such indebtedness is later than the Maturity Date; (ii) the holder of such indebtedness may not receive any payments on account of principal or interest thereon (except to the extent, if any, expressly permitted therein); (iii) any security held in respect of such indebtedness is subordinated to the Security; (iv) the holder of such indebtedness may not take any enforcement action in respect of any such security (except to the extent, if any, otherwise expressly provided therein) without the prior 

 

25.

 

written consent of the Agent; and (v) any enforcement action taken by the holder of such indebtedness will not interfere with the enforcement action (if any) being taken by the Agent in respect of the Security.

“Subsidiaries” means the business entities which are controlled by another business entity (as used herein, "business entity" includes a corporation, company, partnership, limited partnership, trust or joint venture); and for greater certainty includes a Subsidiary of a Subsidiary; and “Subsidiary” means any of them as the context requires.

 

“Supply Agreement” means the amended and restated wholesale cannabis supply agreement between the Parent as purchaser and the Borrower as supplier dated November 26, 2019.

 

“Tangible Net Worth” means in respect of any Person at any time, the excess of its total assets over its total liabilities; provided that the determination of such total assets shall exclude: (a) all goodwill, organizational expenses, research and development expenses, trademarks, trade mark applications, trade names, copyrights, patents, patent applications, licenses and rights in any thereof, and other similar intangibles; (b) all prepaid expenses, deferred charges or unamortized debt discount and expense; (c) all reserves carried and not deducted from consolidated assets; (d) any write-up in the book value of any capital asset resulting from a revaluation thereof; (e) prior to the Conversion Date, the Parent Subordinated Debt provided the same constitutes Permitted Funded Debt; and (f) any items not included in clauses (a) through (f) of this definition which are treated as intangibles under GAAP. For clarity, “Tangible Net Worth” will include biological assets at book value, inventory (including fair value components), and minority interests.

 

"Taxes" is defined in the CBA Model Provisions.

 

“Termination Date” means the date on which (i) all Obligations due and owing under the Loan Documents have been paid in full, other than contingent claims for which no unsatisfied demand for payment has been made, (ii) all Commitments have been cancelled or lapsed and (iii) all Hedging Agreements (if any) have been terminated and all amounts due and owing thereunder (if any) have been paid in full or cash collateral is provided in respect thereof.

 

"Total Funded Debt" means, in respect of any Person at any time, its Funded Debt at such time, specifically including for greater certainty the Outstanding Advances owing by it at such time.

 

“Total Funded Debt to EBITDA Ratio" means, for any period, the ratio of (i) Total Funded Debt of the Companies at the end of such period to (ii) consolidated EBITDA of the Companies for such period.

 

"Trade Secrets" means all right, title and interest (and all related IP Ancillary Rights) arising under any requirement of law in or relating to trade secrets.

"Trademarks" means all right, title and interest (and all related IP Ancillary Rights) in trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers and, in each case, all goodwill associated therewith, all registrations and recordations thereof and all applications in connection therewith.

 

“Unfunded Capital Expenditures” means Capital Expenditures made by the Companies, which is (are): (i) financed by operating cash flow net of proceeds from Dispositions permitted hereunder, (ii) not financed under Capital Leases, (iii) not financed with the proceeds of Facility A, (iv) not financed with the proceeds of other Permitted Funded Debt incurred substantially to fund such Capital Expenditures, and (v) not financed with new equity.

 

 

26.

 

 

	
 
	
1.02
	
Accounting Principles

 

Except as otherwise provided herein, (i) each financial term in this Agreement shall be interpreted in accordance with GAAP in effect on the date of such interpretation; and (ii) where the character or amount of any asset or liability or item of revenue or expense is required to be determined, or any consolidation or other computation is required to be made for the purpose of this Agreement, such determination or calculation shall be made in accordance with GAAP in effect on the date of such determination. Notwithstanding the foregoing, if after the date of this Agreement there is an accounting change under GAAP (referred to herein as an "accounting change"), and if any financial ratio or amount determined pursuant to Section 5.02(w) would be materially different as a result of such accounting change, such financial ratio or amount shall be determined without regard to such accounting change and for the information of the Lenders the Parent shall also deliver to the Lenders a reconciliation in form and substance satisfactory to the Lenders.

 

	
 
	
1.03
	
Currency References

 

All amounts referred to in this Agreement are in Canadian Dollars unless otherwise noted.

 

	
 
	
1.04
	
References to Statutes

 

Whenever in this Agreement reference is made to a statute or regulations made pursuant to a statute, such reference shall, unless otherwise specified, be deemed to include all amendments to such statute or regulations from time to time and all statutes or regulations which may come into effect from time to time substantially in replacement for the said statutes or regulations.

 

	
 
	
1.05
	
Extended Meanings

 

Terms defined in the singular have the same meaning when used in the plural, and vice- versa. When used in the context of a general statement followed by a reference to one or more specific items or matters, the term "including" shall mean "including, without limitation", and the term "includes" shall mean "includes, without limitation". Any reference herein to any action to be taken or decision to be made by the Agent or the Lenders (or the Required Lenders, as the case may be) in their "sole discretion" shall mean that such sole discretion is absolute and unfettered.

 

	
 
	
1.06
	
Joint and Several Obligations

 

All obligations under ARTICLE X which are stated to be obligations of the Guarantors or any one or more of them shall, to the extent permitted by Applicable Law, be joint and several obligations of each of the Guarantors.

 

	
 
	
1.07
	
Exhibits and Schedules

 

The following exhibits and schedules are attached to this Agreement and incorporated herein by reference:

 

 

27.

 

 

Exhibits

 

	
"A"
	
-
	
Lenders and Lenders' Commitments 

	
"B"
	
-
	
Draw Request

	
"C"
	
-
	
Rollover Notice 

	
"D"
	
-
	
Conversion Notice

	
"E"
	
-
	
Repayment Notice

	
"F"
	
-
	
Compliance Certificate

	
"G"
	
-
	
Form of BA Equivalent Note

	
"H"
	
-
	
CBA Model Provisions

	
“I”
	
-
	
Agreement and Acknowledgement to be bound – New Guarantor

 

Schedules

 

	
4.01(b)
	
-
	
Corporate Information 

	
4.01(h)
	
-
	
Material Permits 

	
4.01(i)
	
-
	
Cannabis Investments

	
4.01(j)
	
-
	
Specific Permitted Liens 

	
4.01(k)
	
-
	
Owned Properties

	
4.01(l)
	
-
	
Material Leased Properties 

	
4.01(m)
	
-
	
Intellectual Property 

	
4.01(o)
	
-
	
Material Agreements 

	
4.01(p)
	
-
	
Labour Agreements 

	
4.01(q)
	
-
	
Environmental Matters 

	
4.01(r)
	
-
	
Litigation

	
4.01(s)
	
-
	
Pension Plans and Multi-employer Plans

 

ARTICLE II– FACILITY A (TERM FACILITY)

 

	
 
	
2.01
	
Establishment of Facility A

 

Subject to the terms and conditions in this Agreement, the Lenders hereby establish, on a several and not joint or joint and several basis, in favour of the Borrower, a committed, non- revolving credit facility referred to as “Facility A”, in the maximum aggregate principal amount of Eighty Million Dollars ($80,000,000) (the “Facility A Limit”). Each Lender’s commitment in respect of Facility A shall be limited to the maximum principal amount indicated opposite such Lender's name in Exhibit "A" under the heading "Facility A Commitments". Each Advance by a Lender under Facility A shall be made by such Lender in its Proportionate Share of Facility A.

 

Any undrawn amount under Facility A on the Closing Date shall be cancelled and the Lender’s Commitments in respect of such unused portion shall be reduced in accordance with their Proportionate Share.

 

	
 
	
2.02
	
Purpose

 

Subject to the terms hereof, Advances under Facility A shall be used by the Borrower by way of a single Advance on the Closing Date as follows: (i) not less than Fifty Million Dollars ($50,000,000) shall be used by the Borrower to refinance Funded Debt owed to the Parent by the Borrower on the Closing Date in respect of the Project and the Project Properties (which for clarity, is in addition to the Parent Subordinated Debt), but provided that the balance of the remainder of the Facility A availability is sufficient to pay such remaining Project Costs, and (ii) the balance of Facility A shall be used by the Borrower to refinance greenhouse retrofit costs and specific Capital Expenditures in respect of the 

 

28.

 

Project, to pay closing and transactional costs on the Closing Date and for working capital of the Borrower.

 

	
 
	
2.03
	
Non-Revolving Nature

 

Facility A shall be a non-revolving facility, and any Repayment under Facility A may not be reborrowed.

 

	
 
	
2.04
	
Repayment

 

	
 
	
(a)
	
Notwithstanding all other provisions in this Section 2.04 the Obligations under Facility A shall become due and payable by the Borrower on the earliest of: (i) the Acceleration Date; and (ii) the Maturity Date.
	
 

 

	
 
	
(b)
	
Without limiting (a) above, the Borrower shall make a Repayment under Facility A on the last Business Day of each Fiscal Quarter commencing on the last Business Day in the first full Fiscal Quarter following the Conversion Date. Principal instalments shall be calculated on the Outstanding Advances under Facility A on the Conversion Date assuming an amortization of one hundred and twenty (120) months.
	
 

 

	
 
	
(c)
	
In addition to all other Repayments required pursuant to Section 2.04 (a) and (b) above, the following Repayments shall be required:
	
 

 

	
 
	
(i)
	
If any Company receives proceeds from a policy of insurance in respect of any Collateral, the Borrower shall make a Repayment to the Agent in an amount equal to the portion of such proceeds not permitted to be retained by such Company as provided in Section 6.07, within three (3) Business Days after receipt thereof.
	
 

 

	
 
	
(ii)
	
If any Company receives proceeds (net of transaction expenses) from the raising of capital by way of equity or Funded Debt (excluding Permitted Funded Debt), the Borrower shall make a Repayment to the Agent in an amount equal to one hundred percent (100%) of such net proceeds, within three (3) Business Days after receipt thereof.
	
 

 

	
 
	
(iii)
	
If any Company receives proceeds (net of transaction expenses, applicable taxes and usual adjustments) from a transaction involving the sale or other disposition of Property not in the ordinary course of business permitted under this Agreement, then the Borrower shall within three (3) Business Days of such receipt, make a Repayment to the Agent in an amount equal to one hundred percent (100%) of such net proceeds to the extent such net proceeds are not used to purchase similar assets with similar value within such one hundred and eighty (180) days period. Notwithstanding the foregoing however, the first One Million Dollars ($1,000,000) of net proceeds under this clause (iii) in the aggregate in any Fiscal Year shall not be required to be applied as a Repayment.
	
 

 

	
 
	
(iv)
	
The Borrower shall make a Repayment to the Agent within one hundred and twenty (120) days after the end of each Fiscal Year of the Borrower, commencing with the Fiscal Year ending May 31, 2021, in an amount equal to fifty percent (50%) the of Annual Excess Cash Flow if the Borrower’s Total Funded Debt to EBITDA Ratio is greater than 2.00:1 in respect of such Fiscal Year, unless such Repayment with the prior written consent of the Lenders is waived in respect of any Fiscal Year.
	
 

 

 

29.

 

 

	
 
	
(d)
	
The net proceeds required to be applied as a Repayment pursuant to paragraph (c) above shall be applied firstly against the Borrower’s obligations to make scheduled Repayments under Facility A, in reverse chronological order (including for clarity, the balloon payment payable on the Maturity Date) until paid in full.
	
 

 

	
 
	
2.05
	
Availment Options

 

	
 
	
(a)
	
Subject to the restrictions contained in this Agreement (and in particular, Sections 3.02 and 3.03) the Borrower may receive Advances under Facility A by any one (1) or more of the following Availment Options (or any combination thereof):
	
 

 

	
 
	
(i)
	
Canadian Prime Rate Loans;

 

	
 
	
(ii)
	
Bankers' Acceptances, each having a maturity between twenty-eight (28) and one hundred and eighty-two (182) days (inclusive), subject to availability; or
	
 

 

	
 
	
(iii)
	
BA Equivalent Loans from Non-BA Lenders with a maturity between twenty-eight (28) and one hundred and eighty-two (182) days (inclusive), subject to availability;
	
 

 

	
 
	
(b)
	
Bankers' Acceptances and BA Equivalent Loans will not be issued which in the opinion of the Lenders could result in the Facility A Limit being exceeded at any time. The Outstanding Advances under Facility A in the form of any above Availment Option may be converted into another form of Availment Option, subject to and in accordance with the terms and conditions of this Agreement (but for greater certainty, Bankers' Acceptances and BA Equivalent Loans may not be converted into another Availment Option prior to the maturity thereof).
	
 

 

	
 
	
2.06
	
Interest and Fees

 

In respect of Advances made under Facility A, the Borrower agrees to pay the following:

 

	
 
	
(a)
	
interest on Canadian Prime Rate Loans at the Canadian Prime Rate plus the Applicable Margin per annum, payable monthly in arrears on the last day of each and every month and on the Maturity Date;
	
 

 

	
 
	
(b)
	
in respect of each Bankers' Acceptance, a stamping fee equal to the Applicable Margin, multiplied by the face amount of the Bankers' Acceptance with the product thereof further multiplied by the number of days to maturity of the Bankers' Acceptance and divided by three hundred and sixty-five (365) or three hundred and sixty-six (366), payable at the time of acceptance; and 
	
 

	
 
	
(c)
	
in respect of each BA Equivalent Note, a stamping fee equal to the Applicable Margin, multiplied by the face amount of the BA Equivalent Note with the product thereof further multiplied by the number of days to maturity of the BA Equivalent Note and divided by three hundred and sixty-five (365) or three hundred and sixty-six (366), payable at the time of acceptance.
	
 

 

Except as otherwise provided in this Agreement, such payments shall be made to the Agent for the account of the Lenders; and the Agent shall promptly remit to each Lender its Proportionate Share of each such payment.

 

	
 
	
2.07
	
Voluntary Cancellation; Voluntary Repayments

 

Upon delivery of an executed Repayment Notice to the Agent not less than one (1) Business Day and not more than three (3) Business Days prior to making a Repayment, the Borrower may make 

 

30.

 

Repayments on account of the Outstanding Advances under Facility A from time to time in a minimum amount of Five Hundred Thousand Dollars ($500,000) and multiples of One Hundred Thousand Dollars ($100,000) without payment of any penalty or fee; provided the Borrower shall at its own expense also concurrently unwind Hedge Agreements to the extent necessary (if any) such that the aggregate notional amount of all outstanding Hedge Agreements does not exceed the Outstanding Advances under Facility A at such time; and further provided that Bankers' Acceptances and BA Equivalent Loans may not be repaid prior to the maturity thereof. Each such Repayment under Facility A shall be applied against the scheduled Repayments payable under Facility A in reverse chronological order.

 

ARTICLE III- GENERAL CONDITIONS

 

	
 
	
3.01
	
Matters Relating to Interest

 

	
 
	
(a)
	
Unless otherwise indicated, interest on any outstanding principal amount shall be calculated daily and shall be payable monthly in arrears on the last day of each and every month and on the Maturity Date. If the last day of a month is not a Business Day, the interest payment due on such day shall be made on the next Business Day, and interest shall continue to accrue on the said principal amount and shall also be paid on such next Business Day. Interest shall accrue from and including the day upon which an Advance is made or is deemed to have been made, and ending on but excluding the day on which such Advance is repaid or satisfied. Any change in the Canadian Prime Rate shall cause an immediate adjustment of the interest rate applicable to Canadian Prime Rate Loans without the necessity of any notice to the Borrower.
	
 

 

	
 
	
(b)
	
Unless otherwise stated, in this Agreement if reference is made to a rate of interest, fee or other amount "per annum" or a similar expression is used, such interest, fee or other amount shall be calculated on the basis of a year of three hundred and sixty-five (365) or three hundred and sixty-six (366) days, as the case may be. If the amount of any interest, fee or other amount is determined or expressed on the basis of a period of less than one year of three hundred and sixty-five (365) or three hundred and sixty-six (366) days, as the case may be, the equivalent yearly rate is equal to the rate so determined or expressed, divided by the number of days in the said period, and multiplied by the actual number of days in that calendar year. Interest and fees shall be calculated on the basis of a calendar year unless otherwise specified. All calculations of interest and fees under the Loan Documents shall be made on the basis of the nominal rates described in this Agreement and not on the basis of effective yearly rates or on any other basis that gives effect to the principle of deemed reinvestment. The Credit Parties acknowledge that there is a material difference between the stated nominal rates and effective yearly rates taking into account reinvestment, and that they are capable of making the calculations required to determine effective yearly rates.
	
 

 

	
 
	
(c)
	
Notwithstanding any other provisions of this Agreement, if the amount of any interest, premium, fees or other monies or any rate of interest stipulated for, taken, reserved or extracted under the Loan Documents would otherwise contravene the provisions of Section 347 of the Criminal Code (Canada), Section 8 of the Interest Act (Canada) or any successor or similar legislation, or would exceed the amounts which any Lender is legally entitled to charge and receive under any law to which such compensation is subject, then such amount or rate of interest shall be reduced to such maximum amount as would not contravene such provision; and to the extent that any excess has been charged or received such Lender shall apply such excess against the Outstanding Advances and refund any further excess amount.
	
 

 

 

31.

 

 

	
 
	
(d)
	
If interest or fees are not paid on the date due, the principal amount shall continue to bear interest at the rate that is applicable to the particular type of Advance determined from time to time in accordance herewith, subject to this Section 3.01(d), both before and after maturity, default and judgment, and overdue interest shall bear interest at the same rate, compounded monthly, and be payable on demand. Effective upon the occurrence of any Event of Default and for so long as any Event of Default shall be continuing, the interest rates, stamping fees, issuance fees otherwise payable hereunder shall automatically, immediately and without notice by the Agent to the Borrower be increased by two percent (2%) per annum (such increased rate, the "Default Rate"), to compensate the Agent and the Lenders for the additional risk, and all outstanding Obligations, including unpaid interest, stamping fees and issuance fees, shall continue to accrue interest from the date of such Event of Default at the Default Rate applicable to such Obligations. For greater certainty, the Default Rate shall apply whether or not the Agent declares all Obligations of the Borrower or any one or more of them to be immediately due and payable and whether or not the Agent takes any enforcement action or seeks to avail itself of any remedies hereunder.
	
 

 

	
 
	
3.02
	
Notice Periods

 

	
 
	
(a)
	
The Borrower shall provide two (2) Business Days' prior written notice to the Agent before 11:00 a.m. Toronto time in respect of any Advance, Rollover, Conversion or Repayment; other than a Conversion to a Canadian Prime Rate Loan which shall only require one (1) Business Day’s prior written notice to the Agent before 11:00 am Toronto time.
	
 

 

	
 
	
(b)
	
Notice of any Advance, Rollover, Conversion or voluntary Repayment referred to in paragraph (a) above shall be given in the form of a Draw Request, Rollover Notice, Conversion Notice or Repayment Notice, as the case may be, attached hereto as Exhibits.   All such notices shall be given to the Agent at its address set out in Section 12.07.
	
 

	
 
	
(c)
	
If notice is not provided as contemplated herein with respect to the maturity of a Bankers' Acceptance or BA Equivalent Loan, the Agent may convert the Bankers' Acceptance or BA Equivalent Loan upon its maturity into a Canadian Prime Rate Loan.
	
 

 

	
 
	
(d)
	
Any Conversion from one form of a Canadian Prime Rate Loan to Bankers’ Acceptances or a BA Equivalent Loan to another shall be subject to satisfaction of all of the terms and conditions applicable to the form of the new Availment Option as herein provided.
	
 

 

	
 
	
3.03
	
Minimum Amounts, Multiples and Procedures re Draws, Conversions and Repayments

 

	
 
	
(a)
	
Subject to paragraph (a) each request by the Borrower for an Advance or Conversion in the form of a Canadian Prime Rate Loan shall be in a minimum amount of Five Hundred Thousand Dollars ($500,000) and a multiple of One Hundred Thousand Dollars ($100,000).
	
 

 

	
 
	
(b)
	
Each request by the Borrower for an Advance by way of Bankers' Acceptances and BA Equivalent Notes shall be for an aggregate face amount of Bankers' Acceptances and BA Equivalent Notes of not less than Five Million Dollars ($5,000,000) and in a multiple of One Hundred Thousand Dollars ($100,000) and in such amount as will result in the face amount of each Bankers' Acceptance or BA Equivalent Note issued by a Lender being in a multiple of One Hundred Thousand Dollars ($100,000).
	
 

 

	
 
	
(c)
	
Upon receipt of a Draw Request under Facility A, the Agent shall promptly notify each Lender under Facility A of the contents thereof and such Lender's Proportionate Share of the Advance. Such Draw Request shall not thereafter be revocable.
	
 

 

32.

 

 

	
 
	
(d)
	
Each Advance shall be made by the applicable Lenders to the Agent at its address referred to in Section 12.07 or such other address as the Agent may designate by notice in writing to the Lenders from time to time. Each Lender shall make available its Proportionate Share of each said Advance to the Agent. Unless any condition of the Advance has not been satisfied or waived and the Agent has made that determination, the Agent shall make the funds so received from the Lenders available to the Borrower by 2:00 p.m. (Toronto time) on the requested date of the Advance. No Lender shall be responsible for any other Lender's obligation to make available its Proportionate Share of the said Advance.
	
 

 

	
 
	
(e)
	
The Borrower agrees to deliver in favour of each Lender such other agreements and documentation as such Lender may reasonably require (not inconsistent with this Agreement) in respect of such Lender's requirements for the acceptance of Bankers' Acceptances or the issuance of BA Equivalent Notes.
	
 

 

	
 
	
(f)
	
All payments of principal, interest and other amounts made by the Borrower to the Agent in respect of the Outstanding Advances under Facility A shall be paid by the Agent to the respective Lenders, each in accordance with its Proportionate Share thereof.
	
 

	
 
	
3.04
	
Place of Advances, Repayments

 

	
 
	
(a)
	
Advances by any Lender to the Borrower shall be made by such Lender to the Agent from such Lender's Lending Office in Canada. All payments of principal, interest and other amounts to be made by the Borrower pursuant to this Agreement shall be made to the Agent at its address noted in Section 12.07 or to such other address in Canada as the Agent may direct in writing from time to time. All such payments received by the Agent on a Business Day before 2:00 p.m. (Toronto time) shall be treated as having been received by the Agent on that day; and payments made after such time on a Business Day shall be treated as having been received by the Agent on the next Business Day.
	
 

 

	
 
	
(b)
	
Whenever any payment shall be due on a day which is not a Business Day, the date for payment thereof shall be extended to the next succeeding Business Day. Interest shall continue to accrue and be payable thereon as provided herein, until the date on which such payment is received by the Agent.
	
 

 

	
 
	
(c)
	
The Borrower hereby irrevocably authorizes the Agent to debit any account maintained by the Borrower with the Agent from time to time in order to pay any amount of principal, interest, fees, expenses or other amounts payable by the Borrower pursuant to this Agreement.
	
 

 

	
 
	
3.05
	
Evidence of Obligations (Noteless Advances)

 

The Agent shall open and maintain, in accordance with its usual practice, accounts evidencing the Obligations; and the information entered in such accounts shall constitute prima facie evidence of the Obligations absent manifest error. The Agent may, but shall not be obliged to, request the Borrower to execute and deliver promissory notes from time to time as additional evidence of the Obligations, in form and substance satisfactory to the Agent acting reasonably.

 

	
 
	
3.06
	
Determination of Equivalent Amounts

 

Whenever it is necessary or desirable at any time to determine the Equivalent Amount in Canadian Dollars of an amount expressed any other currency, or vice-versa, the Equivalent Amount shall be determined by reference to the Exchange Rate on the date of such determination.

 

 

33.

 

 

	
 
	
3.07
	
Purchase of Bankers' Acceptances and BA Equivalent Notes

 

	
 
	
(a)
	
In connection with the issuance by the Borrower of a Bankers' Acceptance or BA Equivalent Note, the amount payable by the purchaser thereof to the Borrower shall be determined in accordance with the following formula:
	
 

 

				
	
 
	
F
	
 
	
 

	
 
	
1 + (D x T/365)
	
 
	
 

 

where:

 

	
 
	
F
	
means the face amount of such Bankers' Acceptance or BA Equivalent Note,
	
 

	
 
	
D
	
means the discount rate applicable under paragraph (b), (c) or (d), as the case may be, below, and
	
 

 

	
 
	
T
	
means the number of days to maturity of such Bankers' Acceptance or BA Equivalent Note,
	
 

 

with the amount as so calculated being rounded up or down to the fifth decimal place and with 0.000005 being rounded up.

 

	
 
	
(b)
	
Each BA Lender which is a bank listed in Schedule I of the Bank Act (Canada) agrees to purchase those Bankers' Acceptances which it has accepted at a discount from the face amount thereof equal to the CDOR Rate for the relevant period in effect on the issuance date thereof; provided however that if BMO is the only BA Lender under Facility A, the discount rate shall be the applicable discount rate established by BMO on the issuance date thereof.
	
 

 

	
 
	
(c)
	
Each BA Lender which is a bank listed in Schedule II or Schedule III of the Bank Act (Canada) agrees to purchase those Bankers' Acceptances which it has accepted at a discount from the face amount thereof equal to the CDOR Rate for the relevant period in effect on the issuance date thereof plus a premium determined by such BA Lender not in excess of one-tenth of one percent (0.10%) per annum.
	
 

 

	
 
	
(d)
	
Each Non-BA Lender agrees to purchase BA Equivalent Notes issued by it hereunder at a discount from the face amount thereof equal to the CDOR Rate for the relevant period in effect on the issuance date thereof.
	
 

 

	
 
	
(e)
	
The discount applicable to each Bankers' Acceptances and BA Equivalent Note shall be determined on the basis of a year of three hundred and sixty-five (365) days.
	
 

 

	
 
	
3.08
	
Provisions Regarding Bankers' Acceptances

 

The following provisions are applicable to Bankers' Acceptances issued by the Borrower and accepted by any BA Lender hereunder:

 

Payment of Bankers' Acceptances

 

	
 
	
(a)
	
Subject to the next sentence, the Borrower agrees to provide for each Bankers' Acceptance by payment of the face amount thereof to the Agent on behalf of the BA Lender on the maturity of the Bankers' Acceptance or, prior to such maturity, on the Acceleration Date; and the Agent shall remit the said amount to such BA Lender and such BA Lender shall in turn remit such amount to the holder of the Bankers' Acceptance. If the Borrower does not provide for the payment of the Bankers' Acceptance accordingly, 
	
 

 

34.

 

	
 
		
any amount not so paid shall be immediately subject to Conversion to a Canadian Prime Rate Loan under Facility A. The Borrower agrees not to claim any days of grace for the payment at maturity of any Bankers' Acceptance. The Borrower hereby waives any defences to payment which might otherwise exist if for any reason a Bankers' Acceptance is held by the BA Lender for its own account at maturity.
	
 

Availability of Bankers' Acceptances

 

	
 
	
(b)
	
If at any time and from time to time the Agent determines, acting reasonably, that there no longer exists a market for Bankers' Acceptances for the term requested by the Borrower, or at all, the Agent shall so advise the Borrower, and in such event the BA Lenders shall not be obliged to accept and the Borrower shall not be entitled to issue Bankers' Acceptances.
	
 

 

Power of Attorney

 

	
 
	
(c)
	
The Borrower hereby appoints each BA Lender as its true and lawful attorney to complete and issue Bankers' Acceptances on behalf of the Borrower in accordance with written (including electronic transmittal) transmitted instructions provided by the Borrower to the Agent on behalf of such BA Lender, and the Borrower hereby ratifies all that its said attorney may do by virtue thereof. The Borrower agrees to indemnify and hold harmless the Agent and the BA Lenders and their respective directors, officers and employees from and against any charges, complaints, costs, damages, expenses, losses or liabilities of any kind or nature which they may incur, sustain or suffer, arising from or by reason of acting, or failing to act, as the case may be, in reliance upon this power of attorney, except to the extent caused by the gross negligence or wilful misconduct (including wilful breach of this Agreement) of the Agent or the BA Lender or their respective directors, officers and employees. The Borrower hereby agrees that each Bankers' Acceptance completed and issued and accepted in accordance with this Section by a BA Lender on behalf of the Borrower is a valid, binding and negotiable instrument of the Borrower as drawer and endorser. The Borrower agrees that each BA Lender's accounts and records will constitute prima facie evidence of the execution and delivery by the Borrower of Bankers' Acceptances. This power of attorney shall continue in force until written notice of revocation has been served upon the Agent by the Borrower at the Agent's address set out in Section 12.07.
	
 

 

	
 
	
3.09
	
Provisions regarding BA Equivalent Notes

 

Each Non-BA Lender will not accept Bankers' Acceptances hereunder, and shall instead from time to time make BA Equivalent Loans to the Borrower. Each BA Equivalent Loan shall be evidenced by a non-interest bearing promissory note payable by the Borrower to the Non-BA Lender substantially in the form of Exhibit "G" attached hereto, which will be purchased by the Non-BA Lender. Each BA Equivalent Note shall be negotiable by the Non-BA Lender without notice to or the consent of the Borrower, and the holder thereof shall be entitled to enforce such BA Equivalent Note against the Borrower free of any equities, defences or rights of set-off that may exist between the Borrower and the Non-BA Lender. In this Agreement, all references to a BA Equivalent Note shall mean the loan evidenced thereby if required by the context; and all references to the "issuance" of a BA Equivalent Note by a Non-BA Lender and similar expressions shall mean the making of a BA Equivalent Loan by the Non-BA Lender which is evidenced by a BA Equivalent Note. The following provisions are applicable to each BA Equivalent Loan made by a Non-BA Lender to the Borrower hereunder:

 

Payment of BA Equivalent Notes

 

	
 
	
(a)
	
Subject to the next sentence, the Borrower agrees to provide for each BA Equivalent Note by payment of the face amount thereof to the Agent on behalf of the Non-BA 
	
 

 

35.

 

	
 
		
Lender on the maturity of the BA Equivalent Note or, prior to such maturity, on the Acceleration Date; and the Agent shall remit the said amount to such Non-BA Lender and such Non-BA Lender shall in turn remit such amount to the holder of the BA Equivalent Note. If the Borrower does not provide for the payment of the BA Equivalent Note accordingly, any amount not so paid shall be immediately subject to Conversion to a Canadian Prime Rate Loan under Facility A. The Borrower agrees not to claim any days of grace for the payment at maturity of any BA Equivalent Note. The Borrower hereby waives any defences to payment which might otherwise exist if for any reason a BA Equivalent Note is held by the Non-BA Lender for its own account at maturity.
	
 

 

Availability of BA Equivalent Loans

 

	
 
	
(b)
	
The Non-BA Lender shall have no obligation to make BA Equivalent Loans during any period in which the BA Lenders' obligation to issue Bankers' Acceptances is suspended pursuant to Section 3.5 of the CBA Model Provisions.
	
 

 

Power of Attorney

 

	
 
	
(c)
	
The Borrower hereby appoints the Non-BA Lender as its true and lawful attorney to complete BA Equivalent Notes on behalf of the Borrower in accordance with written (including electronic transmission) transmitted instructions delivered by the Borrower to the Agent, and the Borrower hereby ratifies all that its said attorney may do by virtue thereof. The Borrower agrees to indemnify and hold harmless the Agent and the Non-BA Lender and their respective directors, officers and employees from and against any charges, complaints, costs, damages, expenses, losses or liabilities of any kind or nature which they may incur, sustain or suffer, arising from or by reason of acting, or failing to act, as the case may be, in reliance upon this power of attorney except to the extent caused by the gross negligence or wilful misconduct (including wilful breach of this Agreement) of the Agent or the Non-BA Lender or their respective directors, officers and employees. The Borrower hereby agrees that each BA Equivalent Note completed by the Non-BA Lender on behalf of the Borrower is a valid, binding and negotiable instrument of the Borrower as drawer and endorser. The Borrower agrees that the Non-BA Lender's accounts and records will constitute prima facie evidence of the execution and delivery by the Borrower of BA Equivalent Notes. This power of attorney shall continue in force until written notice of revocation has been served upon the Agent on behalf of the Non-BA Lender by the Borrower at the Agent's address provided in Section 12.07.
	
 

 

	
 
	
3.10
	
No Repayment of Certain Availment Options

 

The Borrower acknowledge that Bankers' Acceptances and BA Equivalent Loans may not be repaid prior to the maturity thereof. If prior to the maturity of such Availment Option the Agent receives any funds from the Borrower or any other Person which are intended to be applied as a Repayment thereof, the Agent may retain such funds without any obligation to invest such funds or pay interest thereon, and shall apply such funds against such Availment Option on the scheduled maturity date thereof.

 

Notwithstanding the foregoing, if for any reason a Bankers' Acceptance or BA Equivalent Loans is repaid or converted to another Availment Option prior to the scheduled maturity date thereof (whether as a result of acceleration or otherwise), the Borrower agrees to pay to the Agent upon demand all losses, damages, costs and expenses which the Agent or any Lender incurs as a result of such Repayment or Conversion prior to the said scheduled maturity date. Such losses, damages, costs and expenses shall include any and all breakage costs (such breakage costs to be determined in accordance with the Agent's standard procedures for a commercial borrower). A certificate as to such losses, damages, costs or expenses setting forth the calculations therefor will be prima facie evidence of such losses, damages, costs or expenses and be binding on the Borrower except for manifest error.

 

36.

 

 

	
 
	
3.11
	
Illegality

 

The obligation of any Lender to make Advances hereunder shall be suspended if and for so long as it is unlawful or impossible for such Lender to maintain Facility A or make Advances hereunder as a result of the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Lender with any request or directive (whether or not having the force of law, but if not having the force of law, compliance therewith is generally regarded by banks as mandatory) of any such Governmental Authority, central bank or comparable agency.

 

	
 
	
3.12
	
Anti-Money Laundering

 

The Borrower acknowledges that pursuant to AML Legislation the Agent and the Lenders may be required to obtain, verify and record information regarding the Credit Parties, Limited Recourse Guarantors and their respective directors, authorized signing officers, direct or indirect shareholders, partners or other persons in control of the Companies and the transactions contemplated hereby. The Borrower shall promptly provide or cause to be provided all such information, including any supporting documentation and other evidence, as may be requested by the Agent or any Lender, or any prospective assignee or participant of a Lender or the Agent, in order to comply with any applicable AML Legislation, whether now or hereafter in existence. If the Agent has ascertained the identity of any Credit Party or Limited Recourse Guarantor, or any authorized signatories of any Credit Party or Limited Recourse Guarantor, for the purposes of applicable AML Legislation, then the Agent shall:

 

	
 
	
(a)
	
be deemed to have done so as an agent for each Lender, and this Agreement shall constitute a "written agreement" in such regard between each Lender and the Agent within the meaning of applicable AML Legislation; and
	
 

 

	
 
	
(b)
	
provide each Lender with copies of all information obtained in such regard without any representation or warranty as to its accuracy or completeness.
	
 

 

Notwithstanding the foregoing each Lender acknowledges and agrees that the Agent has no obligation to ascertain the identity of any Credit Party or Limited Recourse Guarantor, or any authorized signatories of any Credit Party or Limited Recourse Guarantor, on behalf of such Lender or to confirm the completeness or accuracy of any information that the Agent obtains from any Credit Party or Limited Recourse Guarantor, or any such authorized signatory, in doing so.

	
 
	
3.13
	
Terrorist Lists

 

Each Credit Party is and will remain in compliance in all material respects with all Canadian economic sanctions laws and implementing regulations under the Proceeds of Crime {Money Laundering) and Terrorist Financing Act (Canada), the Criminal Code (Canada), the United Nations Act (Canada) and all similar applicable anti-money laundering and counter- terrorism financing provisions and regulations issued pursuant to any of the foregoing. No Credit Party (i) is a Person designated by the Canadian government on any list set out in the United Nations Al-Qaida and Taliban Regulations, the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism or the Criminal Code (collectively, the "Terrorist Lists") with which a Canadian Person cannot deal with or otherwise engage in business transactions, (iii) is a Person who is otherwise the target of Canadian economic sanctions laws or (iv) is controlled by (including without limitation by virtue of such Person being a director or owning voting shares or interests), or acts, directly or indirectly, for or on behalf of, any Person or entity on a Terrorist List or a foreign government that is the target of Canadian economic sanctions prohibitions such that the entry into, or performance under, this Agreement or any other Loan Document would be prohibited under Applicable Law.

 

37.

 

 

ARTICLE IV- REPRESENTATIONS AND WARRANTIES

 

	
 
	
4.01
	
Representations and Warranties

 

The Parent (where specifically mentioned and the context permits) hereby represents and warrants with respect to itself and the Borrower hereby represents and warrants with respect to itself and (where mentioned) each other Company and/or each of its Subsidiaries, as the case may be, in each case to the Agent and the Lenders as follows:

 

	
 
	
(a)
	
Status – The Parent and each Company has been duly incorporated (or amalgamated) and organized or formed, as the case may be, and is validly subsisting under the laws of its jurisdiction of incorporation or formation, as the case may be and is up-to-date in respect of all material corporate and analogous filings, save where the failure to do so has not constituted and would not reasonably be expected to constitute a Material Adverse Change. Each Company is qualified to do business (including the Business) and is in good standing in each jurisdiction where that is necessary or appropriate, save where the failure to be so qualified or be in good standing has not constituted and would not reasonably be expected to constitute a Material Adverse Change.
	
 

 

	
 
	
(b)
	
Information – Schedule 4.01(b) attached hereto, or as updated from time to time by each Compliance Certificate contains a list of all Credit Parties as at the date of this Agreement, or as of the most recently delivered Compliance Certificate as applicable, and the following information: the present and all prior names of each Credit Party, including the names of all predecessors, jurisdiction of incorporation or formation, present governing jurisdiction, jurisdiction in which its registered office and principal place of business is located; in respect of each Company, each jurisdiction where it has assets or carries on business other than the jurisdictions outside of Canada where property and assets not exceeding One Million Dollars ($1,000,000) (calculated on a net book value basis) in the aggregate at any time of the Companies collectively are located; bank accounts of each Company (referencing financial institutions where held); in respect of the Companies, the number and classes of the issued and outstanding shares or other Equity Interests and a list of its shareholders (including all Limited Recourse Guarantors), partners or members, as applicable, including the number and class of shares (or proportionate membership or partnership interest) held by each.
	
 

 

	
 
	
(c)
	
Solvency – Each of the Parent and the Borrower (each on a consolidated basis) is Solvent.
	
 

 

	
 
	
(d)
	
No Pending Changes – No Person has any agreement or option or any right or privilege (whether by law, pre-emptive or contractual) capable of becoming an agreement, including convertible securities, warrants or convertible obligations of any nature out of  the ordinary course of  business, or for the purchase, subscription, allotment or issuance of any debt or Equity Interests of any Company.
	
 

 

	
 
	
(e)
	
No Conflicting Agreements – Neither the execution and delivery of the Security, nor compliance with the terms, provisions and conditions of this Agreement or the Security or any other Loan Document will conflict with, result in a breach of, or constitute a default under the Constating Documents of any Credit Party or any agreement to which it is a party or is otherwise bound, save where such conflict, breach or default has not constituted and would not reasonably be expected to constitute a Material Adverse Change, and does not require the consent or approval of any Person, other than those which have been obtained and save, where the failure to obtain such consent or approval has not constituted and would not reasonably be expected to constitute a Material Adverse Change.
	
 

 

 

38.

 

 

	
 
	
(f)
	
No Conflict with Constating Documents – There are no provisions in the Constating Documents of the Parent or any Company including in any unanimous shareholder agreement affecting it which restrict or limit its powers to borrow money, issue debt obligations, guarantee the payment or performance of the obligations of others, or otherwise encumber all or any of its Property to secure the payment of its Obligations, including without limitation the Project and the Project Property, now owned or subsequently acquired.
	
 

 

	
 
	
(g)
	
Loan Documents – The Borrower has the corporate capacity, power, right and authority to borrow from the Lenders, and each Credit Party has the corporate capacity, power, right and authority to perform its obligations under this Agreement and the other Loan Documents to which it is a party and provide the Security required to be provided by it hereunder; and each Guarantor has the corporate capacity, power, right and authority to guarantee payment to the Agent and the Lenders of the Borrower's Obligations and provide the Security required to be provided by it hereunder. The execution and delivery of the Loan Documents by the Credit Parties and the performance of their respective obligations therein have been duly authorized by all necessary corporate action. This Agreement and the other Loan Documents constitute legal, valid and binding obligations of the Credit Parties, enforceable against them in accordance with the terms and provisions thereof, subject to bankruptcy, insolvency and other similar laws affecting the rights of creditors generally and to general principles of equity.
	
 

 

(h)Conduct of Business; Material Permits – Each Company is in compliance with all Applicable Laws (other than Cannabis Laws which are covered by paragraph below) of each jurisdiction in which it carries on business and is duly licensed, registered and qualified to do business and is in good standing in each jurisdiction in which the nature of the business (including the Business) conducted by it or the Real Property owned or leased by it make such qualification necessary, except to where the failure to comply with any such Applicable Laws or hold any such licence, registration or qualification would not constitute a Material Adverse Change. Attached hereto as Schedule 4.01(h), as updated from time to time by each Compliance Certificate, is a true and complete list of all Material Permits, including with respect to the Business, and all Material Permits of the Companies are valid and subsisting and in good standing.

 

	
 
	
(i)
	
Cannabis Laws - Each of the Parent and each Company is in compliance with all Cannabis Laws applicable to it, its property or its business including, in the case of the Companies, the Business. Specifically, but without limitation, neither the Parent nor any Company (i) conducts any Cannabis Activities, or (ii) holds an Investment in any Person who conducts any Cannabis Activities, in each case other than in an Approved Jurisdiction where such Cannabis Activities would not violate or result in a breach of any applicable Cannabis Law. Schedule 4.01(i) attached hereto, or as updated from time to time by each Compliance Certificate, sets out all such Investments of the Companies, and all Approved Jurisdictions of the Credit Parties.
	
 

 

	
 
	
(j)
	
Ownership of Assets; Specific Permitted Liens – Each Company owns, and possesses its Property free and clear of any and all Liens except for Permitted Liens. No Company has any commitment or obligation (contingent or otherwise) to grant any Liens except for Permitted Liens. Schedule 4.01(j) attached hereto, or as updated from time to time by each Compliance Certificate, contains a true and complete list of the Specific Permitted Liens.
	
 

 

	
 
	
(k)
	
Owned Properties – The Companies do not own any Real Property other than the real property listed in Schedule 4.01(k) attached hereto or as updated from time to time by each Compliance Certificate. Each Company is the beneficial and registered owner of 
	
 

 

39.

 

	
 
		
the applicable Owned Property as identified as owned by it in Schedule 4.01(k) attached hereto or as updated from time to time by each Compliance Certificate.
	
 

 

	
 
	
(l)
	
Material Leased Properties – The Companies do not lease any Material Leased Properties other than the Material Leased Properties listed in Schedule 4.01(l).
	
 

 

	
 
	
(m)
	
Intellectual Property – Each Company possesses or has the right to use all Intellectual Property material to the conduct of its business, including the Business. Schedule 4.01(m) attached hereto or as updated from time to time by each Compliance Certificate is a list of all such material Intellectual Property held by the Companies as at the Closing Date or as at the most current Compliance Certificate as applicable, including a description of the nature of such rights. No Person has asserted any written claim in respect of the validity of such material Intellectual Property or the Companies’ rights therein, and the Companies are not aware of any valid basis for the assertion of any such claims. To the knowledge of the Companies, the conduct and operations of the businesses of each Company do not infringe, misappropriate, dilute or violate any Intellectual Property rights held by any other Person.
	
 

 

	
 
	
(n)
	
Insurance – The Companies have obtained insurance which satisfies all requirements set out in Section 5.01(i) herein.
	
 

 

	
 
	
(o)
	
Material Agreements – Each Material Agreement to which any Company is a party is in good standing and in full force and effect; and none of the Companies, or, to the knowledge of the Companies, any of the other parties thereto, is in material breach of any of the terms or conditions contained therein. Schedule 4.01(o) attached hereto or as updated from time to time by each Compliance Certificate, is a true and complete list of all Material Agreements to which the Companies are a party as at the Closing Date or as at the most current Compliance Certificate as applicable.
	
 

 

	
 
	
(p)
	
Labour Agreements – Schedule 4.01(p) attached hereto or as updated from time to time by each Compliance Certificate contains a true and complete list, as of the Closing Date or as of the most current Compliance Certificate, as applicable, of all contracts with labour unions and employee associations to which the Companies are a party, and the Companies are not aware of any attempts to organize or establish any other labour union or employee association.
	
 

 

	
 
	
(q)
	
Environmental Laws – Except to the extent disclosed in Schedule 4.01(q) attached hereto or disclosed in the environmental reports and questionnaires delivered to the Agent prior to the date hereof or as updated from time to time by each Compliance Certificate:
	
 

 

	
 
	
(i)
	
each Company and its business, operations, assets, equipment, property, leaseholds and other facilities are, to the best of the knowledge and belief of the Companies, in compliance in all respects with all Requirements of Environmental Law, save for non-compliance that does not constitute and would not reasonably be expected to constitute a Material Adverse Change;
	
 

 

	
 
	
(ii)
	
each Company holds all Material Permits, licenses, certificates and approvals from Governmental Authorities which are required in connection with the Requirements of Environmental Law, save for those the absence of which that does not constitute and would not reasonably be expected to constitute a Material Adverse Change;
	
 

 

	
 
	
(iii)
	
to the best of the knowledge and belief of the Companies there has been no material emission, spill, release, or discharge into or upon the air, soils (or any improvements located thereon), surface water or groundwater or the sewer, septic 
	
 

 

40.

 

	
 
		
system or waste treatment, storage or disposal system servicing the premises, of any Hazardous Materials at or from any of the Real Properties;
	
 

 

	
 
	
(iv)
	
as of the Closing Date, or as of the most current Compliance Certificate as applicable, no complaint, order, directive, claim, citation, or notice from any Governmental Authority or any other Person has been received by any Company with respect to any of the Real Properties in respect of air emissions, spills, releases, or discharges to soils or improvements located thereon, surface water, groundwater or the sewer, septic system or waste treatment, storage or disposal systems servicing any of the Properties, noise emissions, solid or liquid waste disposal, the use, generation, storage, transportation, or disposal of Hazardous Materials or other Requirements of Environmental Law affecting the Real Properties that constitutes or would reasonably be expected to constitute a Material Adverse Change;
	
 

 

	
 
	
(v)
	
as of the Closing Date, or as of the most current Compliance Certificate, as applicable, there are no legal or administrative proceedings, investigations or claims now pending, or to each Companies’ knowledge, threatened, with respect to the presence on or under, or the discharge, emission, spill, radiation or disposal into or upon any of the Properties, the atmosphere, or any watercourse or body of water, of any Hazardous Material that constitutes or would reasonably be expected to constitute a Material Adverse Change; nor are there any material matters under discussion between any Company and any Governmental Authority relating thereto; and to the knowledge of the Companies there is no valid basis for any such proceedings, investigations or claims; and
	
 

 

	
 
	
(vi)
	
the Companies have no indebtedness, obligation or liability, absolute or contingent, matured or not matured, with respect to the storage, treatment, cleanup or disposal of any Hazardous Materials, including without limitation any such indebtedness, obligation, or liability under any Requirements of Environmental Law regarding such storage, treatment, cleanup or disposal that constitutes or would reasonably be expected to constitute a Material Adverse Change.
	
 

 

	
 
	
(r)
	
No Litigation – There are no actions, suits or proceedings pending, or to the knowledge of the Credit Parties, threatened in writing, against any Credit Party in any court, or arbitration proceeding, or before or by any Governmental Authority except: (i) litigation disclosed in Schedule 4.01(r) attached hereto or as updated from time to time by each Compliance Certificate; (ii) litigation which has been provided for in the financial statements of such Credit Party or (iii) litigation in which the amount claimed against the Credit Parties do not in the case of the Companies collectively exceed One Million Dollars ($1,000,000) in the aggregate, or Ten Million Dollars ($10,000,000) in the aggregate, in the case of the Parent. Except as disclosed by the Borrower to the Agent, to the knowledge of the Credit Parties there are no investigations by any Governmental Authority with respect to the conduct of any Credit Party’s business, including the Business.
	
 

 

	
 
	
(s)
	
Pension Plans and Multi-employer Plans – Schedule 4.01(s) attached hereto or as updated from time to time by each Compliance Certificate, contains (i) a true and complete list of all Pension Plans established by the Companies as of the Closing Date, or most current Compliance Certificate as applicable, and (ii) a true and complete list of all Multi-employer Plans contributed to by, or under which, any Company has any liability as of the Closing Date, or most current Compliance Certificate, as applicable; no Pension Plan or Multi-employer Plan listed therein is a Defined Benefit Pension Plan. No steps 
	
 

 

41.

 

	
 
		
have been taken to terminate any such Pension Plan (in whole or in part), no contribution failure has occurred with respect to any such Pension Plan or Multi-employer Plan sufficient to give rise to a Lien under any applicable laws of any jurisdiction, and no condition exists and no event or transaction has occurred with respect to any such Pension Plan or Multi-employer Plan which might result in the incurrence by any Company of any material liability, fine or penalty. Each such Pension Plan is in compliance in all material aspects with all Applicable Law. All contributions (including employee contributions made by authorized payroll deductions or other withholdings) required to be made to the appropriate funding agency in accordance with all applicable laws and the terms of such Pension Plan have been made in accordance with all Applicable Law and the terms of such Pension Plan. To the extent applicable, all liabilities under such Pension Plan are funded, on a going concern and solvency basis, in accordance with the terms of the respective Pension Plans, the requirements of applicable pension benefits laws and of applicable regulatory authorities and the most recent actuarial report filed with respect to the Pension Plan. No event has occurred and no conditions exist with respect to any such Pension Plan that has resulted or could reasonably be expected to result in such Pension Plan having its registration revoked or refused for the purposes of any Applicable Law or being placed under the administration of any relevant pension benefits regulatory authority or being required to pay any Taxes or penalties under any Applicable Law. The sole obligation of any Company with respect to such Multi-employer Plan is to make contributions in accordance with the applicable labour agreement providing for participation in such Multi-employer Plan and the Companies have no liability with respect to any costs, expenses, benefits or investments associated with the maintenance or administration of such Multi- employer Plan, including any liability relating to any past or future withdrawals from or the termination or wind-up of such Multi-employer Plan. All contributions (including employee contributions made by authorized payroll deductions or other withholdings) required to be made by any Company to the appropriate funding agency in accordance with all applicable laws, applicable labour agreements, and the terms of such Multi-employer Plan have been made in accordance with all Applicable Law, applicable labour agreements and the terms of such Multi-employer Plan.
	
 

 

	
 
	
(t)
	
Financial Statements – The most recent Borrower Year-end Financial Statements, Parent Year-end Financial Statements and Interim Financial Statements delivered to the Agent and the Lenders have been prepared in accordance with GAAP (except in the case of the Interim Financial Statements, subject to normal year-end adjustments and the absence of footnotes) on a basis which is consistent with the previous fiscal period, and present fairly in all material respects the financial position of the Parent or Borrower, as the case may be, and their financial performance and cash flows for the periods then ended in each case, subject to normal year-end adjustments) and include statements of:
	
 

 

	
 
	
(i)
	
the assets and liabilities and financial condition of the Parent or Borrower as applicable on a consolidated basis as at the dates therein specified;
	
 

 

	
 
	
(ii)
	
the net comprehensive income (loss) of the Parent or Borrower as applicable on a consolidated basis during the periods covered thereby;
	
 

	
 
	
(iii)
	
the cash flows of the Parent or Borrower as applicable on a consolidated basis during the periods covered thereby;
	
 

 

	
 
	
(iv)
	
in the case of the Parent Year-end Financial Statements, the changes in equity of the Parent on a consolidated basis; and
	
 

 

	
 
	
(v)
	
in the case of the Borrower Year-end Financial Statements, the changes in financial position of the Borrower on a consolidated basis;
	
 

 

 

42.

 

 

and since the dates of the said Borrower Year-end Financial Statements and Interim Financial Statements, as the case may be, no liabilities have been incurred by the Borrower on a consolidated basis, except for liabilities incurred in the ordinary course of business and liabilities permitted to be incurred pursuant to this Agreement and no Material Adverse Change has occurred.

 

	
 
	
(u)
	
Financial and Other Information – Taken as a whole, all factual information provided by or in respect of the Credit Parties to the Agent and the Lenders (including any exhibit or report furnished by the Credit Parties pursuant to this Agreement), was true, correct and complete in all material respects when provided, does not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statement contained therein not materially misleading in the circumstances in which it was made. The Annual Business Plan and all projections, including forecasts, budgets, pro formas provided to the Lenders, or any of them, were prepared in good faith based on assumptions which at the time made were believed to be reasonable, and the projections included therein were believed at the time made to be reasonable estimates of the prospects of the Businesses referred to therein.
	
 

 

	
 
	
(v)
	
No Guarantees – No Guarantees have been granted by any Company, except for (i) Guarantees which comprise part of the Security and (ii) Guarantees in respect of Permitted Funded Debt incurred by any other Company.
	
 

 

	
 
	
(w)
	
Taxes – Each Company has duly and timely filed all tax returns required to be filed by it, and has paid all Taxes which are due and payable by it except for (x) returns in respect of Taxes that, do not exceed Two Hundred and Fifty Thousand Dollars ($250,000) in aggregate and (y) Taxes (i) that are not yet delinquent, (ii) for which instalments have been paid based on reasonable estimates pending final assessments, (iii) if past due, the validity of which is being contested diligently and in good faith by appropriate proceedings and (if required by GAAP) for which reserves have been established to the extent required in accordance with GAAP or (iv) that, in aggregate, not including those referred to in (i), (ii) and (iii), do not exceed Two Hundred and Fifty Thousand Dollars ($250,000) in the aggregate or which could not reasonably be expected to result in a Material Adverse Change. Each Company has also paid all other Taxes, charges, penalties and interest due and payable under or in respect of all assessments and re-assessments of which it has received written notice except for (b) Taxes (i) that are not yet delinquent, (ii) for which instalments have been paid based on reasonable estimates pending final assessments, (iii) if past due, the validity of which is being contested diligently and in good faith by appropriate proceedings and (if required by GAAP) for which reserves have been established to the extent required in accordance with GAAP or (iv) that, not including those referred to in (i), (ii) and (iii), do not exceed Two Hundred and Fifty Thousand Dollars ($250,000) in the aggregate or which could not reasonably be expected to result in a Material Adverse Change. There are no actions, suits, proceedings, investigations or claims pending, or to the knowledge of the Companies, threatened, against any Company in respect of Taxes, governmental charges or assessments except for any such actions, suits, proceedings, investigations or claims which are being contested diligently and in good faith and (if required by GAAP) in respect of which reserves have been established to the extent required in accordance with GAAP.
	
 

 

 

43.

 

 

	
 
	
(x)
	
Statutory Liens – Except for those (a) being contested diligently and in good faith by appropriate proceedings and (if required by GAAP) for which reserves have been established to the extent required in accordance with GAAP or (b) those, in the aggregate, that do not exceed Two Hundred and Fifty Thousand Dollars ($250,000), each Company has remitted on a timely basis all amounts required to have been withheld and remitted (including withholdings from employee wages and salaries relating to income tax, employment insurance and Canada Pension Plan contributions), goods and services tax and all other amounts which if not paid when due could result in the creation of a Statutory Lien against any of its Property, except for Permitted Liens.
	
 

 

	
 
	
(y)
	
No Default, etc. – No Default, Event of Default or Material Adverse Change has occurred and is continuing.
	
 

 

	
 
	
(z)
	
Related Party Transactions – The Companies are not party to any contract, commitment or transaction (including by way of loan) with any Affiliate, Associate, or Person of which it is an Associate, that is not a Company which contains any terms which are not commercially reasonable.
	
 

 

	
 
	
(aa)
	
No Broker Fees – No broker’s or finder’s fee or commission will be payable with respect hereto or to any of the transactions contemplated hereby as a result of any actions by it; and each Company hereby agrees to indemnify the Agent and the Lenders harmless from, any claim, demand or liability for any such broker’s or finder’s fees alleged to have been incurred in connection herewith or therewith and any expenses (including reasonable legal fees) arising in connection with any such claim, demand or liability.
	
 

 

	
 
	
(bb)
	
Cannabis Authorizations – No Credit Party has violated or failed to obtain any Cannabis Authorization necessary to (i) the ownership of any of its Property or the conduct of its business, including the Business, or (ii) to make or hold any Investment in any Person who conducts Cannabis Activities. All Cannabis Authorizations necessary as aforesaid:
	
 

 

	
 
	
(i)
	
have been duly obtained, taken, given or made;

 

	
 
	
(ii)
	
are valid and in full force and effect, and

 

	
 
	
(iii)
	
are free from conditions or requirements that have not been met or complied with where the failure to so satisfy would allow for the material modification or revocation thereof.
	
 

 

Each Credit Party is in compliance in all material respects with all Cannabis Authorizations necessary as aforesaid held by, or in favour of, such Credit Party.

 

Specifically, but without limitation, no Credit Party conducts or has conducted any Cannabis Activities in a building or facility for which an applicable Cannabis Authorization necessary as aforesaid was not in full force and effect at the time in question, including without limitation, the Project. No Credit Party has received any notice from any Governmental Authority regarding any actual or alleged material violation of, or any failure on the part of the material requirement of any Cannabis Authorization necessary as aforesaid that has not been remedied, (ii) no Credit Party has received any written notice from any interest of any Credit Party in any of the Cannabis Authorizations necessary as aforesaid that has not been remedied, (iii) no Credit Party knows of any reason why any Cannabis Authorization should be suspended, cancelled or revoked or of any factor that would in any way prejudice the continuance or renewal of any Cannabis Authorization necessary as aforesaid, and (iv) all Taxes, assessments, maintenance fees and other amounts required to maintain the Cannabis Authorizations necessary as aforesaid have been paid in full.

 

44.

 

 

	
 
	
(cc)
	
Anti-Terrorism Law – No Credit Party and to the knowledge of the Credit Parties, no Limited Recourse Guarantor (i) is a Person designated by the Canadian government on any list set out in the United Nations Al-Qaida and Taliban Regulations, the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism or the Criminal Code (Canada) (collectively, the "Terrorist Lists") with which a Canadian Person cannot deal with or otherwise engage in business transactions, (ii) is a Person who is otherwise a target of Canadian economic sanctions laws or (iii) is Controlled by (including without limitation by virtue of such Person being a director or owning voting shares or interests), or acts, directly or indirectly, for or on behalf of, any Person or entity on a Terrorist List or a foreign government that is a target of Canadian economic sanctions prohibitions such that the entry into, or performance under, this Agreement or any other Loan Document would be prohibited under Canadian law.
	
 

 

	
 
	
(dd)
	
Sanctions Laws – No Credit Party and to the knowledge of the Credit Parties, no Affiliate of a Credit Party acting or benefiting in any direct capacity in connection with the Advances is any of the following (a “Restricted Person”): (i) 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”); (ii) 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; (iii) a Person that is owned 50 percent or more by any Person described in this Section 4.01(dd); (iv) any other Person with which any Credit Party is prohibited from dealing under any Sanctions laws applicable to such an Obligor; or (v) a Person that derives more than 10% of its annual revenue from investments in or transactions with any Person described in this Section 4.01(dd)(i), (ii), (iii) or (iv). Further, none of the proceeds from the Advances 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.
	
 

	
 
	
4.02
	
Survival of Representations and Warranties

 

Each Credit Party acknowledges that the Agent and the Lenders are relying upon the foregoing representations and warranties in connection with the establishment of Facility A, the making of Advances thereunder from time to time and the entering into of any Hedging Agreements with the Borrower from time to time. For greater certainty, each of the representations set out in Section 4.01 shall be true and correct and shall be deemed to be given on the occurrence of the making of each Advance, and on each day any Advance is outstanding, in each case by reference to the facts and circumstances existing on the date of such Advance or issuance (except where expressly given as of a specified date, in which case the representations shall be true and correct as of such date). Notwithstanding any investigations which may be made by the Agent or the Lenders, the said representations and warranties shall survive the execution and delivery of this Agreement until full and final payment and satisfaction of the Obligations.

 

 

45.

 

 

ARTICLE V - COVENANTS

 

	
 
	
5.01
	
Positive Covenants

 

Until the Termination Date, the Parent (in respect of itself where specifically mentioned) and the Borrower hereby covenant and agree with the Agent and the Lenders that it will, and (where specifically mentioned) the Borrower will cause each other Company to:

 

	
 
	
(a)
	
Prompt Payment – in the case of the Borrower, pay all principal, interest and other amounts due hereunder at the times and in the manner specified herein;
	
 

 

	
 
	
(b)
	
Preservation of Existence – except for corporate or analogous changes made in compliance with the requirements of Section 6.01(n). herein, each of the Credit Parties shall maintain its corporate existence in good standing, continue to carry on its business, including the Business, preserve its rights, powers, licences, privileges, exercise any rights of renewal or extensions of the Health Canada Licence and any other Material Permits, maintain all qualifications to carry on business, in each case, do so where the failure to be so qualified constitutes or would reasonably be expected to constitute a Material Adverse Change (it being acknowledged that the failure to maintain any Health Canada Licence that is required to carry on its business shall constitute a Material Adverse Change), carry on and conduct its business in a proper and efficient manner so as to protect its Property and income and not materially change the nature of its business;
	
 

 

	
 
	
(c)
	
Cannabis Authorizations. - the Borrower shall:

 

	
 
	
(i)
	
deliver to the Agent a copy of each Cannabis Authorization upon the request of the Agent;
	
 

 

	
 
	
(ii)
	
be and remain the sole legal and beneficial owner of all Cannabis Authorizations;
	
 

 

	
 
	
(iii)
	
maintain as valid and in full force and effect each Cannabis Authorization, and, here applicable, procure the renewal thereof prior to its expiration;
	
 

	
 
	
(iv)
	
comply in all material respects with the terms and conditions of each Cannabis Authorization and do all material things required of a holder thereof by applicable Cannabis Law with due diligence and in a reasonable manner, enforce the material rights granted to it under and in connection with each Cannabis Authorization;
	
 

 

	
 
	
(v)
	
not dispose of or abandon any material right, title or interest in any Cannabis Authorization;
	
 

 

	
 
	
(vi)
	
apply for and obtain each future Cannabis Authorization at or before such time as it shall be required by Applicable Law; and
	
 

 

	
 
	
(vii)
	
timely pay all Taxes, assessments, maintenance fees and other amounts required to be paid to maintain the Cannabis Authorizations.
	
 

 

	
 
	
(d)
	
Compliance with Laws – (A) Comply with Applicable Law (specifically including, for greater certainty, Requirements of Environmental Law), but excluding Cannabis Laws, where the failure to do so constitutes or would reasonably be expected to constitute a Material Adverse Change, (B) comply with all Cannabis Laws and (C) use the proceeds of all Advances hereunder for legal and proper purposes. Without limiting the generality of the foregoing the Borrower shall and shall cause each of the other Companies to:
	
 

 

	
 
	
(i)
	
manage and operate its business in all material respects in accordance with all Applicable Laws, other than Cannabis Laws, where the failure to do so constitutes or would reasonably be expected to constitute a Material Adverse Change;
	
 

 

 

46.

 

 

	
 
	
(ii)
	
manage and operate its business in all material respects in compliance with Cannabis Laws;
	
 

 

	
 
	
(iii)
	
engage in Cannabis-Related Activities only to the extent that such Cannabis-Related Activities are (A) in an Approved Jurisdiction, and
	
 

(B) in compliance with all Applicable Laws, including Cannabis Laws, in such Approved Jurisdiction (including, without limitation on a federal, state, provincial, territorial and municipal basis);

 

	
 
	
(iv)
	
ensure that all activities of the Companies relating to the cultivation, production and processing of Cannabis and Cannabis-related products occur solely in facilities licensed by Governmental Authorities in Approved Jurisdictions; and
	
 

 

	
 
	
(v)
	
ensure that all activities of the Companies relating to the sale of Cannabis and Cannabis related products occur solely in facilities licensed by Governmental Authorities in Approved Jurisdictions or between entities licensed by Governmental Authorities in Approved Jurisdictions and counterparties satisfactory to the Required Lenders.
	
 

 

	
 
	
(e)
	
Payment of Taxes, etc. – pay when due all rents, Taxes, rates, levies, assessments and governmental charges, fees and dues lawfully levied, assessed or imposed in respect of its Property which are material to the conduct of its business, except for rents, Taxes, rates, levies, assessments and governmental charges, fees or dues in respect of which (a) instalments have been paid based on reasonable estimates pending final assessments, (b) an appeal or review proceeding has been commenced, a stay of execution pending such appeal or review proceeding has been obtained and (if required by GAAP) reserves have been established to the extent required in accordance with GAAP or (c) that, in aggregate, not including those referred to in (a) and (b), do not exceed Two Hundred and Fifty Thousand Dollars ($250,000), and the amounts in question do not in the aggregate materially detract from the ability of the Companies to carry on their businesses and to perform and satisfy all of their respective obligations hereunder;
	
 

 

	
 
	
(f)
	
Maintain Records – maintain adequate books, accounts and records in accordance with GAAP;
	
 

 

	
 
	
(g)
	
Maintenance of Assets – keep its Property in good repair and working condition in accordance with standard industry practice;
	
 

 

	
 
	
(h)
	
Inspection – permit the Agent and the Lenders and their respective employees and agents annually (upon reasonable prior notice during normal business hours and in a manner which does not materially interfere with its operations and subject to the rights of the occupants/tenants of the Owned Properties) to enter upon and inspect its properties, assets, books and records from time to time and make copies of and abstracts from such books and records, and discuss its affairs, finances and accounts with any of its officers, directors, accountants and auditors; provided that, nothing in this subsection shall restrict the ability of the Agent’s officers, employees, consultants or other authorized representatives to make such visits, inspections, and examinations upon the occurrence and continuance of a Default or an Event of Default;
	
 

 

	
 
	
(i)
	
Insurance – obtain and maintain, from sound and reputable insurance companies liability insurance, all-risks property insurance on a replacement cost basis (less a reasonable deductible not to exceed amounts customary in the industry for similar businesses and properties) and builders' risk (or "course of construction") insurance in respect of any 
	
 

 

47.

 

	
 
		
construction relating to the Property, use commercially reasonable efforts to obtain crop and business interruption insurance, to the extent it is available at commercially reasonable rates, and obtain and maintain product recall and liability insurance coverage in an amount of not less than Ten Million Dollars ($10,000,000), and insurance in respect of such other risks as are customary in the industry for similar businesses and properties (and having regard to the availability of insurance coverage in the market); all of which policies of insurance shall be in such amounts as are customary in the industry for similar businesses and properties; and the Companies shall cause the interest of the Agent to be noted on property insurance policies as first mortgagee and loss payee (which policies shall include the standard mortgage clause approved by the Insurance Bureau of Canada (or an equivalent clause in other applicable jurisdictions)) and as an additional insured under liability insurance policies; and the Borrower shall provide the Agent with certificates of insurance and certified copies of such policies from time to time upon request;
	
 

	
 
	
(j)
	
Perform Obligations – fulfill all covenants and obligations required to be performed by it under those Loan Documents to which it is a party;
	
 

 

	
 
	
(k)
	
Notice of Certain Events – provide prompt notice to the Agent of: (i) the occurrence of any Default or Event of Default; (ii) the incorrectness in any material respect of any representation or warranty in this Agreement and any material changes to the information contained in the Schedules attached hereto;
	
 

(iii) any Material Adverse Change; (iv) any litigation not provided for in the Borrower Year-end Financial Statements or Parent Year-end Financial Statements in which the amount claimed against any one or more of the Companies is greater than One Million Dollars ($1,000,000) individually or in the aggregate or against the Parent is greater than Ten Million Dollars ($10,000,000) in the aggregate; (vi) any notice of default, termination or suspension received by any Company in respect of Funded Debt in excess of One Million Dollars ($1,000,000) in the aggregate or received by the Parent in respect of Funded Debt in excess of Ten Million Dollars ($10,000,000) in the aggregate or in respect of any Material Agreement or Material Permit; (vii) the adoption by any Credit Party of any material accounting change promptly thereafter; (viii) the issuance of any management letter to the Parent by its auditor; (ix) a proposed change of name of any Credit Party or Limited Recourse Guarantor, which notice shall be given at least thirty (30) days prior to such change becoming effective; (x) the entering into by any Company of a contract with a labour union or employee associations or the expiration of any such contract; (xi) any Material Agreements or Material Permits entered into or obtained after the date of this Agreement; (xii) the acquisition, creation or existence of any new Subsidiary of the Borrower after the date hereof; (xiii) receipt of notice from any Governmental Authority of any of the following in connection with the Companies or the Property if the consequences thereof constitute or would reasonably be expected to constitute a Material Adverse Change or would result in a liability of a Company in excess of Two Million Dollars ($2,000,000): (A) any liability for response or corrective action, natural resource damage or other harm pursuant to any Requirements of Environmental Law, (B) any environmental claim, (C) any violation of an Requirements of Environmental Law or release, threatened release or disposal of a Hazardous Material at or on the Property contrary to the Requirements of Environmental Law; (xiv) promptly after receipt or knowledge thereof a copy of (i) any material document, letter or notice from Health Canada or other Governmental Authority to a Credit Party (it being understood that any warning shall be material), (ii) any written notice, investigation, correspondence or other proceedings or actions which could reasonably be expected to adversely affect any Cannabis Authorization, including any such notice, investigation, correspondence or proceedings involving Health Canada, and (xvi) any changes in the identity of a Responsible Person, together with satisfactory evidence of security clearances for such 

 

48.

 

Responsible Person under the Cannabis Act or the Cannabis Regulations, and any rejection notice for new or renewal security clearance applications for each Responsible Person;

 

	
 
	
(l)
	
Bank Accounts and Service Agreements – in the case of each of the Companies, maintain all of its bank accounts with BMO or an Affiliate of BMO and maintain all cash management, payroll, corporate credit cards (other than corporate credit card programs permitted pursuant to paragraph (vii) of the definition of Permitted Funded Debt) and other banking services with BMO or an Affiliate of BMO;
	
 

 

	
 
	
(m)
	
Use of Advances – utilize the proceeds of all Advances in accordance with Section 2.02 for the business purposes of the Companies; and not permit such proceeds to be used, directly or indirectly, by any other Person or for any other purpose;
	
 

 

	
 
	
(n)
	
Environmental Information – if requested by the Agent from time to time upon the instructions of the Required Lenders (provided, however, if such requests are made by the Agent more frequently than annually, than such additional requests shall be at the cost and expense of the Agent unless the Credit Parties are in default at the time such additional requests are made): (i) provide the Agent with an environmental questionnaire in the Agent's standard form completed by a knowledgeable officer of the Parent in respect of any Owned Property or Material Leased Property; and (ii) if the information contained therein is inconsistent in any material respect with the representations in Section 4.01(q) herein, provide the Agent with a Phase I (and Phase 2 if applicable) environmental report in respect of such Owned Property or Material Leased Property as applicable, and promptly take all such action as may be required to comply in all material respects with all recommendations contained therein; provided that such prompt action to comply with such recommendations shall not be required as long as (A) such recommendations are being diligently contested by such Company in good faith and on reasonable grounds and (B) (x) there is then no Event of Default which is continuing, (y) a Governmental Authority with jurisdiction does not require immediate remediation to protect the public and (z) the Companies are in compliance in all Requirements of Environmental Law, save for non-compliance that does not constitute and would not reasonably be expected to constitute a Material Adverse Change; provided, however, if circumstances change so that the value of the subject Real Property is materially impaired or there is an imminent threat to the health or safety of human beings or any Governmental Authority with jurisdiction requires immediate remediation, then the Companies shall immediately commence such remediation;
	
 

 

	
 
	
(o)
	
Further Assurances – provide the Agent and the Lenders with such further information, financial data, documentation and other assurances as they may reasonably require from time to time in order to ensure ongoing compliance with the terms of this Agreement.
	
 

 

	
 
	
5.02
	
Negative Covenants

 

Until the Termination Date, the Borrower hereby covenants and agrees with the Agent and the Lenders that it will not, and will ensure that each other Company does not, and (where specifically mentioned) the Parent covenants and agrees with the Agent and the Lenders that it will not, in each case, without the prior written consent of the Required Lenders (or if required pursuant to Section 9.01, all Lenders acting unanimously), which consent may be withheld in their sole discretion unless otherwise expressly provided herein:

 

	
 
	
(a)
	
Funded Debt – create, incur or assume any Funded Debt, except Permitted Funded Debt;
	
 

 

49.

 

	
 
	
(b)
	
Liens – grant or suffer to exist any Lien in respect of any of its Property, except Permitted Liens;
	
 

 

	
 
	
(c)
	
Disposition of Assets – directly or indirectly sell, transfer, assign, lease or otherwise dispose of any of its Property (including, without limitation, Intellectual Property) or rights or interests in its Property or agree to do so, except that:
	
 

 

	
 
	
(i)
	
each Company may sell inventory and obsolete or redundant equipment in the ordinary course of business;
	
 

 

	
 
	
(ii)
	
each Company may sell or transfer assets to any other Company, provided that the transferee has provided all Security required to be provided by it hereunder;
	
 

 

	
 
	
(iii)
	
each Company may enter into leases and licences, including Intellectual Property licences, with other Persons in the ordinary course of business;
	
 

 

	
 
	
(iv)
	
each Company may dispose, abandon, surrender or terminate immaterial rights or interests which are effected in the ordinary course of business or otherwise in accordance with prudent industry practice;
	
 

 

	
 
	
(v)
	
each Company may dispose of damaged or destroyed materials or inventory that is spoiled or otherwise not marketable;
	
 

 

	
 
	
(vi)
	
each Company may dispose of cash in transactions permitted by this Agreement;
	
 

 

	
 
	
(vii)
	
each Company may dispose of Cash Equivalents for cash or other Cash Equivalents;
	
 

 

	
 
	
(viii)
	
each Company may dispose and/or terminate leases, subleases, licenses or sublicenses (including the provision of software under an open source license), which (1) are in accordance with prudent industry practice,
	
 

(2) do not materially interfere with the conduct of the Business of the Companies or (3) relate to closed facilities or closed storage or distribution centers or the discontinuation of any product line;

 

	
 
	
(ix)
	
each Company may permit (1) the expiration of any option agreement in respect of real or personal property and (2) any surrender or waiver of contractual rights or the settlement, release or surrender of contractual rights or other litigation claims in accordance with prudent industry practice;
	
 

 

	
 
	
(x)
	
each Company may sell or otherwise dispose of assets for cash (not including sales or disposition referred to in (i) through (xii) inclusive above) from time to time, provided that the fair market value of the assets which are the subject of such dispositions in the aggregate (in one or a series of related transactions) does not exceed One Million Dollars ($1,000,000) per annum, unless the proceeds from such dispositions are used to purchase replacement or other capital assets within one hundred and eighty (180) days of receipt by such Company of such proceeds; and for greater certainty the Borrower shall be required to make a Repayment in connection with each such disposition to the extent required pursuant to Section 2.04(c)(iii); and
	
 

 

	
 
	
(xi)
	
such other dispositions as may be consented to by the Required Lenders from time to time;
	
 

 

 

50.

 

 

provided that, notwithstanding the foregoing, the Companies may not sell, transfer, assign, lease or otherwise dispose of the Project, the Project Property, any Material Permits or Material Contracts.

 

	
 
	
(d)
	
Financial Assistance – make loans to or acquire Funded Debt of any other Person, guarantee, provide an indemnity in respect of, endorse or otherwise become liable for any debts, liabilities or obligations of any other Person, or give other financial assistance of any kind to any Person, except for:
	
 

 

	
 
	
(i)
	
Guarantees and indemnities which comprise part of the Security;

 

	
 
	
(ii)
	
Guarantees in respect of Funded Debt incurred by any Company to the extent such Funded Debt is permitted by paragraph (iv) of the definition of Permitted Funded Debt; and
	
 

 

	
 
	
(iii)
	
financial assistance by way of extending trade credit to its customers in the ordinary course of business.
	
 

 

	
 
	
(e)
	
Investments – make or acquire any Investments, except that the following Investments may be made or acquired if both immediately before and immediately after each such Investment no Default or Event of Default has occurred and is continuing:
	
 

 

	
 
	
(i)
	
Permitted Acquisitions;

 

	
 
	
(ii)
	
Investments in a Company;

 

	
 
	
(iii)
	
Investments in cash or Cash Equivalents maintained with a Lender; and

 

	
 
	
(iv)
	
other Investments that do not otherwise constitute an Investment under clauses (i) or (iii) above, up to a maximum of Five Hundred Thousand Dollars ($500,000) per annum.
	
 

 

	
 
	
(f)
	
Distributions – authorize, declare or pay, or agree to pay, directly or indirectly any Distributions other than so long as no Default or Event of Default is continuing or would be caused thereby:
	
 

 

	
 
	
(i)
	
Distributions by a Company to another Company provided such Company to whom such Distribution is made has delivered Security to the Agent as required hereunder;
	
 

 

	
 
	
(ii)
	
a Company may service Subordinated Debt after the Conversion Date on account of interest on a monthly basis and principal on an annual basis after the Repayment required to be made pursuant to Section 2.04(c)(iv) (Annual Excess Cash Flow Sweep), so long as such repayment is expressly permitted in any related Intercreditor Agreement and further provided that immediately before and immediately after such Distribution, the Borrower shall be in pro forma compliance with the financial covenants in Section 5.03 and the Borrower shall have delivered a pro forma Compliance Certificate evidencing such compliance; and
	
 

 

	
 
	
(iii)
	
such additional Distributions after the Conversion Date provided that immediately before and immediately after such Distribution, the Borrower shall be in pro forma compliance with the financial covenants in Section 5.03 and the Borrower shall have delivered a pro forma Compliance Certificate evidencing such compliance;
	
 

 

 

51.

 

 

	
 
	
(g)
	
Certain Activities and Investments – in the case of the Credit Parties, directly or indirectly own assets or carry on business in any jurisdiction which is not an Approved Jurisdiction;
	
 

 

	
 
	
(h)
	
Corporate Changes – in the case of the Companies, not materially change the nature of its business or enter into any transaction whereby all or a substantial portion of its Property would become the Property of any other Person, whether by way of reconstruction, reorganization, recapitalization, consolidation, amalgamation, merger, transfer, sale or otherwise, without the prior written consent of the Required Lenders; except that any of the foregoing transactions may take place among the Companies (and no other Persons) in each case if prior written notice is given to the Agent, a Material Adverse Change or other Event of Default will not occur as a result, and the Companies concurrently provide any additional or replacement Security as the Required Lenders may reasonably require;
	
 

 

	
 
	
(i)
	
Defined Benefit Pension Plans – establish, assume or otherwise become a party to or liable under any Defined Benefit Pension Plan.
	
 

 

	
 
	
(j)
	
Fiscal Year – change its Fiscal Year (which for greater certainty presently ends on May 31 in each year), except (a) in the case of the Companies, with the prior written consent of the Required Lenders, or prior written notice to the Lenders to the extent its Fiscal Year is being changed to that of the Parent; and (b) in the case of the Parent, prior written notice to the Lenders;
	
 

 

	
 
	
(k)
	
Auditors – change its auditors from its current audit firm to a firm that is not a nationally recognized auditing firm, except (a) in the case of the Companies, with the prior written consent of the Required Lenders; and (b) in the case of the Parent, prior written notice to the Lenders;
	
 

 

	
 
	
(l)
	
Dealing with Related Parties – enter into any contract, carry out any transaction or otherwise have dealings with any Affiliate, Associate, or Person of which it is an Associate except (a) pursuant to and in accordance with the Material Agreements listed in Schedule 4.01(o) and (b) on terms that are commercially reasonable and no less favourable to it than it would obtain on an arm’s length basis.
	
 

 

	
 
	
(m)
	
Hedging – in the case of the Companies, enter into or be a party to any Hedging Agreement except for the purposes of prudent management of its interest rate and currency exposure in the ordinary course of business and not for speculative purposes, and further provided that it shall not enter into any Hedging Agreements with any Person except for a Lender or any Affiliate of the Lender;
	
 

 

	
 
	
(n)
	
Material Agreements – modify or amend any of the Material Agreements or any of the terms thereof in any manner that would constitute or would reasonably be expected to constitute a Material Adverse Change or terminate, suspend or cancel any Material Agreement if doing so would constitute or would reasonably be expected to constitute a Material Adverse Change without entering into a replacement agreement (which shall include an interim replacement agreement) that provides the applicable Company with rights, benefits and value substantially similar to and on the terms and conditions not materially less favourable than those contained in the Material Agreement being replaced (with such replacement agreement being deemed to be a Material Agreement); notwithstanding the foregoing, the Supply Agreement shall not be modified, amended, terminated, suspended or cancelled without the prior written consent of the Lenders, which consent shall be in their sole and absolute discretion;
	
 

 

 

52.

 

 

	
 
	
(o)
	
Environmental Law – receive any complaint, order, directive, claim, citation, or notice from any Governmental Authority with respect to any of the Real Properties in respect of air emissions, spills, releases, or discharges to soils or improvements located thereon, surface water, groundwater or the sewer, septic system or waste treatment, storage or disposal systems servicing any of the Properties, noise emissions, solid or liquid waste disposal, the use, generation, storage, transportation, or disposal of Hazardous Materials or other Requirements of Environmental Law affecting the Properties which constitutes or would reasonably be expected to constitute a Material Adverse Change without providing notice in accordance with Section 5.01(k);
	
 

 

	
 
	
(p)
	
Use of Advances – use the proceeds of any Advance for any purposes other than those expressly contemplated in this Agreement; and without limiting the generality of the foregoing, the proceeds of any Advance will not be used, directly or indirectly, to lend, contribute or otherwise make available such proceeds, directly or indirectly, to fund any operations in, finance any investments, business or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity if such funding, financing or paying would result in a violation of Sanctions by any Person (including any Person participating in such Advance, whether as underwriter, advisor, investor or otherwise), or in any other manner that would result in a violation of Sanctions by any Person. The Agent and the Lenders in their sole and unfettered discretion may refuse to make any Advance or delay, block or refuse to process any transaction which they believe on reasonable grounds may result in a contravention of the foregoing covenant;
	
 

 

	
 
	
(q)
	
No Sale-Leasebacks – enter into, transact or have outstanding any Sale- Leasebacks, unless the Property subject thereto is permitted to be disposed of pursuant to Section 5.02(c);
	
 

 

	
 
	
(r)
	
No Changes of Jurisdiction / Location – (i) change its jurisdiction of incorporation or formation without the prior written consent of the Agent, nor (ii) permit its chief executive office, registered or head office, or other location at which it keeps, maintains or stores assets in excess of Two Hundred and Fifty Thousand Dollars ($250,000) in value (calculated on a net book value basis) to be other than the locations specified on Schedule 4.01(k) as of the date of this Agreement (except for goods in transit, goods with repairers, product out for sterilization and goods that are normally used in more than one jurisdiction if the latter goods are equipment or are inventory leased or held for lease by it), without providing the Agent with ten (10) days prior written notice of the change and promptly taking other steps, if any, as the Agent reasonably requests to maintain the Security and the other Loan Documents so that the Lenders’ position is not adversely affected;
	
 

 

	
 
	
(s)
	
Repayment of Subordinated Debt – repay in full or in part any Subordinated Debt except as expressly permitted in any related Intercreditor Agreement unless the Termination Date has occurred;
	
 

 

	
 
	
(t)
	
Carry on Business – neither the Parent nor the Borrower nor any other Company shall cease to carry on its business, including in the case of the Borrower, the Business;
	
 

 

	
 
	
(u)
	
Acquisitions – directly or indirectly make any Acquisition or make any purchase of assets out of the ordinary course of business other than Permitted Acquisitions;
	
 

 

	
 
	
(v)
	
Anti-Money Laundering and Anti-Terrorism Finance Laws; Foreign Corrupt Practices Act; Sanctions Laws; Restricted Person – neither the Parent, nor the Borrower, nor any other Company will (i) 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 applicable anti-
	
 

 

53.

 

	
 
		
terrorism law, anti-corruption law, anti- money laundering law or sanctions law or (ii) 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 Agent, any Lender or any Credit Party would be in violation of any Applicable Law or (iii) use any part of the proceeds of the Advances, directly or indirectly, for any conduct that would violate any OFAC Sanctions Programs.   Notwithstanding anything in this Agreement, nothing in this Agreement shall require any Credit Party or the Limited Recourse Guarantor, any of their Subsidiaries, or any director, officer, employee, agent or Affiliate of any Credit Party, the Limited Recourse Guarantor or any of their Subsidiaries that is registered or incorporated under the laws of Canada or of a province to commit an act or omission that contravenes the Foreign Extraterritorial Measures (United States) Order, 1992.; and
	
 

 

	
 
	
(w)
	
Cannabis Activity – neither the Parent, nor the Borrower, nor any other Company will, engage in any Cannabis Activities or make an Investment in any Person who engages in Cannabis Activities, other than in an Approved Jurisdiction in accordance with applicable Cannabis Laws.
	
 

 

	
 
	
5.03
	
Financial Covenants

 

	
 
	
(a)
	
The Borrower agrees to maintain at all times, on a consolidated basis, the financial ratios and amounts listed below:
	
 

	
 
	
(i)
	
Maintain a ratio of Total Funded Debt to Tangible Net Worth ratio of not more than 1.00:1.00 at all times during the period from the Closing Date to the Conversion Date;
	
 

 

	
 
	
(ii)
	
Maintain a Fixed Charge Coverage ratio of not less than 1.25:1 after the Conversion Date;
	
 

 

	
 
	
(iii)
	
Maintain a Total Funded Debt to EBITDA ratio of not more than 2.75:1 after the Conversion Date;
	
 

 

	
 
	
(b)
	
The Parent agrees to maintain at all times a Minimum Liquidity of not less than Twenty Two Million Dollars ($22,000,000);
	
 

 

	
 
	
(c)
	
For the purposes of the calculation of the financial covenants unless otherwise provided herein all such calculations shall be tested quarterly at the end of each Fiscal Quarter and determined on a trailing 12 month basis, in accordance with GAAP, provided that for the purposes of the Fixed Charge Coverage Ratio and Total Funded Debt to EBITDA Ratio to be maintained following the Conversion Date, EBITDA will be annualized on the most recent quarterly actuals commencing at the Conversion Date and then on a twelve month trailing basis once achieved with four Fiscal Quarters and debt service will be initially calculated based on the pro forma interest paid and scheduled principal payments on Total Funded Debt over the next 12 month period then on a twelve month trailing basis once achieved.
	
 

 

	
 
	
(d)
	
For the purposes of the calculation of the Fixed Charge Coverage Ratio, in the event the Borrower fails to comply with the requirements of Section 5.03(a)(ii) as of the last day of any Fiscal Quarter, the Parent may inject additional capital by way of Equity Interests or Subordinated Debt (provided that the maturity date of such indebtedness is later than the Maturity Date and the holder of such indebtedness may not receive any payments on account of principal or interest) (each an “Equity Contribution”) and such Equity Contribution shall be included by the Borrower in the calculation of EBITDA solely for the purpose of determining compliance with such Fixed Charge Coverage Ratio as at such Fiscal Quarter end provided that:
	
 

 

54.

 

 

	
 
	
(i)
	
notice of the Parent’s intent to make an Equity Contribution shall be delivered to the Agent by the Borrower or the Parent no later than the day on which the Interim Financial Statements (or Borrower Year-end Financial Statements in the case of a breach as at the last day of the fourth Fiscal Quarter, as applicable) are required to be delivered for the applicable Fiscal Quarter in accordance with Sections 5.04(a) and 5.04(c),
	
 

 

	
 
	
(ii)
	
such Equity Contribution shall be made no later than 10 Business Days after the day on which the Interim Financial Statements or Borrower Year- end Financial Statements, as applicable, are required to be delivered in accordance with Sections 5.04(a) and 5.04(c);
	
 

 

	
 
	
(iii)
	
notwithstanding Section 2.04(c)(iii), the Borrower shall make a Repayment in an amount equal to one hundred percent (100%) of the proceeds from the Equity Contribution, within three (3) Business Days of receipt thereof;
	
 

 

	
 
	
(iv)
	
the amount of the Equity Contribution shall be limited to the amount necessary to cure the covenant breach; and
	
 

 

	
 
	
(v)
	
such Equity Contribution will not result in a reduction of Total Funded Debt when determining the Applicable Margin;
	
 

 

and further provided that following the Conversion Date, an Equity Contribution may not be exercised in consecutive Fiscal Quarters and there shall be no more than four (4) Equity Contributions permitted for the remainder of the term of Facility A.

 

	
 
	
5.04
	
Reporting Requirements

 

The Borrower shall deliver or cause to be delivered (by email in accordance with Section 12.07) to the Agent the following financial and other information at the times indicated below:

 

	
 
	
(a)
	
the annual Borrower Year-end Financial Statements and its Subsidiaries on a consolidated basis by the ninetieth (90th) day after the end of each Fiscal Year commencing with the Fiscal Year ending May 31, 2020, prepared in accordance with GAAP, accompanied by a Compliance Certificate certified by a Senior Officer in the form of Exhibit "F" attached hereto and accompanied by an analysis of any material variances between actual results for such Fiscal Year and the projections contained in the most recent Annual Business Plan presented to the Agent and the Lenders;
	
 

 

	
 
	
(b)
	
as soon as available and in any event not later than sixty (60) days following the commencement of each Fiscal Year, the Annual Business Plan for such Fiscal Year;
	
 

 

	
 
	
(c)
	
the Interim Financial Statements of the Borrower and its Subsidiaries on a consolidated basis by the forty-fifth (45th) day after the end of each Fiscal Quarter (other than the fourth Fiscal Quarter in each Fiscal Year which shall be delivered by the ninetieth (90th) day after the end of the fourth Fiscal Quarter), together with a Compliance Certificate certified by a Senior Officer of the Borrower in the form of Exhibit "F" attached a accompanied by an analysis of any material variances between actual results to date and the projections contained in the most recent Annual Business Plan presented to the Agent and the Lenders;
	
 

 

	
 
	
(d)
	
the annual Parent Year-end Financial Statements on a consolidated basis by the one hundred and twentieth (120th) day after the end of each Fiscal Year of the Parent (or by 
	
 

 

55.

 

	
 
		
the time period within which the Parent is required to file the Parent Year-end Financial Statements by the relevant securities authorities governing the exchange on which the Parent is listed), commencing with the Fiscal Year ending May 31, 2020, prepared in accordance with GAAP, together with the auditor’s report, and accompanied by a compliance certificate certified by a Senior Officer of the Parent which shall evidence compliance with the Minimum Liquidity covenant set out in Section 5.03 herein and the calculation thereof;
	
 

	
 
	
(e)
	
the Interim Financial Statements of the Parent and its Subsidiaries on a consolidated basis by the time period with which the Parent is required to file its Interim Financial Statements with the applicable securities authorities governing the exchange on which the Parent is listed after the end of each Fiscal Quarter (other than the fourth Fiscal Quarter in each Fiscal Year which shall be delivered by the at the time of the annual audited financial statements pursuant to (d) above, accompanied by a compliance certificate certified by a Senior Officer of the Parent which shall evidence compliance with the Minimum Liquidity covenant set out in Section 5.03 herein and the calculation thereof;
	
 

 

	
 
	
(f)
	
within ten (10) Business Days of receipt, a copy of any Health Canada inspection/audit reports for a twelve (12) month period following the issuance of a Health Canada License with cultivation standard for the Borrower;
	
 

 

	
 
	
(g)
	
such additional information and documents as the Agent or the Lenders may reasonably require from time to time, not inconsistent with the terms of this Agreement, to ensure the ongoing compliance by the Borrower with the terms and conditions of this Agreement, in form reasonably acceptable to the Agent and the Lenders.
	
 

 

	
 
	
(h)
	
as soon as available and in any event within forty-five (45) days after the last day of each of its Fiscal Quarters, if any of the information disclosed in Schedule 4.01(r) attached hereto is no longer accurate, an officer's certificate of the Parent attaching copies of the revised Schedule required to ensure that such information remains accurate as of the last day of such Fiscal Quarter;
	
 

 

	
 
	
(i)
	
such additional information and documents as the Agent or the Lenders may reasonably require from time to time, not inconsistent with the terms of this Agreement, to ensure the ongoing compliance by the Borrower with the terms and conditions of this Agreement, in form reasonably acceptable to the Agent and the Lenders.
	
 

 

	
 
	
5.05
	
Anti-Money Laundering

 

	
 
	
(a)
	
The Credit Parties acknowledge that, pursuant to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) and other applicable anti- money laundering, anti-terrorist financing, government sanction and "know your client" laws, whether within Canada or elsewhere (collectively, including any guidelines or orders thereunder, "AML Legislation"), the Agent and the Lenders may be required to obtain, verify and record information regarding the Credit Parties and their respective directors, authorized signing officers, direct or indirect shareholders, partners or other persons in control of the Credit Parties and the transactions contemplated hereby. The Credit Parties shall promptly provide all such information, including any supporting documentation and other evidence, as may be reasonably requested by the Agent or any Lender, or any prospective assignee or participant of a Lender or the Agent, to the extent the same is required in order to comply with any applicable AML Legislation, whether now or hereafter in existence.
	
 

 

 

56.

 

 

	
 
	
(b)
	
If the Agent has ascertained the identity of any Credit Party, or any authorized signatories of any Credit Party, for the purposes of applicable AML Legislation, then the Agent shall:
	
 

	
 
	
(i)
	
be deemed to have done so as an agent for each Lender, and this Agreement shall constitute a "written agreement" in such regard between each Lender and the Agent within the meaning of applicable AML Legislation; and
	
 

 

	
 
	
(ii)
	
provide each Lender with copies of all information obtained in such regard without any representation or warranty as to its accuracy or completeness.
	
 

 

Notwithstanding the preceding sentence and except as may otherwise be agreed in writing, each of the Lenders agrees that the Agent has no obligation to certain the identity of any Credit Party, or any authorized signatories of any Credit Party, on behalf of any Lender or to confirm the completeness or accuracy of any information that the Agent obtains from any Credit Party, or any such authorized signatory, in doing so.

 

	
 
	
5.06
	
Terrorist Lists

 

The Credit Parties shall ensure that each Credit Party is and will remain in compliance in all material respects with all Canadian economic sanctions laws and implementing regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada), the Criminal Code (Canada), the United Nations Act (Canada) and all similar applicable anti-money laundering and counter-terrorism financing provisions and regulations issued pursuant to any of the foregoing. No Credit Party (i) is a Person designated by the Canadian government on any list set out in the United Nations Al-Qaida and Taliban Regulations, the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism or the Criminal Code (collectively, the "Terrorist Lists") with which a Canadian Person cannot deal with or otherwise engage in business transactions, (iii) is a Person who is otherwise a target of Canadian economic sanctions laws or (iv) is Controlled by (including without limitation by virtue of such Person being a director or owning voting shares or interests), or acts, directly or indirectly, for or on behalf of, any Person or entity on a Terrorist List or a foreign government that is a target of Canadian economic sanctions prohibitions such that the entry into, or performance under, this Agreement or any other Loan Document would be prohibited under Canadian law.

 

ARTICLE VI - SECURITY

 

	
 
	
6.01
	
Security to be Provided by the Credit Parties and Limited Recourse Guarantors

 

Each of the Credit Parties agree to provide (or cause to be provided) the security to be provided by it listed below in favour of the Agent for the benefit of the Agent and the Lenders, in each case in form and substance satisfactory to the Agent, as continuing security for the payment of the Obligations and the payment and performance of all other present and future, direct and indirect, indebtedness and obligations of the Borrower to the Agent and the Lenders, specifically including the Obligations arising under or in respect of this Agreement, the Hedging Agreements and the other Loan Documents:

 

	
 
	
(a)
	
an unlimited Guarantee from each present and future Subsidiary of the Borrower in respect of all present and future, direct and indirect, Obligations of the Borrower to the Agent and the Lenders;
	
 

	
 
	
(b)
	
a Guarantee from the Parent in respect of the present and future, direct and indirect, Obligations of the Borrower to the Agent and the Lenders, limited to a maximum amount of Ninety Million Dollars ($90,000,000);
	
 

 

	
 
	
(c)
	
a Guarantee from each of the Limited Recourse Guarantors in respect of all present and future, direct and indirect, Obligations of the Borrower to the Agent and the Lenders, limited in recourse to the Equity Interests of such Limited Recourse Guarantor in the Borrower pledged by the Limited Recourse Guarantor pursuant to the Security (“Limited Recourse Guarantee”);
	
 

 

57.

 

 

	
 
	
(d)
	
a debt service deficiency agreement by the Parent in favour of the Agent for the benefit of the Lenders pursuant to which the Parent agrees to make Equity Contributions in such amount necessary to enable the Borrower to comply with the Fixed Charge Coverage Ratio, in accordance with Section 5.03 hereof (“Debt Service Deficiency Agreement”);
	
 

 

	
 
	
(e)
	
the Parent Subordination Agreement;

 

	
 
	
(f)
	
a general security agreement, debenture, movable hypothec or similar form of security from each Company creating a First-Ranking Security Interest including in respect of all of its present and future Property of the Companies made subject thereto, specifically including all shares, partnership interests and other Equity Interests held by such Company in the capital of any other Company;
	
 

 

	
 
	
(g)
	
a debenture or collateral mortgage from each Company creating a First-Ranking Security Interest in respect of each of the Owned Properties, including but not limited to a debenture or collateral mortgage from the Borrower in the amount of One Hundred Million Dollars ($100,000,000) on the Project Property, together with a satisfactory title opinion or title insurance at the request of the Lenders in their sole and absolute discretion;
	
 

 

	
 
	
(h)
	
at the request of the Lenders, debentures, collateral mortgages or other forms of security required by the Agent in order to create a First-Ranking Security Interest in respect of any or all Material Leased Properties;
	
 

 

	
 
	
(i)
	
specific assignments by each of the Companies of all rights and benefits arising under any Material Agreement (including the Supply Agreement), accompanied by an agreement from the other contracting party (including the Parent) thereto (each a “Consent”), in form and substance satisfactory to the Lenders, acting reasonably; provided that the Companies shall only be required to use commercially reasonable efforts to obtain any Consent (other than the Consent of a Related Party which shall be required to be obtained) after the Closing Date at the request of the Lenders, acting reasonably, and if the Companies are not able to obtain a Consent in respect of any Material Agreement, such Material Agreement will become a Restricted Asset (as such term is defined in the security agreement delivered by the Companies pursuant to Section 7.01(c));
	
 

 

	
 
	
(j)
	
security agreements creating an assignment and First-Ranking Security Interest in respect of its rights to and interest in Intellectual Property, together with any necessary consents from other Persons which may be required in connection with the granting of such assignment and security interest in any Intellectual Property considered by the Lenders to be material;
	
 

	
 
	
(k)
	
a first ranking pledge of all Equity Interests held in any Company, including by each shareholder of the Borrower (including the Parent and each Limited Recourse Guarantor), the delivery of any certificates representing the Equity Interest with endorsements executed in blank and the taking of other steps that the Agent requires to control the Equity Interest and perfect the Security relating to the Equity Interest;
	
 

 

	
 
	
(l)
	
assignments of the interest of each Company in all policies of insurance held by it which requirement shall be satisfied if the Agent's interest as first mortgagee and loss payee is recorded on such policies and a certificate of insurance in respect of all liability insurance naming the Agent as additional insured and all property insurance on a replacement cost basis naming the Agent as additional insured and first loss payee and first mortgagee (and including Insurance Bureau of Canada standard mortgage clause);
	
 

 

 

58.

 

 

	
 
	
(m)
	
environmental checklists and indemnities by the Companies for each of its Owned Properties and Material Leased Properties at the request of the Lenders in their sole and absolute discretion;
	
 

 

	
 
	
(n)
	
such other security as may be reasonably required by the Agent and the Lenders from time to time, not inconsistent with the provisions of this Agreement.
	
 

 

	
 
	
6.02
	
Security to be Provided by Others

 

	
 
	
(a)
	
The Borrower shall cause each holder of indebtedness which is intended to constitute Subordinated Debt to provide a subordination and postponement agreement in favour of the Agent, in form and substance satisfactory to the Agent.   The provision of such subordination and postponement agreements shall constitute a condition precedent to the Closing Date Advance, and the absence of any required such subordination and postponement agreement shall constitute an Event of Default.
	
 

 

	
 
	
(b)
	
To the extent requested by the Agent from time to time, the Borrower agree to use commercially reasonable efforts to obtain Landlord Agreements in respect of the Material Leased Properties.
	
 

 

	
 
	
(c)
	
If at any time (i) any of the Companies own, establishes or acquires a Subsidiary, directly or indirectly, or (ii) any Person becomes a shareholder (the “New Shareholder”) of the Borrower, the Companies or the Borrower, as applicable, shall within thirty (30) days cause that Subsidiary or New Shareholder to become a Guarantor or Limited Recourse Guarantor respectively, in the case of the Subsidiary, adopt this Agreement by delivering an agreement in the form of Exhibit I <Agreement and Acknowledgement to be bound – New Guarantor > so as to be bound by all of the terms applicable to the Companies, as if it had executed this Agreement as a Guarantor, and in the case of such Subsidiary or New Shareholder deliver a guarantee and indemnity and other security documents required to comply with Article VI, which shall become part of the Security. The Companies shall, or the Borrower, as applicable shall cause the New Shareholders, to also deliver or cause the delivery of a first ranking pledge of all of the Equity Interests of all newly acquired or established Subsidiaries or the Borrower, as applicable, as part of the Security, deliver any certificates representing the Equity Interests with endorsements executed in blank and take other steps that the Agent requires to perfect the Security relating to the Equity Interests, and cause the delivery of such legal opinions and other supporting documents as the Agent may reasonably require.
	
 

 

	
 
	
6.03
	
General Provisions re Security; Registration

 

The Security shall be in form and substance satisfactory to the Agent and the Lenders in their sole discretion. The Agent may require that any item of Security be governed by the laws of the jurisdiction where the Property subject to such item of Security is located. The Security shall be registered where necessary or desirable to record and perfect the charges contained therein as may be determined by the Agent in its sole discretion and the Companies shall at the direction of the Agent use commercially reasonable efforts to obtain agreements of other persons and take other actions, as may from time to time be necessary or desirable in perfecting, preserving or protecting the Security, wherever such registration, filing, recording, agreement or other action may be necessary or desirable.

 

	
 
	
6.04
	
Opinions re Security

 

The Credit Parties shall cause to be delivered to the Agent the opinions of the solicitors for the Credit Parties regarding their corporate or analogous status, the due authorization, execution and delivery of the Security and other Loan Documents provided by them, all registrations in respect of the 

 

59.

 

Security, the results of all applicable searches in respect of them, and the enforceability of such Security, subject to Legal Reservations; all such opinions to be in form and substance satisfactory to the Agent and its counsel, acting reasonably.

 

	
 
	
6.05
	
After-Acquired Property, Further Assurances

 

The Companies shall execute and deliver from time to time, and cause each of their respective Subsidiaries and Affiliates to execute and deliver from time to time, all such further documents and assurances as may be reasonably required by the Agent and Lenders from time to time, not inconsistent with the terms of this Agreement, in order to provide the Security contemplated hereunder, specifically including: supplemental or additional security agreements, assignments and pledge agreements which shall include lists of specific assets to be subject to the security interests required hereunder.

 

	
 
	
6.06
	
Insurance by Agent

 

If, following request therefor, the Companies do not provide the Agent with evidence of continuing insurance coverage in accordance with the requirements of this Agreement, the Agent may, but shall have no obligation to, purchase such insurance in order to protect the interests of the Agent and the Lenders in the Property of the Companies. Such insurance may also, but need not, also protect the Companies' interests in such Property. The Companies agree to immediately reimburse the Agent upon demand for all costs and expenses incurred by the Agent in respect of the purchase of any such insurance, and until so paid such expenses shall constitute part of the Obligations, shall bear interest at the highest rate provided herein and shall be secured by the Security.

	
 
	
6.07
	
Insurance Proceeds

 

If insurance proceeds become payable in respect of loss of or damage to any property owned by a Company:

 

	
 
	
(a)
	
if an Event of Default has occurred and is continuing at such time, the Agent shall apply such proceeds against the Obligations;
	
 

 

	
 
	
(b)
	
if no Event of Default has occurred and is continuing at such time, one hundred percent (100%) of the aggregate amount received in cash by the applicable Company in connection with such insurance proceeds less a provision for taxes attributable to such insurance proceeds, that are not re-invested in repair or replacement of the affected assets within one hundred and eighty (180) days from the date of such damage or loss shall be applied against the Obligations; provided that if an amount that is equal to or less than One Million Dollars ($1,000,000) in the aggregate in any Fiscal Year is received by the Companies, the Companies shall not be required to apply such proceeds against the Obligations.
	
 

 

	
 
	
6.08
	
Discharge of Certain Security

 

	
 
	
(a)
	
The Lenders irrevocably authorize the Agent, and the Agent agrees:

 

	
 
	
(i)
	
to release any Lien granted to or held by the Agent under any Loan Document at any time occurring on or following the Termination Date upon the request of the Borrower;
	
 

 

	
 
	
(ii)
	
upon the Borrower’s request to release any Lien in favour of the Agent on any Collateral that is sold or otherwise disposed of or to be sold or otherwise disposed of as part of or in connection with any sale or other disposition permitted under the Loan Documents.
	
 

 

 

60.

 

 

ARTICLE VII- CONDITIONS PRECEDENT

 

	
 
	
7.01
	
Conditions Precedent to First Advance

 

The obligation of each Lender, to fund the single Advance on the Closing Date requested to be made by the Borrower shall be subject to the prior or concurrent satisfaction or waiver of only the conditions precedent set forth in this Section 7.01 (the making of such Advance by a Lender being conclusively deemed to be its satisfaction or waiver of the conditions precedent):

 

	
 
	
(a)
	
The Agent shall have received on its own behalf or for and on behalf of the Lenders as applicable, each in full force and effect and in form and substance satisfactory to the Lenders (unless otherwise noted), acting reasonably, the following:
	
 

 

	
 
	
(i)
	
this Agreement duly executed and delivered by the parties thereto;

	
 
	
(ii)
	
a copy of the Agency Fee Agreement on its own behalf, in form and substance satisfactory to the Agent, duly executed and delivered by the Borrower;
	
 

 

	
 
	
(iii)
	
a copy of each other Loan Document being delivered by the Credit Parties and Limited Recourse Guarantors in connection herewith (including the Security) duly executed and delivered by the Credit Parties and the Limited Recourse Guarantors;
	
 

 

	
 
	
(iv)
	
certificates representing the pledged Equity Interests pursuant to the Security, and endorsements executed in blank relating to those certificates or, if no certificates are available and evidence of other arrangements being made as required by the Agent to enable the Agent to control the pledged Equity Interests and perfect the Security relating thereto;
	
 

 

	
 
	
(v)
	
a certificate of status, good standing, or equivalent in respect of each Credit Party and Limited Recourse Guarantor issued under the laws of the applicable relevant jurisdictions in which it is incorporated;
	
 

 

	
 
	
(vi)
	
a final organization/ownership chart (showing full details of shareholders, partners, directors and officers) applicable to the Credit Parties;
	
 

 

	
 
	
(vii)
	
a certificate of a responsible officer on behalf of the Limited Recourse Guarantor and each Credit Party dated the Closing Date, certifying (A) that attached thereto is a true and complete copy of each Constating Document of the Limited Recourse Guarantor or Credit Party as applicable; (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors or other governing body of the Limited Recourse Guarantor or Credit Party authorizing the execution, delivery and performance of the Loan Documents to which such person is a party and, in the case of the Borrower, the Advances hereunder, and in connection with the pledges of Equity Interests pursuant to the Security or in connection with any disposition of pledged Equity Interests upon enforcement of the Security; and that such resolutions have not been modified, rescinded or amended and are in full force and effect as of the date of such certificate, and (C) as to the incumbency and specimen signature of each officer or authorized person executing any Loan Document or any other document delivered in connection herewith on behalf of the Limited Recourse Guarantor or Credit Party as applicable (together with a certificate of another officer or authorized person as to the incumbency and specimen signature of the officer or authorized person executing the certificate in this clause (i));
	
 

 

 

61.

 

 

	
 
	
(viii)
	
a certified copy of each Material Contract (including without limitation the Supply Agreement and any shareholder agreement, and for greater certainty amendments thereto, among the shareholders of the Borrower) and Material Permit (including Health Canada Licences issued to the Borrower evidencing a minimum cultivation class for operations at the Project by the Borrower of Cannabis Activities, which must be delivered at least 5 Business Days prior to Closing Date);
	
 

	
 
	
(ix)
	
such “know your client” information, including in respect of the Credit Parties and Limited Recourse Guarantors, that the Agent or any Lender may reasonably require;
	
 

 

	
 
	
(x)
	
current certificates of insurance, in form and substance satisfactory to the Agent (acting reasonably), evidencing the insurance required to be maintained by the Companies pursuant to Section 5.01(i), listing the Agent on behalf of the Lenders as first loss payee and mortgagee and additional insured, and containing a mortgage clause or endorsement satisfactory to the Agent (acting reasonably);
	
 

 

	
 
	
(xi)
	
all operation of account documentation relating to the Agent’s account as the Agent may reasonably require;
	
 

 

	
 
	
(xii)
	
all necessary governmental and third party consents and approvals necessary in connections with this Agreement and the transactions contemplated hereby shall have been obtained (in form and substance reasonably acceptable to the Agent) and shall remain in effect;
	
 

 

	
 
	
(xiii)
	
all consents that are required from the directors, shareholders, partners or members of the Companies, either in connection with the pledges of Equity Interests pursuant to the Security or in connection with any disposition of pledged Equity Interests upon enforcement of the Security;
	
 

 

	
 
	
(xiv)
	
favourable opinions of counsel to the Credit Parties and Limited Recourse Guarantors addressed to the Agent, each Lender and Lenders’ counsel, relating to all matters considered relevant, including existence and capacity of each Credit Party, the due authorization, execution, delivery and enforceability of the Loan Documents to which each Credit Party and Limited Recourse Guarantor, is a party being delivered in connection herewith and the registration and perfection of the Security in the relevant jurisdictions;
	
 

 

	
 
	
(xv)
	
as it relates to the Project Property, and any other Owned Property, title insurance or binding commitments to issue title insurance policies, in respect of the Security to the extent it includes specific charges of real property, containing endorsements reasonably required by the Agent and subject only to title qualifications that the Agent reasonably considers acceptable; and
	
 

 

	
 
	
(xvi)
	
such other documents, certificates, opinions and agreements as are reasonably required to confirm the completion and satisfaction of the foregoing which the Agent and the Lenders may reasonably request.
	
 

 

	
 
	
(b)
	
the Lenders shall have completed and shall be satisfied with their due diligence in respect of the Credit Parties, the Limited Recourse Guarantors, the Project, the Project Property, the Property, the Business, including compliance with all Applicable Laws including and Cannabis Laws, current financial statements, environmental review and specifically including but not limited to the following:
	
 

	
 
	
(i)
	
the Parent Year-End Financial Statements and the Borrower Year-end Financial Statements for the immediately preceding Fiscal Year, prepared in accordance with GAAP;
	
 

 

 

62.

 

 

	
 
	
(ii)
	
the Interim Financial Statements for the Borrower and the Parent in respect of the Fiscal Quarter ended August 31, 2019;
	
 

 

	
 
	
(iii)
	
detailed financial model (both consolidated and unconsolidated) including consolidated opening balance sheet and a financial projections for the Business in respect of the next three (3) Fiscal Years;
	
 

 

	
 
	
(iv)
	
the final capital budget and summary of costs incurred by the Borrower to the Closing Date for the retro fit of the Project to a Cannabis production facility, such costs not to exceed One Hundred and Seventy Eight Million Eight Hundred Thousand Dollars ($178,800,000);
	
 

 

	
 
	
(v)
	
property and liability insurance which complies with the representations and requirements herein (to be reviewed by an insurance consultant satisfactory to the Agent and the Lender for the account of the Borrower);
	
 

 

	
 
	
(vi)
	
a Compliance Certificate completed by the Borrower (with pro forma adjustments to reflect the Advances on the Closing Date based on reasonable projections satisfactory to the Lenders) evidencing compliance with the financial covenants in Section 5.03 required to be complied with as at the Closing Date;
	
 

 

	
 
	
(vii)
	
satisfaction of the Lenders that the Borrower has been capitalized as the Closing Date by way of the Minimum Equity Contribution and by way of a shareholder loan advanced by the Parent to the Borrower in a principal amount of approximately Ninety Eight Million Eight Hundred Thousand Dollars ($98,800,000) and that such shareholder loan constitutes Subordinated Debt subject to the Parent Shareholder Subordination;
	
 

 

	
 
	
(viii)
	
a Compliance Certificate completed by the Borrower (with pro forma adjustments to reflect the Advances on the Closing Date based on reasonable projections satisfactory to the Lenders) evidencing compliance immediately following the date of the Equity Contribution;
	
 

 

	
 
	
(ix)
	
satisfaction of the Lenders with the terms and conditions of all Material Agreements (including the Supply Agreement and the Shareholders Agreement among the shareholders of the Borrower), and all Material Permits, including the Health Canada Licences;
	
 

 

	
 
	
(c)
	
the Agent and the Lenders shall have received an environmental questionnaire and indemnity in the Agent’s standard form in respect of each Owned Property (including the Project Property ) and Material Leased Property completed by a Senior Officer of the Company which owns or leases the applicable Real Property;
	
 

 

	
 
	
(d)
	
the Agent and the Lenders shall have received an Acceptable Appraisal completed within six months of the Closing Date in respect of the Owned Properties (including the Project Property ) confirming market value, alternate use value on a hypothetical best use facility basis, cost to complete approach and comparable transaction approach, in a minimum amount of not less than One Hundred and Forty Five Million One Hundred and Thirty Six Thousand Dollars ($145,136,000) in the case of the Project Property, together with a letter from applicable accredited appraiser confirming that the Agent and the Lenders are entitled to rely on each such appraisal;
	
 

 

	
 
	
(e)
	
the Agent shall have completed a site visit to each of the Owned Properties and be satisfied them;
	
 

 

63.

 

 

	
 
	
(f)
	
no litigation is pending or threatened in writing against one or more of the Credit Parties that would reasonably be expected to constitute a Material Adverse Change;
	
 

 

	
 
	
(g)
	
no Applicable Law shall be applicable in the judgment of the Lenders that restrains, prevents or imposes materially adverse conditions upon this Agreement or the transactions contemplated hereby;
	
 

 

	
 
	
(h)
	
the Agent must have received evidence that all Funded Debt of the Companies not forming part of Permitted Funded Debt has been or will be paid and performed in full concurrently with the first Advance;
	
 

 

	
 
	
(i)
	
the Agent must have received releases and discharges (in registrable form where appropriate) covering all Liens affecting any Property of each Company that are not Permitted Liens, or undertakings of the holders of the Liens to deliver releases and discharges promptly after the first Advance;
	
 

 

	
 
	
(j)
	
the Agent must have received all Intercreditor Agreements that are required hereunder;
	
 

 

	
 
	
(k)
	
any governmental, regulatory and third party approvals necessary in connection with this Agreement and the transactions contemplated therein shall have been given unconditionally and without containing any onerous terms;
	
 

 

	
 
	
(l)
	
if requested by the Agent, the Agent and the Lenders shall have received particulars of any particular material, Permitted Liens, specifically including the assets encumbered thereby and the amounts due thereunder;
	
 

 

	
 
	
(m)
	
the property and assets of the Companies shall be insured in accordance with the requirements of this Agreement;
	
 

 

	
 
	
(n)
	
the Credit Parties and the Limited Recourse Guarantors shall have satisfied all requirements of the Agent and each Lender under AML Legislation;
	
 

 

	
 
	
(o)
	
the Borrower shall have paid, or arrangements have been made to pay from the proceeds of the Advance on the Closing Date, all fees and reasonable expenses of the Agent and the Lenders then due in respect of this Agreement and the other Loan Documents, including under the Agency Fee Agreement and including the Agent’s reasonable third party legal expenses;
	
 

 

	
 
	
(p)
	
the Agent and the Lenders shall have received such additional evidence, documents or undertakings as they may reasonably require to complete the transactions contemplated hereby in accordance with the terms and conditions contained herein;
	
 

 

	
 
	
(q)
	
all conditions present in Section 7.02 shall have been satisfied.

.

 

	
 
	
7.02
	
Conditions Precedent to all Advances

 

The Lenders shall have no obligation to make any Advance to the Borrower unless at the time of making each such Advance the following conditions shall have been satisfied:

 

	
 
	
(a)
	
the representations and warranties in Section 4.01 shall be true and correct in all material respects as if made on the date of such Advance, except for any such representations and warranties which are expressly stated herein to have been made only as at the date of this Agreement, and except as may be otherwise agreed in writing by the Required Lenders in their discretion from time to time;
	
 

 

 

64.

 

 

	
 
	
(b)
	
any additional Security required to be provided at such time shall have been executed and delivered and all registrations necessary or desirable in connection therewith shall have been made as required pursuant to this Agreement, and any other documentation required by the Agent pursuant to this Agreement shall have been executed and delivered, all in form and substance satisfactory to the Agent in its sole discretion;
	
 

 

	
 
	
(c)
	
any additional Security required to be provided at such time shall have been executed and delivered on a First-Ranking Security Interest Basis (subject only to Permitted Liens) and all registrations necessary or desirable in connection therewith shall have been made as required pursuant to this Agreement, and any other documentation required by the Agent pursuant to this Agreement shall have been executed and delivered, all in form and substance satisfactory to the Agent in its sole discretion;
	
 

 

	
 
	
(d)
	
no Default or Event of Default shall have occurred and be continuing, nor shall the making of such Advance result in the occurrence of any Default or Event of Default;
	
 

 

	
 
	
(e)
	
the Borrower shall have given a Draw Request to the Agent in accordance with the notice requirements provided herein;
	
 

 

	
 
	
(f)
	
since the date of the most recent Interim Financial Statements, Borrower Year- end Financial Statements and Parent Year-end Financial Statements delivered to the Agent, no Material Adverse Change shall have occurred; and
	
 

 

	
 
	
(g)
	
no third party demand or garnishment order for payment to any Governmental Authority shall have been received by the Agent or any Lender in respect of any Company.
	
 

ARTICLE VIII- DEFAULT AND REMEDIES

 

	
 
	
8.01
	
Events of Default

 

The occurrence of any one or more of the following events, after the expiry of any applicable cure period set out below, shall constitute an event of default under this Agreement (an "Event of Default"):

 

	
 
	
(a)
	
if the Borrower fails to pay any principal hereunder when due;

 

	
 
	
(b)
	
if the Borrower fails to pay any Interest payable hereunder within three (3) Business Days after the date such Interest or other amount is due;
	
 

 

	
 
	
(c)
	
if any Credit Party fails to pay any amount (other than amounts referred to in paragraphs (a) and (b) above) under any Loan Document to which it is party within three (3) Business Days after demand for payment thereof from the Agent;
	
 

 

	
 
	
(d)
	
any representation or warranty made or deemed made by or on behalf of any Credit Party or Limited Recourse Guarantor in or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been incorrect when made or deemed to be made; and, in the case of any incorrect representation or warranty which is capable of being cured, and to the extent such incorrect representation or warranty has not been made intentionally, if such representation and warranty is not corrected within thirty (30) days of the earlier of a Credit Party or Limited Recourse Guarantor becoming aware of such incorrect representation or warranty and notice by the Agent to the Borrower specifying such default or failure;
	
 

 

 

65.

 

 

	
 
	
(e)
	
The Borrower fails to perform or comply with any of the negative covenants set out in Section 5.02;
	
 

 

	
 
	
(f)
	
any Credit Party is not in compliance with any of the financial covenants set out in Section 5.03;
	
 

 

	
 
	
(g)
	
any Credit Party is not in compliance with any of the covenants set out in Sections 5.01(b), 5.01(c), paragraphs (B),(C), and subparagraphs (ii)-(iv) of Section 5.01(d), or Section 5.01(k)(xiv);
	
 

 

	
 
	
(h)
	
any Credit Party or Limited Recourse Guarantor fails to perform or comply with any of its covenants or obligations contained in this Agreement, the Security or any other Loan Document (other than those set out in paragraphs (a), through
	
 

(g) above) within thirty (30) days after the earlier of (i) any Credit Party or Limited Recourse Guarantor becoming aware of such non-compliance and (ii) receipt of notice of such non-compliance by the Agent; provided that if such non- compliance is capable of remedy within thirty (30) days and such Credit Party or Limited Recourse Guarantor diligently attempts to remedy such non-compliance and continually informs the Agent of its efforts in this regard, and such non-compliance is remedied within such period, then such non-compliance shall be deemed not to constitute an Event of Default;

 

	
 
	
(i)
	
there is an event of default under any Subordinated Debt (after the expiry of any grace or cure periods relating respectively thereto);
	
 

 

	
 
	
(j)
	
without limiting paragraph (g) immediately above, any one or more of the Credit Parties is in default of any agreement relating to Funded Debt other than the Obligations (after the expiry of any grace or cure periods relating thereto) for an amount equal to or greater than: (a) One Million Dollars ($1,000,000) in the aggregate for the Companies; and (b) Ten Million Dollars ($10,000,000) in the aggregate for the Parent, if the effect is to cause or permit the acceleration of the due date of that Funded Debt;
	
 

 

	
 
	
(k)
	
any one or more of the Credit Parties is in default in the payment of any indebtedness in excess of: (a) One Million Dollars ($1,000,000) in the aggregate for the Companies; and (b) Ten Million Dollars ($10,000,000) in the aggregate for the Parent in the aggregate under any Material Agreements or there is otherwise a default under a Material Agreement that continues without being waived after any applicable grace period specified in the Material Agreement, if the effect of the default (if not waived) is to terminate the Material Agreement, or if a Credit Party agrees to the surrender of any Material Agreement or any Material Agreement is otherwise terminated prior to the expiry date expressly set out therein, unless within thirty (30) days of termination or surrender, such agreement is replaced with a replacement agreement as contemplated in Section 5.02(n));
	
 

 

	
 
	
(l)
	
an Insolvency Event occurs in respect of any Limited Recourse Guarantor to the extent it constitutes a Material Adverse Change, or an Insolvency Event occurs in respect of any Credit Party;
	
 

 

	
 
	
(m)
	
any Person takes possession of any Property of one or more of the Companies valued in excess of One Million Dollars ($1,000,000) in the aggregate, by way of or in contemplation of enforcement of security; or a distress or execution or similar process is levied or enforced against any such Property; except to the extent that: such matter is being diligently contested and in good faith by such Company in good faith and on reasonable grounds; such Company provides the Agent with all information relating to such matter as it may reasonably request from time to time; a reserve satisfactory to the Required Lenders has been established;
	
 

 

66.

 

 

	
 
	
(n)
	
one or more final judgments or decrees for the payment of money shall have been obtained or entered against any one or more of the Credit Parties in excess of: (a) One Million Dollars ($1,000,000) in the aggregate for the Companies; and (b) Ten Million Dollars ($10,000,000) in the aggregate for the Parent and such judgment or decree for the payment of money shall not be paid, discharged, vacated, bonded or stayed within thirty (30) days;
	
 

 

	
 
	
(o)
	
any Governmental Authority shall take any action to condemn (which is not dismissed or stayed within thirty (30) days of such action being taken) or seize or appropriate any property of any Credit Party that is material to the financial condition, business or operations of the Credit Parties taken as a whole;
	
 

	
 
	
(p)
	
any Loan Document or any material provision thereof is or is declared by any court of competent jurisdiction to be unenforceable, or any Credit Party or Limited Recourse Guarantor terminates or purports to terminate its liability under any Loan Document or disputes the validity or enforceability of such Loan Document;
	
 

 

	
 
	
(q)
	
all or any part of the Security granted by a Credit Party or the Limited Recourse Guarantor ceases to constitute a valid First-Ranking Security Interest in respect of the property intended to be subject thereto;
	
 

 

	
 
	
(r)
	
the Borrower ceases to be a Subsidiary of the Parent (except as a result of an amalgamation or merger with another Credit Party or a winding-up into another Credit Party), unless the Lenders in their discretion otherwise agree in writing;
	
 

 

	
 
	
(s)
	
the Cannabis Act is repealed and is not immediately replaced with substantially similar legislation;
	
 

 

	
 
	
(t)
	
any Cannabis Authorization shall (i) expire or be revoked, terminated or cancelled, and in any such case not immediately replaced, renewed or reinstated on comparable terms or (ii) be modified in any materially adverse fashion;
	
 

 

	
 
	
(u)
	
a Change of Control occurs;

 

	
 
	
(v)
	
any report of the auditors of the Parent in the Parent Year-end Audited Financial Statements contains a going-concern qualification or other materially adverse qualification relating to the creditworthiness of the Credit Parties on a consolidated basis; or
	
 

 

	
 
	
(w)
	
the termination or amendment of the Supply Agreement, or the termination of any other Material Agreement unless within thirty (30) days of termination, such agreement is replaced with a replacement agreement as contemplated in Section 5.02(n); or
	
 

 

	
 
	
(x)
	
an event occurs which in the reasonably opinion of the Required Lenders constitutes a Material Adverse Change.
	
 

 

	
 
	
8.02
	
Acceleration; Additional Interest

 

	
 
	
(a)
	
Upon the occurrence of an Insolvency Event, the Obligations shall become immediately due and payable, without the necessity of any demand upon or notice to the Credit Parties by the Agent.
	
 

 

	
 
	
(b)
	
Upon the occurrence and during the continuation of any Event of Default other than an Insolvency Event, the Agent shall, if instructed of the Required Lenders, issue a written notice to the Borrower (an "Acceleration Notice") declaring all of the Obligations to be immediately due and payable.
	
 

 

 

67.

 

 

	
 
	
(c)
	
At any time on or after the Acceleration Date the Agent may exercise any and all rights and remedies hereunder and under any other Loan Documents, including the enforcement of all or any portion of the Security.
	
 

	
 
	
(d)
	
From and after the date of the occurrence of an Event of Default and for so long as such Event of Default continues, both before and after the Acceleration Date, all Outstanding Advances shall bear interest or fees at the rates otherwise applicable plus two percent (2%) per annum in order to compensate the Lenders for the additional risk.
	
 

 

	
 
	
8.03
	
Acceleration of Certain Contingent Obligations

 

Upon the occurrence of an Event of Default which is continuing, any Lender which has issued or made a Bankers' Acceptance or BA Equivalent Note may make a Canadian Prime Rate Loan to the Borrower in an amount equal to the face amount of such Bankers' Acceptance or BA Equivalent Note; and the proceeds of any such Loan shall be held by such Lender and used to satisfy the Lender's obligations under the said Bankers' Acceptance or BA Equivalent Note as such becomes due, or to effect the unwinding of such Hedging Agreement. Any such Loan shall bear interest only after the maturity date of such Bankers’ Acceptance or BA Equivalent Note at the rate and in the manner applicable to Canadian Prime Rate Loans under Facility A.

 

	
 
	
8.04
	
Combining Accounts, Set-Off

 

Upon the occurrence and during the continuation of Event of Default, in addition to and not in limitation of any rights now or hereafter granted under applicable law, each Lender may without notice to any Credit Party at any time and from time to time:

 

	
 
	
(a)
	
combine, consolidate or merge any or all of the deposits or other accounts maintained with such Lender by any Company (whether term, notice, demand or otherwise and whether matured or unmatured) and such Company's obligations to such Lender hereunder; and
	
 

 

	
 
	
(b)
	
set-off, apply or transfer any or all sums standing to the credit of any such deposits or accounts in or towards the satisfaction of such obligations.
	
 

 

	
 
	
8.05
	
Appropriation of Monies

 

After the occurrence and during the continuation of an Event of Default, the Agent may from time to time, but subject to Section 9.03, apply any Proceeds of Realization of the Security against any portion or portions of the Obligations, and the Borrower may not require any different application. The taking of a judgment or any other action or dealing whatsoever by the Agent or the Lenders in respect of the Security shall not operate as a merger of any of the Obligations hereunder or in any way affect or prejudice the rights, remedies and powers which the Agent or the Lenders may have, and the foreclosure, surrender, cancellation or any other dealing with any Security or the said obligations shall not release or affect the liability of the Borrower or any other Person in respect of the remaining portion of the Obligations.

 

	
 
	
8.06
	
No Further Advances

 

The Lenders shall not be obliged to make any further Advances (including honouring any cheques drawn by the Borrower which are presented for payment) from and after the earliest to occur of the following: (i) delivery by the Agent to the Borrower of a written notice that an Event of Default has occurred and is continuing and that as a result thereof no further Advances will be made (whether or not such notice also requires immediate repayment of the Obligations; (ii) the occurrence of an Insolvency Event; and (iii) receipt by the Agent or any Lender of any garnishment notice or other notice of similar effect in respect of any Company pursuant to the Income Tax Act (Canada), the Excise Tax Act (Canada) or any similar notice under any other statute in effect in any jurisdiction.

 

68.

 

 

	
 
	
8.07
	
Remedies Cumulative

 

All rights and remedies granted to the Agent and the Lenders in this Agreement, subject to applicable cure periods hereunder, if any, and any other documents or instruments in existence between the parties or contemplated hereby, and any other rights and remedies available to the Agent and the Lenders at law or in equity, shall be cumulative. The exercise or failure to exercise any of the said remedies shall not constitute a waiver or release thereof or of any other right or remedy, and shall be non-exclusive.

 

	
 
	
8.08
	
Performance of Covenants by Agent

 

If any Company fails to perform any covenant or obligation to be performed by them pursuant to this Agreement, the Agent may in its sole discretion, after written notice to the Borrower, perform any of the said obligations but shall be under no obligation to do so; and any amounts reasonably expended or advanced by the Agent for such purpose shall be payable by the Borrower upon demand together with interest at the rate applicable to Canadian Prime Rate Loans under Facility A.

 

ARTICLE IX- THE AGENT AND THE LENDERS

 

	
 
	
9.01
	
Lenders' Decisions

 

	
 
	
(a)
	
Any amendment to this Agreement relating to the following matters, and the granting of any waiver or consent by the Lenders in respect of such matters, shall require the unanimous agreement of the Lenders:
	
 

 

	
 
	
(i)
	
changes to the interest rates and fees payable in respect of Facility A;

 

	
 
	
(ii)
	
increases in the maximum amount of credit available under Facility A;

 

	
 
	
(iii)
	
extensions of the Maturity Date;

 

	
 
	
(iv)
	
changes to the scheduled dates or the scheduled amounts for Repayments hereunder;
	
 

 

	
 
	
(v)
	
releases of all or any portion of the Security, except to the extent provided in paragraph (c) below;
	
 

 

	
 
	
(vi)
	
the definitions of "Required Lenders" and "Proportionate Share" in Section 1.01;
	
 

 

	
 
	
(vii)
	
any provision of this Agreement which expressly states that the unanimous consent of the Lenders is required in connection with any action to be taken or consent to be provided by the Lenders; and
	
 

 

	
 
	
(viii)
	
this Section 9.01.

 

	
 
	
(b)
	
Except for the matters described in paragraph (a) above, any amendment to this Agreement shall be effective if made among the Credit Parties, the Agent and the Required Lenders, and for greater certainty any such amendment which is agreed to by the Required Lenders shall be final and binding upon all Lenders.
	
 

 

	
 
	
(c)
	
The Agent may from time to time without notice to or the consent of the Lenders execute and deliver partial releases of the Security in respect of any item of Collateral (whether or not the proceeds of sale thereof are received by the Agent) which the Credit Parties or Limited Recourse Guarantor are permitted to dispose of pursuant to this Agreement 
	
 

 

69.

 

	
 
		
without obtaining the prior written consent of the Lenders; and in releasing any such security the Agent may rely upon and assume the correctness of all information contained in any certificate or document provided by any Credit Party, without further enquiry. Otherwise, any release or discharge in respect of the Security shall require the written consent of all of the Lenders, acting reasonably
	
 

 

	
 
	
(d)
	
Except for the matters which require the unanimous consent of the Lenders as set out in the foregoing paragraphs of this Section 9.01, and except as otherwise specifically provided in this Agreement, any action to be taken or decision to be made by the Lenders pursuant to this Agreement (specifically including for greater certainty the issuance of written notice to the Borrower of the occurrence of an Event of Default, the issuance of a demand for payment of the Obligations, a decision to make an Advance despite any condition precedent relating thereto not being satisfied, the provision of any waiver in respect of a breach of any covenant or the granting of any consent) shall be effective if approved by the Required Lenders; and any such decision or action shall be final and binding upon all the Lenders.
	
 

 

	
 
	
(e)
	
Any action to be taken or decision to be made by the Lenders pursuant to this Agreement which is required to be unanimous shall be made either (i) at a meeting of the Lenders called by the Agent pursuant to Section 9.06(l) or (ii) by a written instrument executed by all of the Lenders. Any action to be taken or decision to be made by the Lenders pursuant to this Agreement which is required to be made by the Required Lenders shall be made either (i) at a meeting of the Lenders called by the Agent pursuant to Section 9.06(l) or (ii) by a written instrument executed by the Required Lenders. Any such instrument may be executed by pdf and in counterparts.
	
 

 

	
 
	
9.02
	
Security

 

	
 
	
(a)
	
Except to the extent provided in paragraph (b) below, the Security shall be granted in favour of and held by the Agent for and on behalf of the Lenders in accordance with the provisions of this Agreement. The Agent shall, in accordance with its usual practices in effect from time to time, take all steps required to perfect and maintain the Security, including: taking possession of the certificates representing the securities required to be pledged hereunder; filing renewals and change notices in respect of such Security; and ensuring that the name of the Agent is noted as loss payee or mortgagee on all property insurance policies covering the Property of the Companies. If the Agent becomes aware of any matter concerning the Security which it considers to be material, it shall promptly inform the Lenders. The Agent shall comply with all instructions provided by the Lenders in connection with the enforcement or release of the Security which it holds. The Agent agrees to permit each Lender to review and make photocopies of the original documents comprising the Security from time to time upon reasonable notice.
	
 

 

	
 
	
(b)
	
Any security which may be granted by a Credit Party in favour of any Lender directly in respect of the Obligations (such as but not limited to security granted in favour of any Lender under the Bank Act (Canada)) shall be deemed to constitute part of the Security. Each Lender which holds any such item of security agrees that it shall not enforce such security unless and until the Required Lenders have made a determination to enforce the Security pursuant to Section 9.01(d), and such Lender agrees to remit to the Agent all amounts received by it in connection with the enforcement thereof.   All such amounts shall be deemed to constitute Proceeds of Realization and shall be dealt with as provided in Section 9.03.
	
 

 

 

70.

 

 

	
 
	
(c)
	
Immediately on any Obligations becoming due and payable under Section 8.02 the Borrower shall, without necessity of further act or evidence, be unconditionally obligated to immediately deposit with the Agent for the Lenders’ benefit cash collateral equal to the full face amount of all Bankers’ Acceptances then outstanding for its account and the Borrower hereby unconditionally promises and agrees to do so. The Borrower authorize the Lenders, or any of them, to debit its accounts with the amount required to pay such Bankers’ Acceptances, notwithstanding that such B/As may be held by the Lenders, or any of them, in their own right at maturity. Amounts paid to the Agent in respect of B/As shall be applied against, and shall reduce, pro rata among the Lenders, to the extent of the amounts paid to the Agent in respect of B/As, the obligations of the Borrower to pay amounts then or subsequently payable under B/As at the times amounts become payable thereunder.
	
 

 

	
 
	
(d)
	
On or before the Maturity Date, the Borrower shall (i) unwind all Hedging Agreements (and pay all applicable unwinding costs in respect thereof) with the Lenders and Affiliates of the Lenders; or (ii) provide cash collateral in favour of the Agent in respect of all outstanding Hedging Agreements in an amount satisfactory to the Agent. For greater certainty, the Agent shall have no obligation to release all or any portion of the Security unless and until all Hedging Agreements are terminated or such cash collateral is provided in respect thereof.
	
 

 

	
 
	
(e)
	
Notwithstanding the rights of an Affiliate of a Lender or a Former Lender to benefit from the Security in respect of the Hedging Obligations, all decisions concerning the Security and the enforcement thereof shall be made by the Lenders or the Required Lenders in accordance with this Agreement and no Affiliate of a Lender nor a Former Lender to whom Hedging Obligations are owed from time to time shall have any additional right to influence the Security or the enforcement of the Security as a result of holding Hedging Obligations.
	
 

 

	
 
	
9.03
	
Application of Proceeds of Realization

 

	
 
	
(a)
	
Subject to paragraph 9.03(b) below but 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:
	
 

	
 
	
(i)
	
first, in payment of all reasonable out of pocket costs and expenses incurred by the Agent and the Lenders in connection with such realization, including reasonable legal, accounting and receivers' fees and disbursements;
	
 

 

	
 
	
(ii)
	
second, against the remaining Obligations (except those referred to in paragraph (iii) below), on a pari passu basis among the Lenders to whom such Obligations are payable;
	
 

 

	
 
	
(iii)
	
third, to pay any Obligations owed to Non-Funding Lenders, on a pari passu basis among the Non-Funding Lenders to whom such Obligations are payable; and
	
 

 

	
 
	
(iv)
	
fourth, if all obligations of the Borrower listed above have been paid and satisfied in full, any surplus Proceeds of Realization shall be paid in accordance with Applicable Law.
	
 

 

	
 
	
(b)
	
If an Event of Default shall have occurred, until all obligations of the Lenders are paid in full in cash and all Hedging Obligations have been discharged or cash collateralized and all Commitments have been terminated, all payments or proceeds received by the Agent under this Agreement or any other Loan Document in respect of any of the Obligations, including, but not limited to any and all proceeds received by the Agent in respect of any 
	
 

 

71.

 

	
 
		
sale, any collection from, or other realization upon all or any part of the Security (including the Proceeds of Realization of the Security or any portion thereof) and any payment, property or distribution received in respect of the Obligations during or in connection with any case or proceeding under any Insolvency Legislation, shall be applied in full or in part as follows:
	
 

 

	
 
	
(i)
	
first, to the payment of reasonable out-of-pocket fees, costs and expenses, including legal fees, of the Agent payable or reimbursable by the Lenders under the Loan Documents;
	
 

 

	
 
	
(ii)
	
second, to the payment of all Obligations under Facility A and all Hedging Obligations (including accrued and unpaid interest, principal of the Outstanding Advances thereunder, including interest accrued at the default rate and swap breakage costs) on a pari passu basis (except those referred to in paragraph 10.03(b)(iv) below);
	
 

 

	
 
	
(iii)
	
fourth, to payment of any other amounts for payment of any other Obligations on a pari passu basis (except those referred to in paragraph 9.03(b)(iv) below);
	
 

 

	
 
	
(iv)
	
fifth, to pay any Obligations owed to Non-Funding Lenders, on a pari passu basis among the Non-Funding Lenders to whom such Obligations are payable; and
	
 

 

	
 
	
(v)
	
sixth, if all obligations of the Borrower listed above have been paid and satisfied in full, any surplus Proceeds of Realization shall be paid in accordance with Applicable Law.
	
 

	
 
	
(c)
	
In carrying out the foregoing, (A) amounts received shall be applied in the numerical order provided until exhausted prior to the application to the next succeeding category, subject to the provisions of the following sentence, and (B) each of the Lenders entitled to payment under any category shall, if applicable, receive an amount equal to its pro rata share of amounts available to be applied in such category. For purposes of this section, the obligations to be satisfied in each of clause first through fifth shall include of all amounts owing under the Loan Documents according to the terms thereof with respect to the category of obligations described therein, including in each case all applicable loan fees, service fees, professional fees and interest (and specifically including interest accrued after the commencement of any Insolvency Event), default interest calculated at default rates, interest on interest, indemnification obligations, expense reimbursements and other charges, in each case whether or not accruing or incurred after the occurrence or commencement of an Insolvency Event and whether or not the same would be or is allowed or disallowed in whole or in part in any Insolvency Event.
	
 

 

	
 
	
9.04
	
Payments by Agent

 

	
 
	
(a)
	
The following provisions shall apply to all payments made by the Agent to the Lenders hereunder:
	
 

 

	
 
	
(i)
	
the Agent shall be under no obligation to make any payment (whether in respect of principal, interest, fees or otherwise) to any Lender until an amount in respect of such payment has been received by the Agent from the Borrower;
	
 

 

	
 
	
(ii)
	
if the Agent receives a payment of principal, interest, fees or other amount owing by the Borrower under Facility A which is less than the full amount of any such payment due, the Agent shall distribute such amount received among the Lenders under Facility A in each Lender's Proportionate Share thereof;
	
 

 

 

72.

 

 

	
 
	
(iii)
	
if any Lender has advanced more or less than its Proportionate Share of Facility A, such Lender's entitlement to a payment of principal, interest, fees or other amount owing by the Borrower under Facility A shall be increased or reduced, as the case may be, to reflect the amount actually advanced by such Lender;
	
 

 

	
 
	
(iv)
	
if a Lender's Proportionate Share of an Advance under Facility A has been advanced for less than the full period to which any payment by the Borrower relates, such Lender's entitlement to receive a portion of any payment of interest or fees under Facility A shall be reduced in proportion to the length of time such Lender's Proportionate Share has actually been outstanding (unless such Lender has paid all interest required to have been paid by it to the Agent pursuant to the CBA Model Provisions);
	
 

 

	
 
	
(v)
	
the Agent acting reasonably and in good faith shall, after consultation with the Lenders in the case of any dispute, determine in all cases the amount of all payments to which each Lender is entitled and such determination shall be deemed to be prima facie correct;
	
 

	
 
	
(vi)
	
upon request, the Agent shall deliver a statement detailing any of the payments to the Lenders referred to herein;
	
 

 

	
 
	
(vii)
	
all payments by the Agent to a Lender hereunder shall be made to such Lender at its address set out herein unless notice to the contrary is received by the Agent from such Lender; and
	
 

 

	
 
	
(viii)
	
if the Agent has received a payment from the Borrower on a Business Day (not later than the time required for the receipt of such payment as set out in this Agreement) and fails to remit such payment to any Lender entitled to receive its Proportionate Share of such payment on such Business Day, the Agent agrees to pay interest on such late payment at a rate determined by the Agent in accordance with prevailing banking industry practice on interbank compensation.
	
 

 

	
 
	
(b)
	
The Agent may in its sole discretion from time to time make adjustments in respect of any Lender's share of an Advance, Conversion, Rollover or Repayment under Facility A in order that the Outstanding Advances due to such Lender under Facility A shall be approximately in accordance with such Lender's Proportionate Share of Facility A.
	
 

 

	
 
	
9.05
	
Protection of Agent

 

	
 
	
(a)
	
Unless the Agent has actual knowledge or actual notice to the contrary, it may assume that each Lender's address set out in Exhibit "A" attached hereto is correct, unless and until it has received from such Lender a notice designating a different address.
	
 

 

	
 
	
(b)
	
The Agent may engage and pay for the advice or services of any lawyers, accountants or other experts whose advice or services may to it seem necessary, expedient or desirable and rely upon any advice so obtained (and to the extent that such costs are not recovered from the Borrower pursuant to this Agreement, each Lender agrees to reimburse the Agent in such Lender's Proportionate Share of such costs).
	
 

 

	
 
	
(c)
	
Unless the Agent has actual knowledge or actual notice to the contrary, it may rely as to matters of fact which might reasonably be expected to be within the knowledge of any Credit Party upon a statement contained in any Loan Document.
	
 

 

	
 
	
(d)
	
Unless the Agent has actual knowledge or actual notice to the contrary, it may rely upon any communication or document believed by it to be genuine.
	
 

 

73.

 

 

	
 
	
(e)
	
The Agent may refrain from exercising any right, power or discretion vested in it under this Agreement unless and until instructed by the Required Lenders as to whether or not such right, power or discretion is to be exercised and, if it is to be exercised, as to the manner in which it should be exercised (provided that such instructions shall be required to be provided by all of the Lenders in respect of any matter for which the unanimous consent of the Lenders is required as set out herein).
	
 

	
 
	
(f)
	
The Agent may refrain from exercising any right, power or discretion vested in it which would or might in its sole and unfettered opinion be contrary to any law of any jurisdiction or any directive or otherwise render it liable to any Person, and may do anything which is in its opinion in its sole discretion necessary to comply with any such law or directive.
	
 

 

	
 
	
(g)
	
The Agent may refrain from acting in accordance with any instructions of the Required Lenders to begin any legal action or proceeding arising out of or in connection with this Agreement or take any steps to enforce or realize upon any Security, until it shall have received such security as it may reasonably require (whether by way of payment in advance or otherwise) against all costs, claims, expenses (including legal fees) and liabilities which it will or may expend or incur in complying with such instructions.
	
 

 

	
 
	
(h)
	
The Agent shall not be bound to disclose to any Person any information relating to the Credit Parties or any Related Person if such disclosure would or might in its opinion in its sole discretion constitute a breach of any law or regulation or be otherwise actionable at the suit of any Person.
	
 

 

	
 
	
(i)
	
The Agent shall not accept any responsibility for the accuracy and/or completeness of any information supplied in connection herewith or for the legality, validity, effectiveness, adequacy or enforceability of any Loan Document and shall not be under any liability to any Lender as a result of taking or omitting to take any action in relation to any Loan Document except in the case of the Agent's gross negligence or wilful misconduct.
	
 

 

	
 
	
9.06
	
Duties of Agent

 

The Agent shall:

 

	
 
	
(a)
	
as a non-fiduciary agent for the Borrower, maintain a record of the Outstanding Advances owing to each Lender, which record shall conclusively be presumed to be correct and accurate, absent manifest error;
	
 

 

	
 
	
(b)
	
hold and maintain the Security to the extent provided in Section 9.02;

 

	
 
	
(c)
	
provide to each Lender copies of all financial information received from the Borrower promptly after receipt thereof, and copies of any Draw Requests, Conversion Notices, Rollover Notices, Repayment Notices and other notices received by the Agent from the Borrower upon request by any Lender;
	
 

 

	
 
	
(d)
	
promptly advise each Lender of Advances required to be made by it hereunder and disburse all Repayments to the Lenders hereunder in accordance with the terms of this Agreement;
	
 

 

	
 
	
(e)
	
promptly notify each Lender of the occurrence of any Event of Default of which the Agent has actual knowledge or actual notice;
	
 

 

	
 
	
(f)
	
at the time of engaging any agent, receiver, receiver-manager, consultant, monitor or other party in connection with the Security or the enforcement thereof, obtain the 
	
 

 

74.

 

	
 
		
agreement of such party to comply with the applicable terms of this Agreement in carrying out any such enforcement activities and dealing with any Proceeds of Realization;
	
 

 

	
 
	
(g)
	
account for any monies received by it in connection with this Agreement, the Security and any other agreement delivered in connection herewith or therewith;
	
 

 

	
 
	
(h)
	
each time the Borrower requests the written consent of the Lenders in connection with any matter, use its best efforts to obtain and communicate to the Borrower the response of the Lenders in a reasonably prompt and timely manner having due regard to the nature and circumstances of the request;
	
 

 

	
 
	
(i)
	
give written notice to the Borrower in respect of any other matter in respect of which notice is required in accordance with or pursuant to this Agreement, promptly or promptly after receiving the consent of the Lenders, if required under the terms of this Agreement;
	
 

 

	
 
	
(j)
	
except as otherwise provided in this Agreement, act in accordance with any instructions given to it by the Required Lenders;
	
 

 

	
 
	
(k)
	
refrain from exercising any right, power or discretion vested in it under this Agreement or any document incidental thereto if so instructed by the Required Lenders (in respect of any matter which requires the consent of the Required Lenders), or by all of the Lenders (in respect of any matter which requires the unanimous consent of the Lenders); and
	
 

 

	
 
	
(l)
	
call a meeting of the Lenders at any time not earlier than five (5) days and not later than thirty (30) days after receipt of a written request for a meeting provided by any Lender.
	
 

 

	
 
	
9.07
	
Lenders' Obligations Several; No Partnership

 

The obligations of each Lender under this Agreement are several. The failure of any Lender to carry out its obligations hereunder shall not relieve the other Lenders of any of their respective obligations hereunder. No Lender shall be responsible for the obligations of any other Lender hereunder. Neither the entering into of this Agreement nor the completion of any transactions contemplated herein shall constitute the Lenders a partnership.

 

	
 
	
9.08
	
Sharing of Information

 

The Agent and the Lenders may share among themselves any information they may have from time to time concerning the Credit Parties whether or not such information is confidential; but shall have no obligation to do so (except for any obligations of the Agent to provide information to the extent required in this Agreement).

 

	
 
	
9.09
	
Acknowledgement by Borrower

 

Each Credit Party hereby acknowledges notice of the terms of the provisions of this ARTICLE IX and agrees to be bound hereby to the extent (if any) of its obligations hereunder.

 

	
 
	
9.10
	
Amendments to ARTICLE IX

 

The Agent and the Lenders may amend any provision in this ARTICLE IX, except Section 9.01, without prior notice to or the consent of the Borrower, and the Agent shall provide a copy of any such amendment to the Borrower reasonably promptly thereafter; provided however if any such amendment would materially adversely affect any rights, entitlements, obligations or liabilities of the Borrower, such amendment shall not be effective until the Borrower provides their written consent thereto, such consent not to be unreasonably withheld or arbitrarily delayed.

 

75.

 

 

	
 
	
9.11
	
Deliveries, etc.

 

As between the Credit Parties on the one hand, and the Agent and the Lenders on the other hand:

 

	
 
	
(a)
	
all statements, certificates, consents and other documents which the Agent purports to deliver to a Credit Party on behalf of the Lenders shall be binding on each of the Lenders, and none of the Credit Parties shall be required to ascertain or confirm the authority of the Agent in delivering such documents;
	
 

 

	
 
	
(b)
	
all certificates, statements, notices and other documents which are delivered by a Credit Party to the Agent in accordance with this Agreement shall be deemed to have been duly delivered to each of the Lenders; and
	
 

 

	
 
	
(c)
	
all payments which are delivered by the Borrower to the Agent in accordance with this Agreement shall be deemed to have been duly delivered to each of the Lenders.
	
 

 

	
 
	
9.12
	
Agency Fees

 

	
 
	
(a)
	
The Borrower hereby jointly and severally agree to pay to the Agent an annual agency fee in such amount as may be agreed in writing from time to time between the Borrower and the Agent, payable on the ARCA Closing Date and annually on each anniversary date thereafter during the term of this Agreement, together with such additional fees as may be provided for in the Agency Fee Agreement.
	
 

 

	
 
	
(b)
	
Each Lender which assigns its interests to another Person agrees to pay an assignment fee of Five Thousand Dollars ($5,000) to the Agent.
	
 

 

	
 
	
9.13
	
Non-Funding Lender

 

	
 
	
(a)
	
Each Non-Funding Lender shall be required to provide to the Agent, immediately upon receipt of a written request from the Agent cash in an amount, as shall be determined from time to time by the Agent in its discretion, equal to all other obligations of such Non-Funding Lender to the Agent that are owing or may become owing pursuant to this Agreement, including, without limitation, such Non-Funding Lender's obligation to pay its Proportionate Share of any indemnification or expense reimbursement amounts not paid by the Borrower. Such cash shall be held by the Agent in one or more accounts in the name of the Agent and shall not be required to be interest-bearing. The Agent shall be entitled to apply such cash from time to time in satisfaction of all or any portion of such obligations of such Non-Funding Lender, as determined by the Agent in its discretion.
	
 

	
 
	
(b)
	
The Agent shall be entitled to set off any Non-Funding Lender's Proportionate Share of all payments received from the Borrower against such Non-Funding Lender's obligations to fund payments and Advances required to be made by it and to purchase participations required to be purchased by it in each case under this Agreement and the other Loan Documents. The Agent shall be entitled to withhold and deposit in one or more non-interest bearing accounts in the name of the Agent all amounts (whether principal, interest, fees or otherwise) received by the Agent from the Borrower and due to such Non-Funding Lender pursuant to this Agreement, which amounts shall be used by the Agent (A) first, to reimburse the Agent for any amounts owing to it by such Non-Funding Lender pursuant to this Agreement or any other Loan Document, (B) second, to reimburse the other Lenders in respect of any Advances which may have been made by them in their discretion in order to fund, in whole or in part, any shortfall in Advances which were required to have been made by such Non-Funding Lender (and to the extent that any said 
	
 

 

76.

 

	
 
		
Advance made by a Lender is so reimbursed, such Advance shall be deemed to have been assigned by such Lender to the Non-Funding Lender), (C) third, to be held in such account and applied by the Agent from time to time against all other obligations of such Non- Funding Lender to the Agent owing pursuant to this Agreement in such amount as shall be determined from time to time by the Agent in its discretion including, without limitation, such Non-Funding Lender's obligation to pay its Proportionate Share of any indemnification or expense reimbursement amounts not paid by the Borrower, and (D) fourth, at the Agent's discretion, to fund from time to time such Non-Funding Lender's Proportionate Share of Advances under Facility A.
	
 

 

	
 
	
(c)
	
A Non-Funding Lender shall have no voting or consent rights with respect to matters under this Agreement or the other Loan Documents, unless and until it is no longer a Non-Funding Lender. Accordingly, the Commitments and the aggregate unpaid principal amount of the Advances owing to any Non-Funding Lender shall be disregarded in the determination of the Required Lenders.
	
 

 

	
 
	
(d)
	
Neither the Agent nor any of its Affiliates nor any of their respective officers, directors, employees, agents or representatives shall be liable to any Lender (including, without limitation, a Non-Funding Lender) for any action taken or omitted to be taken by them in connection with amounts payable by the Borrower to a Non-Funding Lender and received by the Agent and applied in accordance with the provisions of this Agreement, save and except for the negligence or wilful misconduct of the Agent as determined by a final non- appealable judgment of a court of competent jurisdiction.
	
 

 

ARTICLE X - GUARANTEE

 

	
 
	
10.01
	
Guarantee

 

Each Guarantor hereby unconditionally, absolutely and irrevocably guarantees the full and punctual payment to the Agent and the Lenders as and when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all of the Obligations of the Borrower in the same currency as the currency of such Obligations, whether for principal, interest, fees, expenses, indemnities or otherwise.

	
 
	
10.02
	
Nature of Guarantee

 

The agreement of each Guarantor under Section 10.01 shall in all respects be a continuing, absolute, unconditional and irrevocable guarantee of payment when due and not of collection, and shall remain in full force and effect until all Obligations (if applicable, of the other Borrower) have been paid in full, all of its obligations under this ARTICLE X have been paid in full and any and all commitments, actual or contingent, of the Agent and the Lenders to the Borrower have been permanently terminated. Each Guarantor guarantees that the Obligations (if applicable, of the other Borrower) will be paid strictly in accordance with their respective terms, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Agent and the Lenders with respect thereto (provided it shall not be in breach of any such law, regulation or order by doing so).

 

	
 
	
10.03
	
Liability Not Lessened or Limited

 

Subject to the provisions hereof, the liability of the Guarantors under this ARTICLE X shall be absolute, unconditional and irrevocable irrespective of, and without being lessened or limited by:

 

	
 
	
(a)
	
any lack of validity, legality, effectiveness or enforceability of any of the agreements or instruments evidencing any of the Obligations of the Borrower;
	
 

 

 

77.

 

 

	
 
	
(b)
	
the failure of the Agent or any Lender:

 

	
 
	
(i)
	
to assert any claim or demand or to enforce any right or remedy against the Borrower or any other Person (including any other guarantor) under the provisions of any of the agreements or instruments evidencing any of the Obligations of the Borrower, or otherwise, or
	
 

 

	
 
	
(ii)
	
to exercise any right or remedy against any other guarantor of, or collateral securing, any of the Obligations of the Borrower;
	
 

 

	
 
	
(c)
	
any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of the Borrower, or any other extension, compromise, indulgence or renewal of any Obligations of the Borrower;
	
 

 

	
 
	
(d)
	
any reduction, limitation, variation, impairment, discontinuance or termination of the Obligations of the Borrower for any reason (other than by reason of any payment which is not required to be rescinded), including any claim of waiver, release, discharge, surrender, alteration or compromise, and shall not be subject to (and the Borrower hereby waive any right to or claim of) any defence or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, the Obligations of the Borrower or otherwise (other than by reason of any payment which is not required to be rescinded);
	
 

	
 
	
(e)
	
any amendment to, rescission, waiver or other modification of, or any consent to any departure from, any of the terms of any of the agreements or instruments evidencing any of the Obligations of the Borrower or any other guarantees or security;
	
 

 

	
 
	
(f)
	
any addition, exchange, release, discharge, renewal, realization or non- perfection of any collateral security for the Obligations of the Borrower or any amendment to, or waiver or release or addition of, or consent to departure from, any other guarantee held by the Agent or any Lender as security for any of the Obligations of the Borrower;
	
 

 

	
 
	
(g)
	
the loss of or in respect of or the unenforceability of any other guarantee or other security which the Agent or any Lender may now or hereafter hold in respect of the Obligations of the Borrower, whether occasioned by the fault of the Agent or any Lender or otherwise;
	
 

 

	
 
	
(h)
	
any change in the name of the Borrower or any Guarantor, its Constating Documents, including the articles of incorporation, partnership agreement, capital structure, capacity or constitution of any such Credit Party, the bankruptcy or insolvency of any Credit Party, the sale of any or all of the business or assets of any Credit Party or any Credit Party being consolidated, merged or amalgamated with any other Person;
	
 

 

	
 
	
(i)
	
any payment received on account of the Obligations of the Borrower by the Agent or any Lender that it is obliged to repay pursuant to any Applicable Law or for any other reason; or
	
 

 

	
 
	
(j)
	
any other circumstance which might otherwise constitute a defence available to, or a legal or equitable discharge of, the Borrower, any surety or any guarantor.
	
 

 

 

78.

 

 

	
 
	
10.04
	
Agent not Bound to Exhaust Recourse

 

The Agent shall not be bound to pursue or exhaust its recourse against the Borrower or others or any security or other guarantees it may at any time hold before being entitled to payment under this ARTICLE X from the Borrower or to enforce its rights against the Borrower under the Security to which the Borrower is a party.

 

	
 
	
10.05
	
Enforcement

 

Upon any of the Obligations of the Borrower becoming due and payable, each of the Guarantor shall, upon demand by the Agent, forthwith pay to the Agent in immediately available funds at the address of the Agent set forth herein the total amount of the Obligations of each of the Borrower and the Agent may forthwith enforce its rights against each of the Credit Parties under the Security to which each is a party and the Agent shall apply the sums so paid and realized in such manner as provided for herein. A written statement of the Agent as to the amount of the Obligations of the Borrower remaining unpaid to the Agent and the Lenders at any time shall be prima facie evidence against each Guarantor, absent manifest error, as to the amount of the Obligations of the Borrower remaining unpaid to the Agent and the Lenders at such time.

	
 
	
10.06
	
Guarantee in Addition to Other Security

 

The guarantees contained in this ARTICLE X shall be in addition to and not in substitution for any other guarantee or other security which the Agent may now or hereafter hold in respect of the Obligations of the Borrower, and the Agent shall be under no obligation to marshal in favour of the Borrower any other guarantee or other security or any moneys or other assets which the Agent may be entitled to receive or may have a claim upon.

 

	
 
	
10.07
	
Reinstatement

 

The guarantees contained in this ARTICLE X and all other terms of this ARTICLE X shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Obligations of the Borrower is rescinded or must otherwise be returned or restored by the Agent or any Lender by reason of the insolvency, bankruptcy or reorganization of the Borrower or for any other reason not involving the gross negligence or wilful misconduct of the Agent or any Lender, all as though such payment had not been made.

 

	
 
	
10.08
	
Waiver of Notice, etc.

 

To the extent permitted by Applicable Law, each Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Obligations of the Borrower and this Agreement.

 

	
 
	
10.09
	
Subrogation Rights

 

Except to the extent necessary to preserve their rights, none of the Guarantors will exercise any rights which it may acquire by way of subrogation under this Agreement, by any payment made hereunder or otherwise, until the prior satisfaction in full of all of the Obligations of the Borrower. Any amount paid to any Guarantor on account of any such subrogation rights prior to the satisfaction in full of all Obligations of the Borrower shall be held in trust for the benefit of the Agent and the Lenders and shall immediately be paid to the Agent and credited and applied against the Obligations of the Borrower, whether matured or unmatured; provided, however, that if:

 

	
 
	
(a)
	
any Guarantor has made payment to the Agent of all or any part of the Obligations of the Borrower, and
	
 

 

	
 
	
(b)
	
the Termination Date has occurred,

 

79.

 

	
 
		

 

the Agent agrees that, at such Guarantor’s request, the Agent will execute and deliver to such Guarantor appropriate documents (without recourse and without representation or warranty) necessary to evidence the transfer by subrogation to such Guarantor of an interest in the Obligations of the Borrower resulting from such payment by such Guarantor.

 

	
 
	
10.10
	
Postponement and Subordination of Claims

 

If and for so long as an Event of Default has occurred and is continuing, each Guarantor agrees to postpone any and all claims it may have against the Borrower to the claims of the Agent and the Lenders against the Borrower, and agrees to refrain from taking any action or commencing any proceeding against the Borrower or its successors or assigns, whether in connection with a bankruptcy proceeding or otherwise, to recover any amounts in respect of payments made hereunder to the Agent, although a Guarantor may take such actions as may be necessary to preserve their claims against the other Credit Parties. The Borrower agrees that, if and for so long as an Event of Default has occurred and is continuing, all indebtedness and liabilities owing by any Guarantor to the Borrower shall be subordinate and junior in right of payment to the payment in full, in cash or cash equivalents of all of the Obligations of the Borrower.   In the event any payments are made by a particular Guarantor in contravention of the preceding sentences, the relevant Guarantor shall hold the amount so received in trust for the Agent and the Lenders and shall forthwith pay such amount to the Agent.

 

	
 
	
10.11
	
Advances After Certain Events

 

All advances, renewals and credits made or granted by the Agent and the Lenders to or for the Borrower hereunder after the bankruptcy or insolvency of the Borrower, but before the Agent and the Lenders have received notice thereof, shall be deemed to form part of the Obligations of the Borrower, and all advances, renewals and credits obtained from the Agent and the Lenders by or on behalf of the Borrower hereunder shall be deemed to form part of the Obligations of the Borrower, notwithstanding any lack or limitation of power, incapacity or disability of the Borrower or of the directors or agents thereof and notwithstanding that the Borrower may not be a legal entity and notwithstanding any irregularity, defect or informality in the obtaining of such advances, renewals or credits, whether or not the Agent and the Lenders have knowledge thereof.

 

ARTICLE XI - CBA MODEL PROVISIONS

 

	
 
	
11.01
	
CBA Model Provisions Incorporated by Reference

 

The CBA Model Provisions (except for the footnotes contained therein) form part of this Agreement and are incorporated herein by reference, subject to the following variations:

 

	
 
	
(a)
	
Each term set out below which is used as a defined term in the CBA Model Provisions shall be deemed to have been replaced as set out below; and for greater certainty the said replacement term shall have the meaning ascribed thereto in Section 1.01 of this Agreement:
	
 

 

	
 
	
•
	
"Administrative Agent" shall be replaced by "Agent";

	
 
	
•
	
"Applicable Percentage" shall be replaced by "Proportionate Share";

	
 
	
•
	
"Borrower" shall mean all or any of the Borrower as the context requires;

	
 
	
•
	
"Loans" shall be replaced by "Advances";

	
 
	
•
	
"Obligors" shall be replaced by "Companies"; and

	
 
	
•
	
"Provisions" shall be replaced by "CBA Model Provisions".

 

80.

 

	
 
		

	
 
	
(b)
	
Paragraph (c) of the defined term “Applicable Law” is deleted and replaced with the following: “(c) any regulatory policy, practice, request, guideline or directive, but if any of the foregoing shall not have the force of law, it shall only constitute Applicable Law to the extent compliance therewith is generally regarded as mandatory by the Persons to whom it applies or is addressed or in accordance with prudent industry practice; or The defined term “Excluded Taxes” is deleted and replaced with the following: “Excluded Taxes” means, with respect to the Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower or any Guarantor hereunder or under any other Loan Document, (a) taxes imposed on or measured by its net income or capital, and franchise taxes imposed on it (in lieu of net income taxes), (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 applicable lending office is located, or (ii) that are Other Connection Taxes; (b) any branch profits taxes or any similar tax imposed by any jurisdiction in which the Lender is located; (c) any withholding tax payable as a result of such Lender not dealing at arm’s length for the purposes of the Income Tax Act (Canada) (“ITA”) with the Borrower or applicable Guarantor (other than where the non- arm’s length relationship arises from such recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received, perfected or enforced a security interest under, engaged in any other transaction pursuant to or enforced this agreement or any other Document); (d) any withholding tax payable as a result of the Lender being a “specified non- resident shareholder” (as defined in subsection 18(5) of the Income Tax Act (Canada) or not dealing at arm’s length with, a “specified shareholder” of the Borrower (as defined) for purposes of subsection 18(5) of the ITA. For greater certainty, for purposes of (c) above, a withholding tax includes any Tax that a Foreign Lender is required to pay pursuant to Part XIII of the ITA or any successor provision thereto.
	
 

 

	
 
	
(c)
	
The defined term "Foreign Lender" in the CBA Model Provisions does not include a lender that is resident under the laws of Canada for purposes of the Income Tax Act, Canada.
	
 

 

	
 
	
(d)
	
"Pro rata share", "rateably" and similar terms in the CBA Model Provisions shall have the meaning ascribed to the term "Proportionate Share" as defined in Section 1.01 of this Agreement, if the context requires.
	
 

 

	
 
	
(e)
	
Section 3.2(c) in the CBA Provisions shall be amended such that the Companies shall be required to jointly and severally indemnify (except to the extent such indemnification would contravene any limitations specified in the guarantee provided by the relevant Credit Party to reflect Applicable Law) the Agent and each Lender. In addition, Section 3.2(c) shall be amended by adding the following sentence to the end thereof: “Notwithstanding the foregoing, the Borrower shall not be obliged to indemnify the Agent or any Lender to the extent any Indemnified Taxes or Other Taxes become payable as a result of the gross negligence or wilful misconduct of the Agent or such Lender”.
	
 

 

	
 
	
(f)
	
In the third line of subsection 7.7(1) of the CBA Model Provisions, the phrase "...in consultation with the Borrower..." is hereby amended to read "...upon notice to the Borrower...".
	
 

 

	
 
	
(g)
	
Section 9(b) shall not apply to claims made by a Lender in connection with disputes solely between the Agent and the Lenders.
	
 

	
 
	
(h)
	
Section 9(d) shall be amended by adding to the end thereof “,unless such damages result from the gross negligence or wilful misconduct of such Indemnitee”.
	
 

 

81.

 

 

	
 
	
(i)
	
In the fourth and fifth lines of Section 10(a) of the CBA Model Provisions, the following phrase is hereby deleted "hereunder without the prior written consent of the Agent and each Lender ".
	
 

 

	
 
	
(j)
	
In the eleventh and twelfth lines of Section 10(b)(i) of the CBA Model Provisions, the phrase "$5,000,000, in the case of any assignment in respect of a revolving facility, or $1,000,000, in the case of any assignment in respect of a term facility" is replaced with the amount "$500,000".
	
 

 

	
 
	
(k)
	
In addition to the restrictions contained in Section 10(b) of the CBA Model Provisions relating to the ability of Lenders to assign their Commitments in whole or in part, if a Lender proposes to assign less than its entire Commitment under Facility A, it may do so only if it retains a Commitment under Facility A in a principal amount of at least One Million Dollars ($1,000,000).
	
 

 

	
 
	
(l)
	
The parties hereby acknowledge and agree that the indemnity contained in clause 9(b) (iii) of the CBA Model Provisions is in addition to and not in substitution for the indemnity contained in Section 12.04 of this Agreement.
	
 

 

	
 
	
(m)
	
In the seventeenth line of Section 9(b) of the CBA Model Provisions, the phrase “Release of Hazardous Materials” is hereby amended to read “release of Hazardous Materials”.
	
 

 

	
 
	
(n)
	
In the third line of Section 14 of the CBA Model Provisions, the phrase “...its Affiliates and its and its Affiliates’ respective partners...” is hereby amended to read “...its Affiliates and its Affiliates’ respective partners...”.
	
 

 

	
 
	
11.02
	
Inconsistencies with CBA Model Provisions

 

To the extent that there is any inconsistency between a provision of this Agreement and a provision of the CBA Model Provisions, the provision of this Agreement shall govern. For greater certainty, a provision of this Agreement and a provision of the CBA Model Provisions shall be considered to be inconsistent if both relate to the same subject-matter and the provision in the CBA Model Provisions imposes more onerous obligations or restrictions than the corresponding provision in this Agreement.

 

ARTICLE XII - GENERAL

 

	
 
	
12.01
	
Waivers

 

The failure or delay by the Agent or any Lender in exercising any right or privilege with respect to the non-compliance with any provisions of this Agreement by any Credit Parties and any course of action on the part of the Agent or any Lender, shall not operate as a waiver of any rights of the Agent or such Lender unless made in writing by the Agent or such Lender. Any such waiver shall be effective only in the specific instance and for the purpose for which it is given and shall not constitute a waiver of any other rights and remedies of the Agent or such Lender with respect to any other or future non-compliance.

	
 
	
12.02
	
Expenses; Debit Authorization

 

Whether or not the transactions contemplated by this Agreement are completed or any Advance has been made, the Borrower agree to pay on demand by the Agent from time to time all reasonable expenses incurred by the Agent on behalf of the Lenders in connection with this Agreement, the Security and all documents contemplated hereby, specifically including: reasonable expenses incurred by the Agent on behalf of the Lenders in respect of due diligence, appraisals, insurance consultations, credit reporting and responding to demands of any Governmental Authority, reasonable legal expenses 

 

82.

 

incurred by the Agent on behalf of the Lenders in connection with the preparation and interpretation of this Agreement and the Security and the administration of Facility A generally, including the preparation of waivers and partial discharges of Security; and all reasonable legal expenses incurred by the Agent on behalf of the Lenders in connection with the protection and enforcement of the Security. The Borrower hereby authorizes the Agent to debit any account maintained by it with the Agent, and to set off and compensate against any and all accounts, credits and balances maintained by it with the Agent, in order to pay (i) any interest or other amounts payable by the Credit Parties from time to time pursuant to this Agreement when due; and (ii) any expenses referred to herein which are not paid by the Credit Parties within ten (10) days after delivery to them of a written request from the Agent for payment of such expenses. The Agent agrees to give written notice to the Credit Parties of any such debit promptly thereafter.

 

	
 
	
12.03
	
General Indemnity

 

In addition to any other liability of the Borrower hereunder, the Companies hereby agrees to indemnify and save harmless the Indemnitees from and against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (including reasonable legal fees on a solicitor and his own client basis) of any kind or nature whatsoever (but excluding any consequential damages and damages for loss of profit) which may be imposed on, incurred by or asserted against the Indemnitees (except to the extent arising from the negligence or wilful misconduct of such Indemnitees) which relate to or arise out of or result from:

 

	
 
	
(a)
	
any failure by the Borrower to pay and satisfy its obligations hereunder including, without limitation, any costs or expenses incurred by reason of the liquidation or re-employment in whole or in part of deposits or other funds required by the Lenders to fund or maintain Facility A or as a result of the Borrower's failure to take any action on the date required hereunder or specified by it in any notice given hereunder;
	
 

 

	
 
	
(b)
	
any investigation by Governmental Authorities or any litigation or other similar proceeding related to any use made or proposed to be made by the Borrower of the proceeds of any Advance; and
	
 

 

	
 
	
(c)
	
any instructions given to any Lender to stop payment on any cheque issued by the Borrower or to reverse any wire transfer or other transaction initiated by such Lender at the request of the Borrower;
	
 

 

provided, however, that such indemnity shall not be available to any Indemnitee to the extent that such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (i) are determined by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of Indemnitee or (ii) result from a claim brought by the Credit Parties against any Indemnitee for breach in bad faith of such Indemnitee's obligations under any Loan Document.

 

	
 
	
12.04
	
Environmental Indemnity

 

In addition to any other liability of the Borrower hereunder, each Companies hereby agrees to indemnify and save harmless the Indemnitees from and against:

 

	
 
	
(a)
	
any losses suffered by them for, in connection with, or as a direct or indirect result of, the failure of any of the Companies to comply with all Requirements of Environmental Law;
	
 

 

	
 
	
(b)
	
any losses suffered by the Indemnitees for, in connection with, or as a direct or indirect result of, the presence of any Hazardous Material situated in, on or under any Real Property owned by any of the Companies or upon which they on business; and
	
 

 

83.

 

 

	
 
	
(c)
	
any and all liabilities, losses, damages, penalties, expenses (including reasonable legal fees) and claims which may be paid, incurred or asserted against the Indemnitees for, in connection with, or as a direct or indirect result of, any legal or administrative proceedings with respect to the presence of any Hazardous Material on or under any Owned Property or upon which they carry on business, or the discharge, emission, spill, radiation or disposal by any of them of any Hazardous Material into or upon any Land, the atmosphere, or any watercourse or body of water; including the costs of defending and/or counterclaiming or claiming against third parties in respect of any action or matter and any cost, liability or damage arising out of a settlement entered into by the Indemnitees of any such action or matter;
	
 

 

except to the extent arising from the negligence or wilful misconduct of such Indemnitees. The obligations of the Borrower under this Section shall survive the termination of this Agreement.

 

	
 
	
12.05
	
Survival of Certain Obligations despite Termination of Agreement

 

The termination of this Agreement shall not relieve any Credit Party from its obligations to the Agent and the Lenders arising prior to such termination, such as obligations arising as a result of or in connection with any breach by it of this Agreement, any failure by it to comply with this Agreement or the inaccuracy of any representations and warranties made or deemed by it to have been made prior to such termination, and obligations arising pursuant to all indemnity obligations contained herein. Without limiting the generality of the foregoing, the obligations of the Credit Parties to the Agent and the Lenders arising under or in connection with Sections

12.03 and 12.04 of this Agreement and Section 3.2 of the CBA Model Provisions shall continue in full force and effect despite any termination of this Agreement.

 

	
 
	
12.06
	
Interest on Unpaid Costs and Expenses

 

If the Borrower fails to pay when due any amount in respect of costs or expenses or any other amount required to be paid by it hereunder (other than principal or interest on any Advance), it shall pay interest on such unpaid amount from the time such amount is due until paid at the interest rate applicable to Canadian Prime Rate Loans under Facility A.

	
 
	
12.07
	
Notice

 

Without prejudice to any other method of giving notice, all communications provided for or permitted hereunder shall be in writing and given to the applicable addressee by prepaid private courier or by electronic mail to its address or email address and to the attention of the officer of the addressee as follows:

	
 
	
(a)
	
all communications to any Credit Party and Limited Guarantor c/o
	
 

Aphria Inc.

1 Adelaide Street East, Suite 2310 Toronto, Ontario

 

Attention: Carl Merton, Chief Financial Officer Facsimile:

Email: Carl.Merton@Aphria.com

 

and in the case of any communication alleging any Default or Event of Default or threatening enforcement action, with a copy to:

 

 

84.

 

 

Aphria Inc.

1 Adelaide Street East, Suite 2310 Toronto, Ontario

 

Attention: Christelle Gedeon, Chief Legal Officer Facsimile:

Email: Christelle.Gedeon@Aphria.com

 

	
 
	
(b)
	
Draw Requests, Conversion Notices, Rollover Notices and Repayment Notices, to the Agent at the following address:
	
 

 

Bank of Montreal Agent Bank Services

250 Yonge Street, 11th Floor Toronto, Ontario

M5B 2L7

Attention: Manager, Agent Bank Services Facsimile: (416) 598-6218

 

- and -

 

Bank of Montreal

First Canadian Place, 100 King St. West, 18th Floor Toronto, Ontario

M5X 1A1

Attention:

Email:

 

	
 
	
(c)
	
all other communications to the Agent:

Bank of Montreal

100 King Street West, 18th Floor Toronto, Ontario

M5X 1A1

Attention:

Email:

 

	
 
	
(d)
	
to any Lender, at its address noted on Exhibit "A" attached hereto.

 

Any communication transmitted by prepaid private courier shall be deemed to have been validly and effectively given or delivered on the Business Day after which it is submitted for delivery. Any communication transmitted by electronic transmission shall be deemed to have been validly and effectively given or delivered on the day on which it is transmitted, if transmitted on a Business Day on or before 5:00 p.m. (local time of the intended recipient), and otherwise on the next following Business Day. Any party may change its address for service by notice given in the foregoing manner.

 

	
 
	
12.08
	
Severability

 

Any provision of this Agreement which is illegal, prohibited or unenforceable in any jurisdiction, in whole or in part, shall not invalidate the remaining provisions hereof; and any such illegality, prohibition or unenforceability in any such jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

 

85.

 

 

	
 
	
12.09
	
Further Assurances

 

Each Company shall, at its expense, promptly execute and deliver or cause to be executed and delivered to the Agent upon request, acting reasonably, from time to time all such other and further documents, agreements, opinions, certificates and instruments in compliance with this Agreement, or if necessary or desirable to more fully record or evidence the obligations intended to be entered into herein, or to make any recording, file any notice or obtain any consent.

 

	
 
	
12.10
	
Time of the Essence

 

Time shall be of the essence of this Agreement.

 

	
 
	
12.11
	
Promotion and Marketing

 

For the purpose of promotion and marketing each Credit Party hereby authorizes and consents to the reproduction, disclosure and use by the Lenders and the Agent of its name, identifying logo and Facility A to enable the Lenders to publish promotional "tombstones". Each Credit Party acknowledges and agrees that the Lenders shall be entitled to determine, in their sole discretion, whether to use such information; that no compensation will be payable by the Lenders or the Agent in connection therewith; and that the Lenders and the Agent shall have no liability whatsoever to it or any of its employees, officers, directors, affiliates or shareholders in obtaining and using such information as contemplated herein.

 

	
 
	
12.12
	
Entire Agreement; Waivers and Amendments to be in Writing

 

This Agreement supersedes all discussion papers, term sheets and other writings which may have been issued by the Agent or the Lenders prior to the date hereof relating to Facility A, which shall have no force or effect; and this Agreement and any other documents or instruments contemplated herein or therein shall constitute the entire agreement and understanding among the Borrower, the Lenders and the Agent relating to the subject-matter hereof. Subject to Section 9.01(b), no provision of this Agreement, or any other document or instrument in existence among the parties may be modified, waived or terminated except by an instrument in writing executed by the party against whom such modification waiver or termination is sought to be enforced.

 

	
 
	
12.13
	
Inconsistencies with Security

 

To the extent that there is any inconsistency between a provision of this Agreement and a provision of any document constituting part of the Security or other Loan Documents, the provision of this Agreement shall govern. For greater certainty, a provision of this Agreement and a provision of the Security shall be considered to be inconsistent if both relate to the same subject-matter and the provision in the Security imposes more onerous obligations or restrictions than the corresponding provision in this Agreement.

 

	
 
	
12.14
	
Confidentiality

 

The Credit Parties agree not to publicly disclose any information contained herein, including a copy of this Agreement, except (i) on a confidential basis to their respective officers, directors, employees, accountants, lawyers and other professional advisors; and (ii) to any bona fide prospective purchaser of the shares of the Parent or all or substantially all of the assets of the Credit Parties, provided that such Person executes and delivers a confidentiality agreement in form and substance acceptable to the Credit Parties). If any such disclosure is required pursuant to Applicable Law, the Credit Parties will provide at least two (2) Business Days' prior written notice to the Agent before making such disclosure if doing so would not cause any Credit Party to breach Applicable Law, and during such period the Agent and the Lenders acting reasonably may indicate to the Credit Parties which portions of such Loan 

 

86.

 

Documents they wish not be disclosed in order to protect the rights of the Agent and the Lenders to maintain the confidentiality of information which the Agent and the Lenders believe is confidential and proprietary to the Agent and the Lenders. The Credit Parties shall comply with any such request unless such compliance would, in the good faith judgment of the Credit Parties and their legal counsel, contravene Applicable Law. The terms of this Section shall survive the termination of this Agreement.

 

	
 
	
12.15
	
Governing Law

 

This Agreement shall be interpreted in accordance with the laws of the Province of Ontario. Without prejudice to the right of the Agent and the Lenders to commence any proceedings with respect to this Agreement in any other proper jurisdiction, the parties hereby attorn and submit to the non-exclusive jurisdiction of the courts of the Province of Ontario.

 

	
 
	
12.16
	
Execution and Counterparts

 

This Agreement may be executed in several counterparts, each of which, when so executed, shall be deemed to be an original and which counterparts together shall constitute one and the same Agreement. This Agreement may be executed by pdf, and any signature contained hereon by pdf shall be deemed to be equivalent to an original signature for all purposes.

	
 
	
12.17
	
Binding Effect

 

This Agreement shall be binding upon and shall enure to the benefit of the parties and their respective successors and permitted assigns; "successors" includes any corporation resulting from the amalgamation of any party with any other corporation.

 

[The balance of this page is intentionally left blank; signature pages follow]

 

 

 

“SP - 1”

 

 

IN WITNESS OF WHICH, the Parties have duly executed this Agreement

AGENT

 

	
BANK OF MONTREAL, As Agent

	
 
	
 
	
 
	
 
	
 

	
Per:
	
 
	
/s/ Francois Wentzel

	
 
	
 
	
Name:
	
 
	
Francois Wentzel

	
 
	
 
	
Title:
	
 
	
Managing Director

	
 
	
 
	
 
	
 
	
 

	
Per:
	
 
	
/s/ Allen Benjamin

	
 
	
 
	
Name:
	
 
	
Managing director

	
 
	
 
	
Title:
	
 
	
Loan Syndications

	
 
	
 
	
We have the authority to bind the bank

 

 

[Signature Page to the Credit Agreement relating to 1974568 Ontario Limited]

“SP - 2”

 

 

IN WITNESS OF WHICH, the Parties have duly executed this Agreement

 

LENDERS

 

	
BANK OF MONTREAL, As Lender

	
 
	
 
	
 
	
 
	
 

	
Per:
	
 
	
/s/ Hassan Baig 

	
 
	
 
	
Name:
	
 
	
Hassan Baig

	
 
	
 
	
Title:
	
 
	
Associate Director

	
 
	
 
	
 
	
 
	
 

	
Per:
	
 
	
/s/ Kyle Redford

	
 
	
 
	
Name:
	
 
	
Kyle Redford

	
 
	
 
	
Title:
	
 
	
Director

	
 
	
 
	
We have the authority to bind the bank

 

 

[Signature Page to the Credit Agreement relating to 1974568 Ontario Limited]

“SP - 3”

 

 

 

	
ATB FINANCIAL, As Lender

	
 
	
 
	
 
	
 
	
 

	
Per:
	
 
	
/s/ Max Herrera

	
 
	
 
	
Name:
	
 
	
Max Herrera

	
 
	
 
	
Title:
	
 
	
Senior Director

	
 
	
 
	
 
	
 
	
 

	
Per:
	
 
	
/s/ Christopher Hamel

	
 
	
 
	
Name:
	
 
	
Christopher Hamel

	
 
	
 
	
Title:
	
 
	
Portfolio Manager

	
 
	
 
	
We have the authority to bind the bank

 

 

[Signature Page to the Credit Agreement relating to 1974568 Ontario Limited]

“SP - 4”

 

 

 

	
FARM CREDIT CANADA, As Lender

	
 
	
 
	
 
	
 
	
 

	
Per:
	
 
	
/s/ Kent Cunnington

	
 
	
 
	
Name:
	
 
	
Kent Cunnington

	
 
	
 
	
Title:
	
 
	
Senior Corporate & Commercial Credit Manager

	
 
	
 
	
 
	
 
	
 

	
Per:
	
 
	
 

	
 
	
 
	
Name:
	
 
	
 

	
 
	
 
	
Title:
	
 
	
 

	
 
	
 
	
We have the authority to bind the bank

 

 

 

[Signature Page to the Credit Agreement relating to 1974568 Ontario Limited]

“SP - 5”

 

 

IN WITNESS OF WHICH, the Parties have duly executed this Agreement

 

BORROWER

 

	
1974568 ONTARIO LIMITED

	
 
	
 
	
 
	
 
	
 

	
Per:
	
 
	
 

	
 
	
 
	
Name:
	
 
	
 

	
 
	
 
	
Title:
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
Per:
	
 
	
/s/ Carl Merton

	
 
	
 
	
Name:
	
 
	
Carl Merton

	
 
	
 
	
Title:
	
 
	
CFO

	
 
	
 
	
I/We have authority to bind the Corporation

 

 

[Signature Page to the Credit Agreement relating to 1974568 Ontario Limited]

“SP - 6”

 

 

IN WITNESS OF WHICH, the Parties have duly executed this Agreement

 

LIMITED GUARANTOR

 

	
APHRIA INC.

	
 
	
 
	
 
	
 
	
 

	
Per:
	
 
	
/s/ Carl Merton

	
 
	
 
	
Name:
	
 
	
Carl Merton

	
 
	
 
	
Title:
	
 
	
CFO

	
 
	
 
	
 
	
 
	
 

	
Per:
	
 
	
 

	
 
	
 
	
Name:
	
 
	
 

	
 
	
 
	
Title:
	
 
	
 

	
 
	
 
	
I/We have authority to bind the corporation

 

 

[Signature Page to the Credit Agreement relating to 1974568 Ontario Limited]

“SP - 7”

 

 

IN WITNESS OF WHICH, the Parties have duly executed this Agreement

 

LIMITED GUARANTOR

 

	
APHRIA INC.

	
 
	
 
	
 
	
 
	
 

	
Per:
	
 
	
 

	
 
	
 
	
Name:
	
 
	
 

	
 
	
 
	
Title:
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
Per:
	
 
	
/s/ Christelle Gedeon

	
 
	
 
	
Name:
	
 
	
Christelle Gedeon

	
 
	
 
	
Title:
	
 
	
Chief Legal Officer

	
 
	
 
	
We have authority to bind the corporation

 

 

 

 

[Signature Page to the Credit Agreement relating to 1974568 Ontario Limited]

 

 

EXHIBIT “A” - LENDERS AND LENDERS' COMMITMENTS

 

	
 

Lender
	
 

Facility A
	
Total

Commitment
	
 

%

	
Bank of Montreal
	
$35,000,000
	
$35,000,000
	
43.75%

	
ATB Financial
	
$25,000,000
	
$25,000,000
	
31.25%

	
Farm Credit Canada
	
$20,000,000
	
$20,000,000
	
25%

	
Total
	
$80,000,000
	
$80,000,000
	
100.00%

 

 

Lenders' Addresses for Service

 

Bank of Montreal

100 King Street West, 18th Floor Toronto, Ontario

M5X 1A1

Attention: Kyle Redford

Email: kyle.redford@bmo.com Fax No.416-360-7168

 

ATB Financial

585 8th Ave S.W, Suite 600 Calgary, Alberta

T2P 1G1

Attention: Max Herrera s Email: mherrera@atb.com

 

Farm Credit Canada

835 Southdale Road West London, Ontario

N6P 0C6

Attention : Graham Legge

Email : graham.legge@fcc-fac.ca Fax : 519-652-3670

 

 

 

 

 

EXHIBIT “B” - DRAW REQUEST

 

To:Bank of Montreal, as Agent

 

This Draw Request is delivered pursuant to the credit agreement made among 1974568 Ontario Limited, as Borrower, the Guarantors from time to time party thereto, the Limited Guarantor, Bank of Montreal as administrative agent and the Lenders from time to time thereunder, dated as of November 29, 2019 (as amended, restated, supplemented, replaced or otherwise modified from time to time, the "Credit Agreement"). Terms used herein as defined terms shall have the respective meanings ascribed in the Credit Agreement, unless otherwise defined.

 

	
 
	
1.
	
The undersigned Borrower hereby requests an Advance as follows:

 

 

	
 
	
(a)
	
purpose of Advance: 

 

	
 
	
(b)
	
Facility: 

 

	
 
	
(c)
	
date of Advance: 

 

	
 
	
(d)
	
amount of Advance: 

 

	
 
	
(e)
	
Availment Option: 

 

	
 
	
(f)
	
if Availment Option is a Bankers' Acceptance or BA Equivalent Loan,
	
 

indicated period requested: 

 

	
 
	
(g)
	
Bank account into which Advance is to be

deposited (or attach payment instructions): 

 

 

	
 
	
2.
	
The undersigned Borrower hereby certifies that:

 

	
 
	
(a)
	
the representations and warranties in Section 4.01 of the Credit Agreement are true and correct in all material respects on the date hereof and will continue to be true and correct on the date of the requested Advance, in each case except for any such representations and warranties which are expressly stated in the Credit Agreement to have been made only as at the date of the Credit Agreement; and
	
 

 

	
 
	
(b)
	
no Default, Event of Default or Material Adverse Change has occurred and is continuing on the date hereof, nor shall the making of the requested Advance result in the occurrence of a Default, Event of Default or Material Adverse Change.
	
 

 

Dated this                  day of                      ,                 .

 

 

☐

 

	
By:
	
 
	
 
	
 
	
 

	
 
	
 
	
Name:
	
 
	
 

	
 
	
 
	
Title:
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
By:
	
 
	
 
	
 
	
 

	
 
	
 
	
Name:
	
 
	
 

	
 
	
 
	
Title:
	
 
	
 

 

 

 

 

EXHIBIT “C - ROLLOVER NOTICE

 

 

To:Bank of Montreal, as Agent

 

This Rollover Notice is delivered pursuant to the credit agreement made among 1974568 Ontario Limited, as Borrower, the Guarantors from time to time party thereto, the Limited Guarantor, Bank of Montreal as administrative agent and the Lenders from time to time thereunder, dated as of November 29, 2019 (as amended, restated, supplemented, replaced or otherwise modified from time to time, the "Credit Agreement"). Terms used herein as defined terms shall have the respective meanings ascribed in the Credit Agreement, unless otherwise defined.

 

	
 
	
1.
	
The undersigned Borrower hereby requests a Rollover as follows:

 

	
(a)
	
 
	
Facility
	
 

	
(b)
	
 
	
Availment Option to be rolled over:
	
 

	
(c)
	
 
	
amount of maturing Advance:
	
 

	
(d)
	
 
	
date of maturing Advance:
	
 

	
(e)
	
 
	
Availment Option requested:
	
 

	
(f)
	
 
	
if Availment Option is a Bankers' Acceptance or BA Equivalent Loan, indicated period requested:
	
 

 

 

 

	
 
	
2.
	
The undersigned Borrower hereby certifies that:

 

	
 
	
(a)
	
the representations and warranties in Section 3.01 of the Credit Agreement are true and correct in all material respects on the date hereof and will continue to be true and correct on the date of the requested Rollover, in each case except for any such representations and warranties which are expressly stated in the Credit Agreement to have been made only as at the date of the Credit Agreement; and
	
 

 

	
 
	
(b)
	
no Default, Event of Default or Material Adverse Change has occurred and is continuing on the date hereof, nor shall the making of the requested Rollover result in the occurrence of a Default, Event of Default or Material Adverse Change.
	
 

Dated this                day of                           ,              .

 

 

☐

 

	
By:
	
 
	
 
	
 
	
 

	
 
	
 
	
Name:
	
 
	
 

	
 
	
 
	
Title:
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
By:
	
 
	
 
	
 
	
 

	
 
	
 
	
Name:
	
 
	
 

	
 
	
 
	
Title:
	
 
	
 

 

 

 

 

EXHIBIT “D” - CONVERSION NOTICE

 

To:Bank of Montreal, as Agent

 

This Conversion Notice is delivered pursuant the credit agreement made among 1974568 Ontario Limited, as Borrower, the Guarantors from time to time party thereto, the Limited Guarantor, Bank of Montreal as administrative agent and the Lenders from time to time thereunder, dated as of November 29, 2019 (as amended, restated, supplemented, replaced or otherwise modified from time to time, the "Credit Agreement"). Terms used herein as defined terms shall have the respective meanings ascribed in the Credit Agreement, unless otherwise defined.

 

	
 
	
1.
	
The undersigned Borrower hereby requests a Conversion as follows:

 

	
(a)
	
 
	
Facility
	
 

	
(b)
	
 
	
Availment Option to be converted:
	
 

	
(c)
	
 
	
amount of maturing Advance:
	
 

	
(d)
	
 
	
date of maturing Advance:
	
 

	
(e)
	
 
	
Availment Option requested:
	
 

	
(f)
	
 
	
if Availment Option is a Bankers' Acceptance or BA Equivalent Loan, indicated period requested:
	
 

 

 

	
 
	
2.
	
The undersigned Borrower hereby certifies that:

 

	
 
	
(a)
	
the representations and warranties in Section 3.01 of the Credit Agreement are true and correct in all material respects on the date hereof and will continue to be true and correct on the date of the requested Conversion, in each case except for any such representations and warranties which are expressly stated in the Credit Agreement to have been made only as at the date of the Credit Agreement; and
	
 

 

	
 
	
(b)
	
no Default, Event of Default or Material Adverse Change has occurred and is continuing on the date hereof, nor shall the making of the requested Conversion result in the occurrence of a Default, Event of Default or Material Adverse Change.
	
 

Dated this            day of                       ,                    .

 

 

☐

 

	
By:
	
 
	
 
	
 
	
 

	
 
	
 
	
Name:
	
 
	
 

	
 
	
 
	
Title:
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
By:
	
 
	
 
	
 
	
 

	
 
	
 
	
Name:
	
 
	
 

	
 
	
 
	
Title:
	
 
	
 

 

 

 

 

EXHIBIT “E” - REPAYMENT NOTICE

 

To:Bank of Montreal, as Agent

 

This Repayment Notice is delivered pursuant to the credit agreement made among 1974568 Ontario Limited, as Borrower, the Guarantors from time to time party thereto, the Limited Guarantor, Bank of Montreal as administrative agent and the Lenders from time to time thereunder, dated as of November 29, 2019 (as amended, restated, supplemented, replaced or otherwise modified from time to time, the "Credit Agreement"). Terms used herein as defined terms shall have the respective meanings ascribed in the Credit Agreement, unless otherwise defined.

 

	
 
	
1.
	
The undersigned Borrower hereby commits to make a Repayment as follows:

 

	
 
	
(a)
	
Facility:

 

	
 
	
(b)
	
date of Repayment:

 

	
 
	
(c)
	
amount of Repayment:

 

	
 
	
(d)
	
type of Availment Option to be repaid:

 

 

Dated this                     day of                     ,                      .

 

 

☐

 

	
By:
	
 
	
 
	
 
	
 

	
 
	
 
	
Name:
	
 
	
 

	
 
	
 
	
Title:
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
By:
	
 
	
 
	
 
	
 

	
 
	
 
	
Name:
	
 
	
 

	
 
	
 
	
Title:
	
 
	
 

 

 

 

 

EXHIBIT F - COMPLIANCE CERTIFICATE

 

To:Bank of Montreal, as Agent

 

This Compliance Certificate is delivered pursuant to the credit agreement made among 1974568 Ontario Limited, as Borrower, the Guarantors from time to time party thereto, the Limited Guarantor, Bank of Montreal as administrative agent and the Lenders from time to time thereunder, dated as of November 29, 2019 (as amended, restated, supplemented, replaced or otherwise modified from time to time, the “Credit Agreement”) Terms used herein as defined terms shall have the respective meanings ascribed in the Credit Agreement, unless otherwise defined. This Compliance Certificate relates to the [Fiscal Quarter/Fiscal Year] ended. The undersigned Senior Officer of the Borrower hereby certifies on its behalf and without personal liability that:

 

	
 
	
1.
	
Appendix F-2 is a report of all Distributions made by the Credit Parties during the Fiscal Quarter ended                   . [Section 5.02(c) and 5.02(f)]
	
 

 

	
 
	
2.
	
The following are the financial ratios in respect of the Credit Parties, calculated in accordance with the provisions of the Credit Agreement, as at the end of the Fiscal Quarter/Fiscal Year ended                            (Appendix F-1 containing calculations is attached): [Section 5.03]
	
 

 

	
 
	
(a)
	
Per the Minimum Liquidity covenant, the Parent’s current liquidity is:

 

Unrestricted cash and Cash Equivalents:                                ; less all current

liabilities:                                      ; less

equals:                                         .

Note: May not be less than $22,000,000 at any time

 

	
 
	
(b)
	
The ratio of Total Funded Debt to Tangible Net Worth ratio is                       determined as follows [Notes—(i) delete if after the Conversion Date and (ii) prior to the Conversion Date; it may not exceed 1.00 to 1.00 at any time];
	
 

 

Total Funded Debt:                      ; divided by

Tangible Net

Worth:                                           ; 

equals:                             .

	
 
	
(c)
	
The Fixed Charge Coverage ratio is                             , determined as follows: [Note—(i) delete if prior to the Conversion Date and (ii) on and after the Conversion Date; may not be less than 1.25 to 1]:
	
 

 

EBITDA:                              ; less Cash 

Taxes:                                               ; less

Distributions paid in cash:                              ; less

Capital Expenditures not financed by Permitted Funded Debt:                              ; 

equals:                             ; divided by

Funded Debt Service:                                

equals:                                                           .

 

	
 
	
(d)
	
The Total Funded Debt to EBITDA ratio is                             , determined as follows [Note—(i) delete if before the Conversion Date and (ii) on and after the Conversion Date may not exceed 2.75 to 1]:
	
 

Total Funded Debt:                              ; divided by 

EBITDA:                              ;

equals:                              .

 

 

 

– 2 –

 

 

	
 
	
2.
	
Appendix F-3 is a report of all insurance proceeds received by the Credit Parties in respect of Property during the Fiscal Quarter ended                             . The aggregate net cash proceeds received from all such insurance during such Fiscal Quarter was                             $                             . [Section 2.04(c)(i) and Section 6.07]
	
 

 

	
 
	
3.
	
Appendix F-4 is a report of all of debt issuances and equity issuances of the Credit Parties during the Fiscal Quarter ended                                      . The aggregate net cash proceeds received from the Credit Parties from the raising of capital by way of equity or Funded Debt (excluding Permitted Funded Debt) during such Fiscal Quarter was                                      $                                      . [Section 2.04(c)(ii)]
	
 

 

	
 
	
4.
	
The aggregate liability for Purchase Money Security Interests incurred or assumed by the Credit Parties as at the end of the Fiscal Quarter ended                                      was                                                                            $      
	
 

                                       and for the Fiscal Year                                      to date as at the said Fiscal Quarter End was $                                                                            [Definition of Permitted Purchase-Money Security Interests]

 

	
 
	
5.
	
Schedule 4.01(b) (Corporate Information) attached is an update of Schedule 4.01(b) to the Credit Agreement as at the Period End setting forth all information required by Section 4.01(b) of the Credit Agreement [OR There has been no change to the information contained in the version of Schedule 4.01(b) (Corporate Information) to the Credit Agreement]
	
 

 

	
 
	
6.
	
Schedule 4.01(h) (Material Permits) attached is an update of Schedule 4.01(h) to the Credit Agreement as at the Period End setting forth all information required by Section 4.01(h) of the Credit Agreement [OR There has been no change to the information contained in the version of Schedule 4.01(h) (Material Permits) to the Credit Agreement]
	
 

 

	
 
	
7.
	
Schedule 4.01(i) (Cannabis Investments) attached is an update of Schedule 4.01(i) to the Credit Agreement as at the Period End setting forth all information required by Section 4.01(i) of the Credit Agreement [OR There has been no change to the information contained in the version of Schedule 4.01(i) (Cannabis Investments) to the Credit Agreement]
	
 

 

	
 
	
8.
	
Schedule 4.01(j) (Specific Permitted Liens) attached is an update of Schedule 4.01(j) to the Credit Agreement as at the Period End setting forth all information required by Section 4.01(j) of the Credit Agreement [OR There has been no change to the information contained in the version of Schedule 4.01(j) (Specific Permitted Liens) to the Credit Agreement]
	
 

 

	
 
	
9.
	
Schedule 4.01(k)(Owned Properties) attached is an update of Schedule 4.01(k) to the Credit Agreement as at the Period End setting forth all information required by Section 4.01(k) of the Credit Agreement [OR There has been no change to the information contained in the version of Schedule 4.01(k) (Owned Properties) to the Credit Agreement]
	
 

 

	
 
	
10.
	
Schedule 4.01(l) (Material Leased Properties) attached is an update of Schedule 4.01(l) to the Credit Agreement as at the Period End setting forth all information required by Section 4.01(l) of the Credit Agreement [OR There has been no change to the information contained in the version of Schedule 4.01(l) (Material Leased Properties) to the Credit Agreement]
	
 

 

	
 
	
11.
	
Schedule 4.01(m) (Intellectual Property) attached is an update of Schedule 4.01(m) to the Credit Agreement as at the Period End setting forth all information required by Section 4.01(m) of the Credit Agreement [OR There has been no change to the information contained in the version of Schedule 4.01(m) (Intellectual Property) to the Credit Agreement]
	
 

 

	
 
	
12.
	
Schedule 4.01(o) (Material Agreements) attached is an update of Schedule 4.01(o) to the Credit Agreement as at the Period End setting forth all information required by Section 4.01(o) of the Credit Agreement [OR There has been no change to the information contained in the version of Schedule 4.01(o) (Material Agreements) to the Credit Agreement]
	
 

 

	
 
	
13.
	
Schedule 4.01(p) (Labour Agreements) attached is an update of Schedule 4.01(p) to the Credit Agreement as at the Period End setting forth all information required by Section 4.01(p) of the Credit Agreement [OR There has been no change to the information contained in the version of Schedule 4.01(p) (Labour Agreements) to the Credit Agreement]
	
 

 

 

– 3 –

 

 

	
 
	
14.
	
Schedule 4.01(q) (Environmental Matters) attached is an update of Schedule 4.01(q) to the Credit Agreement as at the Period End setting forth all information required by Section 4.01(q) of the Credit Agreement [OR There has been no change to the information contained in the version of Schedule 4.01(q) (Environmental Matters) to the Credit Agreement]
	
 

 

	
 
	
15.
	
Schedule 4.01(r) (Litigation) attached is an update of Schedule 4.01(r) to the Credit Agreement as at the Period End setting forth all information required by Section 4.01(r) of the Credit Agreement [OR There has been no change to the information contained in the version of Schedule 4.01(r) (Litigation) to the Credit Agreement]
	
 

 

	
 
	
16.
	
Schedule 4.01(s) (Pension Plans) attached is an update of Schedule 4.01(s) to the Credit Agreement as at the Period End setting forth all information required by Section 4.01(s) of the Credit Agreement [OR There has been no change to the information contained in the version of Schedule 4.01(s) (Pension Plans) to the Credit Agreement]
	
 

 

	
 
	
17.
	
The foregoing information and all information contained in the enclosures and Schedules and Appendices attached or referred to therein is true, correct and complete;
	
 

 

	
 
	
18.
	
The representations and warranties in Section 4.01 of the Credit Agreement are true and correct in all material respects on the date hereof, in each case except for any such representations and warranties which are expressly stated in the Credit Agreement to have been made only as at the date of the Credit Agreement; and
	
 

 

	
 
	
19.
	
No Default, Event of Default or Material Adverse Change has occurred and is continuing on the date hereof.
	
 

 

 

Dated this                                      day of                                      ,                                      .

 

 

 

 

                                                     

Name:

Title:

 

 

 

 

 

EXHIBIT “G” - FORM OF BA EQUIVALENT NOTE

 

 

 

[insert date]

 

 

 

FOR VALUE RECEIVED, the undersigned hereby promises to pay to the order of [name of Non-BA Lender] at its office at [insert address from Credit Agreement], the sum of                                                                             

                                       Dollars ($                                      ) in lawful money of Canada on [insert date of maturity].

 

Dated this                                      day of                                      ,                                      .

 

 

[<>]

 

	
By:
	
 
	
 
	
 
	
 

	
 
	
 
	
Name:
	
 
	
 

	
 
	
 
	
Title:
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
By:
	
 
	
 
	
 
	
 

	
 
	
 
	
Name:
	
 
	
 

	
 
	
 
	
Title:
	
 
	
 

 

 

 

 

 

EXHIBIT “H” - CBA MODEL PROVISIONS

 

CBA MODEL PROVISIONS

 

The attached model credit agreement provisions, which have been revised under the direction of the Canadian Bankers' Association Secondary Loan Market Specialist Group from provisions prepared by The Loan Syndications and Trading Association, Inc., form part of this Agreement, except for the footnotes to the model credit agreement provisions and subject to the following variations:

 

 

 

 

MODEL CREDIT AGREEMENT PROVISIONS

 

	
 
	
1.
	
Definitions

 

"Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent.

 

"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 the credit agreement of which these Provisions form part.

 

"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 judgement, order, writ, injunction, decision, ruling, decree or award;

(c) any regulatory policy, practice, guideline or directive; or (d) any franchise, licence, qualification, authorization, consent, exemption, waiver, right, permit or other approval of any Governmental Authority, 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 Percentage" means with respect to any Lender, the percentage of the total Commitments represented by such Lender's Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be the percentage of the total outstanding Loans and participations in respect of Letters of Credit represented by such Lender's outstanding Loans and participations in respect of Letters of Credit.

 

"Approved Fund" means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

 

"Assignment and Assumption" means an assignment and assumption entered into by a Lender and an Eligible Assignee and accepted by the Administrative Agent, in substantially the form of Exhibit A or any other form approved by the Administrative Agent.

 

"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.

 

"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.

 

"Default" means any event or condition that constitutes an Event of Default or 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.

"Eligible Assignee" means any Person (other than a natural Person, any Obligor or any Affiliate of an Obligor), in respect of which any consent that is required by Section 10(b) has been obtained.

 

 

 

 

"Excluded Taxes" means, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of an Obligor hereunder, (a) taxes imposed on or measured by its net income, and franchise taxes imposed on it (in lieu of net income taxes), 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 any Lender, in which its applicable lending office is located, (b) any branch profits taxes or any similar tax imposed by any jurisdiction in which the Lender is located and (c) in the case of a Foreign Lender (other than (i) an assignee pursuant to a request by the Borrower under Section 3.3(b), (ii) an assignee pursuant to an Assignment and Assumption made when an Event of Default has occurred and is continuing or (iii) any other assignee to the extent that the Borrower has expressly agreed that any withholding tax shall be an Indemnified Tax), any withholding tax that (A) is not imposed or assessed in respect of a Loan that was made on the premise that an exemption from such withholding tax would be available where the exemption is subsequently determined, or alleged by a taxing authority, not to be available and (B) is required by Applicable Law to be withheld or paid in respect of any amount payable hereunder or under any Loan Document to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new lending office) or is attributable to such Foreign Lender's failure or inability (other than as a result of a Change in Law) to comply with Section 3.2(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from an Obligor with respect to such withholding tax pursuant to Section 3.2(a). For greater certainty, for purposes of item (c) above, a withholding tax includes any Tax that a Foreign Lender is required to pay pursuant to Part XIII of the Income Tax Act (Canada) or any successor provision thereto.1

 

"Foreign Lender" means any Lender that is not organized under the laws of the jurisdiction in which the Borrower is resident for tax purposes and that is not otherwise considered or deemed in respect of any amount payable to it hereunder or under any Loan Document to be resident for income tax or withholding tax purposes in the jurisdiction in which the Borrower is resident for tax purposes by application of the laws of that jurisdiction. For purposes of this definition Canada and each Province and Territory thereof shall be deemed to constitute a single jurisdiction and the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

 

"Fund" means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

 

"Governmental Authority" means the government of Canada or any other nation, or of any political subdivision thereof, whether 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 supranational bodies such as the European Union or the European Central Bank and including a Minister of the Crown, Superintendent of Financial Institutions or other comparable authority or agency.

 

 

1 Please note that this definition of "Excluded Taxes" will result in Foreign Lenders not being grossed up for withholding taxes that exist at the time of execution and delivery of the Credit Agreement, except in the circumstances specified. If a loan is intended to be exempt from withholding tax as a "5/25" structure or otherwise, this premise should be specified in the Credit Agreement.

 

 

"Indemnified Taxes" means Taxes other than Excluded Taxes.

 

"Issuing Bank" means the Person named elsewhere in this Agreement2 as the issuer of Letters of Credit on the basis that it is "fronting" for other Lenders and not on the basis that it is the attorney of other Lenders to sign Letters of Credit on their behalf, or any successor issuer of Letters of Credit. For greater certainty, where the context requires, references to "Lenders" in these Provisions include the Issuing Bank.

 

"Loan" means any extension of credit by a Lender under this Agreement, including by way of bankers' acceptance or LIBO Rate Loan, except for any Letter of Credit or participation in a Letter of Credit.

 

"Obligors" means, collectively, the Borrower and each of the guarantors of the Borrower's obligations that are identified elsewhere in this Agreement.

 

"Other Taxes" means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

 

"Participant" has the meaning assigned to such term in Section 10(d).

 

"Person" means any natural Person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

 

"Provisions" means these model credit agreement provisions.

 

"Related Parties" means, with respect to any Person, such Person's Affiliates and the directors, officers, employees, agents and advisors of such Person and of such Person's Affiliates.

 

"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.

 

	
 
	
2.
	
Terms Generally

 

	
 
	
(1)
	
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 these Provisions to Articles, Sections, Exhibits and Schedules shall be construed to refer to
	
 

 

 

2 Ensure that the Credit Agreement identifies the Issuing Bank or indicates that there is none.

 

 

Articles and Sections of, and Exhibits and Schedules to, these Provisions, but all such references elsewhere in this Agreement shall be construed to refer to this Agreement apart from these Provisions, (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.

 

	
 
	
(2)
	
If there is any conflict or inconsistency between these Provisions and the other terms of this Agreement, the other terms of this Agreement shall govern to the extent necessary to resolve the conflict or inconsistency.
	
 

 

	
 
	
3.
	
Yield Protection

 

	
 
	
3.1
	
Increased Costs

 

	
 
	
(a)
	
Increased Costs Generally. If any Change in Law shall:

 

	
 
	
(i)
	
impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender;
	
 

 

	
 
	
(ii)
	
subject any Lender to any Tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof, except for Indemnified Taxes or Other Taxes covered by Section 3.2 and the imposition, or any change in the rate, of any Excluded Tax payable by such Lender; or
	
 

 

	
 
	
(iii)
	
impose on any Lender or any applicable interbank market any other condition, cost or expense affecting this Agreement or Loans made by such Lender or any Letter of Credit or participation therein;
	
 

 

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or the Issuing Bank of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or any other amount), then upon request of such Lender the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.

 

	
 
	
(b)
	
Capital Requirements. If any Lender determines that any Change in Law affecting such Lender or any lending office of such Lender or such Lender's holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or the Letters of Credit issued or participated in by such Lender, to a level below that which such Lender or its holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of its holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or its holding company for any such reduction suffered.
	
 

 

 

 

 

	
 
	
(c)
	
Certificates for Reimbursement. A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of 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. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.
	
 

 

	
 
	
(d)
	
Delay in Requests. Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's right to demand such compensation, except that the Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefore, unless the Change in Law giving rise to such increased costs or reductions is retroactive, in which case the nine-month period referred to above shall be extended to include the period of retroactive effect thereof.
	
 

 

	
 
	
3.2
	
Taxes.

 

	
 
	
(a)
	
Payments Subject to Taxes. If any Obligor, the Administrative Agent, or any Lender is required by Applicable Law to deduct or pay any Indemnified Taxes (including any Other Taxes) in respect of any payment by or on account of any obligation of an Obligor hereunder or under any other Loan Document, then (i) the sum payable shall be increased by that Obligor when payable as necessary so that after making or allowing for all required deductions and payments (including deductions and payments applicable to additional sums payable under this Section) the Administrative Agent or Lender, as the case may be, receives an amount equal to the sum it would have received had no such deductions or payments been required, (ii) the Obligor shall make any such deductions required to be made by it under Applicable Law and (iii) the Obligor shall timely pay the full amount required to be deducted to the relevant Governmental Authority in accordance with Applicable Law.
	
 

 

	
 
	
(b)
	
Payment of Other Taxes by the Borrower. Without limiting the provisions of paragraph (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with Applicable Law.
	
 

 

	
 
	
(c)
	
Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent and each Lender, within 10 days after demand therefor, 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 Administrative Agent or such Lender and any penalties, interest and 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 a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.
	
 

	
 
	
(d)
	
Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by an Obligor to a Governmental Authority, the Obligor shall deliver to the Administrative Agent 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 Administrative Agent.
	
 

 

 

 

	
 
	
(e)
	
Status of Lenders. Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall, at the request of the Borrower, deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by Applicable Law or reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by Applicable Law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, (a) any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to withholding or information reporting requirements, and (b) any Lender that ceases to be, or to be deemed to be, resident in Canada for purposes of Part XIII of the Income Tax Act (Canada) or any successor provision thereto shall within five days thereof notify the Borrower and the Administrative Agent in writing.
	
 

 

	
 
	
(f)
	
Treatment of Certain Refunds and Tax Reductions. If the Administrative Agent or a Lender determines, in its sole discretion, 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 an Obligor 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 Borrower or Obligor, 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 Obligor 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 Administrative Agent or such 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 Obligor as applicable, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the Borrower or Obligor (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender if the Administrative Agent or such Lender is required to repay such refund or reduction to such Governmental Authority. This paragraph shall not be construed to require the Administrative Agent or any 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.
	
 

 

	
 
	
3.3
	
Mitigation Obligations: Replacement of Lenders.

 

	
 
	
(a)
	
Designation of a Different Lending Office. If any Lender requests compensation under Section 3.1, or requires the Borrower to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.2 , then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.1 or 3.2 , as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
	
 

 

 

	
 
	
(b)
	
Replacement of Lenders3. If any Lender requests compensation under Section 3.1, if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.2, if any Lender's obligations are suspended pursuant to Section 3.4 or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon 10 days' notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:
	
 

 

	
 
	
(i)
	
the Borrower pays the Administrative Agent the assignment fee specified in Section 10(b)(vi);
	
 

 

	
 
	
(ii)
	
the assigning Lender receives payment of an amount equal to the outstanding principal of its Loans and participations in disbursements under Letters of Credit, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any breakage costs and amounts required to be paid under this Agreement as a result of prepayment to a Lender) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);
	
 

 

	
 
	
(iii)
	
in the case of any such assignment resulting from a claim for compensation under Section 3.1 or payments required to be made pursuant to Section 3.2, such assignment will result in a reduction in such compensation or payments thereafter; and
	
 

 

	
 
	
(iv)
	
such assignment does not conflict with Applicable Law.

 

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

 

	
 
	
3.4
	
Illegality.

 

If any Lender determines that any Applicable Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make or maintain any Loan (or to maintain its obligation to make any Loan), or to participate in, issue or maintain any Letter of Credit (or to maintain its obligation to participate in or to issue any Letter of Credit), or to determine or charge interest rates based upon any particular rate, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligation of such Lender with respect to the activity that is unlawful shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if conversion would avoid the activity that is unlawful, convert any Loans, or take any necessary steps with respect to any Letter of Credit in order to avoid the activity that is unlawful. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted. Each Lender agrees to designate a different Lending Office if such designation will avoid the need for such notice and will not, in the good faith judgment of such Lender, otherwise be materially disadvantageous to such Lender.

 

 

3 Please note that the Breakfunding section in the Credit Agreement should expressly include any amount payable as a result of an assignment required by this Section.

 

 

	
 
	
3.5
	
Inability to Determine Rates Etc.

 

If the Required Lenders determine that for any reason a market for bankers' acceptances does not exist at any time or the Lenders cannot for other reasons, after reasonable efforts, readily sell bankers' acceptances or perform their other obligations under this Agreement with respect to bankers' acceptances, the Administrative Agent will promptly so notify the Borrower and each Lender. Thereafter, the Borrower's right to request the acceptance of bankers' acceptances shall be and remain suspended until the Required Lenders determine and the Agent notifies the Borrower and each Lender that the condition causing such determination no longer exists. If the Required Lenders determine that for any reason adequate and reasonable means do not exist for determining the LIBO Rate for any requested Interest Period with respect to a proposed LIBO Rate Loan, or that the LIBO Rate for any requested Interest Period with respect to a proposed LIBO Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Administrative Agent will promptly so notify the Borrower and each Lender. Thereafter, the obligation of the Lenders to make or maintain LIBO Rate Loans shall be suspended until the Administrative Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a borrowing, conversion or continuation of LIBO Rate Loans or, failing that, will be deemed to have converted such request into a request for a borrowing of Base Rate Loans in the amount specified therein.

 

	
 
	
4.
	
Right of Setoff.

 

If an Event of Default has occurred and is continuing, each of the Lenders and each of their respective Affiliates is 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 such Lender or any such Affiliate to or for the credit or the account of any Obligor against any and all of the obligations of the Borrower now or hereafter existing under this Agreement or any other Loan Document to such Lender, irrespective of whether or not such Lender has made any demand under this Agreement or any other Loan Document and although such obligations of the Obligor may be contingent or unmatured or are owed to a branch or office of such Lender different from the branch or office holding such deposit or obligated on such indebtedness. The rights of each the Lenders and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff, consolidation of accounts and bankers' lien) that the Lenders or their respective Affiliates may have. Each Lender agrees to promptly notify the Borrower and the Administrative Agent after any such setoff and application, but the failure to give such notice shall not affect the validity of such setoff and application. If any Affiliate of a Lender exercises any rights under this Section 4, it shall share the benefit received in accordance with Section 5 as if the benefit had been received by the Lender of which it is an Affiliate.

	
 
	
5.
	
Sharing of Payments by Lenders.

 

If any Lender, by exercising any right of setoff or counterclaim or otherwise, obtains any payment or other reduction that might result in such Lender receiving payment or other reduction of a proportion of the aggregate amount of its Loans and accrued interest thereon or other obligations hereunder greater than its pro rata share thereof as provided herein, then the Lender receiving such payment or other reduction shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans and such other obligations of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders rateably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them, provided that:

 

	
 
	
(i)
	
if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest;
	
 

 

 

 

 

	
 
	
(ii)
	
the provisions of this Section shall not be construed to apply to (x) any payment made by any Obligor pursuant to and in accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in disbursements under Letters of Credit to any assignee or participant, other than to any Obligor or any Affiliate of an Obligor (as to which the provisions of this Section shall apply); and
	
 

 

	
 
	
(iii)
	
the provisions of this Section shall not be construed to apply to (w) any payment made while no Event of Default has occurred and is continuing in respect of obligations of the Borrower to such Lender that do not arise under or in connection with the Loan Documents, (x) any payment made in respect of an obligation that is secured by a Permitted Lien or that is otherwise entitled to priority over the Borrower's obligations under or in connection with the Loan Documents, (y) any reduction arising from an amount owing to an Obligor upon the termination of derivatives entered into between the Obligor and such Lender, or (z) any payment to which such Lender is entitled as a result of any form of credit protection obtained by such Lender.
	
 

 

The Obligors consent to the foregoing and agree, to the extent they may effectively do so under Applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against each Obligor rights of setoff and counterclaim and similar rights of Lenders with respect to such participation as fully as if such Lender were a direct creditor of each Obligor in the amount of such participation.

 

	
 
	
6.
	
Administrative Agent's Clawback

 

	
 
	
(a)
	
Funding by Lenders; Presumption by Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any advance of funds that such Lender will not make available to the Administrative Agent such Lender's share of such advance, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with the provisions of this Agreement concerning funding by Lenders and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable advance available to the Administrative Agent, then the applicable Lender shall pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at a rate determined by the Administrative Agent in accordance with prevailing banking industry practice on interbank compensation. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such advance. If the Lender does not do so forthwith, the Borrower shall pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon at the interest rate applicable to the advance in question. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that has failed to make such payment to the Administrative Agent.
	
 

 

	
 
	
(b)
	
Payments by Borrower; Presumptions by Administrative Agent. Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of any Lender hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, 
	
 

 

 

	
 
		
distribute the amount due to the Lenders. In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at a rate determined by the Administrative Agent in accordance with prevailing banking industry practice on interbank compensation.
	
 

 

	
 
	
7.
	
Agency.

 

	
 
	
7.1
	
Appointment and Authority.

 

Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Person identified elsewhere in this Agreement as the Administrative Agent4 to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and the Issuing Bank, and no Obligor shall have rights as a third party beneficiary of any of such provisions.

 

	
 
	
7.2
	
Rights as a Lender.

 

The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with any Obligor or any Affiliate thereof as if such Person were not the Administrative Agent and without any duty to account to the Lenders.

	
 
	
7.3
	
Exculpatory Provisions.

 

	
 
	
(1)
	
The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents5. Without limiting the generality of the foregoing, the Administrative Agent:
	
 

 

	
 
	
(a)
	
shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;
	
 

 

	
 
	
(b)
	
shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for in the Loan Documents), but the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or Applicable Law; and
	
 

 

	
 
	
(c)
	
shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.
	
 

 

 

4 Ensure that the Credit Agreement identifies the Administrative Agent for the purpose of this reference.

 

 

 

 

	
 
	
(2)
	
The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as is necessary, or as the Administrative Agent believes in good faith is necessary, under the provisions of the Loan Documents) or (ii) in the absence of its own gross negligence or wilful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing the Default is given to the Administrative Agent by the Borrower or a Lender.
	
 

 

	
 
	
(3)
	
Except as otherwise expressly specified in this Agreement, the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition specified in this Agreement, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
	
 

 

	
 
	
7.4
	
Reliance by Administrative Agent.

 

The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person.   The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the Issuing Bank, the Administrative Agent may presume that such condition is satisfactory to such Lender or the Issuing Bank unless the Administrative Agent shall have received notice to the contrary from such Lender or the Issuing Bank prior to the making of such Loan or the issuance of such Letter of Credit. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

 

	
 
	
7.5
	
Indemnification of Administrative Agent.

 

Each Lender agrees to indemnify the Administrative Agent and hold it harmless (to the extent not reimbursed by the Borrower), rateably according to its Applicable Percentage (and not jointly or jointly and severally) from and against any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel, which may be incurred by or asserted against the Administrative Agent in any way relating to or arising out of the Loan Documents or the transactions therein contemplated. However, no Lender shall be liable for any portion of such losses, claims, damages, liabilities and related expenses resulting from the Administrative Agent's gross negligence or wilful misconduct.

 

	
 
	
7.6
	
Delegation of Duties.

 

The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent from among the Lenders (including the Person serving as Administrative Agent) and their respective Affiliates. The Administrative Agent and any such sub- agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The provisions of this Article and other provisions of this Agreement for the benefit of the Administrative Agent shall apply to any such sub-agent and to the Related

 

 

5 It is anticipated that the Credit Agreement will require the Borrower to be responsible for compliance with all requirements to maintain perfection of security.

 

 

 

 

Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

 

	
 
	
7.7
	
Replacement of Administrative Agent.

 

	
 
	
(1)
	
The Administrative Agent may at any time give notice of its resignation to the Lenders, the Issuing Bank and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which shall be a Lender having a Commitment to a revolving credit if one or more is established in this Agreement and having an office in Toronto, Ontario or Montréal, Québec, or an Affiliate of any such Lender with an office in Toronto or Montréal. The Administrative Agent may also be removed at any time by the Required Lenders upon 30 days' notice to the Administrative Agent and the Borrower as long as the Required Lenders, in consultation with the Borrower, appoint and obtain the acceptance of a successor within such 30 days, which shall be a Lender having a Commitment to a revolving credit if one or more is established in this Agreement and having an office in Toronto or Montréal, or an Affiliate of any such Lender with an office in Toronto or Montréal.
	
 

 

	
 
	
(2)
	
If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may on behalf of the Lenders, appoint a successor Administrative Agent meeting the qualifications specified in Section 7.7(1), provided that if the Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly, until such time as the Required Lenders appoint a successor Administrative Agent as provided for above in the preceding paragraph.
	
 

 

	
 
	
(3)
	
Upon a successor's appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the former Administrative Agent, and the former Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided in the preceding paragraph). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the termination of the service of the former Administrative Agent, the provisions of this Section 7 and of Section 9 shall continue in effect for the benefit of such former Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the former Administrative Agent was acting as Administrative Agent.
	
 

 

	
 
	
7.8
	
Non-Reliance on Administrative Agent and Other Lenders.

 

Each Lender and the Issuing Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and the Issuing Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information 

 

 

as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

 

	
 
	
7.9
	
Collective Action of the Lenders.

 

Each of the Lenders hereby acknowledges that to the extent permitted by Applicable Law, any collateral security and the remedies provided under the Loan Documents to the Lenders are for the benefit of the Lenders collectively and acting together and not severally and further acknowledges that its rights hereunder and under any collateral security are to be exercised not severally, but by the Administrative Agent upon the decision of the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for in the Loan Documents). Accordingly, notwithstanding any of the provisions contained herein or in any collateral security, each of the Lenders hereby covenants and agrees that it shall not be entitled to take any action hereunder or thereunder including, without limitation, any declaration of default hereunder or thereunder but that any such action shall be taken only by the Administrative Agent with the prior written agreement of the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for in the Loan Documents). Each of the Lenders hereby further covenants and agrees that upon any such written agreement being given, it shall co-operate fully with the Administrative Agent to the extent requested by the Administrative Agent. Notwithstanding the foregoing, in the absence of instructions from the Lenders and where in the sole opinion of the Administrative Agent, acting reasonably and in good faith, the exigencies of the situation warrant such action, the Administrative Agent may without notice to or consent of the Lenders take such action on behalf of the Lenders as it deems appropriate or desirable in the interest of the Lenders.

 

	
 
	
7.10
	
No Other Duties. etc.

 

Anything herein to the contrary notwithstanding, none of the Bookrunners, Arrangers or holders of similar titles, if any, specified in this Agreement shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent or a Lender hereunder.

 

	
 
	
8.
	
Notices: Effectiveness; Electronic Communication

 

	
 
	
(a)
	
Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as-provided in paragraph (b) below), 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 telecopier to the addresses or telecopier numbers specified elsewhere in this Agreement6 or, if to a Lender, to it at its address or telecopier number specified in the Register or, if to an Obligor 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 telecopier 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 paragraph (b) below, shall be effective as provided in said paragraph (b).

 

	
 
	
(b)
	
Electronic Communications. Notices and other communications to the Lenders and the Issuing Bank hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent7, provided that the foregoing shall not apply to notices to any Lender of Loans to be made or Letters 
	
 

 

 

	
 
		
of Credit to be issued if such Lender has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent 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.
	
 

 

Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail 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) notices or communications 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.

 

	
 
	
(c)
	
Change of Address. Etc. Any party hereto may change its address or telecopier number for notices and other communications hereunder by notice to the other parties hereto.
	
 

 

	
 
	
9.
	
Expenses; Indemnity: Damage Waiver8

 

	
 
	
(a)
	
Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with the syndication of the credit facilities provided for herein, 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 shall be consummated), (ii) all reasonable out- of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all reasonable out-of-pocket expenses incurred by the Administrative Agent, any Lender or the Issuing Bank, including the reasonable fees, charges and disbursements of 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, or in connection with the Loans made or Letters of Credit issued hereunder, including all such out- of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.
	
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6 Ensure that the Credit Agreement contains the contact information referred to.

7 Administrative Agents may wish to prescribe procedures for electronic communications and disseminate those procedures to Lenders.

 

 

 

 

	
 
	
(b)
	
Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent (and any sub-agent thereof), each Lender and the Issuing Bank, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the 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 Obligor 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) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or Release of Hazardous Materials on or from any property owned or operated by any Obligor, or any Environmental Liability related in any way to any Obligor, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by an Obligor 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 nonappealable 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 Obligor against an Indemnitee for breach in bad faith of such Indemnitee's obligations hereunder or under any other Loan Document, if the Obligor has obtained a final and nonappealable judgment in its favour on such claim as determined by a court of competent jurisdiction, nor shall it be available in respect of matters specifically addressed in Sections 3.1, 3.2 and 9(a).
	
 

 

	
 
	
(c)
	
Reimbursement by Lenders. To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under paragraph (a) or (b) of this Section to be paid by it to the Administrative Agent (or any sub-agent thereof), the Issuing Bank or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the Issuing Bank or such Related Party, as the case may be, such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent) or the Issuing Bank in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) or Issuing Bank in connection with such capacity. The obligations of the Lenders under this paragraph (c) are subject to the other provisions of this Agreement concerning several liability of the Lenders.
	
 

 

 

 

 

 

 

8 A reference to this Section should be included in the Survival Section, if any, of the Credit Agreement.

 

 

 

 

	
 
	
(d)
	
Waiver of Consequential Damages. Etc. To the fullest extent permitted by Applicable Law, the Obligors shall not assert, and hereby waive, any claim against any Indemnitee, 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, any Loan or Letter of Credit 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.
	
 

 

	
 
	
(e)
	
Payments. All amounts due under this Section shall be payable promptly after demand therefore. A certificate of the Administrative Agent or a Lender setting forth the amount or amounts owing to the Administrative Agent, 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.
	
 

 

	
 
	
10
	
Successors and Assigns

 

	
 
	
(a)
	
Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Obligor may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance with the provisions of paragraph (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of paragraph (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in paragraph (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
	
 

 

	
 
	
(b)
	
Assignments by Lenders. Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that:
	
 

 

	
 
	
(i)
	
except if an Event of Default has occurred and is continuing or in the case of an assignment of the entire remaining amount of the assigning Lender's Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment being assigned (which for this purpose includes Loans outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Loan of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if "Trade Date" is specified in the Assignment and Assumption, as of the Trade Date) shall not be less than $5,000,000, in the case of any assignment in respect of a revolving 
	
 

 

 

	
 
		
facility, or $1,000,000, in the case of any assignment in respect of a term facility, unless each of the Administrative Agent and, so long as no Default has occurred and is continuing, the Borrower otherwise consent to a lower amount (each such consent not to be unreasonably withheld or delayed);
	
 

 

	
 
	
(ii)
	
each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement with respect to the Loan or the Commitment assigned, except that this clause (ii) shall not prohibit any Lender from assigning all or a portion of its rights and obligations among separate credits on a non-pro rata basis;
	
 

 

	
 
	
(iii)
	
any assignment of a Commitment relating to a credit under which Letters of Credit may be issued must be approved by any Issuing Bank (such approval not to be unreasonably withheld or delayed) unless the Person that is the proposed assignee is itself already a Lender with a Commitment under that credit;
	
 

 

	
 
	
(iv)
	
any assignment must be approved by the Administrative Agent (such approval not to be unreasonably withheld or delayed) unless:
	
 

 

	
 
	
(A)
	
in the case of an assignment of a Commitment relating to a revolving credit, the proposed assignee is itself already a Lender with the same type of Commitment,
	
 

	
 
	
(B)
	
no Event of Default has occurred and is continuing, and the assignment is of a Commitment relating to a non-revolving credit that is fully advanced, or
	
 

 

	
 
	
(C)
	
the proposed assignee is a bank whose senior, unsecured, non- credit enhanced, Long Term Debt is rated at least A3, A- or A low by at least two of Moody's Investor Services Inc., Standard & Poor's, a division of The McGraw-Hill Companies, Inc. and Dominion Bond Rating Service Limited, respectively;
	
 

 

	
 
	
(v)
	
any assignment must be approved by the Borrower (such approval not to be unreasonably withheld or delayed) unless the proposed assignee is itself already a Lender with the same type of Commitment or a Default has occurred and is continuing; and
	
 

 

	
 
	
(vi)
	
the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in an amount specified elsewhere in this Agreement9 and the Eligible Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.
	
 

 

Subject to acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement and the other Loan Documents, including any collateral security, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3 and 9, and shall continue to be liable for 

 

 

any breach of this Agreement by such Lender, with respect to facts and circumstances occurring prior to the effective date of such assignment. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (d) of this Section. Any payment by an assignee to an assigning Lender in connection with an assignment or transfer shall not be or be deemed to be a repayment by the Borrower or a new Loan to the Borrower.

	
 
	
(c)
	
Register. The Administrative Agent shall maintain at one of its offices in Toronto, Ontario or Montréal, Québec a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, absent manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
	
 

 

	
 
	
(d)
	
Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural Person, an Obligor or any Affiliate of an Obligor10) (each, a "Participant") in all or a portion of such Lender's rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any payment by a Participant to a Lender in connection with a sale of a participation shall not be or be deemed to be a repayment by the Borrower or a new Loan to the Borrower.
	
 

 

Subject to paragraph (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Section 3 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 4 as though it were a Lender, provided such Participant agrees to be subject to Section 5 as though it were a Lender.

 

	
 
	
(e)
	
Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 3.1 and 3.2 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.2 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 3.2(e) as though it were a Lender.
	
 

 

 

 

 

9 Ensure that the Credit Agreement specifies the amount of this fee.

 

 

	
 
	
(f)
	
Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, but no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
	
 

 

	
 
	
11
	
Governing Law: Jurisdiction: Etc.

 

	
 
	
(a)
	
Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the Province specified elsewhere in this Agreement11 and the laws of Canada applicable in that Province.
	
 

 

	
 
	
(b)
	
Submission to Jurisdiction. Each Obligor irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the courts of the Province specified elsewhere in this Agreement, 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. Each of the parties hereto 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 Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Obligor or its properties in the courts of any jurisdiction.
	
 

 

	
 
	
(c)
	
Waiver of Venue. Each Obligor 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 or any other Loan Document in any court referred to in paragraph (b) of this Section. 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
	
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.

 

 

 

 

10 Consideration should be given to the percentage of Lenders required to permit the sale of a participation to an Obligor or any Affiliate or Subsidiary of an Obligor.

11 Ensure that the Credit Agreement identifies the Province referred to here and in paragraph (b) immediately below.

 

 

	
 
	
13
	
Counterparts: Integration: Effectiveness: Electronic Execution

 

	
 
	
(a)
	
Counterparts: Integration: Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in the conditions precedent Section(s) of this Agreement, this Agreement shall become effective when it has been executed by the Administrative Agent and when the Administrative Agent 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 by sending a scanned copy by electronic mail shall be effective as delivery of a manually executed counterpart of this Agreement.
	
 

 

	
 
	
(b)
	
Electronic Execution of Assignments. The words "execution," "signed," "signature," and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any Applicable Law, including Parts 2 and 3 of the Personal Information Protection and Electronic Documents Act (Canada), the Electronic Commerce Act, 2000 (Ontario) and other similar federal or provincial laws based on the Uniform Electronic Commerce Act of the Uniform Law Conference of Canada or its Uniform Electronic Evidence Act, as the case may be.
	
 

 

14.Treatment of Certain Information: Confidentiality

 

	
 
	
(1)
	
Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to it, its Affiliates and its and its Affiliates' respective partners, directors, officers, employees, agents, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority), (c) to the extent required by Applicable Laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap, derivative, credit-linked note or similar transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent or any Lender on a non-confidential basis from a source other than an Obligor.
	
 

 

	
 
	
(2)
	
For purposes of this Section, "Information" means all information received in connection with this Agreement from any Obligor relating to any Obligor or any of its Subsidiaries or any of their respective businesses, other than any such information that is available to the Administrative Agent or any 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. In addition, the Administrative Agent may disclose to any agency or organization that assigns standard identification numbers to loan facilities such basic information describing the facilities provided hereunder as is necessary to assign unique identifiers (and, if requested, supply a copy of this Agreement), it being understood that the Person to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to make available to the public only such Information as such Person normally makes available in the course of its business of assigning identification numbers.
	
 

 

	
 
	
(3)
	
In addition, and notwithstanding anything herein to the contrary, the Administrative Agent may provide the information described on Exhibit B concerning the Borrower and the credit facilities established herein to Loan Pricing Corporation and/or other recognized trade publishers of information for general circulation in the loan market.
	
 

 

 

EXHIBIT A

 

 

ASSIGNMENT AND ASSUMPTION

 

 

This Assignment and Assumption (the "Assignment and Assumption") is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the "Assignor") and [Insert name of Assignee] (the "Assignee"). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the "Credit Agreement"), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

 

For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor's rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including without limitation any letters of credit, guarantees, and swingline loans included in such facilities) and (ii) to the extent permitted to be assigned under Applicable Law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan-transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as, the "Assigned Interest"). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.

 

 

	
 
	
1.
	
Assignor:                                                    

 

	
 
	
2.
	
Assignee:                                                     

[and is an Affiliate/Approved Fund of [identify Lender]]

 

	
 
	
3.
	
Borrower(s):                                                     

 

	
 
	
4.
	
Administrative Agent:                                                     , as the administrative agent under the Credit Agreement.
	
 

 

5.Credit Agreement:[The [amount] Credit Agreement dated as of          among [name of Borrower(s)], the Lenders parties thereto, [name of Administrative Agent], as Administrative Agent, and the other agents parties thereto]

	
 
	
6.
	
Assigned Interest:

 

					
	
Facility Assigned
	
Aggregate Amount of

Commitment/Loans for all Lenders
	
Amount of

Commitment/Loans Assigned
	
Percentage Assigned

of Commitment/Loans
	
CUSIP

Number N/A

	
 
	
$
	
$
	
%
	
 

	
 
	
$
	
$
	
%
	
 

	
 
	
$
	
$
	
%
	
 

 

 

 

 

	
 
	
[7.
	
Trade Date:                                                      _]

Effective Date:              ,20_ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

 

The terms set forth in this Assignment and Assumption are hereby agreed to:

 

	
 
	
ASSIGNOR

	
 
	
[NAME OF ASSIGNOR]

	
 
	
 
	
 

	
 
	
By:
	
 

	
 
	
 
	
Title:

	
 
	
 
	
 

	
 
	
ASSIGNEE

	
 
	
[NAME OF ASSIGNEE]

	
 
	
 
	
 

	
 
	
By:
	
 

	
 
	
 
	
Title:

 

	
[Consented to and] Accepted:
	
 

	
 
	
 
	
 

	
[NAME OF THE ADMINISTRATIVE AGENT], as
	
 

	
Administrative Agent
	
 

	
 
	
 
	
 

	
By:
	
 
	
 

	
 
	
Title:
	
 

	
 
	
 
	
 

	
[Consented to:]
	
 

	
 
	
 
	
 

	
[NAME OF RELEVANT PARTY]
	
 

	
 
	
 
	
 

	
By:
	
 
	
 

	
 
	
Title:
	
 

 

 

 

 

ANNEX 1 to Assignment and Assumption

 

 

[                              ]

STANDARD TERMS AND CONDITIONS FOR ASSIGNMENT AND ASSUMPTION

 

REPRESENTATIONS AND WARRANTIES.

 

Assignor.

 

The Assignor (a) represents and warrants that (I) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.

 

Assignee.

 

The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all requirements of an Eligible Assignee under the Credit Agreement (subject to receipt of such consents as may be required under the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section _      thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, and (v) if it is a Foreign Lender, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

 

PAYMENTS.

 

From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignee whether such amounts have accrued prior to, on or after the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves.

 

 

GENERAL PROVISIONS.

 

This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and permitted assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy or by sending a scanned copy by electronic mail shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law governing the Credit Agreement.

 

 

EXHIBIT B

 

LOAN MARKET DATA TEMPLATE

 

Recommended Data Fields — At Close

The items highlighted in bold are those that Loan Pricing Corporation (LPC) deem essential. The remaining items are those that LPC has seen become more prominent over time as transparency has increased in the U.S. Loan Market.

 

	
Company Level
	
Deal Specific
	
Facility Specific

	
Issuer Name
	
Currency/Amount
	
Currency/Amount

	
Location
	
Date
	
Type

	
SIC (Cdn)
	
Purpose
	
Purpose

	
Identification Number(s)
	
Financial Covenants
	
Term Out Option

	
Revenue
	
 
	
Expiration Date

	
 
	
Target Company
	
Facility Signing Date

	
*Measurement of Risk
	
Assignment Language
	
Pricing

	
S&P Sr. Debt
	
Law Firms
	
Base Rate(s)

	
 
	
 
	
/Spread(s)/BA/LIBOR

	
S&P Issuer
	
MAC Clause
	
Initial Pricing Level

	
Moody's Sr. Debt
	
Springing lien
	
Pricing Grid (tied to, levels)

	
Moody's Issuer
	
Cash Dominion
	
Grid Effective Date

	
Fitch Sr. Debt
	
Mandatory Prepays
	
Fees

	
Fitch Issuer
	
Restrct'd Payments (Neg Covs)
	
also)

 

Participation Fee (tiered

 

S&P Implied (internal assessment)

DBRS

 

	
Other Restrictions
	
Working Capital Fee

	
Other Ratings
	
Annual Fee

	
*Industry Classification
	
Utilization Fee

	
Moody's Industry
	
LC Fee(s)

	
S&P Industry
	
BA Fee

	
Parent
	
Prepayment Fee

	
Financial Ratios
	
Other Fees to Market

 

Claim

Security Secured/Unsecured Collateral and Seniority of

 

Collateral Value

 

	
 
	
Guarantors

Lenders Names/Titles Lender Commitment ($) Committed/Uncommitted Distribution Method Amortization Schedule

Borrowing Base/Advance Rates New Money Amount

Country of Syndication

Facility Rating (Loss given default) S&P Bank Loan Moody's Bank Loan Fitch Bank Loan

DBRS

Other Ratings

 

* These items would be considered useful to capture from an analytical perspective

 

 

EXHIBIT “I” – AGREEMENT AND ACKNOWLEDGEMENT TO BE BOUND –NEW GUARANTOR

 

 

SUPPLEMENT TO CREDIT AGREEMENT NO. ☐ - AGREEMENT AND ACKNOWLEDGMENT TO BE BOUND

 

This Supplement to the Credit Agreement No. ☐ dated ☐ supplements the Credit Agreement (as hereinafter defined).

 

RECITALS:

 

	
 
	
(A)
	
Reference is made to the credit agreement made among 1974568 Ontario Limited, as Borrower, the Guarantors from time to time party thereto, the Limited Guarantor, Bank of Montreal as administrative agent and the Lenders from time to time thereunder, dated as of November 29, 2019 (as amended, restated, supplemented, replaced or otherwise modified from time to time, the "Credit Agreement").
	
 

 

	
 
	
(B)
	
Section 6.02(c) of the Credit Agreement provides that additional Persons may from time to time after the date of the Credit Agreement become Guarantors under the Credit Agreement by executing and delivering to the Agent a supplemental agreement to the Credit Agreement in the form of this Supplement.
	
 

 

	
 
	
(C)
	
It is a condition to the Agent and the Lenders continuing to extend credit to the Borrowers under the Credit Agreement that the undersigned (the “New Guarantor”) become a Guarantor under the Credit Agreement by executing and delivering this Supplement to the Agent.
	
 

 

NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which are acknowledged, the New Guarantor covenants and agrees with the Agent as follows:

 

	
 
	
1.
	
The New Guarantor has received a copy of, and has reviewed, the Credit Agreement and is executing and delivering this Supplement to the Agent pursuant to Section 6.02(c) of the Credit Agreement.
	
 

 

	
 
	
2.
	
Effective from and after the date this Supplement is executed and delivered to the Agent by the New Guarantor,
	
 

 

	
 
	
(a)
	
the New Guarantor is, and shall be deemed for all purposes to be, a Guarantor and Credit Party under the Credit Agreement with the same force and effect, and subject to the same agreements, representations, indemnities, liabilities, obligations as if the New Guarantor was, effective as of the date of this Supplement, an original signatory to the Credit Agreement as a Guarantor;
	
 

 

	
 
	
(b)
	
the New Guarantor agrees to be bound by all of the terms and conditions of the Credit Agreement applicable to Guarantors and Credit Parties, as such Credit Agreement may be amended, modified, supplemented or restated from time to time, as if it were an original signatory to the Credit Agreement; and
	
 

 

	
 
	
(c)
	
each reference to a Guarantor or Credit Party in the Credit Agreement shall be deemed to include the New Guarantor.
	
 

 

	
 
	
3.
	
The existing Credit Parties under the Credit Agreement acknowledge and agree that the New Guarantor shall be added as a Guarantor and that any necessary changes required to the Credit Agreement as a result of the addition of the New Guarantor shall be made mutatis mutandis.
	
 

 

 

- 2 -

 

 

 

	
 
	
4.
	
The New Guarantor represents and warrants to the Agent and the Lenders that (a) this Supplement has been duly authorized, executed and delivered by the New Guarantor and the Credit Agreement, as supplemented by this Supplement constitutes a legal, valid and binding obligation of the New Guarantor enforceable against the New Guarantor in accordance with its terms, (b) each of the representations and warranties made or deemed to have been made by it under the Credit Agreement as a Guarantor or Credit Party are true and correct on and as of the date of this Supplement, and (c) Schedules 4.01(b), (h), (i), (j), (k) (l) (m), (o), (p), (q), (r) and (s) to this Supplement accurately set out all information which would have been required to be disclosed on such Schedules to the Credit Agreement pursuant to the terms of the Credit Agreement had the New Guarantor been a Guarantor on the date of the execution and delivery of the Credit Agreement (it being understood and agreed, however, that the information furnished pursuant hereto by the New Guarantor is accurate as of the date of this Supplement rather than the date of the Credit Agreement).
	
 

 

	
 
	
5.
	
Except as expressly supplemented hereby, the Credit Agreement shall remain in full force and effect, unamended.
	
 

 

	
 
	
6.
	
Capitalized terms used but not otherwise defined in this Supplement have the respective meanings given to such terms in the Credit Agreement. In this Supplement, the words “including”, “includes” and “include” mean “including (or includes or include) without limitation”.
	
 

 

	
 
	
7.
	
This Supplement 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.
	
 

 

	
 
	
8.
	
This Supplement and the Credit Agreement shall be binding upon the New Guarantor and its successors. The New Guarantor shall not assign its rights and obligations under this Supplement or the Credit Agreement or any interest in this Supplement or the Credit Agreement without the prior written consent of the Agent.
	
 

 

	
 
	
9.
	
Transmission of an executed signature page by facsimile, email or other electronic means is as effective as a manually executed counterpart of this Supplement.
	
 

 

	
 
	
10.
	
The parties hereto shall from time to time and at all times do all such further acts and things and execute and deliver all such documents as are reasonably required in order to fully perform and carry out the terms of this Agreement.
	
 

 

	
 
	
11.
	
The provisions of this Agreement shall enure to the benefit of and shall be binding upon the parties hereto and their respective successors and permitted assigns.
	
 

 

	
 
	
12.
	
This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall be deemed to constitute one and the same instrument, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. Delivery of an executed counterpart of a signature page of this Agreement by facsimile transmission or by e-mail in PDF format shall be effective as delivery of a manually executed counterpart of this Agreement.
	
 

 

[Remainder of page intentionally blank]

 

 

- 3 -

 

 

IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed by its duly authorized representative(s) as of the date first above written.

 

 

		
	
☐

	
[New Guarantor]

	
 
	
 

	
Per:
	
 

	
 
	
 

	
 
	
 

	
Per:
	
 

	
 
	
 

	
Bank of Montreal

	
in its capacity as the Agent and for and on behalf of the Lenders

	
 
	
 

	
 
	
 

	
Per:
	
 

	
 
	
Name:

	
 
	
Title:

	
 
	
 

	
 
	
 

	
Per:
	
 

	
 
	
Name:

	
 
	
Title:

	
 
	
 

	
☐, as Borrower

	
 
	
 

	
 
	
 

	
Per:
	
 

	
 
	
 

	
Per:
	
 

 

 

 

 

[Signature Page to Guarantor Supplement to Credit Agreement]

 

 

- 4 -

 

 

 

 

		
	
☐, as existing Guarantors

	
 

	
 
	
 

	
Per:
	
 

	
 
	
 

	
 
	
 

	
Per:
	
 

	
 

	
 

	
☐, as existing Limited Guarantor

	
 
	
 

	
 
	
 

	
Per:
	
 

	
 
	
 

	
 
	
 

	
Per:
	
 

	
 
	
 

 

 

 

[Signature Page to Guarantor Supplement to Credit Agreement]

 

 

 

 

Schedule 4.01(b)

 

Corporate Information

 

	
 
	
I.
	
Present and Prior Names, Jurisdiction, Registered Office

 

	
 

Entity
	
 

Predecessor Names
	
 

Jurisdiction of Incorporation or Formation
	
 

Present Governing Jurisdiction
	
 

Registered Office

	
 

Aphria Inc.
	
 

Pure Natures Wellness Inc.

 

Cannway Pharmaceuticals Inc.
	
 

Ontario
	
 

Ontario
	
 

1 Adelaide Street

East, Suite 2310, Toronto, Ontario, Canada M5C 2E9

	
 
	
Black Sparrow Capital Corp.
	
 
	
 
	
 

	
 
	
2427745 Ontario Inc.
	
 
	
 
	
 

	
 

1974568 Ontario
	
 

N/A
	
 

Ontario
	
 

Ontario
	
 

245 Talbot Street

	
Limited
	
 
	
 
	
 
	
West, Suite 103,

	
 
	
 
	
 
	
 
	
Leamington,

	
 
	
 
	
 
	
 
	
Ontario, Canada

	
 
	
 
	
 
	
 
	
N8H 1N8

 

 

 

 

 

 

	
II.
	
Location of Assets, Bank Account, and Shareholdings of 1974568 Ontario Limited

 

	
 

Location of Assets
	
 

Ontario

	
 

Bank Account
	
 

Bank of Montreal – CAD

 

297 Erie Street South, Leamington, ON Transit Number 03442

Account Number 1995 174

	
 

Number and classes of issued and outstanding shares
	
 

20,000,000 common shares

	
 

Shareholders
	
 

Aphria Inc. – 10,200,000 common shares

 

2609733 Ontario Limited – 9,800,000 common shares

 

 

 

 

 

Schedule 4.01(h)

 

Material Permits

 

Licence No. LIC-KX10UDSC08-2019 issued by Health Canada to 1974568 Ontario Inc. in accordance with the Cannabis Act and Cannabis Regulations.

 

 

 

 

Schedule 4.01(i)

Cannabis Investments

Subsidiaries

 

	
Subsidiaries
	
Jurisdiction
	
Cannabis Touching

	
Broken Coast Cannabis Ltd
	
BC, Canada
	
Yes

	
LATAM Holdings Inc.
	
BC, Canada
	
No

	
Marigold Acquisitions Inc.
	
BC, Canada
	
No

	
MMJ International Investments Inc.
	
BC, Canada
	
No

	
Nuuvera Holdings Limited
	
Ontario, Canada
	
No

	
ARA-Avanti Rx Analytics Inc.
	
Ontario, Canada
	
Yes

	
MMJ Colombia Partners Inc.
	
Ontario, Canada
	
No

	
FL Group
	
Italy
	
Yes

	
Goodfields Supply Co. Ltd
	
United Kingdom
	
No

	
Hampstead Holdings Ltd
	
Bermuda
	
No

	
ABP, S.A.
	
Argentina
	
Yes

	
Nuuvera Deutchland GmbH
	
Germany
	
Yes

	
Aphria Deutchland GmbH
	
Germany
	
No

	
CC Pharma GmbH
	
Germany
	
Yes

	
CC Pharma Research and Development GmbH
	
Germany
	
Yes

	
Aphria Wellbeing GmbH
	
Germany
	
Yes

	
Marigold Projects Jamaica Limited
	
Jamaica
	
Yes

	
Nuuvera Malta Ltd
	
Malta
	
No

	
ASF Pharma Ltd
	
Malta
	
Yes

	
QSG Health Ltd.
	
Malta
	
Yes

	
ColCanna S.A.S
	
Colombia
	
Yes

	
CC Pharma Nordic ApS
	
Denmark
	
Yes

	
Aphria Terra S.R.L.
	
Italy
	
No

	
APL Aphria Portugal, Lda
	
Portugal
	
Yes

	
CannInvest Africa Ltd.
	
South Africa
	
Yes

	
Verve Dynamics Incorporated (PTY) Ltd.
	
Lesotho
	
Yes

 

 

Convertible Notes

 

	
Entity
	
Jurisdiction
	
Cannabis Touching

	
HydRx Farms (d/b/a Scientus Pharma)
	
Canada
	
Yes

	
Fire and Flower
	
Canada
	
Yes

	
10330698 Canada Ltd.(Starbuds)
	
Canada
	
Yes

	
High Tide Inc.
	
Canada
	
Yes

 

 

 

 

Equity Interests

 

	
Entity
	
Jurisdiction
	
Cannabis Touching

	
Althea Group Holdings Ltd.
	
Australia
	
Yes

	
Tetra Bio- Pharma Inc.
	
Canada
	
Yes

	
National Access Cannabis Corp.
	
Canada
	
Yes

	
Aleafia Health Inc.
	
Canada
	
Yes

	
Rapid Dose Therapeutics Inc.
	
Canada
	
Yes

	
Fire & Flower Inc.
	
Canada
	
Yes

	
High Tide Inc.
	
Canada
	
Yes

	
Resolve Digital Health Inc.
	
Canada
	
No

	
Green Acre Capital Fund I
	
Canada
	
No

	
Green Tank Holdings Corp.
	
Canada
	
No

	
IBBZ KranKahaus GmbH
	
Germany
	
No

	
Greenwell Brands GmbH
	
Germany
	
Yes

	
HierArchy Ventures Ltd.
	
Canada
	
Yes

 

Company

 

None.

 

 

 

 

 

 

Schedule 4.01(j)

Specific Permitted Liens

None.

 

 

Schedule 4.01(k)

Owned Properties

The lands and premises municipally known as 620 Essex County Road 14, Leamington, ON.

 

None.

 

 

Schedule 4.01(l)

 

Material Leased Properties

 

None.

 

 

 

 

Schedule 4.01(m)

 

Intellectual Property

 

None.

 

 

Schedule 4.01(o)

Material Agreements

Amended and Restated Wholesale Cannabis Supply Agreement made as of November 26, 2019 between 1974568 Ontario Limited and Aphria Inc.

 

Unanimous Shareholders’ Agreement made as of February 16, 2018 among Aphria Inc., 2609733 Ontario Limited, Chris Mastronardi, Benji Mastronardi, and 1974568 Ontario Limited.

 

Intercorporate Advance Agreement made as of November 29, 2019 between Aphria Inc. and 1974568 Ontario Limited.

 

 

 

None.

 

 

Schedule 4.01(p)

Labour Agreements

 

 

 

None.

 

 

Schedule 4.01(q)

Environmental Matters

Schedule 4.01(r) Litigation

 

	
Class Action

	
Jurisdiction
	
 

	
CANADA
	
 

	
Quebec
	
Ranger v. Aphria Inc. et al.

	
Ontario
	
Vecchio v. Aphria Inc. et al.

	
 
	
Rogers and Mirzoian v, Aphria Inc. et al.

	
USA
	
 

	
New York
	
Jakobsen v. Aphria Inc., Victor Neufeld

	
 
	
Curkan v. Aphria Inc., Victor Neufeld and Carl Merton

	
 
	
Gloschat v. Aphria Inc., Victor Neufeld and Carl Merton

	
 
	
Florence v. Aphria Inc., Victor Neufeld and Carl Merton

 

 

	
General Commercial Litigation
	
 

	
Jurisdiction
	
 

	
CANADA
	
Scotia Capital Inc. v. Aphria Inc.

	
 
	
Jon Paul Fuller and JPF Komon Kaisha Inc. v. Aphria Inc. and Pure Natures Wellness Inc. d/b/a Aphria

	
USA
	
 

	
 
	
Chestnut Hill Tree Farms LLC v. Aphria Inc., Liberty Health Sciences and Jill Lamoureux

 

 

	
Commercial Arbitration
	
 

	
Jurisdiction
	
 

	
CANADA
	
Emblem Cannabis Corporation and Aphria Inc.

	
USA
	
none

 

 

 

None.

Schedule 4.01(s)

 

Pension Plans and Multi-employer Planstlry-ex1041_747.htm

 

Exhibit 10.41

Execution Version

 

 

 

 

 

 

 

 

 

 

 

 

 

AGREEMENT OF MERGER AND ACQUISITION

dated as of November 4, 2020  

by and among

APHRIA INC.,

PROJECT GOLF MERGER SUB, LLC,

SW BREWING COMPANY, LLC,

SWBC CRAFT HOLDINGS LP,

SWBC CRAFT MANAGEMENT, LLC,

SWBC BLOCKER SELLER, LP

and

CHILLY WATER, LLC

 

 

 

 

 

 

 

 

88758860_15

 

 

TABLE OF CONTENTS

 

	
 
	
 
	
 
	
 
	
Page

	
 
	
 
	
 
	
 
	
 

	
ARTICLE I BLOCKER SALE
	
 
	
2

	
1.1.
	
 
	
Purchase and Sale
	
 
	
2

	
1.2.
	
 
	
Consideration
	
 
	
2

	
1.3.
	
 
	
Blocker Sale Closing
	
 
	
2

	
1.4.
	
 
	
Blocker Seller Deliverables at Blocker Closing
	
 
	
3

	
1.5.
	
 
	
Authorization of the Transactions
	
 
	
3

	
ARTICLE II THE MERGER
	
 
	
3

	
2.1.
	
 
	
The Merger
	
 
	
3

	
2.2.
	
 
	
Effective Time of the Merger
	
 
	
3

	
2.3.
	
 
	
Effects of the Merger
	
 
	
4

	
2.4.
	
 
	
Directors and Officers
	
 
	
4

	
2.5.
	
 
	
Closing
	
 
	
4

	
2.6.
	
 
	
Closing Deliveries
	
 
	
5

	
2.7.
	
 
	
Effect on Units; Merger Sub Units
	
 
	
7

	
2.8.
	
 
	
Purchase Price
	
 
	
7

	
2.9.
	
 
	
Pre-Closing Purchase Price Adjustment
	
 
	
8

	
2.10.
	
 
	
Closing Date Stock Issuance
	
 
	
8

	
2.11.
	
 
	
Closing Date Payments
	
  
	
9

	
2.12.
	
 
	
Purchase Price Adjustment
	
 
	
10

	
2.13.
	
 
	
Purchase Price Settlement
	
 
	
12

	
2.14.
	
 
	
Withholding
	
 
	
13

	
2.15.
	
 
	
Earn-Out
	
 
	
14

	
2.16.
	
 
	
Earn-Out Settlement
	
 
	
14

	
2.17.
	
 
	
Earn-Out Covenants
	
 
	
16

	
2.18.
	
 
	
Exchange of Units
	
 
	
17

	
2.19.
	
 
	
Appraisal Right
	
 
	
18

	
2.20.
	
 
	
Tax Treatment; Allocation of the Purchase Price
	
 
	
18

	
2.21.
	
 
	
Paying Agent
	
 
	
19

	
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
	
 
	
19

	
3.1.
	
 
	
Organization and Qualification
	
 
	
19

	
3.2.
	
 
	
Capitalization; Subsidiaries
	
 
	
19

	
3.3.
	
 
	
Authority
	
 
	
20

	
3.4.
	
 
	
No Violation and Consents
	
 
	
21

	
3.5.
	
 
	
Affiliate Contracts
	
 
	
21

	
3.6.
	
 
	
Title to Assets; Condition and Sufficiency of Assets
	
 
	
21

	
3.7.
	
 
	
Litigation and Compliance with Laws
	
 
	
22

	
3.8.
	
 
	
Intellectual Property
	
 
	
22

	
3.9.
	
 
	
Privacy and Data Protection
	
 
	
24

	
3.10.
	
 
	
Contracts
	
 
	
24

	
3.11.
	
 
	
Financial Statements and Related Matters
	
 
	
27

	
3.12.
	
 
	
No Undisclosed Material Liabilities
	
 
	
27

 

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Page

 

	
3.13.
	
 
	
Subsequent Events
	
 
	
27

	
3.14.
	
 
	
Insurance
	
 
	
27

	
3.15.
	
 
	
Licenses and Permits
	
 
	
28

	
3.16.
	
 
	
Environmental Matters
	
 
	
28

	
3.17.
	
 
	
Tax Matters.
	
 
	
29

	
3.18.
	
 
	
Labor and Employee Benefits
	
 
	
30

	
3.19.
	
 
	
Real Property
	
 
	
34

	
3.20.
	
 
	
Suppliers; Distributors
	
 
	
34

	
3.21.
	
 
	
Accounts Receivable, Accounts Payable
	
 
	
35

	
3.22.
	
 
	
Regulatory
	
 
	
35

	
3.23.
	
 
	
Payments; Foreign Corrupt Practices Act; U.S. Export and Sanctions Laws
	
 
	
36

	
3.24.
	
 
	
Inventory; Returns
	
 
	
37

	
3.25.
	
 
	
Product Warranties; Recalls
	
 
	
37

	
3.26.
	
 
	
Trade Programs
	
 
	
38

	
3.27.
	
 
	
Bank Accounts
	
 
	
38

	
3.28.
	
 
	
Cares Act
	
 
	
38

	
3.29.
	
 
	
Brokers
	
 
	
38

	
3.30.
	
 
	
Acknowledgement of No Other Representations or Warranties
	
 
	
38

	
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BLOCKER, BLOCKER GP AND BLOCKER SELLER
	
 
	
39

	
4.1.
	
 
	
39
	
 
	
39

	
4.2.
	
 
	
39
	
 
	
39

	
4.3.
	
 
	
Capitalization
	
 
	
39

	
4.4.
	
 
	
Blocker Interests
	
 
	
40

	
4.5.
	
 
	
No Violations and Consents
	
 
	
40

	
4.6.
	
 
	
Litigation and Compliance with Laws
	
 
	
40

	
4.7.
	
 
	
Purpose
	
 
	
41

	
4.8.
	
 
	
No Employees
	
 
	
41

	
4.9.
	
 
	
No Broker
	
 
	
41

	
4.10.
	
 
	
Taxes
	
 
	
41

	
4.11.
	
 
	
Acknowledgement of No Other Representations or Warranties
	
 
	
42

	
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
	
 
	
42

	
5.1.
	
 
	
Organization
	
 
	
42

	
5.2.
	
 
	
Authority
	
 
	
43

	
5.3.
	
 
	
No Violations and Consents
	
 
	
43

	
5.4.
	
 
	
Litigation
	
 
	
44

	
5.5.
	
 
	
Sufficient Funds
	
 
	
44

	
5.6.
	
 
	
R&W Policy
	
 
	
44

	
5.7.
	
 
	
Brokers
	
 
	
44

	
5.8.
	
 
	
Absence of Certain Changes
	
 
	
44

	
5.9.
	
 
	
Restrictions on Payment
	
 
	
44

 

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TABLE OF CONTENTS

(continued)

 

Page

 

	
5.10.
	
 
	
Parent Public Company Reports; Financial Statements; No Undisclosed Liabilities.
	
 
	
44

	
5.11.
	
 
	
Legal Compliance
	
 
	
45

	
5.12.
	
 
	
No Required Vote
	
 
	
46

	
5.13.
	
 
	
Solvency
	
 
	
46

	
5.14.
	
 
	
Investment Intent
	
 
	
46

	
5.15.
	
 
	
Acknowledgement of No Other Representations or Warranties
	
 
	
46

	
ARTICLE VI COVENANTS
	
 
	
48

	
6.1.
	
 
	
Certain Governmental Matters
	
 
	
48

	
6.2.
	
 
	
Conduct of Business by the Company and its Subsidiaries and the Blocker Pending the Transactions
	
 
	
49

	
6.3.
	
 
	
Access to Information
	
 
	
52

	
6.4.
	
 
	
Further Assurances
	
 
	
53

	
6.5.
	
 
	
Directors & Officers Indemnification and Insurance
	
 
	
54

	
6.6.
	
 
	
Employee Benefit Matters
	
 
	
54

	
6.7.
	
 
	
Intercompany Accounts
	
 
	
56

	
6.8.
	
 
	
Tax Matters
	
 
	
56

	
6.9.
	
 
	
Financing Covenants
	
 
	
58

	
6.10.
	
 
	
Blocker Actions
	
 
	
59

	
6.11.
	
 
	
Securityholders’ Representative
	
 
	
59

	
6.12.
	
 
	
Post-Closing Registration
	
 
	
61

	
6.13.
	
 
	
Regulatory
	
 
	
63

	
6.14.
	
 
	
Release
	
 
	
63

	
6.15.
	
 
	
PPP Loan
	
 
	
64

	
6.16.
	
 
	
R&W Policy
	
 
	
64

	
6.17.
	
 
	
Tax Exemption Certificates
	
 
	
64

	
6.18.
	
 
	
Blocker Seller Access to Information
	
 
	
65

	
6.19.
	
 
	
PPP Escrow Agreement
	
 
	
65

	
ARTICLE VII CONDITIONS TO THE TRANSACTIONS
	
 
	
65

	
7.1.
	
 
	
Conditions to Obligations of Each Party to Effect the Transactions
	
 
	
65

	
7.2.
	
 
	
Additional Conditions to Obligations of Parent and Merger Sub
	
 
	
65

	
7.3.
	
 
	
Additional Conditions to Obligations of the Company and Blocker Seller
	
 
	
66

	
ARTICLE VIII TERMINATION
	
 
	
67

	
8.1.
	
 
	
Termination
	
 
	
67

	
8.2.
	
 
	
Effect of Termination
	
 
	
68

	
ARTICLE IX NO SURVIVAL; NO RECOURSE
	
 
	
68

	
9.1.
	
 
	
No Survival
	
 
	
68

	
9.2.
	
 
	
No Recourse
	
 
	
68

 

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(continued)

 

Page

 

	
ARTICLE X GENERAL PROVISIONS
	
 
	
69

	
10.1.
	
 
	
Cost and Expenses
	
 
	
69

	
10.2.
	
 
	
Amendment, Modification and Waiver
	
 
	
69

	
10.3.
	
 
	
Savings Clause
	
 
	
69

	
10.4.
	
 
	
Entire Agreement
	
 
	
69

	
10.5.
	
 
	
Assignment; Successors and Assigns
	
 
	
69

	
10.6.
	
 
	
Parties in Interest
	
 
	
70

	
10.7.
	
 
	
Mutual Drafting; Interpretation; Headings; Disclosure Letter
	
 
	
70

	
10.8.
	
 
	
Governing Law
	
 
	
71

	
10.9.
	
 
	
Venue
	
 
	
71

	
10.10.
	
 
	
Waiver of Jury Trial and Certain Damages
	
 
	
71

	
10.11.
	
 
	
Notices
	
 
	
72

	
10.12.
	
 
	
Public Announcements
	
 
	
74

	
10.13.
	
 
	
Counterparts
	
 
	
74

	
10.14.
	
 
	
Enforcement of Agreement
	
 
	
74

	
10.15.
	
 
	
Limitation on Recourse
	
 
	
75

 

 

 

 

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88758860_15

 

 

AGREEMENT OF MERGER AND ACQUISITION

This Agreement of Merger and Acquisition dated as of November 4, 2020 (this “Agreement”), is entered into by and among Aphria Inc., a corporation existing under the Ontario Business Corporations Act (“Parent”), Project Golf Merger Sub, LLC, Delaware limited liability company (“Merger Sub”), SW Brewing Company, LLC, a Delaware limited liability company (the “Company”), SWBC Craft Holdings LP, a Delaware limited partnership (“Blocker”), SWBC Craft Management, LLC (the “Blocker GP”), SWBC Blocker Seller, LP, a Delaware limited partnership ( “Blocker Seller” and, together with the Blocker GP, collectively, “Blocker Partners”), and Chilly Water, LLC, a Delaware limited liability company (“Securityholders’ Representative”).

RECITALS:

WHEREAS, Parent indirectly owns all of the issued and outstanding membership interests of Merger Sub (the “Merger Sub Units”);

WHEREAS, the Company owns all of the issued and outstanding membership interests of Cheese Grits, LLC, a Georgia limited liability company (“Cheese Grits”), and immediately prior to the Closing, the Company will enter into that certain Redemption Agreement, substantially in the form attached hereto as Exhibit A whereby, as further reflected on Schedule I thereto, the Company will redeem, immediately prior to the Effective Time, certain Class O Units (the “Redeemed Units”) from Class O Members (each a “Redeemed Holder”) of the Company in exchange for all of the issued and outstanding membership interests of Cheese Grits, resulting in Cheese Grits no longer being a Subsidiary of the Company (the foregoing, the “Redemption”);

WHEREAS, the Blocker GP owns all of the issued and outstanding general partner interests of Blocker (the “Blocker GP Interests”) and the Blocker Seller owns all of the issued and outstanding limited partner interests of the Blocker (the “Blocker LP Interests” and, together with the Blocker GP Interests, collectively, the “Blocker Interests”), which Blocker, immediately following completion of the transactions set forth on Schedule I (the “Pre-Closing Blocker Reorganization”) will own Class T Units of the Company, with the remainder of the outstanding Units owned by the other Persons set forth on Section 3.2(a) of the Disclosure Letter (each, a “Unitholder”);

WHEREAS, each Blocker Partner desires to sell (the “Blocker Sale”) to Parent (or a Subsidiary thereof), and Parent desires to purchase (or cause a Subsidiary to purchase) from each Blocker Partner, all of such Blocker Partner’s right, title and interest in and to the Blocker Interests held by such Blocker Partner, on the terms and subject to the conditions hereinafter set forth;

WHEREAS, immediately following the closing of the Blocker Sale, on the terms and subject to the conditions hereinafter set forth, Parent and the Company desire to cause Merger Sub to merge (the “Merger,” and together with the Blocker Sale, the “Transactions”) with and into the Company, with the Company being the surviving limited liability company and becoming an indirectly wholly-owned Subsidiary of Parent;

WHEREAS, the respective board of directors, general partner, or other governing body of each of Parent, Merger Sub, the Company, the Blocker, and Blocker Seller deems it advisable and in the best interest of its respective entity and such entity’s respective stockholders or members, as applicable, to consummate the Transactions on the terms and conditions set forth in this Agreement;

 

1

88758860_15

 

 

WHEREAS, the Company has entered into the Bensch Consulting Agreement as of the date hereof, to be effective as of the Closing;

WHEREAS, unless otherwise expressly provided, each other defined term shall have the meaning given thereto in Annex I; and

WHEREAS, the parties hereto desire to make certain representations, warranties, covenants and agreements in connection with the Transactions, and also to prescribe various conditions to the Transactions.

NOW, THEREFORE, in consideration of the foregoing recitals, the representations, warranties and covenants set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and intending to be legally bound hereby, the parties hereto hereby agree as follows:

AGREEMENT

ARTICLE I BLOCKER SALE

1.1.Purchase and Sale. Upon the terms and subject to the conditions of this Agreement, at the Blocker Closing (as hereafter defined), (a) Blocker Seller shall sell and transfer to Parent (or, if directed in writing by Parent, to Four Twenty Corporation, a Delaware corporation and wholly-owned subsidiary of Parent), and Parent agrees to purchase (or cause Four Twenty Corporation to purchase) from Blocker Seller, Blocker Seller’s right, title and interest in and to the Blocker LP Interests, and (b) the Blocker GP shall sell and transfer to Parent, and Parent agrees to purchase from the Blocker GP, the Blocker GP’s right, title and interest in and to the Blocker GP Interests.

1.2.Consideration. The aggregate consideration to be paid by Parent (for itself or on behalf of Four Twenty Corporation) to or for the account of Blocker Seller in exchange for the purchase of the Blocker LP Interests shall be the amount payable to the Blocker Seller as set forth in the Payment Schedule. No consideration shall be payable by Parent to or for the account of the Blocker GP in exchange for the purchase of the Blocker GP Interests.

1.3.Blocker Sale Closing. Upon the terms and subject to the conditions of this Agreement, the closing of the purchase and sale of all Blocker Interests (the “Blocker Closing”) shall take place at the offices of DLA Piper LLP (US), 1251 Avenue of the Americas, New York, New York 10020 or by mutual exchange of electronic signatures as soon as reasonably practicable, but no more than three (3) Business Days, following the satisfaction or waiver of all conditions to the obligations of Parent, Merger Sub, Blocker Seller and the Company to consummate the Transactions contemplated hereby (other than conditions with respect to actions Parent, Merger Sub, Blocker Seller and the Company will take at the Blocker Closing or Closing itself, but subject to such conditions being satisfied at the Blocker Closing or Closing, as applicable) or at such other place and time as is mutually agreed to in writing by Securityholders’ Representative and Parent. For all purposes of this Agreement, the Blocker Sale shall be deemed to have taken place immediately prior to the Closing. The term “Blocker Closing” as used herein shall refer to the actual conveyance, transfer, assignment and delivery of the Blocker Interests to Parent (or its Subsidiary) in exchange for the consideration to be delivered at the Blocker Closing pursuant to and in accordance with Section 2.11(f).

 

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1.4.Blocker Seller Deliverables at Blocker Closing. At the Blocker Closing, the Blocker Seller shall deliver or cause to be delivered to Parent:

(a)a general partner interest and limited partner interest transfer agreement in a form reasonably acceptable to Parent;

(b)an IRS Form W-9 for Blocker Seller;

(c)a certificate signed by the Blocker GP, dated as of the Closing Date, certifying on behalf of Blocker as to: (A) the Organizational Documents of Blocker; and (B) a certificate of good standing of Blocker, certified by an appropriate authority of the Governmental Authority issuing such certificate in the jurisdiction of Blocker’s creation, formation or organization dated not earlier than ten (10) Business Days prior to the Closing Date;

(d)a certificate signed by the Blocker GP, dated as of the Closing Date, certifying on behalf of the Blocker that the conditions set forth in Sections 7.2(b) and 7.2(c) as they relate to the representations, warranties and covenants of Blocker have been satisfied;

(e)the Waiver Agreement, duly executed by SWBC Craft, LLC; and

(f)written evidence that the Pre-Closing Blocker Reorganization has been effected.

1.5.Authorization of the Transactions. Immediately following the execution and delivery of this Agreement, holders of Units holding a majority of the issued and outstanding Units (the “Approving Holders”) have executed a written consent in lieu of a meeting, with such written consent including resolutions approving and adopting the Transactions, entry into this Agreement by the applicable parties, and the consummation of the other transactions contemplated hereunder, as required by the Act, and appointing Securityholders’ Representative as representative, from and after the Closing, of the Unitholders (other than the Blocker). The parties hereto shall each take, as promptly as practicable, all such other actions as may be necessary or advisable under the Act and applicable Law in connection with this Agreement and the consummation of the Transactions contemplated hereunder.

ARTICLE II
THE MERGER

2.1.The Merger. On the terms and subject to the conditions set forth in this Agreement, and in accordance with the Delaware Limited Liability Company Act (the “Act”), at the Effective Time, Merger Sub shall be merged with and into the Company, with the Company surviving as an indirect wholly-owned Subsidiary of Parent. Following the consummation of the Merger, the separate limited liability company existence of Merger Sub shall cease and the Company shall continue as the surviving limited liability company (Merger Sub and the Company are sometimes referred to herein as the “Constituent Entities” and the Company following the consummation of the Merger is sometimes referred to herein as the “Surviving Entity”).

2.2.Effective Time of the Merger.

(a)Upon the terms and subject to the conditions set forth in this Agreement, on the Closing Date, (i) a certificate of merger substantially in the form attached hereto as Exhibit B (the “Certificate of Merger”) shall be filed with the Secretary of State of the State of Delaware, and (ii) the 

 

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parties shall make all other filings or recordings required by the Act or other applicable Law to effectuate the Merger.

(b)The Merger shall become effective at the later of (i) the time of the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, and (ii) such time thereafter which the parties hereto shall have agreed upon as is provided in the Certificate of Merger (the date and time when the Merger shall become effective is referred to herein as the “Effective Time”).

2.3.Effects of the Merger.

(a)Upon the terms and subject to the conditions of this Agreement, at the Effective Time (i) Merger Sub shall be merged with and into the Company and the separate existence of Merger Sub shall cease, (ii) the certificate of formation of the Company, as in effect immediately prior to the Effective Time shall be the certificate of formation of the Surviving Entity unless and until thereafter repealed, changed or amended in accordance with the provisions thereof and applicable Law, and (iii) the LLC Agreement shall become the limited liability company agreement of the Surviving Entity.

(b)At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the Act. Without limiting the generality of the foregoing, at and after the Effective Time:

(i)the Surviving Entity shall possess all of the rights, privileges, immunities, powers and franchises, and be subject to all the restrictions, disabilities and duties of each of the Constituent Entities;

(ii)all the rights, privileges, immunities, powers and franchises, and all property, real, personal and mixed, and all debts due on whatever account, including, without limitation, all choses in action, and all and every other interest of or belonging to or due to either Constituent Entity shall be taken and deemed to be transferred to, and vested in, the Surviving Entity without further act or deed; and all property, rights and privileges, immunities, powers and franchises and all and every other interest shall be thereafter as effectually the property of the Surviving Entity as they were of either Constituent Entity prior to the Effective Time; and

(iii)all debts, liabilities, duties and obligations of Merger Sub shall become the debts, liabilities, duties and obligations of the Surviving Entity, and the Surviving Entity shall thenceforth be responsible and liable for all the debts, liabilities, duties and obligations of Merger Sub, and the rights of creditors of Merger Sub shall not be impaired by the Merger, and may be enforced against the Surviving Entity.

2.4.Directors and Officers. The directors and officers of the Surviving Entity as of the Effective Time shall be the directors and officers of the Surviving Entity as set forth in the LLC Agreement, unless and until removed or until their respective terms of office shall have expired in accordance with the Act, the Surviving Entity’s certificate of formation or the LLC Agreement, as applicable.

2.5.Closing. Unless this Agreement shall have been validly terminated pursuant to Section 8.1, upon the terms and subject to the satisfaction or waiver of the conditions set forth in Article VII, the closing of the Merger (the “Closing”) will take place at the offices of DLA Piper LLP (US), 1251 Avenue of the Americas, New York, New York 10020 or by mutual exchange of electronic signatures as 

 

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soon as reasonably practicable, but not more than three (3) Business Days, following the satisfaction or waiver of all conditions to the obligations of Parent, Merger Sub, Blocker Seller and the Company to consummate the Transactions contemplated hereby as set forth in Article VII (other than conditions with respect to actions Parent, Merger Sub, Blocker Seller and the Company will take at the Blocker Closing or Closing itself, but subject to such conditions being satisfied at the Blocker Closing or Closing, as applicable) or at such other place and time as is mutually agreed to in writing by Securityholders’ Representative, Blocker Seller and Parent (the date on which the Closing actually occurs is the “Closing Date”). The Closing shall be deemed to occur at the Effective Time.

2.6.Closing Deliveries.

(a)At the Closing, the Company shall deliver, or cause to be delivered, to Parent:

(i)the Certificate of Merger, duly executed by the Company;

(ii)a certificate of an authorized officer for the Company certifying, on behalf of the Company as to: (A) the Organizational Documents of the Company and each of its Subsidiaries; (B) resolutions of the board of managers of the Company authorizing and approving the execution, delivery and performance by the Company of this Agreement and any agreements, instruments, certificates or other documents executed by the Company or any of its Subsidiaries pursuant to this Agreement; (C) resolutions of the requisite Unitholders authorizing and approving the execution, delivery and performance by the Company of this Agreement and any agreements, instruments, certificates or other documents executed by the Company or any of its Subsidiaries pursuant to this Agreement; and (D) certificate(s) of good standing of the Company and each of its Subsidiaries, certified by an appropriate authority of the Governmental Authority issuing such certificate in the jurisdiction of such Person’s creation, formation or organization and in any other jurisdiction where such Person is qualified to do business dated not earlier than five (5) Business Days prior to the Closing Date;

(iii)a certificate signed by an authorized officer of the Company, dated as of the Closing Date, stating that the conditions set forth in Sections 7.2(a) and 7.2(c) as they relate to the representations, warranties and covenants of the Company have been satisfied;

(iv)one or more payoff letters in customary form, drafts of which shall have been delivered to Parent at least two (2) Business Days prior to the Closing, executed by the lenders or other financing sources of the Company or any of its Subsidiaries set forth on Section 2.6(a)(iv) of the Disclosure Letter (A) setting forth all amounts (including principal and accrued but unpaid interest) necessary to be paid to repay in full any such Indebtedness through the Closing, (B) providing that, upon payment in full of such amounts, all obligations with respect to the Indebtedness of the Company and its Subsidiaries owed to such lender or other financing source will be satisfied and released (other than any obligations that, by their terms, survive payoff of such Indebtedness), and that any and all related Liens on the assets of the Company or any of its Subsidiaries will be terminated and released and (C) draft UCC-3 termination statements or similar documents in form sufficient to evidence the termination of all such Liens;

(v)invoices setting forth the amount constituting payment in full of each item of the Transaction Expenses and the Person to whom each such amount is payable;

 

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(vi)the consents, authorizations and approvals of the Governmental Authorities and other Persons set forth in Section 2.6(a)(vi) of the Disclosure Letter;

(vii)resignations of each manager of the Company and each of its Subsidiaries and each officer of the Company and each of its Subsidiaries listed on Section 2.6(a)(vii) of the Disclosure Letter, in each instance, with such resignations to be effective as of the Closing;

(viii)a counterpart of the Adjustment Escrow Agreement, duly executed by Securityholders’ Representative;

(ix)a counterpart of the PPP Escrow Agreement, duly executed by Securityholders’ Representative;

(x)all sales tax exemption certificates from United Distributors, Inc. from all states which the Company or its Subsidiaries generated revenue during fiscal years ended December 31, 2017 through December 31, 2019;

(xi)the Lease Amendment, duly executed by the Company and Cheese Grits;

(xii)the Waiver Agreement, duly executed by the Company; and

(xiii)access credentials to all online portals and databases for all Alcohol Beverage Authorities, and all third party compliance companies, with which the Company has an account.

(b)At the Closing, Parent and Merger Sub shall deliver to the Securityholders’ Representative:

(i)the payments to be delivered by Parent to pursuant to Section 2.11;

(ii)book-entry credits representing the Stock Consideration, duly transferred by Parent in accordance with Section 2.10;

(iii)a certificate of an authorized officer of each of Parent and Merger Sub certifying as to: (A) the Organizational Documents of such Person; (B) resolutions of the board of directors of or board of managers, as applicable, of such Person authorizing and approving the execution, delivery and performance by such Person of this Agreement and any agreements, instruments, certificates or other documents executed by such Person pursuant to this Agreement; and (C) a certificate of the secretary of state of the jurisdiction of Parent’s or Merger Sub’s creation, formation, or organization, as applicable, dated as of a date not earlier than five (5) Business Days prior to the Closing Date, as to the good standing of Parent or Merger Sub, as applicable;

(iv)a certificate signed by an authorized officer of each of Parent and Merger Sub, dated as of the Closing Date, stating that the conditions set forth in Sections 7.3(a) and 7.3(b) as they relate to the representations, warranties and covenants of Parent and Merger Sub have been satisfied;

(v)a counterpart of the Adjustment Escrow Agreement, duly executed by Parent; and

 

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(vi)a counterpart of the PPP Escrow Agreement, duly executed by Parent.

2.7.Effect on Units; Merger Sub Units. At the Effective Time, by virtue of the Merger and without any action on the part of Merger Sub, the Company or the holders of any Units or the holders of Merger Sub Units:

(a)Each Unit (i) held by the Company as treasury Units, (ii) owned by any direct or indirect wholly-owned Subsidiary of the Company, or (iii) that is issued or outstanding and owned directly or indirectly by Parent or Merger Sub or any of their Subsidiaries (excluding, (A) following the Blocker Closing, the Units held by Blocker, which such Units held by Blocker shall be addressed pursuant to Section 2.7(d) and remain outstanding following the Merger, and (B) the Redeemed Units, which shall not be Cancelled Units for purposes of this Agreement, and which shall be addressed pursuant to Section 2.7(e)), in each instance, immediately prior to the Effective Time (the “Cancelled Units”) shall be automatically cancelled and retired and shall cease to exist, and no cash, stock or other consideration shall be delivered or deliverable in exchange therefor.

(b)Each Unit (subject to the last sentence of Section 2.1) that is issued and outstanding immediately prior to the Effective Time, other than the Cancelled Units, the Redeemed Units and Units held by the Blocker, shall automatically be converted into the right for the Unitholder thereof to receive an amount calculated in respect of such Unit in accordance with the Payment Schedule, Section 2.10, Section 2.11(f) (in the case of Class O Units and Class M Units, as adjusted in accordance with Section 2.13), Section 2.15 (if any) and Section 6.12(f) (if any); provided, however, that for the avoidance of doubt, the Blocker Members shall not have the right to receive consideration payable under Section 2.10, Section 2.15 and Section 6.12(f). At such time, all such Units shall cease to be outstanding and shall be automatically cancelled and shall cease to exist, and each holder of Units immediately prior to the Effective Time shall thereafter cease to have any rights with respect to such Units, except, in all cases, the right to receive the amounts described in this Section 2.7, without interest.

(c)Each Merger Sub Unit that is issued and outstanding immediately prior to the Effective Time shall automatically be converted into, and be exchanged for one (1) unit of the Surviving Entity such that, immediately following the Effective Time, Parent will hold indirectly all of the ownership interests of the Surviving Entity (other than the interests of the Surviving Entity held by Blocker).

(d)Each Unit held by the Blocker shall remain outstanding following the Merger, and no cash, stock or other consideration shall be delivered or deliverable in exchange therefor.

(e)Each Redeemed Unit (which, for the avoidance of doubt, shall be held by the Company immediately following the consummation of the transactions contemplated by the Redemption Agreement but prior to the Effective Time), (i) shall remain outstanding following the Merger, but shall not entitle the Company to any cash, stock or other consideration in exchange therefor, and (ii) shall entitle the Redeemed Holders solely to their respective portions of (A) the Earn-Out Payments, if any, and (B) the amounts payable pursuant to Section 2.13(a), Section 2.13(b) and Section 6.11(b), if any, in each case, attributable to the Redeemed Units as if such Redeemed Holder continued to hold its Redeemed Units on the applicable date of determination, in each case, as set forth in the Payment Schedule.

2.8.Purchase Price. The aggregate purchase price to be paid by Parent to or for the account of (i) Blocker Seller, in connection with the Blocker Sale, and (ii) Unitholders, in connection with 

 

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the Merger on the Closing Date shall be an aggregate amount in cash equal to (a) the Enterprise Value, plus (b) Estimated Cash, minus (c) Estimated Closing Date Indebtedness, minus (d) Estimated Transaction Expenses, minus (e) the Adjustment Escrow Amount, minus (f) the PPP Escrow Amount, minus (g) the Securityholders’ Representative Expense Amount, minus (h) the amount, if any, by which the Target Net Working Capital exceeds the Net Working Capital, plus (i) the amount, if any, by which the Net Working Capital exceeds the Target Net Working Capital, minus (j) the Closing Stock Value (after giving effect to the foregoing, the “Estimated Purchase Price”). The Estimated Purchase Price shall be payable at Closing in accordance with Section 2.11 and the Payment Schedule, subject to adjustment in accordance with Section 2.13.

2.9.Pre-Closing Purchase Price Adjustment. Not less than three (3) Business Days prior to the Closing Date, an authorized officer of the Company shall provide to Parent a written statement containing (i) a balance sheet of the Company and its Subsidiaries as of the Effective Time (the “Estimated Closing Balance Sheet”) and, based thereon, the Company’s good faith estimate of (A) the Cash (the “Estimated Cash”), (B) the Closing Date Indebtedness (the “Estimated Closing Date Indebtedness”), (C) Net Working Capital (the “Estimated Net Working Capital”), and (D) the Transaction Expenses as of immediately prior to the Effective Time (the “Estimated Transaction Expenses”), and (ii) after taking into account the determinations set forth in clause (i) hereof, the calculation of the Estimated Purchase Price. In preparing the Estimated Closing Balance Sheet and the calculation of the Estimated Purchase Price, all terms of an accounting or financial nature shall (a) be based exclusively on the facts and circumstances as they existed as of immediately prior to the Effective Time and shall exclude the effects of the Transactions, (b) be construed in accordance with GAAP (as modified by the Historical Accounting Practices), applied consistently with the Financial Statements, as modified by (c) the accounting policies and procedures and methodology set forth or reflected in Annex II (collectively, the “Policies and Procedures”); provided that, in the event of a conflict between clause (b) and clause (c), the Policies and Procedures shall control. In addition to the written statement provided pursuant to this Section 2.9, an authorized officer of the Company, with the approval of the Blocker Seller, shall provide to Parent a final Payment Schedule based on the Estimated Purchase Price; provided, that the Blocker Seller agrees that such consent shall not be unreasonably withheld and it shall be deemed unreasonable if Blocker Seller withholds approval of the final Payment Schedule for changes thereto that give effect to the provisions of this Agreement, the Redemption and/or the Company LLC Agreement.

2.10.Closing Date Stock Issuance. At the Closing, Parent shall deliver to each Unitholder (other than the Blocker Members or with respect to the Redeemed Units) book-entry credits in the name of such Unitholder (other than the Blocker Members or with respect to the Redeemed Units), and for the book-entry credit allocable to SWB Management, LLC, directly to the SWB Members, in accordance with the Payment Schedule representing that number of common shares (the “Stock Consideration”) of Parent, without par value per share (“Parent Common Shares”) having a value equal to such Unitholder’s portion of the Closing Stock Value determined in accordance with the Payment Schedule, which in the aggregate for all Parent Common Shares shall be equal to fifty million dollars ($50,000,000) (the “Closing Stock Value”) calculated based on the volume-weighted average trading price of Parent Common Shares on the NASDAQ for the thirty (30) day period immediately ending on the close of trading on the day that the Parent issues a public announcement concerning the Transactions as required under applicable Securities Laws. Following the Closing, the Parent shall distribute the Stock Consideration (subject to compliance with the payment mechanics set forth in Section 6.12, including but not limited to with respect to the requisite Letters of Transmittal with respect to Unitholders receiving consideration in the context of the Merger) to the Unitholders (excluding, for the avoidance of doubt, the 

 

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Blocker Members), and for the Stock Consideration allocable to SWB Management, LLC, directly to the SWB Members, in accordance with (i) Section 6.12, and (ii) the Payment Schedule.

2.11.Closing Date Payments. On the Closing Date, immediately following acceptance of the Certificate of Merger, Parent shall make, or cause to be made, the following payments:

(a)an amount in the aggregate equal to the Estimated Closing Date Indebtedness, if any, by wire transfer of immediately available funds to the accounts designated by the lenders and other creditors of the Company set forth in the payoff letters provided by such lenders and other creditors in accordance with Section 2.6(a)(iv);

(b)an amount in the aggregate equal to the Estimated Transaction Expenses, by wire transfer of immediately available funds to the accounts provided by the Company to the Parent at least two (2) Business Days prior to the Closing Date; provided, however, that (1) any Estimated Transaction Expenses paid pursuant to this Section 2.11(b) to the Company or its Subsidiaries and ultimately payable to an employee of the Company or any of its Subsidiaries (other than those payable pursuant to subsection (2) hereof) shall thereafter be paid by the Company or such Subsidiary to the applicable Person (net of withholding Taxes) through the Company’s or such Subsidiary’s payroll system not later than the next regular payroll date of the Company, (2) with respect to the Sale Bonus (as defined in the Bates Agreement) which may become payable to Patrick Bates pursuant to the Bates Agreement on October 13, 2021 (which, for the avoidance of doubt, constitutes a Transaction Expenses), (i) to the extent the Sales Bonus becomes payable to Patrick Bates in accordance with the Bates Agreement, such amounts shall thereafter be paid by the Company or such Subsidiary to the applicable Person (net of withholding Taxes) through the Company’s or such Subsidiary’s payroll system not later than the next regular payroll date of the Company, and (ii) to the extent that it is ultimately determined that Patrick Bates is not entitled to the Sale Bonus in accordance with the terms of the Bates Agreement such amounts shall be paid by wire transfer of immediately held funds to the Securityholders’ Representative, on behalf of and for the benefit of the Unitholders (other than the Blocker Members), for further distribution to such Unitholders in accordance with the Payment Schedule, subject to Section 2.18, and (3) any Taxes withheld from any payment under clause (1) or (2) shall be held and remitted to the applicable Governmental Authority in accordance with applicable Law;

(c)an amount equal to the Adjustment Escrow Amount by wire transfer of immediately available funds to the Adjustment Escrow Agent to be held in an account (the “Adjustment Escrow Account”) in accordance with the terms of the Adjustment Escrow Agreement to be used solely for the purposes of making the payments, if any, required by Section 2.13(a);

(d)an amount equal to the PPP Escrow Amount by wire transfer of immediately available funds to the PPP Escrow Agent to be held in an account (the “PPP Escrow Account”) in accordance with the terms of the PPP Escrow Agreement to be used solely for the purposes of making the payments, if any, required by Section 2.13(b);

(e)an amount equal to the Securityholders’ Representative Expense Amount by wire transfer of immediately available funds to the Securityholders’ Representative into an account designated by the Securityholder’s Representative, for purposes of satisfying costs, expenses and/or Liabilities of the Unitholders (other than the Blocker Members) hereunder or otherwise incurred in its capacity as the Securityholders’ Representative and otherwise in accordance with this Agreement; and

 

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(f)an amount equal to the Estimated Purchase Price shall be paid by wire transfer of immediately available funds to (i) for amounts allocable to Blocker Seller pursuant to Section 1.2, directly to Blocker Seller (as satisfaction of the payment required by Section 1.2) in accordance with the Payment Schedule pursuant to wiring instructions provided by Blocker Seller at least two (2) Business Days prior to the Closing Date, (ii) for amounts allocable to SWBC Craft, LLC, directly to SWBC Craft, LLC in accordance with the Payment Schedule pursuant to wiring instructions provided by SWBC Craft, LLC at least two (2) Business Days prior to the Closing Date and (iii) for amounts allocable to the other Unitholders (other than the Blocker Members), the Securityholders’ Representative, on behalf of and for the benefit of such Unitholders, for further distribution to such Unitholders in accordance with the Payment Schedule, subject to Section 2.18.

2.12.Purchase Price Adjustment.

(a)As promptly as possible and in any event within ninety (90) days after the Closing Date, Parent shall prepare and deliver to Securityholders’ Representative (i) a balance sheet of the Company and its Subsidiaries as of the Effective Time (the “Final Closing Balance Sheet”), and (ii) based on the Final Closing Balance Sheet, Parent’s good faith calculation of the Company’s (A) Cash (the “Final Cash”), (B) the Closing Date Indebtedness (the “Final Closing Date Indebtedness”), (C) the Transaction Expenses as of immediately prior to the Effective Time (the “Final Transaction Expenses”) and (D) the Net Working Capital (the “Final Net Working Capital” together with the Final Cash, Final Closing Date Indebtedness, and Final Transaction Expenses, the “Final Calculations”), and (E) the calculation of the Final Purchase Price based thereon. In preparing the Final Balance Sheet, all terms of an accounting or financial nature shall

(b)be based exclusively on the facts and circumstances as they existed as of immediately prior to the Effective Time and shall exclude the effects of the Transactions, (b) be construed in accordance with GAAP (as modified by the Historical Accounting Practices), applied consistently with the Financial Statements, as modified by (c) the Policies and Procedures; provided that, in the event of a conflict between clause (b) and clause (c), the Policies and Procedures shall control. Parent shall provide Securityholders’ Representative with reasonable supporting detail with respect to the calculation of each of the components of the Final Purchase Price. Parent and the Securityholders’ Representative shall provide each other reasonable access to the appropriate personnel of the other parties and all supporting financial statements, worksheets and other documentation used to determine the calculation of each of the components of the Final Purchase Price, and such schedules and data with respect to the determination of such amounts as each party and its representatives reasonably request for the purposes of their review of the Final Calculations.

(b)Before 11:59 p.m. ET on date that is thirty (30) days after the Final Closing Balance Sheet and the Final Calculations are delivered to Securityholders’ Representative pursuant to Section 2.12(a) (the “30-Day Period”), the Securityholders’ Representative shall deliver to Parent either (i) a written acknowledgement signed by Securityholders’ Representative accepting the Final Closing Balance Sheet and the Final Calculations in their entirety (the “Acknowledgement”), or (ii) a written notice (the “Adjustment Report”) containing a written explanation of those items in the Final Closing Balance Sheet and the Final Calculations which Securityholders’ Representative disputes, in which case the items identified by Securityholders’ Representative shall be deemed to be in dispute. During the 30-Day Period, Parent and the Surviving Entity covenant and agree that Securityholders’ Representative shall be permitted access to the appropriate personnel of Parent and the Surviving Entity and all supporting financial statements, worksheets and other documentation used by Parent and the Surviving Entity to determine the Final Closing Balance Sheet and the Final Calculations as well as any relevant 

 

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work papers as Securityholders’ Representative may reasonably request to enable Securityholders’ Representative and its representatives to evaluate the Final Closing Balance Sheet and the Final Calculations, provided that such access does not unreasonably interfere with the day-to-day operations of Parent’s business. If Securityholders’ Representative (i) delivers an Acknowledgement within the 30-Day Period or (ii) fails to deliver an Acknowledgement or an Adjustment Report to Parent within the 30-Day Period, Securityholders’ Representative shall be deemed to have accepted and agreed to the Final Closing Balance Sheet and the Final Calculations as delivered pursuant to Section 2.12(a), and such Final Closing Balance Sheet and Final Calculations shall be final and binding upon all parties and the Final Purchase Price shall be as set forth therein. In the event that Securityholders’ Representative timely delivers an Adjustment Report to Parent, then Parent and Securityholders’ Representative will use all commercially reasonable efforts to resolve the disputed matter(s) within the thirty (30)-day period following the delivery of the Adjustment Report. If Securityholders’ Representative and Parent fail to agree on Securityholders’ Representative’s proposed adjustments contained in the Adjustment Report within thirty (30) days after Parent receives the Adjustment Report, then Parent and Securityholders’ Representative shall jointly submit the disputed matter(s) to RSM US LLP (provided, that if such Person is unable or unwilling to serve in such capacity, Parent and Securityholders’ Representative shall work in good faith to jointly select an alternative nationally recognized independent accounting) (the “Independent Auditor”). The Independent Auditor’s function will be to resolve each element of the dispute that has not been resolved by Parent and Securityholders’ Representative as an accounting expert and not as an arbitrator. The Independent Auditor shall resolve any such dispute in accordance with the Policies and Procedures and the applicable definitions set forth herein (i.e., not on the basis of an independent review). The Independent Auditor shall not have any power or authority to alter, modify, add to, or subtract from any term or provision of this Agreement. Parent and Securityholders’ Representative will furnish, or cause to be furnished, to the Independent Auditor such work papers, documentation and other reports and information relating to the disputed matter(s) as the Independent Auditor may request or as either Securityholders’ Representative or Parent believes relevant and each party shall be afforded the opportunity to discuss the disputed matter with the Independent Auditor (provided that no ex parte communications shall be permitted). The Independent Auditor shall make a final written determination of the disputed matter(s) (the “Auditor’s Determination”) in reliance upon supporting documentation provided to the Independent Auditor by Securityholders’ Representative and Parent within twenty (20) Business Days of submission of the disputed matter(s) to the Independent Auditor. In resolving any disputed item, the Independent Auditor may not revise any element of the Final Closing Balance Sheet and Final Calculations that is not contested by the parties. The Auditor’s Determination shall be furnished to Securityholders’ Representative and Parent as soon as practicable after the disputed items(s) have been referred to the Independent Auditor and, absent manifest error or Fraud and subject to the following sentence, shall be nonappealable and incontestable by each party and each of their respective Affiliates and successors and not subject to collateral attack for any reason. With respect to each disputed amount, the Auditor’s Determination must be an amount between or equal to one or the other of Securityholders’ Representative’s position as set forth in the Adjustment Report and Parent’s position as set forth in the Final Closing Balance Sheet and the Final Calculations. The fees, costs and expenses of the Independent Auditor and the American Arbitration Association incurred in resolving the disputed matter(s) pursuant to this Section 2.12(b) shall be borne by Parent, on the one hand, and Securityholders’ Representative, on the other hand, in inverse proportion to the respective percentages of the dollar value of disputed items determined in favor of Parent, on the one hand, and Securityholders’ Representative, on the other hand, as determined by the Independent Auditor and set forth in the Auditor’s Determination. Notwithstanding the foregoing, each of Parent and Securityholders’ Representative will be responsible for paying the fees, costs and expenses of their respective attorneys, accountants and other representatives in connection with any such dispute.

 

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(c)The term “Final Closing Balance Sheet” as used herein shall mean the Final Closing Balance Sheet as ultimately determined pursuant to this Section 2.12. The term “Final Calculations” as used herein shall mean the Final Calculations as ultimately determined pursuant to this Section 2.12. The date on which the Final Closing Balance Sheet and the Final Calculations are finally determined pursuant to this Section 2.12 shall hereinafter be referred to as the “Settlement Date.”

2.13.Purchase Price Settlement.

(a)No later than five (5) Business Days after the Settlement Date, the following payment (if any) shall be made, by wire transfer of immediately available funds to the account (or accounts) specified in writing by Parent or Securityholders’ Representative, as applicable:

 

(i)In the event the Final Purchase Price is less than the Estimated Purchase Price (such amount, the “Downward Adjustment Amount”), Parent and Securityholders’ Representative shall cause the Adjustment Escrow Agent to pay Parent an amount equal to the Downward Adjustment Amount from the Adjustment Escrow Amount; provided, that if the Downward Adjustment Amount is greater than the Adjustment Escrow Amount, then the Securityholders’ Representative shall pay to the Parent from the Securityholders’ Representative Expense Amount an amount equal to the Downward Adjustment Amount minus the amount paid to Parent from the Adjustment Escrow Amount. Notwithstanding anything contained herein to the contrary, to the extent that the Downward Adjustment Amount is greater than the sum of the Adjustment Escrow Amount plus the amount available from the Securityholders’ Representative Expense Amount to satisfy the full Downward Adjustment Amount, then Parent and the Surviving Entity shall have the express right to offset any such deficiency against any amount otherwise payable or deliverable following the Closing pursuant to Section 2.13(b) or Section 2.15. For the avoidance of doubt, any amount set off for purposes of Section 2.13(b) or Section 2.15 in accordance with this Section 2.13(a)(i) shall be deemed to have been paid to the Securityholders’ Representative and the Unitholders for purposes of Section 2.13(b) or Section 2.15, as applicable. After taking into account the payment of the Downward Adjustment Amount, if any, Parent and Securityholders’ Representative shall cause all remaining funds from the Adjustment Escrow Amount (including any interest accrued thereon), if any, to be released by the Adjustment Escrow Agent to the Securityholders’ Representative (for further distribution to the Unitholders (other than the Blocker Members) in accordance with the Payment Schedule).

(ii)In the event the Final Purchase Price is greater than the Estimated Purchase Price (such amount, the “Upward Adjustment Amount”), then (a) Parent shall pay the Securityholders’ Representative (for further distribution to the Unitholders (other than the Blocker Members) in accordance with the Payment Schedule) an amount equal to the Upward Adjustment Amount, and (b) Parent and Securityholders’ Representative shall cause the Adjustment Escrow Agent to release the entire Adjustment Escrow Amount (including any interest accrued thereon) to the Securityholders’ Representative (for further distribution to the Unitholders (other than the Blocker Members) in accordance with the Payment Schedule).

(iii)In the event the Final Purchase Price is equal to the Estimated Purchase Price, no adjustment payment shall be made pursuant to this Section 2.13(a), and Parent and Securityholders’ Representative shall cause the Adjustment Escrow Agent to release the entire Adjustment Escrow Amount (including any interest accrued thereon) to the Securityholders’ 

 

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Representative (for further distribution to the Unitholders (other than the Blocker Members) in accordance with the Payment Schedule).

For the avoidance of doubt, recovery from the Adjustment Escrow Account and the Securityholders’ Representative Expense Amount and subject to the set off right contained in Section 2.13(a)(i), in each instance (as provided in clause (i) above) shall be the sole and exclusive remedy available to Parent, Merger Sub, the Surviving Entity and their respective Affiliates for any Downward Adjustment Amount and no Unitholders or any of their respective Affiliates shall have any Liability or obligation under this Agreement for any portion of the Downward Adjustment Amount in excess of the amount of the then remaining Adjustment Escrow Funds and the Securityholders’ Representative Expense Amount and any reduction to the Earn-Out Payments made pursuant to the set off rights in accordance with Section 2.13(a)(i).

 

(b)Subject in all instances to the set off right contained in Section 2.13(a)(i), no later than five (5) Business Days after the CARES Act Determination Date, the following payment (if any) shall be made, by wire transfer of immediately available funds to the account (or accounts) specified in writing by Parent or Securityholders’ Representative, as applicable:

(i)In the event that there is CARES Unforgiven Debt, Parent and Securityholders’ Representative shall cause the PPP Escrow Agent to pay Parent an amount equal to such CARES Unforgiven Debt from the PPP Escrow Amount. After taking into account the payment made pursuant to the previous sentence, if any, Parent and Securityholders’ Representative shall cause all remaining funds from the PPP Escrow Amount (including any interest accrued thereon) to be released by the PPP Escrow Agent to the Securityholders’ Representative (for further distribution to the Unitholders (other than the Blocker Members) in accordance with the Payment Schedule).

(ii)In the event that there is no CARES Unforgiven Debt, no adjustment payment shall be made pursuant to this Section 2.13(b), and Parent and Securityholders’ Representative shall cause the PPP Escrow Agent to release the entire PPP Escrow Amount (including any interest accrued thereon) to the Securityholders’ Representative (for further distribution to the Unitholders (other than the Blocker Members) in accordance with the Payment Schedule).

2.14.Withholding. Each of Parent, Merger Sub and the Company shall be entitled to, after good faith consultation with Securityholders’ Representative, deduct and withhold from the amounts payable or otherwise deliverable pursuant to this Agreement such amounts as required to be deducted or withheld therefrom under the Code or under any applicable provision of state, local or foreign Tax Law; provided, however, that other than with respect to compensatory payments or withholding applied for failure to comply with the provisions of Section 6.8(a) of this Agreement, the payor that determines that it has an obligation to deduct and withhold from any payment shall provide advance notice of such determination and each such payor and payee shall use commercially reasonable efforts to minimize any such Taxes. To the extent such amounts are so deducted or withheld and timely remitted to the appropriate tax authority, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid. The applicable withholding agent will promptly pay or cause to be paid any amounts withheld pursuant to this Section 2.14 for applicable Taxes to the appropriate tax authority.

 

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2.15.Earn-Out.

(a)Subject in all instances to the set off right contained in Section 2.13(a)(i), as additional consideration for the Merger (but not the Blocker Sale), Unitholders (other than the Blocker Members) shall be entitled, subject to satisfaction of the conditions set forth in this Section 2.15, to receive subsequent payments in cash (the “Earn-Out Payments”), and Parent and the Surviving Entity shall be jointly and severally obligated to make any such Earn-Out Payments. The Earn-Out Payments, if any, shall be payable in accordance with Section 2.16.

(b)Subject in all instances to the set off right contained in Section 2.13(a)(i), within five Business Days after the 2022 Adjusted EBITDA is finally determined pursuant to Section 2.16, Parent shall, or shall cause the Surviving Entity to pay to Securityholders’ Representative (for distribution to the Unitholders (other than the Blocker Members) in accordance with the Payment Schedule) an amount, if any (the “2022 Earn-Out Payment”), equal to the product of (i) eleven (11) and (ii) the difference of (x) 2022 Adjusted EBITDA, minus (y) twenty- four million dollars ($24,000,000); provided, however, that if the calculation pursuant to clause (ii) of this Section 2.15 results in a negative number, no 2022 Earn-Out Payment shall be payable; provided further, that if the calculation pursuant to clause (ii) of this Section 2.15(b) results in a number greater than or equal to the Earn-Out Cap, the 2022 Earn-Out Payment shall be deemed to equal the Earn-Out Cap. For purposes of this Agreement, the term “Earn-Out Cap” shall mean sixty-six million dollars ($66,000,000).

(c)Subject in all instances to the set off right contained in Section 2.13(a)(i), and the limitations set forth in this Section 2.15(c), within five Business Days after the 2023 Adjusted EBITDA is finally determined pursuant to Section 2.16, Parent shall, or shall cause the Surviving Entity to, pay to Securityholders’ Representative (for distribution to the Unitholders (other than the Blocker Members) in accordance with the Payment Schedule) an amount, if any (the “2023 Earn-Out Payment”), equal to the product of (i) eleven (11) and (ii) the difference of (x) 2023 Adjusted EBITDA, minus (y) 2022 Adjusted EBITDA; provided, however, that if the calculation pursuant to clause (ii) of this Section 2.15(c) results in a negative number, no 2023 Earn-Out Payment shall be payable; provided further, that in no event shall the sum (the “Aggregate Earn-Out Payment”) of (A) the amount paid pursuant to Section 2.15(b), and (B) the amount payable pursuant to this Section 2.15(c), exceed, in the aggregate, the Earn-Out Cap, and therefore, if the amount calculated pursuant to this Section 2.15(c) would otherwise cause the Aggregate Earn-Out Payment to exceed, in the aggregate, the Earn-Out Cap, the amount payable pursuant to this Section 2.15(c) shall be reduced to such amount such that the Aggregate Earn-Out Payment equals the Earn-Out Cap. Notwithstanding anything contained herein to the contrary, in the event that the payment made pursuant to Section 2.15(b) was equal to the Earn-Out Cap, no subsequent payment shall be due or payable pursuant to this Section 2.15(c).

2.16.Earn-Out Settlement.

(a)By no later than February 28, 2023, Parent shall prepare and deliver to Securityholders’ Representative a calculation (the “2022 Adjusted EBITDA Calculation”) of the Adjusted EBITDA of the Company and its Subsidiaries during the period from January 1, 2022 through December 31, 2022 (the “2022 Adjusted EBITDA”). The parties shall provide reasonable access to the appropriate personnel of the other parties and all supporting financial statements, worksheets and other documentation used to determine the 2022 Adjusted EBITDA Calculation.

(b)By no later than February 28, 2024, Parent shall prepare and deliver to Securityholders’ Representative a calculation (the “2023 Adjusted EBITDA Calculation”) of the 

 

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Adjusted EBITDA of the Company and its Subsidiaries during the period from January 1, 2023 through December 31, 2023 (the “2023 Adjusted EBITDA”). The parties shall provide reasonable access to the appropriate personnel of the other parties and all supporting financial statements, worksheets and other documentation used to determine the 2023 Adjusted EBITDA Calculation. For the avoidance of doubt, notwithstanding anything contained herein to the contrary, in the event that the payment made pursuant to Section 2.15(b) was equal to the Earn-Out Cap, Parent shall have no obligation to deliver the 2023 Adjusted EBITDA Calculation and no subsequent adjustment shall be made pursuant to Section 2.16(d).

(c)Within fifteen (15) days (the “2022 15-Day Period”) after the date on which the 2022 Adjusted EBITDA Calculation is received by Securityholders’ Representative, Securityholders’ Representative shall deliver to Parent either (i) a written acknowledgement signed by Securityholders’ Representative accepting the 2022 Adjusted EBITDA Calculation in its entirety (the “2022 EBITDA Acknowledgement”), or (ii) a written notice (the “2022 EBITDA Adjustment Report”) containing a detailed written explanation of those items in the 2022 Adjusted EBITDA Calculation which Securityholders’ Representative disputes, in which case (subject to the following sentence) the items identified by Securityholders’ Representative shall be deemed to be in dispute. If (i) the 2022 Adjusted EBITDA Calculation reports 2022 Adjusted EBITDA such that the payment to be made pursuant to Section 2.15(b) is equal to or in excess of the Earn- Out Cap, (ii) Securityholders’ Representative delivers a 2022 EBITDA Acknowledgement within the 2022 15-Day Period or (iii) Securityholders’ Representative fails to deliver a 2022 EBITDA Acknowledgement or a 2022 EBITDA Adjustment Report to Parent within the 2022 15-Day Period, Securityholders’ Representative shall be deemed to have accepted and agreed to the 2022 Adjusted EBITDA Calculation, as delivered pursuant to Section 2.16(a), and such 2022 Adjusted EBITDA Calculation shall be final and binding upon Securityholders’ Representative (on behalf of the Unitholders and Blocker Seller) and Parent and the 2022 Adjusted EBITDA shall be as set forth therein.

(d)Within fifteen (15) days (the “2023 15-Day Period”) after the date on which the 2023 Adjusted EBITDA Calculation is received by Securityholders’ Representative, Securityholders’ Representative shall deliver to Parent either (i) a written acknowledgement signed by Securityholders’ Representative accepting the 2023 Adjusted EBITDA Calculation in its entirety (the “2023 EBITDA Acknowledgement”), or (ii) a written notice (the “2023 EBITDA Adjustment Report,” and together with the 2022 EBITDA Adjustment Report, the “EBITDA Adjustment Reports”) containing a detailed written explanation of those items in the 2023 Adjusted EBITDA Calculation which Securityholders’ Representative disputes, in which case (subject to the following sentence) the items identified by Securityholders’ Representative shall be deemed to be in dispute. If (i) the 2023 Adjusted EBITDA Calculation reports 2023 Adjusted EBITDA that, when taken together with the amount paid pursuant to Section 2.15(b), would exceed the Earn-Out Cap, (ii) Securityholders’ Representative delivers a 2023 EBITDA Acknowledgement within the 2023 15-Day Period or (iii) Securityholders’ Representative fails to deliver a 2023 EBITDA Acknowledgement or a 2023 EBITDA Adjustment Report to Parent within the 2023 15-Day Period, Securityholders’ Representative shall be deemed to have accepted and agreed to the 2023 Adjusted EBITDA Calculation, as delivered pursuant to Section 2.16(b), and such 2023 Adjusted EBITDA Calculation shall be final and binding upon Securityholders’ Representative (on behalf of the Unitholders and Blocker Seller) and Parent and the 2023 Adjusted EBITDA shall be as set forth therein.

(e)In the event that the Securityholders’ Representative timely delivers an EBITDA Adjustment Report to Parent, then Parent and Securityholders’ Representative will use all commercially reasonable efforts to resolve the disputed matter(s) within the fifteen (15) day period following the delivery of the applicable EBITDA Adjustment Report. If Securityholders’ Representative and Parent 

 

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fail to agree on Securityholders’ Representative’s proposed adjustments contained in the applicable EBITDA Adjustment Report within such fifteen (15) day period, then Parent and Securityholders’ Representative shall jointly submit the disputed matter(s) to the Independent Auditor. Parent and Securityholders’ Representative will furnish, or cause to be furnished, to the Independent Auditor such work papers, documentation and other reports and information relating to the disputed matter(s) as the Independent Auditor may request or as either Securityholders’ Representative or Parent believe relevant and each party shall be afforded the opportunity to discuss the disputed matter with the Independent Auditor. The Independent Auditor shall make the final determination of the disputed matter(s) (the “Auditor’s EBITDA Determination”) (A) in reliance upon the supporting documentation provided to the Independent Auditor by Securityholders’ Representative and Parent, (B) in writing, and (C) in accordance with Section 2.16(f). Securityholders’ Representative and Parent each agree to use its respective commercially reasonable efforts to cooperate with the Independent Auditor and to cause the Independent Auditor to resolve any dispute no later than 30 days after submission of the dispute to the Independent Auditor in accordance with this Section 2.16(e). The Auditor’s EBITDA Determination shall be furnished to Securityholders’ Representative and Parent as soon as practicable after the disputed items(s) have been referred to the Independent Auditor and, absent manifest error or fraud and subject to the following sentence, shall be nonappealable and incontestable by Securityholders’ Representative, Unitholders, Blocker Seller, Parent and any of their respective Affiliates and successors and not subject to collateral attack for any reason. The fees, costs and expenses of the Independent Auditor incurred in resolving the disputed matter(s) pursuant to this Section 2.16(e) shall be borne by Parent, on the one hand, and Securityholders’ Representative (on behalf of the Unitholders (other than the Blocker Members)), on the other hand, in inverse proportion to the respective percentages of the dollar value of disputed items determined in favor of such Person.

(f)In determining each of the 2022 Earn-Out Payment and 2023 Earn-Out Payment, all terms of an accounting or financial nature shall be construed in accordance with (i) Policies and Procedures and (ii) the calculation of Adjusted EBITDA reflected in Annex III. Following receipt thereof from Parent, Securityholders’ Representative shall distribute the 2022 Earn-Out Payment and 2023 Earn-Out Payment, if any, to the Unitholders (other than the Blocker Members) in accordance with the Payment Schedule.

 

2.17.Earn-Out Covenants.

 

(a)Conduct of the Business During Earn-Out Period. From the date hereof until the earlier of (x) payment of Earn-Out Payments in an amount equal to the Earn-Out Cap and (y) December 31, 2023 (such period, the “Earn-Out Period”), Parent covenants and agrees as follows:

(i)Parent will, and will cause the Surviving Entity to, use commercially reasonable efforts to support the business and interest of the operations of the Surviving Entity and its Subsidiaries and to act in good faith in connection with its ownership and operation of the Surviving Entity and neither Parent nor any of its Affiliates (including after the Effective Time, the Surviving Entity and its Subsidiaries) shall take any action intended to interfere with the ability of the Surviving Entity and its Subsidiaries to achieve the 2022 Earn-Out Payment and 2023 Earn-Out Payment in an aggregate amount equal to the Earn-Out Cap.

(ii)Parent shall, and shall cause the Surviving Entity and its Subsidiaries to, cause the business activities and operations of the Surviving Entity and its Subsidiaries to be accounted for separately from the Parent’s and its other Subsidiaries’ and to maintain such books 

 

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and records with respect thereto as shall be necessary to carry out the provisions of this Agreement.

(iii)Parent agrees to provide the Surviving Entity and its Subsidiaries access to funding, personnel, compensation for employees, and other working capital in accordance with the budget proposed by the chief executive officer or equivalent of the Company and approved by the board of directors of Parent.

(iv)Except as required by GAAP, Parent shall not, and cause the Surviving Entity and its Subsidiaries not to, make any change in any method of accounting or accounting practice or policy of the Company without the consent of the Securityholders’ Representative.

(v)Parent agrees to not change the nature of the business conducted by the Company in a manner materially different than the business conducted by the Company and its Subsidiaries prior to the date of this Agreement which change would reasonably be expected to interfere with the Unitholders’ ability to achieve the 2022 Earn-Out Payment or the 2023 Earn-Out Payment.

(vi)Parent covenants and agrees not to enter into, or permit the Surviving Entity to enter into, any Contract that expressly restricts payment of the Earn- Out Payments.

 

(b)Acceleration. If an Acceleration Event occurs during the Earn-Out Period, then, notwithstanding the actual Adjusted EBITDA during the Earn-out Period, the Company shall pay to the Securityholders’ Representative (on behalf of the Unitholders (other than the Blocker Members)) an amount equal to (x) the Earn-Out Cap minus (y) the sum of all previously paid Earn- Out Payments. All such payments shall be made to the Securityholders’ Representative by wire transfer of immediately available funds to the account designated in writing by the Securityholders’ Representative within five (5) Business Days after the occurrence of such Acceleration Event (the “Acceleration Payment Date”).

(c)Payment Default. Notwithstanding anything to the contrary contained herein, if Parent shall fail to pay the Earn-out Payment within three (3) Business Days after the Earn-Out Payment Date or the Acceleration Payment Date, as applicable, then interest shall begin to accrue on any unpaid Earn-Out Payment or accelerated Earn-Out Payments, as the case may be, from and as of the date such payment or payments were due and payable, at eight percent (8%) per annum, and until such payment or payments, together with such accrued default interest, are paid in full.

2.18.Exchange of Units.

(a)The Securityholders’ Representative shall facilitate payments made to or on behalf of the Unitholders (other than the Blocker Members) as a result of the Closing. Immediately following acceptance of the Certificate of Merger, Parent will (i) pay to Blocker Seller the amount required pursuant to Section 2.11(f), to be paid to Blocker Seller (for purposes of consideration required to be paid in connection with the Blocker Closing) (ii) pay to SWBC Craft, LLC the amount required pursuant to Section 2.11(f) for the benefit of SWBC Craft, LLC and (iii) deposit with the Securityholders’ Representative the amount required pursuant to Section 2.11(f) for the benefit of the Unitholders (other than the Blocker Members) (whose Units have been converted pursuant to Section 2.7 into the right to receive such amount), in the case of the Unitholders subject to Section 2.18(b) below. Such amounts, once 

 

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paid or deposited with the Securityholders’ Representative, as applicable, shall, pending its disbursement to such Persons, be held in trust for the benefit of such Persons and shall not be used for any other purposes, other than the Securityholders’ Representative Expense Amount which may be used for Downward Adjustment Amount or otherwise to pay expenses on behalf of the Unitholders.

(b)As soon as practicable after the date hereof, the Securityholders’ Representative shall mail to each Unitholder (other than any Blocker Member) as of immediately prior to the Effective Time a letter of transmittal (substantially in the form attached hereto as Exhibit C) (the “Letter of Transmittal”). Upon delivery of a duly completed and validly executed Letter of Transmittal to the Securityholders’ Representative, the relevant Unitholder shall be entitled to receive the applicable consideration payable hereunder, without interest, in exchange for each Unit held by such Unitholder as of immediately prior to the Effective Time. Until the delivery of a duly completed and validly executed Letter of Transmittal as contemplated by this Section 2.18(b), each Unit (other than a Cancelled Unit or any Unit held by any Blocker Member) shall be deemed at any time after the Effective Time to represent only the right to receive upon such delivery the applicable consideration payable hereunder, without interest.

(c)None of Parent, Merger Sub, or the Surviving Entity or their respective representatives shall be liable to any Person in respect of any consideration to the extent actually received by the Securityholders’ Representative.

2.19.Appraisal Right. No appraisal rights shall be available with respect to the Merger or the other Transactions contemplated by this Agreement.

2.20.Tax Treatment; Allocation of the Purchase Price.

(a)Within sixty (60) days of the final determination of Final Purchase Price, Parent shall provide to Securityholders’ Representative a schedule allocating the purchase price for Tax purposes (including the applicable Liabilities of the Company) among the assets of the Company (the “Purchase Price Allocation Schedule”). The Purchase Price Allocation Schedule will be prepared in accordance with the applicable provisions of the Code and the methodologies set forth on Annex IV.

(b)If within thirty (30) days of receiving the Purchase Price Allocation Schedule, the Securityholders’ Representative has not objected, the Purchase Price Allocation Schedule shall be final and binding. If within thirty (30) days the Securityholders’ Representative objects to the Purchase Price Allocation Schedule, the Securityholders’ Representative and Parent shall cooperate in good faith to resolve their differences, provided that if after thirty (30) days, the Securityholders’ Representative and Parent are unable to agree, they shall retain the Independent Auditor to resolve their dispute, provided that the Independent Auditor shall utilize the methodologies for determining fair market value as set forth on Annex IV. The determination of the Independent Auditor shall be final and binding on all parties.

(c)The parties hereto shall make appropriate adjustments to the Purchase Price Allocation Schedule to reflect changes in the purchase price. The parties hereto agree for all Tax reporting purposes to report the transactions in accordance with the agreements herein and the Purchase Price Allocation Schedule, as adjusted pursuant to the preceding sentence, and to not take any position during the course of any audit or other proceeding inconsistent with the agreements as to Tax treatment herein or with such schedule unless required by a determination of the applicable Governmental Authority that is final.

 

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2.21.Paying Agent. Prior to the Closing, Securityholders’ Representative may select a nationally recognized bank or trust company to act as the paying agent for the Transactions (the “Paying Agent”), and, in such case, Securityholders’ Representative and Parent shall engage the Paying Agent and enter into a paying agent agreement on customary terms related to the nature of engagement thereof (the “Paying Agent Agreement”). In the event that a Paying Agent is engaged pursuant to this Section 2.21,  (i) all  payments and other disbursements  to be made to the Unitholders (other than the Blocker Members) under this Agreement, including without limitation, those payments and disbursements to be made under Sections 2.10, 2.11, 2.13, 2.16 and 6.12(f) shall instead be made to the Paying Agent, and (ii) the facilitation of payments and delivery of the Letter of Transmittal pursuant to Section 2.18 shall be made by the Paying Agent, and in each case, in accordance with the terms of the Paying Agent Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the letter delivered by the Company to Parent concurrently with the execution of this Agreement (the “Disclosure Letter”), the Company hereby represents and warrants to Parent and Merger Sub as of the date hereof as follows:

3.1.Organization and Qualification. The Company is a limited liability company duly formed, validly existing and in good standing under the Laws of the State of Delaware. Each of the Subsidiaries of the Company is a legal entity duly formed or organized, validly existing and in good standing, as applicable, under the Laws of the jurisdiction of its respective formation or organization. The Company and its Subsidiaries each have requisite limited liability company or other legal entity, as the case may be, power and authority to own, lease and operate their respective properties and assets and to carry on their respective businesses as they are now being conducted, except where the failure to have such power and authority would not, individually or in the aggregate, reasonably be expected to be materially adverse to the Company taken as a whole. The Company and its Subsidiaries are each duly qualified to do business and is in good standing in each jurisdiction where the ownership, leasing or operation of its properties or assets or the conduct of their respective businesses requires such qualification, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, result in a Material Adverse Effect. The Company has made available to Parent true and correct copies of each of its and its Subsidiaries’ Organizational Documents, each as in effect as of the date hereof and together with all amendments and modifications thereto.

3.2.Capitalization; Subsidiaries.

(a)The issued and outstanding Units constitute all of the issued and outstanding equity interests of the Company. All of the Units were duly authorized and validly issued and are free of preemptive and similar rights. No Units were issued in violation of any applicable Laws in all material respects, any Contract to which the Company is a party or bound by, or any preemptive or similar rights of any Person. Section 3.2(a) of the Disclosure Letter sets forth a list of each Unitholder, along with the number and class of Units owned by each Unitholder as of the date hereof. The number of issued and outstanding Units of the Company as of immediately prior to the Effective Time will be as set forth in Section 3.2(a) of the Disclosure Letter, subject to such changes therein as will occur as a result of the Pre-Closing Blocker Reorganization and the Redemption.

 

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(b)Except as set forth in the Company’s or its Subsidiaries’ respective Organizational Documents or as set forth in Section 3.2(a) of the Disclosure Letter, there are no (i) outstanding securities of the Company or its Subsidiaries convertible into or exchangeable for one or more units of equity or voting interests in, the Company or its Subsidiaries, (ii) options, warrants or other rights or securities issued or granted by either the Company or its Subsidiaries relating to or based on the value of the equity securities of the Company or its Subsidiaries, (iii) Contracts that are binding on the Company or its Subsidiaries that obligate the Company or any of its Subsidiaries to issue, acquire or sell, redeem, exchange or convert any equity interests in the Company or its Subsidiaries, or (iv) outstanding restricted equity interests, restricted share units, unit appreciation rights, performance shares, performance units, deferred stock units, contingent value rights, “phantom” stock or similar rights issued or granted by the Company or its Subsidiaries that are linked to the value of the Units, and all such interests shall, from and after the Merger, represent solely the right to receive consideration in accordance with this Agreement. Except with respect to the Pre-Closing Blocker Restructuring, there are no outstanding contractual obligations of the Company or either of its Subsidiaries to repurchase, redeem, exchange, convert or otherwise acquire or sell any membership interests of the Company or its Subsidiaries.

(c)Section 3.2(c) of the Disclosure Letter sets forth a true and correct list of each Subsidiary of the Company as of the date hereof, together with its jurisdiction of organization or formation and the holders of ownership interests in such Subsidiary. Except as set forth in Section 3.2(c) of the Disclosure Letter, the Company or one or more of its Subsidiaries owns, directly or indirectly, all of the issued and outstanding equity interests of each of the Company’s Subsidiaries, free and clear of any Liens except for transfer and other restrictions under applicable federal and state securities Laws or Permitted Liens, and all of such outstanding equity securities have been duly authorized and validly issued and are free of preemptive and similar rights. Other than with respect to the Subsidiaries, the Company and its Subsidiaries do not own any equity interest or other voting security in any Person. After giving effect to the Redemption, Cheese Grits will not be a Subsidiary of the Company for purposes of this Agreement.

(d)Except as set forth in Section 3.2(d) of the Disclosure Letter, neither the Company nor any of its Subsidiaries is a party to any Contract with respect to the voting of, that restricts the transfer of or that provides registration rights in respect of, any membership interests or other voting securities or equity interests of the Company or any of its Subsidiaries.

3.3.Authority. The Company (a) has the respective rights and powers to enter into, and perform its obligations under each agreement delivered in connection herewith to which it is a party and (b) has taken all requisite action to authorize (i) the execution, delivery and performance of each such agreement delivered in connection herewith to which it is a party and (ii) the consummation of the Transactions and other transactions contemplated by this Agreement and each such other agreement delivered in connection herewith to which it is a party. All requisite consent from the Unitholders has been obtained and will be valid at Closing. Each agreement delivered in connection herewith to which to which the Company is a party is duly executed by the Company and, assuming the due authorization, execution and delivery of such agreements by each other party thereto, is binding upon, and legally enforceable against, the Company in accordance with its terms, except as such enforceability may be subject to, and limited by, applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, receivership and similar Laws affecting the enforcement of creditors’ rights generally, and general equitable principles (regardless of whether enforceability is considered a proceeding at law or in equity) (the “Bankruptcy and Equity Exception”).

 

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3.4.No Violation and Consents.

(a)Except as set forth in Section 3.4(a) of the Disclosure Letter, the consummation by the Company of the transactions contemplated by this Agreement will not: (i) (x) conflict with or violate any provision of the Company’s Organizational Documents, or (y) conflict with or violate any provision of the Organizational Documents of any Subsidiary of the Company; (ii) assuming that all consents, approvals and authorizations described in Section 3.4(a) have been obtained and all filings and notifications described in Section 3.4(a) have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to the Company or any of its Subsidiaries, or any of their respective properties or assets; or (iii) require any consent, notice or approval under, violate, conflict with, result in any breach of or any loss of any benefit under, or constitute a default under (with or without notice or lapse of time, or both), or result in termination or give to others any right of termination, vesting, amendment, acceleration, modification, cancellation, purchase or sale of, or result in the triggering of any payment or in the creation of a Lien (other than Permitted Liens) upon any of the respective properties or assets (including rights) of the Company or any of its Subsidiaries, pursuant to any Contract to which the Company or any of its Subsidiaries is a party (or by which any of their respective properties or assets (including rights) are bound) or any Permit held by the Company or any of its Subsidiaries.

(b)The consummation by the Company of the transactions contemplated by this Agreement will not require (with or without notice or lapse of time, or both) any consent, approval, authorization or permit of, or filing or registration with or notification to, any Governmental Authority with respect to the Company or any of its Subsidiaries or any of their respective properties or assets, other than (i) such filings as may be required in connection with the payment of any transfer and gain taxes, (ii) compliance with, and such filings, consents, approvals, authorizations and/or registrations as set forth on Section 3.4(a) of the Disclosure Letter, (iii) compliance with applicable federal or state securities or “blue sky” Laws, (iv) such consents, approvals, authorizations, permits, filings, registrations or notifications as may be required as a result of the identity of Parent or its Affiliates and (v) where the failure to obtain such consents, approvals, authorizations or permits of, or to make such filings, registrations with or notifications to, any Governmental Authority would not, individually or in the aggregate, (A) prevent or materially delay consummation of the Transactions and the other transactions contemplated by this Agreement or (B) reasonably be expected to be materially adverse to the Company taken as a whole.

3.5.Affiliate Contracts. Except as set forth in Section 3.5 of the Disclosure Letter, neither the Company nor any of its Subsidiaries is party to any Contract with any of the Company’s or its Subsidiaries’ respective directors, officers or Affiliates (other than the Company and its Subsidiaries) that is material to the Company and its Subsidiaries, except for Contracts (i) providing for employment and benefit arrangements, including employment agreements, incentive compensation and equity arrangements or (ii) entered into in the Ordinary Course on terms no less favorable to the Company or its Subsidiaries than would be obtained in a comparable arm’s length transaction with a Person that is not a director, officer or Affiliate of the Company or its Subsidiaries.

3.6.Title to Assets; Condition and Sufficiency of Assets.

(a)The Company and its Subsidiaries have good and valid title to, or otherwise has the right to use pursuant to a valid and enforceable lease, license or similar Contract, all of its machinery, equipment and other material tangible assets (collectively, the “Assets”), in each case free and clear of 

 

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any Lien other than Permitted Liens, except as would not reasonably be expected, individually or in the aggregate, to be materially adverse to the Company taken as a whole. The Assets owned and leased by the Company and each Subsidiary constitute all of the material tangible assets, together with the Company’s and each Subsidiaries’ non-tangible assets and rights, necessary to permit the continued operation of the Business of the Company and its Subsidiaries in substantially the same manner as conducted on the date hereof and during the twelve-month period ended on the Balance Sheet Date.

(b)The buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property of each the Company and any of its Subsidiaries are structurally sound, are, in all material respects, in good operating condition and repair, and are adequate for the uses to which they are being put, and none of such buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost. The buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property currently owned or leased by each of the Company and any of its Subsidiaries, together with all other properties and assets of the Company and any of its Subsidiaries, are, in all material respects, sufficient for the continued conduct of the Business of each of the Company and any of its Subsidiaries after the Closing in substantially the same manner as conducted prior to the Closing.

3.7.Litigation and Compliance with Laws. Except as set forth in Section 3.7 of the Disclosure Letter:

 

(a)To the Company’s Knowledge, neither the Company nor any of its Subsidiaries is, in any material respect, in conflict with, or in default, breach or violation of, (i) any Law applicable to the Company or any of its Subsidiaries, as applicable, or (ii) any Permit.

(b)As of the date of this Agreement, there is no Action pending or, to the Company’s Knowledge, threatened against either the Company or any of its Subsidiaries, or any property or asset of the Company or any of its Subsidiaries, at law or in equity by or before any Governmental Authority, the outcome of which, if adversely decided, would reasonably be expected to result in damages in excess of $100,000. Neither the Company nor any of its Subsidiaries nor any material property or asset of the Company or any of its Subsidiaries is subject to any continuing Order of, consent decree, settlement agreement or other similar written agreement with, or, to the Company’s Knowledge, continuing investigation by, any Governmental Authority, or any Order, writ, judgment, injunction, decree, determination or award of any Governmental Authority that would (A) prevent or materially delay consummation of the Transactions and the other transactions contemplated by this Agreement or (B) reasonably be expected to be materially adverse to the Company taken as a whole.

(c)As of the date hereof, there is no Action to which the Company or any of its Subsidiaries is a party pending or, to the Knowledge of the Company, threatened seeking to prevent, hinder, modify, delay or challenge the Transactions or any of the other transactions contemplated by this Agreement.

3.8.Intellectual Property.

(a)Set forth on Section 3.8(a) of the Disclosure Letter is a complete and accurate list of all Company Intellectual Property that is (i) Registered Intellectual Property as of the date hereof and 

 

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that has not otherwise lapsed, been abandoned, expired or been cancelled (“Company Registered Intellectual Property”) (including the jurisdictions where such Company Registered Intellectual Property is registered or where applications have been filed, all application and registration numbers, and all application filing and registration dates), or (ii) general categories of trade secrets (including recipes and formulae) and unregistered trademarks, in each case, that are Company Intellectual Property and that are material to the conduct of the Businesses of the Company and any of its Subsidiaries. Each item of Company Registered Intellectual Property is valid and enforceable, and each item of Company Registered Intellectual Property is subsisting. No loss or expiration of any Company Owned Intellectual Property is threatened in writing, pending or reasonably foreseeable.

(b)Except as set forth on Section 3.8(b) of the Disclosure Letter, the Company and its Subsidiaries collectively own or have the rights to use, pursuant to a written, enforceable license agreement, all Intellectual Property Rights that are reasonably necessary for or material to the conduct of the businesses of the Company and any of its Subsidiaries. Immediately subsequent to the Closing, subject to obtaining any required consents listed on Section 3.4(a) of the Disclosure Letter, the Company Intellectual Property will be exclusively owned by one of the Company and its Subsidiaries and all other Intellectual Property that is material to or necessary for the conduct of the businesses of the Company and its Subsidiaries as currently conducted and currently proposed to be conducted immediately subsequent to the Closing will be available for use by the Company and its Subsidiaries on terms and conditions substantially similar to those under which the Company and its Subsidiaries used such Intellectual Property immediately prior to the Closing, without the payment of additional fees.

(c)The Company’s and its Subsidiaries’ conduct of each of their respective Businesses as currently conducted do not infringe, violate, or misappropriate the Intellectual Property Rights of any third party. No Action has been filed or threatened in writing against either the Company or any of its Subsidiaries between January 1, 2015 and the date hereof that alleges either the Company or any of its Subsidiaries infringes or misappropriates the Intellectual Property Rights of any third party.

(d)Except as set forth in Section 3.8(d) of the Disclosure Letter, to the Company’s Knowledge, no Person is misappropriating, infringing, diluting or violating any Company Intellectual Property. The Company or its Subsidiaries have not, since January 1, 2015, made any claim of any interference, infringement, misappropriation or other violation Company Intellectual Property, and to the Knowledge of the Company, no grounds for any such claim exists.

(e)Except as set forth on Section 3.8(e) of the Disclosure Letter, the Company or one of its Subsidiaries has secured from each employee, contractor or other Person who is or was involved in the creation or development of any Company Intellectual Property, a written agreement containing (A) a present, affirmative assignment of all Intellectual Property developed by such employee, contractor or Person rights in such Company Intellectual Property for or on behalf of, or during their employment by the Company of any of its Subsidiaries to the Company or any of its Subsidiaries and a waiver of all moral rights therein, and (B) a confidentiality provision protecting the Trade Secrets and other confidential information of the Company or a Subsidiary. No employee, contractor or other Person has any claim, right (whether or not currently exercisable) or interest to or in any Company Intellectual Property. No funding, facilities or personnel of any governmental authority or any university, college, research institute or other educational institution (other than refundable tax credits) have been or are being used, directly or indirectly, to develop or create, in whole or in part, any Company Intellectual Property, and to the Knowledge of the Company, no employee, contractor or other Person who was 

 

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involved in, or who contributed to, the creation or development of any Company Intellectual Property performed services for any governmental authority, university, college, research institute or other educational institution during a period of time during which such employee, contractor or other Person was also performing services for the Company or its Subsidiaries.

(f)The Company and its Subsidiaries have acted in a commercially reasonable and prudent manner with respect to the protection and preservation of the confidentiality of the Trade Secrets that are Company Intellectual Property.

(g)To the Company’s Knowledge, the IT Systems of the Company and any of its Subsidiaries are adequate, in all material respects, for the operation of the business of each the Company and any of its Subsidiaries as currently conducted and currently proposed to be conducted immediately following the Closing. The Company and its respective Subsidiaries have taken steps to provide for the back-up and recovery of material data and have disaster recovery plans and procedures.

3.9.Privacy and Data Protection. Except as set forth on Section 3.9(a) of the Disclosure Letter, the Company and each of its Subsidiaries have taken commercially reasonably security measures in accordance with normal industry practice to protect the IT Systems against intrusion. Except as set forth on Section 3.9(a) of the Disclosure Letter, since January 1, 2017, (i) the IT Systems have not suffered a material failure, and (ii) there have not been any security breaches relating to the IT Systems that have resulted in a third Person obtaining access to any material confidential information or proprietary information relating to the Businesses of either the Company or any of its Subsidiaries or personal identifiable information of the customers of either the Company or any of its Subsidiaries. The Company and each of its Subsidiaries are in material compliance with any posted privacy policies and any Laws relating to personal data or other information.

3.10.Contracts.

(a)Section 3.10(a) of the Disclosure Letter sets forth a true and correct list, and the Company has made available to Parent true and correct copies, in each case as of the date hereof, of each Contract and all amendments and modifications thereto to which the Company or any of its Subsidiaries is a party or by which it is bound or to which any of their respective assets are subject that:

(i)is a limited liability company agreement, limited partnership agreement or joint venture agreement or Organizational Document or similar Contract that is material to the Business and operations of the Company and its Subsidiaries;

(ii)(A) pursuant to which the Company or any of its Subsidiaries spent, in the aggregate, more than $250,000 with respect to any such agreement or Contract during the fiscal year ended December 31, 2019, (B) is reasonably expected to spend more than $250,000 by the Company or any of its Subsidiaries in the current fiscal year or(A) with any of the Material Suppliers;

(iii)(A) that generated more than $250,000 in revenues for the Company or any of its Subsidiaries in the fiscal year ended December 31, 2019, (B) is reasonably expected to generate more than $250,000 in revenues for the Company or any of its Subsidiaries in the current fiscal year or (C) with any of the Material Distributors;

 

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(iv)contains covenants of the Company or any of its Subsidiaries (w) purporting to limit, in any material respect, either the type of Business in which the Company or any of its Subsidiaries or any of their Affiliates may engage or the geographic area in which any of them may so engage, (x) obligating the Company or any of its Subsidiaries to sell any product exclusively to a single party, or to obtain any product or service exclusively from a single party, or (y) imposing any minimum requirements, so– called “take or pay” penalties or other similar obligations or penalties upon the Company or any of its Subsidiaries;

(v)that relates to the creation, incurrence, assumption or guarantee of Indebtedness in excess of $100,000 (individually or in the aggregate), whether unsecured or secured;

(vi)contains a put, call or similar right pursuant to which the Company or any of its Subsidiaries could be required to purchase or sell, as applicable, any equity interests of any Person or assets;

(vii)related to any interest rate, derivatives or hedging transaction;

(viii)provides for the employment or service of any employee or service provider of the Company or any of its Subsidiaries with aggregate cash payments in any calendar year in excess of $100,000 or that is not terminable “at will” or that imposes further Liability or executory obligations on the Company or any of its Subsidiaries following the termination date other than accrued salary and other similar liability required by Law;

(ix)any collective bargaining Contract or other Contract with any labor union, works council, trade or labor organization or employee association representing or purporting to represent any employee of the Company or any of its Subsidiaries;

(x)granting a “most favored nation” provision in favor of any customer or licensee of the Company or any of its Subsidiaries;

(xi)to which any Governmental Authority is a party or under which any Governmental Authority has any rights or obligations;

(xii)concerns the sale, disposition, assignment, transfer or acquisition (whether by merger, purchase of stock, purchase of assets or otherwise) of material tangible assets or properties by the Company or any of its Subsidiaries (in a single transaction or a series of related transactions), or any merger or business combination with respect to the Businesses of the Company or any of its Subsidiaries;

(xiii)pursuant to which the Company or any of its Subsidiaries obtains or grants any licenses or other rights with respect to material Company Intellectual Property (each such Contract, a “Material Company Intellectual Property Contract”);

 

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(xiv)pursuant to which the Company or any of its Subsidiaries is granted a license to any software (excluding in each case licenses for commercially available off- the-shelf software licensed pursuant to a non-negotiated license having an annual value of less than $25,000), or pursuant to which any software has been customized for the Company or any of its Subsidiaries;

(xv)that requires the Company or any of its Subsidiaries to provide any funds to or make any investment in (in each case, in the form of a loan, capital contribution or similar transaction) any Person in excess of $100,000;

(xvi)that grants any rights of first refusal, rights of first negotiation or other similar rights to any Person with respect to the sale of any material business or assets of the Company or any of its Subsidiaries, taken as whole;

(xvii)related to a lease or sublease interest in any Leased Real Property;

(xviii)that relates to material Intellectual Property Rights not owned by the Company or any of its Subsidiaries and used by the Company or any of its Subsidiaries, other than confidentiality and non-disclosure agreements entered into in the Ordinary Course, intellectual property assignments entered into with employees and contractors in the Ordinary Course;

(xix)providing for the settlement of any Action pending before any Governmental Authority, or any other Action, against the Company or any of its Subsidiaries, pursuant to which the Company or any of its Subsidiaries has existing obligations; or

(xx)Contract with any professional employer organization, staffing agency, temporary employee agency or similar company or service.

Each Contract of a type described in clause (a) of this Section 3.10 is referred to herein as a “Company Material Contract.”

(b)Neither the Company nor any of its Subsidiaries is in (or has received any written claim of) breach of or default under the terms of any Company Material Contract, and, to the Knowledge of the Company, no event has occurred that with notice or lapse of time or both would constitute a breach or default thereunder by the Company or any of its Subsidiaries, where such breach or default would, individually or in the aggregate, reasonably be expected to be materially adverse to the Company taken as a whole. To the Knowledge of the Company, no other parties to any Company Material Contract is in breach of or default under the terms of any Company Material Contract where such breach or default has had or would reasonably be expected to be materially adverse to the Company taken as a whole. As of the date of this Agreement, each Company Material Contract is a valid and binding agreement of the Company or any Subsidiary thereof, and, to the Knowledge of the Company, the other parties thereto and is in full force and effect, except, for such failures as would not, individually or in the aggregate, reasonably be expected to be materially adverse to the Company taken as a whole, subject to the Bankruptcy and Equity Exception.

 

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3.11.Financial Statements and Related Matters.

(a)Section 3.11(a) of the Disclosure Letter contains true, correct and complete copies of (i) audited consolidated financial statements of the Company and its Subsidiaries, as of and for the periods ended December 31, 2018 and December 31, 2019 (collectively, the “Annual Financial Statements”) and the related consolidated balance sheets, statements of income, statements of retained earnings and other comprehensive income, and statements of cash flows, and (ii) unaudited interim consolidated financial statements of the Company and its Subsidiaries at and for the nine-month period ended September 30, 2020 (the “Balance Sheet Date”) (the “Interim Financial Statements”) and the related consolidated balance sheet and statement of income (the Annual Financial Statements and the Interim Financial Statements, collectively, the “Financial Statements”). The Financial Statements have been prepared in accordance with GAAP and all applicable rules and regulations as modified by the Historical Accounting Practices, and, in the case of the Interim Financial Statements, subject to normal year-end adjustments and the absence of notes. The Financial Statements accurately and fairly present in all material respects the consolidated financial position, results of operations and cash flows of the Company and its Subsidiaries at the dates and for the periods indicated therein and are consistent with the books and records of the Company (except as expressly noted therein).

(b)The Company and its Subsidiaries (i) make and keep books, records and accounts, which, in reasonable detail, accurately and fairly reflect, in all material respects, the transactions and dispositions of assets of the Company and any of its Subsidiaries and (ii) maintain a system of internal accounting controls sufficient, in all material respects, to provide reasonable assurances (A) all transactions are executed in accordance with management’s general or specific authorization and (B) access to the property and assets of the Company and any of its Subsidiaries is permitted only in accordance with management’s general or specific authorization.

3.12.No Undisclosed Material Liabilities. Except for Liabilities (a) disclosed, accrued or reserved against in the Financial Statements, (b) incurred in the Ordinary Course since the Balance Sheet Date that would not reasonably be expected, individually or in the aggregate, to be material to the Company taken as a whole, (c) set forth in Section 3.12 of the Disclosure Letter and (d) obligations of future performance under Contracts neither the Company nor any of its Subsidiaries has any material Liability of any kind that would be required to be set forth on the face of a balance sheet prepared in accordance with GAAP.

3.13.Subsequent Events. Except as set forth on Section 3.13 of the Disclosure Letter or otherwise contemplated by this Agreement:

(a)Since May 31, 2020, the Business of the Company and each of its Subsidiaries has been conducted and carried on in all material respect in the Ordinary Course; and

(b)Since May 31, 2020, there has been no Material Adverse Effect; and

(c)Since the Balance Sheet Date, neither the Company nor any of its Subsidiaries has taken any action that if taken after the date hereof would require Parent’s consent pursuant to Section 6.2.

3.14.Insurance. Section 3.14 of the Disclosure Letter sets forth and describes all material policies of insurance and self-insurance arrangements which are currently maintained by or on behalf of the Company and any of its Subsidiaries. Each such policy of insurance is in full force and effect in accordance with its terms. Each such policy is, and during the past three (3) years, each such policy (or a 

 

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reasonably equivalent policy) has been, in full force and effect (and all premiums due and payable thereon have been paid in full on a timely basis), and no written notice of cancellation, termination or revocation or other written notice that any such insurance policy is no longer in full force or effect or that the issuer of any policy is not willing or able to perform its obligations thereunder has been received by the Company or any of its Subsidiaries, except, in each case, as would not reasonably be expected, individually or in the aggregate, to be materially adverse to the Company taken as a whole. Section 3.14 of the Disclosure Letter sets forth any pending insurance claims under insurance policies maintained by or on behalf of the Company or any of its Subsidiaries that have been denied insurance coverage.

3.15.Licenses and Permits. Section 3.15 of the Disclosure Letter sets forth a true and correct list of all local, state and federal licenses, franchises, permits, certifications, approvals, operating authorities, state operating licenses or registrations and other interstate, intrastate, national or international regulatory licenses and other Governmental Authority authorizations held by the Company and its Subsidiaries material to the conduct of the Business (collectively, “Permits”). The Permits are valid and in effect and none of the Permits will be terminated as a result of this Agreement and the transaction contemplated hereunder. There has been no violation, cancellation, revocation or default of any Permit, except as would not reasonably be expected to be materially adverse to the Company taken as a whole. All applications required to have been filed for the renewal of the Permits listed in Section 3.15 of the Disclosure Letter and all other filings required to have been made with respect to such Permits have been duly filed on a timely basis with the appropriate Governmental Authority. The Company has filed to renew all Permits that expire within forty-five (45) days of the Closing Date unless filing for renewal within such timeframe is not permitted by the applicable Governmental Authority.

3.16.Environmental Matters. Except as could not, individually or in the aggregate, reasonably be expected to be materially adverse to the Company taken as a whole:

(a)The Company and each of its Subsidiaries is each, and has been in compliance with those Environmental Laws applicable to their respective operations as currently or formerly conducted (including possessing and complying with any Environmental Permits required for their respective operations as presently conducted), and there are no administrative or judicial proceedings pending or threatened against the Company or any of its Subsidiaries and neither the Company nor any of its Subsidiaries have received any written notice, demand, letter or claim, in either case, alleging that the Company or its Subsidiaries is in violation of, or liable under, any Environmental Law and, to the Knowledge of the Company, no such notice, demand or claim has been threatened.

(b)Neither the Company nor any of its Subsidiaries has received any notification, notice, demand or claim alleging liability on the part of the Company or any of its Subsidiaries as a result of the presence, Release or exposure to Hazardous Substances and, to the Knowledge of the Company, neither the Company nor any of its Subsidiaries has been responsible for the Release of Hazardous Substances at, on or under any of the Real Property in a quantity or condition that, in either case, would reasonably be expected to result in a Liability under Environmental Laws on the part of the Company or any of its Subsidiaries.

(c)Neither the Company nor any of its Subsidiaries is subject to any Governmental Order, settlement or agreement that relates to any violation of, noncompliance with or Liability under any Environmental Law, and has not received any written notice of Liability, violation or noncompliance under any Environmental Law from a Governmental Authority or any other person, which remains unresolved.

 

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(d)The Company has provided or otherwise made available to Parent and Merger Sub: any and all material environmental reports, studies, audits, records, sampling data, site assessments, risk assessments, and other similar documents with respect to the Business of each of the Company and any of its Subsidiaries or any other real property currently or formerly owned, leased or operated by the Company in connection with the Business related to compliance with Environmental Laws or concerning Hazardous Substances.

3.17.Tax Matters.

(a)The Company and its Subsidiaries have complied with all Laws relating to Taxes. The Company and its Subsidiaries have timely filed (or caused to be timely filed) all income and other material Tax Returns required to be filed by it with the appropriate Governmental Authorities in all jurisdictions in which such Tax Returns are required to be filed, and such Tax Returns are true, correct and complete in all material respects. Neither the Company nor any of its Subsidiaries have requested or filed or caused to be requested or filed any extension of time within which to file any Tax Return, which Tax Return has not since been filed.

(b)Except as set forth in Section 3.17(b) of the Disclosure Letter, the Company and its Subsidiaries have (i) timely paid (or caused to be paid) all Taxes required by it to be paid (whether or not shown or required to be shown due on any Tax Return); and (ii) made adequate provision on its books and records in accordance with GAAP for all unpaid Taxes not yet due and owing.

(c)No Tax audits or other proceedings are in progress, pending, or to the Knowledge of the Company threatened with regard to any Taxes or Tax Returns of or with respect to the Company or any of its Subsidiaries. Neither the Company nor its Subsidiaries has received in the past five (5) years a notice from any Governmental Authority that the Company or any of its Subsidiaries is required to pay Taxes or file Tax Returns in a jurisdiction in which the Company or any of its Subsidiaries does not file Tax Returns or pay Taxes. Neither the Company nor any of its Subsidiaries has commenced a voluntary disclosure proceeding in any state or local or non-U.S. jurisdiction that has not been fully resolved or settled.

(d)Neither the Company nor any of its Subsidiaries has a request for a private letter ruling, a request for administrative relief, a request for technical advice, a request for a change of any method of accounting, or any other similar request that is in progress or pending with any Governmental Authority with respect to Taxes or Tax Returns of the Company or any of its Subsidiaries. No power of attorney granted by the Company or any of its Subsidiaries with respect to any Taxes is currently in force. Neither the Company nor any of its Subsidiaries has executed or filed with any Governmental Authority any agreement or other document extending or having the effect of extending the period for assessment, reassessment or collection of any Taxes.

(e)The Company and each of its Subsidiaries has timely and properly withheld (i) all required amounts from payments to its employees, agents, contractors, nonresidents, equity holders, lenders, and other Persons and (ii) all sales, use, ad valorem, and value added Taxes. The Company and each of its Subsidiaries have timely remitted all withheld Taxes to the proper Governmental Authority in accordance with all applicable Laws.

(f)Neither the Company nor any of its Subsidiaries has ever been a member of an Affiliated Group. Neither the Company nor any of its Subsidiaries are liable for Taxes of any other Person as a result of successor liability, transferee liability, joint or several liability (including pursuant to 

 

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Treasury Regulation Section 1.1502-6 or any similar provision of state, local, or non-U.S. Laws), or otherwise. Neither the Company nor any of its Subsidiaries is a party to any tax sharing agreements (other than an agreement entered into in the Ordinary Course and not primarily related to Taxes).

(g)Neither the Company nor any of its Subsidiaries is required to pay, gross up, or otherwise indemnify any employee or contractor for any Taxes, including potential Taxes imposed under Code Section 409A.

(h)Neither the Company nor any of its Subsidiaries has are required to include any material item of income in, or exclude any material item of deduction for any period after the Closing Date as a result of (i) an installment sale transaction occurring on or before the Closing governed by Code Section 453 (or any similar provision of state, local or non-U.S. Laws); (ii) a transaction occurring on or before the Closing reported as an open transaction for U.S. federal income Tax purposes (or any similar doctrine under state, local, or non-U.S. Laws); (iii) any advance payments, prepaid amounts or “deferred revenue”; (iv) a change in method of accounting with respect to a Pre-Closing Period (or an impermissible method used in a Pre-Closing Period); (v) an agreement entered into with any Government Authority (including a “closing agreement” under Code Section 7121) on or prior to the Closing Date; or (vi) the application of Code Section 263A (or any similar provision of state, local, or non-U.S. Laws).

(i)Neither the Company nor any of its Subsidiaries use the cash method of accounting for income Tax purposes or are party to any “long-term contracts” that are subject to a method of accounting provided for in Code Section 460.

(j)There are no Liens for Taxes other than Permitted Liens upon any of the assets of the Company or any of its Subsidiaries.

(k)Neither the Company nor any of its Subsidiaries has engaged in any transaction that could affect the Tax Liability for any taxable year not closed by the applicable statute of limitations which is a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2) (irrespective of the effective dates).

(l)Neither the Company nor any of its Subsidiaries has an office, fixed place of business, or “permanent establishment” (within the meaning of an applicable Tax treaty) in any country other than the United States.

(m)The Company and its Subsidiaries have complied in all material respects with the terms of any Tax holidays, Tax credit programs, and other similar Tax benefits to which they were entitled and chose to participate in.

3.18.Labor and Employee Benefits.

(a)Except as set forth on Section 3.18(a) of the Disclosure Letter, no employee of the Company or any of its Subsidiaries is, or has in the five (5) years preceding the date of this Agreement been, represented by any union or covered by any collective bargaining agreement. Except as set forth on Section 3.18(a) of the Disclosure Letter, no labor organization or group of employees of the Company or any of its Subsidiaries has made a demand for recognition or certification, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or, to the Knowledge of the Company, threatened to be brought or filed, with the National Labor 

 

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Relations Board or any other labor relations Governmental Authority. In the five (5) years preceding the date of this Agreement, there has not been, nor to the Knowledge of the Company has there been any threat of, any strike, slowdown, work stoppage, lockout or other similar labor disruption or dispute affecting the Company, its Subsidiaries, or any of their employees, independent contractors or consultants. Neither the Company nor any of its Subsidiaries currently has any duty to recognize or bargain with any union or other Person purporting to act as the exclusive bargaining representative of any employees, independent contractors or consultants of the Company or any of its Subsidiaries. The Company is not, and in the five (5) years preceding the date of this Agreement has not been, the subject of any actual or, to the Knowledge of the Company, threatened Action asserting that the Company has committed an unfair labor practice.

(b)The Company and its Subsidiaries have complied in all material respects with the Immigration Reform and Control Act of 1986 and all regulations promulgated thereunder (“IRCA”) and similar laws with respect to the completion, maintenance and other documentary requirements of Forms I-9 (Employment Eligibility Verification Forms) and similar employee verification forms for all employees of the Company and any of its Subsidiaries and the re- verification of the employment status of any and all employees of the Company and any of its Subsidiaries whose employment authorization documents indicated a limited period of employment authorization. Neither the Company nor any of its Subsidiaries has received any written notice of any inspection or investigation relating to its alleged noncompliance with or violation of applicable immigration Laws, nor has it been warned, fined or otherwise penalized by reason of any failure to comply with applicable immigration Laws.

(c)The Company and each of its Subsidiaries has maintained and currently maintains adequate insurance as required by applicable Laws with respect to workers’ compensation claims. Neither the Company nor any of its Subsidiaries is aware of any facts or circumstances that are reasonably likely to result in an increase in liability to the Company or any of its Subsidiaries under any workers’ compensation Laws after the Closing Date. To the Knowledge of the Company, there are no workers’ compensation claims that are reasonably likely to have a material adverse effect on the accident cost experience of the Company or any of its Subsidiaries.

(d)Except as set forth on Section 3.18(d) of the Disclosure Letter, since March 1, 2020, neither the Company nor any of its Subsidiaries has instituted a furlough, salary reduction, or layoff in response to the coronavirus disease 2019 (COVID-19). If applicable, the Company has complied with the WARN Act, and it has no plans to undertake any action in the future that would trigger the WARN Act. During the preceding ninety (90)-day period, no employees of any of the Company have suffered an “employment loss,” as defined under the WARN Act. The Company and its Subsidiaries have complied in all material respects with all applicable Laws (including the U.S. Families First Coronavirus Response Act), and have made commercially reasonable efforts to comply in all material respects with all applicable guidance published by a Governmental Authority, in each case, concerning workplace and employee health and safety practices related to the COVID-19 pandemic. The Company has provided to Parent all inspection reports issued under the Occupational Safety and Health Administration or any similar Governmental Authority (“OSHA”). The Company and each of its Subsidiaries have complied in all material respects with any Orders issued to such entity under OSHA or any other applicable occupational health and safety Law and there are no appeals of any Orders that are currently outstanding.

(e)Except as would not, individually or in the aggregate, reasonably be expected to be materially adverse to the Company taken as a whole, (i) each of the Company and its Subsidiaries is and has been in the five (5) years preceding the date of this Agreement in compliance with all applicable 

 

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Laws relating to the employment of labor, including all applicable Laws relating to wages, hours, collective bargaining, employment discrimination, safety and health and (ii) there are no Actions, complaints, charges or claims against the Company or any of its Subsidiaries filed or, to the Knowledge of the Company, threatened in writing to be brought or filed, with any Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment of any individual by the Company or any or its Subsidiaries. The Company and its Subsidiaries have used commercially reasonable efforts to investigate any employment discrimination and sexual harassment allegations of, or against, any employee, officer, or director of the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has taken any corrective action or entered into any Contract to settle any allegation of sex-based discrimination, sexual assault, sexual harassment or other misconduct against any director, officer, or manager of the Company or any of its Subsidiaries.

(f)The Company has provided Parent a true, accurate and complete list of (i) all employees of the Company or any of its Subsidiaries, specifying each employee’s name; title; department; hire date; status (full-time/part-time/seasonal/temporary); principal place of employment; classification as exempt or non-exempt under the Fair Labor Standards Act (the “FLSA”) or applicable Law; current year annual base salary or hourly wage; current year target incentive compensation (bonus and/or commission, as applicable); and full, prior year actual incentive compensation (bonus and/or commission, as applicable) and (ii) all Persons currently engaged by the Company or any of its Subsidiaries as independent contractors or consultants, specifying each Person’s name; start date; end date (if applicable); location; full, prior year total compensation (or, if prior year not available, current year to date total compensation); current year to date total compensation; and compensation rate. As of the date hereof, all compensation, including wages, commissions and bonuses, payable to all employees, independent contractors and consultants for services performed on or prior to the date hereof have been paid in full (or accrued in full on the Interim Financial Statements). All employees of the Company or its Subsidiaries who have been classified as exempt under the FLSA or similar Laws have been properly classified and treated as such, and all current and former employees of the Company and any of its Subsidiaries have been properly compensated for all time worked in accordance with the FLSA and similar Laws, and all Persons who have provided services to the Company or any of its Subsidiaries as independent contractors or consultants have been properly classified as independent contractors, rather than employees, of the Company or its Subsidiaries, for purposes of all applicable Laws and Benefit Plans.

(g)Section 3.18(g) of the Disclosure Letter set forth a complete list of each Benefit Plan. With respect to each Benefit Plan, the Company has made available to Parent a true and correct copy of: (i) each such Benefit Plan and all amendments thereto; (ii) each trust, insurance or material administrative services agreement relating to each such Benefit Plan; (iii) the most recent summary plan description of each such Benefit Plan and any material modifications thereto, if applicable; (iv) all material written contracts relating to each Benefit Plan, including administrative service contracts and group insurance contracts; (v) all material communications with any Governmental Authority in connection with any Benefit Plan during the last three (3) years; and (vi) the most recent determination, advisory or opinion letter, if applicable, issued by the IRS with respect to any Benefit Plan intended to be qualified under Section 401(a) of the Code. The Company does not have any commitment to (A) establish or enter into any new Benefit Plan, or (B) to modify or amend any Benefit Plan or the terms and conditions of any Benefit Plan.

(h)Each Benefit Plan is and has been administered, operated and maintained in compliance with its terms and in all material respects with all applicable Laws, including ERISA and the 

 

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Code. With respect to any Benefit Plan, there has been no (i) “prohibited transaction,” as defined in Section 406 of ERISA or Code Section 4975 that are not otherwise exempt under Section 408 of ERISA, (ii) failure to comply with any provision of ERISA, the Code, other applicable Law, or any agreement, or (iii) nondeductible contribution, which, in the case of any of (i), (ii), or (iii), would subject the Company, its Subsidiaries or any ERISA Affiliate to material Liability either directly or indirectly (including, without limitation, through any obligation of indemnification or contribution) for any damages, penalties, or Taxes, or any other Losses or expense. No Action (other than those relating to routine claims for benefits) is pending or, to the Company’s Knowledge, threatened with respect to any Benefit Plan, nor is there any basis for such Action. The Company has not been informed that any Benefit Plan is the subject of an examination or audit by a Governmental Authority. All payments, distributions, reimbursements or contributions required to have been made (under the provisions of any agreements or other governing documents or applicable Law) with respect to all Benefit Plans have been paid, made or accrued.

(i)None of the Company, its Subsidiaries or any ERISA Affiliate has ever maintained, sponsored, contributed to, or has any obligation to contribute to, (i) a “defined benefit plan” as defined in Section 3(35) of ERISA, (ii) a pension plan subject to Title IV of ERISA, Section 412 of the Code, or Section 302 of ERISA, (iii) a “multiple employer plan” within the meaning of Section 413(c) of the Code, (iv) a “multiemployer plan” as defined in Section 3(37) of ERISA or Section 414(f) of the Code, or (v) a “multiple employer welfare arrangement” as defined in Section 3(40) of ERISA. Neither the Company nor its Subsidiaries is under any obligation to provide, nor does any Benefit Plan provide or has ever provided, health care or other welfare benefits with respect to any Person after termination of such Person’s employment with, or service to, the Company or its Subsidiaries (other than as required by Part 6 of Subtitle B of Title I of ERISA or other applicable state Laws).

(j)Except as set forth in Section 3.18(j) of the Disclosure Letter, neither the execution and delivery of this Agreement nor the consummation of the Transactions contemplated hereby or any termination of employment or service in connection therewith will (i) cause any payment (including severance, change of control, retention, golden parachute, bonus or otherwise) to become due to any Person, (ii) result in any forgiveness of Indebtedness, (iii) increase any benefits otherwise payable by the Company, (iv) result in the acceleration of the time of payment or vesting of any benefits, or (v) result in “parachute payments” as defined in Section 280G(b)(2) of the Code (whether or not such payment is considered to be reasonable compensation for services rendered). None of the Company or its Subsidiaries has any obligation to reimburse, “gross-up”, make similar “make-whole” payments to, or otherwise indemnify any Person for any Taxes imposed under Section 4999 of the Code.

(k)With respect to each group health plan benefiting any current or former employee of the Company or its Subsidiaries that is subject to Section 4980B of the Code, the Company and each of its Subsidiaries have complied in all material respects with the continuation coverage requirements of Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA. The Company, its Subsidiaries and each ERISA Affiliate have complied and are in compliance in all material respects with the requirements of the Patient Protection and Affordable Care Act, including the Health Care and Education Reconciliation Act of 2010, as amended, and including any guidance issued thereunder (“PPACA”), in all material respects. Neither the Company nor any of its Subsidiaries has incurred, or is reasonably expected to incur or to be subject to, any Tax, penalty or other Liability that may be imposed under PPACA. Except as set forth in Section 3.18(k) of the Disclosure Letter, no health and welfare Benefit Plan is self-funded or self-insured.

 

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(l)Each Benefit Plan that constitutes in any part a nonqualified deferred compensation plan within the meaning of Section 409A of the Code has been operated and maintained in form and operation in compliance in all material respects with Section 409A of the Code and applicable guidance thereunder. No payment to be made under any Benefit Plan is, or will be, subject to the penalties of Section 409A(a)(1) of the Code. None of the Company or its Subsidiaries has any obligation to reimburse, “gross-up”, make similar “make-whole” payments to, or otherwise indemnify any Person for any Taxes imposed under Section 409A of the Code.

(m)Except as set forth in Section 3.18(m) of the Disclosure Letter, there are no

(i) employment Contracts or agreements for a specified duration, or (ii) agreements providing for retention (in connection with the transactions contemplated hereby), severance or other benefits in the event of termination of any employee of the Company or any of its Subsidiaries.

3.19.Real Property.

(a)After giving effect to the Redemption, neither the Company nor any of its Subsidiaries will own any real property.

(b)Section 3.19(b) of the Disclosure Letter lists the common street address for all real property (the “Leased Real Property”) in which the Company and any of its Subsidiaries holds a lease interest as of the date hereof, and lists the Contract pursuant to which such lease exists (including each amendment or guaranty related thereto). Except as would not, individually or in the aggregate, reasonably be expected to be materially adverse to the Company taken as a whole, the Company and its Subsidiaries collectively holds a valid leasehold interest in all such Leased Real Property. True and complete copies of the Contracts underlying such leases have been made available to Parent.

(c)Except as provided in Section 3.19(c) of the Disclosure Letter, or as would not, individually or in the aggregate, reasonably be expected to be materially adverse to the Company taken as a whole, to the Knowledge of the Company, as of the date hereof, neither the Company nor any of its Subsidiaries has received any written notice to the effect that any condemnation or rezoning proceedings are pending or threatened, with respect to any of the Leased Real Property.

3.20.Suppliers; Distributors.

(a)Suppliers. Section 3.20(a) of the Disclosure Letter sets forth the ten (10) largest suppliers of the Company and its Subsidiaries (based on dollar amounts of products and services supplied to the Company and its Subsidiaries) (the “Material Suppliers”), in each case, (i) for the twelve months ended December 31, 2019, and (ii) for the nine months ended September 30, 2020, and the amounts for which such Material Suppliers invoiced the Company and its Subsidiaries during such periods. Except as set forth in Section 3.20(a) of the Disclosure Letter, (w) all Material Suppliers continue to be suppliers of the Company or any of its Subsidiaries; (x) neither the Company nor any of its Subsidiaries has received any written notice that any Material Supplier will reduce materially its business with the Company or any of its Subsidiaries from the levels achieved during the twelve months ended December 31, 2019; (y) no Material Supplier has terminated its relationship with the Company or any of its Subsidiaries or, to the Company’s Knowledge, threatened to do so; and (z) neither the Company nor any of its Subsidiaries is involved in any material claim or dispute with any Material Supplier.

 

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(b)Distributors. Section 3.20(b) of the Disclosure Letter sets forth the twenty (20) largest distributors of the Company and its Subsidiaries (based on dollar amounts of the purchase orders such distributors provided to the Company and its Subsidiaries) (the “Material Distributors”), in each case, for (i) the twelve months ended December 31, 2019, and (ii) the nine months ended September 30, 2020, and the total dollar amounts for which the Company and its Subsidiaries received purchase orders from such Material Distributors during such periods. Except as set forth in Section 3.20(b) of the Disclosure Letter: (w) all Material Distributors continue to be distributors of the Company or any of its Subsidiaries; (x) neither the Company nor any of its Subsidiaries has received any written notice that any Material Distributor will reduce materially or has threatened to reduce its business with the Company or any of its Subsidiaries from the levels achieved during the twelve months ended December 31, 2019; (y) no Material Distributor has terminated its relationship with the Company or any of its Subsidiaries or, to the Company’s Knowledge, threatened to do so; and (z) neither the Company nor any of its Subsidiaries is involved in any material claim or dispute, with any Material Distributor in excess of $100,000.

3.21.Accounts Receivable, Accounts Payable.

(a)All accounts receivable and other receivables constitute valid claims in favor of the Company and its Subsidiaries arising from bona fide arm’s length transactions of the Company or any of its Subsidiaries, arising in the Ordinary Course. The reserves, allowances and discounts with respect to such accounts receivable are adequate and consistent in extent with reserves, allowances and discounts previously maintained by the Company and its Subsidiaries in the Ordinary Course, and there are no claims, defenses, counterclaims, refusals to pay or other rights of set off against any thereof other than such as has arisen or will arise in the Ordinary Course and for which reserves have been established to the extent required by GAAP. No Person has any Lien on any such accounts receivable or any part thereof, and no material agreement, for deduction, free goods, discount or other deferred price or quantity adjustment has been made with respect to any such accounts receivable.

(b)To the Company’s Knowledge, there is no contest, claim, defense, or right of setoff (i) with any obligor of any of the accounts receivable; or (ii) as to the amount or validity of such accounts receivable.

(c)Since January 1, 2019, neither the Company nor any of its Subsidiaries has (i) collected its accounts receivable other than in the Ordinary Course; (ii) accelerated or otherwise altered its collection practices; or (iii) written off or written down any of its accounts receivable.

(d)Except as set forth on Section 3.21(d) of the Disclosure Letter, the Company and its Subsidiaries have paid their respective accounts payable in the Ordinary Course, have not delayed payments on any such accounts payable and have not altered the payment terms thereunder.

3.22.Regulatory.

(a)A complete and accurate list of all brand names under which all Company Products are currently branded or marketed (the “Brands”), the Company Product associated with each Brand and a brief description of such Company Product is set forth on Section 3.22(a) of the Disclosure Letter.

(b)Except as set forth on Section 3.22(b) of the Disclosure Letter, neither the Company nor any of its Subsidiaries holds or has ever held or applied for under the laws of the United 

 

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States or any of its jurisdictions a local, municipal or state (i) alcohol beverage retail license or (ii) Permit relating to the sale, manufacture, production, distribution or marketing of cannabis or any product derived from cannabis.

(c)(x) The Company has received depletion reports and sales reports relating to each Material Distributor for (i) the twelve months ended December 31, 2019, and (ii) the nine months ended September 30, 2020, and (y) the Company has made available to Parent true and correct copies of each of such depletion report and sales report actually received from each Material Distributor for (i) the twelve months ended December 31, 2019, and (ii) the nine months ended September 30, 2020.

(d)Neither the Company nor any of its Subsidiaries manufactures, produces, distributes, sells or markets, or, since January 1, 2018, has ever manufactured, produced, distributed, sold or marketed, Company Products in the United States except in material compliance with applicable Law and the Permits. Except as set forth on Section 3.22(d) of the Disclosure Letter, no investigations, accusations, inquiries or claims of a Governmental Authority relating to the manufacture, production, distribution, sale or marketing of any Company Products are presently pending or, to the Knowledge of the Company, threatened.

(e)Since January 1, 2018, neither the Company nor any of its Subsidiaries has ever manufactured, produced, sold or marketed any Company Products with a label that violates applicable Law or the Permits. Since January 1, 2018, neither the Company nor any of its Subsidiaries has ever received written notice of investigations, accusations, inquiries or claims by any Governmental Authority or other person relating to a claim that the Company has marketed the Products as “all natural” or made other health related claims.

(f)A complete list of all agreements between any Person and the Company or any of its Subsidiaries that relate to any profit sharing, marketing promotions or sponsorships relating to any Company Products in excess of $50,000, the Company or any of its Subsidiaries is set forth on Section 3.22(f) of the Disclosure Letter, all of which are in material compliance with applicable Law and the Permits.

3.23.Payments; Foreign Corrupt Practices Act; U.S. Export and Sanctions Laws.

(a)Neither the Company, its Subsidiaries nor, to the Company’s Knowledge, any of their directors, officers, agents, employees, consultants, resellers, distributors or other Persons associated with or acting on behalf of the Company or its Subsidiaries has, directly or indirectly paid, promised, offered, or agreed to pay, or authorized the payment of, any fee, commission or other sum of money or item of value, however characterized, to any Person, Governmental Authority or other party that is illegal or improper under any applicable Law, including the United States Foreign Corrupt Practices Act of 1977 (15 United States Code Section 78dd-1, et. seq.) (“FCPA”) and the UK Anti-Bribery Act of 2010, and any other applicable Law regarding corruption, bribery, ethical business conduct, money laundering, political contributions, gifts, hospitalities, or expense reimbursements to public officials and private persons, books and records, and financial controls (the “Anti-Corruption Laws”), paid, provided, authorized, promised, offered, solicited, or accepted any unlawful bribe, corrupt payment, rebate, payoff, influence payment, kickback or any other illegal benefit or advantage of a financial or other nature; (iii) made any unlawful contribution, gift, entertainment or other unlawful expense in violation of any applicable Law, (iv) made any unlawful payment or offered anything of value to any foreign or domestic political parties or campaigns, (v) violated or is in violation of any provision of the FCPA, the UK Anti-Bribery Act of 2010, or any Anti-Corruption Laws, or (vi) established or maintained any fund or account 

 

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that has not been accurately recorded in the books and records of the Company and its Subsidiaries. The Company, its Subsidiaries and, to the Company’s Knowledge, their respective directors, officers, agents, employees, consultants, resellers, and distributors are not the subject of any allegation, voluntary disclosure, investigation, prosecution or other enforcement action related to the FCPA, the UK Anti-Bribery Act of 2010, or any Anti- Corruption Law.

(b)Neither the Company nor any of its Subsidiaries is the subject of any allegation, voluntary disclosure, investigation, prosecution, or other enforcement action pending or threatened against the Company and/or its Subsidiaries under any Export Control and Sanctions Laws. Neither the Company nor any of its Subsidiaries has received any correspondence, notice, request for information or administrative subpoena from a Governmental Authority regarding a potential violation by the Company or any of its Subsidiaries of any Export Control and Sanctions Laws.

(c)To the Knowledge of the Company, neither the Company nor any of its Subsidiaries has participated in or is participating in an international boycott within the meaning of Section 999 of the Code.

3.24.Inventory; Returns.

(a)The inventories of each of the Company and its Subsidiaries, including all raw materials, work in process, parts, supplies and finished goods merchandise of each the Company and its Subsidiaries (the “Inventory”) are of good and merchantable material, of a quality and quantity usable or saleable in the Ordinary Course, are fit for their intended purpose and are not, in any material respect, adulterated, misbranded, mispackaged, mispack or mislabeled within the meaning of, or in violation of, any applicable Laws, and are carried on the books and records of the Company in accordance with GAAP.

(b)Neither the Company nor any of its Subsidiaries has any Contract or understanding with any customer that involves any “guaranteed sales” (or other similar program) of products of the Company or any of its Subsidiaries by that customer to third parties that could result in uncontested returns of such products from such customer or otherwise obligate the Company or any of its Subsidiaries to accept returned products of the Company or any of its Subsidiaries, and none of the Company’s or any of its Subsidiaries’ customers has asserted any claim against the Company or any of its Subsidiaries for guaranteed or uncontested returns during the past two (2) years with respect to any product or item manufactured, distributed or sold by or on behalf of the Company or any of its Subsidiaries.

3.25.Product Warranties; Recalls.

(a)Except as set forth on Section 3.25(a) of the Disclosure Letter, no claims of a customer, distributor, Governmental Authority or other Person based upon any alleged defects, nonconformance, impurity, contamination, misbranding, adulteration or unsuitability of any of the products of the Company or any of its Subsidiaries are presently pending or, to the Knowledge of the Company, threatened. Except as set forth in Section 3.25(a) of the Disclosure Letter, neither the Company nor any of its Subsidiaries has given or made any express warranties to third parties with respect to any products or items manufactured, distributed or sold by or on behalf of the Company or any of its Subsidiaries, except for warranties arising by operation of Law.

(b)Except as set forth on Section 3.25(b) of the Disclosure Letter, (i) there have been no recalls of any Company Products, whether ordered by a Governmental Authority or undertaken voluntarily by the Company or any of its Subsidiaries, (ii) there have been no voluntary withdrawals, post-

 

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sale warnings or similar actions conducted with respect to any Company Products, and (iii) to the Knowledge of the Company, none of the Company Products have been produced, adulterated, misbranded, mispackaged, mispacked or mislabeled in violation of applicable Law. Other than as set forth on Section 3.25(b) of the Disclosure Letter, neither the Company nor any of its Subsidiaries has made, nor, to the Knowledge of the Company, has any other party made, any investigation of, or decision concerning whether or not to undertake any of the foregoing nor, to the Knowledge of the Company, is there a basis for any such recall.

3.26.Trade Programs. Section 3.26 of the Disclosure Letter contains a description of all existing programs, practices or arrangements that relate to trade discounts, trade promotions, allowances, marketing, promotional sales, demo and sampling commitments, coupons, reward programs, gift certificates, or gift cards related to the operations of the Company’s and any of its Subsidiaries’ business as conducted from January 1, 2018 through the date of this Agreement. Except as set forth on Section 3.26 of the Disclosure Letter, to the Knowledge of the Company, no investigations, accusations, inquiries or claims of a Governmental Authority relating to any trade program are presently pending or threatened.

3.27.Bank Accounts. Section 3.27 of the Disclosure Letter sets forth a correct and complete list of each bank, trust company, savings institution, brokerage firm, mutual fund or other financial institution with which the Company or any of its Subsidiaries has an account, safe deposit or lock box and the names and identification of all Persons authorized to draw on it or to have access to it.

3.28.Cares Act.

(a)The Company has obtained a “Paycheck Protection Program” loan through the U.S. Small Business Administration under the CARES Act with a face amount of $441,162 (collectively with any interest accrued thereon, the “PPP Loan”). At the time of submission of the application and at the time the PPP Loan was funded, the Company satisfied, in all material respects, all of the applicable criteria for the PPP Loan set forth in the Small Business Act (15 U.S.C. 636(a)) and the CARES Act. The application materials and supporting documentation with respect to the PPP Loan delivered by the Company to the financial institutions providing the PPP Loan were true and correct in all material respects.

(b)Except as set forth on Section 3.28(b) of the Disclosure Letter, neither the Company nor any of its Subsidiaries has elected to defer any Taxes payable by the Company or any of its Subsidiaries pursuant to Section 2302 of the CARES Act. All Taxes payable by the Company or any of its Subsidiaries which have been so deferred have been properly accrued for and are reflected on the Financial Statements.

3.29.Brokers. Except for Arlington Capital Services LLC, neither the Company nor any of its Subsidiaries has any Liability to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

3.30.Acknowledgement of No Other Representations or Warranties. The Company acknowledges and agrees that, (i) except for the representations and warranties contained in Article V, neither Parent, Merger Sub nor any of their respective Affiliates or Representatives makes or has made, nor is the Company relying on, and expressly disclaims any reliance on, any representation or warranty, either express or implied, concerning Parent, Merger Sub or any of their respective businesses, operations, assets, Liabilities, results of operations, condition (financial or otherwise) or prospects or the 

 

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transactions contemplated by this Agreement, and (ii) the Company hereby disclaims all Liability and responsibility for any representation, warranty, projection, forecast, statement or information communicated, or furnished (orally or in writing) by Parent, Merger Sub or any of their respective Affiliates or Representatives (including any opinion, information, projection, or advice that may have been or may be provided to the Company by any Representative of Parent or Merger Sub) except for the representations and warranties expressly set forth in Article V. Notwithstanding anything in this Agreement to the contrary, the Company and its Subsidiaries make no representations or warranties to Parent or Merger Sub regarding any projections or the future or probable profitability, success, business, opportunities, relationships and operations of the Company and its Subsidiaries. Subject to all of the foregoing provisions of this Section, each of Blocker, the Company, Parent and Merger Sub retains all of its rights and remedies with respect to claims based on Fraud.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BLOCKER, BLOCKER GP AND 
BLOCKER SELLER

Except as set forth in the Disclosure Letter, each of Blocker, Blocker Seller and Blocker GP hereby represents and warrants to Parent and Merger Sub as of the date hereof as follows:

4.1.Organization. Blocker is a legal entity duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization. Blocker has the requisite power and authority to own, lease and operate its properties and assets and to carry on its business as it is now being conducted, except where the failure to have such power and authority would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the ability of Blocker to consummate the Blocker Sale.

4.2.Authority. Each of Blocker, Blocker Seller and Blocker GP (a) has the right and power to enter into, and perform its obligations under, this Agreement and each other agreement delivered in connection herewith to which it is a party and (b) has taken all requisite action to authorize (i) the execution, delivery and performance of this Agreement and each such other agreement delivered in connection herewith to which it is a party and (ii) the consummation of the Blocker Sale and other Transactions contemplated by this Agreement and each such other agreement delivered in connection herewith to which it is a party. This Agreement has been duly executed and delivered by Blocker and, assuming the due authorization, execution and delivery of this Agreement by each other parties hereto, is binding upon, and legally enforceable against, Blocker in accordance with its terms, subject to the Bankruptcy and Equity Exception.

4.3.Capitalization. All of the limited partner interests of Blocker as of the date hereof are issued and outstanding and held (beneficially and of record) by Blocker Seller, and all of the general partner interests of Blocker as of the date hereof are issued and outstanding and held (beneficially and of record) by the Blocker GP. All outstanding Blocker Interests have been duly authorized, validly issued, and are not subject to preemptive rights. There are no options, warrants, convertible, exercisable or exchangeable securities or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued membership interests of Blocker or obligating Blocker to issue or sell any membership interests of, or other interest convertible, exercisable or exchangeable for any equity interest in, Blocker.

 

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4.4.Blocker Interests. Blocker Seller is the sole record and beneficial owner of the Blocker LP Interests, free and clear of any Lien other than transfer restrictions under applicable federal and state securities laws and the Organizational Documents of Blocker or other Permitted Liens. The Blocker GP is the sole record and beneficial owner of the Blocker GP Interests, free and clear of any Lien other than transfer restrictions under applicable federal and state securities laws and the Organizational Documents of Blocker or other Permitted Liens. No other Person owns or holds any equity interests or rights in Blocker and no Person other than Parent has any right to acquire any Blocker Interests.

4.5.No Violations and Consents.

(a)None of the execution, delivery or performance of this Agreement by Blocker Seller, Blocker GP and Blocker or the consummation by Blocker Seller, Blocker GP and Blocker of the Transactions contemplated by this Agreement will: (i) conflict with or violate any provision of the charter, bylaws or any equivalent Organizational Document or governing documents of Blocker Seller, Blocker GP or Blocker; (ii) assuming that all consents, approvals and authorizations described in Section 4.5(b) have been obtained and all filings and notifications described in Section 4.5(b) have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to Blocker Seller, Blocker GP or Blocker or any of their respective properties or assets; or (iii) require any consent or approval under, violate, conflict with, result in any breach of or any loss of any benefit under, or constitute a default under (with or without notice or lapse of time, or both), or result in termination or give to others any right of termination, vesting, amendment, acceleration, cancellation, purchase or sale of, or result in the triggering of any payment or in the creation of a Lien (other than Permitted Liens) upon any of the properties or assets of Blocker or its assets pursuant to, any Contract to which Blocker, Blocker GP or Blocker Seller is a party (or by which any of its properties or assets is bound) or any Permit held by it except, with respect to clauses (ii) and (iii), as would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the ability of Blocker to consummate the Blocker Sale.

(b)None of the execution, delivery or performance of this Agreement by Blocker, Blocker GP or Blocker Seller or the consummation by Blocker, Blocker GP or Blocker Seller of the Transactions contemplated by this Agreement will require (with or without notice or lapse of time, or both) any consent, approval, authorization or permit of, or filing or registration with or notification to, any Governmental Authority, other than (i) such filings as may be required in connection with the payment of any transfer and gain Taxes, (ii) compliance with, and such filings, consents, approvals, authorizations and/or registrations as set forth on Section 4.5(b) of the Disclosure Letter and (iii) where the failure to obtain such consents, approvals, authorizations or permits of, or to make such filings, registrations with or notifications to, any Governmental Authority would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the ability of Blocker, Blocker GP or Blocker Seller to consummate the Blocker Sale.

4.6.Litigation and Compliance with Laws.

(a)Neither Blocker, Blocker GP nor Blocker Seller is in material conflict with, or in material default, breach or violation of any Law applicable to such Person.

(b)As of the date of this Agreement, there is no Action pending or, to the knowledge of Blocker, threatened against Blocker, or any property or asset of such Person, at law or in equity by or before any Governmental Authority. Neither Blocker, Blocker GP, Blocker Seller nor any material property or asset of such Person is subject to any continuing Order of, consent decree, settlement 

 

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agreement or other similar written agreement with, or, to Blocker’s, Blocker GP’s, or Blocker Seller’s knowledge, continuing investigation by, any Governmental Authority, or any Order, writ, judgment, injunction, decree, determination or award of any Governmental Authority that would (A) prevent or materially delay consummation of the Blocker Sale and the other Transactions contemplated by this Agreement or (B) reasonably be expected to be materially adverse to Blocker, Blocker GP or Blocker Seller taken as a whole.

(c)As of the date hereof, there is no Action to which Blocker, Blocker GP or Blocker Seller is a party pending or, to the knowledge of Blocker, Blocker GP or Blocker Seller, threatened seeking to prevent, hinder, modify, delay or challenge the Blocker Sale or any of the other Transactions contemplated by this Agreement.

(d)As of the date hereof, there are no Actions pending or, to the knowledge of Blocker, Blocker GP or Blocker Seller, threatened against Blocker, Blocker GP or Blocker Seller with respect to this Agreement, or in connection with the Transactions contemplated hereby.

4.7.Purpose. Blocker (i) was formed solely for the purpose of holding the direct or indirect equity interests in the Company held directly or indirectly by it (the “Company Ownership”), (ii) has not conducted any business or engaged in any activities other than those related to the Company Ownership and activities incidental thereto (including the negotiation, execution and consummation of this Agreement and the Transactions contemplated hereby, and all other acts, actions and activities incidental thereto, including the Pre-Closing Blocker Restructuring), (iii) has no assets other than the Company Ownership and cash and cash equivalents and (iv) has no material Liabilities other than those incidental to its formation or existence or the Company Ownership or incurred in connection with this Agreement and the Transactions contemplated hereby (including the Pre-Closing Blocker Restructuring).

4.8.No Employees. Blocker does not currently have any employees, and Blocker has never had any employees.

4.9.No Broker. Neither Blocker, Blocker GP nor Blocker Seller has entered into any agreement or arrangement entitling any broker, finder, investment banker or financial advisor to any broker’s or finder’s fee or commission in connection with the transactions contemplated by this Agreement for which either Parent, Merger Sub, the Company, its Subsidiaries or their Affiliates would be responsible.

4.10.Taxes.

(a)Blocker is currently, and has been at all times since formation, been treated as a corporation for U.S. federal and state income tax purposes.

(b)Blocker (i) has duly and timely filed (taking into account any extension of time within which to file) all income and other material Tax Returns required to be filed by it as of the date hereof; (ii) has timely paid all material Taxes (whether or not shown as due on such filed Tax Returns) that Blocker is otherwise obligated to pay; (iii) has duly and timely paid all material Taxes required to be withheld from any payment to a shareholder, partner, employee or any other Person; (iv) with respect to all Tax Returns filed by or with respect to Blocker, has not waived any statute of limitations with respect to Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency (other than any such extension obtained in connection with an extension to file a Tax Return); and (v) to the actual knowledge of the Blocker, does not have any deficiency, audit, examination, investigation or other 

 

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proceeding in respect of Taxes or Tax matters pending or, as of the date of this Agreement, proposed or threatened in writing which, if resolved in the favor of the Taxing authority, would result in a material Tax deficiency.

(c)Blocker does not have any liability for the Taxes of any other person under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor or by contract (other than any contract the principal purpose of which does not relate to Taxes).

(d)There are no Liens on the assets of Blocker as a result of unpaid Taxes (other than for current Taxes not yet due and payable).

(e)Blocker is not, and has not been, a party to, or a promoter of, a “listed transaction” within the meaning of Treasury Regulations Section 1.6011- 4(b).

4.11.Acknowledgement of No Other Representations or Warranties. Blocker and Blocker GP acknowledge and agree that, (i) except for the representations and warranties contained in Article V, neither Parent, Merger Sub nor any of their respective Affiliates or Representatives makes or has made, nor is Blocker or Blocker GP relying on, and expressly disclaims any reliance on, any representation or warranty, either express or implied, concerning Parent, Merger Sub or any of their respective businesses, operations, assets, Liabilities, results of operations, condition (financial or otherwise) or prospects or the transactions contemplated by this Agreement, and (ii) Blocker and Blocker GP hereby disclaims all liability and responsibility for any representation, warranty, projection, forecast, statement or information communicated, or furnished (orally or in writing) by Parent, Merger Sub or any of their respective Affiliates or Representatives (including any opinion, information, projection, or advice that may have been or may be provided to Blocker by any Representative of Parent or Merger Sub) except for the representations and warranties expressly set forth in Article V. Notwithstanding anything in this Agreement to the contrary, neither Blocker nor either Blocker Partner makes any representations or warranties to Parent or Merger Sub regarding any projections or the future or probable profitability, success, business, opportunities, relationships and operations of Blocker. Subject to all of the foregoing provisions of this Section, each of Blocker, each Blocker Partner, the Company, Parent and Merger Sub retains all of its rights and remedies with respect to claims based on Fraud.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

Except as set forth in the letter delivered by Parent to the Company concurrently with the execution of this Agreement (the “Parent Disclosure Letter”), Parent and Merger Sub jointly and severally represent and warrant to the Company, Blocker GP and Blocker Seller as of the date hereof as follows:

5.1.Organization. Parent is a legal entity duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization. Parent has the requisite power and authority to own, lease and operate its properties and assets and to carry on its business as it is now being conducted, except where the failure to have such power and authority would not, individually or in the aggregate, reasonably be expected to be materially adverse to the Parent taken as a whole. Merger Sub is a limited liability company duly formed, validly existing and in good standing under the Laws of the State of Delaware, and has all requisite limited liability company power to effect the transactions contemplated by this Agreement. Merger Sub was formed for the specific purpose of 

 

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consummating the transactions contemplated hereby, and Merger Sub has not conducted any operations or business nor does Merger Sub have any Liabilities or obligations other than in connection with the negotiation of this Agreement or any other Transaction Document and the consummation of the transaction contemplated hereby.

5.2.Authority. Each Parent and Merger Sub (a) has the respective right and power to enter into, and perform its obligations under, this Agreement and each other agreement delivered in connection herewith to which it is a party and (b) has taken all requisite action to authorize (i) the execution, delivery and performance of this Agreement and each such other agreement delivered in connection herewith to which it is a party and (ii) the consummation of the Merger and other transactions contemplated by this Agreement and each such other agreement delivered in connection herewith to which it is a party. This Agreement has been duly executed and delivered by Parent and Merger Sub and, assuming the due authorization, execution and delivery of this Agreement by each other parties hereto, is binding upon, and legally enforceable against, Parent and Merger Sub in accordance with its terms, subject to the Bankruptcy and Equity Exception.

5.3.No Violations and Consents.

(a)None of the execution, delivery or performance of this Agreement by Parent or Merger Sub or the consummation by Parent or Merger Sub of the transactions contemplated by this Agreement will: (i) conflict with or violate any provision of the charter, bylaws or any equivalent organizational or governing documents of Parent or Merger Sub; (ii) assuming that all consents, approvals and authorizations described in Section 5.3(b) have been obtained and all filings and notifications described in Section 5.3(b) have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to Parent or Merger Sub or any of its properties or assets; or (iii) require any consent or approval under, violate, conflict with, result in any breach of or any loss of any benefit under, or constitute a default under (with or without notice or lapse of time, or both), or result in termination or give to others any right of termination, vesting, amendment, acceleration, cancellation, purchase or sale of, or result in the triggering of any payment or in the creation of a Lien upon any of the properties or assets of Parent or Merger Sub pursuant to, any Contract to which Parent or Merger Sub is a party (or by which any of its properties or assets is bound) or any Permit held by it except, with respect to clauses (ii) and (iii), as would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the ability of Parent or Merger Sub to consummate the Merger.

(b)None of the execution, delivery or performance of this Agreement by Parent or Merger Sub or the consummation by Parent or Merger Sub of the transactions contemplated by this Agreement will require (with or without notice or lapse of time, or both) any consent, approval, authorization or permit of, or filing or registration with or notification to, any Governmental Authority, other than (i) such filings as may be required in connection with the payment of any transfer and gain Taxes, (ii) compliance with, and such filings, consents, approvals, authorizations and/or registrations as set forth on Section 5.3(b) of the Parent Disclosure Letter and (iii) where the failure to obtain such consents, approvals, authorizations or permits of, or to make such filings, registrations with or notifications to, any Governmental Authority would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the ability of Parent or Merger Sub to consummate the Merger.

 

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5.4.Litigation.

(a)As of the date hereof, there is no Action to which Parent or Merger Sub is a party pending or, to the Knowledge of Parent, threatened against Parent or Merger Sub that would reasonably be expected to prevent or materially delay the consummation of the transactions contemplated hereby. As of the date hereof, neither Parent nor Merger Sub is subject to any outstanding Order that, individually or in the aggregate, would reasonably be expected to (A) prevent or materially delay consummation of the Transactions and the other transactions contemplated by this Agreement or (B) be materially adverse to the Parent taken as a whole.

(b)Except as set forth in the Public Company Reports, none of Parent or any of its Subsidiaries, or their respective officers, directors or employees (in their capacity as such) are (a) subject to any outstanding injunction, judgment, order, decree, ruling or charge, or (b) party to any action, suit, Proceeding, hearing, or investigation of, in, or before any court or quasi-judicial or administrative agency or any federal, state, local, or foreign jurisdiction nor, to the Knowledge of Parent, is any such action, suit, Proceeding, hearing, or investigation threatened, in each case that is required to be disclosed in the Public Company Reports and has not been disclosed.

5.5.Sufficient Funds. Parent and Merger Sub has, and at the Closing will have, sufficient cash on hand or other sources of immediately available funds to enable it to make payment of all amounts payable by them hereunder and consummate the Transactions contemplated by this Agreement. Neither Parent nor any of its Subsidiaries has incurred any obligation, commitment, restriction or Liability of any kind which would reasonably be expected to impair or adversely affect Parent or Merger Sub’s ability to make any such payment.

5.6.R&W Policy. The R&W Policy obtained by the Parent in connection with the transactions contemplated by this Agreement provides that the insurer thereunder expressly waives, and agrees not to pursue, directly or indirectly, any subrogation rights against the Unitholders or Blocker Seller with respect to any claim made by any insured thereunder other than in the case of Fraud.

5.7.Brokers. Except for Jefferies, LLC, neither Parent nor Merger Sub has entered into any agreement or arrangement entitling any broker, finder, investment banker or financial advisor to any broker’s or finder’s fee or commission in connection with the transactions contemplated by this Agreement for which either Blocker, the Company, its Subsidiaries or their Affiliates would be responsible.

5.8.Absence of Certain Changes. Except to the extent arising out of or relating to the transactions contemplated by this Agreement or as otherwise disclosed in any of the Public Company Reports (a) since May 31, 2020, the business of Parent has been operated in the Ordinary Course in all material respects and (b) since May 31, 2020, there has been no Parent Material Adverse Effect.

5.9.Restrictions on Payment. No Contract that the Parent or any of its Affiliates is party to contains a specific prohibition against payment of an Earn-Out Payment.

5.10.Parent Public Company Reports; Financial Statements; No Undisclosed Liabilities.

(a)Parent has filed or furnished, as applicable, its Form 40-F and Annual Information Form for the fiscal year ended May 31, 2020, its audited financial statements and Management’s Discussion and Analysis Form for the year ended May 31, 2020, and its unaudited financial statements 

 

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and Management’s Discussion and Analysis for the three months ended August 31, 2020, and all exhibits described therein for the fiscal quarter ended August 31, 2020 (collectively, the “Public Company Reports”). As of its respective date, and, if amended, as of the date of the last such amendment, each Public Company Report complied in all material respects with the applicable requirements of the Securities Laws, and any rules and regulations promulgated thereunder applicable to the Public Company Report. As of its respective date, and, if amended, as of the date of the last such amendment, no Public Company Report contained any untrue statement of a material fact or omitted 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. As of the date hereof, there are no outstanding or unresolved comments from any comment letters received by Parent from the SEC or CSA relating to reports, statements, schedules, registration statements or other filings made by Parent with the SEC or CSA.

(b)The consolidated financial statements included or incorporated by reference into the Public Company Reports (including the notes thereto) have been prepared in accordance with IFRS applied on a consistent basis, except as required by the implementation of new IFRS, throughout the periods covered thereby and present fairly in all material respects the consolidated financial condition of Parent as of such dates and the results of operations, stockholders’ equity, and cash flows of Parent for such periods.

(c)Parent has implemented and maintains a system of internal controls over financial reporting that are sufficient to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with IFRS, including policies and procedures that provide reasonable assurance that (a) transactions are executed only in accordance with authorizations of management and directors, (b) transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS. To Parent’s Knowledge, there are not (i) any significant deficiencies or material weaknesses in the design or operation of Parent’s internal control over financial reporting which would have a Parent Material Adverse Effect or (ii) any Fraud, whether or not material, that involves management or other employees who have a significant role in Parent’s internal control over financial reporting.

(d)Except for Liabilities (a) disclosed, accrued or reserved against in the consolidated financial statements included or incorporated by reference into the Public Company Reports, (b) incurred in the Ordinary Course since the latest document filed as part of the Public Company Report that would not reasonably be expected, individually or in the aggregate, to be material to the Parent taken as a whole, (c) set forth in Section 5.10(d) of the Parent Disclosure Letter, neither the Parent, Merger Sub nor any of their respective Subsidiaries has any material Liability of any kind.

5.11.Legal Compliance.

(a)Parent and each of its Subsidiaries is in compliance in all material respects with all Laws and orders applicable to Parent or any of its Subsidiaries or any assets owned or used by Parent or any of its Subsidiaries which are material to the business and operations of Parent and its Subsidiaries.

(b)Neither Parent, its Subsidiaries, or, to Parent’s Knowledge, any representatives acting on their behalf, have, directly or indirectly, corruptly offered, promised, paid, authorized or given money or anything of value to any Governmental Authority or official thereof, for the purpose of: (i) influencing any act or decision of any Government Authority or official thereof; (ii) inducing any Governmental Authority or official thereof to do or omit to do an act in violation of a lawful duty; (iii) 

 

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securing any improper business advantage; (iv) inducing any Governmental Authority or official thereof to influence the act or decision of a Governmental Authority or any official thereof; or (v) for any other corrupt, improper, or illegal purpose, each in order to obtain or retain business for Parent or any of its Subsidiaries in violation of applicable anti-corruption Laws

5.12.No Required Vote. No vote of the holders of any equity interests in Parent is required for Parent to consummate the transactions contemplated by this Agreement, including without limitation the issuance of any Parent Common Shares.

5.13.Solvency. Immediately after giving effect to the transactions contemplated by this Agreement, and assuming the representations set forth in Article III and Article IV are true and correct in all material respects:

(a)the fair saleable value (determined on a going concern basis) of the assets of the Parent and its Subsidiaries (including, following the Closing, the Surviving Entity and its Subsidiaries) shall be greater than the total amount of their liabilities (including all liabilities, whether or not reflected in a balance sheet prepared in accordance with GAAP, and whether direct or indirect, fixed or contingent, secured or unsecured, disputed or undisputed);

(b)each of the Parent and its Subsidiaries (including, following the Closing, the Surviving Entity and its Subsidiaries) shall be able to pay their debts and obligations in the ordinary course of business as they become due;

(c)each of the Parent and its Subsidiaries (including, following the Closing, the Surviving Entity and its Subsidiaries) shall have adequate capital to carry on their businesses and all businesses in which they are about to engage; and

(d)In completing the transactions contemplated by this Agreement, the Parent does not intend to hinder, delay or defraud any present or future creditors of Parent, the Surviving Entity or any of their respective Subsidiaries.

5.14.Investment Intent. Parent is acquiring the Units solely for the purpose of investment and not with a view to, or for sale in connection with, any distribution of the Units in violation of the Securities Act or other applicable Securities Laws. Parent acknowledges that the Units have not been registered under the Securities Act or other applicable Securities Laws and that the Units may not be transferred or sold except pursuant to the registration provisions of the Securities Act or other applicable Securities Laws or pursuant to an applicable exemption from such registration provisions. Purchaser has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Units and is capable of bearing the economic risks of such investment.

5.15.Acknowledgement of No Other Representations or Warranties.

(a)Parent and Merger Sub acknowledges and agrees that, except for the representations and warranties contained in Article III and Article IV, as applicable, (i) neither the Company, its Subsidiaries nor any of their respective Affiliates or Representatives makes or has made, nor is Parent or Merger Sub relying on, and Parent and Merger Sub expressly disclaims any reliance on, any representation or warranty, either express or implied, of any kind whatsoever, including without limitation any representation or warranty concerning (x) the Company, its Subsidiaries, or any of their 

 

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respective Affiliates; (y) any of the Company’s, its Subsidiaries’, or any of their Affiliates’ respective businesses, operations, assets, liabilities, results of operations, condition (financial or otherwise), or prospects; or (z) the transactions contemplated by this Agreement, (ii) neither Blocker, either Blocker Partner nor any of their respective Affiliates or Representatives makes or has made, nor is Parent or Merger Sub relying on, and Parent and Merger Sub expressly disclaims any reliance on, any representation or warranty, either express or implied, of any kind whatsoever, including without limitation any representation or warranty concerning (x) the Company, its Subsidiaries, Blocker, the Blocker Partners or any of their respective Affiliates; (y) any of the Company’s, its Subsidiaries’, Blocker’s, the Blocker Partners’ or any of their respective Affiliates’ respective businesses, operations, assets, liabilities, results of operations, condition (financial or otherwise), or prospects; or (z) the transactions contemplated by this Agreement; and (iii) the Company, its Subsidiaries, Blocker, the Blocker Partners, and each of their respective Affiliates and Representatives hereby disclaim all liability and responsibility for, and Parent and Merger Sub expressly disclaim any reliance on, any representation, warranty, projection, forecast, statement or information communicated, or furnished (orally or in writing) by the Company, its Subsidiaries, Blocker, the Blocker Partners, and each of their respective Affiliates and Representatives (including any opinion, information, projection, or advice that may have been or may be provided to Parent or Merger Sub by any Representative of the Company, its Subsidiaries, Blocker, the Blocker Partners or any of their respective Affiliates).

(b)Without limiting the generality of clause (a) above, Parent and Merger Sub acknowledges and agrees that (i) it has made its own inquiry and investigation into, and, based thereon, has formed an independent judgment concerning the Company and its Subsidiaries, Blocker, the Blocker Partners and the transactions contemplated by this Agreement, (ii) in connection with its investigation of the Company and its Subsidiaries, Blocker, the Blocker Partners, Parent and Merger Sub has received from or on behalf of the Company and its Subsidiaries, Blocker and the Blocker Partners certain projections, including projected statements of operating revenues and income from operations of the Company and its Subsidiaries, Blocker and the Blocker Partners and certain business plan information of the Company and its Subsidiaries, Blocker and the Blocker Seller Partners, (iii) there are uncertainties inherent in attempting to make such estimates, projections and other forecasts and plans, that Parent and Merger Sub is familiar with such uncertainties, and that each Parent and Merger Sub is taking full responsibility for making its own evaluation of the adequacy and accuracy and completeness of all estimates, projections and other forecasts and plans so furnished to it (including the reasonableness of the assumptions underlying such estimates, projections and forecasts), (iv) neither the Company, Blocker, the Blocker Seller Partners, the Company’s Subsidiaries nor any of their respective Affiliates, or Representatives make any representations or warranties whatsoever with respect to such estimates, projections and other forecasts and plans (including the reasonableness of the assumptions underlying such estimates, projections and forecasts), and Parent and Merger Sub have not relied thereon, and (v) Parent and Merger Sub will have no claim against the Company, its Subsidiaries, Blocker, the Blocker Partners or any other Person with respect thereto.

(c)Notwithstanding the foregoing, each of Blocker, the Blocker Partners, the Company, its Subsidiaries, Parent and Merger Sub retains all of its rights and remedies with respect to claims based on Fraud.

 

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ARTICLE VI
COVENANTS

6.1.Certain Governmental Matters.

(a)Without in any way limiting the other provisions of this Section 6.1, Parent and the Company agree to make or cause to be made, in consultation and cooperation with the other and as promptly as practicable and advisable after the date hereof, (i) an appropriate filing of a Notification and Report Form pursuant to the HSR Act, which filing shall be made within five

(5) Business Days of the date hereof, (ii) an appropriate filing with the Toronto Stock Exchange (“TSX”) pursuant to the Toronto Stock Exchange Company Manual (the “TSX Manual”) within five (5) Business Days of the date hereof requesting that the TSX approve the issuance of the Stock Consideration as contemplated herein, subject only to the satisfaction of the customary listing conditions of the TSX (which shall not include the requirement to obtain any approval of the equityholders of Parent prior to Closing) and (ii) all other necessary registrations, declarations, notices and filings relating to the Transactions with any Governmental Authority with regulatory jurisdiction over enforcement of any applicable Competition Laws (“Governmental Competition Authority”) with respect to the Transactions and to respond as promptly as practicable to any inquiries received and requests made by a Governmental Competition Authority for any additional information and documentary material pursuant to the HSR Act, the TSX Manual and any other Competition Law, and in each case, request “early termination” or any equivalent process, if available. From and after the date hereof and until all governmental approvals required in connection with the Transactions have been obtained, Parent shall not, and shall cause its Affiliates not to, operate its business in such manner or take any action, that could reasonably be expected to significantly increase the risk of not obtaining any such governmental approval or clearance or the expiration or termination of any applicable waiting period. Parent shall be responsible for all filing fees paid pursuant to this Section 6.1.

(b)Each of the Company and Parent shall (i) keep each other apprised of the status of any communications with, and any inquiries or requests for additional information from, any Governmental Competition Authority, and shall respond to any such inquiry or request as promptly as practicable, (ii) cooperate and consult with each other in connection with the making of all filings, notifications and any other material actions pursuant to this Section 6.1, including, subject to applicable Laws relating to the exchange of information, by permitting counsel for the other party to review in advance, and consider in good faith the views of the other party in connection with, any proposed written communication to any Governmental Competition Authority, (iii) provide counsel for the other party with copies of all filings and submissions made by such party and all correspondence and other written communications between such party (and its advisors) and any Governmental Competition Authority and any other information supplied by such party or its Affiliates to a Governmental Competition Authority or received from such a Governmental Competition Authority in connection with the Acquisition; provided, however, that materials may be withheld or redacted before being provided to the other party as necessary to (x) comply with contractual arrangements or (y) address reasonable privilege or confidentiality concerns, and (iv) furnish to the other party such information and assistance as such party reasonably may request in connection with the preparation of any submissions to, or agency Action by, any Governmental Competition Authority. Upon and subject to the terms of this Section 6.1, each party agrees to cooperate and use reasonable best efforts to assist in any defense by any other party to the Transactions before any Governmental Competition Authority reviewing the Transactions, including by responding as promptly as practicable to any requests for information by such 

 

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Governmental Competition Authority or such assistance as may be reasonably requested by the other party to this Agreement in such defense.

(c)If any objections are asserted by any Governmental Competition Authority with respect to the Transactions under any applicable Competition Law or which would otherwise prevent, materially impede or materially delay the consummation of the Merger, or if any Action is instituted by any Governmental Competition Authority or any private party challenging the Transactions as violative of any applicable Competition Law, or an Order is issued enjoining the Transactions, each of the Company and Parent shall use its reasonable best efforts to resolve any such objections or Actions so as to permit consummation of the Transactions by the Closing as soon as practicable.

(d)Each of the Company and Parent shall use their reasonable best efforts to cause the expiration or termination of the applicable waiting periods under the applicable Competition Law as soon as practicable. Nothing in this Agreement, including this Section 6.1, obligates Parent or any of its Subsidiaries or Affiliates to offer, negotiate, accept or agree to any divestiture, sale, license or other disposition, or holding separate, of any assets, businesses, entities, or operations, or to the imposition of any restraints, conditions, modifications, limitations or other constraints on the operation of any assets, businesses, entities, or operations. The Company and Parent shall not extend, directly or indirectly, any such waiting period or enter into any agreement with a Governmental Competition Authority to delay or to not consummate the Acquisition on the Closing Date, except with the prior written consent of the other party to this Agreement, which consent shall not be unreasonably withheld or delayed. The Company and Parent shall not have any substantive contact with any Governmental Competition Authority in respect of any filing or Action contemplated by this Section 6.1 unless it consults with the other party in advance and, to the extent permitted by such Governmental Competition Authority, gives the other party the opportunity to participate.

6.2.Conduct of Business by the Company and its Subsidiaries and the Blocker Pending the Transactions. The Company and the Blocker agree that, between the date of this Agreement and the Closing, and in the case of the Blocker, subject to Section 6.10, except (i) as set forth in Section 6.2 of the Disclosure Letter, (ii) as contemplated or required by any other provision of this Agreement (including effecting the Pre-Closing Blocker Reorganization or the Redemption), or (iii) as required by applicable Law or by any Governmental Authority of competent jurisdiction, 54 unless Parent and Merger Sub otherwise agrees in writing (which agreement shall not be unreasonably withheld, delayed or conditioned), the Company and each of its Subsidiaries and the Blocker shall each use reasonable best efforts to conduct their operations in all material respects in the Ordinary Course. Without limiting the foregoing, except (i) as set forth in Section 6.2 of the Disclosure Letter, (ii) as contemplated or required by any other provision of this Agreement (including effecting the Pre-Closing Blocker Reorganization or the Redemption), (iii) as required by applicable Law or by any Governmental Authority of competent jurisdiction, (iv) as required to comply with COVID-19 Measures or (v) as reasonably undertaken to respond to the effects of COVID-19 or COVID-19 Measures with the prior consultation with Parent, neither the Company nor any of its Subsidiaries nor the Blocker shall, between the date of this Agreement and the Closing, as applicable, unless Parent and Merger Sub otherwise agrees in writing (which agreement shall not be unreasonably withheld, delayed or conditioned):

(a)amend their Organizational Documents, except for non-material amendments made solely for administrative purposes;

(b)(i) issue or authorize the issuance of or sell any units, membership interest, shares of capital stock or other ownership interests, or any notes, bonds or other securities of the Company or 

 

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any of its Subsidiaries or the Blocker (including any option, warrant or other right to acquire the same), in any instance, convertible into, exchangeable for or exercisable for ownership interests of the Company or any of its Subsidiaries or the Blocker or split, subdivide, combine or reclassify any ownership interests of the Company or any of its Subsidiaries or the Blocker, (ii) purchase, redeem or otherwise acquire, or offer to purchase redeem or otherwise acquire, any ownership interests of the Company or any or its Subsidiaries or the Blocker or any other security convertible into, exchangeable for or exercisable for ownership interests of the Company or any of its Subsidiaries or the Blocker, or (iii) declare, set aside, or make any other distributions using membership interests or property of the Company or its Subsidiaries with respect to, or enter into any Contract relating to the declaration of any such distribution with respect to, the ownership interests in the Company or any of its Subsidiaries or the Blocker (for the avoidance of doubt, the Company and its Subsidiaries and the Blocker shall be permitted to make cash distributions or dividends);

(c)(i) sell, pledge, dispose of, transfer, lease, license or encumber (except for Permitted Liens) any material personal property, equipment or assets (except as set forth in clause (ii) below) of the Company or any of its Subsidiaries or the Blocker, except solely in the case of the Company and its Subsidiaries (and not the Blocker) (A) in the Ordinary Course or (B) pursuant to existing Contracts set forth in Section 6.2(c) of the Disclosure Letter, or (ii) sell, pledge, dispose of, transfer, lease, license or create or impose any Liens on any material assets or property except for (A) the execution of covenants, restrictions and other similar instruments in the Ordinary Course that, individually or in the aggregate, do not, and would not reasonably be expected to, materially impair the existing use and operation of, the property or asset affected by the applicable instrument, (B) in connection with the incurrence of any Indebtedness permitted to be incurred by the Company or any of its Subsidiaries pursuant to Section 6.2 or (C) the execution of licenses in the Ordinary Course;

(d)merge or consolidate the Company or any of its Subsidiaries or the Blocker with any Person or adopt a plan of complete or partial liquidation or resolutions providing for a complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of the Company or any of its Subsidiaries or the Blocker;

(e)acquire (including by merger, consolidation or acquisition of stock or assets) any interest in any Person (or equity interests thereof) or any assets, real property, personal property, equipment, business or other rights (whether by merger, stock purchase, asset purchase or otherwise), except solely in the case of the Company and its Subsidiaries (and not the Blocker) for acquisitions of inventory, personal property, equipment and vehicles either (i) in the Ordinary Course, substantially consistent with past practice or in accordance with the capital improvement plans made available to Parent and Merger Sub prior to the date hereof, or (ii) is less than $100,000;

(f)incur, assume, refinance or guarantee any Indebtedness for borrowed money or issue any debt securities, or assume or guarantee any Indebtedness for borrowed money of any Person, in any such case in excess of $100,000 in the aggregate, except Indebtedness that

(i)is prepayable at any time without penalty or premium or borrowings under the Existing Credit Facility or (ii) will be repaid at Closing;

(g)make any loans, advances or capital contributions to, or investments in, any other Person that would reasonably be expected to adversely affect the Company or any of its Subsidiaries or the Blocker following Closing;

 

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(h)other than (x) in the Ordinary Course with past practice, (y) to the extent required by Law or the terms of any Benefit Plan as set forth in Section 6.2(h) of the Disclosure Letter, or (z) as specifically contemplated by this Agreement: (i) materially increase the level of compensation or benefits payable or to become payable to its directors, officers or employees; or (ii) enter into any severance agreement with any director, officer, or employee of the Company or any of its Subsidiaries or the Blocker;

(i)make any tax election inconsistent with past practice with respect to the Company or any of its Subsidiaries or the Blocker, file any material Tax Return materially inconsistent with past practice, make or change any material Tax election inconsistent with past practice, settle or compromise any material Tax Contest or assessment by any Governmental Authority, adopt or change any accounting method with respect to Taxes, enter into any closing agreement with a taxing authority or surrender any right to claim a refund of a material amount of Taxes, in each instance, (X) that would reasonably be expected to materially adversely impact Parent, the Company or any of its Subsidiaries or the Blocker from a Tax perspective following the Closing and (Y) that is not otherwise required by applicable Law;

(j)make any material change in financial accounting policies or procedures, other than as required by GAAP, applicable Law or any Governmental Authority of competent jurisdiction;

(k)except as set forth in Section 6.2(k) of the Disclosure Letter, make any capital expenditures or enter into any Contract for any renovation, construction or capital expenditure; provided, however, that notwithstanding the foregoing, the Company and its Subsidiaries shall be permitted to make (i) capital expenditures required by Law or any lender of the Company or any of its Subsidiaries, (ii) emergency capital expenditures in any amount that the Company or its Subsidiaries determines is necessary in its reasonable judgment to maintain its ability to operate its businesses in the Ordinary Course, and (iii) capital expenditures in any amount not exceeding $100,000 in the aggregate for all projects of the Company and its Subsidiaries;

(l)grant or announce any increase in the salaries, bonuses or other benefits payable by the Company or any of its Subsidiaries or the Blocker to any of the directors, officers, employees, consultants or independent contractors, other than as required by Law;

(m)fail to exercise any rights of renewal with respect to any Leased Real Property that by its terms would otherwise expire;

(n)pay, discharge, settle or satisfy any suit, Action or claim, other than settlements of any suit, Action or claim, or threatened suit, Action or claim, that (i) require payments by the Company or any of its Subsidiaries or the Blocker (net of insurance proceeds) in an amount not to exceed $25,000 individually or $50,000 in the aggregate and (ii) do not require any other actions or impose any other material restrictions on the business of the Company or any of its Subsidiaries or the Blocker;

(o)issue, deliver, sell, grant, pledge or otherwise encumber or subject to any Lien any ownership interests, any other voting securities or any securities convertible into, exchangeable for, exercisable for, or any rights, warrants or options to acquire, any such ownership interests, voting securities or convertible securities, or any “phantom” units, “phantom” unit rights, or unit appreciation rights, including pursuant to contracts as in effect on the date hereof;

 

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(p)adopt a plan or agreement of a complete or partial liquidation or dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its Subsidiaries or the Blocker;

(q)delay or postpone the payment of accounts payable or other Liabilities beyond their due date or accelerate the collection of any accounts receivable except in the Ordinary Course;

(r)(i) adopt, enter into, terminate or amend (A) any Benefit Plan, except as required by Law or as specifically contemplated by this Agreement, (B) any other agreement, plan or policy involving the Company or any of its Subsidiaries or the Blocker and one or more of their respective current or former employees or members of the board of directors that is not terminable at will, or (C) any retention or bonus agreement involving the Company or any of its Subsidiaries or the Blocker and one or more of their respective current or former employees or members of the board of directors, (ii) take any action to accelerate the vesting or payment of any compensation or benefit under any Benefit Plan, or (iii) loan or advance any money or other property (other than reimbursement of reimbursable expenses or any advances of such expenses pursuant to the Company’s or any of its Subsidiaries’ credit cards or otherwise in the Ordinary Course) to any current or former member of the board of directors or officer of the Company or any of its Subsidiaries or the Blocker;

(s)fail to use commercially reasonable efforts to maintain current insurance coverages, or fail to enforce the rights of the Company or any of its Subsidiaries under any such existing coverage;

(t)amend or modify in any respect or terminate any Material Contract other than in accordance with its terms, or, enter into any Contract that if entered into on or prior to the date hereof would constitute a Material Contract;

(u)enter into any collective bargaining agreement or announce, implement or effect any reduction in labor force or lay-off;

(v)sell, assign, transfer or exclusively license any material Company Intellectual Property, or permit the lapse of any right, title or interest to any material Company Intellectual Property, including any Registered Intellectual Property, or terminate, cancel or amend any Material Company Intellectual Property Contract other than in the Ordinary Course;

(w)amend, modify or terminate, or allow to lapse, any material Permit; or

(x)authorize or enter into any Contract to do any of the foregoing. Notwithstanding the foregoing or anything else to the contrary, nothing contained in this Agreement shall give Parent or Merger Sub, directly or indirectly, the right to control or direct the operations of the Company or any of its Subsidiaries or the Blocker prior to the Closing, and the Company or the Blocker (in each case, in its sole discretion) may at any time or from time to time prior to the Closing use any cash on hand for any purpose (including making distributions or dividends, redeeming Units as permitted under the Company’s Organizational Documents or repaying any Indebtedness). Prior to the Closing, the Company and each of its Subsidiaries and the Blocker shall exercise, consistent with the terms and conditions of this Agreement, complete unilateral control and supervision over its business operations.

6.3.Access to Information. From the date of this Agreement to the Closing, the Company and each of its Subsidiaries shall: (a) provide to Parent, Merger Sub and their respective Representatives 

 

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reasonable access during normal business hours in such a manner as not to interfere unreasonably with the operation of any business conducted by the Company and its Subsidiaries, upon reasonable prior written notice to the Company or its Subsidiaries, as applicable, to the officers, employees, properties, offices and other facilities of the Company and its Subsidiaries and to the books and records thereof; (b) provide to Parent, Merger Sub and their respective Representatives non-exclusive access credentials to online portals and databases for all Alcohol Beverage Authorities, and all third party compliance companies, with which the Company has, or has had, and account, solely for the purpose of providing required information regarding Parent or Merger Sub in connection with the Transactions, and in no event, shall Parent, Merger Sub or their respective Representatives make any representations regarding the Company or its Subsidiaries in such portals and databases; and (c) furnish promptly such information concerning the business, properties, Contracts, assets and Liabilities of the Company and its Subsidiaries as Parent, Merger Sub or their Representatives may reasonably request; provided, however, that the Company and its Subsidiaries shall not be required to afford such access or furnish such information to the extent that the Company and its Subsidiaries believe in good faith that doing so would: (i) result in the loss of attorney-client privilege; (ii) violate any obligations of the Company or any of its Subsidiaries with respect to confidentiality to any third party or otherwise breach, contravene or violate any then effective Contract to which the Company or any of its Subsidiaries is party; or (iii) breach, contravene or violate any applicable Law in any material respect (provided that the Company and its Subsidiaries shall use commercially reasonable efforts to allow for such access or disclosure in a manner that does not result in the events set out in clauses (i) through (iii)). Parent and Merger Sub shall, and shall cause each of their respective Representatives, to hold all information provided or furnished pursuant to this Section 6.3 confidential in accordance with the terms of the Confidentiality Agreement.

6.4.Further Assurances.

(a)Subject to the terms and conditions of this Agreement, each party shall use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate the transactions contemplated hereby and to cause the conditions set forth in Article VII to be satisfied as promptly as practicable, including using their respective reasonable best efforts to (i) promptly obtain all actions or non-actions, consents, Permits, waivers, approvals, authorizations and Orders from Governmental Authorities necessary or advisable in connection with the consummation of the transactions contemplated hereby, (ii) as promptly as practicable, make and not withdraw (without Parent’s and the Company’s consent) all registrations and filings with any Governmental Authority necessary or advisable in connection with the consummation of the transactions contemplated by this Agreement, and promptly make any further filings pursuant thereto that may be necessary or advisable, (iii) defend all lawsuits or other legal, regulatory, administrative or other proceedings to which it or any of its Affiliates is a party challenging or affecting this Agreement or the consummation of the transactions contemplated by this Agreement, in each case until the issuance of a final, non-appealable Order with respect to each such lawsuit or other proceeding, (iv) seek to have lifted or rescinded any injunction or restraining order which may adversely affect the ability of the parties to consummate the transactions contemplated hereby, in each case until the issuance of a final, non-appealable Order with respect thereto, (v) seek to resolve any objection or assertion by any Governmental Authority challenging this Agreement or the transactions contemplated hereby and (vi) execute and deliver any additional instruments necessary to consummate the transactions contemplated hereby; provided, that the efforts standard of this Section 6.4(a) shall not replace any efforts standard expressly provided for in any other provision of this Agreement.

(b)Each of the parties hereto shall give prompt notice to the other parties, of (a) any notice or other communication received by such party from any Governmental Authority in connection 

 

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with this Agreement, and the transactions contemplated hereby or from any Person alleging that the consent of such Person is or may be required in connection with this Agreement, and the other transactions contemplated hereby, and (b) any Actions, suits, claims, investigations or proceedings commenced or, to such party’s knowledge, threatened against, relating to or involving or otherwise affecting such party or which relate to this Agreement, and the transactions contemplated hereby.

6.5.Directors & Officers Indemnification and Insurance.

(a)Contemporaneously with the Closing, the Company shall purchase, with all of the cost thereof being a Transaction Expense, a “tail” policy of directors’ and officers’ liability insurance coverage, providing coverage for a period of six (6) years following the Closing Date, with respect to any Person who is on the date hereof or at the Closing an officer or manager of the Company or any of its Subsidiaries in connection with such Person’s service as a manager or officer of the Company or any of its Subsidiaries at any time prior to the Closing. For a period of six (6) years after the Closing, Parent will not, and will not permit the Surviving Entity or its Subsidiaries to, take any action to amend (in a manner adverse to the beneficiary thereof) or terminate such policy and shall take all commercially reasonable steps, to cause the Surviving Entity and its Subsidiaries to maintain in effect such policy and shall not amend, repeal or modify (in a manner adverse to the beneficiary thereof) any provision in each of the Company’s and its Subsidiaries’ Organizational Documents relating to the exculpation or indemnification of any pre- Closing officers or managers. The provisions of this Section 6.5 are intended to be for the benefit of, and will be enforceable by, each indemnified party, his or her heirs and his or her representatives and are in addition to, and not in substitution for, any other right to indemnification or contribution that any such Person may have by contract or otherwise.

(b)In the event that any Person incurs Losses that are or would have been subject to coverage under an officers’ and directors’ liability insurance policy pursuant to Sections 6.5(a) and such policy terminated (but not due to a temporal expiration) or affords lesser coverage than is required by Sections 6.5 (a), in each case, as a result of the Parent’s failure to fulfill its obligations pursuant to Section 6.5(a), the Parent and the Surviving Entity, jointly and severally, shall pay to such Persons such amounts and provide any other coverage or benefits as such Persons would have received pursuant to such policy.

(c)The provisions of this Section 6.5 are intended to be for the benefit of, and will be enforceable by, each such Person entitled to indemnification, his or her heirs and his or her representatives.

6.6.Employee Benefit Matters.

(a)During the one-year period following the Closing Date (or such shorter period of employment, as the case may be), Parent shall, and shall cause the Surviving Entity or the applicable Subsidiary to, provide each employee of the Surviving Entity or any of its Subsidiaries who is employed at the Closing Date and who remains employed with the Surviving Entity or any of its Subsidiaries immediately following the Closing (each, an “Affected Employee”) with (i) a base salary or hourly wage rate that is at least equal to the base salary or hourly wage rate provided to the Affected Employee immediately prior to the Closing Date, (ii) bonus opportunities (including annual and long-term incentive opportunities) that, with respect to each Affected Employee, are comparable in the aggregate to those opportunities in effect for such Affected Employee immediately prior to the Closing Date, and (iii) retirement, health and welfare benefits that, with respect to each Affected Employee, are comparable 

 

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in the aggregate to such benefits provided to such Affected Employee immediately prior to the Closing Date.

(b)Parent shall, or shall cause the Surviving Entity or the applicable Subsidiary to, provide each Affected Employee who incurs a termination of employment during the one-year period following the Closing Date with severance benefits that are no less favorable than the severance benefits to which such Affected Employee would have been entitled with respect to such termination under the severance policies, practices and guidelines of the Company or any of its Subsidiaries as in effect immediately prior to the Closing Date or, if greater, the severance benefits provided to similarly situated employees of Parent. In addition, during the one-year period following the Closing Date, Parent shall, or shall cause the Surviving Entity or the applicable Subsidiary to, honor all employment and severance agreements that are in effect with an Affected Employee immediately prior to the Closing Date.

(c)Parent shall, or shall cause the Surviving Entity or the applicable Subsidiary to, give each Affected Employee credit (for purposes of eligibility to participate and vesting, but not benefit accrual and excluding defined benefit pension, equity, and retiree benefits) for service with the Company or any of its Subsidiaries prior to the Closing Date (to the same extent such service credit was granted under the applicable Benefit Plans) under the comparable employee benefit plans, programs and policies of Parent, the Surviving Entity and any of their Subsidiaries in which such Affected Employees became participants, as if such service had been performed with Parent, except to the extent that such service crediting would result in duplication of benefits for the same period of service.

(d)Parent shall, or shall cause the Surviving Entity or the applicable Subsidiary to, use commercially reasonable efforts to (i) waive any preexisting condition limitations otherwise applicable to Affected Employees and their eligible dependents under any plan maintained by Parent or any of its Affiliates (including the Surviving Entity) that provides health benefits in which Affected Employees may be eligible to participate following the Closing, other than any limitations that were in effect with respect to such Affected Employees as of the Closing Date under the analogous Benefit Plan; (ii) honor any deductible, co-payment and out-of-pocket maximums incurred by a Affected Employee and his or her eligible dependents under the health Benefit Plans in which such Affected Employee participated immediately prior to the Closing Date during the portion of the plan year prior to the Closing Date in satisfying any deductibles, co- payments or out-of-pocket maximums under health plans maintained by Parent or any of its Affiliates (including the Company) in which such Affected Employee is eligible to participate after the Closing Date in the same plan year in which such deductibles, co-payments or out-of-pocket maximums were incurred; and (iii) waive any waiting period limitation or evidence of insurability requirement that would otherwise be applicable to an Affected Employee and his or her eligible dependents on or after the Closing Date, in each case to the extent such Affected Employee or eligible dependent had satisfied any similar limitation or requirement under an analogous Benefit Plan prior to the Closing Date.

(e)All provisions contained in this Agreement with respect to employee benefit plans or employee compensation are included for the sole benefit of the respective parties hereto and shall not create any right in any other Person (including Affected Employees, participants or beneficiaries in any Benefit Plan, retirees, or dependents or beneficiaries of employees or retirees).

(f)Nothing contained in this Section 6.6, express or implied (i) shall be construed to establish, amend, or modify, or limit the ability of Parent, the Surviving Entity or any of their Affiliates to amend modify or terminate, any benefit or compensation plan, program, agreement, contract or arrangement at any time assumed, established, sponsored or maintained by any of them, subject to the 

 

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terms thereof, or (ii) shall limit the ability of Parent, the Surviving Entity or their Affiliates from terminating the employment of any employee (including any Affected Employee) at any time and for any or no reason subject to the terms of any existing contracts.

6.7.Intercompany Accounts. The Company shall cause all Intercompany Accounts relating to the business of the Company and any of its Subsidiaries to be settled or terminated prior to Closing, except otherwise related to the Lease Agreement.

6.8.Tax Matters.

(a)FIRPTA Certificate. Prior to the Closing, the Securityholders’ Representative shall deliver to Parent and Merger Sub a properly completed and executed IRS Form W-9 from each Unitholder certifying that such Unitholder is not a foreign person for purposes of Code Section 1445 and 1446(f).

(b)Transfer Taxes. Parent shall, and with Securityholders’ Representative’s good faith cooperation and assistance, prepare, execute and file, or cause to be prepared, executed and filed, all Tax Returns, questionnaires, applications or other documents regarding any real property transfer, sales, use, transfer, value added, stock transfer and stamp Taxes, any transfer, recording, registration and other fees and any similar Taxes which, in each case, become payable in connection with any transaction contemplated by this Agreement, the ancillary agreements and the other transactions contemplated hereby and thereby (together, with any related interests, penalties or additions to Tax, the “Transfer Taxes”).

(c)Straddle Periods. For purposes of this Agreement, in the case of any Taxes that are payable for a Straddle Period, the portion of such Tax which relates to the portion of such Straddle Period ending on the Closing Date shall (A) in the case of any Taxes other than Taxes based upon or related to income, receipts, sales, use, or payroll, be deemed to be the amount of such Tax for the entire Straddle Period multiplied by a fraction (1) the numerator of which is the number of calendar days in the Straddle Period ending on the Closing Date and (2) the denominator of which is the number of calendar days in the entire Straddle Period and (B) in the case of any Tax based upon or related to income, receipts, sales, or payroll, be deemed equal to the amount which would be payable if the relevant Straddle Period ended as of the close of the Closing Date. For purposes of this Section 6.8(c), to the maximum extent permitted by Law, (A) any item determined on an annual or periodic basis (including amortization and depreciation deductions) for income Tax purposes shall be allocated to the portion of the Straddle Period ending on the Closing Date based on the relative number of days in such portion of the Straddle Period as compared to the number of days in the entire Straddle Period; (B) any Tax or item of income, gain, loss, deduction or credit resulting from a Parent Closing Date Transaction shall be allocated to the portion of the Straddle Period beginning on the day after the Closing Date; and (C) any item of deduction attributable to any Transaction Expenses and other items incurred by the Unitholders shall be allocated to the portion of the Straddle Period ending on the Closing Date. Notwithstanding the foregoing or anything to the contrary in this Agreement, the parties agree that for purposes of determining income, profit, loss, deduction, or any other items allocable to any Tax period of the Company, such items will be determined using the interim closing of the books method under Code Section 706 and Treasury Regulations Section 1.706-4 (or any similar or corresponding provision of state or local law), using the “calendar day” convention, effective as of the end of the Closing Date.

(d)Tax Returns. Parent shall furnish to Securityholders’ Representative’s assoon as reasonably practicable after the Closing Date, and in any event within one-hundred twenty (120) days 

 

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after the Closing Date, all information concerning the Company and its Subsidiaries required for the preparation of U.S. federal, state, local or foreign income Tax Returns with respect to any taxable periods (or portions thereof) through the Closing Date. Parent shall prepare and file all Tax Returns of the Company and its Subsidiaries that are due after the Closing Date. With respect to any such Tax Return which is an IRS Form 1065 (or any similar state or local income Tax Return) or any other Tax Return the results or operations of which reflected on such Tax Return are also reflected on the Tax Returns of the Unitholders (or their owners) or Blocker that relates to a Pre-Closing Period or Straddle Period (a “Flow-Through Return”), such Tax Return shall be prepared on a basis consistent with existing procedures and practices and accounting methods. At least thirty (30) days prior to the due date of a Flow-Through Return, Parent shall provide a draft of such Flow-Through Return to Securityholders’ Representative for Securityholders’ Representative’s review and comment. Parent shall cause the Company or applicable Subsidiary of the Company to incorporate any reasonable comments made by the Securityholders’ Representative in the Flow-Through Return actually filed. Parent shall not, and shall not allow the Company or any Subsidiary of the Company to, amend any Flow-Through Return or otherwise initiate (or agree to) any other Securityholders’ Representative Tax Matter without the prior written consent of the Securityholders’ Representative.

(e)Contest Provisions. Securityholders’ Representative shall have the right to control the conduct and resolution of any audit or other proceeding in respect of any Taxes or Tax Returns of the Company and any of its Subsidiaries (a “Tax Contest”), related to any Flow- Through Return, provided that Securityholders’ Representative shall in good faith allow Parent to make comments to Securityholders’ Representative regarding the conduct of or positions taken in such Tax Contest and shall not settle any such Tax Contest without the prior written consent of Parent, which consent will not be unreasonably withheld, conditioned or delayed. Parent shall control all other Tax Contests of the Company and any of its Subsidiaries, provided that Parent shall in good faith allow Securityholders’ Representative to make comments to Parent regarding the conduct of or positions taken in such Tax Contest and shall not settle any such Tax Contest without the prior written consent of Securityholders’ Representative, which consent will not be unreasonably withheld, conditioned or delayed. Parent shall not (and shall cause its Affiliates not to) take any Parent Closing Date Transaction (including, for the avoidance of doubt, any action to liquidate Blocker on the Closing Date after the Closing). Parent shall not, and shall not allow the Company or any of its Subsidiaries, to make an election under Code Section 6226 with respect to a Pre-Closing Tax Period or Straddle Period without the prior written consent of the Securityholders’ Representative.

(f)Cooperation.

(i)From and after the Closing, Securityholders’ Representative, on the one hand, and Parent, the Company and each of their Affiliates, on the other hand, shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the preparation and filing of any Tax Return and any Tax Contest audit, litigation or other proceeding with respect to Taxes attributable to the Company and any of its Subsidiaries for periods (or portions thereof) through the Closing Date. Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information which are reasonably relevant to any such Tax Return, Tax Contest audit, litigation or other proceeding or any tax planning and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.

(ii)Parent shall (A) retain all books and records with respect to Tax matters pertinent to the Company and any of its Subsidiaries and their respective businesses relating to any 

 

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periods (or portions of any Straddle Period) ending on or before the Closing Date until the expiration of the statute of limitations (including any extensions thereof) applicable to such taxable periods, and abide (and cause the Company and any of its Subsidiaries to abide) by all record retention agreements entered into with any Governmental Authority, and (B) provide Securityholders’ Representative with reasonable written notice prior to transferring, destroying or discarding any such books and records and, if Securityholders’ Representative so requests, Parent will allow Securityholders’ Representative to take possession of such books and records.

(g)Parent shall not take (or cause any of its Affiliates to take (including, following the Closing, the Blocker or the Company) any action on the Closing Date after the Closing outside of the ordinary course of business that would increase any Taxes of the Unitholders or the Blocker (including, for the avoidance of doubt, liquidating the Blocker or distributing any interests in the Company out of the Blocker).

6.9.Financing Covenants. Blocker, the Company and its Subsidiaries agree that from the date hereof until the earlier of the Closing or the valid termination of this Agreement, to the extent that Parent and Merger Sub desires to seek financing in connection with the transactions contemplated hereby, Blocker and the Company shall provide, and shall cause its Subsidiaries to provide, and shall cause their respective employees, agents and representatives to provide, reasonable cooperation to Parent and Merger Sub in connection with obtaining any such financing (“Financing”). Parent shall, promptly upon request by Blocker or the Company, reimburse the Company and its Subsidiaries and Blocker for all out-of-pocket costs incurred by such Person or their respective Representatives in connection with such cooperation and shall indemnify and hold harmless the Company and its Subsidiaries and their respective Representatives for, from and against any and all Losses actually suffered or incurred by them in connection therewith.

Notwithstanding anything to the contrary contained in this Section 6.9, (i) Blocker, the Company and its Subsidiaries shall not be required, under the provisions of this Section 6.9 or otherwise in connection with the Financing (x) to pay any commitment or other similar fee prior to the Closing that is not advanced by the Parent or Merger Sub or (y) to incur any expense unless such expense is reimbursed by the Parent on the earlier of the Closing or termination of this Agreement in accordance with Article VIII, and (ii) (w) neither the Blocker, the Company nor any of their respective Subsidiaries shall be required to incur any Liability in connection with the Financing prior to the Closing, (x) the pre-Closing board of managers of the Company and Blocker and the directors, managers or members of the Subsidiaries of the Company shall not be required to adopt resolutions approving the agreements, documents and instruments pursuant to which the Financing is obtained, (y) neither the Blocker, the Company nor any of their respective Subsidiaries shall be required to execute prior to the Closing any definitive financing documents, including any credit or other agreements, pledge or security documents, or other certificates, legal opinions or documents in connection with the Financing, and (z) neither the Blocker, the Company nor any of their respective Subsidiaries shall be required to take any corporate actions prior to the Closing to permit the consummation of the Financing. Each of Parent and Merger Sub acknowledges and agrees that it is not a condition to the Closing under this Agreement for Parent and/or Merger Sub to consummate any Financing or to receive any proceeds thereof. Notwithstanding anything to the contrary contained in this Agreement, the Company and Blocker shall be deemed to have complied with their obligations under this Section 6.9 unless the Financing has not been obtained by Parent or Merger Sub primarily as a result of the Company’s or Blocker’s willful and material breach of their respective obligations under this Section 6.9.

 

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6.10.Blocker Actions. The Blocker Partners will (a) cause Blocker to perform its obligations under this Agreement and to consummate the Blocker Sale on the terms and conditions set forth in this Agreement and (b) ensure that Blocker prior to the Closing shall not conduct any business, incur or guarantee any indebtedness or any other material Liabilities or make any investments, in each case other than those activities incident to its continued existence and the Company Ownership or its obligations under this Agreement or the Blocker Sale (including effecting the Pre-Closing Blocker Reorganization). The Blocker Partners shall not sell, transfer, convey or assign the Blocker Interests to any other Person prior to the Blocker Closing. Notwithstanding anything to the contrary contained herein, during the period from the date of this Agreement until the Closing, Blocker shall be permitted to make cash distributions or dividends and take any actions contemplated by the Pre-Closing Blocker Reorganization.

6.11.Securityholders’ Representative.

(a)Prior to entry into this Agreement, the Company and the Unitholders (other than the Blocker Members) shall appoint Chilly Water, LLC to act as the representative for the benefit of each Unitholder (other than the Blocker Members) as the exclusive agent and attorney- in-fact to act on behalf of each Unitholder (other than the Blocker Members), in connection with the transactions contemplated hereby.

(b)The Securityholders’ Representative shall have the authority to act for and on behalf of the Unitholders (other than the Blocker Members), including, without limitation, (i) to give and receive notices and communications, (ii) to act on behalf of such Persons with respect to the Adjustment Escrow Account, the PPP Escrow Account, the Earn-Out Payments and any other matters arising under this Agreement or the other Transaction documents, (iii) to authorize delivery to Parent and Merger Sub of any funds and property in its possession or in the possession of the Adjustment Escrow Agent or PPP Escrow Agent in satisfaction of claims by Parent and Merger Sub, (iv) to object to such deliveries, (v) to agree to, negotiate, enter into settlements and compromises of, and commence, prosecute, participate in, settle, dismiss or otherwise terminate, as applicable, lawsuits and claims, mediation and arbitration proceedings, and to comply with orders of courts and awards of courts, mediators and arbitrators with respect to such suits, claims or proceedings, (vi) subject to the restrictions in Section 6.11(f), to use the Securityholders’ Representative Expense Amount to satisfy costs, expenses and/or Liabilities of the Securityholders’ Representative or the Unitholders (other than the Blocker Members) in connection with matters related to this Agreement and/or the Transaction documents and satisfy a portion of the Downward Adjustment Amount in accordance with Section 2.13(a)(i), with any balance of the Securityholders’ Representative Expense Amount not used for such purposes to be disbursed and paid to the Unitholders (other than the Blocker Members) in accordance with the Payment Schedule at such time as the Securityholders’ Representative determines in its sole discretion that no additional such costs, expenses and/or Liabilities shall become due and payable, (vii) appoint the Paying Agent and enter into the Paying Agent Agreement and (viii) to take all actions necessary or appropriate in the judgment of the Securityholders’ Representative for the accomplishment of the foregoing. The Securityholders’ Representative shall for all purposes be deemed the sole authorized agent of the Unitholders (other than the Blocker Members) from and after Closing until such time as the agency is terminated. Any successor in the position of Securityholders’ Representative may be filled by Securityholders’ Representative, and any such replacement shall acknowledge and agree to be treated the “Securityholders’ Representative” for purposes of this Agreement and any other Transaction Document. Notices or communications to or from the Securityholders’ Representative shall constitute notice to or from each of the Unitholder (other than the Blocker Members) during the term of the agency. The Securityholders’ Representative undertakes to perform such duties and only such duties as are specifically set forth in this Agreement and 

 

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no other covenants or obligations shall be implied under this Agreement against the Securityholders’ Representative; provided, however, that the foregoing shall not act as a limitation on the powers of the Securityholders’ Representative determined by it to be reasonably necessary to carry out the purposes of its obligations.

(c)The Securityholders’ Representative shall have reasonable access to information about the Company, Blocker, Parent, Merger Sub and the Surviving Entity necessary or appropriate for it to fulfill its obligations under this Agreement and the reasonable assistance of the Surviving Entity’s, Blocker’s and Parent’s officers and employees for purposes of performing its duties and exercising its rights hereunder, provided that the Securityholders’ Representative shall treat confidentially and not disclose any nonpublic information from or about the Surviving Entity, Blocker or Parent to anyone (except on a need to know basis to agents or representatives of Securityholders’ Representative who first agree to treat such information confidentially) other than in connection with the enforcement of any rights hereunder or any other proceeding brought in connection herewith.

(d)A decision, act, consent or instruction of the Securityholders’ Representative shall constitute a decision, act, consent or instruction of all of the Unitholders (other than the Blocker Members) and shall be final, binding and conclusive upon each such Person. Parent may rely upon any such decision, act, consent or instruction of the Securityholders’ Representative as being the decision, act, consent or instruction of every such Unitholder (other than the Blocker Members) and shall have no Liability to any such Person for any actions taken in reliance upon any such decision, act, consent or instruction of the Securityholders’ Representative.

(e)The Securityholders’ Representative will not be liable for any act taken or omitted to be taken as Securityholders’ Representative while acting in good faith, and any act taken or omitted to be taken pursuant to the reasonable advice of counsel will be conclusive evidence of such good faith. The Securityholders’ Representative shall be entitled to rely, and shall be fully protected in relying, upon any statements furnished to it by the Surviving Entity, Parent, Merger Sub and any third party or any other evidence deemed by the Securityholders’ Representative to be reliable, and the Securityholders’ Representative shall be entitled to act on the advice of counsel selected by it. The Securityholders’ Representative shall be fully justified in failing or refusing to take any action under this Agreement or any related document or agreement if it shall have received such advice or concurrence as it deems appropriate with respect to such inaction, or if it shall not have been expressly indemnified to its satisfaction against any and all Liability and expense that the Securityholders’ Representative may incur by reason of taking or continuing to take any such action.

(f)Notwithstanding anything contained herein to the contrary, the Securityholders’ Representative covenants and agrees that, prior to the payment of any amounts required to be paid pursuant to Section 2.13(a)(i) from the Securityholders’ Representative Expense Amount, the Securityholders’ Representative shall not use any portion of the Securityholders’ Representative Expense Amount to pay costs, fees or expenses or otherwise distribute any portion of the Securityholders’ Representative Expense Amount to any Person (other than the Unitholders (other than the Blocker Members)) other than those costs, fees and expenses reasonably incurred in connection with the Securityholders’ Representative discharging its duties hereunder.

(g)Notwithstanding anything contained herein to the contrary, the Securityholders’ Representative shall not have the authority to act for and on behalf of the Blocker Members, and all decisions, acts, consents or instructions required by any of the Blocker Members or Blocker Partners herein shall be made by the Blocker Seller.

 

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6.12.Post-Closing Registration.

(a)Registration. Parent covenants with respect to the Registrable Shares (as hereinafter defined) for the benefit of the Unitholders (other than the Blocker Members):

(i)Parent will use commercially reasonable efforts, to within ninety (90) days following the Closing, prepare and file with the SEC a shelf registration statement on Form F-3 or Form F-10 (or, if Form F-3 or Form F-10 is not then available to Parent, on such form of registration statement as is then available to effect a registration of the Registrable Shares for resale) (the “Registration Statement”), that would permit the resale of all of the Parent Common Shares constituting the Stock Consideration (as may be adjusted by Section 6.12(f), the “Registrable Shares”) under the Securities Act; it being understood that if such Registration Statement is a shelf registration statement, the prospectus contained therein need not name the Unitholders nor otherwise identify the Registrable Shares if such prospectus is supplemented with such information by the filing of a prospectus supplement thereto (a “Prospectus Supplement”) following the effectiveness of such Registration Statement, and if the Parent fails to file the Registration Statement within such ninety (90) day period, Parent shall continue to use commercially reasonable efforts to do so until such Registration Statement has been filed. Parent shall, subject to the Unitholders’ provision of the required information for such filing(s), use commercially reasonable efforts to, within ninety (90) days following the Closing, file a Prospectus Supplement to the Registration Statement, with the SEC to permit the sale of the Registrable Shares pursuant to the Registration Statement; provided, that if the Parent fails to file a Prospectus Supplement to the Registration Statement within such ninety (90) day period, Parent shall continue to use commercially reasonable efforts to do so until such Prospectus Statement has been filed.

(ii)Parent shall use commercially reasonable efforts to cause the Registration Statement to be declared and remain effective and available for resale of the Registrable Shares and to file with the SEC such amendments and supplements as may be necessary to keep the prospectus included in the Registration Statement (including the Prospectus Supplement) (the “Prospectus”) current and in compliance in all material respects, including filing any post-effective amendments or prospectus supplements thereto, with the Securities Act and the rules and regulations of the SEC promulgated thereunder until the sooner to occur of the following events (i) the expiration of the thirty six month period following the date the Registration Statement is declared effective, or (ii) the sale of all the Registrable Shares by the Unitholders; provided, the Unitholders (or their designees), upon receipt from Parent of notice that an event has occurred which requires a post-effective amendment to the Registration Statement, a supplement to the Prospectus or a supplemental filing with the SEC to be incorporated by reference therein, shall promptly discontinue the sales of the Registrable Shares until the Unitholders (or their designees) receive copies of a supplemental or amended prospectus from Parent or notice from Parent that the existing prospectus has become available for such sale, which Parent shall provide as soon as practicable after such notice of discontinuance.

(b)Expenses. Parent shall pay all expenses associated with effecting the registration of the Registrable Shares pursuant to this Section 6.12, including filing and printing fees, Parent’s counsel and accounting fees and expenses, and listing fees, but excluding discounts, commissions, fees of underwriters, selling brokers, dealer managers or similar securities industry professionals with respect to the Registrable Shares being sold and excluding the fees and disbursements of counsel to any Unitholders (other than the Blocker Members).

 

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(c)Covenants Regarding Registrable Shares.

(i)Securityholders’ Representative covenants and agrees (on behalf of the Unitholders) with Parent that it will, and will cause the Unitholders (other than the Blocker Members) to, cooperate with Parent in connection with the preparation of the Prospectus Supplement prior to and after the Closing Date for so long as Parent is obligated to keep the Registration Statement effective, and will provide to Parent, in writing, for use in the Prospectus Supplement, all information reasonably requested by Parent regarding Unitholder (or its designee) and its plan of distribution and such other information as may be reasonably necessary to enable Parent to prepare the Prospectus Supplement and to maintain the currency and effectiveness thereof. If the Unitholders (other than the Blocker Members) breaches their respective covenants under this Section 6.12(c), Parent may exclude the Registrable Shares held by such Unitholder (or its designee) from the Registration Statement until such time as the breach is cured.

(ii)Parent covenants and agrees that it shall continue, for so long as Parent is obligated to keep the Registration Statement effective, to file or furnish with the SEC in a timely manner all Exchange Act filings that Parent is required to file or furnish under the Exchange Act.

(d)Indemnification. In connection with any registration of the Registrable Shares pursuant to the provisions of this Section 6.12, Parent shall indemnify and hold harmless the Unitholders (other than the Blocker Members) to the extent that companies generally indemnify and hold harmless selling shareholders in connection with public offerings under the Securities Act, and the Unitholders (other than the Blocker Members) shall indemnify and hold harmless Parent to the extent that selling shareholders generally indemnify and hold harmless public companies in connection with public offerings under the Securities Act.

(e)Information by Shareholder. Each Unitholder (or its designee) (other than the Blocker Members) shall promptly furnish to Parent such information regarding Unitholder (or its designee) (other than the Blocker Members) and the plan of distribution for the Registrable Shares proposed by the Unitholder (or its designee) (other than the Blocker Members) as Parent may request in writing and as shall be required in connection with any registration, qualification or compliance referred to herein.

(f)Downside Protection.

(i)Until the date on which the Registerable Shares are registered for resale pursuant to this Section 6.12 (the “Trigger Date”), in the event that the Registerable Value is less than the Closing Stock Value, then Parent shall issue to the Unitholders (other than the Blocker Members or with respect to the Redeemed Units), and for the Parent Common Shares allocable to SWB Management, LLC, directly to the SWB Members, in accordance with the Payment Schedule, and include in the Registrable Shares, an additional number of Parent Common Shares, equal to the quotient of (X) the difference of (1) the Closing Stock Value, minus (2) Registerable Value, divided by (Y) the Pre-Registration Price; provided, that in no event shall the aggregate value of the Stock Consideration after giving effect to the additional number of Parent Common Shares issuable under this Section 6.12(f)(i) be greater than the Closing Stock Value (based on the Pre-Registration Price), and in the event that in calculating the Pre-Registration Price in accordance with Section 6.12(f)(ii) issuing the additional Parent Common Shared hereunder would result in the Stock Consideration being greater than the Closing Stock Value, then the 

 

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Parent shall only be obligated to issue the number of Parent Common Shares pursuant to this Section 6.12(f)(i) that will result in the Unitholders (other than the Blocker Members or with respect to the Redeemed Units) holding Stock Consideration in an amount equal to the Closing Stock Value (based on the Pre-Registration Price).

(ii)For purposes of this Agreement, (A) “Registerable Value” means the aggregate value of the number of Parent Common Shares included in the Stock Consideration (prior to giving effect to any adjustment to the number of Parent Common Shares in accordance with this Section 6.12(f)), measured as the product of (i) number of Parent Common Shares in the Stock Consideration (prior to giving effect to any adjustment to the number of Parent Common Shares in accordance with this Section 6.12(f)), multiplied by (ii) the Pre-Registration Price, and (B) “Pre-Registration Price” means the lesser of (i) the volume-weighted average trading price of Parent Common Shares on the NASDAQ for the thirty (30) day period immediately ending on the close of trading the day prior to the Trigger Date, and (ii) the closing price of Parent Common Shares on the NASDAQ on the day prior to the Trigger Date.

6.13.Regulatory.

(a)From and after the date hereof, the Company shall (i) in good faith use commercially reasonable efforts to the extent reasonably requested by the Parent to keep the Permits valid and effective and to obtain any updates, transfers, renewals and/or acquisitions of Permits, waivers, approvals, clearances, authorizations, filings or consents from or with any Alcohol Beverage Authorities that may be necessary, proper or advisable, as determined in Parent’s reasonable discretion, in connection with the Transactions contemplated by this Agreement and (ii) provide such other information and communications to Alcohol Beverage Authorities as any Alcohol Beverage Authorities may reasonably request.

(b)Without limiting the generality of Section 6.14(b), the Company shall promptly, following the date hereof, reasonably cooperate in making such filings as are required to obtain any necessary, proper or advisable, as determined in Parent’s reasonable discretion, Permit, waiver, approval, clearance, authorization, filing or consent issued, granted, given or otherwise made available by or under any Alcohol Beverage Authorities to consummate the Transactions contemplated by this Agreement and to operate the Business after Closing including, without limitation, all federal permits and/or brewer’s notices required by the TTB, together with any state licenses and local permits relating to the manufacturing, distribution, sale and marketing of Company Products.

(c)Contemporaneous with Closing, the Company shall provide written notice to all Distributors identified on Schedule 3.20(c) of the Disclosure Letter regarding the occurrence of the Transactions contemplated by this Agreement.

(d)The Company shall promptly make available to Parent true and correct copies of each of depletion report and sales report that the Company or its Subsidiaries receives from each Material Distributor between the date hereof and the Closing Date.

6.14.Release.

(a)Effective upon the Closing, each Blocker Partner hereby irrevocably and unconditionally releases and forever discharges Blocker, the Company, and each of their respective past, present, and future Subsidiaries, successors and assigns and any of their respective officers, directors, 

 

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managers, equityholders, employees, agents, counsel, consultants, advisors or other representative authorized to represent or act on behalf of such Person (the “Released Parties”), from any and all claims, charges, complaints, causes of action, damages, Contracts, and Losses of any kind or nature whatsoever (“Released Claims”), whether known or unknown, absolute or contingent, matured or unmatured and whether at law or in equity, arising from conduct occurring at or prior to the Closing relating to or arising out of such Blocker Partner’s ownership of Blocker Interests, and Blocker’s ownership of the Units. Notwithstanding the foregoing, nothing contained in this Section 6.14(a) shall operate to release any obligations of the Released Parties with respect to, or obligate the Blocker Partners to refrain from making, claims or commencing any proceedings arising under, or in connection with, this Agreement.

(b)Effective upon the Closing, each of Blocker and the Company hereby irrevocably and unconditionally releases and forever discharges each Blocker Partner and each of its past, present, and future Affiliates, successors and assigns and any of their respective officers, directors, managers, equityholders, employees, agents, counsel, consultants, advisors or other representative authorized to represent or act on behalf of such Person (the “Blocker Seller Released Parties”), from any and all Released Claims, whether known or unknown, absolute or contingent, matured or unmatured and whether at law or in equity, arising from conduct occurring at or prior to the Closing relating to or arising out of the Transactions. Notwithstanding the foregoing, nothing contained in this Section 6.14(b) shall operate to release any obligations of the Blocker Seller Released Parties with respect to, or obligate Blocker or the Company to refrain from making, claims or commencing any proceedings arising under, or in connection with, this Agreement.

6.15.PPP Loan. After the Closing, Parent shall, cause the Surviving Entity to, (a) use its reasonable best efforts to comply with Sections 1102 and 1106 of the CARES Act to obtain forgiveness of the PPP Loan to the extent provided thereunder, (b) unless filed by the Company prior to the Closing, to file an application for forgiveness of the PPP Loan and take all other actions reasonably necessary to obtain forgiveness thereof; (c) permit the Securityholders’ Representative to participate in Parent’s and the Company’s efforts to cause the PPP Loan to be forgiven (and, in the furtherance of this clause (c), permit the Securityholders’ Representative to contact, or engage in discussions with, the lender with respect to such loan, the Small Business Administration or other third parties for the purpose of facilitating or encouraging such forgiveness); (d) respond to Securityholders’ Representative’s questions and other inquiries with respect to the status of such efforts (including by providing to Securityholders’ Representative all documentation reasonably related to such efforts); and (e) otherwise update Securityholders’ Representative as to the status of such efforts.

6.16.R&W Policy. Parent shall not amend, modify, terminate or waive any provision set forth in the R&W Policy in a manner adverse to the Unitholders or the Blocker Partners, including any amendment, modification, termination or waiver resulting in the elimination of a full waiver of subrogation (other than for Fraud), without the prior written consent of the Securityholders’ Representative and Blocker Seller. Parent and Merger Sub agree that the provisions in this Agreement related to the R&W Policy and the limits imposed on Parent’s, Merger Sub’s and the Surviving Entity’s rights and remedies with respect to the Transactions and this Agreement were specifically bargained for between sophisticated parties and were specifically taken into account in the determination of the amounts payable hereunder.

6.17.Tax Exemption Certificates. The Company shall use commercially reasonable efforts to obtain all sales tax exemption certificates from all states from which the Company or its Subsidiaries generated revenue during the fiscal years ended December 31, 2017 through December 31, 2019. Each 

 

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of Parent and Merger Sub acknowledges and agrees that it is not a condition to the Closing under this Agreement for the Company to obtain all such sales tax exemption certificates.

6.18.Blocker Seller Access to Information. The Blocker Seller shall have reasonable access to information about the Company, Blocker, Parent, Merger Sub and the Surviving Entity necessary or appropriate for it to fulfill its obligations and exercise its rights under this Agreement and the reasonable assistance of the Surviving Entity’s, Blocker’s and Parent’s officers and employees for purposes of performing its duties and exercising its rights hereunder, provided that the Blocker Seller shall treat confidentially and not disclose any nonpublic information from or about the Surviving Entity, Blocker or Parent to anyone (except on a need to know basis to agents or representatives of the Blocker Seller who first agree to treat such information confidentially) other than in connection with the enforcement of any rights hereunder or any other proceeding brought in connection herewith.

6.19.PPP Escrow Agreement. The Parent and Securityholders’ Representative shall negotiate in good faith to enter into the PPP Escrow Agreement, which shall provide that upon the CARES Determination Date, the Parent and Securityholders’ Representative shall deliver joint written instructions to the PPP Escrow Agent instructing the PPP Escrow Agent to release the PPP Escrow Amount in accordance with Section 2.13(b) herein.

ARTICLE VII
CONDITIONS TO THE TRANSACTIONS

7.1.Conditions to Obligations of Each Party to Effect the Transactions. The obligations of each party to consummate the Transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions:

(a)The applicable waiting period and any extensions thereof under the HSR Act shall have expired or been terminated.

(b)No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Order which is in effect and has the effect of making the transactions,contemplated by this Agreement illegal, otherwise restraining or prohibiting consummation of such transactions or causing any of the transactions contemplated hereunder to be rescinded following completion thereof, and no Action instituted by a Governmental Authority and seeking such an Order shall be pending.

(c)The requisite Unitholders shall have executed a written consent in lieu of a meeting approving and adopting the Transactions.

(d)The TSX shall have approved Parent’s issuance of the Stock Consideration.

7.2.Additional Conditions to Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to effect the Transactions contemplated by this Agreement are also subject to the satisfaction or waiver by Parent of each of the following additional conditions:

(a)Company Representations and Warranties. (i) Each of the representations and warranties of the Company contained in this Agreement (except for the representations and warranties of the Company set forth in Sections 3.1, 3.2, 3.3, 3.4(a)(i) and 3.29)) shall be true and correct in all respects (without regard to materiality or Material Adverse Effect qualifiers contained within such representations and warranties) as of the Closing Date, as though made on and as of such date (except to the extent 

 

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expressly made as of a specific date, in which case as of such specific date), except for any failure of such representations and warranties to be true and correct that, individually or in the aggregate, does not cause a Material Adverse Effect; (ii) the representations and warranties of the Company set forth in Sections 3.1, 3.2(c) and (d), 3.3, 3.4(a)(i), and 3.29 shall be true and correct in all material respects as of the Closing Date, as though made on and as of such date (except to the extent expressly made as of a specific date, in which case as of such specific date); and (iii) the representation and warranties of the Company set forth in Section 3.2(a) and (b) shall be true and correct in all but de minimis respects as of the Closing Date.

(b)Blocker Representations and Warranties. (i) Each of the representations and warranties of the Blocker contained in this Agreement (except for the representations and warranties of the Blocker set forth in Sections 4.1, 4.2, 4.3, 4.4, and 4.9) shall be true and correct in all respects (without regard to materiality or Material Adverse Effect qualifiers contained within such representations and warranties) as of the Closing Date, as though made on and as of such date (except to the extent expressly made as of a specific date, in which case as of such specific date), except for any failure of such representations and warranties to be true and correct that, individually or in the aggregate, does not cause a Material Adverse Effect; (ii) the representations and warranties of the Blocker, as applicable, set forth in Sections 4.1, 4.2, 4.3, 4.4, and 4.9 shall be true and correct in all material respects as of the Closing Date, as though made on and as of such date (except to the extent expressly made as of a specific date, in which case as of such specific date); and (iii) the representations and warranties of the Company set forth in Section 4.3 shall be true and correct in all but de minimis respects as of the Closing Date.

(c)Agreements and Covenants. The Company and Blocker shall each have performed or complied in all material respects with all agreements and covenants required of it by this Agreement to be performed or complied with by them on or prior to the Closing.

(d)All Necessary Documents. Parent shall have received those documents to be delivered pursuant to Section 1.4 and Section 2.6(b).

(e)No Material Adverse Effect. From the date of this Agreement, there shall not have occurred any Material Adverse Effect.

7.3.Additional Conditions to Obligations of the Company and Blocker Seller. The obligations of the Company and the Blocker Partners to effect the Transactions contemplated by this Agreement are also subject to the satisfaction or waiver by the Company of each of the following additional conditions:

(a)Representations and Warranties. (i) Each of the representations and warranties of Parent and Merger Sub contained in this Agreement (except for the representations and warranties of Parent and Merger Sub set forth in Sections 5.1, 5.2, 5.5, 5.6, 5.7, 5.12, 5.13 and 5.14) shall be true and correct in all respects (without regard to materiality qualifiers contained within such representations and warranties) as of the Closing Date, as though made on and as of such date (except to the extent expressly made as of a specific date, in which case as of such specific date), except for any failure of such representations and warranties to be true and correct that, individually or in the aggregate, does not cause a Parent Material Adverse Effect; and (ii) the representations and warranties of Parent and Merger Sub set forth in Sections 5.1, 5.2, 5.5, 5.6, 5.7, 5.12, 5.13 and 5.14 shall be true and correct in all material respects as of the Closing Date, as though made on and as of such date (except to the extent expressly made as of a specific date, in which case as of such specific date).

 

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(b)Agreements and Covenants. Parent and Merger Sub shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by Parent and Merger Sub on or prior to the Closing.

(c)All Necessary Documents. The Securityholders’ Representative shall have received those documents to be delivered pursuant to Section 2.6(b).

ARTICLE VIII
TERMINATION

8.1.Termination. This Agreement may be terminated at any time prior to the Closing only as follows:

(a)at any time, Parent, Merger Sub and the Company may terminate this Agreement by mutual written consent;

(b)at any time after January 31, 2021 (the “Outside Date”), by the Company, on the one hand, or Parent and Merger Sub, on the other hand, by written notice to the other, if the Closing shall not have occurred on or before the Outside Date; provided, that the right to terminate this Agreement under this Section 8.1(b) shall not be available to the Company, if the Company, or to Parent and Merger Sub, if Parent or Merger Sub, as applicable, has breached its obligations under this Agreement in any manner that shall have principally caused the failure of the Closing to have occurred on or before such date; provided, however, that the parties agree that the no party shall have the right to terminate this Agreement pursuant to this Section 8.1(b) during the pendency of any Actions pursuant to Section 10.14;

(c)By the Company, on the one hand, or Parent and Merger Sub, on the other hand, by written notice to the other, if any Governmental Authority of competent jurisdiction shall have issued any Order permanently enjoining, restraining or prohibiting the Transactions, and such Order shall have become final and non-appealable, if applicable; provided, that the right to terminate this Agreement under this Section 8.1(c) shall not be available to the Company, if the Company’s, or to Parent and Merger Sub, if Parent’s or Merger Sub’s, as applicable, breach of its obligations under this Agreement has been the principal cause of, or principally resulted in, such Order, restraint or prohibition;

(d)By Parent and Merger Sub, by written notice to the Company, if the Company or Blocker Seller has breached or failed to perform any of its representations, warranties, covenants or agreements contained in this Agreement, in any case, such that a condition contained in Section 7.1 or Section 7.2 would be incapable of being satisfied and such breach is not cured by the earlier of (i) the date that is twenty (20) days after written notice to the Company by Parent and Merger Sub and (ii) the Outside Date; provided, however, that no cure period will be required for any such breach that by its nature cannot be cured; provided, further, however, that Parent and Merger Sub shall not be permitted to terminate this Agreement pursuant to this Section 8.1(d) if Parent or Merger Sub has breached or failed to perform any of their respective representations, warranties, covenants or agreements contained in this Agreement, in any case, such that a condition contained in Section 7.1 or Section 7.3 would be incapable of being satisfied by the Outside Date; or

(e)By the Company, by written notice to Parent and Merger Sub, if Parent or Merger Sub has breached or failed to perform any of its representations, warranties, covenants or agreements contained in this Agreement, in any case, such that a condition contained in Section 7.1or Section 7.3 would be incapable of being satisfied and such breach is not cured by the earlier of (i) the date that is 

 

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twenty (20) days after written notice to the Parent and Merger Sub by the Company and (ii) the Outside Date; provided, however, that no cure period will be required for any such breach that by its nature cannot be cured; provided, further, however, that the Company shall not be permitted to terminate this Agreement pursuant to this Section 8.1(e) if the Company has breached or failed to perform any of its representations, warranties, covenants or agreements contained in this Agreement, in any case, such that a condition contained in Section 7.1 or Section 7.2 would be incapable of being satisfied by the Outside Date.

8.2.Effect of Termination. In the event of termination of this Agreement by the Company, on the one hand, or Parent and Merger Sub, on the other hand, as provided in Section 8.1, this Agreement shall forthwith become void and there shall be no Liability or obligation on the part the Parent or Merger Sub, or the Blocker, Blocker Seller or the Company and its Subsidiaries or any of their respective Representatives, in either case, relating to, based on or arising under or out of this Agreement, the transactions contemplated hereby or the subject matter hereof (including the negotiation and performance of this Agreement), in each case whether based on contract, tort, equity or strict liability, by the enforcement of any assessment, by any legal or,equitable proceeding, by virtue of any Laws or otherwise and whether by or through attempted piercing of the corporate veil, by or through any claim by or on behalf of a party hereto or another Person or otherwise, except (i) with respect to this Section 8.2, Article X (other than Section 10.14), and Annex I (and such provisions shall remain in full force and effect following such termination), (ii) the Confidentiality Agreement shall continue in full force and effect in accordance with its terms, and (iii) any Liability of any party hereto for (x) Fraud or (y) any willful breach of this Agreement (which, for the avoidance of doubt, shall be deemed to include any failure by the Parent and Merger Sub to consummate the transactions contemplated by this Agreement if they are obligated to do so hereunder) prior to such termination.

ARTICLE IX

NO SURVIVAL; NO RECOURSE

9.1.No Survival. The parties hereto, intending to modify any applicable statute of limitations, agree that (i) the representations and warranties of the Company, Blocker, Parent, Merger Sub and Blocker Seller contained in this Agreement (including the Schedules and Exhibits attached hereto and the certificates delivered pursuant hereto) shall not survive the Closing for any purpose, and thereafter there shall be no Liability on the part of, shall any claim be made by, any party or its Affiliates with respect thereto, (ii) after the Closing, there shall be no Liability on the part of, nor shall any claim be made by, any Person (including any party or any of their respective Affiliates) in respect of any covenant or agreement to be performed prior to the Closing, and (iii) all covenants and agreements contained in this Agreement that contemplate performance thereof following the Closing or otherwise expressly by their terms survive the Closing will survive the Closing in accordance with their terms. The Parent and Merger Sub further acknowledge and agree that Parent’s and its Affiliates’ (including, after the Effective Time, the Surviving Entity’s and its Subsidiaries’) sole and exclusive remedy (other than in the case of Fraud) for breaches of any representations and warranties and losses relating thereto shall be the R&W Policy.

9.2.No Recourse. Each of Parent and Merger Sub hereby acknowledges and agrees that, following the Closing, none of the Unitholders or the Blocker Partners nor any of their respective Affiliates shall have any Liability or obligation arising under this Agreement or as a result of the consummation of the transactions contemplated hereby under any Law, in equity, contract, tort or otherwise, other than with respect to any covenant or agreement contained in this Agreement or any 

 

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certificate or other document delivered pursuant to this Agreement that contemplates performance following the Closing or otherwise expressly by their terms survive the Closing.

ARTICLE X
GENERAL PROVISIONS

10.1.Cost and Expenses. Except as otherwise expressly provided for herein, each party will pay its own costs and expenses (including attorneys’ fees, accountants’ fees and other professional fees and expenses) in connection with the negotiation, preparation, execution and delivery of this Agreement and the consummation of the Blocker Sale, the Merger and the other Transactions contemplated by this Agreement and, for the avoidance of doubt, the Company shall be liable for all Transaction Expenses.

10.2.Amendment, Modification and Waiver. This Agreement may be amended, modified or supplemented at any time only by written agreement signed by the parties hereto (other than Merger Sub), and any failure of the Company or Blocker (in each case prior to the Closing) or the Blocker Partners to comply with any term or provision of this Agreement may be waived by Parent and Merger Sub, and any failure of Parent or Merger Sub or the Company or Blocker (post-Closing) to comply with any term or provisions of this Agreement may be waived by the Securityholders’ Representative and the Blocker Seller, at any time by an instrument in writing signed by or on behalf of such other party, but such waiver shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure to comply.

10.3.Savings Clause. If any provision hereof shall be held invalid or unenforceable by any court of competent jurisdiction or as a result of future legislative action, such holding or action shall be strictly construed and shall not affect the validity or effect of any other provision hereof. Upon such declaration that any term or other provision is invalid, illegal or incapable of being enforced, the parties to this Agreement shall negotiate in good faith to modify this Agreement, as needed, so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement be consummated as originally contemplated to the greatest extent possible.

10.4.Entire Agreement. This Agreement (together with the Annexes, Exhibits, Disclosure Letter and the other documents delivered pursuant hereto or referenced herein) and the Confidentiality Agreement constitute the entire agreement of the parties and supersede all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof.

10.5.Assignment; Successors and Assigns. The respective rights and obligations of the parties hereto shall not be assignable without the prior written consent of (a) Parent, in the event of an assignment by the Company (prior to the Closing), the Blocker (prior to the Closing), or the Blocker Partners, or (b) the Securityholders’ Representative, in the event of an assignment by Parent, Merger Sub, the Company (following the Closing) or the Blocker (following the Closing); provided, however, that Parent may assign all or part of its respective rights under this Agreement without such written consent to Four Twenty Corporation, a Delaware corporation, a Subsidiary or to its lenders as security for any reason including for obligations arising in connection with the financing of the Transactions contemplated hereby; provided, that no such assignment will relieve Parent of any of its obligations hereunder. Any assignment or transfer in violation of the preceding sentence shall be void. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and permitted assigns.

 

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10.6.Parties in Interest. Except for (i) current and former managers, officers, directors and controlling Persons of the Company and its Subsidiaries pursuant to Section 6.5, (ii) the Unitholders pursuant to Section 6.12, and (iii) those Persons referenced Section 10.15, each of which is an intended third party beneficiary hereof, the parties hereby agree that their respective representations, warranties and covenants set forth herein are solely for the benefit of the other parties hereto, in accordance with and subject to the terms of this Agreement, and this Agreement is not intended to, and does not, confer upon any Person, other than the parties hereto, any rights or remedies hereunder, including, the right to rely upon the representations and warranties set forth herein. The parties hereto further agree that the rights of third-party beneficiaries under Section 6.5 and Section 6.12 shall not arise unless and until the Closing occurs. The representations and warranties in this Agreement are the product of negotiations among the parties hereto and are for the sole benefit of the parties hereto. Any inaccuracies in such representations and warranties may be subject to waiver by the parties hereto in accordance with Section 10.2 without notice or liability to any other Person. In some instances, the representations and warranties in this Agreement may represent an allocation among the parties hereto of risks associated with particular matters regardless of the Knowledge of any of the parties hereto. Consequently, Persons, other than the parties hereto, may not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.

10.7.Mutual Drafting; Interpretation; Headings; Disclosure Letter.

(a)Each party hereto has participated in the drafting of this Agreement, which each party acknowledges is the result of extensive negotiations between the parties. If an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision. For purposes of this Agreement, whenever the context requires: (i) the singular number shall include the plural, and vice versa; (ii) the masculine gender shall include the feminine and neuter genders; (iii) the feminine gender shall include the masculine and neuter genders; and (iv) the neuter gender shall include masculine and feminine genders. As used in this Agreement, the words “include” and “including,” and words of similar meaning, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.” Except as otherwise indicated, all references in this Agreement to “Sections,” “Annexes” and “Exhibits,” are intended to refer to Sections of this Agreement and the Annexes and Exhibits to this Agreement. All references in this Agreement to “$” are intended to refer to U.S. dollars. The term “or” shall not be deemed to be exclusive. The words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement. References herein to “as of the date hereof,” “as of the date of this Agreement” or words of similar import shall be deemed to mean “as of immediately prior to the execution and delivery of this Agreement.” The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

(b)The information in the Disclosure Letter constitutes (i) exceptions or qualifications to representations, warranties, covenants and obligations of the Company, Blocker and the Blocker Partners as set forth in this Agreement or (ii) descriptions or lists of assets and Liabilities and other items referred to in this Agreement. The Disclosure Letter shall not be construed as indicating that any disclosed information is required to be disclosed, and no disclosure shall be construed as an admission that such information is material to, or required to be disclosed by, the Company, Blocker and the Blocker Partners. The Company, Blocker and the Blocker Partners may, at their respective options, include in the Disclosure Letter items that are not material, and such inclusion, or any references to dollar 

 

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amounts, shall not be deemed to constitute an admission of any liability by the Company, Blocker and the Blocker Partners or any other Person to any third party or otherwise imply that such items are material, to establish any standard of materiality or to define further the meaning of such terms (including Material Adverse Effect) for purposes of this Agreement. Any disclosure contained in any section of the Disclosure Letter shall be deemed to be disclosed with respect to any other Section of this Agreement to the extent that it is reasonably apparent from the face of such disclosure that such disclosure is applicable to such other Section of this Agreement. The Disclosure Letter constitute a part of this Agreement and are incorporated into this Agreement for all purposes as if fully set forth herein. Capitalized terms used in the Disclosure Letter that are not defined therein shall have the meanings given them in this Agreement.

10.8.Governing Law. The validity, interpretation and effect of this Agreement shall be governed exclusively by the Laws of the State of Delaware, excluding the “conflict of laws” rules thereof.

10.9.Venue. Each of the parties irrevocably agrees that any legal Action arising out of or relating to this Agreement or any of the transactions contemplated by this Agreement (including claims asserted for breach of contract, tort, or otherwise and regardless of whether such claims arise in law or in equity) must be brought by any other party or its successors or assigns in the Court of Chancery of the State of Delaware or, only if such court does not have jurisdiction, any other state or federal court located in the State of Delaware, and in each case any appellate courts therefrom, and each of the parties hereby irrevocably submits to the exclusive jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally. Each of the parties agrees not to commence any Action, suit, or proceeding arising out of or related to this Agreement or any of the transactions contemplated by this Agreement except in the courts described above in Delaware, except for Actions in any court of competent jurisdiction to enforce any judgment, decree, or award rendered by any such court in Delaware as described herein. Each of the parties further agrees that notice as provided in Section 10.11 shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient provided, however, that nothing in this Section 10.9 shall affect the right of any party to serve legal process in any other manner permitted by Law. Each of the parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim, or otherwise, in any Action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (a) any claim that it is not personally subject to the jurisdiction of the courts in Delaware as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and (c) that (i) the Action in any such court is brought in an inconvenient forum, (ii) the venue of such Action is improper, or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts. Each party hereto agrees that a final, non-appealable judgment in any Action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law.

10.10.Waiver of Jury Trial and Certain Damages. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY  HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO 

 

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REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THE FOREGOING WAIVER, (III) IT MAKES THE FOREGOING WAIVER VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.10.

10.11.Notices.

(a)All notices, requests, demands and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if delivered (i) by hand (including by reputable overnight courier), (ii) by mail (certified or registered mail, return receipt requested), (iii) by facsimile transmission (followed by delivery of an original via overnight courier service) or (iv) by E-mail (followed by delivery of an original via overnight courier service) to the respective parties at the following addresses:

If to the Company:

SweetWater Brewing Company, LLC 

195 Ottley Drive

Atlanta, GA 30324

Attention: Fredrick M. Bensch, Chief Executive Officer

E-mail: freddy@sweetwaterbrew.com

with a copy to (for information purposes only): Winston & Strawn LLP

200 Park Avenue

New York, NY 10166-4193

Facsimile: (212) 294-4700

Attention: Jennifer Kurtis, Esq.; Ryan Walden, Esq.

E-mail: jkurtis@winston.com; rwalden@winston.com

If to Blocker and the Blocker Partners:

c/o TSG Consumer Partners 

600 Montgomery St.

San Francisco, CA 94111

Attention: Jamie O’Hara and Frances Jack

Email: johara@tsgconsumer.com; bjack@tsgconsumer.com

with a copy to (for information purposes only):

Ropes & Gray LLP

Prudential Tower 

800 Boylston Street

Boston, MA 02119 

Attention: Paul Van Houten

Email: 

 

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Paul.VanHouten@ropesgray.com

If to Securityholders’ Representative:

c/o SweetWater Brewing Company, LLC 

195 Ottley Drive

Atlanta, GA 30324

Attention: Fredrick M. Bensch, Chief Executive Officer 

E-mail: freddy@sweetwaterbrew.com

with a copy to (for information purposes only): 

Winston & Strawn LLP

200 Park Avenue

New York, NY 10166-4193

Facsimile: (212) 294-4700

Attention: Jennifer Kurtis, Esq.; Ryan Walden, Esq.

E-mail: jkurtis@winston.com; rwalden@winston.com 

and

Ropes & Gray LLP 

Prudential Tower 

800 Boylston Street

Boston, MA 02119 

Attention: Paul Van Houten

Email: Paul.VanHouten@ropesgray.com

If to Parent or Merger Sub: 

c/o Aphria, Inc.

PO Box 20009

269 Erie Street South

Leamington, Ontario, N8H 3C4, Canada Attention: Christelle Gedeon, Chief Legal Officer Email: christelle.gedeon@aphria.com

with copies to (for information purposes only):

DLA Piper LLP (US)

1251 Avenue of the Americas, 27th Floor New York, NY 10020

Attention: Christopher Giordano
Jon Venick

Email: Christopher.Giordano@us.dlapiper.com 
Jon.Venick@us.dlapiper.com

(b)Any party may from time to time change its address for the purpose of notices to that party by a similar notice specifying a new address, but no such change shall be deemed to have been given until it is actually received by the party sought to be charged with its contents.

(c)All notices and other communications required or permitted under this Agreement which are addressed as provided in this Section 10.11 if delivered personally or courier, shall be effective upon delivery; if sent by facsimile, shall be delivered upon receipt of proof of transmission.

 

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10.12.Public Announcements. The initial press release or public announcement issued by the parties concerning this Agreement and the transactions contemplated hereby shall be in a form agreed to by Parent, Securityholders’ Representative and the Blocker Seller and thereafter the parties shall consult with each other (and obtain the other party’s prior consent) before issuing any press release or otherwise making any public statements with respect to the transactions contemplated by this Agreement, in each case except (a) based on the reasonable advice of counsel, such press release or public statement is required by applicable Law, stock exchange rule or regulation, or (b) any press release or other public statement that is consistent with previous press releases, public disclosures or public statements made by a party hereto in accordance with this Agreement, in each case under this clause (b) to the extent such disclosure is still accurate, and in each case under clause (a) and (b), provided the other party with an opportunity to review and comment on such press release or public statement prior to its issuance, distribution or publication. Notwithstanding the provisions of this Section 10.12, on and after the Closing Date, the Blocker Partners and their Affiliates will be permitted (i) to disclose to their respective and prospective members, limited partners and partners (who may disclose to their direct and indirect investors) the fact that the Closing has occurred, the consideration paid hereunder, other items directly relating to such consideration and other types of information that are customary for private equity funds to provide to their respective and prospective members, limited partners and partners and (ii) to disclose in connection with normal fund raising and related marketing or informational or reporting activities, including on their websites and in their marketing materials, any such information permitted to be disclosed pursuant to clause (i) above and any information previously provided as part of a press release or public announcement issued or made with the prior written consent of the Parent, the Securityholders’ Representative, and the Blocker Seller which disclosure may be accompanied by the logo of the Company.

10.13.Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same instrument. A copy transmitted via facsimile or e-mail as a portable document format (.pdf) of this Agreement, bearing the signature of any party shall be deemed to be of the same legal force and effect as an original of this Agreement bearing such signature(s) as originally written of such one or more parties.

10.14.Enforcement of Agreement. The parties agree that irreparable damage may occur in the event that the parties hereto do not perform the provisions of this Agreement (including failing to take such actions as are required of it hereunder to consummate this Agreement) in accordance with the specific terms thereof or otherwise breach such provisions, and that money damages may not be an adequate remedy, even if available. The parties hereto accordingly agree that, prior to the valid termination of this Agreement pursuant to Article VIII, the Company, the Blocker Partners and the Parent shall be entitled to an injunction or injunctions, or any other appropriate form of specific performance or equitable relief, to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof (including the parties’ obligations to consummate the transactions contemplated hereby and the Parent’s obligation to pay, and the right of the Blocker Seller and Unitholders to receive, the consideration payable hereunder) in any court of competent jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. Each of the parties agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that any other party has an adequate remedy at law or that any award of specific performance is not an appropriate remedy for any reason at law or in equity. Any party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement shall not be required to provide any bond or other security in connection with any such order or injunction.

 

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10.15.Limitation on Recourse. Notwithstanding anything to the contrary in this Agreement or otherwise, no claim arising in whole or in part out of or related to this Agreement, the negotiation, interpretation, construction, validity or enforcement of this Agreement or the Transactions (whether sounding in contract, tort, statute or otherwise) shall be brought or maintained by or on behalf of any party hereto or any of its Affiliates or their respective successors or permitted assigns against any Person not a party to this Agreement. Without limitation of the foregoing, except for claims against a party to this Agreement, no claim described in the immediately preceding sentence shall be brought or maintained against any past, present or future officer, director, employee, agent, direct or indirect general or limited partner, manager, management company, direct or indirect member, stockholder, equityholder, or controlling Person, Representative or Affiliate, or any heir, executor, administrator, successor or assign of any of the foregoing, of Parent, Merger Sub, the Company or any of its Subsidiaries, Blocker, Blocker Partners or the Securityholders’ Representative, as applicable, and no recourse shall be had against any of them in respect of any such claim, including in connection with any alleged misrepresentation or inaccuracy in or breach of or omission in any of the representations, warranties, covenants or agreements of any such party set forth or contained in this Agreement or any exhibit or schedule hereto or any certificate delivered hereunder.

[Signature Page Follows]

 

 

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective officers thereunto duly authorized all as of the date first written above.

 

	
APHRIA INC.

	
 
	
 
	
 

	
By:
	
 
	
/s/ Carl A. Merton

	
Name:
	
  
	
Carl A. Merton

	
Title:
	
 
	
Chief Financial Officer

	
 
	
 
	
 

	
PROJECT GOLF MERGER SUB, LLC

	
 
	
 
	
 

	
By:
	
 
	
FOUR TWENTY CORPORATION,

	
 
	
 
	
its Sole Member

	
 
	
 
	
 

	
By:
	
 
	
/s/ Carl A. Merton

	
Name:
	
 
	
Carl A. Merton

	
Title:
	
 
	
Authorized Representative

 

[Signature Page to Agreement of Merger and Acquisition]

 

 

 

 

	
SW BREWING COMPANY, LLC

	
 
	
 
	
 

	
By:
	
 
	
/s/ Fredrick Bensch

	
Name:
	
  
	
Fredrick Bensch

	
Title:
	
 
	
Chief Executive Officer

	
 
	
 
	
 

	
SWBC CRAFT HOLDINGS LP

	
 
	
 
	
 

	
By:
	
 
	
SWBC CRAFT MANAGEMENT, LLC, 

	
 
	
 
	
its General Partner

	
 
	
 
	
 

	
By:
	
 
	
 

	
Name:
	
 
	
F. Blythe Jack

	
Title:
	
 
	
Manager

 

	
SWBC BLOCKER SELLER, LP

	
 
	
 
	
 

	
By:
	
 
	
SWBC CRAFT MANAGEMENT, LLC,

	
 
	
 
	
its General Partner

	
 
	
 
	
 

	
By:
	
 
	
 

	
Name:
	
  
	
F. Blythe Jack

	
Title:
	
 
	
Manager

	
 
	
 
	
 

	
SWBC CRAFT MANAGEMENT, LLC

	
 
	
 
	
 

	
By:
	
 
	
 

	
Name:
	
 
	
F. Blythe Jack

	
Title:
	
 
	
Manager

 

	
CHILLY WATER, LLC

	
 
	
 
	
 

	
By:
	
 
	
/s/ Fedrick Bensch

	
Name:
	
 
	
Fedrick Bensch

	
Title:
	
 
	
Member

 

[Signature Page to Agreement of Merger and Acquisition]

 

 

 

	
SW BREWING COMPANY, LLC

	
 
	
 
	
 

	
By:
	
 
	
 

	
Name:
	
  
	
Fredrick Bensch

	
Title:
	
 
	
Chief Executive Officer

	
 
	
 
	
 

	
SWBC CRAFT HOLDINGS LP

	
 
	
 
	
 

	
By:
	
 
	
SWBC CRAFT MANAGEMENT, LLC, 

	
 
	
 
	
its General Partner

	
 
	
 
	
 

	
By:
	
 
	
/s/ F. Blythe Jack

	
Name:
	
 
	
F. Blythe Jack

	
Title:
	
 
	
Manager

 

	
SWBC BLOCKER SELLER, LP

	
 
	
 
	
 

	
By:
	
 
	
SWBC CRAFT MANAGEMENT, LLC,

	
 
	
 
	
its General Partner

	
 
	
 
	
 

	
By:
	
 
	
/s/ F. Blythe Jack

	
Name:
	
  
	
F. Blythe Jack

	
Title:
	
 
	
Manager

	
 
	
 
	
 

	
SWBC CRAFT MANAGEMENT, LLC

	
 
	
 
	
 

	
By:
	
 
	
/s/ F. Blythe Jack

	
Name:
	
 
	
F. Blythe Jack

	
Title:
	
 
	
Manager

 

	
CHILLY WATER, LLC

	
 
	
 
	
 

	
By:
	
 
	
 

	
Name:
	
 
	
Fedrick Bensch

	
Title:
	
 
	
Member

 

 

 

[Signature Page to Agreement of Merger and Acquisition]

 

 

ANNEX I
DEFINITIONS

For purposes of this Agreement:

“2022 15-Day Period” has the meaning set forth in Section 2.16(c).

“2022 Adjusted EBITDA” has the meaning set forth in Section 2.16.

“2022 Adjusted EBITDA Calculation” has the meaning set forth in Section 2.16(a).

“2022 Earn-Out Payment” has the meaning set forth in Section 2.15(b).

“2022 EBITDA Acknowledgement” has the meaning set forth in Section 2.16(c).

 “2022 EBITDA Adjustment Report” has the meaning set forth in Section 2.16(c). 

“2023 15-Day Period” has the meaning set forth in Section 2.16(d).

“2023 Adjusted EBITDA” has the meaning set forth in Section 2.16(b).

“2023 Adjusted EBITDA Calculation” has the meaning set forth in Section 2.16(b).

“2023 Earn-Out Payment” has the meaning set forth in Section 2.15(c).

“2023 EBITDA Acknowledgement” has the meaning set forth in Section 2.16(d). 

“2023 EBITDA Adjustment Report” has the meaning set forth in Section 2.16(d). 

“30-Day Period” has the meaning set forth in Section 2.12(b).

“Acceleration Event” means any of the following:

(a)a direct or indirect sale or transfer (in a single transaction or through a series of related transactions, pursuant to a merger, equity sale or otherwise) to any third party of: (A) securities representing greater than 50% of the outstanding voting power, or economic interest in (whether by way of a sale of securities, merger or otherwise) the Company or any of its Subsidiaries; or (B) all or substantially all of the assets or business line or business group of the Company or any of its Subsidiaries, taken as a whole;

(b)a material breach by Parent or the Surviving Entity of the covenants or representations contained in Section 2.17(a) of this Agreement; or

(c)prior to the expiration of the Earn-Out Period, (i) the employment of Fredrick M. Bensch with the Parent or the Company is terminated without Cause (as such term is defined in the Bensch Consulting Agreement) or (ii) Mr. Bensch terminates his employment for Good Reason (as defined in the Bensch Consulting Agreement).

“Acceleration Payment Date” has the meaning set forth in Section 2.17(b).

“Acknowledgement” has the meaning set forth in Section 2.12(b).

 

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“Act” has the meaning set forth in Section 2.1.

“Action” means any action, administrative enforcement, appeal, petition, plea, charge, complaint, claim, suit, demand, litigation, arbitration, mediation, hearing, investigation, audit or other proceeding.

“Adjustment Escrow Account” has the meaning set forth in Section 2.11(c).

“Adjustment Escrow Agent” means Citibank, N.A. “Adjustment Escrow Amount” means $1,000,000.

“Adjustment Escrow Agreement” means that certain escrow agreement substantially in the form attached hereto as Exhibit D for purposes of the Adjustment Escrow Amount, to be entered into at the Closing by and between Parent, Securityholders’ Representative and Adjustment Escrow Agent.

“Adjustment Report” has the meaning set forth in Section 2.12(b).

“Affected Employee” has the meaning set forth in Section 6.6(a).

“Affiliate” means as to any Person, any other Person which, directly or indirectly, is controlled by, controls, or is under common control with, such first-mentioned Person.

“Affiliated Group” means an affiliated group as defined in Section 1504 of the Code (or any analogous combined, consolidated or unitary group defined under state, local or foreign income Tax Law)

“Aggregate Earn-Out Payment” has the meaning set forth in Section 2.15(c).

“Agreement” has the meaning set forth in the caption.

“Alcohol Beverage Authorities” means the United States Alcohol and Tobacco Tax and Trade Bureau (the “TTB”), the Georgia Department of Revenue, City of Atlanta and any other local, state or federal Governmental Agency responsible for regulating the manufacturing, distribution, sale and/or marketing of alcohol beverages.

“Annual Financial Statements” has the meaning set forth in Section 3.11(a). “Anti-Corruption Laws” has the meaning set forth in Section 3.23(a). “Approving Holders” has the meaning set forth in Section 1.5.

“Assets” has the meaning set forth in Section 3.6.

“Auditor’s Determination” has the meaning set forth in Section 2.12(b). “Auditor’s EBITDA Determination” has the meaning set forth in Section 2.16(e). “Balance Sheet Date” has the meaning set forth in Section 3.11(a).

“Bankruptcy and Equity Exception” has the meaning set forth in Section 3.3.

“Bates Agreement” means that certain Employment Agreement dated November 1, 2020 by and between SweetWater Brewing Company, LLC and Patrick Bates.

 

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“Benefit Plan” means any (a) “employee pension benefit plan” (as defined in Section 3(2) of ERISA), (b) any “employee welfare benefit plan” (as defined in Section 3(1) of ERISA), and (c) any other material plan, agreement or arrangement providing for employment, severance, compensation, change of control or retention pay or benefits, stock options, stock purchase, phantom stock, stock appreciation or other forms of equity-based or phantom equity-based incentive compensation, health, fringe, and other benefit plans, programs, or arrangements that are maintained or contributed to by the Company or any of its Subsidiaries or to which the Company or any of its Subsidiaries is required to contribute on behalf of an employee of the Company or any of its Subsidiaries or for which the Company or any of its Subsidiaries have any Liability (actual or contingent) by virtue of having an ERISA Affiliate.

“Bensch Consulting Agreement” means that certain consulting agreement substantially in the form attached hereto as Exhibit E entered into on the date hereof by and between Class V, Inc. and the Surviving Entity.

“Blocker” has the meaning set forth in the caption.

“Blocker Closing” has the meaning set forth in Section 1.3.

“Blocker GP” has the meaning set forth in the caption.

“Blocker GP Interests” has the meaning set forth in the recitals.

“Blocker LP Interests” has the meaning set forth in the recitals.

“Blocker Interests” has the meaning set forth in the recitals. “Blocker Members” means Blocker and SWBC Craft, LLC. “Blocker Partners” has the meaning set forth in the caption. “Blocker Sale” has the meaning set forth in the recitals. “Blocker Seller” has the meaning set forth in the caption.

“Blocker Seller Released Parties” has the meaning set forth in Section 6.14(b).

“Brands” has the meaning set forth in Section 3.22(a).

“Business” means any business conducted, engaged in, or currently conducted or engaged in by the Company or any of its Subsidiaries.

“Business Day” means any day, except for a Saturday or Sunday or a day on which banks are required or authorized by Law to close in New York, New York or a day on which the Delaware Secretary of State is authorized or required by Law to close.

“Canadian Securities Laws” means, collectively, the Ontario Securities Act and the applicable securities laws of the other provinces and territories of Canada, the regulations made and forms prescribed thereunder together with all applicable published rules, instruments, policy statements and blanket orders and rulings of the Canadian securities regulatory authorities.

“Cancelled Units” has the meaning set forth in Section 2.7(a).

“CARES Act” means The Coronavirus Aid, Relief, and Economic Security Act, Pub.L. 116–136 (03/27/2020).

 

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“CARES Act Determination Date” means the date which the lender of the CARES Debt (and, to the extent required, any Governmental Authority (including the United States Small Business Administration)) has finally determined that all or a portion of the CARES Debt is ineligible for forgiveness pursuant to the provisions of the CARES Act, thus resulting in such CARES Debt being deemed CARES Unforgiven Debt for purposes of Section 2.13(b).

“CARES Debt” means the PPP Loan.

“CARES Unforgiven Debt” means that amount of the CARES Debt that has been finally determined by the lender of the CARES Debt (and, to the extent required, any Governmental Authority (including the United States Small Business Administration)) to be ineligible for forgiveness pursuant to the provisions of the CARES Act.

“Cash” means all cash (excluding, for the avoidance of doubt, restricted cash and any security deposits, bonds or other similar instruments serving as collateral with respect to any property or assets leased by the Company, and any deposits or reserves associated with any self- insurance, including but not limited to any deposits or reserves associated with any workers compensation policies or claims), cash equivalents and marketable securities held by the Company and its Subsidiaries, calculated as of immediately prior to the Effective Time. “Cash” shall (i) be calculated net of issued but uncleared checks, drafts and overdrafts as of immediately prior to the Effective Time, and (ii) include checks and other wire transfers and drafts deposited for the account of the Company as of immediately prior to the Effective Time, including but not limited to credit card and debit card receipts, but solely to the extent received prior to the final determination of the Final Purchase Price.

“CERCLA” has the meaning set forth in clause (i) of the definition of Hazardous Material. “Certificate of Merger” has the meaning set forth in Section 2.2(a).

“Cheese Grits” has the meaning set forth in the Recitals. “Closing” has the meaning set forth in Section 2.5. “Closing Date” has the meaning set forth in Section 2.5.

“Closing Date Indebtedness” means the aggregate amount of Indebtedness calculated as of immediately prior to the Effective Time (other than with respect to the inclusion of Transaction Tax Deductions in the calculation of the Pre-Closing Income Tax Liability Amount, which shall be calculated as of immediately after the Effective Time); provided, however, that Closing Date Indebtedness shall not include (a) any amount taken into account in the calculation of Closing Date Working Capital, or (b) any Transaction Expenses.

“Closing Date Working Capital” means the Net Working Capital calculated as of immediately prior to the Effective Time.

“Closing Stock Value” has the meaning set forth in Section 2.10.

“Code” means the U.S. Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

“Company’s Knowledge” or “Knowledge of the Company” or similar phrase means the actual knowledge of Fredrick M. Bensch, Patrick Bates and JD Usry.

“Company” has the meaning set forth in the caption.

 

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“Company Intellectual Property” means all of the Intellectual Property Rights owned or purported to be owned by or exclusively licensed to the Company or any of its Subsidiaries.

“Company LLC Agreement” means Second Amended and Restated Limited Liability Company Agreement of the Company, dated as of October 21, 2020, as amended and in effect from time to time.

“Company Material Contract” has the meaning set forth in Section 3.10(a).

“Company Ownership” has the meaning set forth in Section 4.7.

“Company Products” means any and all products and services that currently are manufactured, produced, marketed, offered, sold, licensed, provided or distributed by the Company or any of its Subsidiaries.

“Company Registered Intellectual Property” has the meaning set forth in Section 3.8(a).

“Competition Laws” shall mean Laws that are designed or intended to prohibit, restrict or regulate actions, including transactions, acquisitions and mergers, having the purpose or effect of creating or strengthening a dominant position, monopolization, lessening of competition or restraint of trade.

“Confidentiality Agreement” means the Confidentiality Agreement dated as of December 2, 2019, by and between Parent and the Company.

“Constituent Entities” has the meaning set forth in Section 2.1.

“Contract” means, with respect to any Person, any contract, agreement, deed, mortgage, lease, license, purchase order, commitment, arrangement or undertaking, written or oral, or other document or instrument to which or by which such Person is a party or otherwise subject or bound or to which or by which any asset, property or right of such Person is subject or bound.

“control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, as trustee or executor, by Contract or otherwise.

“COVID-19” means SARS-CoV-2 or COVID-19, and any evolutions or mutations thereof or resulting epidemics, pandemic or disease outbreaks.

“COVID-19 Measures” means, collectively, any quarantine, shelter in place, stay at home, workforce reduction, social distancing, shut down, closure, sequester or any other Law, directive, policy, guideline or recommendation by any Governmental Authority in connection with or in response to COVID-19 and applicable to the Company, its Subsidiaries or their respective businesses.

“CSA” means the Canadian Securities Administrators.

“Disclosure Letter” has the meaning set forth in the introductory paragraph in Article III.

“Downward Adjustment Amount” has the meaning set forth in Section 2.13(a)(i).

 

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“Earn-Out Cap” has the meaning set forth in Section 2.15(b). “Earn-Out Payments” has the meaning set forth in Section 2.15(a). “Earn-Out Period” has the meaning set forth in Section 2.17(a).

“EBITDA Adjustment Report” has the meaning set forth in Section 2.16.

“Effective Time” has the meaning set forth in Section 2.2(b).

“Enterprise Value” means three hundred million dollars ($300,000,000).

“Environment” means soil, land surface or subsurface strata, waters (including, navigable waters, oceans, streams, ponds, reservoirs, drainage basins, wetlands, surface or ground water), sediments, ambient air (including indoor), noise, plant life, animal life, and all other environmental media or natural resources.

“Environmental Laws” means any and all applicable Laws, Permits, approvals, authorizations and other requirements having the force and effect of Law, whether local, state, territorial or national, in force and effect as of the Closing Date and relating to: (i) emissions, discharges, spills, releases or threatened releases of Hazardous Materials; (ii) the use, treatment, storage, disposal, handling, manufacturing, transportation or shipment of Hazardous Materials; (iii) the regulation of storage tanks; or (iv) relating to pollution or the protection of human health, safety or the Environment, including the following statutes as now written and amended, including any and all regulations promulgated thereunder and any and all state and local counterparts: CERCLA, the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., the Federal Water Pollution Control Act, 33 U.S.C. §1251 et seq., the Clean Air Act, 42 U.S.C. §7401 et seq., the Toxic Substances Control Act, 15 U.S.C. §2601 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §11001 et seq., and the Safe Drinking Water Act, 42 U.S.C. §300f et seq.

“Environmental Permits” means any Permit required under any applicable Environmental Law.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations and rulings promulgated thereunder.

“ERISA Affiliate” means any member of the Company’s controlled group of companies within the meaning of Code Section 414(b), (c), (m) or (o).

“Estimated Cash” has the meaning set forth in Section 2.9.

“Estimated Closing Balance Sheet” has the meaning set forth in Section 2.9. “Estimated Closing Date Indebtedness” has the meaning set forth in Section 2.9. “Estimated Net Working Capital” has the meaning set forth in Section 2.9. “Estimated Purchase Price” has the meaning set forth in Section 2.8.

“Estimated Transaction Expenses” has the meaning set forth in Section 2.9.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Act Document” means all of the documents Parent is required to file or furnish under the Exchange Act.

 

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“Existing Credit Facility” means that certain Credit Agreement dated October 21, 2020 by and among the Company and its Subsidiaries, the Lenders (defined herein), and Truist Bank, in its capacities as Administrative Agent, Issuing Bank and Swing Line Lender.

“Final Calculations” has the meaning set forth in Section 2.12(a).

“Final Cash” has the meaning set forth in Section 2.12(a).

“Final Closing Balance Sheet” has the meaning set forth in Section 2.12(a). “Final Closing Date Indebtedness” has the meaning set forth in Section 2.12(a). “Final Net Working Capital” has the meaning set forth in Section 2.12(a).

“Final Purchase Price” means Enterprise Value, plus (b) Final Cash (as finally determined pursuant to Section 2.12), minus (c) Final Closing Date Indebtedness (as finally determined pursuant to Section 2.12), minus (d) Final Transaction Expenses (as finally determined pursuant to Section 2.12), minus (e) the Adjustment Escrow Amount, minus (f) the PPP Escrow Amount, minus (g) the Securityholders’ Representative Expense Amount, minus (h) the amount, if any, by which the Target Net Working Capital exceeds the Final Net Working Capital (as finally determined pursuant to Section 2.12), plus (i) the amount, if any, by which the Final Net Working Capital (as finally determined pursuant to Section 2.12) exceeds the Target Net Working Capital, minus (j) the Closing Stock Value.

“Final Transaction Expenses” has the meaning set forth in Section 2.12(a). “Financial Statements” has the meaning set forth in Section 3.11(a). “Financing” has the meaning set forth in Section 6.9.

“Flow-Through Return” has the meaning set forth in Section 6.8(d).

“FLSA” has the meaning set forth in Section 3.18(f).

“Fraud” means, with respect to any Person, the intentional common law fraud (as determined pursuant to Delaware state Law) of such Person effected by such Person in the making of a representation and warranty (a) in the case of the Company, set forth in Article III hereof, (b) in the case of Blocker or the Blocker Seller, set forth in Article IV hereof, or (c) in the case of Parent or Merger Sub, set forth in Article V hereof.

“GAAP” means generally accepted accounting principles as applied in the United States. “Governmental Competition Authority” has the meaning set forth in Section 6.1(a). “Governmental Authority” means the government of the United States or any foreign country or any state or political subdivision thereof and any entity, body or authority exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including quasi-governmental authorities established to perform such functions, as well as any arbitrator or arbitral body or body exercising, or entitled to exercise, any administrative, executive, judicial, adjudicative, legislative, police, regulatory or taxing authority or power of any nature including, without limitation, any and all Alcohol Beverage Authorities, the United States Food and Drug Administration and the United States Federal Trade Commission.

“Governmental Competition Authority” has the meaning set forth in Section 6.1(a).

“Hazardous Material” means (i) all substances, wastes, pollutants, contaminants and materials (collectively, “Substances”) regulated, defined or designated as hazardous, extremely or imminently 

 

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hazardous, dangerous or toxic, under Environmental Laws, including the following federal statutes and their state counterparts, as well as these statutes’ implementing regulations: the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. (“CERCLA”) the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S. C. Section 136 et seq; the Atomic Energy Act, 42 U.S.C. Section 22011 et seq; and the Hazardous Materials Transportation Act, 42 U.S.C. Section 1801 et seq; (ii) all Substances with respect to which any Governmental Authority may require investigation, monitoring, reporting, or remediation; (iii) mercury, (iv) petroleum and petroleum products and by products including crude oil and any fractions thereof; and (v) radon, radioactive substances, asbestos, urea formaldehyde, and polychlorinated biphenyls.

“Historical Accounting Practices” means the Company’s historical accounting practices as set forth on Annex V.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

“IFRS” means International Financial Reporting Standards as in effect from time to time

“Indebtedness” means, as to the Company, whether matured, unmatured, liquidated, unliquidated, contingent or otherwise, without duplication, all (a) all indebtedness for borrowed money, or issued in substitution for or exchange of indebtedness for borrowed money, or for the deferred purchase price of property or services with respect to which a Person is liable, contingently or otherwise, as obligor or otherwise (including reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers’ acceptances, whether or not matured), including the current portion of such indebtedness, (b) all obligations evidenced by notes, bonds, debentures or similar instruments, (c) the deferred purchase price of property, goods or services (other than trade payables or accruals incurred in the Ordinary Course, but solely to the extent that such amounts are otherwise included in the calculation of the Final Purchase Price), (d) all capital lease obligations (excluding, for the avoidance of doubt, operating leases, including the Lease Agreement), (e) contractual obligations relating to interest rate protection, swap agreements and collar agreements, (f) deferred rent Liabilities, (g) all obligations under conditional sale or other title retention agreements, (h) the Pre-Closing Income Tax Liability Amount, (i) any indebtedness secured by a Lien on a Person’s assets, (j) any and all amounts related to the forgiveness of any loans or other obligations owed to the Company or any of its Subsidiaries in connection with the transactions contemplated by this Agreement, in all cases, arising on or prior to the Effective Time, (k) any incentive compensation (solely to the extent arising from the consummation of the Transactions) or paid time off owed by the Company or any of its Subsidiaries for employees attributable to any period at or prior to the Closing, plus the employer portion of any employment Taxes due in connection with any such payments, the execution of this agreement or as a result of the consummation of the transactions contemplated by this Agreement, to the extent not paid prior to Closing or otherwise included in the calculation of the Purchase Price, (l) any deposits for events at the taproom that may or could become payable upon cancellation at any time from and after the Closing, (m) any accrued interest on any of the foregoing, (n) any prepayment or other similar fees, expenses or penalties on or relating to the repayment or assumption of any of the foregoing, and (o) all guarantees of any of the items set forth in clauses (a) - (n) above. For the avoidance of doubt, “Indebtedness” shall not include (i) amounts actually included as Transaction Expenses or in calculating Net Working Capital, or (ii) the CARES Debt.

“Independent Auditor” has the meaning set forth in Section 2.12(b).

 

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“Intellectual Property Rights” means any and all intellectual property and proprietary rights throughout the world including each of the following: (i) all United States and foreign patents and utility models and applications therefor (including provisional applications) and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations in part thereof (collectively, “Patents”); (ii) all Trade Secrets and similar rights in confidential information, know- how and materials; (iii) copyrights and all other rights corresponding thereto in any works of authorship, including Software (collectively, “Copyrights”); (iv) all trademark rights and similar rights in trade names, logos, trademarks and service marks together with all of the goodwill associated with the foregoing (collectively, “Trademarks”); (v) all rights in databases and data collections (including knowledge databases, customer lists and customer databases); (vi) all rights to Uniform Resource Locators, Web site addresses and domain names; and (vii) any registrations of or applications to register any of the foregoing.

“Intercompany Accounts” means all accounts payable of the Company or any of its Subsidiaries representing amounts owed by the Company or any of its Subsidiaries to divisions or Affiliates of the Company or any of its Subsidiaries and accounts receivable owed to the Company or any of its Subsidiaries by divisions or Affiliates of such Company or any of its Subsidiaries.

“Interim Financial Statements” has the meaning set forth in Section 3.11(a).

“Inventory” has the meaning set forth in Section 3.24(a). “IRCA” has the meaning set forth in Section 3.18(b). “IRS” means the Internal Revenue Service.

“IT Systems” means electronic data processing, information, recordkeeping, communications, telecommunications, account management, inventory management and other computer systems (including all Software, databases, firmware, hardware and related documentation) and Internet websites.

“Law” means any law, statute, code, regulation, ordinance, rule, common law, Order or governmental requirement enacted, promulgated, entered into, agreed, imposed or enforced by any Governmental Authority.

“Lease Agreement” means that certain Lease Agreement dated as of October 20, 2020 by and between SweetWater Brewing Company, LLC and Cheese Grits, LLC.

“Lease Amendment” means that that certain amendment to the Lease Agreement substantially in the form attached hereto as Exhibit F, by and between SweetWater Brewing Company, LLC and Cheese Grits, LLC.

“Leased Real Property” has the meaning set forth in Section 3.18(a)(b).

“Letter of Transmittal” has the meaning set forth in Section 2.18(b).

“Liability” or “Liabilities” means any and all liabilities and obligation of any kind or nature whatsoever, whether known or unknown, express or implied, primarily or secondarily, direct or indirect, secured or unsecured, liquidated or unliquidated, absolute, accrued, contingent or otherwise and whether due or to become due, vested or unvested, executory, determined, determinable or otherwise, and whether or not the same is required by GAAP to be accrued on the financial statements of such Person.

 

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“Lien” means any mortgage, lien, charge, restriction, pledge, security interest, option, lease or sublease, claim, right of any third party, easement, encroachment or encumbrance or other charges or rights of others of any kind or nature, except Permitted Liens.

“LLC Agreement” shall mean the LLC Agreement of the Company adopted by the Company at the direction of Parent at Closing.

“Losses” means all Actions, Orders, damages, dues, penalties, fines, costs, reasonable amounts paid in settlement, Liabilities, Taxes, Liens and losses (including costs of investigation, all reasonable accounting, consultant and attorneys’ fees, court costs, costs of expert witnesses and other expenses relating to any of the foregoing).

“Material Adverse Effect” means any event, development, change, effect or occurrence that is, or would reasonably be expected to, (a) be materially adverse to the business operations or financial condition of the Company and its Subsidiaries taken as a whole or (b) materially and adversely affect the ability of the Company to perform its obligations hereunder or to consummate the transactions contemplated hereby; provided, however, that, solely for purposes of clause (a) above, a “Material Adverse Effect” shall not include changes to the assets, operations or financial condition of the Company to the extent resulting from (i) the announcement or disclosure of the transactions contemplated herein, including effects related to the identity of Parent, (ii) any hurricane, earthquake or other natural disasters, acts of god, or pandemics, including effects related to COVID-19 pandemic, COVID-19 Measures or any changes thereto or worsening thereof, (iii) changes in general economic, regulatory or political conditions in North America, (iv) changes in GAAP, (v) changes in the North American debt or securities markets, (vi) national or international political or social conditions, including, without limitation, the occurrence or escalation or any military action or any act of terrorism, (vii) changes in currency exchange rates or commodities prices, (viii) changes in Law or other binding directives issues by any Governmental Authority, (ix) compliance with the terms of this Agreement, (x) general business or economic conditions affecting the industry in which the Company or any of its Subsidiaries operates, (xi) any matter referenced in the Disclosure Letter, (xii) any act or omission of the Company taken with the prior consent of, or at the request of, Parent or (xi) any failure of the Company to meet projections or forecasts (provided that the underlying causes of such failure shall be considered in determining whether there is or has been a Material Adverse Effect); provided, further, that any event, development, change, effect, omission, occurrence, or circumstance referred to in clauses (ii) through (viii) and (x), immediately above shall be taken into account in determining whether a Material Adverse Effect has occurred or could reasonably be expected to occur solely to the extent that such event, development, change, effect, omission, occurrence, or circumstance has a disproportionate effect on the Company compared to other participants in the industries in which the Company conducts its business.

“Material Company Intellectual Property Contract” has the meaning set forth in Section 3.10(a)(xiii).

“Material Distributors” has the meaning set forth in Section 3.20(b). “Material Suppliers” has the meaning set forth in Section 3.20(a). “Merger” has the meaning set forth in the recitals.

“Merger Sub” has the meaning set forth in the caption. “Merger Sub Units” has the meaning set forth in the recitals. “NASDAQ” means the Nasdaq Stock Market.

“Net Working Capital” means, as of any date of determination, an amount excess of (a) the sum of the line items identified as “Total Working Capital Assets” of the Company and its Subsidiaries set forth 

 

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on Annex VI, over (b) the sum of the line items identified as “Total Working Capital Liabilities” of the Company and its Subsidiaries set forth on Annex VI, in each case, as of immediately prior to the Closing and determined in accordance with the Policies and Procedures. For the avoidance of doubt, Net Working Capital shall be calculated without giving effect to the Transactions.

“Object Code” means computer Software in binary form that is intended to be directly executable by a computer after suitable processing and linking but without the intervening steps of compilation or assembly.

“Ontario Securities Act” means the Securities Act (Ontario), as amended, and the regulations and rules made thereunder.

“Order” means any decree, order, judgment, writ, award, injunction, stipulation or consent of or by, or settlement agreement with, a Governmental Authority.

“Ordinary Course” means the ordinary course of business of the Company and any of its Subsidiaries, consistent with past practice and custom.

“Organizational Documents” means the articles of incorporation, articles or certificate of incorporation, bylaws, articles or certificate of formation, operating agreement, certificate of limited partnership, partnership agreement, and all other similar documents, instruments or certificates executed, adopted or filed in connection with the creation, formation, or organization of a Person, including any amendments thereto, as applicable.

“OSHA” has the meaning set forth in Section 3.18(d). “Outside Date” has the meaning set forth in Section 8.1(b). “Parent” has the meaning set forth in the caption.

“Parent Closing Date Transaction” means any transaction engaged in by the Company or any of its Subsidiaries on the Closing Date, which occurs after the Closing or at the direction of Parent that is not contemplated by this Agreement and is outside the ordinary course of business, including any transaction engaged in by the Company or any of its Subsidiaries in connection with the financing of any obligations of Parent or the Company or any of its Subsidiaries to make a payment under this Agreement.

“Parent Common Shares” has the meaning set forth in Section 2.10.

“Parent Disclosure Letter” has the meaning set forth in the introductory paragraph in

Article V.

“Parent Material Adverse Effect” means any event, development, change, effect or occurrence that is, or would reasonably be expected to, (a) be materially adverse to the business operations or financial condition of the Parent taken as a whole or (b) materially and adversely affect the ability of the Parent to perform its obligations hereunder or to consummate the transactions contemplated hereby; provided, however, that, solely for purposes of clause (a) above, a “Parent Material Adverse Effect” shall not include changes to the business, operations or financial condition of the Company to the extent resulting from (i) the announcement or disclosure of the transactions contemplated herein, including effects related to the identity of Company, (ii) any hurricane, earthquake or other natural disasters, acts of god, or pandemics, including effects related to the COVID-19 pandemic or any changes thereto or worsening thereof, (iii) changes in general economic, regulatory or political conditions in North 

 

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America, (iv) changes in GAAP, (v) changes in the North American debt or securities markets, (vi) national or international political or social conditions, including, without limitation, the occurrence or escalation or any military action or any act of terrorism, (vii) changes in currency exchange rates or commodities prices, (viii) changes in Law or other binding directives issues by any Governmental Authority, (ix) compliance with the terms of this Agreement, (x) general business or economic conditions affecting the industry in which the Parent operates, (xi) any matter referenced in the Disclosure Letter, (xii) any act or omission of the Parent taken with the prior consent of, or at the request of, Company or (xi) any failure of the Parent to meet projections or forecasts (provided that the underlying causes of such failure shall be considered in determining whether there is or has been a Parent Material Adverse Effect); provided, further, that any event, development, change, effect, omission, occurrence, or circumstance referred to in clauses (ii) through (viii) and (x), immediately above shall be taken into account in determining whether a Parent Material Adverse Effect has occurred or could reasonably be expected to occur solely to the extent that such event, development, change, effect, omission, occurrence, or circumstance has a disproportionate effect on the Parent compared to other participants in the industries in which the Parent conducts its business.

“Parent’s Knowledge” or “Knowledge of Parent” or similar phrase means the knowledge of Irwin Simon, Carl Merton and Denise Faltischek, in each case, with the assumption that such Persons shall have made reasonable and diligent inquiry on the matters presented.

“Paying Agent” has the meaning set forth in Section 2.21.

“Paying Agent Agreement” has the meaning set forth in Section 2.21.

“Payment Schedule” means that certain schedule attached hereto as Annex VII, as updated prior to the Closing in accordance with this Agreement, setting forth the number and type of Units owned by each Unitholder and the Blocker Seller, the percentage interest of each Unitholder and the Blocker Seller and a breakdown of the consideration payable hereunder (including the Earn- Out Payments, Adjustment Escrow Amount and PPP Escrow Amount) payable to and Stock Consideration issuable to each Unitholder and the Blocker Seller under the scenarios illustrated therein. For the avoidance of doubt, the Payment Schedule attached as Annex VII hereto as of the date hereof contains estimated calculations of the amounts set forth thereon for illustrative purposes only, and the payments required pursuant to this Agreement shall be calculated based on the calculations set forth in the final Payment Schedule delivered pursuant to Section 2.9.

“Permit” has the meaning set forth in Section 3.15.

“Permitted Liens” means (a) Liens for Taxes, assessments or other charges by Governmental Authorities not yet due and payable or the amount or validity of which are being contested in good faith or for which appropriate reserves have been established in accordance with GAAP, (b) mechanic’s, workmen’s, repairmen’s, carrier’s, warehousemen’s or other like Liens for amounts not yet due and payable or the amount or validity of which are being contested in good faith or for which appropriate reserves have been established on the Financial Statements in accordance with GAAP, (c) Liens securing the obligations of the Company under or in respect of Indebtedness under the existing credit facilities all of which will be paid off at the Closing, (d) Liens created, imposed or promulgated by Law or by any Governmental Authority not resulting in a Material Adverse Effect, (e) Liens to secure landlords, lessors, or renters under Leases incurred in the Ordinary Course, (f) Liens arising from non-exclusive licenses of Intellectual Property Rights, (g) Liens arising by operation of Law in the nature of zoning restrictions and (h) Liens created by or imposed on Parent or Merger Sub.

 

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“Person” means any natural person, corporation, limited liability company, partnership, firm, joint venture, joint-stock company, trust, association, unincorporated entity or organization of any kind, Governmental Authority or other entity of any kind.

“Policies and Procedures” has the meaning set forth in Section 2.9.

“PPACA” has the meaning set forth in Section 3.18(k).

“PPP Escrow Account” has the meaning set forth in Section 2.11(d).

“PPP Escrow Agent” means Truist Bank. “PPP Escrow Amount” means $441,162.

“PPP Escrow Agreement” means that certain escrow agreement in a customary form reasonably acceptable to the Parent and the Company for purposes of the PPP Escrow Amount, to be entered into at the Closing by and between Parent, Securityholders’ Representative and PPP Escrow Agent.

“PPP Loan” has the meaning set forth in Section 3.28.

“Pre-Closing Blocker Reorganization” has the meaning set forth in the Recitals.

“Pre-Closing Income Tax Liability Amount” means the excess, if any (but not less than

$0), of the aggregate income Tax liabilities, over the aggregate income Tax assets (including Tax refunds and credits, estimated payments and prepayments of income Taxes, and applicable Transaction Tax Deductions) of the Company on a combined basis, in each case, attributable to any Pre-Closing Period for which the applicable Tax Return was not yet filed as of the Closing Date. The calculation of the Pre-Closing Income Tax Liability Amount shall (a) exclude any deferred income Tax liabilities or deferred income Tax assets and any assets or liabilities to the extent accounted for through Net Working Capital, (b) assume that the Tax period of the Company that includes the Closing Date ends on the Closing Date and (c) exclude any Taxes arising from a Parent Closing Date Transaction.

“Pre-Closing Period” means any Tax period ending on or before the Closing Date. “Pre-Registration Price” has the meaning set forth in Section 6.12(f)(ii). “Prospectus” has the meaning set forth in Section 6.12(a)(ii).

“Prospectus Supplement” has the meaning set forth in Section 6.12(a)(i).

“Public Company Reports” has the meaning set forth in Section 5.10(a).

“Purchase Price Allocation Schedule” has the meaning set forth in Section 2.20(b).

“R&W Policy” means that certain representations and warranties insurance policy, dated as of the date hereof, a copy of which is attached hereto as Exhibit G. “Redeemed Holder” has the meaning set forth in the Recitals. “Redeemed Units” has the meaning set forth in the Recitals. “Redemption” has the meaning set forth in the Recitals. “Registerable Value” has the meaning set forth in Section 6.12(f)(ii).

“Registered Intellectual Property” means all United States, international and foreign:

 

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(i) Patents; (ii) Trademarks; (iii) Copyrights; and (iv) any other Intellectual Property Rights, in each case, that are the subject of an application, certificate, filing, registration or other document issued, filed with, or recorded by any state, government or other public legal authority.

“Registrable Shares” has the meaning set forth in Section 6.12(a)(i).

“Registration Statement” has the meaning set forth in Section 6.12(a)(i).

 

“Release” means releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping.

“Released Claims” has the meaning set forth in Section 6.14(a).

“Released Parties” has the meaning set forth in Section 6.14(a).

“Representatives” means, with respect to any Person, the directors, officers, employees, advisors (including investment bankers, financial advisors, legal counsel, accountants and consultants), financing sources and other agents and representatives of such Person and its Affiliates.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and

regulations promulgated thereunder.

“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended. “Securities Laws” means the Securities Act, the Securities Exchange Act, the Canadian

Securities Laws, and all other applicable securities Laws promulgated by the SEC, CSA or any other relevant Governmental Authority.

“Securityholders’ Representative” has the meaning set forth in the caption. “Securityholders’ Representative Expense Amount” means $500,000.

“Securityholders’ Representative Tax Matter” means (i) amending a Flow-Through Return; (ii) making or revoking an election on any Flow-Through Return filed after the Closing Date that adversely affects any Flow-Through Return or the income Taxes of the Company or any Subsidiary of the Company for a Pre-Closing Period or Pre-Closing Period portion of a Straddle Period; (iii) extending or waiving the applicable statute of limitations with respect to an income Tax of the Company or any Subsidiary of the Company for a Pre-Closing Period or Pre-Closing Portion of a Straddle Period; (iv) filing any ruling request with any Governmental Authority that relates to Flow-Through Returns or income Taxes of the Company or any Subsidiary of the Company for a Pre-Closing Period or Pre-Closing Period portion of a Straddle Period or (v) entering or pursuing a voluntary disclosure agreement with a Governmental Authority with respect to filing Flow-Through Returns or paying income Taxes for a Pre-Closing Period or Pre-Closing Period portion of a Straddle Period.

“Settlement Date” has the meaning set forth in Section 2.12(c).

 

I-14

88758860_15

 

“Software” means any and all (i) computer programs, including any and all software implementations of algorithms, program interfaces, models and methodologies, whether in Source Code or Object Code, (ii) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (iii) descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing and (iv) all user documentation, including user manuals and training materials, relating to any of the foregoing.

“Source Code” means computer Software and code, in form other than Object Code or machine readable form, including related programmer comments and annotations, help text, data and data structures, instructions and procedural, object-oriented and other code, which may be printed out or displayed in human readable form.

“Straddle Period” means any taxable period that includes (but does not end on) the date of Closing.

“Stock Consideration” has the meaning set forth in Section 2.10.

“Subsidiary” of any Person means another Person (a) at least 50% of the securities or ownership interests having by their terms ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions is owned or controlled directly or indirectly by such first Person and/or by one or more of its Subsidiaries or (b) of which such first Person and/or one of its Subsidiaries serves as a general partner (in the case of a partnership) or a manager or managing member (in the case of a limited liability company) or similar function. Notwithstanding anything to the contrary set forth herein, in light of the Redemption, no representations, warranties, covenants or agreements are made herein with respect to Cheese Grits and Cheese Grits shall not be deemed a Subsidiary of the Company for any purpose.

“Substances” has the meaning set forth in clause (i) of the definition of Hazardous Material. “Surviving Entity” has the meaning set forth in Section 2.1.

“SWB Members” means the members of SWB Management, LLC as set forth in that certain Limited Liability Company Agreement of SWB Management, LLC dated December 31, 2016 by and among SWB Management, LLC, Class V, Inc., the Company and each of the Persons party thereto.

“Target Working Capital” means $4,362,420.

“Taxes” means all taxes, charges, fees, duties (including custom duties), levies, or other assessments, including net income, gross income, capital gains, gross receipts, net receipts, gross proceeds, net proceeds, ad valorem, profits, real property, personal property (whether tangible or intangible), gaming, sales, use, franchise, capital, excise, estimated, value added, stamp, lease, transfer, occupational, equalization, license, payroll, employment, environmental, disability, severance, withholding, unemployment, or other taxes, charges or fees assessed by any Governmental Authority, including any interest, penalties, or additions to tax attributable thereto.

“Tax Contest” has the meaning set forth in Section 6.8(e).

“Tax Return” means any return, report or similar statement filed or required to be filed with any taxing authority with respect to any Tax, including any information return, claim for refund, amended return or declaration of estimated Tax.

 

I-15

88758860_15

 

“Trade Secrets” means, where protectable as a trade secret by applicable Law, any and all inventions (whether or not patentable, reduced to practice or made the subject of a pending patent application), invention disclosures and improvements, all proprietary information, know-how and technology, confidential or proprietary information and all documentation therefor.

“Transaction Expenses” means all (i) costs, fees and expenses (including attorneys’ fees, accountants’ fees, investment banking fees and other professional fees and expenses) in connection with the negotiation, preparation, execution and delivery of this Agreement and the consummation of the Blocker Sale and the other transactions contemplated by this Agreement payable by, in each instance, Blocker, the Company or any of their respective Subsidiaries, (ii) any (A) amounts (including transaction or change-in-control bonuses or similar payments) payable by the Company to any Person solely in connection with, or conditioned in any way upon, the consummation of the transactions contemplated by this Agreement, (B) amounts payable to any employee, officer, director or consultant of either Company pursuant to the incentive plans or any employment agreement or other Contract with any of the aforementioned Persons solely as a result of the consummation of the transactions contemplated hereby (including, for the avoidance of doubt, the amounts payable pursuant to the Bates Agreement), and (C) any severance (and other post termination) obligation of the Company to any Person whose employment has been terminated prior to the Closing (including payments under any non-competition or consulting agreements or arrangements or any COBRA or similar payments), any deferred compensation or other similar payment, in each instance, plus the employer portion of any employment Taxes due and payable in connection with (w) any such payments, (y) the execution of this Agreement or (z) as a result of the consummation of the transactions contemplated by this Agreement, (iii) 50% of any and all fees of the Adjustment Escrow Agent under the Escrow Agreement, (iv) any and all Transfer Taxes, including, for the avoidance of doubt, all Transfer Taxes associated with the transactions contemplated by the Redemption, (v) any and all costs, fees, expenses and premiums necessary to obtain the tail pursuant to Section 6.5(a), (vi) any and all fees of the Paying Agent under the Paying Agent Agreement, and (vii) any and all fees of the PPP Escrow Agent under the PPP Escrow Agreement.

“Transaction Tax Deductions” means the aggregate amount of Tax deductions arising from (i) any compensatory payments made or accrued by the Company or any of its Subsidiaries (or Merger Sub or Parent on behalf of the Company or any of its Subsidiaries) in connection with the transactions contemplated by this Agreement, (ii) any pay down, prepayment or satisfaction of any portion of the Closing Date Indebtedness by the Company or any of its Subsidiaries (or Merger Sub or Parent on behalf of the Company or any of its Subsidiaries) or otherwise in accordance with this Agreement, (iii) the Transaction Expenses and (iv) any other deductible payments that are attributable to the transactions contemplated by this Agreement and economically borne by the Unitholders. For this purpose, seventy percent (70%) of any Transaction Tax Deductions that are success-based fees shall be treated as deductible in accordance with IRS Revenue Procedure 2011- 29.

“Transactions” has the meaning set forth in the recitals. “Transfer Taxes” has the meaning set forth in Section 6.8(a). “Trigger Date” has the meaning set forth in Section 6.12(f)(i). “TSX” has the meaning set forth in Section 6.1(a).

“TSX Manual” has the meaning set forth in Section 6.1(a).

“Unitholder” has the meaning set forth in the recitals.

“Units” has the meaning set forth in the Company LLC Agreement.

 

I-16

88758860_15

 

“Upward Adjustment Amount” has the meaning set forth in Section 2.13(a)(ii).

“Waiver Agreement” means that certain Waiver Agreement substantially in the form attached hereto as Exhibit H, by and between the Company and SWBC Craft, LLC

 

 

 

 

I-17

88758860_15

 

 

ANNEX II

Policies and Procedures

Together with the calculation detailed in Annex VI, the following will apply (i) for purposes of calculating the Estimated Net Working Capital pursuant to Section 2.9 of the Agreement and (ii) for purposes of calculating the Final Net Working Capital pursuant to Section 2.12 of the Agreement.

	
 
	
1.
	
Except as otherwise provided herein, as contemplated by Annex VI or as contemplated by the Historical Accounting Practices, Net Working Capital, Estimated Net Working Capital and Final Closing Working Capital will be calculated in accordance with GAAP, applied consistently with the conventions, procedures, methodologies, and principles used in preparing the Financial Statements.

	
 
	
2.
	
Net Working Capital, Estimated Net Working Capital and Final Net Working Capital will be calculated without giving effect to any of the transactions contemplated by this Agreement.

	
 
	
3.
	
“Current Assets” will include only (i) accounts receivable (net of allowance for doubtful accounts), (ii) inventory and (iii) other current assets (including, but not limited to, prepaid expenses, prepaid hops, prepaid insurance and prepaid point-of-sale and marketing costs).

	
 
	
4.
	
For the avoidance of doubt, Current Assets will not include (i) cash and cash equivalents, (ii) any income Tax assets (whether current or deferred), (iii) prepaid Transaction Expenses, and (iv) intercompany and related company accounts receivable.

	
 
	
5.
	
“Current Liabilities” will include, (i) accounts payable, (ii) accrued expenses (including accrued payroll, accrued bonuses or other compensation and fees and any payroll taxes with respect thereto), (iii) accrued property tax, (iv) accrued utility payments, (v) accrued freight, (vi) accrued excise and sales and use tax and (vii) deposit liabilities.]

	
 
	
6.
	
For the avoidance of doubt, Current Liabilities will not include (i) any Transaction Expenses, (ii) Indebtedness (including the current portion of capital lease obligations), (iii) intercompany and related company accounts payable, and (iv) income Tax liabilities (whether current or deferred) or other deferred Tax liabilities.

 

88758860_15

 

ANNEX III

Calculation of Adjusted EBITDA

ADJUSTED EBITDA DEFINITION

“Adjusted EBITDA” means on a consolidated basis for any period of computation:

(i)the sum (without duplication) of the following, which calculations shall be calculated in a manner consistent with and apply the same accounting methods, policies, practices, classifications and estimation methodologies used in the sample calculation detailed below under Section (II), consistently applied:

	
 
	
a.
	
the aggregate net income (or loss) as determined in accordance with GAAP, of the Company and its Subsidiaries (“Net Income”);

	
 
	
b.
	
plus, the amount of interest expense deducted in determining Net Income;

	
 
	
c.
	
plus, the amount of all income taxes (and other payments in lieu of income taxes) deducted in determining Net Income (including payments under tax-sharing arrangements with Parent or its Affiliates);

	
 
	
d.
	
plus, the amount of depreciation and amortization deducted in determining Net Income;

	
 
	
e.
	
minus, the amount of interest income added in determining Net Income; and

	
 
	
f.
	
minus, the amount of income tax benefit added in determining Net Income.

(ii)Notwithstanding the foregoing, in determining Adjusted EBITDA for purposes of this Agreement:

	
 
	
a.
	
Adjusted EBITDA shall exclude:

	
 
	
i.
	
non-cash share-based compensation;

	
 
	
ii.
	
non-recurring expenses;

	
 
	
iii.
	
brand income rights income; and

	
 
	
iv.
	
non-recurring income and gains

	
 
	
b.
	
For greater clarity, the calculation of Adjusted EBITDA shall not include any add backs or adjustments related to COVID-19 or the pandemic.

 

 

 

88758860_15

 

 

Sample Calculation of Adjusted EBITDA

 

	
net income
	
 
	
$20,466,465

	
plus interest expense
	
 
	
$0

	
plus income taxes
	
 
	
$0

	
plus depreciation and amortization
	
 
	
$3,803,085

	
minus interest income
	
 
	
$0

	
minus income tax benefit
	
 
	
$0

	
exclude:
	
 
	
 

	
non -cash share-based compensation
	
 
	
$72,240

	
non-recurring expenses
	
 
	
$73,345

	
brand income rights income
	
 
	
($1,764,243)

	
non-recurring income and gains
	
 
	
$0

	
Adjusted EBITDA
	
 
	
$22,650,892

 

 

 

 

 

 

 

ANNEX IV

Purchase Price Allocation

 

	
Asset Class
	
Allocation

	
 

Cash and Cash Equivalents
	
 

Cash value

	
 

Inventory
	
 

The amount of inventory used for purposes of the determination of the Final Net Working Capital (as finally determined).

	
 

Prepaids
	
 

The amount of prepaids used for purposes of the determination of the Final Net Working Capital (as finally determined).

	
 

Accounts Receivable
	
 

The amount of accounts receivable (net of any allowance for doubtful accounts) used for purposes of the determination of the Final Net Working Capital (as finally determined).

	
 

Other Current Assets
	
 

The amount of other current assets used for purposes of the determination of the Final Net Working Capital (as finally determined).

	
 

Property and Equipment and Leasehold Interests and other Tangible and Intangible Assets (other than assets included in Code Section 197)
	
 

Book value immediately prior to the Closing Date.

	
 

Goodwill and Going Concern Value and Other Code Section 197 Assets
	
 

Remainder of the purchase price (and applicable liabilities).

 

 

88758860_15

 

 

ANNEX V

Historical Accounting Practices

Estimated Closing Balance Sheet and Final Closing Balance Sheet will be prepared in accordance with GAAP as modified by the following (“Historical Accounting Practices”):

	
 
	
a.
	
During interim periods, discounts and co-ops expense are recorded on a cash basis with the exception of the United distributors which are accrued monthly. Discounts and co-op expense related to all non-United distributors are accrued at year end only.

	
 
	
b.
	
Returns are recorded on a cash basis.

	
 
	
c.
	
State excise taxes are recorded on a cash basis.

	
 
	
d.
	
Variances between actual and standard costing of inventory are recorded on an annual basis only.

	
 
	
e.
	
Keg liability is adjusted on a quarterly basis only.

	
 
	
f.
	
Share based compensation is adjusted on a quarterly basis only.

	
 
	
g.
	
The company capitalizes additions to property, plant and equipment and major repairs that extend the life of property, plant and equipment when the expenditure exceeds $1,500 individually or in the aggregate for related expenditures.

	
 
	
h.
	
During interim periods, the allowance for doubtful accounts is not adjusted.

	
 
	
i.
	
During interim periods, the accrual for health claims is not adjusted.

	
 
	
j.
	
The Company does not maintain an accrual for incurred but not reported health claims.

	
 
	
k.
	
The Company does not maintain an accrual for paid-time-off (PTO) liabilities during the interim periods.

 

 

 

88758860_15

 

 

ANNEX VI

Sample Calculation of Working Capital

(See attached)

 

 

 

88758860_15

 

 

Annex VI

Net Working Capital

 

	
Accounts Receivable
	
 
	
$4,306,181

	
Inventory
	
 
	
$4,549,801

	
Other Current Assets
	
 
	
$728,600

	
Total Working Capital Assets
	
 
	
$9,584,582

	
 
	
 
	
 

	
Accounts Payable
	
 
	
$1,163,525

	
Accrued Expenses
	
 
	
$2,215,874

	
Other Current Liabilities
	
 
	
$1,842,763

	
Total Working Capital Liabilities
	
 
	
$5,222,162

	
 
	
 
	
 

	
Net Working Capital
	
 
	
$4,362,420

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ANNEX VII

 

Payment Schedule

 

(See attached)

 

 

 

 

 

ANNEX VII

Payment Schedule

The amounts payable by Parent pursuant to Section 2.11(f) of the Agreement will be determined as follows:

Blocker Seller will be entitled to receive pursuant to Section 1.2 of the Agreement an amount in cash equal to the product of (i) the Preference Amount (as defined in the Company LLC Agreement), calculated as of the Closing, times (ii) the number of Class T Units held by the Blocker following the Pre-Closing Blocker Reorganization and immediately prior to the Closing.

Each Class T Unit (other than Class T Units held by the Blocker following the Pre-Closing Blocker Reorganization and immediately prior to the Closing) will be converted pursuant to Section 2.7(b) of the Agreement into the right to receive an amount in cash equal to the Preference Amount, calculated as of the Closing.

Each Class O Unit (other than Cancelled Units) will be converted pursuant to Section 2.7(b) of the Agreement into the right to receive the portions of (i) the Estimated Purchase Price (as adjusted pursuant to Section 2.13), (ii) the Stock Consideration, (iii) the Earn-Out Payments, and (iv) any consideration payable pursuant to Section 6.12(f) of the Agreement, in each case to which a Class O Unit is entitled as of the Closing pursuant to the Company LLC Agreement.

Each Class M Unit (other than Cancelled Units) will be converted pursuant to Section 2.7(b) of the Agreement into the right to receive the portions of (i) the Estimated Purchase Price (as adjusted pursuant to Section 2.13), (ii) the Stock Consideration, (iii) the Earn-Out Payments, and (iv) any consideration payable pursuant to Section 6.12(f) of the Agreement, in each case to which a Class M Unit is entitled as of the Closing pursuant to the Company LLC Agreement.

This Payment Schedule sets forth estimated calculations of the amounts set forth above assuming (i) a Closing Date of December 15, 2020, (ii) estimates of the numbers of Class T Units held by each of SWBC Craft, LLC and the Blocker following the Pre-Closing Blocker Reorganization and immediately prior to the Closing, and (iii) an Estimated Purchase Price of

$143,050,000.00. The Securityholders' Representative, with the consent of the Blocker Seller (as set forth in the Agreement), will deliver a final Payment Schedule to Parent prior to the Closing in accordance with the Agreement containing actual calculations, as of the Closing Date, of the amounts set forth herein.

 

Payment of the Estimated Purchase Price

 

Calculate amounts payable in cash in respect of Class T Units

 

	
Class T Units held by the Blocker (3)
	
 
	
1,480,694.19

	
Class T Units held by SWBC Craft, LLC
	
 
	
6,445,425.06

	
Total Class T Units
	
 
	
7,926,119.25

	
Aggregate Preference Amount in respect of all Class T Units (1)
	
 
	
$35,485,440.16

	
Preference Amount (per Class T Unit)
	
 
	
$4.48

 

	
 
	
 
	
Payment

Amount

	
Cash Payment Amount to Blocker Seller (2)
	
 
	
$6,629,106.05

	
Cash Payment Amount to SWBC Craft LLC
	
 
	
$28,856,334.11

	
 
	
 
	
$35,485,440.16

 

(1)The Preference Amount is calculated in accordance with the Company LLC Agreement and will be updated to reflect the aggregate Preference Amount as of immediately prior to the Closing.

 

(2)The aggregate amount payable to the Blocker Seller and SWBC Craft, LLC is the Preference Amount multiplied by the number of Class T Units.

 

(3)The numbers of Class T Units held by the Blocker and SWBC Craft, LLC as of immediately prior to the Closing reflected above are estimates, subject to finalization prior to the Closing. The updated Payment Schedule delivered prior to the Closing will contain updated numbers.

 

 

 

 

 

 

 

 

Payment of Remainder of Estimated Purchase Price to Class O Units and Class M Units

 

	
Unit Holder
	
 
	
Number of Units (2)
	
 
	
Value per Unit (3)
	
 
	
Payment Amount (4)

	
Class O Units
	
 
	
 
	
 
	
 
	
 
	
 

	
Robert J. & Jill Corkern
	
 
	
3,078,910.62
	
 
	
$1.81
	
 
	
$5,561,183.97

	
L F Limited, L.P.
	
 
	
1,539,455.04
	
 
	
$1.81
	
 
	
$2,780,591.49

	
Pratt S. Rather Trust
	
 
	
1,352,856.66
	
 
	
$1.81
	
 
	
$2,443,554.14

	
Weisshorn Investments LLC
	
 
	
1,210,323.55
	
 
	
$1.81
	
 
	
$2,186,108.25

	
Chris Sorlie
	
 
	
2,913,330.67
	
 
	
$1.81
	
 
	
$5,262,110.46

	
Rather Family Investments LLLP
	
 
	
2,704,801.01
	
 
	
$1.81
	
 
	
$4,885,460.43

	
Greene Properties Inc.
	
 
	
502,873.50
	
 
	
$1.81
	
 
	
$908,299.20

	
Jane & Hugh Greene
	
 
	
502,873.50
	
 
	
$1.81
	
 
	
$908,299.20

	
Michael Moulton
	
 
	
687,134.58
	
 
	
$1.81
	
 
	
$1,241,114.89

	
Sarah Wight Schuelke
	
 
	
582,638.72
	
 
	
$1.81
	
 
	
$1,052,372.57

	
Juan Velez & Veronica Escobar
	
 
	
822,915.66
	
 
	
$1.81
	
 
	
$1,486,365.13

	
John Brian Robinson
	
 
	
291,353.71
	
 
	
$1.81
	
 
	
$526,248.34

	
James N. Nock (1)
	
 
	
1,078,255.13
	
 
	
$1.81
	
 
	
$1,947,563.88

	
James N. Nock (1)
	
 
	
448,849.22
	
 
	
$1.81
	
 
	
$810,719.56

	
GFY, LLC
	
 
	
1,173,677.97
	
 
	
$1.81
	
 
	
$2,119,918.34

	
Dock Rigsby (1)
	
 
	
661,648.48
	
 
	
$1.81
	
 
	
$1,195,081.43

	
The No Quarter Trust
	
 
	
22,355,552.42
	
 
	
$1.81
	
 
	
$40,379,002.52

	
Christopher Blanchard
	
 
	
688,473.44
	
 
	
$1.81
	
 
	
$1,243,533.16

	
The Tortoise Trust
	
 
	
11,938,871.09
	
 
	
$1.81
	
 
	
$21,564,204.58

	
Mark Medlin (1)
	
 
	
229,273.18
	
 
	
$1.81
	
 
	
$414,117.35

	
Dave Guender (1)
	
 
	
277,038.42
	
 
	
$1.81
	
 
	
$500,391.80

	
William B. Burge (1)
	
 
	
14,329.57
	
 
	
$1.81
	
 
	
$25,882.33

	
Canvasback Trust
	
 
	
946,643.06
	
 
	
$1.81
	
 
	
$1,709,843.80

	
Robert A. Bensch
	
 
	
359,921.11
	
 
	
$1.81
	
 
	
$650,096.00

	
RAB Trust
	
 
	
586,722.03
	
 
	
$1.81
	
 
	
$1,059,747.92

	
Class M Units
	
 
	
 
	
 
	
 
	
 
	
 

	
No Quarter
	
 
	
2,033,112.00
	
 
	
$0.80
	
 
	
$1,623,299.11

	
Dave Guender (1)
	
 
	
1,016,556.00
	
 
	
$0.80
	
 
	
$811,649.55

	
Stephen Farace (1)
	
 
	
508,278.00
	
 
	
$0.80
	
 
	
$405,824.78

	
Mark Medlin (1)
	
 
	
508,278.00
	
 
	
$0.80
	
 
	
$405,824.78

	
Paul Kirbabas (1)
	
 
	
781,059.01
	
 
	
$0.80
	
 
	
$623,621.52

	
Brian Miesieski (1)
	
 
	
520,706.00
	
 
	
$0.80
	
 
	
$415,747.67

	
Teal Brown (1)
	
 
	
65,085.00
	
 
	
$0.80
	
 
	
$51,965.86

	
Tucker Sarkisian (1)
	
 
	
65,085.00
	
 
	
$0.80
	
 
	
$51,965.86

	
Jennifer Hendricks (1)
	
 
	
131,478.00
	
 
	
$0.80
	
 
	
$104,976.08

	
Phil Gramaglia (1)
	
 
	
260,353.00
	
 
	
$0.80
	
 
	
$207,873.84

	
 
	
 
	
62,838,712.35
	
 
	
 
	
 
	
$107,564,559.84

 

(1) Units are owned through SWB Management , LLC

(2) The number of Class O Units gives effect to the Redemption

(3) The Value per Unit is calculated in accordance with the Company LLC Agreement and the Mash Tun Holdings LLC 2014 Equity Incentive Plan

(4) The Payment Amount is the Value per Unit multiplied by the number of units held .

 

			
	
Total Payments of Estimated Purchase Price
	
 
	
$143,050,000.00

 

 

 

 

 

Payment of Stock Consideration and Downside Protection to Class O Units and Class M Units

 

	
 
	
 
	
Number of Units (2)
	
 
	
Value per Unit (3)
	
 
	
Payment Amount (4)
	
 
	
Number of

Shares of Parent

Common Stock

(5)
	
 
	
Percentage

Allocation for

Downside

Protection

	
Class O Units
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Robert J. & Jill Corkern
	
 
	
3,078,910.62
	
 
	
$0.84
	
 
	
$2,585,044.73
	
 
	
574,454
	
 
	
5.17%

	
L F Limited, L.P.
	
 
	
1,539,455.04
	
 
	
$0.84
	
 
	
$1,292,522.13
	
 
	
287,227
	
 
	
2.59%

	
Pratt S. Rather Trust
	
 
	
1,352,856.66
	
 
	
$0.84
	
 
	
$1,135,854.66
	
 
	
252,412
	
 
	
2.27%

	
Weisshorn Investments LLC
	
 
	
1,210,323.55
	
 
	
$0.84
	
 
	
$1,016,184.26
	
 
	
225,819
	
 
	
2.03%

	
Chris Sorlie
	
 
	
2,913,330.67
	
 
	
$0.84
	
 
	
$2,446,024.26
	
 
	
543,561
	
 
	
4.89%

	
Rather Family Investments LLLP
	
 
	
2,704,801.01
	
 
	
$0.84
	
 
	
$2,270,943.35
	
 
	
504,654
	
 
	
4.54%

	
Greene Properties Inc.
	
 
	
502,873.50
	
 
	
$0.84
	
 
	
$422,211.18
	
 
	
93,825
	
 
	
0.84%

	
Jane & Hugh Greene
	
 
	
502,873.50
	
 
	
$0.84
	
 
	
$422,211.18
	
 
	
93,825
	
 
	
0.84%

	
Michael Moulton
	
 
	
687,134.58
	
 
	
$0.84
	
 
	
$576,916.27
	
 
	
128,204
	
 
	
1.15%

	
Sarah Wight Schuelke
	
 
	
582,638.72
	
 
	
$0.84
	
 
	
$489,181.83
	
 
	
108,707
	
 
	
0.98%

	
Juan Velez & Veronica Escobar
	
 
	
822,915.66
	
 
	
$0.84
	
 
	
$690,917.68
	
 
	
153,537
	
 
	
1.38%

	
John Brian Robinson
	
 
	
291,353.71
	
 
	
$0.84
	
 
	
$244,619.76
	
 
	
54,360
	
 
	
0.49%

	
James N. Nock (1)
	
 
	
1,078,255.13
	
 
	
$0.84
	
 
	
$905,299.98
	
 
	
201,178
	
 
	
1.81%

	
James N. Nock (1)
	
 
	
448,849.22
	
 
	
$0.84
	
 
	
$376,852.55
	
 
	
83,745
	
 
	
0.75%

	
GFY, LLC
	
 
	
1,173,677.97
	
 
	
$0.84
	
 
	
$985,416.73
	
 
	
218,981
	
 
	
1.97%

	
Dock Rigsby (1)
	
 
	
661,648.48
	
 
	
$0.84
	
 
	
$555,518.21
	
 
	
123,448
	
 
	
1.11%

	
The No Quarter Trust
	
 
	
22,355,552.42
	
 
	
$0.84
	
 
	
$18,769,659.16
	
 
	
4,171,035
	
 
	
37.54%

	
Christopher Blanchard
	
 
	
688,473.44
	
 
	
$0.84
	
 
	
$578,040.37
	
 
	
128,453
	
 
	
1.16%

	
The Tortoise Trust
	
 
	
11,938,871.09
	
 
	
$0.84
	
 
	
$10,023,842.71
	
 
	
2,227,521
	
 
	
20.05%

	
Mark Medlin (1)
	
 
	
229,273.18
	
 
	
$0.84
	
 
	
$192,497.12
	
 
	
42,777
	
 
	
0.38%

	
Dave Guender (1)
	
 
	
277,038.42
	
 
	
$0.84
	
 
	
$232,600.68
	
 
	
51,689
	
 
	
0.47%

	
William B. Burge (1)
	
 
	
14,329.57
	
 
	
$0.84
	
 
	
$12,031.07
	
 
	
2,674
	
 
	
0.02%

	
Canvasback Trust
	
 
	
946,643.06
	
 
	
$0.84
	
 
	
$794,798.86
	
 
	
176,622
	
 
	
1.59%

	
Robert A. Bensch
	
 
	
359,921.11
	
 
	
$0.84
	
 
	
$302,188.75
	
 
	
67,153
	
 
	
0.60%

	
RAB Trust
	
 
	
586,722.03
	
 
	
$0.84
	
 
	
$492,610.17
	
 
	
109,469
	
 
	
0.99%

	
Class M Units
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
No Quarter
	
 
	
2,033,112.00
	
 
	
$0.37
	
 
	
$754,569.68
	
 
	
167,682
	
 
	
1.51%

	
Dave Guender (1)
	
 
	
1,016,556.00
	
 
	
$0.37
	
 
	
$377,284.84
	
 
	
83,841
	
 
	
0.75%

	
Stephen Farace (1)
	
 
	
508,278.00
	
 
	
$0.37
	
 
	
$188,642.42
	
 
	
41,921
	
 
	
0.38%

	
Mark Medlin (1)
	
 
	
508,278.00
	
 
	
$0.37
	
 
	
$188,642.42
	
 
	
41,921
	
 
	
0.38%

	
Paul Kirbabas (1)
	
 
	
781,059.01
	
 
	
$0.37
	
 
	
$289,882.43
	
 
	
64,418
	
 
	
0.58%

	
Brian Miesieski (1)
	
 
	
520,706.00
	
 
	
$0.37
	
 
	
$193,254.95
	
 
	
42,946
	
 
	
0.39%

	
Teal Brown (1)
	
 
	
65,085.00
	
 
	
$0.37
	
 
	
$24,155.66
	
 
	
5,368
	
 
	
0.05%

	
Tucker Sarkisian (1)
	
 
	
65,085.00
	
 
	
$0.37
	
 
	
$24,155.66
	
 
	
5,368
	
 
	
0.05%

	
Jennifer Hendricks (1)
	
 
	
131,478.00
	
 
	
$0.37
	
 
	
$48,796.78
	
 
	
10,844
	
 
	
0.10%

	
Phil Gramaglia (1)
	
 
	
260,353.00
	
 
	
$0.37
	
 
	
$96,627.48
	
 
	
21,473
	
 
	
0.19%

	
Total Payments of Stock Consideration
	
 
	
62,838,712.35
	
 
	
 
	
 
	
$50,000,000.00
	
 
	
11,111,111
	
 
	
100.00%

 

(1) Units are owned through SWB Management , LLC

(2) The number of Class O Units gives effect to the Redemption

(3) The Value per Unit is calculated in accordance with the Company LLC Agreement and the Mash Tun Holdings LLC 2014 Equity Incentive Plan

(4) The Payment Amount is the Value per Unit multiplied by the number of units held .

(5) Payment Amount divided by post announcement price

 

 

 

 

 

 

 

 

 

Allocation of Earn-Out Payments, Adjustment Escrow Amount, Upward Adjustment Amount, PPP Escrow Amount and Securityholders' Representative Expense Amount, in each case to Class O Units and Class M Units

 

 

	
Unit Holder
	
 
	
Number of Units
	
 
	
Percentage of Value

	
Class O Units (2)
	
 
	
 
	
 
	
 

	
Robert J. & Jill Corkern
	
 
	
3,229,407.10
	
 
	
4.9212%

	
L F Limited, L.P.
	
 
	
1,614,703.26
	
 
	
2.4606%

	
Pratt S. Rather Trust
	
 
	
1,418,984.00
	
 
	
2.1623%

	
Weisshorn Investments LLC
	
 
	
1,269,483.90
	
 
	
1.9345%

	
Chris Sorlie
	
 
	
3,055,733.63
	
 
	
4.6565%

	
Rather Family Investments LLLP
	
 
	
2,837,011.09
	
 
	
4.3232%

	
Greene Properties Inc.
	
 
	
527,453.85
	
 
	
0.8038%

	
Jane & Hugh Greene
	
 
	
527,453.85
	
 
	
0.8038%

	
Michael Moulton
	
 
	
720,721.57
	
 
	
1.0983%

	
Sarah Wight Schuelke
	
 
	
611,117.97
	
 
	
0.9313%

	
Juan Velez & Veronica Escobar
	
 
	
863,139.60
	
 
	
1.3153%

	
John Brian Robinson
	
 
	
305,595.02
	
 
	
0.4657%

	
James N. Nock (1)
	
 
	
1,130,960.00
	
 
	
1.7234%

	
James N. Nock (1)
	
 
	
470,788.87
	
 
	
0.7174%

	
GFY, LLC
	
 
	
1,231,047.09
	
 
	
1.8760%

	
Dock Rigsby (1)
	
 
	
693,989.71
	
 
	
1.0576%

	
The No Quarter Trust
	
 
	
23,448,286.92
	
 
	
35.7322%

	
Christopher Blanchard
	
 
	
722,125.87
	
 
	
1.1004%

	
The Tortoise Trust
	
 
	
12,522,440.49
	
 
	
19.0826%

	
Mark Medlin (1)
	
 
	
240,480.00
	
 
	
0.3665%

	
Dave Guender (1)
	
 
	
290,580.00
	
 
	
0.4428%

	
William B. Burge (1)
	
 
	
15,030.00
	
 
	
0.0229%

	
Canvasback Trust
	
 
	
992,914.77
	
 
	
1.5131%

	
Robert A. Bensch
	
 
	
377,513.97
	
 
	
0.5753%

	
RAB Trust
	
 
	
615,400.87
	
 
	
0.9378%

	
 
	
 
	
59,732,363.40
	
 
	
 

	
Class M Units
	
 
	
 
	
 
	
 

	
No Quarter
	
 
	
2,033,112.00
	
 
	
3.0982%

	
Dave Guender (1)
	
 
	
1,016,556.00
	
 
	
1.5491%

	
Stephen Farace (1)
	
 
	
508,278.00
	
 
	
0.7746%

	
Mark Medlin (1)
	
 
	
508,278.00
	
 
	
0.7746%

	
Paul Kirbabas (1)
	
 
	
781,059.01
	
 
	
1.1902%

	
Brian Miesieski (1)
	
 
	
520,706.00
	
 
	
0.7935%

	
Teal Brown (1)
	
 
	
65,085.00
	
 
	
0.0992%

	
Tucker Sarkisian (1)
	
 
	
65,085.00
	
 
	
0.0992%

	
Jennifer Hendricks (1)
	
 
	
131,478.00
	
 
	
0.2004%

	
Phil Gramaglia (1)
	
 
	
260,353.00
	
 
	
0.3967%

	
 
	
 
	
5,889,990.01
	
 
	
 

	
 
	
 
	
65,622,353.41
	
 
	
100.0000%

 

(1) Units are owned through SWB Management , LLC

(2) The number of Class O Units is calculated as though the Redemption will not have occurred.

 

 

 

 

 

 

 

 

 

Redemption of Class O Units Upon Distribution of Cheese Grits, LLC

 

	
Value of the Real Estate
	
 
	
$30,000,000.00

	
Debt associated with the Real Estate
	
 
	
$(22,635,000.00)

	
Equity Value of the Real Estate
	
 
	
$7,365,000.00

	
 
	
 
	
 

	
Value of a Unit (2)
	
 
	
$2.65

	
 
	
 
	
 

	
Units to be Redeemed
	
 
	
2,783,641.06

 

	
Class O Unit Holder
	
 
	
Units Held

before

Redemption*
	
 
	
Units

Redeemed (2)
	
 
	
Units Held

after

Redemption
	
 
	
Transferred

Company

Membership

Interests

	
Robert J. & Jill Corkern
	
 
	
3,229,407.10
	
 
	
150,496.48
	
 
	
3,078,910.62
	
 
	
5.41%

	
L F Limited, L.P.
	
 
	
1,614,703.26
	
 
	
75,248.22
	
 
	
1,539,455.04
	
 
	
2.70%

	
Pratt S. Rather Trust
	
 
	
1,418,984.00
	
 
	
66,127.34
	
 
	
1,352,856.66
	
 
	
2.38%

	
Weisshorn Investments LLC
	
 
	
1,269,483.90
	
 
	
59,160.35
	
 
	
1,210,323.55
	
 
	
2.13%

	
Chris Sorlie
	
 
	
3,055,733.63
	
 
	
142,402.96
	
 
	
2,913,330.67
	
 
	
5.12%

	
Rather Family Investments LLLP
	
 
	
2,837,011.09
	
 
	
132,210.08
	
 
	
2,704,801.01
	
 
	
4.75%

	
Greene Properties Inc.
	
 
	
527,453.85
	
 
	
24,580.35
	
 
	
502,873.50
	
 
	
0.88%

	
Jane & Hugh Greene
	
 
	
527,453.85
	
 
	
24,580.35
	
 
	
502,873.50
	
 
	
0.88%

	
Michael Moulton
	
 
	
720,721.57
	
 
	
33,586.99
	
 
	
687,134.58
	
 
	
1.21%

	
Sarah Wight Schuelke
	
 
	
611,117.97
	
 
	
28,479.25
	
 
	
582,638.72
	
 
	
1.02%

	
Juan Velez & Veronica Escobar
	
 
	
863,139.60
	
 
	
40,223.94
	
 
	
822,915.66
	
 
	
1.45%

	
John Brian Robinson
	
 
	
305,595.02
	
 
	
14,241.31
	
 
	
291,353.71
	
 
	
0.51%

	
James N. Nock (1)
	
 
	
1,130,960.00
	
 
	
52,704.87
	
 
	
1,078,255.13
	
 
	
1.89%

	
James N. Nock (1)
	
 
	
470,788.87
	
 
	
21,939.65
	
 
	
448,849.22
	
 
	
0.79%

	
GFY, LLC
	
 
	
1,231,047.09
	
 
	
57,369.12
	
 
	
1,173,677.97
	
 
	
2.06%

	
Dock Rigsby (1)
	
 
	
693,989.71
	
 
	
32,341.23
	
 
	
661,648.48
	
 
	
1.16%

	
The No Quarter Trust
	
 
	
23,448,286.92
	
 
	
1,092,734.50
	
 
	
22,355,552.42
	
 
	
39.26%

	
Christopher Blanchard
	
 
	
722,125.87
	
 
	
33,652.43
	
 
	
688,473.44
	
 
	
1.21%

	
The Tortoise Trust
	
 
	
12,522,440.49
	
 
	
583,569.40
	
 
	
11,938,871.09
	
 
	
20.96%

	
Mark Medlin (1)
	
 
	
240,480.00
	
 
	
11,206.82
	
 
	
229,273.18
	
 
	
0.40%

	
Dave Guender (1)
	
 
	
290,580.00
	
 
	
13,541.58
	
 
	
277,038.42
	
 
	
0.49%

	
William B. Burge (1)
	
 
	
15,030.00
	
 
	
700.43
	
 
	
14,329.57
	
 
	
0.03%

	
Canvasback Trust
	
 
	
992,914.77
	
 
	
46,271.71
	
 
	
946,643.06
	
 
	
1.66%

	
Robert A. Bensch
	
 
	
377,513.97
	
 
	
17,592.86
	
 
	
359,921.11
	
 
	
0.63%

	
RAB Trust
	
 
	
615,400.87
	
 
	
28,678.84
	
 
	
586,722.03
	
 
	
1.03%

	
 
	
 
	
59,732,363.40
	
 
	
2,783,641.06
	
 
	
56,948,722.34
	
 
	
100.00%

 

(1) Units are owned through SWB Management , LLC

(2) The Value per Unit is calculated in accordance with the Company LLC Agreement and the Mash Tun Holdings LLC 2014 Equity Incentive Plan

 

 

 

 

 

 

 

 

 

 

Calculating the Value of the Class O Units and Class M Units

 

	
Estimated Purchase Price
	
 
	
$143,050,000.00

	
Stock Consideration
	
 
	
$50,000,000.00

	
Equity Value of the Real Estate
	
 
	
$7,365,000.00

	
Total Equity Value
	
 
	
$200,415,000.00

	
Adjust for Debt Recap Effect on Class M Units Threshold
	
 
	
$126,335,000.00

	
Adjusted Equity Value for Class M Units Threshold
	
 
	
$326,750,000.00

	
Threshold
	
 
	
$(250,000,000.00)

	
Equity Value for Class M Units
	
 
	
$76,750,000.00

	
 
	
 
	
 

	
Total Number of Class O Units
	
 
	
59,732,363.40

	
Total Number of Class M Units
	
 
	
5,889,990.01

	
 
	
 
	
65,622,353.41

 

	
 
	
 
	
Cash

Value

Per Unit
	
 
	
Stock

Consideration

Value

per Unit
	
 
	
Total

Value

Per Unit

	
Value of Class  M Unit (1)(2)(4)
	
 
	
$0.80
	
 
	
$0.37
	
 
	
$1.17

	
Value of Class O Unit (1)(3)(4)
	
 
	
$1.81
	
 
	
$0.84
	
 
	
$2.65

 

(1) The Value per Unit is calculated in accordance with the Company LLC Agreement and the Mash Tun Holdings LLC 2014 Equity Incentive Plan

(2) The Value of a Class M unit is equal to the Equity Value for Class M Units divided by Total Class O and Class M Units

(3) The Value of a Class O unit is equal to Total Equity Value, less the Class T Units Preference Amount, less the Value of Class M Units, divided by the number of Class O Units

(4) The Cash Value per Unit is equal to the ratio of (a) Estimated Purchase Price less the aggregate Class T Unit Preference Amount to (b) the sum of the Estimated Purchase Price less the aggregate Class T Unit Preference Amount plus the Stock Consideration, applied to Total Value per Unit. The Stock Consideration Value per Unit is equal to the inverse of the Cash Value per Unit.

 

	
Estimated Purchase Price less Class T Unit Payment
	
 
	
$
	
107,564,559.84
	
 
	
 
	
68.27%

	
Stock Consideration
	
 
	
$
	
50,000,000.00
	
 
	
 
	
31.73%

	
Total Closing Date Value to Class O and Class M Units
	
 
	
$
	
157,564,559.84
	
 
	
 
	
100.00%

 

 

 

 

 

 

 

 

 

EXHIBIT A

Redemption Agreement

(See attached)

 

 

 

88758860_15

 

 

FORM OF REDEMPTION AGREEMENT

THIS REDEMPTION AGREEMENT (this “Agreement”) is made and entered into as of this       day of , 2020, by and among SW Brewing Company, LLC, a Delaware limited liability company (“SweetWater”), Cheese Grits, LLC, a Georgia limited liability company (the “Company”), and each of the Class O Members set forth on Schedule I hereto (the “Members”).

WHEREAS, as of the Effective Date, each of the Members owns Class O Units in SweetWater in the amounts set forth across such Member’s name on Schedule I;

WHEREAS, as of the Effective Date, SweetWater owns all of the issued and outstanding equity interests in Company (the “Company Membership Interests”);

WHEREAS, SweetWater has entered into that certain Agreement of Merger and Acquisition (the “Purchase Agreement”) dated as of November 4, 2020 by and among SweetWater, Aphria Inc., a corporation existing under the Ontario Business Corporations Act, Project Golf Merger Sub, LLC, Delaware limited liability company, SWBC Craft Holdings LP, a Delaware limited partnership, SWBC Craft Management, LLC, SWBC Blocker Seller, LP, a Delaware limited partnership, and Chilly Water, LLC, a Delaware limited liability company; and

WHEREAS, in connection with the transactions contemplated by the Purchase Agreement, SweetWater desires to purchase and redeem (the “Redemption”) from the Members, and the Members desire SweetWater to so purchase and redeem, certain of the Class O Units held by such Member in the amounts set forth across such Member’s name on Schedule I, in accordance with the terms hereof (the “Redeemed Class O Units”) in a transaction intended to be governed by Code Section 731.

NOW, THEREFORE, for and in consideration of the mutual covenants, agreements, representations and warranties set forth herein, the parties agree as follows:

1.Definitions. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Purchase Agreement.

2.Redemption of the Class O Units.

(a)Redemption of the Class O Units. SweetWater hereby purchases and redeems from the Members, and the Members hereby transfer to SweetWater, the Redeemed Class O Units. The Redeemed Class O Units purchased and redeemed by SweetWater shall be cancelled and forfeited immediately upon the consummation of the Redemption.

(b)Redemption Consideration.

(i)Closing Redemption Price. As consideration for the redemption of the Redeemed Class O Units, SweetWater hereby transfers, assigns and conveys to the Members all of its rights, title and interest in and to Company Membership Interests (collectively, the “Transferred Company Membership Interests”), to be held by each Member in the amounts set forth on the Payment Schedule of the Purchase Agreement (the “Redemption Consideration”).

(ii)Post-Closing Purchase Price Adjustment; Escrow; Earn-Out. Notwithstanding the redemption of the Redeemed Class O Units, each Member shall be entitled to its portion of (A) the Earn-Out Payments, if any, and (B) the amounts payable pursuant to Section 2.13(a), Section 2.13(b) and Section 6.11(b) 

 

 

 

of the Purchase Agreement, if any, in each case, attributable to the Redeemed Class O Units as if such Member continued to hold its Redeemed Class O Units on the applicable date of determination, in each case, as set forth in the Purchase Agreement and the Payment Schedule.

3.The Closing. The closing (the “Closing”) of the Redemption pursuant to this Agreement shall take place on the Closing Date under the Purchase Agreement immediately prior to the consummation of the closing of the Transactions under the Purchase Agreement.

4.Representations and Warranties of the Members. Each of the Members hereby represents and warrants to SweetWater as follows:

(a)Binding Effect. This Agreement is the valid and binding obligation of such Member, enforceable against such Member in accordance with its terms. Such Member has the full legal right to execute, deliver and perform this Agreement and the execution, delivery and performance of this Agreement by such Member has been duly authorized by all necessary action on the part of such Member.

(b)Ownership of the Class O Units. Such Member is the record and beneficial owner of title of the Class O Units set forth such Member’s name on Schedule I, free and clear of any security interests, pledges, liens, restrictions, claims or encumbrances of any kind other than encumbrances under the federal and applicable state securities laws and the Second Amended and Restated Limited Liability Company Agreement of SweetWater, dated October 21, 2020 (the “SweetWater LLC Agreement”) and those arising under applicable securities laws.

5.Representations and Warranties of SweetWater and the Company. SweetWater and the Company represent and warrant to the Members as follows:

(a)Binding Effect. The Company is a limited liability company organized, validly existing, and in good standing under the laws of the State of Georgia. SweetWater is a limited liability company organized, validly existing, and in good standing under the laws of the State of Delaware. Each of SweetWater and the Company has all required limited liability company power to enter into and perform its obligations under this Agreement, and generally to carry out all of the transactions contemplated hereby. The execution, delivery and performance of this Agreement by the Company has been duly authorized and approved by all necessary action, and this Agreement, when duly executed and delivered by the Company in accordance with its terms, will constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. The execution, delivery and performance of this Agreement by SweetWater has been duly authorized and approved by all necessary action, and this Agreement, when duly executed and delivered by SweetWater in accordance with its terms, will constitute a valid and binding obligation of SweetWater, enforceable against SweetWater in accordance with its terms.

6.Closing Deliveries. At the Closing, each Member shall (i) deliver an executed counterpart to the Third Amended and Restated Operating Agreement of the Company dated as of the date hereof attached hereto as Exhibit A and (ii) upon request by SweetWater or the Company, execute and deliver any other documents, certificates or instruments deemed by SweetWater or the Company to be necessary to complete the redemption of the Redeemed Class O Units and the transfer of the Transferred Company Membership Interests contemplated hereby.

7.Release. Each Member hereby forever fully, irrevocably and unconditionally releases and discharges SweetWater and its subsidiaries, each of their respective affiliates, stockholders, members, partners, directors, officers, employees, agents, and representatives and all of their respective successors and assigns (collectively, the “Released Parties”) from any and all actions, suits, claims, demands, debts, sums of money, accounts, 

 

 

 

reckonings, bonds, bills, covenants, contracts, controversies, promises, judgments, liabilities or obligations of any kind whatsoever in law or equity and causes of action of every kind and nature, or otherwise (including, claims for damages, costs, expenses, and reasonable attorneys’, brokers’ and accountants’ fees and expenses) (collectively, “Losses”) related to SweetWater’s ownership of the Company prior to the date hereof and its indirect ownership of the real property owned by the Company however so arising, whether known or unknown, suspected or unsuspected, unanticipated as well as anticipated and that now exist (collectively, “Released Claims”). Each Member hereby irrevocably agrees to refrain from directly or indirectly asserting any claim or demand or commencing (or causing to be commenced) any suit, action, or proceeding of any kind, in any court or before any tribunal, against any Released Party based upon any Released Claim. The Released Parties are intended third-party beneficiaries of this Section 7 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. Notwithstanding the foregoing, nothing contained in this Section 7 shall operate to release any obligations of the Released Parties with respect to, or obligate any Member to refrain from, to the extent permissible, making, claims or commencing any proceedings arising under, or in connection with, this Agreement, the Lease Agreement, the Purchase Agreement or any certificate or other document delivered pursuant to the Purchase Agreement.

8.Indemnification. The Members, severally and not jointly and severally, shall defend, indemnify and hold harmless the Released Parties from and against all Losses arising from SweetWater’s ownership of the Company prior to the date hereof and its indirect ownership of the real property owned by the Company.

9.Miscellaneous.

(a)Amendments and Waivers. Except as otherwise expressly set forth in this Agreement, any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the parties hereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition, or provision.

(b)Termination. Notwithstanding anything to the contrary herein, if the Purchase Agreement is terminated in accordance with its terms and the Securityholders’ Representative is not pursuing its remedies pursuant thereto in connection with such termination, this Agreement and all transactions contemplated herein shall be rescinded and terminated ab initio, and each of the parties hereto agrees to take such action, including delivering any and all documents, instruments and certificates, provide all information and take or refrain from taking all such further actions as may be reasonably necessary or appropriate to cause the Redemption to be of no further effect with the result being that each Member shall own the same equity interests in SweetWater prior to and as if the Redemption did not occur, and SweetWater shall continue to own all of the Company Membership Interests.

(c)Assignment. This Agreement may not be assigned by any Member without the prior written consent of SweetWater.

(d)Successors and Assigns. Except as otherwise expressly provided herein, the provisions of this Agreement shall bind and inure to the benefit of the respective successors, permitted assigns, heirs, executors, and administrators of the parties hereto.

(e)Entire Agreement. This Agreement contains the entire agreement among the parties hereto as it relates to the subject matter hereof. This is a fully integrated agreement. This Agreement supersedes any other agreement between the parties with respect to the subject hereof.

 

 

 

(f)Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Signatures transmitted by facsimile shall be accepted as originals for all purposes.

(g)Severability. If any provision of this Agreement is determined by any court or arbitrator of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such provision will be enforced to the maximum extent possible given the intent of the parties hereto. If such clause or provision cannot be so enforced, such provision shall be stricken from this Agreement and the remainder of this Agreement shall be enforced as if such invalid, illegal or unenforceable clause or provision had (to the extent not enforceable) never been contained in this Agreement.

(h)Tax Treatment of Redemption Consideration. The payment of the consideration set forth in Section 2(b)(ii)(A) and (B) shall be treated as consideration paid for the Class O Units, and the receipt of the consideration set forth in Section 2(b)(ii)(C) shall be treated as the receipt of shares in exchange for a contribution of Class O Units under Code Section 351.

(i)Governing Law. This Agreement shall be governed by and interpreted and construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof and regardless of the laws that might otherwise govern under applicable principles of conflicts of law.

[Signature page follows]

 

 

 

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have each executed and delivered this Agreement as of the day and year first above written.

 

	
SWEETWATER:

	
 

	
SW BREWING COMPANY HOLDINGS, LLC

	
 
	
 
	
 

	
By:
	
 
	
 

	
Name:
	
 
	
 

	
Title:
	
 
	
 

 

	
COMPANY:

	
 

	
CHEESE GRITS, LLC

	
 
	
 
	
 

	
By:
	
 
	
 

	
Name:
	
 
	
 

	
Title:
	
 
	
 

	
 
	
 
	
 

	
 
	
 
	
 

	
MEMBERS:

	
 
	
 
	
 

 

 

 

 

 

 

[Signature page to Redemption Agreement]

 

 

Schedule I1

 

	
Class O Member
	
Redeemed Class O Units
	
Transferred Company 

Percentage Interests

	
 
	
 
	
 

 

 

 

	
	 

	
1 
	
 To reflect calculations set forth in the final Payment Schedule.

 

 

 

Exhibit A

Third Amended and Restated Operating Agreement

 

 

 

 

 

 

 

EXHIBIT B

Certificate of Merger

(See attached)

 

 

 

88758860_15

 

 

STATE of DELAWARE

 

 

CERTIFICATE OF MERGER 

OF

PROJECT GOLF MERGER SUB, LLC 

WITH AND INTO

SW BREWING COMPANY, LLC

 

Pursuant to Section 18-209 of the 
Delaware Limited Liability Company Act

 

 

SW Brewing Company, LLC (the “Company”), Delaware limited liability company, does hereby certify to the following facts relating to the merger (the “Merger”) of Project Golf Merger Sub, LLC (“Merger Sub”), a Delaware limited liability company, with and into the Company, with the Company remaining as the surviving company (“Surviving Company”):

FIRST: That the name and state of formation of each of the constituent companies of the Merger is as follows:

 

			
	
Name
	
 
	
State of Formation

	
 
	
 
	
 

	
Project Golf Merger Sub, LLC
	
 
	
Delaware

	
 
	
 
	
 

	
SW Brewing Company, LLC
	
 
	
Delaware

 

SECOND: The Agreement of Merger and Acquisition, dated as of November 4, 2020, by and among the Company, Merger Sub, Aphria Inc., a corporation existing under the Ontario Business Corporations Act (“Parent”), SWBC Craft Holdings LP, a Delaware limited partnership (“Blocker”), SWBC Craft Management, LLC, a Delaware limited liability company, SWBC Blocker Seller, LP, a Delaware limited partnership (“Blocker Seller”), and Chilly Water, LLC, a Delaware limited liability company (“Securityholders’ Representative”) (the “Merger Agreement”) has been approved, adopted, certified, executed and acknowledged by each of the constituent companies in accordance with the requirements of Section 18-209 of the Delaware Limited Liability Company Act.

THIRD: That the name of the Surviving Company of the Merger will be “SW Brewing Company, LLC.”

FOURTH: The Certificate of Formation of the Surviving Company shall be its Certificate of Formation.

FIFTH: That the executed Merger Agreement is on file at an office of the Surviving Company located at: 195 Ottley Drive, Atlanta, GA 30331.

 

 

 

SIXTH: That a copy of Merger Agreement will be furnished by the Surviving Company, on request and without cost, to any member of any constituent company.

SEVENTH: That this Certificate of Merger shall be effective immediately upon its filing with the Secretary of State of the State of Delaware.

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

 

 

 

 

-2-

 

EAST\177218268.3

 

 

This Certificate of Merger has been executed this             day of [●], 2020.

 

	
SW BREWING COMPANY, LLC

	
 
	
 
	
 

	
By:
	
 
	
 

	
Name:
	
 
	
 

	
Title:
	
 
	
 

 

 

 

 

[Certificate of Merger – Project Golf Merger Sub, LLC and SW Brewing Company, LLC]

 

EAST\177218268.3

 

 

EXHIBIT C

Letter of Transmittal

(See attached)

 

 

 

88758860_15

 

 

FORM OF
LETTER OF TRANSMITTAL 
TO SURRENDER UNITS OF

SW BREWING COMPANY, LLC

Reference is made to that certain Agreement of Merger and Acquisition, dated as of November 4, 2020 (the “Agreement”), by and among SW Brewing Company, LLC (the “Company”), Aphria Inc., a corporation existing under the Ontario Business Corporations Act (“Parent”), Project Golf Merger Sub, LLC, a Delaware limited liability company (“Merger Sub”), SW Brewing Company, LLC, a Delaware limited liability company (the “Company”), SWBC Craft Holdings LP, a Delaware limited partnership (“Blocker”), SWBC Craft Management, LLC (the “Blocker GP”), SWBC Blocker Seller, LP, a Delaware limited partnership ( “Blocker Seller” and, together with the Blocker GP, collectively, “Blocker Partners”), and Chilly Water, LLC, a Delaware limited liability company (“Securityholders’ Representative”).This Letter of Transmittal is being delivered in accordance with the terms set forth in the Agreement to each record holder of Class O Units and Class T Units of the Company and each beneficial owner of Class M Units of the Company held through SWB Management, LLC, issued and outstanding immediately prior to Effective Time. Pursuant to the terms and subject to the satisfaction of the conditions set forth in the Agreement, at the Effective Time, Merger Sub will merge with and into the Company, with the Company surviving, and Parent indirectly owning the equity interests of the Company (the “Merger”). Capitalized terms used but not defined herein have the meanings ascribed to them in the Agreement.

In order to exchange your Class O Units, Class T Units and Class M Units of the Company (collectively, the “Units”) for the portion of the Final Purchase Price and other consideration due to you in connection with the consummation of the Merger and the Stock Consideration, if issuable to you pursuant to the Agreement, please complete and deliver the following to [Citibank, N.A.]1 (the “Paying Agent”), at the address set forth below:

(i)this Letter of Transmittal, properly completed and duly signed; and

(ii)an Internal Revenue Service Form W-9, properly completed and duly signed (a “Form W-9”).

Please read the accompanying Instructions carefully and then complete and return all pages of this Letter of Transmittal and all other required materials to the Paying Agent.

Delivery may be made (a) using the Paying Agent’s online platform, or (b) to the address of the Paying Agent set forth immediately below by (i) hand delivery, (ii) registered mail, (iii) UPS overnight delivery or other overnight courier services or (iv) e-mail. Please retain a copy of this Letter of Transmittal and any other required materials for your records.

 

 

 

 

 

 

 

 

1 Draft Note: To be determined, if the Securityholders’ Representative determines to engage a Paying Agent.

 

 

 

 

 

 

 

[Citibank, N.A.

777 Third Avenue, 12th Floor 
New York, NY 10017

Attention: [●] Paying Agent

E-mail:

For information call: [●]]

IMPORTANT: Delivery of this Letter of Transmittal to an address other than as set forth above does not constitute a valid delivery. The instructions accompanying this Letter of Transmittal should be read carefully before this Letter of Transmittal is completed. No alternative, conditional or contingent submissions will be accepted. The method of delivery of this Letter of Transmittal is at the option and risk of the owner.

 

 

2

 

 

Please complete the following tables:

 

 

	
BOX A
	
DESCRIPTION OF UNITS SURRENDERED

	
Type of Units
	
Number of Units

	
 
	
 

	
 
	
 

	
 
	
 

	
 
	
 

	
 
	
 

	
 
	
 

	
Total Number of Units:
	
 

	
BOX B
	
REGISTERED HOLDER CONTACT INFORMATION

	
 
	
 

	
Registered Holder Name:
	
 
	
 

	
 
	
 

	
Mail Notices to the Attention of:
	
 
	
 

	
 
	
 

	
Address:
	
 
	
 

	
 
	
 
	
 

	
 
	
 
	
 

	
 
	
 

	
City:
	
 
	
State/Province:
	
 
	
Postal Code:
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 

	
Country:
	
 
	
 

	
 
	
 

	
Email Address:
	
 
	
 

	
 
	
 

	
Telephone Number:
	
 
	
 

	
 
	
 

 

Ladies and Gentlemen:

In connection with the Merger, the undersigned (“the undersigned” or “you”) hereby surrenders the above described Units.

By virtue of the Merger, as more thoroughly described in the Agreement, at the Effective Time, each Unit will automatically be converted into the right for you to receive (i) an amount equal to the amount payable to you pursuant to and in accordance with Section 2.11(f) of the Agreement (in the case of Class O Units or Class M Units, as adjusted in accordance with Section 2.13(a) and (b) of the Agreement for the Escrow Amounts detailed below), Section 2.15 of the Agreement (for Earn-Out Payments) (if any) and Section 6.11(b) (if any) and (ii) if you are a holder of Class O Units or Class M Units, a number of common shares of Parent equal to the portion of Closing Stock Value payable to you pursuant to Section 2.10 in accordance with the Payment Schedule (see summary under “Closing Date Stock Issuance; Post-Closing Registration” below) and a number of common shares of Parent issuable pursuant to Section 6.12(f) (if any). In order to receive such amount, you will need to first properly execute and deliver this Letter of Transmittal and the materials contemplated hereby.

The undersigned, upon request, will execute and deliver any additional documents deemed by the Paying Agent to be reasonably necessary or desirable to complete the surrender of the Units listed above in order to receive such payment.

All authority herein conferred or agreed to be conferred herein shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, personal 

 

3

 

representatives, trustees in bankruptcy, successors and assigns of the undersigned. The surrender of the Units hereby is irrevocable and, once delivered to the Paying Agent, may not be withdrawn under any circumstances.

The undersigned understands that surrender is not made in acceptable form until the receipt by the Paying Agent of this Letter of Transmittal and Form W-9, properly completed and duly signed. All questions as to validity, form and eligibility of any surrender of the Units hereby will be reasonably determined by Parent (which may delegate power in whole or in part to the Paying Agent) and such determination shall be final and binding.

The undersigned acknowledges and agrees that the Final Purchase Price, as adjusted pursuant to the Agreement, will be distributed by the Paying Agent in accordance with the Agreement (other than the portion thereof to be paid to the Blocker Members, which will be paid by Parent directly to the Blocker Members) and that (i) an aggregate amount equal to $500,000 (the “Adjustment Escrow Amount”) will be deposited into escrow on behalf of the Unitholders (other than the Blocker Members) to satisfy any Final Purchase Price adjustment and (ii) an aggregate amount equal to $441,162 (the “PPP Escrow Amount” and together with the Adjustment Escrow Amount, the “Escrow Amounts”) will be deposited into escrow on behalf of the Unitholders (other than the Blocker Members) to satisfy any CARES Unforgiven Debt. After the Closing and in accordance with the timing set forth in the Agreement, the Adjustment Escrow Amount (less any amount required to be paid to Parent pursuant to Section 2.13(a) of the Agreement) and the PPP Escrow Amount (less any amount required to be paid to Parent pursuant to Section 2.13(b) of the Agreement) will be released for the benefit of the Unitholders (other than the Blocker Members), in each case, in accordance with the terms of the Agreement and in accordance with the Adjustment Escrow Agreement and PPP Escrow Agreement, as applicable.

In addition, the undersigned acknowledges and agrees that the Final Purchase Price payable on the Closing Date contains the reductions set forth in the Agreement, including a reduction in the amount of $[●] (the “Securityholders’ Representative Expense Amount”) that will be held by the Securityholders’ Representative on behalf of the Unitholders (other than the Blocker Members) to pay amounts required to be paid by the Securityholders’ Representative under the Agreement, including, without limitation, any downward adjustment in excess of the Adjustment Escrow Amount and third party expenses and costs incurred by the Securityholders’ Representative in connection with the consummation of the Merger (see summary under “The Securityholders’ Representative; Securityholders’ Representative Expense Amount” below). Furthermore, Unitholders (other than the Blocker Members) may be entitled to receive Earn-Out Payments to the extent that certain financial thresholds are met during the 2022 and 2023 calendar years.

At the Closing, Parent shall deliver to each Unitholder (other than the Blocker Members or with respect to the Redeemed Units) book-entry credits in the name of such Unitholder (other than the Blocker Members), and for the book-entry credit allocable to SWB Management, LLC, directly to the SWB Members, in accordance with the Payment Schedule representing that number of common shares (the “Stock Consideration”) of Parent, without par value per share (“Parent Common Shares”) having a value equal to such Unitholder’s or SWB Member’s portion, as applicable, of the Closing Stock Value determined in accordance with the Payment Schedule, which in the aggregate for all Parent Common Shares shall be equal to fifty million dollars ($50,000,000) (the “Closing Stock Value”) calculated based on the volume-weighted average trading price of Parent Common Shares on the NASDAQ for the thirty (30) day period immediately

ending on the close of trading on the day that the Parent issues a public announcement concerning the Transactions as required under applicable Securities Laws. Additionally on the date on which the Registerable Shares (as defined below) are registered for resale pursuant to Section 6.12 of the Agreement, in the event that the Registerable Value is less than the Closing Stock Value, then Parent shall issue to the Unitholders (other than the Blocker Members), and for the Parent Common Shares allocable to SWB Management, LLC, directly to the SWB Members, in accordance with the Payment Schedule, and include in the Registrable Shares, an additional number of Parent Common Shares, equal to the quotient of (X) the difference of (1) the Closing Stock Value, minus (2) Registerable Value, divided by (Y) the Pre-Registration Price, calculations of which are set forth in Section 6.12(f)(ii) of the Agreement. In the event that in calculating the Pre-Registration Price (as defined in the Merger Agreement) issuing the additional Parent Common Shares hereunder would result in the Stock Consideration being greater than the Closing Stock Value, then the Parent shall only be obligated to issue the number of Parent Common Shares that will result in the Unitholders (other than the Blocker Members or with respect to the Redeemed Units) holding Stock Consideration in an amount equal to the Closing Stock Value.

 

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Parent will use commercially reasonable efforts, to within ninety (90) days following the Closing, prepare and file with the SEC a shelf registration statement on Form F-3 or Form F-10 (or, if Form F-3 or Form F- 10 is not then available to Parent, on such form of registration statement as is then available to effect a registration of the Registrable Shares for resale) (the “Registration Statement”), that would permit the resale of all of the Parent Common Shares constituting the Stock Consideration (as may be adjusted as detailed below, the “Registrable Shares”) under the Securities Act in accordance with Section 6.12 of the Agreement; it being understood that if such Registration Statement is a shelf registration statement, the prospectus contained therein need not name the Unitholders nor otherwise identify the Registrable Shares if such prospectus is supplemented with such information by the filing of a prospectus supplement thereto (a “Prospectus Supplement”) following the effectiveness of such Registration Statement, and if the Parent fails to file the Registration Statement within such ninety (90) day period, Parent shall continue to use commercially reasonable efforts to do so until such Registration Statement has been filed.

The Final Purchase Price and Stock Consideration will be distributed in the manner described in the Adjustment Escrow Agreement, the PPP Escrow Agreement, the Agreement and this Letter of Transmittal, and amounts owed to the undersigned pursuant to the Agreement will be paid to the undersigned.

The undersigned understands that payment to it of the amount described herein will be made as promptly as practicable after the surrender of the Units is made in acceptable form, but in no event before the Effective Time. The undersigned understands and agrees that the amount described herein paid in exchange for its Units shall be deemed to have been issued in full satisfaction of all rights pertaining to all Units held by the undersigned.

To the extent that the undersigned indirectly owns Units as a member of SWB Management, LLC, the undersigned acknowledges and agrees that (i) the reference to Units herein shall refer to the Units held by the undersigned via SWB Management, LLC on a look-through basis and (ii) the undersigned shall individually be bound by the terms and obligations herein, including without limitation, the release set forth in Paragraph 6 and the restrictive covenants set forth in Paragraphs 7, 8, and 9.

IMPORTANT: Delivery of the required materials will be effected and risk of loss shall pass only upon receipt by the Paying Agent at the address above.

 

 

 

 

5

 

 

Please complete the following table if payment is to be issued to the undersigned:

 

	
BOX C
	
PAYMENT INSTRUCTIONS

	
 C
	
PAYMENT INSTRUCTIONS
	
 

	
OX 
	
 
	
 

	
Requested Payment Method*:
	
 
	
 

	
 
	
 
	
 

	
*Checks will be mailed to the address provided in Box B “Registered Holder Contact Information.
	
 

	
 
	
 
	
 

	
ELECTRONIC PAYMENT INSTRUCTIONS:
	
 

	
 
	
 
	
 

	
Account Type (Checking or Savings):
	
 
	
 

	
 
	
 
	
 

	
Bank Name:
	
 
	
 

	
 
	
 
	
 

	
ABA Routing Number:
	
 
	
 

	
 
	
 
	
 

	
Beneficiary/Account Holder Name:
	
 
	
 

	
 
	
 
	
 

	
Bank Account Number:
	
 
	
 

	
 
	
 
	
 

	
SWIFT/BIC:
	
 
	
 

	
 
	
 
	
 

	
IBAN:
	
 
	
 

	
 
	
 
	
 

	
Intermediary Bank ABA Routing Number:
	
 
	
 

	
 
	
 
	
 

	
Intermediary SWIFT/BIC Code:
	
 
	
 

	
 
	
 
	
 

	
FFC | Account Name:
	
 
	
 

	
 
	
 
	
 

	
FFC | Account Number:
	
 
	
 

	
 
	
 
	
 

 

Please complete the following table only if payment is to be issued in the name of someone other than the undersigned:

 

	
 
	
SPECIAL PAYMENT INSTRUCTIONS
	
 

	
 
	
(See Instructions 3)
	
 

	
 
	
 
	
 
	
 
	
 

	
 
	
To be completed ONLY if the payment is to be issued in the name of someone other than the undersigned. NOTE: THE PERSON NAMED IN THESE SPECIAL PAYMENT INSTRUCTIONS MUST BE THE PERSON WHO COMPLETES THE FORM W-9.
	
 

	
 
	
 
	
 
	
 
	
 

	
 
	
Issue the check representing payment to:
	
 

	
 
	
 
	
 
	
 
	
 

	
 
	
Name 
	
 
	
 

	
 
	
 
	
(Please Print)
	
 

	
 
	
 
	
 
	
 
	
 

	
 
	
Address
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
 
	
If you complete this box, you will need a signature guarantee by an eligible institution. See Instructions.

 

 

 

6

 

 

CERTAIN REPRESENTATIONS AND WARRANTIES, COVENANTS AND AGREEMENTS

 

1.Surrender of Units. In connection with the Merger pursuant to the Agreement, the undersigned hereby surrenders, subject to the terms and conditions of the Agreement, the Units noted above owned by the undersigned in exchange for, and for the purpose of receiving, the amounts to be paid to the undersigned pursuant to the Agreement.

The undersigned further acknowledges and agrees that (i) any payment for the Units noted above shall be made net of any federal, state, local and foreign taxes required to be withheld in accordance with Section 2.14 of the Agreement, (ii) such payment, along with the Earn-Out Payment if any, and the Stock Consideration, if issuable to the undersigned pursuant to the Agreement, together with all other amounts that are payable pursuant to the Agreement satisfies all obligations of Parent, the Company, and each of their respective Subsidiaries and Affiliates to the undersigned pertaining to the Units, (iii) such amount, along with the Earn-Out Payment and allocable portion of the Escrow Amounts, if any, and the Stock Consideration, if issuable to the undersigned pursuant to the Agreement, together with all other amounts that are payable pursuant to the Agreement, accurately reflects the portion of consideration payable under the Agreement which the undersigned is entitled to receive pertaining to the Units, (iv) in accepting such amount, the Company, Parent, Merger Sub, the Blocker Partners and Blocker and their respective Subsidiaries, Affiliates and representatives shall be deemed to have no further obligations to the undersigned with respect to any amounts payable pursuant to the Agreement, in each case, except as expressly set forth in the Agreement, (v) a portion of the Final Purchase Price will be held by Citibank, N.A. as the Adjustment Escrow Agent and Truist Bank, as the PPP Escrow Agent, in each case, pursuant to and subject to the terms and conditions of the Agreement, and the undersigned will only be entitled to a portion of such amounts (if any) as and when such amounts are payable in accordance with the provisions of the Agreement, the Adjustment Escrow Agreement and the PPP Escrow Agreement, (vi) a portion of the Final Purchase Price will be held by the Securityholders’ Representative to pay amounts required to be paid by the Securityholders’ Representative under the Agreement, including, without limitation, any downward adjustment in excess of the Adjustment Escrow Amount, third party expenses and costs incurred by the Securityholders’ Representative in connection with the consummation of the Merger, (vii) the undersigned has determined the Merger and the consideration (in form and amount) to be received by undersigned, along with the undersigned’s right to receive a portion of the Earn-Out Payment, if any, and the Stock Consideration, if issuable to the undersigned pursuant to the Agreement, together with all other amounts that are payable pursuant to the Agreement, to be fair to, and in the best interests of, the undersigned, and (viii) the execution and delivery of this Letter of Transmittal and other required materials is a condition to receiving the undersigned’s portion of the Final Purchase Price and Stock Consideration under the Agreement together with all other amounts that are payable pursuant to the Agreement.

 

2.Representations and Warranties. The undersigned hereby represents and warrants to the Company, Parent, Merger Sub, and Blocker as follows:

 

a.If the undersigned is a corporation, limited liability company or partnership, the undersigned is duly organized, validly existing and, to the extent such concept is recognized, in good standing under the Laws of its state of organization.

 

b.The undersigned has received a copy of and has read or has been given sufficient opportunity to read this Letter of Transmittal and the Agreement, understands fully all terms used herein and therein and all provisions contained herein and therein and their significance, and has executed and delivered this Letter of Transmittal and the Form W-9 voluntarily. The execution, delivery and performance of this Letter of Transmittal by the undersigned has been duly and validly authorized by all necessary action on the part of the undersigned. The undersigned has had an opportunity to consult with, and has relied solely upon the advice (if any) of, its legal, financial, accounting and/or tax advisors with respect to this Letter of Transmittal, the Agreement, the transactions described therein, including the Merger, in each case to the extent it has deemed necessary. The undersigned hereby acknowledges and agrees that it has not been advised or directed by the Company, Parent, Merger Sub, the Blocker Partners or Blocker or their respective legal counsel or other advisors or representatives in respect of any such matters and that it has not relied on any such parties in connection with this Letter of Transmittal, the Agreement or the transactions contemplated hereby or thereby, including the Merger.

 

7

 

 

c.The undersigned has full legal capacity to enter into and deliver this Letter of Transmittal and the Form W-9, and to perform its obligations hereunder and thereunder. This Letter of Transmittal and the Form W-9 have been or will be duly executed and delivered by the undersigned and, assuming the due execution and delivery of this Letter of Transmittal and the Form W-9 constitute, or when executed and delivered will constitute, the valid and binding agreements of the undersigned, enforceable in accordance with their terms, except as the enforceability hereof and thereof may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting the enforcement of creditor’s rights generally and as limited by the availability of specific performance and other equitable remedies or applicable equitable principles (whether considered in a proceeding at law or in equity).

 

d.As of the date of this Letter of Transmittal, the undersigned holds of record those Units set forth above, directly or indirectly, free and clear of any Liens and any other restrictions on transfer (other than restrictions under applicable securities Laws and the LLC Agreement (as defined below) and Permitted Liens).

 

e.The execution, delivery and performance by the undersigned of this Letter of Transmittal and the Form W-9 will not (a) violate, conflict with, result in any material breach of, constitute a material default under, result in the termination or acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice under (i) if a corporation, limited liability company or partnership, any organizational documents of the undersigned or (ii) any material contract to which the undersigned is bound or affected; or (b) require any authorization, consent, approval, exemption or other action by or notice to any Governmental Authority under the provisions of any Law.

 

f.The undersigned certifies, represents and warrants that the information included by or on behalf of the undersigned in this Letter of Transmittal and the Form W-9 is true, correct and complete.

 

3.Consent to Merger Agreement. By signing and submitting this Letter of Transmittal to the Paying Agent, and in further consideration of the undersigned’s receipt of the amount payable hereby, the undersigned hereby unconditionally approves and consents to the Merger and the transactions contemplated by, and terms and conditions of, the Agreement in all respects and irrevocably waives, to the fullest extent permitted by the Delaware Limited Liability Company Act (the “Act”), the undersigned’s right to dissent and seek appraisal that he, she or it may have under the Act, the Second Amended and Restated Limited Liability Company Agreement of the Company dated October 21, 2020 (as amended, the “LLC Agreement”) or the Agreement.

 

4.Post-Closing Registration.2 The undersigned covenants and agrees, in accordance with Section 6.12 of the Agreement, to cooperate with Parent in connection with the preparation of the Prospectus Supplement prior to and after the Closing Date for so long as Parent is obligated to keep the Registration Statement effective, and will promptly provide to Parent, in writing, for use in the Prospectus Supplement, all information reasonably requested by Parent regarding Unitholder (or its designee) and its plan of distribution and such other information as may be reasonably necessary to enable Parent to prepare the Prospectus Supplement and to maintain the currency and effectiveness thereof. If the undersigned breaches its respective covenants as outlined in this Section 4, Parent may exclude the Registrable Shares held by the undersigned (or its designee) from the Registration Statement until such time as the breach is cured.

 

 

 

 

 

 

 

2 Draft Note: This section to be deleted in the letter of transmittal signed by SWBC Craft, LLC.

 

 

8

 

 

5.Appointment of   Securityholders’ Representative; Securityholders’ Representative Expense Amount.3

 

a.The undersigned shall be bound by and obligated as Unitholder (other than the Blocker Members), as applicable, under the Agreement and hereby irrevocably appoints the Securityholders’ Representative (and its successors designated in accordance with the Agreement) as the undersigned’s agent, proxy and attorney-in-fact to act on behalf of the undersigned for all purposes of the Agreement, the Adjustment Escrow Agreement and the PPP Escrow Agreement, including full power and authority on the undersigned’s behalf (a) to consummate the transactions contemplated therein, (b) to pay expenses (whether incurred on or after the date of the Agreement) incurred in connection with the negotiation and performance of the Agreement, (c) to prepare, deliver and receive any notices on behalf of the undersigned contemplated by the Agreement, (d) to act on behalf of the undersigned in reviewing the Final Closing Balance Sheet and Parent’s calculation of the Final Net Working Capital and making any objections to such amount and negotiating on behalf of the undersigned in order to resolve any dispute relating to any of the Final Calculations, (e) to use reasonable efforts to enforce and protect the rights and interests of the Unitholders arising out of or under or in any manner relating to the Agreement and the Transactions, (f) to employ and obtain the advice of legal counsel, accountants and other professional advisors as the Securityholders’ Representative, in its sole discretion, deems necessary or advisable in the performance of its duties as the Securityholders’ Representative and to rely on their advice and counsel, and (g) to take all actions necessary in the judgment of the Securityholders’ Representative for the accomplishment of the foregoing. Without limiting the generality of the foregoing, the Securityholders’ Representative, in such capacity, shall have such powers and authority as are necessary or appropriate to carry out the functions assigned to it under the Agreement or any other document delivered in connection therewith. All actions, notices, communications and determinations by the Securityholders’ Representative to carry out such functions shall conclusively be deemed to have been authorized by, and shall be binding upon, the undersigned. The undersigned hereby reaffirms, approves, accepts and adopts, and hereby agrees to comply with and perform, all of the acknowledgements and agreements made by the Securityholders’ Representative on behalf of the undersigned in the Agreement and the other documents delivered in connection therewith. THE UNDERSIGNED AGREES THAT SUCH AGENCY AND PROXY ARE COUPLED WITH AN INTEREST, ARE THEREFORE IRREVOCABLE WITHOUT THE CONSENT OF THE SECURITYHOLDERS’ REPRESENTATIVE AND SHALL SURVIVE THE DEATH, INCAPACITY, BANKRUPTCY, DISSOLUTION OR LIQUIDATION OF THE UNDERSIGNED.

 

b.Neither the Securityholders’ Representative nor any agent employed by it shall incur any liability to the undersigned relating to the performance of its duties under the Agreement for any error of judgment, or any action taken, suffered or omitted to be taken on behalf of the Unitholders (or any of them), except in the case of the Securityholders’ Representative’s gross negligence or fraud. The Securityholders’ Representative may consult with counsel of its own choice and shall have full and complete authorization and protection for any action taken or suffered by the Securityholders’ Representative hereunder in good faith and in accordance with the advice of such counsel.

 

c.Upon the Closing, Parent shall wire to the Securityholders’ Representative the Securityholders’ Representative Expense Amount which shall be used for the purposes of paying directly or reimbursing the Securityholders’ Representative for any loss, liability or expense, including reasonable attorneys’ fees and expenses, incurred by the Securityholders’ Representative pursuant to this Agreement and, if the Securityholders’ Representative Expense Amount is exhausted, by the Unitholders (other than the Blocker Members) in accordance with their respective allocation of the Final Purchase Price as set forth in the Payment Schedule; provided, however, that the Securityholders’ Representative shall be entitled to withhold from any amounts released in accordance with terms of the Adjustment Escrow Agreement and/or the PPP Escrow Agreement from the Escrow Amounts to the Unitholders (other than the Blocker Members) any amounts that are not so reimbursed by the Unitholders (other than the Blocker Members). The undersigned acknowledges that the Securityholders’ Representative is not providing any investment supervision, recommendations or advice. The Securityholders’ Representative shall disburse the balance of the Securityholders’ Representative Expense Account to the Unitholders (other than the Blocker Members) in accordance with the Agreement. For tax purposes, the Securityholders’ Representative Expense Amount will be treated as having been received and voluntarily set aside by the Unitholders at the time of Closing.

 

3 Draft Note: This section to be deleted in the letter of transmittal signed by SWBC Craft, LLC.

 

9

 

 

6.Release. Effective as of the Effective Time, you, on your own behalf and on behalf of your heirs, family members, successors, assigns and executors (each, a “Releasing Party”), hereby unconditionally and irrevocably and forever release and discharge each of the Company, Parent, Merger Sub, and Blocker, and each of their respective Affiliates and each of their respective successors and assigns, and any present or former directors, managers, officers, employees or agents of such Person (each, a “Parent Released Party”), of and from, and hereby unconditionally and irrevocably waive, any and all claims, debts, losses, expenses, proceedings, covenants, liabilities, suits, judgments, damages, actions and causes of action, obligations, accounts, and liabilities of any kind or character whatsoever, known or unknown, suspected or unsuspected, in contract, direct or indirect, at law or in equity that such party ever had, now has or ever may have or claim to have against any Parent Released Party, for or by reason of any matter, circumstance, event, action, inaction, omission, cause or thing whatsoever arising prior to or upon the Effective Time, in respect of the undersigned’s ownership of the Units. You expressly waive all rights afforded by any statute which limits the effect of a release with respect to unknown claims. You understand the significance of this release of unknown claims and waiver of statutory protection against a release of unknown claims, and acknowledge and agree that this waiver is an essential and material term of the Agreement. The claims released pursuant to this paragraph 6 are referred to collectively as the “Released Claims.”

 

This waiver and release shall not be deemed to waive and release any claims or rights of a Releasing Party to (i) wages that remain unpaid as of the Effective Time, (ii) reimbursements for business expenses incurred and documented in compliance with Company’s or any of its Subsidiaries’ policies in effect immediately prior to the Effective Time and consistent with prior expenditures, (iii) unreimbursed claims under employee health and welfare plans, consistent with the terms of coverage, (iv) the entitlement, if any, to COBRA continuation coverage benefits or any other similar benefits required to be provided by law, (v) amounts that are vested under any of Company’s or any of its Subsidiaries’ 401(k) plan, and (vi) any rights pursuant to a written employment or consulting agreement between the undersigned or any of its Affiliates and the Company or any of its Subsidiaries. Notwithstanding the foregoing, Parent shall remain liable to the undersigned with respect to the liabilities and obligations, if any, (i) arising pursuant to this Letter of Transmittal, the Agreement or any other agreement, document, certificate, instrument or documents executed or delivered in connection with the Agreement by Parent in favor of the undersigned, and (ii) subject to Section 6.5 of the Agreement, with respect to the undersigned’s designated member of the board of managers of the Company, arising out of (A) the indemnification or contribution provisions of the Company’s and its Subsidiaries’ Organizational Documents, or any existing indemnification agreements between the undersigned (or any general partner, officer, director, manager, retired general partner, retired officer, retired director or retired manager of the undersigned) and the Company, (B) any applicable directors’ and officers’ liability insurance; and (C) if (and only if) the undersigned is an employee of or consultant to the Company, any rights the undersigned may have with respect to salaries, bonus, incentive compensation, severance, accrued vacation and reimbursement of business expenses by virtue of his or her employment or engagement with the Company or any rights the undersigned may have pursuant to any employment or consulting agreement between the undersigned (or any general partner, officer, director, manager, retired general partner, retired officer, retired director, retired manager or Affiliate of the undersigned) and the Company or any of its Subsidiaries.

 

You represent and warrant that each of the Released Claims is hereby fully and finally discharged, settled and satisfied. You acknowledge that you have had the opportunity to consult legal counsel with respect to the waiver and releases set forth in this Letter of Transmittal and that you understand and acknowledge that you may hereafter discover facts and legal theories concerning the release set forth herein and the subject matter hereof in addition to or different from those of which you now believe to be true.

 

 

10

 

 

7.Non-Solicit.4 For a period of three (3) years from and after the Closing, without the prior written consent of the Company, the undersigned Unitholder (other than the Blocker Members), other than in connection with providing services to or for the benefit of the Company or any of its Affiliates, covenants and agrees to not (i) induce or attempt to induce any officer of the Company, or employee or independent contractor or consultant of the Company or any of its Subsidiaries (each a “Covered Person”), to leave the employ of the Company or any of its Subsidiaries, or in any way interfere with the relationship between the Company or any of its Subsidiaries, on the one hand, and any such Covered Person, on the other hand, (ii) solicit or cause to be solicited the employment of or hire or cause to be hired any such Covered Person at any time during such period, provided, however, that the foregoing shall not prohibit the undersigned from (a) engaging in any general advertising or general solicitation, including an internet publication, not specifically targeted to the Covered Persons or (b) employing any Covered Person who contacts the undersigned on his or her own initiative and without direct solicitation from the undersigned or (iii) induce any customer, supplier, licensee, licensor, franchisee or other business relation of the Company or any of its Subsidiaries to cease doing business with, or alter their business relationship with, the Company or any of its Subsidiaries, or in any way interfere with the relationship between any such customer, supplier, licensee, licensor, franchisee or other business relation and the Company or any of its Subsidiaries.

 

8.Non-Competition.5 For a period of three (3) years from and after the Closing (the “Restricted Period”), the undersigned Unitholder (other than the Blocker Members), other than in connection with providing services to or for the benefit of the Company or any of its Affiliates, covenants and agrees to not, directly or indirectly, own any interest in, provide any financing to, manage, control, participate in, consult with, render services for, or otherwise engage in or assist any other person with engaging in, the Restricted Business in the United States and in any country where the Company’s products are currently being distributed or sold as of the Effective Date; provided, however, that nothing set forth in this Letter of Transmittal shall prohibit any Person from (i) continuing to own any class of capital stock or equity of any entity, whether or not such entity is engaged in the Restricted Business, (ii) owning up to five percent (5%) in the aggregate of any class of capital stock or equity of any corporation if such stock or equity is publicly traded and listed on any national or regional stock exchange or (iii) continuing to conduct the business activities of the undersigned as conduced as of the Effective Time. “Restricted Business” means the developing, branding, brewing, bottling and distributing of beer (including non-alcoholic beer) and hard seltzers. The undersigned may, prior to the end of the Restricted Period, request a waiver of the obligations set forth in this Section 8 from the Company and the Company shall have the right to consent to such waiver request, which the Company shall not unreasonably withhold.

 

9.Confidentiality. The undersigned agrees to keep the terms of the Agreement and this Letter of Transmittal confidential, except to the extent required by applicable Law or for financial reporting purposes and except that the undersigned may disclose such terms to its accountants, advisors and other representatives as necessary in connection with tax filings or other legal matters (so long as such Persons agree to or are bound by contract to keep the terms of the Agreement and this Letter of Transmittal confidential). [Notwithstanding the foregoing, the undersigned and its Affiliates will be permitted (i) to disclose to their respective and prospective members, limited partners and partners (who may disclose to their direct and indirect investors) the fact that the Closing has occurred, the consideration paid under the Agreement, other items directly relating to such consideration and other types of information that are customary for private equity funds to provide to their respective and prospective members, limited partners and partners and (ii) to disclose in connection with normal fund raising and related marketing or informational or reporting activities, including on their websites and in their marketing materials, any such information permitted to be disclosed pursuant to clause (i) above.]6

 

 

 

 

 

4 Draft Note: This section to be deleted in the letter of transmittal signed by SWBC Craft, LLC.

5 Draft Note: This section to be deleted in the letter of transmittal signed by SWBC Craft, LLC.

6 Draft Note: Bracketed language to be included in the letter of transmittal signed by SWBC Craft, LLC.

 

11

 

10.Reasonableness of Covenants. The undersigned expressly acknowledges and agrees that each restriction contained in this Letter of Transmittal is reasonable in all respects (including with respect to subject matter, time period and geographical area) and such restrictions are necessary to protect Parent’s interest in, and the value of, the Company and its Subsidiaries (including the goodwill inherent therein). If the final judgment of a court of competent jurisdiction declares that any term or provision of this Letter of Transmittal is invalid or unenforceable, the undersigned agrees that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Letter of Transmittal shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed. The undersigned acknowledges and agrees that in the event of a breach by the undersigned of any of the covenants of this Letter of Transmittal, monetary damages shall not constitute a sufficient remedy. Consequently, in the event of any such breach, Parent, the Company, their Subsidiaries and/or their respective successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof.

 

11.Successors and Assigns; Instructions. This Letter of Transmittal shall be binding upon and inure to the benefit of the undersigned and his, her or its successors and permitted assigns. The undersigned agrees that the Instructions to this Letter of Transmittal constitute an integral part of this instrument and agrees to be bound thereby. Surrender of the Units noted above is subject to the terms, conditions, and limitations set forth in the Agreement and the Instructions attached.

 

12.Governing Law; Venue.   The validity, interpretation and effect of this Letter of Transmittal shall be governed exclusively by the Laws of the State of Delaware, excluding the “conflict of laws” rules thereof. The undersigned agrees that any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Letter of Transmittal may be brought in the Court of Chancery of the State of Delaware or, only if such court does not have jurisdiction, any other state or federal court located in the State of Delaware, and in each case any appellate courts therefrom, and the undersigned hereby irrevocably submits to the exclusive jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally.

 

 

 

 

[continued on following pages]

 

 

12

 

 

SIGNATURE PAGE

 

[The Paying Agent hereby is instructed by the undersigned to issue to the undersigned the portion of the Purchase Price to which the undersigned is entitled in connection with the Merger as provided for and pursuant to the terms and conditions of the Agreement of Merger and Acquisition.]7 If the undersigned holder of the Units is married and such Units are held jointly with such holder’s spouse, or the holder of the Units and such holder’s spouse reside in a community property state (including Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), both such holder and his or her spouse must sign this Letter of Transmittal. Signatures of trustees, executors, administrators, guardians, officers of corporations, attorneys-in-fact, or others acting in a fiduciary capacity must include the full title of the signer in such capacity.

 

PLEASE SIGN HERE

 

 

			
	
Signature of Holder:
	
 

	
(The signature must correspond exactly with the name(s) recorded in the books and records of the Company).

	
 
	
 

	
Date:
	
 

	
 
	
 

	
Name:
	
 

	
 
	
(Please Print)

	
 
	
 

	
Title of Signing Party:
	
 

	
(if entity, trustee or other authorized party)

 

 

IF SPOUSAL OR ADDITIONAL SIGNATURES ARE REQUIRED, USE THE FIELDS BELOW.

 

			
	
Signature of Holder:
	
 

	
 

	
 
	
 

	
Date:
	
 

	
 
	
 

	
Name:
	
 

	
 
	
(Please Print)

	
 
	
 

	
Title of Signing Party:
	
 

	
 

 

 

 

 

 

 

 

 

 

7 Draft Note: This sentence to be deleted in the letter of transmittal signed by SWBC Craft, LLC.

 

 

 

 

13

 

 

 

 

	
 

	
 

 

 

 

 

 

 

 

 

 

 

 

 

14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[continued on following pages]

 

 

15

 

 

 

 

 

 

 

 

INSTRUCTIONS

 

1.Delivery of Letter of Transmittal. This Letter of Transmittal must be properly completed, duly executed, dated, and, delivered as set forth on the first page of this Letter of Transmittal together with (a) a Form W-9, and (b) any other required documents. The method of delivering documentation is at the option and the risk of the holder. If sent by mail, registered mail, properly insured, with return receipt requested, is recommended.

 

Until a holder has surrendered his, her, or its Units via delivery of this Letter of Transmittal as set forth on the first page of this Letter of Transmittal, he, she, or it will not receive payment of the portion of the consideration payable to such holder with respect to his/her/its Units.

 

You should complete one Letter of Transmittal listing all Units registered in the same name. If any Units are registered in different ways, you will need to complete, sign, and submit as many separate Letters of Transmittal as there are different registrations. You may not submit fewer than the entire number of Units held by you.

 

2.Form W-9. Each Unitholder is required to provide the Paying Agent with a correct taxpayer identification number (“TIN”), generally such holder’s social security or federal employer identification number, on Form W-9, which is provided below. The undersigned must complete item (4) on the Form W- 9 if the undersigned is exempt from backup withholding and specify the appropriate code found in the instructions found with the Form W-9. Part I of the form may be completed with “Applied For” if the Unitholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If “Applied For” is indicated and the Paying Agent is not provided with a TIN within sixty (60) days, then the Paying Agent will withhold 24% of all payments of the Final Purchase Price due to the Unitholder until a TIN is provided to the Paying Agent. Further instructions to completing the Form W-9 are included with the Form W-9 and should be read prior to completing the form.

 

3.Signatures. The signature on this Letter of Transmittal must correspond exactly with the name(s) recorded in the books and records of the Company, unless the Units described on this Letter of Transmittal have been assigned by the registered holder or holders thereof, in which event this Letter of Transmittal should be signed in exactly the same form as the name(s) of the last transferee(s) indicated in the books and records of the Company.

 

For a name correction or for a change in name which does not involve a change in ownership, proceed as follows: For a change in name by marriage, etc., the Letter of Transmittal should be signed, e.g., “Mary Doe, now by marriage Mary Jones.” For a correction in name, the Letter of Transmittal should be signed, e.g., “James E. Brown, incorrectly inscribed as J.E. Brown.” The signature in each such case should be guaranteed as described below in Instruction 4.

 

If this Letter of Transmittal is signed by a trustee, executor, administrator, guardian, officer of a corporation, attorney-in-fact, or other person acting in a fiduciary or representative capacity, the person signing must give his or her full title in such capacity and of his or her authority to so act.

4.Request for Assistance. All questions regarding appropriate procedures for surrendering the Units should be directed to Corey R. Katz, Winston & Strawn LLP, at (212) 294-5338 or ckatz@winston,com or Ryan Walden, Winston & Strawn LLP, at (212) 294-9178 or rwalden@winston,com.

 

5.Additional Copies. Additional copies of this Letter of Transmittal or a Form W-9 may be obtained from the Paying Agent at the mailing address or telephone number set forth on the front page.

 

 

16

 

 

6.Units Transfer Taxes. The undersigned will pay all transfer taxes with respect to the delivery of checks in payment for surrendered Units. If, however, payment is to be made to any person other than the registered holder(s), or if surrendered unit(s) are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any transfer taxes (whether imposed on the registered holder(s), the Company or any other person) payable on account of the payment to such other person will be deducted from the Final Purchase Price or must be paid by the recipient or the person signing this Letter of Transmittal unless evidence satisfactory to Parent of the payment of such taxes, or exemption therefrom, is submitted.

 

7.Internal Revenue Service Forms. Each holder of Units receiving payment in connection with the Merger is required to provide a correct Taxpayer Identification Number on Form W-9. Please see “IMPORTANT TAX INFORMATION.”

 

8.Miscellaneous. Any and all Letters of Transmittal or copies (including any other required documents) not in proper form are subject to rejection. The terms and conditions of the Agreement of Merger and Acquisition are incorporated herein by reference and are deemed to form part of the terms and conditions of this Letter of Transmittal.

 

9.Waiver of Conditions. To the extent permitted by applicable law, Parent reserves the right to waive any and all conditions set forth herein and accepts for exchange any securities submitted for exchange.

 

17

 

IMPORTANT TAX INFORMATION

 

A United States Holder (as defined below) of Units who is receiving any consideration in connection with the Merger is generally required under United States federal income tax law to provide his, her or its current taxpayer identification number (“TIN”). If such holder is an individual, the TIN is his or her Social Security Number. If the holder does not provide the correct TIN or an adequate basis for an exemption, the holder may be subject to a penalty imposed by the Internal Revenue Service (the “IRS”), and any consideration such holder receives in the Merger may be subject to backup withholding at the applicable rate (currently 24%). Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund from the IRS may be obtained. To prevent backup withholding on any cash payment made to a holder of SW Brewing Company, LLC Units in connection with the Merger Agreement, a United States Holder is required to notify SW Brewing Company, LLC of his, her or its correct TIN by completing the enclosed Form W-9 and certifying under penalties of perjury that the TIN provided on Form W-9 is correct. In addition, the holder must date and sign as indicated. If the holder does not provide the Paying Agent with a certified TIN within by the time of payment, backup withholding may apply.

 

To prevent backup withholding, holders that are not United States Holders should (i) submit a properly completed IRS Form W-8BEN or W-8BEN-E, or other applicable IRS form W-8, to the Paying Agent, certifying under penalties of perjury to the holder’s foreign status or (ii) otherwise establish an exemption.

 

Certain holders (including, among others, corporations) are exempt recipients not subject to these backup withholding requirements. See the enclosed copy of the Form W-9 and the General Instructions to Form W-9. To avoid possible erroneous backup withholding, exempt United States Holders should complete and return the Form W-9.

 

For purposes of these instructions, a “United States Holder” is (i) an individual who is a citizen or resident alien of the United States, (ii) a corporation (including an entity taxable as a corporation) or partnership created under the laws of the United States or of any political subdivision thereof, (iii) an estate the income of which is subject to United States federal income tax regardless of its source or (iv) a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust or (b) the trust has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person.

 

See the enclosed “General Instructions” on Form W-9 for additional information and instructions.

IN ALL CASES, TAX FORMS PREPARED AND ATTACHED TO THIS LETTER OF TRANSMITTAL SHOULD BE COMPLETED IN ACCORDANCE WITH INSTRUCTIONS FROM THE IRS ATTACHED TO EACH FORM OR AVAILABLE AT WWW.IRS.GOV. PLEASE CONSULT YOUR INDEPENDENT LEGAL, ACCOUNTING OR FINANCIAL ADVISOR FOR FURTHER QUESTIONS.

 

FAILURE TO PROPERLY COMPLETE THE INFORMATION REQUESTED ON FORM W-9 MAY RESULT IN WITHHOLDING ON ANY CASH PAYMENTS MADE TO YOU.

 

 

18

 

 

EXHIBIT D

 

Adjustment Escrow Agreement

 

(See attached)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

88758860_15

 

 

ESCROW AGREEMENT

 

THIS ESCROW AGREEMENT (this “Agreement”) is made and entered into as of [●], by and among Aphria Inc., a corporation existing under the Ontario Business Corporations Act (“Parent”), Chilly Water, LLC, a Delaware limited liability company (the “Securityholders’ Representative” and, together with Parent, sometimes referred to individually as a “Party” and collectively as the “Parties”), and Citibank, N.A., as escrow agent (the “Escrow Agent”).

 

RECITALS

 

WHEREAS, Parent and the Securityholders’ Representative are parties to that certain Agreement of Merger and Combination (the “Business Combination Agreement”) dated as of November 4, 2020, by and among Parent, Project Golf Merger Sub, LLC, a Delaware limited liability company (“Merger Sub”), SW Brewing Company, LLC, a Delaware limited liability company (the “Company”), SWBC Craft Holdings LP, a Delaware limited partnership (“Blocker”), SWBC Craft Management, LLC, a Delaware limited liability company (“Blocker GP”), SWBC Blocker Seller, LP, a Delaware limited partnership (“Blocker Seller”), and the Securityholders’ Representative;

 

WHEREAS, Parent and the Securityholders’ Representative desire to have the Escrow Agent act as escrow agent for the purpose of holding certain funds in escrow pursuant to the terms of the Business Combination Agreement and this Agreement;

 

WHEREAS, the Escrow Agent hereby agrees to serve as the escrow agent and depository subject to the terms of this Agreement; and

 

WHEREAS, capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Business Combination Agreement.

 

NOW THEREFORE, in consideration of the foregoing and of the mutual covenants hereinafter set forth, the parties hereto agree as follows:

 

1.Appointment of Escrow Agent. The Parties hereby appoint the Escrow Agent as their escrow agent for the purposes set forth herein, and the Escrow Agent hereby accepts such appointment and agrees to act as escrow agent in accordance with the terms and conditions set forth herein.

 

2.Escrow Funds.

 

(a)Simultaneously with the execution and delivery of this Agreement, Parent is depositing with the Escrow Agent an amount in cash equal to $1,000,000 (the “Escrow Amount”) in immediately available funds. The Escrow Agent hereby acknowledges receipt of the Escrow Amount, together with all products and proceeds thereof, including all interest, dividends, gains and other income (collectively, the “Escrow Earnings”) earned with respect thereto (collectively, the “Escrow Funds”) in a separate and distinct account (the “Escrow Account”), subject to the terms and conditions of this Agreement.

(b)For greater certainty, all Escrow Earnings shall be retained by the Escrow Agent and reinvested in the Escrow Funds and shall become part of the Escrow Funds; and shall be disbursed as part of the Escrow Funds in accordance with the terms and conditions of this Agreement.

 

 

EAST\177140163.5

 

 

3.Investment of Escrow Funds.

 

(a)Unless otherwise instructed in writing and executed by an Authorized Representative (as defined in Section 4(iv) below) of both Parties, the Escrow Agent shall hold the Escrow Funds in a “noninterest-bearing deposit account” insured by the Federal Deposit Insurance Corporation (“FDIC”) to the applicable limits. The Escrow Funds shall at all times remain available for distribution in accordance with Section 4 below.

 

(b)The Escrow Agent shall send an account statement to each of the Parties on a monthly basis reflecting activity in the Escrow Account for the preceding month.

 

(c)The Escrow Agent shall have no responsibility for any investment losses resulting from the investment, reinvestment or liquidation of the escrowed property, as applicable, provided that the Escrow Agent has made such investment, reinvestment or liquidation of the escrowed property in accordance with the terms, and subject to the conditions of this Agreement. The Escrow Agent does not have a duty nor will it undertake any duty to provide investment advice.

 

4.Disposition and Termination of the Escrow Funds.

 

(a)Escrow Funds. The Parties shall act in accordance with, and the Escrow Agent shall hold and release the Escrow Funds as provided in, this Section 4(a) as follows:

 

(i)Upon receipt of a Joint Release Instruction, substantially in the form of Exhibit B annexed hereto, with respect to the Escrow Funds, the Escrow Agent shall promptly, but in any event within two (2) Business Days after receipt of a Joint Release Instruction, disburse all or part of the Escrow Funds in accordance with such Joint Release Instruction.

 

(ii)Upon receipt by the Escrow Agent of a copy of Final Determination from any Party, the Escrow Agent shall on the fifth (5th) Business Day following receipt of such determination, disburse as directed, part or all, as the case may be, of the Escrow Funds (but only to the extent funds are available in the Escrow Funds) in accordance with such Final Determination. The Escrow Agent will act on such Final Determination without further inquiry.

 

(iii)All payments of any part of the Escrow Funds shall be made by wire transfer of immediately available funds or check as set forth in the Joint Release Instruction or Final Determination, as applicable.

 

(iv)Any instructions setting forth, claiming, containing, objecting to, or in any way related to the transfer or distribution of any funds on deposit in any Escrow Account under the terms of this Agreement must be in writing, executed by the appropriate Party or Parties as evidenced by the signatures of the person or persons set forth on Exhibit A-1 and Exhibit A-2 (the “Authorized Representatives”) and delivered to the Escrow Agent either (i) by confirmed facsimile only at the fax number set forth in Section 11 below (and receipt confirmed by the Escrow Agent) or (ii) attached to an e-mail received on a Business Day sent to an e-mail address set forth in Section 11 below (and receipt confirmed by the Escrow Agent). In the event a Joint Release Instruction or Final Determination is delivered to the Escrow Agent, whether in writing, by facsimile or otherwise, the Escrow Agent is authorized to seek confirmation of such instruction by telephone call back to the person or persons designated in Exhibit A-1 and/or A-2 annexed hereto (the “Call Back Authorized Individuals”), and the Escrow Agent may rely upon the confirmations of anyone purporting to be a Call Back Authorized Individual. To assure accuracy of the instructions it receives, the Escrow Agent may record such call backs. If the Escrow Agent is unable to verify the 

 

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instructions, or is not satisfied with the verification it receives, it will not execute the instruction until all such issues have been resolved. The persons and telephone numbers for call backs may be changed only in writing, executed by an Authorized Representative of applicable Party and actually received and acknowledged by the Escrow Agent.

 

(b)Certain Definitions.

 

(i)“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are not required or authorized by law to be closed in New York, New York.

 

(ii)“Final Determination” means a final non-appealable order of any court of competent jurisdiction which may be issued for the distribution of all or a portion of the Escrow Funds, as applicable, together with (A) a certificate executed by an Authorized Representative of the prevailing Party, to the effect that such order is final and non-appealable and from a court of competent jurisdiction having proper authority and (B) the written payment instructions executed by an Authorized Representative of the prevailing Party, to effectuate such order.

 

(iii)“Joint Release Instruction” means the joint written instruction executed by an Authorized Representative of each of Parent and the Securityholders’ Representative, directing the Escrow Agent to disburse all or a portion of the Escrow Funds, as applicable.

 

(iv)“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.

 

5.Escrow Agent. The Escrow Agent undertakes to perform only such duties as are expressly set forth herein, which shall be deemed purely ministerial in nature, and no other duties, including but not limited to any fiduciary duties, shall be implied. The Escrow Agent shall neither be responsible for, nor chargeable with, knowledge of, nor have any requirements to comply with, the terms and conditions of any other agreement, instrument or document between the Parties, in connection herewith, if any, including without limitation the Business Combination Agreement, nor shall the Escrow Agent be required to determine if any Person has complied with any such agreements, nor shall any additional obligations of the Escrow Agent be inferred from the terms of such agreements, even though reference thereto may be made in this Agreement. Notwithstanding the terms of any other agreement between the Parties, the terms and conditions of this Agreement will control the actions of Escrow Agent. The Escrow Agent may rely upon and shall not be liable for acting or refraining from acting upon any Joint Release Instruction or Final Determination furnished to it hereunder and reasonably believed by it to be genuine and to have been signed by an Authorized Representative of the proper Party or Parties. Concurrent with the execution of this Agreement, the Parties shall deliver to the Escrow Agent authorized representative’s forms in the form of Exhibit A-1 and Exhibit A-2 attached hereto. The Escrow Agent shall be under no duty to inquire into or investigate the validity, accuracy or content of any such document, notice, instruction or request. The Escrow Agent shall have no duty to solicit any payments which may be due it or the Escrow Funds. In the event that the Escrow Agent shall be uncertain as to its duties or rights hereunder or shall receive instructions, claims or demands from any Party hereto which, in its opinion, conflict with any of the provisions of this Agreement, it shall be entitled to refrain from taking any action and its sole obligation shall be to keep safely all property held in escrow until it shall be directed otherwise in a Joint Release Instruction or Final Determination. The Escrow Agent may interplead all of the assets held hereunder into a court of competent jurisdiction or may seek a declaratory judgment with respect to certain circumstances, and thereafter be fully relieved from any and all liability or obligation with respect to such interpleaded assets or any action or nonaction based on such declaratory judgment. The Escrow Agent may consult with legal counsel of its selection in the event of any dispute or question as to the meaning or construction of any of the provisions hereof or its duties hereunder. The Escrow Agent will not be liable for any action taken, suffered or omitted to be taken by it in good faith except to the extent that the Escrow Agent’s fraud, gross negligence or willful misconduct was the cause of any 

 

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direct loss to either Party. To the extent practicable, the Parties agree to pursue any redress or recourse in connection with any dispute (other than a dispute involving the Escrow Agent) without making the Escrow Agent a party to the same. Anything in this Agreement to the contrary notwithstanding, in no event shall the Escrow Agent be liable for any special, indirect, punitive, incidental or consequential losses or damages of any kind whatsoever (including but not limited to lost profits), even if the Escrow Agent has been advised of the likelihood of such losses or damages and regardless of the form of action.

 

6.Resignation and Removal of the Escrow Agent. The Escrow Agent (a) may resign and be discharged from its duties or obligations hereunder by giving thirty (30) calendar days advance notice in writing of such resignation to the Parties specifying a date when such resignation shall take effect or (b) may be removed, with or without cause, by Parent and the Securityholders’ Representative acting jointly at any time by providing written notice executed by an Authorized Representative of each Party, to the Escrow Agent. Any corporation or association into which the Escrow Agent may be merged or converted or with which it may be consolidated, or any corporation or association to which all or substantially all of the escrow business of the Escrow Agent’s line of business may be transferred, shall be the Escrow Agent under this Agreement without further act. The Escrow Agent’s sole responsibility after such thirty (30) day notice period expires or after receipt of written notice of removal shall be to hold and safeguard the Escrow Funds (without any obligation to reinvest the same) and to deliver the same (i) to a substitute or successor escrow agent pursuant to a joint written designation from the Parties, (ii) as set forth in a Joint Release Instruction or (iii) in accordance with the directions of a Final Determination, and, at the time of such delivery, the Escrow Agent’s obligations hereunder shall cease and terminate. In the event the Escrow Agent resigns, if the Parties have failed to appoint a successor escrow agent prior to the expiration of thirty (30) calendar days following receipt of the notice of resignation, the Escrow Agent may petition any court of competent jurisdiction for the appointment of such a successor escrow agent or for other appropriate relief, and any such resulting appointment shall be binding upon all of the parties hereto.

 

7.Fees and Expenses. All fees and expenses of the Escrow Agent are described in Schedule 1 attached hereto and shall be paid one-half by Parent and one-half by the Securityholders’ Representative. The fees agreed upon for the services to be rendered hereunder are intended as full compensation for the Escrow Agent services as contemplated by this Agreement.

 

8.Indemnity. Each of the Parties shall jointly and severally indemnify, defend, and hold harmless the Escrow Agent and its affiliates and their respective successors, assigns, directors, officers, agents and employees (the “Indemnitees”) from and against any and all losses, damages, claims, liabilities, penalties, judgments, settlements, actions, suits, proceedings, litigation, investigations, costs or expenses (including the reasonable fees and expenses of one outside counsel and experts and their staffs and all expense of document location, duplication and shipment actually incurred) (collectively “Escrow Agent Losses”) arising out of or in connection with (a) the Escrow Agent’s execution and performance of this Agreement, tax reporting or withholding, the enforcement of any rights or remedies under or in connection with this Agreement, or as may arise by reason of any act, omission or error of such Indemnitee, except to the extent that such Escrow Agent Losses, as adjudicated by a court of competent jurisdiction, have been caused by the fraud, gross negligence or willful misconduct of such Indemnitee, or (b) its following any instructions or other directions from Parent or the Securityholders’ Representative. The Parties hereby grant the Escrow Agent a lien on, right of set-off against and security interest in, the Escrow Funds for the payment of any reasonable claim for indemnification, expenses and amounts due hereunder. Notwithstanding anything to the contrary herein, Parent and the Securityholders’ Representative agree, solely as between themselves, that any obligation for indemnification under this Section 8 (or for reasonable fees and expenses of the Escrow Agent described in Section 7) shall be borne by the Party or Parties determined by a court of competent jurisdiction to be responsible for causing the loss, damage, liability, cost or expense against which the Escrow Agent is entitled to indemnification or, if no 

 

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such determination is made, then one-half by Parent and one-half by the Securityholders’ Representative. The Parties acknowledge that the foregoing indemnities shall survive the resignation or removal of the Escrow Agent or the termination of this Agreement.

 

9.Tax Matters.

 

(a)Securityholders’ Representative shall be responsible for and the taxpayer on all taxes due on the interest or income earned, if any, on the Escrow Funds for the calendar year in which such interest or income is earned. The Escrow Agent shall report any interest or income earned on the Escrow Funds, if any, to the Internal Revenue Service (the “IRS”) or other taxing authority on IRS Form 1099. Prior to the date hereof, the Parties shall provide the Escrow Agent with certified tax identification numbers by furnishing appropriate IRS forms W-9 or W-8 as applicable and such other forms and documents that the Escrow Agent may request.

 

(b)The Escrow Agent shall be responsible only for income reporting to the IRS with respect to income earned on the Escrow Funds. The Escrow Agent shall withhold any taxes required to be withheld by applicable law, including but not limited to required withholding in the absence of proper tax documentation, and shall remit such taxes to the appropriate authorities.

 

(c)The Escrow Agent, its affiliates, and its employees are not in the business of providing tax or legal advice to any taxpayer outside of Citigroup, Inc. and its affiliates. This Agreement and any amendments or attachments hereto are not intended or written to be used, and may not be used or relied upon, by any such taxpayer or for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.

 

10.Covenant of the Escrow Agent. The Escrow Agent hereby agrees and covenants with Parent and the Securityholders’ Representative that it shall perform all of its obligations under this Agreement and shall not deliver custody or possession of any of the Escrow Funds to anyone except pursuant to the express terms of this Agreement or as otherwise required by law.

 

11.Notices. Except as otherwise expressly required in Section 4(a)(iv), all communications required under this Agreement shall be in writing, in English, and shall be deemed to have been duly given if delivered (i) personally, (ii) by facsimile transmission with written confirmation of receipt, (iii) on the day of transmission if sent by electronic mail (“e-mail”) with a PDF attachment executed by an Authorized Representative of the Party/ Parties to the e-mail address given below, and written confirmation of receipt is obtained promptly after completion of the transmission, (iv) by overnight delivery with a reputable national overnight delivery service, or (v) by mail or by certified mail, return receipt requested, and postage prepaid. If any notice is mailed, it shall be deemed given five Business Days after the date such notice is deposited with the United States Postal Service. If notice is given to a Party, it shall be given at the address for such Party set forth below. It shall be the responsibility of the Parties to notify the Escrow Agent and the other Party in writing of any name or address changes.

 

if to Parent, then to:

 

Address1 

Address2 

Address3

Attention: Carl Merton, Chief Financial Officer 

Telephone No.:  519-564-6374

E-mail: 

 

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carl.merton@aphria.com

 

with a copy (which shall not constitute notice) to:

 

DLA Piper LLP (US)

1251 Avenue of the Americas, 27th Floor 

New York, NY 10020

Attention: Christopher Giordano 

Jon Venick

Email: Christopher.Giordano@us.dlapiper.com Jon.Venick@us.dlapiper.com

 

or, if to the Securityholders’ Representative, then to:

 

Address1

Address2

Address3

Telephone No.:

Facsimile No.:

E-mail:

 

with a copy (which shall not constitute notice) to:

 

Address1

Address2

Address3

Telephone No.:

 Facsimile No.:

E-mail:

 

or, if to the Escrow Agent, then to:

 

Citibank, N.A.

Citi Private Bank

388 Greenwich Street

Tower Building, 29th Floor

 New York, NY 10013

Attn: William T. Lynch

Telephone No.: 212-783-7108

Facsimile No.: 212-783-7131

E-mail: William.lynch@citi.com

 

Notwithstanding the above, in the case of communications delivered to the Escrow Agent pursuant to the foregoing clause (i) through (iv) of this Section 11, such communications shall be deemed to have been given on the date received by the Escrow Agent. In the event that the Escrow Agent, in its sole discretion, shall determine that an emergency exists, the Escrow Agent may use such other means of communication as the Escrow Agent deems appropriate.

 

12.Termination. This Agreement shall terminate on the first to occur of (a) the distribution of all of the amounts in the Escrow Funds in accordance with this Agreement or (b) delivery to the Escrow Agent of a written notice of termination executed jointly by an Authorized Representative of Parent and the 

 

7

 

EAST\177140163.5

 

Securityholders’ Representative, after which this Agreement shall be of no further force and effect except that the provisions of Section 8 hereof shall survive termination.

 

13.Miscellaneous. The provisions of this Agreement may be waived, altered, amended or supplemented, in whole or in part, only by a writing signed by all of the parties hereto. Neither this Agreement nor any right or interest hereunder may be assigned in whole or in part by any party without the prior consent of the other parties. This Agreement shall be governed by and construed under the laws of the State of Delaware. Each Party irrevocably waives any objection on the grounds of venue, forum non-conveniens or any similar grounds and irrevocably consents to service of process by mail or in any other manner permitted by applicable law and consents to the jurisdiction of the courts located in the State of Delaware. The Parties hereby waive any right to a trial by jury with respect to any lawsuit or judicial proceeding arising from or relating to this Agreement. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. All signatures of the parties to this Agreement may be transmitted by facsimile or electronic transmission in portable document format (.pdf), and such facsimile or .pdf will, for all purposes, be deemed to be the original signature of such party whose signature it reproduces, and will be binding upon such party. If any provision of this Agreement is determined to be prohibited or unenforceable by reason of any applicable law of a jurisdiction, then such provision shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions thereof, and any such prohibition or unenforceability in such jurisdiction shall not invalidate or render unenforceable such provisions in any other jurisdiction. The Parties represent, warrant and covenant that each document, notice, instruction or request provided by such Party to the Escrow Agent shall comply with applicable laws and regulations. Where, however, the conflicting provisions of any such applicable law may be waived, they are hereby irrevocably waived by the parties hereto to the fullest extent permitted by law, to the end that this Agreement shall be enforced as written. Except as expressly provided in Sections 7 and 8, nothing in this Agreement, whether express or implied, shall be construed to give to any person or entity other than the Escrow Agent and the Parties any legal or equitable right, remedy, interest or claim under or in respect of this Agreement or any funds escrowed hereunder.

 

14.Compliance with Court Orders. In the event that any escrow property shall be attached, garnished or levied upon by any court order, or the delivery thereof shall be stayed or enjoined by an order of a court, or any order, judgment or decree shall be made or entered by any court order affecting the property deposited under this Agreement, the Escrow Agent is hereby expressly authorized, in its sole discretion, to obey and comply with all writs, orders or decrees so entered or issued, which it is advised by legal counsel of its own choosing is binding upon it, whether with or without jurisdiction, and in the event that the Escrow Agent obeys or complies with any such writ, order or decree it shall not be liable to any of the Parties or to any other Person, by reason of such compliance notwithstanding such writ, order or decree be subsequently reversed, modified, annulled, set aside or vacated.

 

15.Further Assurances. Following the date hereof, each party shall deliver to the other parties such further information and documents and shall execute and deliver to the other parties such further instruments and agreements as any other party shall reasonably request to consummate or confirm the transactions provided for herein, to accomplish the purpose hereof or to assure to any other party the benefits hereof.

 

16.Assignment; Successors and Assigns. No assignment of the interest of any of the Parties shall be binding upon the Escrow Agent unless and until written notice of such assignment shall be filed with and consented to by the Escrow Agent (such consent not to be unreasonably withheld). Any transfer or assignment of the rights, interests or obligations hereunder in violation of the terms hereof shall be void and of no force or effect. This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective legal representatives, successors and permitted assigns.

 

17.Force Majeure. The Escrow Agent shall not incur any liability for not performing any act or fulfilling any obligation hereunder by reason of any occurrence beyond its control (including, but not limited 

 

8

 

EAST\177140163.5

 

to, any provision of any present or future law or regulation or any act of any governmental authority, any act of God or war or terrorism, or the unavailability of the Federal Reserve Bank wire services or any electronic communication facility), it being understood that the Escrow Agent shall use commercially reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as reasonably practicable under the circumstances.

 

18.Compliance with Federal Law. To help the U.S. Government fight the funding of terrorism and money laundering activities and to comply with Federal law requiring financial institutions to obtain, verify and record information on the source of funds deposited to an account, the Parties agree to provide the Escrow Agent with the name, address, taxpayer identification number, and remitting bank for all Parties depositing funds at Citibank pursuant to the terms and conditions of this Agreement. For a non-individual person such as a business entity, a charity, a trust or other legal entity, the Escrow Agent will ask for documentation to verify its formation and existence as a legal entity. The Escrow Agent may also ask to see financial statements, licenses, and identification and authorization documents from individuals claiming authority to represent the entity or other relevant documentation.

 

19.Use of Citibank Name. No publicly distributed printed or other material in any language, including prospectuses, notices, reports, and promotional material which mentions “Citibank” by name or the rights, powers, or duties of the Escrow Agent under this Agreement shall be issued by any other Parties hereto, or on such Party’s behalf, without the prior written consent of the Escrow Agent.

 

 

 

*     *     *     *     *

 

 

 

 

 

9

 

EAST\177140163.5

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth above.

 

	
PARENT:

	
 

	
APHRIA INC.

	
 
	
 

	
By:
	
 

	
Name:
	
 

	
Its:
	
 

 

 

	
SECURITYHOLDERS’ REPRESENTATIVE:

	
 

	
CHILLY WATER, LLC

	
 
	
 

	
By:
	
 

	
Name:
	
 

	
Its:
	
 

 

 

	
ESCROW AGENT:

	
 

	
CITIBANK, N.A.

	
 
	
 

	
By:
	
 

	
Name:
	
 

	
Its:
	
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to Escrow Agreement

 

 

Schedule 1

 

ESCROW AGENT FEE SCHEDULE

Citibank, N.A., Escrow Agent

 

Acceptance Fee

To cover the acceptance of the Escrow Agency appointment, the study of the Agreement, and supporting documents submitted in connection with the execution and delivery thereof, and communication with other members of the working group:

Fee: Waived 

Administration Fee

The administration fee covers maintenance of the Escrow Account including safekeeping of assets in the escrow account, normal administrative functions of the Escrow Agent, including maintenance of the Escrow Agent’s records, follow-up of the Agreement’s provisions, and any other safekeeping duties required by the Escrow Agent under the terms of the Agreement. Fee is based on Escrow Amount being deposited in a non-interest bearing deposit account, FDIC insured to the applicable limits.

Fee: Waived

Tax Preparation Fee

To cover preparation and mailing of Forms 1099-INT, if applicable for the escrow parties for each calendar year:

Fee: Waived

Transaction Fees

To oversee all required disbursements or release of property from the escrow account to any escrow party, including cash disbursements made via check and/or wire transfer, fees associated with postage and overnight delivery charges incurred by the Escrow Agent as required under the terms and conditions of the Agreement:

Fee: Waived 

Other Fees

Material amendments to the Agreement: additional fee(s), if any, to be discussed at time of amendment.

 

 

 

 

 

 

 

TERMS AND CONDITIONS: The above schedule of fees does not include charges for reasonable out-of-pocket expenses or for any services of an extraordinary nature that Citibank or its legal counsel may be called upon from time to time to perform. Fees are also subject to satisfactory review of the documentation, and Citibank reserves the right to modify them should the characteristics of the transaction change. Citibank’s participation in this program is subject to internal approval of the third party depositing monies into the escrow account to be established hereunder. The Acceptance Fee, if any, is payable upon execution of the Agreement. Should this schedule of fees be accepted and agreed upon and work commenced on this program but subsequently halted and the program is not brought to market, the Acceptance Fee and legal fees incurred, if any, will still be payable in full.

 

 

 

EAST\177140163.5

 

 

EXHIBIT A-1

 

Certificate as to Parent’s Authorized Signatures

 

The specimen signatures shown below are the specimen signatures of the individuals who have been designated as authorized representatives of Parent and are authorized to initiate and approve transactions of all types for the escrow account or accounts established under this Agreement, on behalf of Parent. The below listed persons (must list at least two individuals, if applicable) have also been designated Call Back Authorized Individuals and will be notified by Citibank N.A. upon the release of Escrow Funds from the escrow account(s).

 

	
Name / Title / Telephone
	
 
	
Specimen Signature

	
 
	
 
	
 

	
 
	
 
	
 

	
Name
	
 
	
Signature

	
 
	
 
	
 

	
 
	
 
	
 

	
Title
	
 
	
 

	
 
	
 
	
 

	
 
	
 
	
 

	
Phone
	
 
	
Mobile Phone

	
 
	
 
	
 

	
 
	
 
	
 

	
 
	
 
	
 

	
Name
	
 
	
Signature

	
 
	
 
	
 

	
 
	
 
	
 

	
Title
	
 
	
 

	
 
	
 
	
 

	
 
	
 
	
 

	
Phone
	
 
	
Mobile Phone

	
 
	
 
	
 

	
 
	
 
	
 

	
Name
	
 
	
Signature

	
 
	
 
	
 

	
 
	
 
	
 

	
Title
	
 
	
 

	
 
	
 
	
 

	
 
	
 
	
 

	
Phone
	
 
	
Mobile Phone

	
 
	
 
	
 

	
 
	
 
	
 

	
 
	
 
	
 

 

NOTE: Actual signatures are required above. Electronic signatures, “Docusigned” signatures and/or signature fonts are not acceptable.

 

 

 

Exhibit to Escrow Agreement

 

EAST\177140163.5

 

 

EXHIBIT A-2

 

Certificate as to the Securityholders’ Representative Authorized Signatures

 

The specimen signatures shown below are the specimen signatures of the individuals who have been designated as authorized representatives of the Securityholders’ Representative and are authorized to initiate and approve transactions of all types for the escrow account or accounts established under this Agreement, on behalf of the Securityholders’ Representative. The below listed persons (must list at least two individuals, if applicable) have also been designated Call Back Authorized Individuals and will be notified by Citibank N.A. upon the release of Escrow Funds from the escrow account(s).

 

	
Name / Title / Telephone
	
 
	
Specimen Signature

	
 
	
 
	
 

	
 
	
 
	
 

	
Name
	
 
	
Signature

	
 
	
 
	
 

	
 
	
 
	
 

	
Title
	
 
	
 

	
 
	
 
	
 

	
 
	
 
	
 

	
Phone
	
 
	
Mobile Phone

	
 
	
 
	
 

	
 
	
 
	
 

	
 
	
 
	
 

	
Name
	
 
	
Signature

	
 
	
 
	
 

	
 
	
 
	
 

	
Title
	
 
	
 

	
 
	
 
	
 

	
 
	
 
	
 

	
Phone
	
 
	
Mobile Phone

	
 
	
 
	
 

	
 
	
 
	
 

	
Name
	
 
	
Signature

	
 
	
 
	
 

	
 
	
 
	
 

	
Title
	
 
	
 

	
 
	
 
	
 

	
 
	
 
	
 

	
Phone
	
 
	
Mobile Phone

	
 
	
 
	
 

	
 
	
 
	
 

	
 
	
 
	
 

 

NOTE: Actual signatures are required above. Electronic signatures, “Docusigned” signatures and/or signature fonts are not acceptable.

 

 

 

 

Exhibit to Escrow Agreement

 

EAST\177140163.5

 

 

EXHIBIT B

Form of Joint Release Instruction

 

[Date]

 

[Via Email]

[Via Fax]

[212.780.7131]

Citibank, N.A.

Escrow Services

388 Greenwich Street

Tower Building, 29th Floor

 New York, NY 10013

Attn: William T. Lynch

william.lynch@citi.com

 

RE: [Name of Parties] – Escrow Agreement dated []

 Escrow Account number [●]

 

We refer to an escrow agreement dated [] between [] and Citibank, N.A. as Escrow Agent (the “Escrow Agreement”)

 

Capitalized terms in this letter that not otherwise defined shall have the same meaning given to them in the Escrow Agreement.

 

Pursuant to Section 4(a) of the above referenced escrow agreement, the Parties instruct the Escrow Agent to release [$     ] to the specified party as instructed below.

 

 

[Bank name]

[ABA number]

[Bank Address]

[Beneficiary name]

[Beneficiary Account number]

 

 

Thank you.

 

 

	
	
[●]

	
 

	
 

	
 

	
[●]

	
 

	
 

 

 

 

Exhibit to Escrow Agreement

 

EAST\177140163.5

 

 

EXHIBIT E

 

Bensch Consulting Agreement

 

(See attached)

 

 

 

 

 

88758860_15

 

 

AMENDED AND RESTATED MANAGEMENT AGREEMENT

 

This AMENDED AND RESTATED MANAGEMENT AGREEMENT (this “Agreement”) is entered into as of November 4, 2020, by and among SW Brewing Company, LLC, a Georgia limited liability company (the “Company”), Class V, Inc., a Georgia corporation (the “Manager”), Aphria Inc. (“Aphria”) and Freddy Bensch (“Bensch”) (each of the foregoing individually, a "Party," and collectively, the "Parties"). This Agreement shall be effective (the “Effective Date”) as of the Closing Date (as defined in the Agreement of Merger and Acquisition (the “Merger Agreement”) dated as of November 4, 2020, by and among Aphria, Project Golf Merger Sub, LLC, a Delaware limited liability company, SW Brewing Company, LLC, a Delaware limited liability company (the “Company”), SWBC Craft Holdings LP, a Delaware limited partnership, SWBC Craft Management, LLC, a Delaware limited liability company, SWBC Blocker Seller, LP, a Delaware limited partnership, and Chilly Water, LLC, a Delaware limited liability).

 

RECITALS

 

WHEREAS, the Parties are party to a Management Agreement, dated as of April 17, 2014 and amended and restated on October 22, 2015 (the "Original Agreement"), pursuant to which the Company engaged the Manager to make Bensch available to serve the role of the Company's Chief Executive Officer (“CEO”);

 

WHEREAS, Bensch has certain experience and expertise that qualifies him to provide the direction and leadership required by the Company;

 

WHEREAS, subject to the terms and conditions hereinafter set forth, the Company wishes to engage the Manager to make Bensch available to serve the role of the Company's CEO, and the Manager wishes to accept such engagement; and

 

WHEREAS, the Parties intend to supersede the Original Agreement with this Agreement as of the Effective Date.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, terms, provisions and conditions set forth in this Agreement, the receipt and adequacy of which are hereby acknowledged, the Parties hereby agree as follows:

 

1.Engagement. Subject to the terms and conditions in this Agreement, the Company hereby engages the Manager, and the Manager hereby accepts such engagement, to make Bensch available to, and Bensch shall, serve as the Company's CEO, reporting to the Chairman and Chief Executive Officer of Aphria.

2.Term. This Agreement is for an Initial Term commencing on the Effective Date, subject to the provisions of Section 6. As used in this Agreement, the “Initial Term” means the period commencing on the Effective Date and ending on the earlier to occur of December 31, 2023 or the date of termination of the Manager's engagement pursuant to Section 6. For purposes of clarity, this Agreement may only be terminated during the Initial Term by the Company for Cause (as defined below). This Agreement shall automatically renew for successive one (1) year terms (each such one year renewal term, a “Renewal Term”, and together 

 

 

 

with the Initial Term, the “Term”) unless otherwise terminated pursuant to Section 6 or any of the Parties to this Agreement gives written notice to the other Parties of its intent not to renew this Agreement at least forty-five (45) days prior to the expiration of the then-current term. The Manager's continued engagement during any Renewal Term shall be in accordance with and governed by this Agreement, unless modified by the Parties in writing.

 

3.Capacity and Performance.

 

	
 
	
a.
	
During the Term, the Manager shall make Bensch available to serve the role of the Company's CEO, reporting to Aphria’s Chairman and CEO.

 

	
 
	
b.
	
During the Term, Bensch shall have the following roles: (i) assisting in establishing the culture, values and vision of the Company, (ii) providing oversight and supervision with respect to the day-to-day management, management of the P&L, and direction of the Company's business, (iii) assisting in developing and recommending to the Chief Executive Officer of Aphria strategic objectives with respect to the business, the introduction of Aphria brands and products into the U.S. (to the extent legally possible) and the introduction of the Company’s brands into Canada as well as approaches for implementing those objectives, (iv) recommending to the Company methods to drive growth and profitability, (v) assisting the Company in preserving and enhancing relationships with its customers, distributors, suppliers and other business relations including, but not limited to, making introductions to the Aphria CEO, (vi) assisting in developing relationships with new customers, distributors, suppliers and other business relations, (vii) assisting Aphria with the integration of the businesses and work with the Company’s management team to ensure the timely delivery of financial information, (viii) assisting the Aphria CEO with any potential acquisitions, (ix) work with the Aphria CEO to build out and strengthen the management team and to develop a succession plan, and (x) such other duties and activities as may be requested by the Aphria CEO.

 

	
 
	
c.
	
During the Term, the Manager shall cause Bensch to, and Bensch shall, devote sufficient time to enable him to perform the authorities and roles described above. In addition, the Manager shall cause Bensch to be available and attend certain public relations events and Aphria Board of Directors’ meetings. The performance of the Manager' s duties and responsibilities hereunder may be rendered at the Company’s headquarters in Atlanta, Georgia, or such other places as the Manager may determine, it being acknowledged that Bensch's primary residence during the Term may be located outside the state of Georgia. Notwithstanding the foregoing, Bensch will be permitted to (i) serve as a member of the board of directors or advisory boards (or their equivalents in the case of a non-corporate entity) of non- competing private businesses and charitable organizations so long as such service would not have a material adverse effect on the reputation of the Company Group (as defined below), (ii) engage in charitable activities and community affairs and (iii) manage his personal investments and affairs, except that Bensch will limit the time devoted to the foregoing activities so as not to materially interfere, individually or in the aggregate, with the performance of his duties and responsibilities hereunder and shall comply with Section 5 hereof, and except that the Manager shall promptly disclose all outside activities under (i) and (ii) hereof to the Aphria CEO.

 

	
 
	
d.
	
During the Term, the Manager shall, and shall cause Bensch to, and Bensch shall comply with all written policies, practices and procedures and all codes of ethics or business conduct 

 

2

 

	
 
		
applicable to his position, as in effect from time to time, at the Company and its parent and subsidiary companies (the “Company Group”).

 

4.Compensation and Benefits. As compensation for all services performed by the Manager under this Agreement and during the Term:

 

	
 
	
a.
	
Management Fee. During the Term, the Company shall pay to the Manager an annual amount of four hundred thousand dollars ($400,000) per year (the “Management Fee”) payable in equal installments on a monthly basis. The Management Fee will be subject to such upward adjustment as may be approved by the Aphria CEO, from time to time.

 

	
 
	
b.
	
Up-front Stock Grant. As soon as reasonably practicable following the Effective Date, Bensch shall receive 50,000 Restricted Share Units (“RSUs”), which shall be granted in accordance with and remain subject to the terms and conditions of the Aphria’s Omnibus Long Term Incentive Plan (“Omnibus Plan”). Any RSUs granted pursuant to this Section shall vest equally over two years from the date of grant, with half of the RSUs vesting one year from the date of grant and the remainder vesting two years from the date of grant.

 

	
 
	
c.
	
Bonus. During each Fiscal Year during the Term, the Manager shall be eligible to receive a performance-based bonus of up to 100% of the Management Fee (the “Bonus”) to be paid within 90 days following the Fiscal Year end, or within such other period as determined by the Aphria Board of Directors. The Bonus shall be paid in cash or RSUs, at the Manager’s option. Payment of the Bonus shall be dependent upon the Company’s overall achievement of four (4) performance metrics to be developed with and agreed to by the Aphria CEO (the “SweetWater Scorecard”) in consultation with the Manager and Bensch. The Bonus that the Manager will be eligible to receive for the Fiscal Year ending May 31, 2021 will be prorated for the period commencing on the Effective Date through May 31, 2021. This Agreement must be in full force and effect on the date the Bonus is to be paid in order for the Manager to be eligible to receive the Bonus.

 

	
 
	
d.
	
Time Off. The Manager may permit Bensch to take time off without reduction of the Management Fee at the Manager's discretion subject to the reasonable business needs of the Company and provided that the number of days of such time off do not have a significant negative impact on Bensch's performance of the Manager's or Bensch's duties or responsibilities to the Company. The Manager may permit Bensch to leave to attend such meetings, seminars, conferences, lectures, conventions and the like as are reasonable and proper to maintain or enhance the skills pertinent to the performance of his duties.

 

	
 
	
e.
	
Participation in Employee Benefit Plans. During the Term, Bensch shall be entitled to participate in all employee benefit plans from time to time in effect for employees of the Company generally and senior executives, except to the extent such plans are duplicative of benefits otherwise provided by the Manager under this Agreement. Participation by Bensch in any such employee benefit plan shall be subject to the terms of the applicable plan documents and the standard policies and procedures of the Company with respect to such employee benefit plan, and any other restrictions or limitations imposed by law. The Company may alter, modify, add, suspend 

 

3

 

	
 
		
or terminate any employee benefit plan at any time as the Company, in its sole discretion, may determine to be appropriate, without recourse by the Manager or Bensch.

 

	
 
	
f.
	
Business Expenses. The Company shall pay or reimburse the Manager for all reasonable travel (including first-class travel accommodations within the United States and including travel to and from Bensch's primary residence to the Company's headquarters), entertainment and other business expenses incurred or paid by the Manager in the performance of Bensch's duties and responsibilities hereunder, subject to such reasonable substantiation and documentation as may be reasonably required by the Company from time to time. In addition, during the Term, the Company will provide the Manager, for further provision to Bensch, with an automobile of a similar type, style and cost Bensch is currently provided, and repair costs of such automobile.

5.Confidential Information and Restricted Activities.

 

	
 
	
a.
	
Confidential Information. Each of the Manager and Bensch acknowledges that, as a result of the Manager being a manager of the Company, both prior to the date hereof and during the course of the engagement, the Manager and Bensch have learned of and will continue to learn of Confidential Information, as defined below, and they have developed and may continue to develop Confidential Information on behalf of the Company Group. The Manager and Bensch agree that they will not use or disclose to any Person (except as required by applicable law or for the proper performance of their duties and responsibilities for the Company Group) any Confidential Information obtained by them incident to any association with the Company Group, other than in connection with the enforcement of their rights hereunder. The Manager and Bensch agree that this restriction shall continue to apply after the engagement hereunder terminates, regardless of the reason for such termination. Further, the Manager and Bensch agree to furnish prompt notice to Aphria of any required disclosure of Confidential Information sought pursuant to subpoena, court order or any other legal process or requirement, and agree to provide Aphria a reasonable opportunity to seek protection of the Confidential Information prior to any such disclosure.

 

	
 
	
b.
	
Protection of Documents. All documents, records and files of the Company Group, in any media of whatever kind and description, relating to the business, present or otherwise, of the Company Group, and any copies, in whole or in part, thereof (the “Documents:), whether or not prepared by the Manager or Bensch, shall be the sole and exclusive property of the Company Group. The Manager and Bensch agree to use commercially reasonable efforts to safeguard all Documents and to surrender to Aphria, at the time the engagement hereunder terminates, all Documents then in the Manager's or Bensch's possession or under their control to which no member of the Company Group or any officer or employee thereof has access and can provide such Documents to Aphria without expense. The Manager and Bensch also agree to disclose to Aphria, at the time the engagement hereunder terminates or at such earlier time or times as Aphria CEO may specify, all passwords necessary or desirable to obtain access to, or that would assist in obtaining access to, any Documents which the Manager or Bensch has password-protected on any computer equipment, network or system of the Company Group.

 

 

4

 

 

	
 
	
c.
	
Assignment of Rights to Intellectual Property. Each of the Manager and Bensch hereby assigns and agrees to assign to the Company Group its or his full right, title and interest in and to all Intellectual Property created or developed by Manager or Bench during the Term. To the extent applicable, Bensch hereby waives his moral rights in and to the Intellectual Property in favor of the Company Group and their respective successors and permitted assigns. Each of the Manager and Bensch agrees to execute any and all applications for domestic and foreign patents, copyrights, trademarks or other proprietary rights and to do such other acts (including without limitation the execution and delivery of instruments of further assurance or confirmation) requested by the Company, all at the Company's expense, to assign the Intellectual Property to the Company Group and to permit the Company to enforce any patents, copyrights, trademarks or other proprietary rights to the Intellectual Property. Neither the Manager nor Bensch will charge the Company for time spent in complying with these obligations during the Term. All copyrightable works that the Manager or Bensch creates during the Term shall be considered "work made for hire" and shall, upon creation, be owned exclusively by the Company.

 

	
 
	
d.
	
Restricted Activities. The Manager and Bensch agree that the following restrictions on their activities during and after the Term are necessary to protect the goodwill, Confidential Information, trade secrets and other legitimate interests of the Company Group:

 

	
 
	
i.
	
During the Term and, except as set forth below, during the twelve (12)- month period immediately following the end of the Term (the “Tail Period”), regardless of the reason therefor (in the aggregate, the “Restricted Period”), except in their capacity as directly or indirectly a member, manager or service provider to the Company Group and in furtherance of the interests of the Company Group, the Manager and/or Bensch shall not, directly or indirectly, engage in, carry on, provide services in connection with, or otherwise assist or compete with all or any portion of the business or businesses of the Company Group, in each case as carried on during the Term or, following termination of the Term but during the Tail Period, if applicable, as of the date of termination, in any geographic area in which the Company Group does business during the Term or, following termination of the Term but during the Tail Period, if applicable, in any geographic area in which the Company Group has devoted substantial expense or time in anticipation of launching into such geographic area within the subsequent twelve (12) months. The passive ownership of less than 5% of the outstanding stock of any publicly-traded corporation will not be deemed to be a violation of the terms hereof.

 

	
 
	
ii.
	
During the Restricted Period, neither the Manager nor Bensch will, directly or indirectly, for itself, himself or any other Person, solicit the business of any Person known by the Manager or Bensch to be a customer, distributor or wholesaler of the Company Group with respect to the business of the Company Group, induce or attempt to induce any Person known by the Manager or Bensch to be a customer, distributor or wholesaler of the Company Group to cease doing business with the Company Group, or in any way interfere with the relationship between the Company Group and any Person known by the Manager or Bensch to be a customer, distributor or wholesaler of the Company Group.

 

 

5

 

 

	
 
	
iii.
	
During the Restricted Period, neither the Manager nor Bensch will recruit, offer employment, employ, engage as a consultant, lure or entice away, or in any other manner persuade or attempt to persuade, any Person who is an employee or independent contractor of the Company Group to leave the employ of, or engagement with, the Company Group until one (1) year after such individual's employment or independent contractor relationship with the Company Group has been terminated; provided, however, that the provisions of this Section 5(d)(iii) shall not prohibit the Manager or Bensch from (i) employing any employee or engaging any independent contractor of any member of the Company Group who contacts the Manager or Bensch, as applicable, on his or her own initiative and without any direct solicitation, directly or indirectly, from the Manager or Bensch or any of their respective affiliates or agents as a result of general employment advertising not directed at the business of the Company Group or (ii) soliciting or employing any employee or engaging any independent contractor of the Company Group through any recruiting firm that has not been directed to target, and has not targeted, employees or independent contractor of the Company Group.

 

	
 
	
iv.
	
Mutual Non-Disparagement. The Manager and Bensch agrees that during the Term of this Agreement and at all times after the termination thereof (for any reason whatsoever), Bensch shall not make any statements (oral or written), directly or indirectly, to any third party that are disparaging or derogatory toward the Company Group, or the Company Group’s products, services, agents, or employees. During the Term of this Agreement and at all times after the termination thereof (for any reason whatsoever), the Company Group shall direct its directors and officers not to make any statements (oral or written), directly or indirectly, to any third party that are disparaging or derogatory toward the Manager and Bensch. Nothing in this Agreement is intended to prevent any Party from (A) testifying truthfully under oath pursuant to any lawful court order or subpoena, or (B) otherwise responding to or providing disclosures required by law. This includes any statement to or response to an inquiry by any member of the press or media, whether written, verbal, electronic, or otherwise.

 

	
 
	
e.
	
The Manager and Bensch agree that during the Term, neither the Manager nor Bensch will undertake any outside activity, whether or not competitive with the business of the Company Group, that could reasonably be expected to give rise to a conflict of interest with the Company Group.

 

	
 
	
f.
	
In signing this Agreement, the Manager and Bensch give the Company assurances that they have carefully read and considered all the terms and conditions of this Agreement, including the restraints imposed on them under this Section 5. The Manager and Bensch agree without reservation that these restraints are necessary for the reasonable and proper protection of the Company Group, and that each and every one of the restraints is reasonable in respect to subject matter, length of time and geographic area. The Manager and Bensch further agree that, were they to breach any of the covenants contained in this Section 5, the damage to the Company Group would be irreparable. The Manager and Bensch therefore agree that the Company, in addition to any other remedies available to it, shall be entitled to preliminary 

 

6

 

	
 
		
and permanent injunctive relief against any breach or threatened breach by the Manager or Bensch of any of those covenants, without having to post bond. The Parties further agree that in the event of any dispute under this Agreement, the prevailing party shall be entitled to recover its reasonable attorney's fees and costs from the other party; provided, however, that the Company shall not be entitled to recover attorneys' fees to the extent the applicable breach of covenant by the Manager or Bensch contained in Section 5 is capable of being cured without any liability, damage or loss to the Company Group and has been fully cured by the Manager or Bensch within ten (10) business days following written notice from the Company without any such liability, damage or loss to the Company Group. So that the Company may enjoy the full benefit of the covenants contained in this Section 5, the Manager and Bensch further agrees that the Restricted Period shall be tolled, and shall not run, during the period of any breach by the Manager or Bensch of any of the covenants contained in this Section 5. The Parties further agree that, in the event that any provision of this Section 5 is determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a time, too large a geographic area or too great a range of activities, that provision shall be deemed to be modified to permit its enforcement to the maximum extent permitted by law. It is also agreed that all entities comprising the Company Group shall have the right to enforce all of the Manager's and Bensch's obligations to that entity under this Agreement, including without limitation pursuant to this Section

5.Finally, no claimed breach of this Agreement or other violation of law attributed to the Company shall operate to excuse the Manager or Bensch from the performance of his or its obligations under this Section 5.

 

6.Termination of Engagement. During the Initial Term, the Manager’s engagement hereunder shall not be terminated for any reason other than Cause (as defined below) in accordance with Section 6(a) below. During the Extended Term, the Manager's engagement hereunder may be terminated under the following circumstances:

 

	
 
	
a.
	
By the Company For Cause. Aphria or the Company may terminate this Agreement for Cause upon written notice to the Manager setting forth in reasonable detail the nature of the Cause. The following shall constitute “Cause” for termination: (i) the Manager’s or Bensch’s willful failure to perform (other than by reason of disability) or refusal to carry out the reasonable and lawful instructions of Aphria’s CEO, consistent with the roles specified above or gross negligence in the performance of Bensch’s duties and responsibilities to the Company Group, which willful failure or gross negligence, to the extent capable of being cured, remains uncured after ten (10) business days’ written notice by Aphria, such notice to specify in reasonable detail the circumstances and manner in which Bensch has willfully failed to perform, or has been grossly negligent, as applicable; (ii) Bensch’s or the Manager’s material breach of this Agreement or any similar agreement between Bensch and the Company Group providing for non-competition and/or non- solicitation covenants in favor of the Company Group which breach, to the extent capable of being cured, remains uncured after ten (10) business days' notice by Aphria, such notice to specify in reasonable detail the facts and circumstances giving rise to and/or the nature of such breach; or (iii) Bensch's conviction of a felony or any crime committed involving moral turpitude, fraud, embezzlement, or theft. Bensch's opportunity to cure an event giving rise to Cause for termination shall not apply to any repeated or subsequent similar events, and any such repeated or subsequent event shall be deemed incapable of being cured for purposes of this Section 6(a).

 

7

 

 

	
 
	
b.
	
By the Company Without Cause. The Company may terminate the Manager’s engagement at any time without Cause, upon not less than sixty (60) days’ prior written notice to the Manager (the “Termination Without Cause Notice Period”). During the Termination Without Cause Notice Period, the Manager shall cause Bensch to continue to perform such duties and responsibilities as directed by the Company, including but not limited to assisting the Company in the transition of Bensch’s duties and responsibilities.

 

	
 
	
c.
	
By the Manager Without Good Reason. The Manager may terminate its engagement hereunder upon sixty (60) days’ notice to Aphria. In the event of such termination, Aphria’s CEO may elect to waive the period of notice, or any portion thereof, and, if the Aphria CEO so elects, the Company will pay the Manager the Management Fee for the period so waived.

 

	
 
	
d.
	
By the Manager for Good Reason. The Manager may terminate its engagement hereunder for Good Reason by (a) providing notice to Aphria specifying in reasonable detail the condition giving rise to the Good Reason by no later than the thirtieth (30th) calendar day following the occurrence of that condition, (b) providing the Company a period of thirty (30) calendar days to remedy the condition and so specifying in the notice and (c) terminating its engagement for Good Reason within thirty (30) calendar days following the expiration of the period to remedy if the Company fails to remedy the condition. The following shall constitute “Good Reason” for termination hereunder:

 

	
 
	
i.
	
a material diminution in the nature or scope of the Manager's or Bensch's duties and responsibilities as set forth under this Agreement;

 

	
 
	
ii.
	
a requirement that Bensch be physically present at any particular location in order to perform hereunder;

 

	
 
	
iii.
	
any material breach by the Company of its obligations under this Agreement; or

 

	
 
	
iv.
	
any reduction in the Management Fee as set forth in Section 4(a) hereof; provided, that the foregoing shall only constitute Good Reason hereunder to the extent any such action was (x) caused by, or taken with the approval, or at the direction, of the Aphria CEO and (y) not consented to by Bensch.

 

	
 
	
e.
	
Death and Disability. The Manager's engagement hereunder shall automatically terminate in the event of Bensch's death. The Company may terminate the Manager's engagement hereunder due to Bensch's Disability. For purposes of this Agreement, Bensch shall be deemed to have a “Disability” if Bensch is unable to perform the essential functions set forth under this Agreement even with a reasonable accommodation, for any one hundred twenty (120) consecutive days, due to mental or physical disability as determined by a physician mutually selected by the Manager and the Company. If the Manager and the Company cannot agree on the selection of a physician, each of them will select a physician and the two physicians will select a third physician who will determine whether Bensch has a Disability. The determination of the physician selected under this Section 6(d) shall for purposes of this Agreement be 

 

8

 

	
 
		
conclusive of the issue. Bensch shall, at the Company's request, submit to a medical examination by such physician in connection with making the determination of Disability under this Section 6(d). If Bensch is determined to have a Disability in accordance with the foregoing, the Company may elect to terminate the Manager' s engagement hereunder by giving a written notice of termination to the Manager and Bensch; provided, however, that the Company may not terminate the Manager's engagement unless, at the time the Company gives such notice of termination, Bensch continues to have a physical or mental disability that, in the opinion of the determining physician, may be expected to prevent Bensch from performing the essential duties under this Agreement for at least an additional sixty (60) days in excess of the one hundred twenty (120) days resulting in his Disability.

7.Other Matters Related to Termination.

 

	
 
	
a.
	
Final Compensation. In the event of termination of the Manager's engagement hereunder with the Company, howsoever occurring, the Company shall pay the Manager (i) any earned but unpaid Management Fee through the date of termination; (ii) reimbursement for business expenses incurred by the Manager but not yet paid to the Manager as of the date of termination, provided the Manager submits all expenses and supporting documentation required within 90 days of the date of termination, and provided further that such expenses are reimbursable under this Agreement and any applicable travel and expense policies; and (iii) any accrued but unpaid benefits under Section 4(c) hereof through the date of termination, to the extent such benefits are payable under the terms of the applicable employee benefit plan (all of the foregoing, “Final Compensation”).

 

	
 
	
b.
	
Benefits. In the event of any termination of the Manager’s engagement pursuant to Sections 6(b) or 6(d) above, if permitted by applicable law and Bensch elects to continue benefits coverage under COBRA, the Manager shall be entitled to receive cash payments equal to the difference between Bensch’s COBRA continuation coverage premiums and the amount of premiums paid by similarly situated active employees of the Company Group under the Company’s group health plans (the “COBRA Premium Amount”) for the twenty-four (24) month period following termination (the “COBRA Premium Period”); provided, that (i) in the event that the applicable period for COBRA continuation coverage under the Company’s group health plans is shorter than the COBRA Premium Period, the Manager shall remain entitled to receive the COBRA Premium Amount until the expiration of the COBRA Premium Period; (ii) the Manager and Bensch agree to renegotiate this Section 7(b) with the Company in good faith in the event that the provision of the benefits described in this Section 7(b) would be reasonably likely to result in additional tax liability to the Company, the Manager or Bensch; and (iii) the Manager’s eligibility to receive the COBRA Premium Amount under this Section 7(b) shall terminate in the event that Bensch (x) is receiving substantially comparable benefits pursuant to a group health plan available to Bensch’s spouse or (y) becomes employed in a position pursuant to which Bensch is eligible for substantially comparable benefits.

 

	
 
	
c.
	
Survival. Sections 5, 7, 8, 9, 11, 12, 13, 14, 15, 16 and 17 of this Agreement shall survive any termination of the Manager's engagement as set forth therein. Upon termination of this 

 

9

 

	
 
		
Agreement by either the Manager or the Company as permitted hereby, all rights, duties and obligations of the Manager and the Company to each other pursuant to this Agreement shall cease, except for those provisions hereof that contemplate performance after termination.

8.Timing of Payments and Section 409A.

 

	
 
	
a.
	
Notwithstanding anything to the contrary in this Agreement, if at the time the Manager's engagement hereunder terminates, Bensch is deemed to be a "specified employee," as defined below, any and all amounts payable under this Agreement on account of such separation from service that would (but for this provision) be payable within six (6) months following the date of termination, shall instead be paid on the next business day following the expiration of such six (6) month period or, if earlier, upon Bensch's death; except (A) to the extent of amounts that do not constitute a deferral of compensation within the meaning of Treasury regulation Section 1.409A-l(b) (including without limitation by reason of the safe harbor set forth in Section l.409A-l(b)(9)(iii), as determined by the Company in its reasonable good faith discretion); (B) benefits which qualify as excepted welfare benefits pursuant to Treasury regulation Section l.409A-l(a)(5); or (C) other amounts or benefits that are not subject to the requirements of Section 409A of the Internal Revenue Code of 1986, as amended ("Section 409A").

 

	
 
	
b.
	
For purposes of this Agreement, all references to "termination of engagement" and correlative phrases shall be construed to require a "separation from service" (as defined in Section l.409A-l(h) of the Treasury regulations after giving effect to the presumptions contained therein), and the term "specified employee" means an individual determined by the Company to be a specified employee under Treasury regulation Section 1.409A-l(i).

 

	
 
	
c.
	
Each payment made under this Agreement shall be treated as a separate payment and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments.

 

	
 
	
d.
	
In no event shall the Company have any liability relating to the failure or alleged failure of any payment or benefit under this Agreement to comply with, or be exempt from, the requirements of Section 409A. However, this Agreement is intended to comply with or be exempt from Section 409A, and accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance with or be exempt from Section 409A.

 

9.Definitions. For purposes of this Agreement, the following definitions apply:

 

	
 
	
a.
	
“Confidential Information” means any and all information of the Company Group that is not generally known by Persons with whom members of the Company Group compete or do business, and is otherwise not generally available to, or known by, the public. Confidential Information includes without limitation such information relating to (i) the development, research, testing, manufacturing, production, marketing and financial activities of the Company Group, (ii) the Products, (iii) the costs, sources of supply, financial performance, commercial plans and strategic plans of the Company Group and (v) the people and organizations with whom the Company Group has business relationships and the nature and substance of those relationships. Confidential Information does 

 

10

 

	
 
		
not include information that enters the public domain, other than through the Manager’s or Bensch’s breach of its or his obligations under this Agreement.

 

	
 
	
b.
	
“Fiscal Year” means Aphria’s fiscal year, which commences on June 1st and ends on May 31st.

 

	
 
	
c.
	
“Intellectual Property” means inventions, discoveries, developments, methods, processes, compositions, works, concepts and ideas (whether or not patentable or copyrightable or constituting trade secrets) conceived, made, created, developed or reduced to practice by the Manager or Bensch (whether alone or with others, whether or not during normal business hours or on or off Company premises) during the Manager's engagement with the Company Group that relate to the business of any member of the Company Group (including any business that any member of the Company Group has devoted substantial expense or time in planning to engage in within the subsequent twelve (12) months) or that make use of Confidential Information or any of the equipment or facilities of the Company Group.

 

	
 
	
d.
	
“Person” means an individual, a corporation, a limited liability company, an association, a partnership, an estate, a trust or any other entity or organization.

 

	
 
	
e.
	
“Products” means all products sold, licensed, leased or otherwise distributed or put into use by the Company Group, together with all services provided by the Company Group, during the Term, as well as all such Products with respect to which the Company has developed substantial expense or time in planning, researching, developing or testing for sale or distribution in anticipation of launching within the subsequent twelve (12) months.

 

10.Conflicting Agreements. The Manager and Bensch hereby represent and warrant that their signing of this Agreement and the performance of their obligations under will not breach or be in conflict with any other agreement to which the Manager or Bensch is a party or is bound, and that the Manager and Bensch are not now subject to any covenants against competition or similar covenants or any court order that could affect the performance of the Manager's or Bensch's obligations under this Agreement. The Manager and Bensch agree that they will not disclose to or use on behalf of the Company Group any confidential or proprietary information of a third party without that party's consent.

11.Independent Contractor. The Manager and Bensch acknowledge that Bensch is not an employee of the Company. The Manager is responsible for all taxes, levies and duties that may accrue by virtue of this Agreement including, without limitation, as a result of, the compensation, reimbursements or other payments to be paid or made hereunder. Except as may otherwise be required by law, the Company shall make all payments due and payable hereunder without deduction or withholding of any taxes, levies or duties.

 

12.Indemnification. The Manager shall indemnify and hold harmless the Company and its officers, directors, members, and employees, for and from any and all claims, damages, costs, claims, expenses or other liability (including reasonable attorneys’ fees) brought or imposed against the Company or its affiliates by Bensch or any of the Manager’s personnel or by any other party (including private parties, governmental bodies, insurance carriers or administrators, and courts) related to or as a result of Bensch’s status (or the status of any of Class V’s personnel) as an independent contractor, rather than an employee, including but not limited 

 

11

 

to, claims related to worker’s compensation, wage and hour laws, employment taxes, payroll withholdings, and eligibility for or participation in any Company group health and welfare benefit plans.

 

13.Assignment. No Party may make any assignment of this Agreement or any interest in it, by operation of law or otherwise, without the prior written consent of the other Parties; provided, however, the Company may assign its rights and obligations under this Agreement without the other Parties' consent to another member of the Company Group or to any Person with whom the Company shall hereafter effect a reorganization, consolidate with, or merge into or to whom it transfers all or substantially all of its properties or assets. This Agreement shall inure to the benefit of and be binding upon the Parties and each of their respective successors, executors, administrators, heirs and permitted assigns.

 

14.Severability. If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

 

15.Miscellaneous. This Agreement sets forth the entire agreement among the Parties, and replaces all prior and contemporaneous communications, agreements and understandings, written or oral, with respect to the terms and conditions hereof, including, without limitation, the Original Agreement. This Agreement may not be modified or amended, and no breach shall be deemed to be waived, unless agreed to in writing by the Manager, Bensch and a representative of the Company that is expressly authorized to agree thereto by the Board. The headings and captions in this Agreement are for convenience only and in no way define or describe the scope or content of any provision of this Agreement. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.

 

16.Jurisdiction and Venue. This is a Georgia contract and shall be governed and construed in accordance with the laws of the State of Georgia, without regard to any conflict of laws principles that would result in the application of the laws of any other jurisdiction. Each of the Parties agrees to submit to the exclusive jurisdiction of the courts of the State of Georgia in connection with any dispute arising out of this Agreement. Each Party hereby waives and agrees not to assert, by way of motion, as a defense or otherwise, in any such action, any claim that it or he is not subject personally to the jurisdiction of the above-named courts, that its or his property is exempt or immune from attachment or execution, that any such action brought in one of the above-named courts should be dismissed on grounds of forum non conveniens, should be transferred or removed to any court other than one of the above-named courts, or should be stayed by reason of the pendency of some other proceeding in any other court other than one of the above-named courts, or that this Agreement or the subject matter hereof may not be enforced in or by such court.

 

 

12

 

 

17.Notices. Any notices provided for in this Agreement shall be in writing and shall be effective when delivered in person or deposited in the United States mail, postage prepaid, and addressed to the Manager or Bensch at its or his last known address on the books of the Company or, in the case of the Company or Aphria, to it at its principal place of business, attention of the Chief Executive Officer, or to such other address as any Party may specify by notice to the others actually received.

 

If to the Manager:

 

[]

[]

[]

Attention: Fredrick M. Bensch

E-mail: freddy@sweetwaterbrew.com

 

If to Aphria or the Company:

c/o Aphria, Inc.

745 Fifth Avenue

Suite 1602

New York, NY 10151

Attention: Irwin D. Simon, Chief Executive Officer 

Email: Irwin.simon@aphria.com

 

 

18.Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same instrument. A copy transmitted via facsimile or e-mail as a portable document format (.pdf) of this Agreement, bearing the signature of any party shall be deemed to be of the same legal force and effect as an original of this Agreement bearing such signature(s) as originally written of such one or more parties.

 

[signature page follows]

 

 

13

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective officers thereunto duly authorized all as of the date first written above.

 

 

	
SW BREWING COMPANY, LLC

	
 

	
 
	
 

	
By:
	
 

	
Name:
	
 

	
Its:
	
 

 

 

	
CLASS V, INC.

	
 

	
 
	
 

	
By:
	
 

	
Name:
	
 

	
Its:
	
 

 

 

	
FREDRICK M. BENSCH

	
 

	
 

	
 

	
 

 

	
APHRIA INC.

	
 

	
 
	
 

	
By:
	
 

	
Name:
	
 

	
Its:
	
 

 

 

 

 

 

[Signature Page to Management Agreement]

 

 

EXHIBIT F

 

Lease Amendment

 

(See attached)

 

 

 

 

 

 

 

 

 

 

88758860_15

 

 

FORM OF FIRST AMENDMENT TO LEASE AGREEMENT

THIS FIRST AMENDMENT TO LEASE AGREEMENT (this “Amendment”) is made as of November , 2020, by and between CHEESE GRITS, LLC, a Georgia limited liability company (“Landlord”) and SWEETWATER BREWING COMPANY, LLC, a Georgia limited liability company (“Tenant”).

 

WITNESSETH

 

WHEREAS, pursuant to that certain Lease Agreement (the “Lease”) by and between Landlord and Tenant dated as of October 20, 2020, Tenant is leasing the Leased Premises as more particularly set forth in the Lease).

 

WHEREAS, Landlord and Tenant desire to make certain modifications of the Lease on the terms and conditions set forth below.

 

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and adequacy of which are hereby conclusively acknowledged, the parties hereto agree as follows:

 

1)CAPITALIZED TERMS. Capitalized terms used and not defined in this Amendment have the meanings ascribed to such terms in the Lease.

 

2)IMPOSITIONS. The definition of “Imposition” or “Impositions” at Appendix A of the Lease is hereby modified in part by deleting the words “prior to” from the tenth (10th) line thereof. For purposes of clarification, Tenant shall not be obligated to pay any Imposition pursuant to Section 8 of the Lease arising or accruing prior to the effective date of the Lease. Any such Impositions for which Landlord is obligated hereunder shall be paid by Landlord in a timely manner and in accordance with all applicable Legal Requirements. In the event that a payment of Impositions is due for a period which includes charges for the periods arising both prior to and following the effective date of the Lease, Tenant shall only be responsible for the pro rata share of such Impositions for the period of time arising upon the effective date of the Lease until the end of the applicable billing or service period.

 

3)MISCELLANEOUS.

 

a)Effect of this Amendment. Landlord and Tenant hereby agree that all references in the Lease or in the exhibits or schedules thereto or in this Amendment to “the Lease” or “this Lease” shall be deemed to mean the Lease as amended by this Amendment. Except solely and expressly as amended by this Amendment, each of the covenants, terms, provisions and conditions of the Lease remain unmodified and in full force and effect.

 

b)Conflicts. In the event of a conflict or inconsistency between this Amendment and the Lease, the terms hereof shall supersede and govern.

 

c)Entire Agreement. This Amendment contains the entire agreement of the parties with respect to the subject matter hereof and all prior negotiations, understandings or agreements between the parties with respect to the subject matter hereof are merged herein.

 

EAST\177319086.1
 

 

 

d)Governing Law. This Amendment shall be governed by Georgia law (without giving effect to conflict of laws principles thereof).

 

e)Severability. The provisions of this Amendment are severable, and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, and not any other clause or provision of this Amendment.

 

f)Authorization. Each of Landlord and Tenant represents and warrants to each other that its respective execution and delivery of this Amendment has been duly authorized, and that the individual executing this Amendment on behalf of Landlord and Tenant, respectively, has been duly authorized to do so.

 

g)Counterparts. This Amendment may be executed in any number of counterparts, including facsimile or portable document formatted (.pdf) counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same agreement.

 

h)Binding. This Amendment is binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and permitted assigns.

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

Error! Unknown document property name.

 

EAST\177319086.1
 

 

 

IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Amendment as of the day and year first above written.

 

	
 
	
LANDLORD:
	
CHEESE GRITS, LLC, a Georgia limited liability company
	
 

 

 

	
 
	
By:
	
 Name:
	
 

Title:

 

 

 

TENANT:SWEETWATER BREWING COMPANY, LLC, a

Georgia limited liability company

 

 

	
 
	
By:
	
 Name:
	
 

Title:

 

EAST\177319086.1
 

 

 

EXHIBIT G

 

R&W Policy

 

(See attached)

 

88758860_15
 

 

 

EXHIBIT H

 

Waiver Agreement

 

(See attached)

 

 

 

88758860_15
 

 

 

WAIVER AGREEMENT

 

This WAIVER AGREEMENT (this “Agreement”) is entered into as of [●] by and between SW Brewing Company, LLC (the “Company”), and SWBC Craft, LLC (the “Recipient”).

 

WHEREAS, reference is made to that certain Agreement of Merger and Acquisition (the “Merger Agreement”), dated as of November 4, 2020, by and among the Company, Aphria Inc., a corporation existing under the Ontario Business Corporations Act (“Parent”), Project Golf Merger Sub, LLC, a Delaware limited liability company (“Merger Sub”), SWBC Craft Holdings LP, a Delaware limited partnership (“Blocker”), SWBC Craft Management, LLC, a Delaware limited liability company, SWBC Blocker Seller, LP, a Delaware limited partnership, and Chilly Water, LLC, a Delaware limited liability company, pursuant to which, among other things, Parent and the Company desire to cause Merger Sub to merge with and into the Company, with the Company being the surviving limited liability company and becoming an indirectly wholly-owned subsidiary of Parent;

 

WHEREAS, reference is made to that certain Redemption Agreement (the “Redemption Agreement”), dated as of October 21, 2020, by and among the Company and the Recipient, pursuant to which the Company redeemed certain membership interests of the Company held by the Recipient;

 

WHEREAS, as a result of the consummation of the transactions contemplated in the

Merger Agreement (the “Transactions”), the Recipient shall receive substantial consideration;

 

WHEREAS, all capitalized terms not defined herein shall have such meaning set forth in the Merger Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Recipient, intending to be legally bound, agree as follows:

 

1.Effective Upon the Closing Date. This Agreement shall become effective as of, and contingent upon, the Closing. In the event that the Closing does not occur or in the event the Merger Agreement is terminated in accordance with its terms, this Agreement will automatically be deemed null and void and of no further force and effect.

 

2.Waiver of Claims.

 

(a)Effective as of, and contingent upon, the Closing, and in consideration of the Transactions, to the maximum extent permitted by law, the Recipient, on the Recipient’s behalf and on behalf of the Recipient’s heirs, executors, administrators, beneficiaries, representatives, and successors or permitted assigns, hereby voluntarily, knowingly, and willingly waives (the “Waiver”) any and all claims, rights, and obligations of every kind and nature whatsoever which the Recipient and/or the Recipient’s executors, administrators, successors, or assigns ever had in the past, now have, or hereafter can, shall or may have pursuant to Section 5.01 of the Redemption Agreement (collectively, the “Claims”) against the Company and its permitted successors and assigns. For the avoidance of doubt, nothing in this Waiver of Claims shall (i) limit or restrict the Recipient’s claims for any payments due pursuant to the terms of the Merger Agreement, (ii) be construed to prohibit Recipient from bringing appropriate proceedings to enforce this Agreement, or (iii) waive any rights or claims that, pursuant to law, may not be lawfully released and/or waived in a waiver of this kind.

 

 

 

 

(b)Assuming the payments contemplated under the Merger Agreement are made in accordance with the terms of the Merger Agreement and the Payment Schedule (as such term is defined in the Merger Agreement), Recipient hereby represents and acknowledges that no further payments are due to the Recipient by the Company in connection with the Redemption Agreement. The Recipient hereby represents and warrants that Recipient has not filed, caused to be filed or permitted to be filed any complaints, charges or lawsuits against the Company in respect of the Claims, and that no such complaints, charges or lawsuits are pending. The Recipient further covenants and agrees that the Recipient will not file, cause to be filed or permit to be filed any Claims, lawsuits, actions, proceedings, complaints, charges, demands, or causes of action at any time hereafter with respect to any Claims waived pursuant to this Agreement.

 

3.No Oral Modifications. This Agreement may not be amended orally, and may only be amended in a signed writing by both the Recipient and a duly authorized representative of the Company.

 

4.Assignment. Neither party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent signed by a duly authorized representative of the other party; provided, however, that the Company may transfer or assign this Agreement, in whole or in part, to any successor to one or more of its businesses without the prior written consent signed by the Recipient.

 

5.Binding Effect. This Agreement shall inure to the benefit of and be binding upon the parties and their respective successors and assigns; nothing in this Agreement, express or implied, is intended to confer on any person or entity other than the parties and their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement.

 

6.Severability. In the event that any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement or any other such instrument, and the provision in question is to be modified by the court so as to be rendered enforceable or, if the determination relates to the waiver provisions, the Recipient will be required to enter into an enforceable waiver agreement unless otherwise agreed in writing by the parties.

 

7.Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the application of any choice- of-law rules that would result in the application of another state’s laws.

 

8.Waiver of Jury Trial. Each party hereby irrevocably waives their right to a jury for any action, proceeding or counterclaim arising from or relating to this Agreement, to the fullest extent permitted by applicable law.

 

9.Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

10.Miscellaneous. This Agreement, along with the Redemption Agreement and the Merger Agreement (and the related documents thereto) constitutes the complete, final, and exclusive embodiment of the entire agreement between the Recipient and the Company with regard to this subject matter, and is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and supersedes any other such promises, warranties or representations. Any permitted successors and assigns are expressly made third- party beneficiaries of this Agreement.

 

 

 

 

[Signature Page Follows]

 

 

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above.

 

Very truly yours,

 

SW BREWING COMPANY, LLC

 

 

	
 
	
By:
	
 Name:
	
 

Title:

 

 

 

Agreed to and Accepted:

 

SWBC CRAFT, LLC

 

 

	
 
	
By:
	
 Name:
	
 

Title

 

 

 

 

SCHEDULE I

 

Redemption / Pre-Closing Blocker Reorganization

 

(See attached)

 

 

 

 

 

 

 

 

 

 

Pre-Closing Blocker Restructuring Structure Prior to Pre-Closing Blocker Restructuring

SWBC Craft Management, LLCGPTSGBlocked LPsGPGP[SWBC Blocker Seller LP]SWBC Craft Holdings LPSWBC Craft Professionals LPSWBCCraft LPSWBManagement, LLC-Class O Units-Class M Units

SWBCCraft, LLCClass T UnitsSW Brewing Company, LLC

 

 

 

 

 

 

Pre-Closing Blocker Restructuring Blocker Equity Distributions and Cash Sweep

Steps:

1.SWBC Craft, LLC distributes Class T Units of SW Brewing Company, LLC to SWBC Craft LP in partial redemption of SWBC Craft LP’s interest in SWBC Craft, LLC.

2.SWBC Craft LP distributes the Class T Units of SW Brewing Company, LLC to SWBC Craft Holdings LP in complete redemption of its interest in SWBC Craft LP.

3.Immediately prior to the Closing, SWBC Craft Holdings LP will effect a pre-Closing cash sweep, redeeming a portion of the shares held by SWBC Blocker Seller LP immediately prior to the Closing in exchange for the cash held by SWBC Blocker Seller.

SWBC Craft Management, LLCGPGPClass T UnitsTSGBlocked LPsGP[SWBC Blocker Seller LP]SWBC Craft Holdings LPSWBC Craft Professionals LPSWBCCraft LPInterests in SWBC Craft LPSWBManagement, LLCUnits in SWBC Craft, LLCSWBCCraft, LLCClass T UnitsOther Class O Holders(including Freddy)-Class O Units-Class M UnitsClass T UnitsSW Brewing Company, LLC

 

 

 

 

 

 

Pre-Closing Blocker Restructuring Structure After Pre-Closing Blocker RestructuringSWBC Craft Management, LLCTSGBlocked LPsGPGPGPSWBC Craft Professionals LPSWBCCraft LP[SWBC Blocker Seller LP]SWBManagement, LLCSWBCCraft, LLCSWBC Craft Holdings LPOther Class O Holders(including Freddy)-Class O Units-Class M UnitsClass T UnitsClass T UnitsSW Brewing Company, LLC

 

 

 

 

 

 

Pre-Closing Real Estate Restructuring Structure Prior to Pre-Closing Real Estate Restructuring

SWBC Craft Management, LLC TSG Blocked LPs GP [SWBC Blocker Seller LP] GP SWBC Craft Holdings LP GP SWBC Craft Professionals LP SWBC Craft LP SWB Management, LLC  Class O Units Class M Units SWBC Craft, LLC  Class T Units Other Class O Holders (including Freddy) SW Brewing Company, LLC Other Subs Cheese Grits, LLC

 

 

 

 

 

 

Pre-Closing Real Estate Restructuring Distribution of Cheese Grits Equity

Step: 1.SW Brewing Company, LLC distributes equity interests of Cheese Grits, LLC to SWB Management, LLC and Other Class O Holders (including Freddy) in partial redemption of their Class O Units in SW Brewing Company, LLC. SWBC Craft Management, LLC TSG Blocked        LPs GP GP GP  [SWBC Blocker Seller LP] SWBC Craft Holdings LP SWBC Craft Professionals LP  SWBC Craft LP SWB Management, LLC Class O Units-Class M Units SWBC Craft, LLC Other Class O Holders (including Freddy) Class T Units Cheese Grits, LLC Units Cheese Grits, LLC Units SW Brewing Company, LLC Class O Units Class O Units Class O Units Other Subs Cheese Grits, LLC

 

 

 

 

 

 

 

Pre-Closing Real Estate Restructuring Structure After Pre-Closing Real Estate RestructuringSWBC Craft Management, LLC GP TSG Blocked LPs [SWBC Blocker Seller LP] GP GP SWBC Craft Holdings LP SWBC Craft Professionals LP SWBC Craft LP Other Class O Holders (including Freddy) SWB Management, LLC Class O Units Class M Units SWBC Craft, LLC Class T Units Cheese Grits, LLC SW Brewing Company, LLC Subs

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