Document:

exhibittentwo.htm

 

AMENDED AND RESTATED ROYALTY AGREEMENT

 

This Amended and Restated Royalty Agreement (this “Agreement”), dated and effective as of  February 8, 2016 (the “Effective Date”), by and between GrowBlox Sciences, Inc. a Delaware corporation (“GBS Delaware”), GB Sciences Nevada LLC, a Nevada limited liability company (“GBS Nevada”), and Pacific Leaf Ventures, LP, a California limited partnership (“PACIFIC LEAF”), amends and restates in its entirety that certain Royalty Agreement dated May 12, 2015, by and between GBS Delaware and PACIFIC LEAF (the “Original Royalty Agreement”).

 

RECITALS

 

A.   GBS Delaware is the sole member of GBS Nevada.  GBS Nevada holds a provisional certificate issued by the Division of Public & Behavioral Health of the Nevada Department of Health and Human Services to operate an establishment to cultivate medical cannabis at 3550 W. Teco Avenue, Las Vegas, Nevada (the “Teco Facility”).

 

B.                GBS Nevada is also a party to that certain Binding Letter of Separation (the “Letter Agreement”), dated as of August 17, 2015, between GBS Nevada and GBS Nevada Partners LLC (“GBS Partners”), which provides for GBS Nevada and GBS Partners to enter into a Consignment and Delivery Agreement (the “CDA”, and together with the Letter Agreement, the “GBS Partners Agreements”).  Pursuant to the GBS Partners Agreements, GBS Nevada is entitled to (i) 20% of the shelf space at the dispensaries operated by GBS Partners for consignment sales of GBS Nevada’s medical cannabis products, and (ii) 10% of the profits and distributions of GBS Partners’ dispensary operations (the “Profits Interest”).

 

        C.   PACIFIC LEAF has developed certain proprietary know-how and other intellectual property for the cultivation of cannabis and the extraction of oils and other constituents from cannabis (the “Intellectual Property”), and has provided GBS Nevada and GBS Delaware with financial support, advice and services (collectively, the “Support”), including, without limitation, pursuant to that certain Amended and Restated 6% Senior Secured Convertible Promissory Note, dated as of the date hereof, made by GBS Delaware in favor of PACIFIC LEAF, in the principal amount of $2,750,000 (the “Note”).

 

D.  Pursuant to the Original Royalty Agreement, PACIFIC LEAF has provided the Intellectual Property to GBS Delaware for the use of GBS Nevada in its operations in the State of Nevada.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing recitals, the mutual promises and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I

LICENSE AND ROYALTY

1.1  Transfer and Use of Intellectual Property.  GBS Nevada shall have the right to use the Intellectual Property in perpetuity in its operations within the State of Nevada.  In addition, any other entity owned, controlled, or otherwise affiliated with GBS Delaware (collectively, the “Affiliates”) shall have the right to use the Intellectual Property within the State of Nevada. Any other use or transfer of the Intellectual Property by GBS Delaware, GBS Nevada, or the Affiliates shall require the explicit written authorization of PACIFIC LEAF following additional negotiations, agreements, and consideration.  Any and all costs of equipment, related installation expenses, and operational expenses related to the implementation and use of the Intellectual Property by GBS Nevada and Affiliates shall be the sole responsibility of GBS Delaware, GBS Nevada, and the Affiliates, provided however that the hiring of all control personnel in connection with the installation, cultivation or extraction operations of GBS Nevada shall require the approval of PACIFIC LEAF, which approval shall not be unreasonably withheld or delayed.

  

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1.2 Royalty Payments.  In consideration of the transfer by PACIFIC LEAF of the Intellectual Property pursuant to the Section 1.1, and the Support provided by PACIFIC LEAF to GBS Nevada and GBS Delaware, during the period (the “Royalty Period”) commencing on the Effective Date and ending ten (10) years after the date the first royalty payment in excess of twenty-five thousand dollars ($25,000) is made to PACIFIC LEAF pursuant to this Agreement (the “First Royalty Payment Date”), GBS Nevada shall pay to PACIFIC LEAF within forty-five (45) days after the end of each calendar quarter an amount equal to the Royalty Rate (defined below) multiplied by the gross sales revenues of GBS Nevada and its subsidiaries from all sources during the preceding fiscal quarters, including, without limitation (i) from the sale of cannabis produced at the Teco Facility, (ii) from the sale of its cannabis at dispensaries operated by GBS Partners, and (iii) received by it in respect of the Profits Interest issued to under the GBS Partners Agreements.  The Royalty Rate at any time shall be equal to the sum of (i) 9.1%, and (ii) 9.1% multiplied by a fraction, the numerator of which shall be equal to the maximum amount by which the aggregate advances by PACIFIC LEAF to GBS Delaware at any one time outstanding under the Note prior the date of the applicable royalty payment exceeded $1,750,000, and the denominator of which shall be equal to $1,000,000; provided, however, that following the later of (i) the seventh anniversary of the First Royalty Payment Date, and (ii) the date that all amounts outstanding under the Note have been repaid in full, the Royalty Rate shall be reduced by 50%.

1.3 SEC Filing.  Concurrently with or prior to each royalty payment made under Section 1.2 above, GBS Delaware shall file with the Securities and Exchange Commission a Quarterly Report on Form 10-Q, an Annual Report on Form 10-K or Current Report on Form 8-K, which shall report the revenues of GBS Nevada for the applicable quarter resulting in such royalty payment.

1.4  No Transfer or Encumbrance.  Until the termination of the Royalty Period, without PACIFIC LEAF’s prior written consent (i) GB Delaware shall not sell, transfer, assign or encumber its ownership interest in GBS Nevada, and (ii) GBS Nevada shall not sell, transfer, assign or encumber the Teco Facility or any of its rights under the GB Partners Agreements.

1.5  Good Faith and Fair Dealing.  GBS Delaware and GBS Nevada further agree that the royalty payments provided by this Agreement shall be paid in good faith and with fair dealing and that GBS Delaware and GBS Nevada will not enter into any arrangement to modify pricing or transfer sales or revenue that would have the effect of depriving PACIFIC LEAF of the full payment of royalties due under this Agreement.

1.6  Late Charges.  On any royalty payment due under this Agreement not paid within fifteen (15) days of the date due, GBS Nevada shall pay to PACIFIC LEAF (i) a late fee in the amount of 2% of the total past due amount and (ii) interest on the amount due until paid at the rate of 1.5% per month or the highest rate allowed by law, whichever is less.

1.7  Insurance.  Until the termination of the Royalty Period, GBS Nevada shall at all times maintain a commercial general liability insurance policy with limits of at least Two Million Dollars ($2,000,000) per occurrence and per claim issued by a company admitted to write liability insurance in the State of Nevada and rated at least A or better by AM Best or Standard & Poor’s Ratings Services.

  

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1.8 Guaranty.  GBS Delaware hereby unconditionally and irrevocably guarantees to PACIFIC LEAF (i) the punctual payment when due of all debts, obligations and liabilities of GBS Nevada to PACIFIC LEAF pursuant to this Agreement, and (ii) the due and prompt performance of all other covenants, agreements, obligations and liabilities of GBS Nevada under this Agreement.

ARTICLE II

INFORMATION; AUDITS; DISPUTES

 

2.1 Information. GBS Delaware and GBS Nevada shall keep accurate records of date, type, and weight of all cultivated material produced by GBS Nevada, all revenues generated by GBS Nevada, including, without limitation, under the GBS Partner Agreements, and any other information or data relevant to the calculation of the royalty payments provided herein, including but not limited to settlement sheets, receipts, invoices or other information regarding transactions between GBS Nevada and third parties. In addition, PACIFIC LEAF shall have the right to physically inspect all facilities of GBS Nevada at any time during regular business hours.

 

2.2 Audits. PACIFIC LEAF shall have the right to audit the books and records of GBS Delaware and GBS Nevada related to the calculation of the royalty payments provided herein. The audit may be performed once during any calendar quarter by any person or persons designated by PACIFIC LEAF during regular business hours and in a manner that does not materially interfere with the operations of GBS Delaware and GBS Nevada.

 

2.3 Disputes. Any controversy or claim, whether based on contract, tort, statute or other legal or equitable theory (including, but not limited to, any claim of fraud, misrepresentation or fraudulent inducement or any question of validity or effect of this Agreement, including this clause) arising out of or related to this Agreement (including amendments or extensions), or the breach or termination of this Agreement, shall be settled by arbitration proceedings held within the State of Nevada in accordance with the then current Rules of the American Arbitration Association for Commercial Arbitration.

 

ARTICLE IV

GENERAL

 

3.1 Confidentiality. GBS Delaware and GBS Nevada agree to keep confidential all information provided to them by PACIFIC LEAF under this Agreement and not to disclose any such information to any third party without the prior written consent of PACIFIC LEAF.

 

3.2 Amendment and Waiver. This Agreement may only be amended by an instrument in writing signed by the parties hereto. Except for waivers specifically provided for in this Agreement, rights under this Agreement may not be waived except by an instrument in writing signed by the party to be charged with the waiver. The failure of a party to insist on the strict performance of any provision of this Agreement or to exercise any right, power or remedy upon a breach of this Agreement will not constitute a waiver of any provision of this Agreement or limit such party’s rights thereafter to enforce any provision or exercise any right.

 

3.3 Severability. If at any time any covenant or provision contained in this Agreement is deemed to be invalid or unenforceable, such covenant or provision shall be considered divisible and shall be deemed immediately amended and reformed to include only such portion of such covenant or provision that is valid and enforceable. Such covenant or provision, as so amended and reformed, shall be valid and binding as though the invalid or unenforceable portion had not been included in this Agreement.

  

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3.4. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior understandings, agreements, or representations by or between the parties, written or oral, to the extent they relate in any way to the subject matter hereof.

 

3.5 Headings. The subject headings of the Articles, Sections, and Subsections of this Agreement and the Exhibits to this Agreement are included for purposes of convenience only, and shall not affect the construction or interpretation of any of their provisions.

 

3.6 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada without giving effect to any choice or conflicts of law provision or rule (whether of the State of Nevada or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Nevada.

 

3.7 Rules of Construction. Each party represents that it has been represented by counsel during the negotiation, preparation, and execution of this Agreement. Each such party therefore waives the application of any law or rule of construction providing that ambiguities in an agreement or other document shall be construed against the drafter of the agreement or document.

 

3.8 Attorneys’ Fees. Except as otherwise specified herein, in the event of a dispute under this Agreement, the prevailing Party shall be entitled to payment of its reasonable attorneys’ fees and costs in arbitrating or litigating the dispute.

 

3.9  No Joint Venture, Partnership, or Agency. This Agreement shall not be construed to create, expressly or by implication, a joint venture, partnership, or agency relationship between the parties.

3.10 Parties in Interest. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the parties.

 

3.11 Counterparts. This Agreement may be executed in multiple counterparts, and all such counterparts taken together shall constitute the same document.

 

[Signature Page Follows]

 

  

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Executed as of this __ day of February, 2016.

GROWBLOX SCIENCES, INC.                                                                           PACIFIC LEAF VENTURES, LP

By /s/ John Poss                                                                                                      By  /s/ Signature

Name:        John Poss                                                                                               Name:

Title:         President                                                                                                  Title:    Manager

GB SCIENCES NEVADA LLC

By  /s/ John Poss

Name:   John Poss

Title:    President

	  	  	  

  

- 5 -exhibittenthree.htm

OMNIBUS AMENDMENT AND WAIVER

 

THIS OMNIBUS AMENDMENT AND WAIVER (this “Amendment”) is entered into as of February 8, 2016 (the “Amendment Date”), between Growblox Sciences, Inc., a Delaware corporation (the “Company”), GB Sciences Nevada LLC, a Nevada limited liability company (“GBS Nevada”) and Pacific Leaf Ventures, LP (the “Investor”).

 

R E C I T A L S

 

A.           The Company and the Investor are parties to that certain Note Purchase Agreement dated as of May 12, 2015 and made effective June 8, 2015 (as amended from time to time, the “Purchase Agreement”), and a related 6% Senior Secured Convertible Promissory Note and, with GBS Nevada, a Security Agreement (respectively, the “Note” and “Security Agreement”).  Unless otherwise indicated herein, all capitalized terms used herein have the respective meanings set forth in the Purchase Agreement.

 

B.           The Company, GBS Nevada and the Investor desire to amend the Purchase Agreement, the Note and the Security Agreement as set forth in this Amendment.

 

NOW, THEREFORE, in consideration of these premises and other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree, as follows:

 

1. Amended and Restated Note. Concurrent with the execution of this Amendment, the Company shall deliver to the Investor an Amended and Restated 6% Senior Secured Convertible Promissory Note (the “Amended Note”), in the form attached hereto as Exhibit A, duly executed by the Company, which Amended Note will amend and restate the outstanding Note, and will be issued in substitution of and exchange for the original Note.  From and after the date this Amendment becomes effective, the Amended Note will be deemed to be the “Note” referred to in the Purchase Agreement and the Security Agreement for all purposes therein.

 

	
2.  

	
Amendment to Purchase Agreement.

 

	
(a)  

	
Section 1.4 of the Purchase Agreement is hereby amended and restated in its entirety to read as follows:

 

“Subsequent Advances Under the Note.  From time to time as requested by the Company and agreed to by the Investor in its sole and absolute discretion, the Investor may make additional advances to the Company under the Note (“Advances”) in an amount up to an additional $2,650,000 in the aggregate.  All such Advances made at any additional closing (each an “Additional Closing” and each of the Initial Closing and Additional Closing, as applicable, being referred to herein as a “Closing”), shall be made on the terms and conditions set forth in this Agreement, and the representations and warranties of the Company set forth in Section 2 hereof shall speak as of the Closing Date for the Additional Closing.  Notwithstanding any other provision of this Agreement to the contrary, the Investor shall have no obligation to make an Advance at any Additional Closing even if the conditions to closing set forth in Section 4 as of the Closing Date of such Additional Closing have been satisfied, unless the Investor in its sole and absolute discretion determines to make such Advance.

 

  

  

  

	
(b)  

	
Section 1.5 of the Purchase Agreement is hereby amended and restated in its entirety to read as follows:

 

	
(c)  

	
“Use of Proceeds.  The proceeds of the Initial Advance and all other Advances under the Note shall be used solely for (i) the acquisition and installation of equipment and other hard assets dedicated to the cultivation of cannabis by GB Sciences Nevada LLC, a Nevada limited liability company and subsidiary of the Company (“GBS Nevada”), at a grow facility located at 3550 W. Teco Avenue, Las Vegas, Nevada (the “Teco Facility”), in an amount and manner that complies in all respects with all legal requirements of the State of Nevada, including, without limitation, by obtaining and/or complying with, all applicable licenses, permits and approvals of all governmental authorities in the State of Nevada (collectively, “Nevada Legal Requirements”); (ii) the acquisition and installation at the Teco Facility of equipment and other hard assets dedicated to the extraction of oils and other constituents present in cannabis in an amount and manner complying in all respects with Nevada Legal Requirements; and (iii) such other tenant improvements at the Teco Facility, approved of in writing by the Investor, as may be reasonably necessary to improve the output and profitability of the cannabis cultivation and extraction operations of GBS Nevada at the Teco Facility.” 

 

	
(d)  

	
Section 1.6, Exhibit C and Schedule 1.4 of the Purchase Agreement are hereby deleted.

 

3. Amendment to Security Agreement.

 

	
(a)  

	
Section 1 of the Security Agreement is hereby amended and restated in its entirety to read as follows:

 

“Each Grantor hereby grants to Secured Party, a security interest in and so pledges and assigns to the Secured Party, all of its right, title and interest in, to and under, the following properties, assets and rights of such Grantor, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof (all of the same being hereinafter called the “Collateral”): (i) all goods (as defined in the Uniform Commercial Code) including inventory, equipment and fixtures, of GBS Nevada, (ii) Borrower’s membership interest in GBS Nevada (the “Membership Interest”), together with the right to receive all cash and other distributions from GBS Nevada with respect to such membership interest, (iii) all rights of GBS Nevada under (x) that certain Binding Letter of Separation, dated as of August 17, 2015 between, GBS Nevada and GBS Nevada Partners LLC, and (y) the Consignment and Delivery Agreement referred to therein, and (iv) the proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance covering any or all of the foregoing, or other tangible or intangible property resulting from the sale, exchange, collection or other disposition of any of the foregoing, or any portion thereof or interest therein, and the proceeds thereof.  The security interest in the Collateral shall secure the payment in full of all obligations (the “Secured Obligations”) of Grantors to Secured Party under the Note, the Purchase Agreement, this Agreement and that certain Amended and Restated Royalty Agreement, dated as of February __, 2016, between the Company and the Investor, as amended from time to time. By their execution of this Agreement, each Grantor authorizes Secured Party at any time and from time to time to file in any Uniform Commercial Code jurisdiction any initial financing statements and amendments thereto that (a) indicate the Collateral, and (b) contain any other information required by part 5 of Article 9 of the Uniform Commercial Code for the sufficiency or filing office acceptance of any financing statement or amendment, including whether the applicable Grantor is an organization, the type of organization and any organization identification number issued to such Grantor.  Each Grantor agrees to furnish any such information to the Secured Party promptly upon request.”

	
(b)  

	
Section 9 of the Security Agreement is hereby amended by adding the following to the end thereof:

 

  

  

  

“In the event of the transfer of the Membership Interest to the Secured Party or any other person (the “Transferee”) following an Event of Default and the exercise by the Secured Party of its rights hereunder, Borrower and GBS Nevada shall cooperate with the Transferee, and take all action reasonably requested by it, to effect the transfer to the Transferee or its designee of all State and local licenses and permits held by GBS Nevada with respect to the cultivation of medical cannabis.”

 

4. Waiver and Consent.  The Company and the Investor each waive any default by the other of their respective obligations under Sections 1.4 and 1.5 of the Purchase Agreement occurring prior to the date hereof.

 

5. Reaffirmation of Loan Documents. Except as amended and modified hereby, all of the terms and provisions of the Purchase Agreement and the other Transaction Documents shall remain in full force and effect and are hereby in all respects ratified and confirmed by the Company.  The Company hereby agrees that except as expressly provided in this Amendment, the amendments and modifications herein contained shall in no manner affect or impair the liabilities, duties and obligations of the Company under the Purchase Agreement or the other Transaction Documents.

 

6. Representations and Warranties.  As a material inducement for the Investor to enter into this Amendment, the Company hereby represents and warrants to the Investor that after giving effect to this Amendment: (a) all representations and warranties in the Purchase Agreement and the other Transaction Documents are true and correct in all material respects, as though made on the date hereof, except to the extent that (i) any of them speak to a different specific date or may have otherwise been made inaccurate by the mere passage of time; or (ii) the facts or circumstances on which any of them were based have been changed by transactions or events not prohibited by the Transaction Documents; (b) no Event of Default under the Note will exist after giving effect to this Amendment; and (c) this Amendment has been duly authorized and approved by all necessary organizational action and requires the consent of no other person, and is binding and enforceable against the Company in accordance with its terms.  The Company further represents and warrants to the Investor as of the date of this Amendment that (i) GBS Nevada holds a duly issued provisional certificate (the “Certificate”) from the Division of Public & Behavioral Health of the Nevada Department of Health and Human Services to operate an establishment to cultivate medical cannabis at 3550 W. Teco Avenue, Las Vegas, Nevada, (ii) such Certificate is in good standing, (iii) GBS Nevada is in compliance with all applicable legal requirements for the issuance and maintenance of the Certificate, and (iv) neither the Company nor GBS Nevada has received any notice that such Certificate may be revoked nor is any of them aware of any grounds for such revocation.

 

7. GBS Nevada Purchase Option.  Until the payment in full of the Amended Note, the Investor or its designee shall have the option (the “Option”) to purchase up to a 20% membership interest in GBS Nevada from GBS Nevada for a purchase price equal to $100,000 for each 2% of membership interest purchased (i.e., $1,000,000 if the Option is exercised in full), provided that the Option may not be exercised for less than a 1% membership interest in GBS Nevada.  Investor or its designee (the “Purchaser”) shall give written notice (the “Exercise Notice”) to the Company of its intention to exercise the Option no less than 15 days prior to the date designated by the Purchaser in the Exercise Notice for the closing of its purchase of the membership interest in GBS Nevada.  The Exercise Notice shall also specify the percentage membership interest of GBS Nevada to be purchased pursuant to the Option.  The Company and GBS Nevada shall thereafter take all reasonable actions necessary or requested by the Purchaser to cause the Purchaser to be admitted as a member of GBS Nevada in accordance with the terms of this Section 7 and the Exercise Notice.   The proceeds of the purchase price paid by the Purchaser upon exercise of the Option shall be used by GBS Nevada for the operation, development and/or expansion of the Teco Facility.  The Option under this Section 7 may be exercised by one or more Purchasers at one or more times, subject to the 20% membership interest limitation set forth above.

 

  

  

  

	
8.  

	
Conditions Precedent. Notwithstanding any contrary provision, this Amendment shall be effective on the first business day upon which all of the following conditions precedent have been satisfied:

 

	
(a)  

	
Investor shall have received duly executed counterparts of this Amendment executed by the Company and GBS Nevada;

 

	
(b)  

	
Investor shall have received the Amended Note in the principal amount of $2,750,000 duly executed by the Company and payable to the order of Investor; and

 

	
(c)  

	
Investor shall have received a duly executed counterpart to that certain Amended and Restated Royalty Agreement, dated as of February __, 2016, in form and substance satisfactory to Investor.

 

9. Miscellaneous.

 

	
(a)  

	
All of the terms and provisions of this Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns.

 

	
(b)  

	
This Amendment may be executed in counterparts and by different parties hereto in separate counterparts each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.  Delivery of photocopies of the signature pages to this Amendment by facsimile or electronic mail shall be effective as delivery of manually executed counterparts of this Amendment.

 

	
(c)  

	
The headings, captions and arrangements used in this Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this Amendment, nor affect the meaning thereof.

 

	
(d)  

	
Any provision of this Amendment held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

 

	
(e)  

	
This Amendment shall be construed in accordance with and governed by the laws of the State of Delaware.

 

[Signature Page Follows]

 

  

  

  

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first set forth above.

 

GROWBLOX SCIENCES, INC.

 

 

By:       /s/ John Poss    

 

Name:  John Poss

 

Title:  President

 

 

 

GB SCIENCES NEVADA LLC

 

 

By:           /s/ John Poss

 

Name:  John Poss

 

Title:  President

 

 

 

PACIFIC LEAF VENTURES, LP

 

 

 

By:        /s/ Signature   

 

Name:

 

Title:  Manager

 

Signature Page to Omnibus Amendment and Waiver

 

  

  

  

Exhibit A

 

 

AMENDED AND RESTATED NOTE

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