ASSET PURCHASE AGREEMENT
Exhibit 2.2
THIS AGREEMENT IS SUBJECT TO STRICT REQUIREMENTS FOR ONGOING
REGULATORY COMPLIANCE BY THE PARTIES HERETO, INCLUDING, WITHOUT
LIMITATION, REQUIREMENTS THAT THE PARTIES TAKE NO ACTION IN
VIOLATION OF THE NEVADA CANNABIS LAWS OR THE GUIDANCE OR
INSTRUCTION OF THE REGULATORY AUTHORITIES. SECTION 10.3(D) OF THIS
AGREEMENT CONTAINS SPECIFIC REQUIREMENTS AND COMMITMENTS BY THE
PARTIES TO MAINTAIN FULLY THEIR RESPECTIVE COMPLIANCE WITH THE
NEVADA CANNABIS LAWS AND THE REGULATORY AUTHORITIES. THE PARTIES
HAVE READ AND FULLY UNDERSTAND THE REQUIREMENTS OF SECTION
10.3(D).
This Asset Purchase Agreement (this
“Agreement”),
dated as of July 17, 2020 (the “Effective Date”),
is entered into by Planet 13 Holdings Inc., a corporation organized
under the Business Corporations
Act (British Columbia)
(“Planet
13”), MM Development
Company, Inc., a Nevada corporation (“Buyer”,
and together with Planet 13 the “Planet 13
Parties”), and W the
Brand, LLC, a Delaware limited liability company
(“W
Vapes”), and West Coast
Development Nevada, LLC, a Nevada limited liability company
(“Seller”)
and R. Xxxxx Xxxxxxx, a North Carolina resident
(“Xxxxxxx”
and together with Seller and W Vapes, the
“Transferors”).
Buyer, Planet 13, Seller, W Vapes and Xxxxxxx are sometimes
referred to individually as a “Party”
and collectively as the “Parties.”
RECITALS
A. Buyer
desires to purchase certain assets relating to the Business of
Seller, and Seller desires to sell such assets to Buyer on the
terms herein.
B. W
Vapes is treated as the parent company of Seller by virtue of a
certain Beneficial Holding Agreement effective as of February 28,
2017 by and between Xxxxxxx, and W Vapes.
C. Planet
13 is the parent company of Buyer.
D. On
the First Closing Date, Seller wishes to sell to Buyer, and Buyer
wishes to purchase from Seller, the Purchased Assets except for the
Second Closing MRB Assets, free and clear of all Encumbrances
except for Permitted Encumbrances, and Seller wishes to assign to
Buyer, and Buyer wishes to assume from Seller, the Assumed
Liabilities, but excluding the Second Closing Assumed Liabilities,
all upon the terms and conditions contained in this
Agreement.
E. On
the Second Closing Date, Seller desires to sell to Buyer, the
Second Closing MRB Assets, and Buyer desires to purchase from
Seller, the Second Closing MRB Assets, subject to the Regulatory
Approval and the assumption by Buyer of the Second Closing Assumed
Liabilities.
AGREEMENT:
NOW,
THEREFORE, in consideration of
the mutual covenants and promises contained in this Agreement, and
for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the Parties agree as
follows:
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ARTICLE 1
DEFINITIONS; RECITALS
1.1.
Definitions.
For all purposes, capitalized terms in this Agreement shall have
the respective meanings set forth below in this
Agreement in Schedule 1
to this
Agreement.
1.2.
Recitals.
The Recitals are hereby incorporated herein by this
reference.
1.3.
Usage of
Terms. Except where the context
otherwise requires, words importing the singular
number will include the plural number and vice versa. Use of the
word “including” means “including, without
limitation.”
1.4.
References to
Articles, Sections, Exhibits and Schedules. All references in this Agreement
to Articles, Sections (and other subdivisions), Exhibits and
Schedules refer to the corresponding Articles, Sections (and other
subdivisions), Exhibits and Schedules of or attached to this
Agreement, unless expressly provided
otherwise.
ARTICLE 2
PURCHASE AND SALE OF PURCHASED ASSETS AND MRB ASSETS
2.1.
Purchase of Assets at
First Closing.
(a) In
accordance with the terms and upon the conditions of this
Agreement, on the First Closing Date, Buyer shall purchase and
accept from Seller, and Seller shall sell, transfer, assign, convey
and deliver to Buyer, all of its right, title and interest in and
to the following assets, properties, rights and claims of Seller,
and, free and clear of all Encumbrances (other than Permitted
Encumbrances) (collectively, the “Purchased
Assets”):
(i) all
Tangible Personal Property;
(ii) the
MRB Inventory;
(iii) all
equipment owned or leased (to the extent assignable) in connection
with Business and the additional equipment set forth on
Schedule
2.1(a)(iii) (but excluding MRB
Assets described in Section
2.2(a)(i)(v);
(iv) all
Contracts and agreements between Seller and third parties set forth
on Schedule
2.1(a)(iv) (the
“Assumed
Contracts”) other than
the MRB Contracts;
(v) books,
records and other documents and information in Seller's possession
pertaining solely to the Purchased Assets;
(vi) all
transferable Permits (excluding the MRB Licenses set forth
on Schedule
2.1(a)(vi);
and
(vii) all
rights, claims and causes of action against third parties arising
on or after the First Closing Date related solely to the operation
of the Business.
(b) Excluded
Assets. Notwithstanding
anything to the contrary herein, Seller shall not contribute, sell,
transfer, or assign to Buyer, and Buyer shall not receive, any of
Seller’s right, title and interest in, any assets other than the Purchased
Assets as set forth in Section 2.1(a)
above on the First Closing Date and
the MRB Assets set forth in Section 2.2(a)
below on the Second Closing Date
(collectively, the “Excluded
Assets”), including,
without limitation, any of the following
assets:
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(i) all
cash, cash equivalents and securities existing on the First Closing
Date;
(ii) all
accounts arising from the provision of goods to customers, billed
and unbilled, recorded and unrecorded, for products provided by
Seller/Indus (pursuant to the Excluded Management Agreement) prior
to the First Closing Date;
(iii) all
rights, claims, and causes of action against third parties arising
prior to the First Closing Date, or not related solely to the
operation of the Business;
(iv) all
refunds of Taxes and tax loss carry-forwards of Seller relating to
the Purchased Assets and the Business with respect to any
Pre-Closing Tax Period;
(v) all
bank and other depository accounts and safe deposit boxes of
Seller;
(vi) the
organizational charter or other governing documents of Seller and
all qualifications to conduct business as a foreign entity,
taxpayer identification numbers, seals, minute books, and other
books, records, correspondence and documents relating to the
organization, maintenance, existence, or tax matters of
Seller;
(vii) any
employee benefit plans currently or formerly offered by the
Seller;
(viii) all
Excluded MRB Inventory;
(ix) the
Excluded Management Agreement; and
(x) any
and all books, records, correspondence and documents solely
relating to the Excluded Assets.
(c) Assumed
Liabilities at First Closing.
Buyer agrees to assume, effective as of the First Closing, all
liabilities related to the Assumed Contracts but only to the extent
that such liabilities (i) are required to be performed after the
First Closing Date; and (ii) do not relate to any failure to
perform, improper performance, warranty or other breach, default or
violation by Seller on or prior to the First Closing Date
(collectively, the “First Closing Assumed
Liabilities”). All
liabilities related to the Seller, W Vapes, Indus, the Purchased
Assets and the MRB Assets, other than the First Closing Assumed
Liabilities and Second Closing Assumed Liabilities (as defined
below) (the “Excluded
Liabilities”), shall not
be assumed by Buyer.
2.2.
Transfer of MRB Assets
at Second Closing.
(a) In
accordance with the terms and upon the conditions of this
Agreement, on the Second Closing Date and upon issuance of the
Regulatory Approvals, Buyer will purchase and accept from Seller
and Seller will sell, transfer, assign, convey and deliver to Buyer
all of its right, title and interest in and to the following assets
of Seller, free and clear of all Encumbrances (other than Permitted
Encumbrances) (the “Second Closing MRB
Assets”):
(i) the
then
existing MRB
Inventory;
(ii) the
MRB Licenses;
(iii) all
Contracts entered into by Seller related to the Business to the
extent that Seller must be authorized to hold any MRB License or
MRB Inventory under the terms of such Contract or applicable Laws
(the “MRB
Contracts”), a list of
which is set forth on Schedule
2.2(a)(iii);
(iv) any
assets, tangible or intangible, related to the Business which are
required to be held by a Person authorized to hold any MRB License
or MRB Inventory under applicable Laws; and
(v) all
books, records and other documents and information pertaining
solely to the MRB Assets in Seller's possession, but excluding
books, records and other documents and information pertaining to
the Excluded Assets.
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(b) For
the avoidance of doubt, the MRB Assets shall not include the
Excluded Assets. Buyer and Seller will enter into all customary
instruments of transfer, assumption, filings, assignments or other
documents, in form and substance reasonably satisfactory to the
Parties, to evidence the transfer of the MRB Assets from Seller to
Buyer on the Second Closing Date.
(c) Assumed
Liabilities at Second Closing.
Buyer agrees to assume, effective as of the Second Closing, any and
all liabilities arising from the Lease and from operations under
the Management Agreement, including, without limitation, all
accounts payable, all obligations under Contracts and other
agreements and arrangements, tort claims, and all other liabilities
and obligations relating to the operations under the Management
Agreement. Collectively, the assumption and, if applicable,
cancellation of Liability set forth in this Section 2.2(c)
are referred to herein as the
“Second Closing
Assumed Liabilities”,
and, collectively with the First Closing Assumed Liabilities, the
“Assumed Liabilities”.
For purposes of this Agreement and the Transferors’
obligation of indemnity set forth herein, delivery by the Planet 13
Parties of an “Estoppel Certificate” to the Regulatory
Authorities in connection with the Planet 13 Parties application
for the Regulatory Approvals shall not be deemed an assumption of
the Excluded Liabilities by the Planet 13
Parties.
2.3.
Purchase
Price. The total aggregate
purchase price (collectively, the “Purchase
Price”) to be
paid by Buyer to Seller, in consideration for delivery of the
Purchased Assets on the First Closing Date and the Second Closing
MRB Assets on the Second Closing Date consists of the
following:
(a) the
Cash Purchase Price; plus
(b) a
certificate representing that number of Planet 13 common shares
having a value of Two Million Five Hundred Thousand U.S. Dollars
(US$2,500,000) measured on the basis of the volume weighted average
trading price of the common shares of Planet 13 for the ten (10)
trading days preceding the First Closing Date (the
“Consideration
Shares”).
2.4.
Payment and Delivery
of Purchase Price.
(a) First
Closing Payments. Upon the
First Closing Date, Buyer shall cause the following to
occur:
(i) Payment
of the Cash Purchase Price to Seller minus
the sum of (i) the aggregate amount of
the Closing Indebtedness set forth on the Pre-Closing Statement and
(ii) the aggregate amount
of the Transaction Expenses set forth on the Pre-Closing Statement,
payable to an account designated in writing by Seller prior to the
Closing, in cash by wire transfer of immediately available funds to
such accounts and in such amounts as Seller designates in writing
to Buyer; and
(ii) Payment
of the Closing Indebtedness to the respective lenders as set forth
on the Pre-Closing Statement;
(iii) Payment
of the Transaction Expenses to the Persons as set forth on the
Pre-Closing Statement; and
(iv) A
certificate representing that number of Consideration Shares having
an aggregate value of Two Million Five Hundred Thousand US Dollars
(US$2,500,000.00) as established pursuant to Section
2.3(b) has been issued in the
name of Seller and has been deposited with the Escrow Holder to be
held pursuant of the terms of the Share Escrow Agreement to be
released to Seller on the Second Closing Date or returned to Planet
13 if the Second Closing Date shall not occur as provided in
Section
8.2.
(b) On
the Second Closing Date, the Escrow Holder shall release to the
Seller the certificate representing the Consideration Shares issued
in the name of Seller.
(c) Payments.
Unless otherwise stated herein, all payments pursuant to
this Section 2.4
will be paid by Buyer to Seller,
lenders or service providers, as applicable, by wire transfer of
immediately available funds to such account(s) designated by
Seller, lenders or service providers, as applicable, in writing in
advance of the First Closing Date.
(d) Withholding.
Buyer and any other applicable withholding agent will be entitled
to deduct and withhold from any amounts payable pursuant to or as
contemplated by this Agreement any Taxes or other amounts required
under the Code or any applicable Law to be deducted and withheld,
as a result of the purchase and sale transactions provided for in
this Agreement, and to the extent that any amounts are so deducted
or withheld, such amounts shall be promptly and timely paid over to
such taxing authority and be treated for all purposes of this
Agreement as having been paid to the Person in respect of which
such deduction and withholding was made.
2.5.
Transfer Taxes / Stock
Transfer Taxes.. Seller will be
responsible for the payment of any and
all Transfer Taxes associated with the transfer of the Purchased
Assets and the MRB Assets and any deficiency, interest or penalty
with respect to such Taxes. The Parties will reasonably cooperate
with respect to the preparation and filing of all Tax Returns
required to be filed in connection with any such Transfer Taxes.
Buyer will be responsible for the payment of any and all costs,
including, but not limited to, Stock Transfer Taxes, associated
with the issuance and transfer of the Consideration Shares, both to
Seller and into and out of the Escrow
Holder.
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2.6.
Allocation of Purchase
Price, Buyer will propose the
allocation of the Purchase Price among the Purchased Assets and the MRB Assets in
accordance with Section 1060 of the Code (the
“Purchase Price
Allocation”) which shall
allocate not less than $1,100,000 to inventory purchased on the
First Closing Date, and will deliver such Purchase Price Allocation
to Seller within ninety (90) days after the First Closing Date or
as soon as reasonably practicable. The Parties agree to confer and
to mutually approve the Purchase Price Allocation and to timely
file IRS Form 8594 based upon the Purchase Price Allocation The
Parties shall file all Tax Returns (including amended returns and
claims for refund) and information reports in a manner consistent
with the Purchase Price Allocation, and shall not contend or
represent that such allocation is not a correct allocation in any
action, arbitration, audit, hearing, investigation, litigation,
suit or other proceeding related to the determination of any Tax,
except as may otherwise
be (i) required pursuant to a final determination within the
meaning of Section 1313(a)(1) of the Code or any corresponding
provision of state, local or foreign Law or (ii) agreed to by the
Parties in writing. Each Party agrees to notify the other if any
Governmental Authority proposes to reallocate the Purchase
Price.
2.7.
Lease; Management
Agreement. As of the First
Closing Date, Seller will shall enter into the
Lease and the Option Agreement with Rx Land, and Buyer and Seller
shall enter into the Management
Agreement.
2.8.
Pre-Closing
Statement. At least five
Business Days prior to the First Closing Date, Seller
shall prepare and deliver to Buyer a statement
(the “Pre-Closing
Statement”) setting forth
(i) the amount of Indebtedness of Seller immediately prior to the
First Closing Date(collectively, the “Closing
Indebtedness”)
and (ii) the amount of the Transaction Expenses, including a list
of the payees and the amounts payable to each.
ARTICLE 3
FIRST AND SECOND CLOSINGS
3.1.
First Closing. The first
closing of the Transaction, when the ownership of the Purchased
Assets is transferred to Buyer as described in Section 2.1 (the “First Closing”),
will take place remotely via the electronic exchange of documents
and signatures as soon as practicable following the satisfaction or
waiver of the applicable conditions set forth in Article 7 and in
any event not later than the earlier of: (i) fourteen (14) Business
Days thereafter, (ii) July 17, 2020, or (iii) or on such later date
as Buyer and Seller may mutually agree upon
(the “First Closing
Date”). The First Closing will be deemed
to have occurred at 12:01 a.m., Pacific Time, on the First Closing
Date.
3.2.
Second
Closing. The second and final
closing of the Transaction, when ownership of the
Second Closing MRB Assets will be transferred to
Buyer as described in Section 2.2
(the “Second Closing”),
will take place remotely via the electronic exchange of documents
and signatures as soon as practicable following the satisfaction or
waiver of the applicable conditions set forth in Article 7 and in
any event within 14 days after the receipt of the last of the
Regulatory Approvals, or on such other date as Buyer and Seller may
mutually agree upon (the “Second Closing
Date”). The Second
Closing will be deemed to have occurred at 12:01 a.m., Pacific
Time, on the Second Closing Date.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF SELLER AND W VAPES
Except as set forth on the disclosure schedules
delivered by Seller to Buyer on the Effective Date (the
“Disclosure
Schedules”) and subject
to the Cannabis Carve Out set forth in Section 10.11
below, Seller represents and
warrants to Buyer that the representations and warranties set forth
in this Article 4 are true and correct as of the Effective Date and
shall be true and correct on the First Closing Date and on the
Second Closing Date, as may be applicable. Notwithstanding anything
to the contrary provided in this Agreement (in addition to any
specific exception to Federal Cannabis Laws and any similar Law set
forth in this Article 4), all representations, warranties,
covenants and disclosures of Seller in this Article 4 are being
made with exception to and not with respect to Federal Cannabis
Laws.
4.1.
Organization and
Authority to Conduct Business; Power and Authority; Binding
Effect. Seller is duly
organized, validly existing and in good status under the Laws of
the State of Nevada. Seller has full limited liability company
power and authority to conduct its business and to own and lease
its properties and assets (except under Federal Cannabis Laws).
Seller has, subject to the Parties obtaining all
required Regulatory Approvals relating to the MRB Assets, all
necessary power and authority to execute, deliver and perform its
obligations under this Agreement and consummate the Transaction
(except under Federal Cannabis Laws). This Agreement has been duly
executed and delivered by Seller and constitutes a legal, valid and
binding obligation of Seller enforceable against Seller in
accordance with its terms, except as such enforcement may be
limited by Federal Cannabis Laws.
4.2.
Consents and
Approvals. Subject to the
requirements under the Nevada Cannabis Laws,
except as set forth on Schedule 4.2
of the Disclosure Schedules, no
consent, approval or authorization of, or declaration, filing or
registration with, any Person is required to be made or obtained by
Seller in connection with the execution, delivery and performance
of this Agreement and the consummation of the Transaction or will
be necessary to ensure the continuing validity and effectiveness
immediately following the First Closing or the Second Closing of
any Permit, Assumed Contract and MRB Contract of Seller, as
applicable. This Agreement and each other Transaction Document has
been duly and validly executed and delivered by Seller and
(assuming the due authorization, execution and delivery by the
other parties hereto and thereto) constitutes the legal, valid and
binding obligations of Seller enforceable against Seller in
accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar Laws
affecting creditors’ rights and remedies generally, and
subject, as to enforceability, to general principles of equity,
including principles of commercial reasonableness, good faith and
fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
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4.3.
No Violation; Consents
and Approvals. The execution
and delivery by the Seller and W Vape of this Agreement and all other instruments
and agreements to be delivered by each such Transferor as
contemplated hereby do not and the performance by it of its
obligations hereunder and thereunder, do not and will not (a)
conflict with or violate any provision of Law applicable to such
Transferor or by which any property or asset of such Transferor is
bound or affected, (b) conflict with or violate any Order to which
such Transferor is subject, (c) require a registration, filing,
application, notice, consent, approval, order, qualification, or
waiver with, to or from any Governmental Authority or any other
Person; (d) except as set forth on Schedule
4.3,require a consent, approval
or waiver from, or notice to, any party to any contract to which
such Transferor is a party or in a breach of, constitute change of
control or a default under, or result in the acceleration of
material obligations, loss of benefit or increase in any
liabilities or fees under, or create in any party the right to
terminate, vest in, cancel or modify, any contract to which such
Transferor is a party; or (e) result in the creation of any
Encumbrance on any property or asset of such Transferor (including
the Purchased Assets) or give any Person the right to prevent, or
to cause any delay to, the Transactions contemplated by this
Agreement.
4.4.
Financial
Statements. Schedule 4.4
sets forth copies of (i) the tax basis
balance sheet (the “Balance
Sheet”) each of Seller as
of December 31, 2018 and December 31, 2019 (the
“Balance Sheet
Date”) and the related
statements of profit and loss for each of the years then ended
(collectively, the “Annual Financial
Statements”), (ii) the
tax basis balance sheets of the Seller as of May 31, 2020 (the
“Interim Balance
Sheet” and the date of
such balance sheet the “Interim Balance Sheet
Date”) and the related
unaudited statements of profit and loss for the three- and
one-month periods then ended (collectively, the
“Interim Financial
Statements” and, together
with the Annual Financial Statements,, the
“Financial
Statements”). The
Financial Statements fairly present the financial condition and the
results of operations and cash flows of the Seller at the
respective dates of and for the periods referred to in such
Financial Statements; provided, however, that the Financial
Statements are subject to normal and non recurring year-end
adjustments (the effect of which will not have Material Adverse
Effect). The Financial Statements reflect the consistent
application of Seller’s accounting practices throughout the
periods involved. The parties recognize that some of the Financial
Statements include results of operations of a Seller Affiliated
Oregon entity, and that the Oregon entity results of operations
should not be deemed to include in Financial Statements for
purposes of the representation made in this Section
4.4.
4.5.
No Undisclosed
Liabilities. To the Knowledge
of Seller, Seller has no Liabilities except
for (i) Liabilities reflected and accrued for or
reserved against on the face of the Interim Balance Sheet, (ii)
future performance obligations arising under the terms of any
executory contracts that are listed on Schedule 4.11
or entered into in the Ordinary Course
of Business that are not required to be listed thereon, excluding
Liabilities for any breach of any Contract, breach of warranty,
tort, infringement or violation of Law, and (iii) Liabilities
incurred in the Ordinary Course of Business since the Interim
Balance Sheet Date consistent in amount and kind with past practice
(none of which results from, arises out of, relates to, is in the
nature of or was caused by any breach of Contract, breach of
warranty, tort, infringement or violation of Law). Seller does not
engage in or maintain any off-balance sheet arrangements (as
defined in Item 303 of Regulation S-K of the United States Securities Act
of 1933, as amended (the
“Securities
Act”).
4.6.
Intentionally
omitted.
4.7.
Title to Assets;
Encumbrances. Seller owns good
and transferable title to, or in the case of
property
held under a lease or other contract, a valid and enforceable
leasehold interest in or right to use, all of the Purchased Assets,
free and clear of any Encumbrances other than Permitted
Encumbrances. Schedule 4.7 lists the Tangible Personal Property
included on the Interim Financial Statements.
4.8.
Absence of Certain
Developments. Since the Balance
Sheet Date, there has not been any Material
Adverse Effect and, no event has occurred or circumstances exist
that are reasonably expected to result in a Material Adverse
Effect.
4.9.
Taxes.
(a) Seller
at all times has been treated as a disregarded entity for federal
income tax purposes.
(b) All
Tax Returns that were required to be filed by or on behalf of
Seller and W Vapes, pursuant to applicable requirements of any
Governmental Authority, were timely filed or extended, and all such
Tax Returns were true, correct and complete and were prepared in
substantial compliance with all applicable requirements of the
relevant Governmental Authority. The Seller and W Vapes (or its
members) have paid all Taxes that have or may have become due to be
paid by them for all periods covered by the Tax Returns or
otherwise, or pursuant to any assessment received by Seller or W
Vapes, except such Taxes, if any, as are being contested in good
faith and as to which adequate reserves (determined in accordance
with GAAP consistently applied) have been provided in the Balance
Sheet and the Interim Balance Sheet. There are no Encumbrances on
any of the Assets that arose as a result of any failure (or alleged
failure) to pay any Tax.
(c) There
are no audits, claims, proceedings or assessments regarding Taxes
pending or threatened in writing against Seller or the Business.
Seller has received no written notification from any other state
that it is subject to income tax in such state.
(d) The
Seller has withheld and paid over to the proper Governmental
Authority all Taxes required to have been withheld and paid over by
Seller with respect to the Business operations, and complied with
all information reporting and backup withholding requirements,
including maintenance of required records with respect
thereto.
(e) The
Seller has reserved the required amounts necessary to pay all
unemployment Taxes and/or other Taxes due by the Seller based on
taxable wages paid by Seller through the First Closing Date, and
such amounts have been segregated for later payment to the
appropriate Governmental Authorities
and all Forms W-2 and 1099 required with respect to employees and
independent contractors have been, or will be, properly completed
and timely filed.
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4.10.
Intellectual
Property.
(a) To
the Knowledge of Seller, the operations of Seller do not infringe,
misappropriate or otherwise violate any Intellectual Property owned
by any other Person. During the last three years, Seller has not
received notice from any Person claiming the operations of Seller
infringe, misappropriate or otherwise violate any Intellectual
Property of such Person.
(b) Schedule
4.10(b) contains a complete
list of all material licenses, sublicenses, consent to use
agreements, settlements, coexistence agreements, covenants not to
xxx, waivers, releases, permissions and other Contracts, whether
written or oral, relating to the Intellectual Property to which
Seller is a party, beneficiary or otherwise bound, whether as
grantor or grantee, licensor or licensee or in any other capacity
(“IP
Agreements”). Each IP
Agreement is valid and binding and is in full force and effect. No
party to an IP Agreement is, or to the Knowledge of Seller is
alleged to be, in breach of or default under, or has provided or
received any notice of breach of, default under, or intention to
terminate (including by non-renewal) any IP
Agreement.
4.11.
Contracts.
(a) Schedule
4.11(a) (arranged in
subsections corresponding to the subsections set forth below)
contains an accurate and complete list Material Contracts
previously disclosed on the Indus Purchase Agreement (the "Indus
Disclosed Contracts") which continue to be in effect together with,
to the Knowledge of Seller, additional Contracts entered into
subsequent to the date of the Indus Purchase Agreement the
“Material
Contracts”):
(b)
Except as set forth on Schedule 4.11(b):
(i) neither
the execution and delivery or performance of this Agreement by
Seller nor the consummation or performance of the Transaction
contemplated hereby will, directly or indirectly (with or without
notice or lapse of time) (x) violate or conflict with, or result in
a breach of any provision of or forfeiture of any rights under, or
require any consent, waiver or approval (not otherwise obtained in
connection herewith), or result in a default or give rise to any
right of termination, cancellation, modification or acceleration
(or an event that, with the giving of notice, the passage of time
or otherwise, would constitute a default or give rise to any such
right) under, any of the terms, conditions or provisions of such
Indus Disclosed Contracts or (y) result in the imposition or
creation, pursuant to the terms of such Indus Disclosed Contracts,
of any Encumbrance upon or with respect to any of the Purchased
Assets;
(ii) to
the Knowledge of Seller, the Seller is in compliance in all
material respects with the terms and requirements of the Material
Contracts;
(iii) to
the Knowledge of Seller, each other Person that has or had any
obligation or liability under such Material Contract is in material
compliance with all terms of such Material Contract;
(iv) to
the Knowledge of Seller, no event has occurred or circumstance
exists that may contravene, conflict with or result in a breach of,
or give Seller or, to the Knowledge of Seller, any other Person the
right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or payment under, or to
cancel, terminate or modify, such Material Contract;
and
(v) Seller
has not given to or, to the Knowledge of Seller, received from any
other Person any notice regarding (x) any actual or alleged
violation or breach of, or default under, such Material
Contract
or (y) any event or circumstances that would reasonably be expected
to constitute or result in a violation, breach or default under
such Material Contract;
4.12.
Labor
Matters.
(a) Schedule
4.12(a) contains a complete and
accurate list of the following information for each employee of
Seller, including each employee on leave of absence or layoff
status, each former employee of Seller receiving benefits under
COBRA, and each consultant and independent contractor of Seller:
name; job title; classification as exempt or non-exempt; date of
hire; current salary and bonus paid or payable; other compensation
and fringe benefits that such employee is entitled to receive; sick
and vacation leave that is accrued but unused; service credited for
purposes of vesting and eligibility to participate in any Benefit
Plan; and whether such employee, consultant or independent
contractor is engaged directly or through a staffing agency or
other third Person. All employees have provided the required
documentation and have attested that they are either U.S. citizens
or residents specifically authorized to engage in employment in the
United States in accordance with all applicable
Laws.
(b) Schedule
4.12(b) contains a complete and
accurate list of the following information for each retired
employee of Seller, and each of their dependents, that as of the
First Closing Date is receiving benefits or is scheduled to receive
benefits in the future from Seller: name, Benefit Plan benefits,
and other benefits.
(c) Seller
is not a party to any collective bargaining agreement or collective
bargaining relationship with any labor organization. To the
Knowledge of Seller, no union, other labor organization or similar
entity is engaged in any organizing activity with respect to any
employees of Seller and no such organizing activity is threatened.
There is not, and in the past five years there has not been, any,
(i) unfair labor practice charge or complaint or material labor
grievance or labor arbitration pending or, to the Knowledge of
Seller, threatened in writing against Seller before the National
Labor Relations Board or any Governmental Authority or arbitrator,
(ii) except as set forth in Schedule
4.12(c) charge of
discrimination or complaint against Seller pending or, to the
Knowledge of Seller, threatened, before the Equal Employment
Opportunity Commission, U.S. Department of Labor, or any similar
Governmental Authority or other federal, local or state agency that
enforces Laws related to labor and employment, or (iii) other
Proceeding pending, or, to the Knowledge of Seller, threatened,
against Seller pertaining to the employment of labor, including
those relating to wages, hours, collective bargaining, employment
discrimination, sexual harassment, workers’ compensation, and
the payment or withholding of Taxes.
7
(d) To
the Knowledge of Seller, Seller is, and during the past three years
has been, in material compliance with all Laws and other applicable
requirements of Governmental Authorities relating to employment,
employment practices, terms and conditions of employment, equal
employment opportunity, nondiscrimination, immigration, wages,
overtime, classification, temporary workers, independent
contractors, leave, hours, benefits, worker’s compensation,
labor relations, plant closings or layoffs, the payment of social
security and similar Taxes and occupational safety and health Laws
(“Labor and Employment Legal Requirements”). To the
Knowledge of Seller, Seller is not liable for any outstanding
payments of any Taxes, fines, penalties or other amounts, however
designated, for failure to comply with any of the foregoing
requirements. To the Knowledge of Seller, no employee, consultant
or independent contractor has been misclassified with respect to
application of any Labor and Employment Legal Requirements. Seller
has not implemented any plant closing or mass layoff of employees
as those terms are defined in the Worker Adjustment Retraining and
Notification Act of 1988 Act or any similar Law. To the Knowledge
of Seller, there is no, and during the prior three years has not
been, any Proceeding or Order pending or, to the Knowledge of
Seller, threatened by or against Seller alleging any violation of
or failure to comply with Labor and Employment Legal Requirements,
and no event has occurred,
and no circumstance exists, that would reasonably be expected to
give rise to or serve as a basis for the commencement of any such
Proceeding or Order against Seller.
4.13.
Employee
Benefits. Seller does not and
has never been required to operate a Benefit
Plan.
4.14.
Litigation.
There is no, and during the prior five years there has not been,
any Proceeding or Order pending or, to the Knowledge of Seller,
threatened by or against Seller or that otherwise directly pertains
to the Business or any of the Purchased Assets. To the Knowledge of
Seller, no event has occurred or circumstance exists that would
reasonably be expected to give rise to or serve as a basis for the
commencement of any Proceeding or Order against
Seller.
4.15.
Compliance with Laws;
Permits.
(a)
Except as set forth on Schedule
4.15(a):
(i) Seller
has not received, at any time in the last five years, any notice or
communication from any Governmental Authority or any other Person
regarding (x) any actual, alleged, possible or potential violation
of, or failure to comply with, any Law or (y) any actual, alleged,
possible or potential obligation on the part of Seller to
undertake, or to bear all or any portion of the cost of, any
remedial action of any nature; and
(ii) Seller
is not now and has not during the last five years been bound by an
Order of any Governmental Authority.
(b) Neither
Seller, nor to the Knowledge of Seller, any director, manager,
officer, employee, agent or other Person acting on behalf of Seller
has, directly or indirectly, (i) used any funds of any Transferor
for unlawful contributions, unlawful gifts, unlawful entertainment
or other unlawful expense relating to political activity; (ii) made
any unlawful payment or gift, promise to pay, or authorization of
any payment or gift of anything of value to foreign or domestic
governmental officials or employees or to foreign or domestic
political parties or campaigns; (iii) violated or is in violation
of the Foreign Corrupt Practices Act of 1977, as amended, or any
other applicable Law that relates to bribery or corruption; (iv)
established or maintained any unlawful fund of monies or other
assets of Seller; (v) made any fraudulent entry on the books or
records of a Transferor; or (vi) made any unlawful bribe, unlawful
kickback or other unlawful payment to any person, private or
public, regardless of form, whether in money, property or services,
to obtain favorable treatment in securing business to obtain
special concessions for a Transferor.
4.16.
Privacy and Data
Security. To the Knowledge of
Seller, Seller is in compliance with all applicable Laws relating
to Personal Data and any terms of Contracts to which it is a party
relating to Personal Data, data privacy, security or breach
notification. To the Knowledge of Seller, Seller has established
and implemented policies, programs and procedures as required by
applicable Laws or otherwise necessary and appropriate, including
administrative, technical and physical safeguards, to protect the
confidentiality, integrity and security of Personal Data in its
possession, custody or control against unauthorized access, use,
modification, disclosure or other misuse. To the Knowledge of
Seller, in the past three years Seller has not experienced any
unauthorized access, disclosure, use or breach of security of any
Personal Data in its possession, custody or control, or otherwise
held or processed on its behalf or received any written claim,
complaint, inquiry, or request for information from any
Governmental Body related to Seller’s collection, processing,
use, storage, security, and/or disclosure of Personal
Data.
4.17.
Environmental
Matters. Except as set forth in
Schedule 4.17, (a) to the Knowledge of Seller, Seller is in
compliance with all applicable Environmental Laws, including the
possession of all Permits required under Environmental Laws and
compliance with such Permits; (b) to the Knowledge of Seller, no
Hazardous Materials related to Seller’s operation of the
Business are present in or under the land, ground water and surface
water at the Real Property; and (c) to the Knowledge of Seller,
Seller has not received any written notice of any actual or alleged
noncompliance with or Liability under any Environmental Law or
Permit. Seller has provided to Buyer complete copies of all
environmental audits, reports and other documents relating to
Environmental Liabilities within Sellers’ actual possession
relating to the Business or the Purchased
Assets.
4.18.
Insurance.
Schedule
4.18 contains a complete and
correct list of all insurance policies maintained by the Seller
(specifying the insurer, policy number, amount of and nature of
coverage, the risk insured against, the deductible amount (if any)
and the date through which coverage will continue by virtue of
premiums already paid). All such insurance policies are in full
force and effect, all premiums owed thereunder have been paid and
Seller is not in default regarding its obligations under any of
such insurance policies. To the Knowledge of Seller, Seller has not
failed to give any notice or present any claim under any insurance
policy in a timely fashion or in the manner required by such
insurance policies. Except for workers’ compensation
insurance claims incurred in the Ordinary Course of
Business, Schedule
4.18(a) contains a list of all
pending claims under such insurance policies, any instances in the
past five years of a denial or limitation of coverage or claim by
Seller under any such policy, and all claims paid by the insurers
of such policies during the last five years. There is no claim by
Seller pending under any such insurance policies as to which
coverage has been questioned, denied or disputed by the relevant
insurer.
8
4.19.
Brokers.
The Transferors have not entered into any agreement, arrangement or
understanding with any Person which will result in the obligation
to pay any finder’s fee, brokerage commission or similar
payment in connection with the Transaction.
4.20.
W Vapes and Xxxxxxx
Representations and Warranties.
W Vapes and Xxxxxxx jointly and severally represent and warrant to
Buyer that the representations and warranties set forth in
this Section 4.20
are true and correct as of the
Effective Date.
(a) W
Vapes Organization and Authority to Conduct
Business. W Vapes is duly
organized, validly existing and in good status under the Laws of
the State of Delaware. W Vapes has full limited Liability company
power and authority to conduct its business and to own and lease
its properties and assets (except under Federal Cannabis
Laws).
(b) W
Vapes Power and Authority; Binding Effect. W Vapes has all necessary power and authority
and has taken all action necessary to authorize, execute and
deliver this Agreement, to consummate the Transaction, and to
perform its obligations under this Agreement. This Agreement has
been duly executed and delivered by W Vapes and constitutes a
legal, valid and binding obligation of W Vapes enforceable against
W Vapes in accordance with its terms, except as such enforcement
may be limited by Federal Cannabis Laws.
(c) Ownership
of Seller. W Vapes is the
beneficial owner of Seller.
(d) W
Vapes No Conflict or Violation.
The execution and delivery of this Agreement, the consummation of
the Transaction, and the fulfillment of the terms of this
Agreement, do not and will not result in or constitute (a) a
violation of or conflict with any provision of the organizational
or other governing documents of W Vapes, (b) a violation by W Vapes
of any statute, rule, regulation, ordinance, by-law, code, order,
judgment, writ, injunction, decree or award applicable to W Vapes
which could
result in a penalty or a loss of privilege or (c) an imposition of
any Encumbrance (other than a Permitted Encumbrance) on the assets
of W Vapes.
(e)
W Vapes
Consents and Approvals. Except
as set forth on Schedule
4.2, no consent, approval or
authorization of, or declaration, filing or registration with, any
Person is required to be made or obtained by W Vapes or Xxxxxxx in
connection with the execution, delivery and performance of this
Agreement and the consummation of the Transaction other than from
the Regulatory Authorities in connection with the Second
Closing.
4.21.
Securities
Matters. The Transferors
jointly and severally represent and warrant to Buyer that the
representations, warranties and acknowledgments set forth in this
Section 4.21 are true and correct as of the Effective
Date.
(i) No
Prior Holdings; Acquisition for Investment. No Transferor is the registered or beneficial
holder of any securities of Planet 13. The Transferors acknowledge
they will be acquiring the Consideration Shares issuable pursuant
to this Agreement for investment for their own account and not as
nominees or agents, and not with a view to the resale or
distribution of any part thereof, and further represent that they
have no present intention of selling, granting any participation
in, or otherwise distributing the same. The Transferors further
represent that they do not have any Contract, undertaking,
agreement or arrangement with any Person to sell, transfer or grant
participation to such person or to any third person, with respect
to any of the Consideration Shares. The Transferors understand that
any Consideration Share issuable hereunder will not be registered
under the Securities Act, on the ground that the sale and the
issuance of securities hereunder is exempt from registration under
the Securities Act pursuant to Section 4(a)(2) thereof, and that
Planet 13’s reliance on such exemption is predicated on the
Transferors’ representation set forth herein, including the
Transferors’ completion and execution of the Questionnaire.
The Transferors further understand that any Consideration Share
issuable hereunder will constitute a distribution of securities
that is exempt from the prospectus requirement of applicable
Canadian Securities Laws.
(ii) Investment
Experience. Each Transferor
acknowledges that it can bear the economic risk of the investment,
and it has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of
the investment in the Consideration Shares. Each Transferor (x) is
an “accredited investor” within the meaning of Rule 501
promulgated under the Securities Act (as amended by Section 413(a)
of the Xxxx-Xxxxx Xxxx Street Reform and Consumer Protection Act),
and has duly completed and executed the Questionnaire, in the form
attached hereto as Exhibit H
(the” Questionnaire”),
and (y) agrees that it will not take any action that could
negatively impact the availability of the exemption from
registration provided by Section 4(a)(2) of the Securities Act with
respect to the sale and the issuance of securities
hereunder.
(iii) Information.
The Transferors have carefully reviewed such information as they
have deemed necessary with respect to the Consideration Shares. The
Consideration Shares shall be subject to a hold period of four
months and a day commencing not later than five Business Days after
the First Closing Date under Canadian Securities Laws (depending
upon the actual effective date of the issuance of the Certificate),
and shall not be registered under Securities Act, and may not be
offered or sold within the United States absent registration under
United States federal and state securities laws or an applicable
exemption from such United States registration requirements. To the
Transferors’ full satisfaction, each Transferor has been
furnished all materials requested by such Transferor relating to
Planet 13, and the issuance of Consideration Shares hereunder, and
each Transferor has been afforded the opportunity to ask questions
of representatives of Planet 13, to obtain any information
necessary to verify the accuracy of any representations or
information made or given to such Transferor.
9
(iv) Restricted
Securities. The Transferors
understand that the Consideration Shares issuable pursuant to this
Agreement may not be sold, transferred, or otherwise disposed of
without registration under the Securities Act and applicable state
and federal securities laws or an exemption therefrom, and that in
the absence of an effective registration statement covering the
Consideration Shares or any available exemption from registration
under the Securities Act and applicable state and federal
securities laws, the Consideration Shares must be held
indefinitely. Without limitation of the foregoing, each of the
Purchased Assets (excluding the MRB Inventory) and MRB Assets sold
to the Buyer hereunder by Seller have a fair value of not less than
CDN$150,000 and each Transferor understands that the Consideration
Shares may not be resold under applicable Canadian Securities Laws
before the date that is four (4) months plus one (1) day following
the First Closing Date (subject to release of the Consideration
Shares to the Seller pursuant to the Share Escrow Agreement (the
“Stock
Release”)), is aware that
the certificate which it shall receive evidencing the Consideration
Shares will bear a legend with respect to the resale restrictions
under applicable Canadian Securities Laws in substantially the
following form:
UNLESS
PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY
MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR MONTHS AND
ONE DAY AFTER THE FIRST CLOSING DATE.
and, understands that after the date that is four (4) months plus
one (1) day following the First Closing Date, subject to the
occurrence of the Stock Release, the Consideration Shares may be
resold under applicable Canadian Securities Laws in each Province
and Territory of Canada, provided: (i) the trade is not a
“control distribution” as defined in National
Instrument 45-102 – Resale of
Securities; (ii) no unusual
effort is made to prepare the market or create a demand for the
Consideration Shares; (iii) no extraordinary commission or
consideration is paid in respect of such trade; and (iv) if the
selling securityholder is an “insider” or
“officer” of Planet 13 (as such terms are defined by
applicable Canadian Securities Laws), the insider or officer has no
reasonable grounds to believe that Planet 13 is in default of
applicable Canadian Securities Laws. Unless registered under the
Securities Act and applicable state securities laws, the
certificate representing the Consideration Shares shall also bear a
legend in the following form:
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, (THE “SECURITIES ACT”) AND MAY NOT BE OFFERED,
SOLD, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO OR FOR THE BENEFIT OF
ANY NATIONAL, CITIZEN OR RESIDENT OF THE UNITED STATES, ANY
CORPORATION, PARTNERSHIP OR OTHER ENTITY CREATED OR ORGANIZED IN OR
UNDER THE LAWS OF THE UNITED STATES, EXCEPT: (A) TO THE ISSUER, (B)
OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION
S UNDER THE SECURITIES ACT AND WITH APPLICABLE STATE SECURITIES
LAWS, (C) IN COMPLIANCE WITH (1) RULE 144 OR (2) RULE 144A UNDER
THE SECURITIES ACT AND WITH APPLICABLE STATE SECURITIES LAWS, (D)
IN CONNECTION WITH ANOTHER EXEMPTION UNDER THE SECURITIES ACT, OR
(E) WITH THE PRIOR WRITTEN CONSENT OF THE ISSUER, UPON THE ISSUER
RECEIVING, IN THE CASE OF CLAUSES (C)(1) AND (D) ABOVE, AN OPINION
OF COUNSEL FOR THE HOLDER, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
Notwithstanding
the foregoing, (i) at any time Planet 13 or its successor company
is a “foreign issuer”, as defined in Rule 902(e) of
Regulation S of the Securities Act, if such securities are being
sold in accordance with the requirements of Rule 904 of Regulation
S of the Securities Act, as referred to above, and in compliance
with local Laws and regulations, the legend may be removed by
providing a declaration to the Planet 13’s transfer agent for
such securities, in the form as may be prescribed by Planet 13 or
its successor company from time to time, together with any other
evidence, which may include an opinion of counsel of recognized
standing reasonably satisfactory to Planet 13 or its successor
company to the effect that such legend is no longer required under
applicable requirements of the Securities Act, required by Planet
13 or its successor company or such transfer agent; and (ii) if any
such securities are being sold pursuant to Rule 144 under the
Securities Act, the legend may be removed by delivery to the
registrar and transfer agent for such securities of an opinion of
counsel of recognized standing reasonably satisfactory to Planet 13
or its successor company to the effect that such legend is no
longer required under applicable requirements of the Securities Act
or applicable state securities laws.
The Seller is acquiring the Consideration Shares
as principal for its own account and not with a view toward, or for
sale in connection with, any distribution thereof, or with any
present intention of distributing or selling the Consideration
Shares in any Province or Territory of Canada. The Seller is an
“accredited investor” as defined in National Instrument
45-106 Prospectus Exemptions
of the Canadian Securities
Administrators and is able to bear the economic risk of an
investment in the Consideration Shares.
The Transferors acknowledge that Planet 13 may be required to file
a report with the Canadian securities regulatory authorities
containing personal information about Xxxxxxx and the other
beneficial owners of Seller and W Vapes, including their full
names, addresses and telephone numbers, the number and type of
securities purchased, the total purchase price paid for the
securities, the date of the closing and the exemption relied upon
under applicable Canadian Securities Laws.
(v) Rule
144. Transferors understand and
acknowledge that (i) if Planet 13 or any successor company is
deemed to have been at any time previously an issuer with no or
nominal operations and no or nominal assets other than cash and
cash equivalents, other than a Capital Pool Company (as such term
is defined in the TSXV Corporate Finance Manual), Rule 144 under
the Securities Act may not be available for resales of the
Consideration Shares and (ii) Planet 13 is not obligated to make
Rule 144 under the Securities Act available for resales of such
Consideration Shares.
(vi) No
Registration Statement.
Transferors understand and acknowledge that Planet 13 has no
obligation or present intention of filing with the United States
Securities and Exchange Commission or with any state securities
administrator any registration statement in respect of resales of
the Consideration Shares in the United States.
(vii) Foreign
Issuer. Transferors understand
and acknowledge that Planet 13 or any successor company (i) is not
obligated to remain a “foreign issuer” within the
meaning of Rule 902(e) of Regulation S of the Securities Act, (ii)
may not, at the time the Consideration Shares are resold by it or
at any other time, be a foreign issuer, and (iii) may engage in one
or more transactions which could cause Planet 13 or any successor
company not to be a foreign issuer, and if Planet 13 or any
successor company is not a foreign issuer at the time of sale or
transfer of the Consideration Shares pursuant to Rule 904
of Regulation
S of the Securities Act, the certificate representing the
Consideration Shares may continue to bear the legend described
above.
(viii)
Financial
Statements. Each Transferor
understands and acknowledges that the financial statements of
Planet 13 have been prepared in accordance with International
Financial Reporting Standards, which differ in some respects from
United States generally accepted accounting principles, and thus
may not be comparable to financial statements of United States
companies.
10
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Each
of Buyer and Planet 13 represents and warrants to Transferors that
each of the representations and warranties set forth in this
Article 5 are true and correct as of the Effective Date and shall
be true and correct on the First Closing Date and on the Second
Closing Date. Notwithstanding anything to the contrary provided in
this Agreement (in addition to any specific exception to Federal
Cannabis Laws and any similar Law set forth in this Article 5), all
representations, warranties, covenants and disclosures of Buyer and
Planet 13 in this Article 5 are being made with exception to and
not with respect to Federal Cannabis Laws.
5.1.
Organization and Good
Standing. Buyer is a
corporation, duly organized, validly existing
and in good standing under the Laws of the State of Nevada. Buyer
has full corporate power and authority to conduct its business and
to own and lease its properties and assets (except under Federal
Cannabis Laws). Planet 13 Holdings Inc is a corporation duly
organized, validly existing and in good standing under the
Business
Corporations Act (British
Columbia). Planet 13 has full corporate power and authority to
conduct its business and to own and lease its properties and assets
(except under Federal Cannabis Laws).
5.2.
Authority;
Authorization; Binding Effect.
Each of Buyer and Planet 13 have all necessary
power and authority to execute and deliver this Agreement and to
consummate the Transaction and to perform its obligations under
this Agreement (except under Federal Cannabis Laws). This Agreement
has been duly executed and delivered by Buyer and Planet 13 and
constitutes a legal, valid and binding obligation of Buyer and
Planet 13 respectively, enforceable against Buyer and Planet 13 in
accordance with its terms, except as such enforcement may be
limited by Federal Cannabis Laws.
5.3.
Consents and
Approvals. Subject to the
requirements under the Nevada Cannabis Laws,
and applicable Canadian Securities Laws and U.S. securities laws
filings and Canadian Securities Exchange requirements, and except
as set forth on Schedule 5.3
of the Disclosure Schedules, no
consent, approval or authorization of, or declaration, filing or
registration with, any Person is required to be made or obtained by
Buyer or Planet 13 in connection with the execution, delivery and
performance of this Agreement and the consummation of the
Transaction.
5.4.
No
Brokers. The Planet 13 Parties
have not entered into any agreement, arrangement
or
understanding with any Person which will result in the obligation
to pay any finder’s fee, brokerage commission or similar
payment in connection with the Transaction.
ARTICLE 6
PRE-CLOSING COVENANTS
6.1. Reasonable Best
Efforts. During the period from
the Effective Date and continuing until the earlier of the
termination of this Agreement or the Second Closing
Date:
11
(a) Each
Party will cooperate with the other Party and use its commercially
reasonable efforts to promptly (i) take or cause to be taken all
actions, and do or cause to be done all things, necessary, proper
or advisable under this Agreement and the ancillary documents
referenced in this Agreement and applicable Law to consummate and
make effective the Transaction as soon as practicable, including
preparing and filing promptly and fully all documentation to effect
all necessary filings, notices, petitions, statements,
registrations, submissions of information, applications and other
documents, (ii) obtain all approvals, consents, registrations,
permits, authorizations and other confirmations required to be
obtained from any third party and/or Governmental Authority
necessary, proper or advisable to consummate the Transaction, and
(iii) execute and deliver such documents, certificates and other
papers as a Party may reasonably request to evidence the other
Party’s satisfaction of its obligations hereunder. Subject to
applicable Law relating to the exchange of information and in
addition to Section
6.1(b), the Parties will have
the right to review in advance, and, to the extent practicable,
each will consult the other Party on, any information relating to
Seller or Buyer and their respective Affiliates, as the case may
be, that appears in any filing made with, or written materials
submitted to, any third party and/or any Governmental Authority in
connection with the Transaction.
(b) Without
limiting the forgoing Section
6.1(a), the Parties will: (i)
cooperate with one another promptly to determine whether any
filings are required to be or should be made or consents,
approvals, permits or authorizations are required to be or should
be obtained under any applicable Law, and (ii) in promptly making
any such filings, furnishing information required in connection
therewith and seeking to obtain timely any such consents, permits,
authorizations or approvals.
(c) Without
limiting Section
6.1(a), Seller shall not
voluntarily mortgage, pledge, or subject to any lien any of the
Purchased Assets or MRB Assets. Transferors hereby undertake and
agree that until the earlier of Second Closing Date or the valid
termination of this Agreement, neither Transferor or their
respective affiliates shall, and shall cause their respective
officers, owners, directors, employees, investment bankers,
attorneys, accountants, financial advisors, agents and other
representatives (collectively, “Representatives”)
not to, directly or indirectly:
(i) Initiate,
solicit, encourage or knowingly facilitate or induce the submission
of any inquiries, proposals or offers that constitute, or may
reasonably be expected to lead to, any “Alternative
Transaction” (defined as
a proposal with respect to the purchase of the Purchased Assets,
any equity in the owner of such assets, or a merger, exchange,
recapitalization, reorganization, or other transaction resulting in
a change of control of the subsidiaries which own the Purchased
Assets.
(ii) Engage
or participate in any discussions or negotiations regarding, or
provide or cause to be provided any non-public information or data
relating to the Business or the Purchased Assets or have any
discussions with any person relating to, an actual or proposed
Alternative Transaction; or
(iii) Enter
into any letter of intent, agreement in principle, merger
agreement, acquisition agreement, option agreement or other similar
statement of intention or agreement relating to any Alternative
Transaction.
(d) Each
Party will keep the other Party reasonably apprised of the status
of matters relating to the completion of the Transaction and work
cooperatively in connection with obtaining all required approvals
or consents of any Governmental Authority. In that regard, each
Party will without limitation: (i) promptly notify the other
Parties of, and if in writing, furnish the other Party with copies
of (or, in the case of material oral communications, advise the
other Party orally of) any communications from or with any
Governmental Authority with respect to the Transaction, (ii) permit
the other Party to review and discuss in advance, and consider in
good faith the views of the other Party in connection
with,
12
any proposed written (or any material proposed oral) communication
with any such Governmental Authority, (iii) not participate in any
meeting with any such Governmental Authority unless it consults
with the other Party in advance and, to the extent permitted by
such Governmental Authority, gives the other the opportunity to
attend and participate, (iv) furnish the other Party with copies of
all correspondence, filings and communications (and memoranda
setting forth the substance thereof) between it and any such
Governmental Authority with respect to this Agreement, any
ancillary documents and the Transaction, and (v) furnish the other
Party with such necessary information and reasonable assistance as
the other Party may reasonably request in connection with its
preparation of necessary filings or submissions of information to
any such Governmental Authority. Notwithstanding the foregoing,
Seller shall not be required to disclose any information it
reasonably believes is subject to any applicable privilege or
obligations of confidentiality.
(e) Seller
shall not amend any Assumed Contracts or enter into any new
Contracts or other agreements with any third party related to the
Purchased Assets or MRB Assets without giving Buyer the opportunity
to review such amendments, Contracts or other agreements and
receiving the consent of Buyer, which consent shall not be
unreasonably, withheld, conditioned or delayed.
6.2.
Intentionally
Omitted.
6.3.
Confidentiality and
Publicity. The Parties to this
Agreement acknowledge, covenant and
agree that each Party and such Party’s Representatives and
Affiliates will keep all information relating to the Parties
confidential, and no Party, its Representatives or Affiliates will
disclose or allow to be disclosed any confidential information with
respect to the other Party, directly or indirectly, to any third
party without the prior written approval of all Parties, except
where the information is already generally available to the public
through no act of a Party or where a Party is required by any
applicable Law to disclose confidential information (and then prior
notice of such disclosure shall be given to the other Parties).
Notwithstanding the foregoing, the Mutual Non-Disclosure Agreement
between the Parties dated June 12, 2020, shall also continue in
effect.
6.4.
Access.
During the period from the Effective Date and continuing until the
earlier of the
termination of this Agreement or the First Closing Date, Seller
will permit Representatives of Buyer (including legal counsel and
accountants) to have, upon prior written notice, reasonable access
during normal business hours and under reasonable circumstances,
and in a manner so as not to interfere with the normal business
operations of Seller, to the premises, personnel, books, records
(including Tax records (but excluding income Tax Returns of any
federal consolidated (and state combined or unitary) group of which
Seller is a member and limited with respect to all other Tax
Returns and correspondence with accountants to the portions of such
Tax Returns and correspondence with accountants that specifically
relate to Seller)), material Contracts, Permits and documents of or
pertaining to the Business, subject to applicable Laws and security
procedures of Seller and the Company. Neither Buyer, Planet 13, nor
any of their Representatives will contact any employee, customer,
supplier or landlord of Seller without the prior approval of Seller
prior to the First Closing Date.
6.5.
Notification of
Certain Matters. During the
period from the Effective Date and continuing
until the earlier of the termination of this Agreement or the
Second Closing Date, except as prohibited by applicable Law, each
Party will give prompt notice to the other Parties of (a) the
occurrence or nonoccurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation
or warranty of such Party contained in this Agreement to be untrue
or inaccurate in any material respect at or prior to the First
Closing or Second Closing such that the conditions set forth
in Section 7.2(a),
Section 7.2(o) or Section 7.3(a) would not be satisfied, and (b) any material
failure of such Party to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied
by
13
such Party hereunder such that the conditions set forth in
Section
7.2(e), 7.2(p) or Section 7.3(b) would not be satisfied.
6.6.
Applications for
Regulatory Approval. Promptly
following the First Closing, Buyer
will
prepare, and Buyer and Seller will submit the applicable
Applications with the Regulatory Authorities in order to obtain the
consent and approval of the Regulatory Authorities for the transfer
or substitution of Buyer as the owner of the MRB Licenses. Seller
will cooperate in good faith with Buyer and take all actions
necessary to support the timely submission of the Applications.
Buyer and Seller agree to execute and deliver any forms required by
the Regulatory Authorities for the transfer or substitution of
Buyer as the owner of the MRB Licenses. Buyer and Seller shall
promptly respond to requests for additional information, documents,
forms or fees from any Regulatory Authorities with jurisdiction to
approve the transfer or substitution of Buyer as owner of the MRB
Licenses. Seller’s obligation to seek the Regulatory
Approvals will be an ongoing post-First Closing covenant until
successful completion thereof and the Second Closing occurs.
Notwithstanding the foregoing, in no event shall Seller be
obligated to incur any costs, including, but not limited to, any
filing fees with respect to the foregoing activities.
6.7.
Disclosure
Schedules. Between the
Effective Date and the First Closing Date,
Transferors
shall use Transferors’ reasonable best efforts to promptly
correct and supplement the information set forth on the Disclosure
Schedules delivered by Transferors pursuant to this Agreement in
order to cause such Disclosure Schedule to remain correct and
complete in all respects. Transferors’ delivery to the Planet
13 Parties of any corrections or supplements shall, without further
notice or action on the part of Transferors or Buyer, immediately
and automatically constitute an amendment to the Disclosure
Schedule to which such corrections and supplements relate;
provided,
however,
that solely for purposes of determining whether the condition
precedent pursuant to Section 7.3.(a)
has been satisfied, or whether Buyer
has the right to terminate this Agreement pursuant to
Section
8.1), any such amendment to the
Disclosure Schedule shall be disregarded.
(a) The
information in the Disclosure Schedules constitutes: (i) exceptions
to particular representations, warranties, covenants and
obligations of Transferors as set forth in this Agreement; or (ii)
descriptions or lists of assets and other items referred to in this
Agreement. If there is any inconsistency between the statements in
this Agreement and those in the Disclosure Schedules (other than an
exception expressly set forth as such in the Disclosure Schedule
with respect to a specifically identified representation or
warranty), the statements in the Disclosure Schedules shall
control.
(b) The
Disclosure Schedules shall be deemed to be a part of this Agreement
and are fully incorporated into this Agreement by reference. Any
capitalized terms used in the Disclosure Schedules but not
otherwise defined therein shall have the meanings ascribed to such
terms in this Agreement. The inclusion of any item referenced in
one section or subsection of the Disclosure Schedules shall be
deemed to refer to (a) the corresponding section or subsection of
this Agreement and (b) any other section or subsection of the
Disclosure Schedules (and accordingly to the applicable sections or
subsections of this Agreement), whether or not an explicit
cross-reference appears, if the applicability of such item to the
other section or subsection is reasonably apparent on the face of
such disclosure
ARTICLE 7
CONDITIONS TO FIRST CLOSING AND SECOND CLOSING
7.1
Conditions to
Obligations of Each Party Under This Agreement. The respective obligations
of each Party to effect the Transaction will be subject to the
satisfaction at or prior to the First Closing Date and/or the
Second Closing Date, as applicable, of the following conditions,
any or all of which may be waived in writing by
a
Party with respect only to itself, in whole or in part, to
the extent permitted by applicable Law:
14
(a)
Proceedings.
(i) No
Governmental Authority of competent jurisdiction will have enacted,
issued, promulgated, enforced or entered, other than the Federal
Cannabis Laws, any statute, rule, regulation, or Order (whether
temporary, preliminary or permanent) that is in effect and has the
effect of making the Transaction illegal or otherwise prohibiting
consummation of the Transaction.
(ii) No
Proceeding will have been commenced against any Party which could
reasonably prevent the First Closing or Second Closing to occur
(either by way of injunction or other legal remedy).
(iii) There
will be no other legal impediment to the First Closing or Second
Closing, except for the existence of the Federal Cannabis
Laws.
(iv) There
will be no Nevada-state or local mandated closure of the cannabis
dispensaries located in Las Vegas, Nevada.
(v) The
Excluded Management Agreement will be terminated on terms
acceptable to Seller.
7.2. Additional
Conditions to Obligations of Buyer. The obligations of Buyer to effect the
Transaction are subject to satisfaction of the following additional
conditions, any or all of which may be waived in writing by Buyer,
in whole or in part, to the extent permitted by applicable
Law:
(a) Representations
and Warranties. The
representations and warranties of Seller set forth in this
Agreement will be true and correct in all material respects (giving
effect to the applicable exceptions set forth in the Disclosure
Schedules but without giving effect to any limitation as to
“materiality”) as of the First Closing Date and Second
Closing Date, as if made as of such time (except to the extent that
such representations and warranties expressly speak as of another
date, in which case such representations and warranties will be
true and correct as of such date). Buyer will have received a
certificate signed on behalf of Seller to such
effect.
(b) Title
to Purchased Assets and MRB Assets. As of the First Closing Date Seller shall have
good and valid title to, or a valid leasehold in, all of the
Purchased Assets (except for the Second Closing MRB Assets), free
and clear of all Encumbrances except for Permitted Encumbrances.
With respect to the Second Closing, subject to the Nevada Cannabis
Laws and satisfaction of all other conditions precedent hereunder
to transfer of the Second Closing MRB Assets to Buyer on the Second
Closing Date, Seller shall have on or before the Second Closing
Date, good and valid title to, or a valid leasehold in, all of the
Second Closing MRB Assets, free and clear of all Encumbrances,
other than Permitted Encumbrances and the full and unrestricted
power to sell, assign, transfer and deliver the Second Closing MRB
Assets pursuant to the terms of this Agreement.
(c) Organization
and Authority of Seller to Conduct Business. As of the First Closing Date, Seller shall be
duly organized, validly existing and in good status under the Laws
of the State of Nevada. Seller shall have full limited liability
company power and authority to conduct the Business and to own and
lease its properties and assets (except under Federal Cannabis
Laws).
(d) Good
Standing. Seller shall have
delivered to Buyer a certificate of the secretary or an officer of
Seller, in form and substance reasonably satisfactory to Buyer,
certifying as to (i) the certificate of formation of Seller, as
amended, certified by the Secretary of State of the State of
Nevada, as of a recent date, and stating that no amendment has been
made to such articles since such date; (ii) its
15
operating
agreement or equivalent; (iii) the resolutions or authority of its
respective members and/or managers authorizing the execution and
performance of the Transaction Documents and the transactions
contemplated thereby; (iv) a certificate of good standing, as of a
recent date, certified by the Secretary of State of the State of
Nevada, and (v) incumbency and signatures of its respective
officers executing the Transaction Documents.
(e) MRB
Licenses. As of the First
Closing Date and the Second Closing Date, the MRB Licenses shall
constitute all Permits used in the operation of and necessary to
conduct the Business and all MRB Licenses shall be valid and in
full force and effect with no Proceeding pending or, to the
Knowledge of Seller, threatened to revoke or limit any of the MRB
Licenses.
(f) Agreements
and Covenants. Transferors
shall have performed and complied with all of their covenants
hereunder in all material respects through the First Closing Date
and the Second Closing Date, respectively, and Buyer will have
received a certificate signed on behalf of Seller to such
effect.
(g) Documents.
As of the First Closing Date, the Management Agreement and all of
the documents, instruments and agreements to be executed and/or
delivered pursuant to this Agreement at the First Closing,
including the First Closing Documents and such other customary
instruments of transfer, assumption, filings, assignments or other
documents, in form and substance reasonably satisfactory to Buyer
and Seller, will have been executed by the Parties thereto other
than Buyer and delivered to Buyer. As of the Second Closing Date,
all of the Second Closing Date Documents, to be executed and/or
delivered pursuant to this Agreement, in form and substance
reasonably satisfactory to Buyer and Seller, will have been
executed by the Parties thereto other than Buyer and delivered to
Buyer.
(h) UCC
Release/Payoffs Required at First Closing. Seller shall have delivered to Buyer releases or
pay-off letters from the applicable lenders with respect to all
outstanding Closing Indebtedness of Seller and evidence
satisfactory to Buyer that all Encumbrances affecting Seller or the
Purchased Assets will be released upon the consummation of the
First Closing (including, where applicable, UCC termination
statements authorized to be filed by Buyer upon the consummation of
the Closing);
(i) Designation
of Point of Contact. As of the
First Closing Date, Buyer shall have the right to designate an
individual to serve as the new point of contact to manage all
communications with the Regulatory Authorities regarding the MRB
Licenses, and Seller shall take all necessary steps to ensure that
the individual designated by Buyer is listed as the point of
contact with the Regulatory Authorities for the MRB
Licenses.
(j) Consents
and Approvals. As of the First
Closing Date and the Second Closing Date, as applicable, Seller
will have received all of the consents and approvals set out
in Schedule 4.2
of the Disclosure Schedules, on terms
satisfactory to Buyer and Seller in their reasonable
discretion.
(k) Material
Adverse Change. As of the First
Closing Date, there shall have occurred no Material Adverse Effect
between the Effective Date and the First Closing
Date.
(l) Lease
and Option Agreement. As of the
First Closing Date, Rx Land shall have acquired the Leased
Premises, and Seller and Rx Land shall have entered into the Lease
and the Option Agreement.
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(m) Regulatory
Confirmation. With respect to
the First Closing only, Buyer shall have received assurances
reasonably satisfactory to Buyer that the MRB Licenses are, subject
to approval from the Regulatory Authorities, transferable to Buyer
under the Nevada Cannabis Laws.
(n) Regulatory
Approvals. With respect to the
Second Closing only, Buyer and Seller shall have received the
Regulatory Approvals. Any waiver of the closing condition set forth
in this Section 7.2(n)
as to any individual MRB Licenses will
not result in a reduction in the Purchase
Price.
(o) Destruction
of Excluded MRB Inventory. On
or prior to the First Closing, Indus shall have destroyed or sold
as the case may be, the Excluded Inventory in compliance with
Nevada Cannabis Laws.
7.3. Additional Conditions
to Obligations of Transferors.
The obligations of Transferors to effect the Transaction are
subject to satisfaction of the following additional conditions, any
or all of which may be waived in writing by Transferors, in whole
or in part, to the extent permitted by applicable
Law:
(a) Representations
and Warranties. The
representations and warranties of the Planet 13 Parties set forth
in this Agreement will be true and correct in all material respects
(without giving effect to any limitation as to
“materiality”) as of the First Closing Date and the
Second Closing Date, as if made as of such time (except to the
extent that such representations and warranties expressly speak as
of another date, in which case such representations and warranties
will be true and correct as of such date). Transferors will have
received a certificate signed on behalf of the Planet 13 Parties to
such effect.
(b) Agreements
and Covenants. The Planet 13
Parties will have performed and complied with all of their
covenants hereunder in all material respects through the First
Closing Date and the Second Closing Date. Transferors will have
received a certificate signed on behalf of Planet 13 Parties to
such effect.
(c) Documents.
As of the First Closing Date, the Management Agreement and all of
the documents, instruments and agreements to be executed and/or
delivered at the First Closing pursuant to this Agreement,
including the First Closing Documents and such other customary
instruments of transfer, assumption, filings, assignments or other
documents, in form and substance reasonably satisfactory to Seller,
will have been executed by the parties thereto other than Seller
and delivered to Seller. As of the Second Closing Date, all of the
Second Closing Date Documents, instruments and agreements to be
executed and/or delivered pursuant to this Agreement, including
customary instruments of transfer, assumption, filings, assignments
or other documents, in form and substance reasonably satisfactory
to Seller, will have been executed by the parties thereto other
than Seller and delivered to Seller.
(d) Consents
and Approvals. As of the First
Closing Date and the Second Closing Date, as applicable, Seller
will have received all of the consents and approvals set out
in Schedule 4.2
of the Disclosure Schedules, on terms
satisfactory to Buyer and Seller in their reasonable
discretion.
(e) Regulatory
Approvals. With respect to the
Second Closing only, Buyer and Seller shall have received the
Regulatory Approvals. Any waiver of the closing condition set forth
in this Section 7.3(e)
as to any individual MRB Licenses will
not result in a reduction in the Purchase
Price.
(f) Termination
of Indus Transaction.
Transferors shall have terminated (i) their obligation to sell the
Purchased Assets and the MRB Assets to Indus and its Affiliates
(the “Prior
APA”), (ii) the current
lease between Seller and Indus, and (iii) the Excluded Management
Agreement, on terms acceptable to Transferors.
17
ARTICLE 8
TERMINATION
8.1. Termination Prior to
First Closing Date.
(a) This
Agreement may be terminated and the Transaction may be abandoned at
any time prior to the First Closing Date:
(i)
By
mutual written consent of Buyer and Seller;
(ii)
By
either Buyer or Seller if:
(A) the
First Closing Date has not occurred on or before August 31, 2020 or
another date mutually agreed to in writing by Buyer and
Seller; provided,
that the right to terminate this Agreement under this
Section
8.1(a)(ii)(A) will not be
available to any Party whose failure to fulfill any material
obligation under this Agreement has been the cause of the failure
of the First Closing Date to have occurred on or before such
date;
(B) a
Governmental Authority shall have issued an Order or taken any
other action (excluding any Order or action arising under, relating
to or in connection with the Federal Cannabis Laws), in each case
that has become final and non-appealable and that restrains,
enjoins or otherwise prohibits the Transaction or any part of it;
provided that this Agreement shall not be terminated unless the
Party terminating this Agreement has utilized commercially
reasonable efforts to oppose the issuance of such Order, decree or
ruling or the taking of such action;
(iii) By
Buyer, if (i) any of the representations and warranties of Seller
or W Vapes in this Agreement become untrue or inaccurate in any
material respect such that Section 7.2(a)
would not be satisfied or (ii) there
has been a material breach on the part of Seller or W Vapes of any
of their respective covenants or agreements contained in this
Agreement such that Section 7.2(e)
would not be satisfied;
or
(iv) By
Seller if (i) any of the representations and warranties of Buyer or
Planet 13 in this Agreement become untrue or inaccurate in any
material respect such that Section
7.3(a) would
not be satisfied or (ii) there has been a material breach on the
part of Buyer or Planet 13 of any of its covenants or agreements
contained in this Agreement such that Section 7.3(b)
would not be
satisfied.
(b) Notice
of Termination. If Buyer
intends to terminate this Agreement under Sections 8.1(a)(ii)(A),
8.1(a)(ii)(B), or 8.1(a)(iii , or if Seller intends to terminate
this Agreement under Sections
8.1(a)(ii)(A), 8.1(a)(ii)(B) or 8.1(a)(iv), such Person will provide the other Party with
written notice of their intent, indicating in reasonable detail the
deficiencies relied upon to terminate this
Agreement.
(c) Effect
of Termination. In the event of
the termination of this Agreement pursuant to any provision
of Section 8.1(a),
this Agreement (other than this
Section
8.1(c), Section 6.3 and Article
10, which will survive such termination) will forthwith become
void, and there will be no Liability on the part of any Party or
any of their respective officers or managers to the other and all
rights and obligations of any Party will cease; provided, however,
that nothing in this Section 8.1(c)
will relieve any Party from Liability
for fraud in the giving of any representations or warranties or for
any willful and material breach, prior to termination of this
Agreement.
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8.2.
Termination After
First Closing Date and Prior to Second Closing
Date.
(a) If
the Regulatory Authorities deny the issuance of the Regulatory
Approvals prior the first anniversary of the First Closing Date,
then, the Seller, in its sole discretion, may
elect to terminate this Agreement and unwind the Transaction
(except for the purchase of the MRB Inventory on the First Closing
Date), and exercise its option to under the Option Agreement to
reacquire the Real Property and Tangible Personal Property in which
case the parties shall take the action described
below:
(A) The
Consideration Shares issued on the First Closing Date shall be
returned to Planet 13, the Share Escrow Agreement cancelled and
such Consideration Shares cancelled by Planet 13;
(B) all
ancillary documents executed in connection with this Agreement,
(including the First Closing Documents) shall be
terminated;
(C) Seller
and Rx Land lease shall be cancelled;
(D) all
of Tangible Personal Property transferred to Buyer pursuant to this
Agreement shall be returned to the full ownership and control of
Seller, free and clear of any Encumbrances other than Encumbrances
existing as of the First Closing Date or approved in writing by
Seller and the Buyer; provided, however, that to the extent Buyer
no longer owns certain Tangible Personal, reasonable replacement
assets may be transferred to Seller in substitution, as determined
in good faith by mutual agreement of the Parties;
(F) Buyer
will terminate the Management Agreement, and will be responsible
for the cancellation, payment, or satisfaction of any liabilities
and obligations incurred by Buyer under the Management Agreement
which are not automatically cancelled or terminated upon the
termination of the Management Agreement, unless Seller, in its sole
discretion, elects in writing to assume such liabilities and/or
obligations;
(G) the
Parties will work together in good faith to execute and deliver and
take such additional actions as are reasonably necessary to return
the Parties to the situation and condition existing immediately
prior to the First Closing,
(b) If
the Regulatory Authorities have not issued all Regulatory Approvals
within six (6) years of the First Closing Date for any reason (and
if Section 8.2(a)
has not previously applied) then, this
Agreement shall terminate and:
(A) The
Consideration Shares shall be returned to Planet 13, the Share
Escrow Agreement terminated, and such Consideration Shares
cancelled by Planet 13;
(B) all
ancillary documents executed in connection with this Agreement,
(including the First Closing Documents) shall be
terminated;
19
(C) Seller
shall assume the Lease from Rx Land;
(D) all
of the Tangible Personal Property transferred to Buyer pursuant to
this Agreement (subject to changes reflecting the operation of the
Business in the ordinary course) shall be returned to the full
ownership and control of Seller, free and clear of any Encumbrances
other than Encumbrances existing as of the First Closing Date or
approved in writing by Seller and the Buyer; provided, however,
that to the extent Buyer no longer owns certain Tangible Personal
Property, reasonable replacement assets may be transferred to
Seller in substitution, as determined in good faith by mutual
agreement of the Parties;
(F) Buyer
will terminate the Management Agreement, and will be responsible
for the cancellation, payment, or satisfaction of any liabilities
and obligations incurred by Buyer under the Management Agreement
which are not automatically cancelled or terminated upon the
termination of the Management Agreement, unless Seller, in its sole
discretion, elects in writing to assume such liabilities and/or
obligations;
(G) the
Parties will work together in good faith to execute and deliver and
take such additional actions as are reasonably necessary to return
the Parties to the situation and condition existing immediately
prior to the First Closing,
(c) In
the event of the termination of this Agreement pursuant to
Section
8.2(a)(ii), this
Agreement (other than Section
8.2(a)(ii), this
Section
8.2(c), Section 6.3 and Article
10, which will survive such termination) will forthwith become
void, and there will be no Liability on the part of any Party or
any of their respective officers or managers to the other and all
rights and obligations of any Party will cease; provided, however,
that nothing in this Section 8.2(c)
will relieve any Party from Liability
for fraud in the giving of any representations or warranties or for
any willful and material breach, prior to termination of this
Agreement in accordance with its terms, of any covenant or
agreement contained in this Agreement.
ARTICLE 9
COVENANTS AND CONDUCT OF THE PARTIES AFTER THE FIRST CLOSING
AND
SECOND CLOSING
9.1.
Survival and Indemnification.
(a) Survival
of Representations, Warranties, Covenants and
Agreements. All representations
and warranties of Seller and Buyer contained in this Agreement will
survive the Second Closing Date for a period of two (2) years. Any
claim made by Buyer or Seller based on fraud in the giving of any
representations and warranties will survive indefinitely. All
covenants and agreements made by Seller and Buyer contained in this
Agreement (including the obligation of Buyer and Seller to submit
the Applications (pursuant to Section
6.6) and to convey the
MRB
Assets (pursuant to
Section
2.2) to Buyer), will survive
the First Closing Date and Second Closing Date until fully
performed or discharged. Any written claim for breach of
representation and warranty delivered prior to the above-referenced
applicable expiration date to the Party against whom such
indemnification is sought will survive thereafter and, as to any
such claim, such expiration, if any, will not affect the rights to
indemnification under this Article 9 of the Party making such
claim.
20
(b)
Indemnification by
Seller.
(i) Seller
agrees to defend, indemnify and hold harmless the Planet 13 Parties
and their Affiliates, and the managers, directors, officers and
employees of the Planet 13 Parties and their respective Affiliates
(each a “Buyer
Party” and collectively,
the “Buyer
Parties”), from, against,
and in respect of:
(A) any
and all Losses suffered or incurred by a Buyer Party by reason of
any breached or untrue representation or warranty of Seller
contained in Article 4 of this Agreement;
(B) any
and all Losses suffered or incurred by a Buyer Party by reason of
the breach of or non-compliance with any covenant or agreement by
Seller contained in this Agreement or any ancillary agreements
executed in connection with this Agreement;
(C) any
and all Losses suffered or incurred by a Buyer Party attributable
to (1) any and all Taxes of Seller, (2) without duplication, and
subject to Section 2.5 (Transfer
Taxes), any and all Taxes (or
the non-payment thereof) imposed on Buyer with respect to the
Purchased Assets and MRB Licenses attributable to any Pre-Closing
Tax Period or any MRB Pre-Closing Tax Period, and (3) any and all
withholding, payroll, social security, unemployment or similar
Taxes attributable to any payments made by Seller that are
contingent upon or payable as a result of the transactions
contemplated by this Agreement;
(D) any
and all Losses suffered or incurred by a Buyer Party by reason of
any Excluded Liabilities or Excluded Assets or Taxes which are the
responsibility of Seller pursuant to Section 9.2;
(E) any
and all Losses suffered or incurred by a Buyer Party by reason of
any Third-Party Claim based upon, resulting from or arising out of
the business, operations, properties, assets or obligations of
Seller (other than the Purchased Assets or Assumed Liabilities)
conducted, existing or arising on or prior to the Second Closing
Date, except to the extent indemnified by Buyer as set forth
in Section
9.1(c)(iv) below;
and
(F) any
and all Losses suffered or incurred by a Buyer Party by reason of
fraud by Seller.
(ii) W
Vapes and Xxxxxxx jointly and severally agree to defend, indemnify
and hold harmless the Buyer Parties from, against, and in respect
of:
(A) any
and all Losses suffered or incurred by a Buyer Party by reason of
any breached or untrue representation or warranty of W Vapes and
Xxxxxxx contained in Article 4 of this Agreement;
(B) any
and all Losses suffered or incurred by a Buyer Party by reason of
the breach of or non-compliance with any covenant or agreement by W
Vapes and Xxxxxxx contained in this Agreement or any ancillary
agreements executed in connection with this Agreement;
and
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(C) by
a Transferor Taxes which are the responsibility of Seller pursuant
to Section
9.2;
21
(D)
any and all Losses suffered or incurred by a Buyer Party
by
reason of fraud by Transferors.
(c) Indemnification by
Planet 13 Parties. The Planet
13 Parties jointly and severally
agree to indemnify and hold harmless the Transferors and their
Affiliates, and the managers, officers and employees of Seller and
their respective Affiliates (each a “Seller
Party”), and
collectively, the “Seller Parties”)
from, against, and in respect of:
(i) any
and all Losses suffered or incurred by a Seller Party by reason of
any breach of a representation or warranty by a Planet 13 Party
contained in Article 5 of this Agreement;
(ii) any
and all Losses suffered or incurred by a Seller Party by reason of
the breach of or non-compliance with any covenant or agreement by a
Planet 13 Party contained in this Agreement or any ancillary
agreements executed in connection with this Agreement;
(iii) any
and all Losses suffered or incurred by a Seller Party by reason of
any Assumed Liabilities, or Taxes which are the responsibility of
the Planet 13 Parties pursuant to Section
9.2.
(iv) any
and all Losses suffered or incurred by a Seller Party by reason of
any Third-Party Claim based upon, resulting from or arising out of
the business, operations, properties, assets or obligations of the
Business (including the Purchased Assets, and Assumed Liabilities)
conducted, existing or arising after the First Closing Date (to the
extent that such Third-Party Claim does not relate to the MRB
Assets or the actions of Seller after the First Closing Date and
prior to the Second Closing Date); and
(v) any
and all Losses suffered or incurred by a Seller Party by reason of
fraud by a Planet 13 Party.
(d) Notification of Claims. In the
event that any party hereto entitled to indemnification
pursuant to this Agreement (the “Indemnified
Party”) proposes to make
any claim for such indemnification, the Indemnified Party will
deliver to the indemnifying party (the “Indemnifying
Party”), which delivery
with respect to the Losses arising from breaches of representations
and warranties will be on or prior to the date upon which the
applicable representations and warranties expire pursuant to
Section 9.1(a) hereof, a signed certificate, which certificate will
(i) state that Losses have been incurred or that a claim has been
made for which Losses may be incurred, (ii) specify the sections of
this Agreement under which such claim is made, and (iii) specify in
reasonable detail each individual item of Loss or other claim
including the amount thereof and the date such Loss was incurred.
In addition, each Indemnified Party will give notice to the
Indemnifying Party promptly following its receipt of service of any
suit or proceeding initiated by a third party which pertains to a
matter for which indemnification may be sought (a
“Third Party
Claim”);
provided,
however,
that the failure to give such notice will not relieve the
Indemnifying Party of its obligations hereunder if the Indemnifying
Party has not been prejudiced thereby.
(e) Defense of Third Party
Claims. Any Indemnified Party
will in good faith cooperate
and assist the Indemnifying Party in defending against any claims
or asserted claims with respect to which the Indemnified Party
seeks indemnification under this Agreement. If requested by the
Indemnifying Party, the Indemnified Party will join in any action,
litigation, arbitration or proceeding, provided
that the Indemnified Party will pay
its own costs caused by such joinder. The Indemnified Party will
not settle or compromise any claim or asserted claim, nor agree to
extend any statute of limitations applicable to any claim or
asserted claim, for which the Indemnified Party seeks
indemnification under this
22
Agreement,
without the prior written consent of the Indemnifying Party, which
consent will not be unreasonably withheld.
(f)
Other Indemnification
Matters.
(i) All
indemnification payments made pursuant to this Section 9.1
by the Transferors will be treated as
an adjustment to the Purchase Price unless otherwise required by
applicable Law.
(ii) Except
(A) with respect to claims based upon fraud, (B) for remedies that
cannot be waived as a matter of Law and (C) injunctive and
provisional relief in accordance with the terms of this Agreement,
if the First Closing occurs, this Section 9.1
will be the sole and exclusive remedy
for breach of, inaccuracy in, or failure to comply with, any
representation, warranty, or covenant contained in this Agreement,
or otherwise in respect of the transactions contemplated by this
Agreement.
(iii) With
respect to any indemnification payment obligations of Seller, W
Vapes or Xxxxxxx under this Section 9.1
that is determined to be a Final
Indemnification Claim, a Buyer Party shall be entitled to recover
such amounts from Seller, W Vapes or Xxxxxxx, as applicable, under
this Agreement. provided, that, such recovery shall come from the
following sources in the following order of priority: first, from
the Consideration Shares, and second, from Seller, W Vapes or
Xxxxxxx, as applicable. Any Consideration Shares that is used in
satisfaction of such indemnification obligation shall be valued at
the greater of: (i) the volume weighted average trading price of
the Consideration Shares on the Canadian Securities Exchange during
the 10-trading day period preceding such payment date, and (ii) the
value of such Restricted Shares established at the First Closing. A
“Final Indemnification
Claim” shall mean any
claim by any Transferor against Seller or W Vapes pursuant
to Section 9.1(b)
with respect to any Losses suffered or
incurred by any Transferor that is (i) subject to a written
agreement between Seller and any Transferor, (ii) a final
settlement between Seller and any Transferor; or (iii) a final
adjudication determined by a court of competent jurisdiction that
an indemnification obligation is owing by Seller to a Buyer
Party.
(iv) No
Buyer Party shall be entitled to indemnification with respect to
the breach or inaccuracy of any representation or warranty unless,
until and only to the extent that any Buyer Party (individually or
collectively with all other Buyer Parties) has suffered or incurred
actual Losses in respect aggregating in excess of $75,000 (the
“Basket”),
in which case Buyer Parties shall be entitled to recover all Losses
to the extent they exceed the Basket, subject to the other
limitations set forth herein.
(v) In
no event shall Seller Parties be obligated to indemnify Buyer
Parties with respect to the breach or inaccuracy of any
representation or warranty for amounts in excess of $4,100,000 (the
“Purchase Price
Cap”).
9.2.
Tax
Matters.
(a) The
amount of any Taxes based on or measured by income, receipts,
profits, including, without limitation sales, use, value added,
excise, employment, payroll or withholding taxes arising prior to
or First Closing Date applicable, shall be the obligation of
Seller.
(b) Buyer
and Seller will cooperate fully, as and to the extent reasonably
requested by the other Parties, in connection with the filing of
Tax Returns and any audit, litigation, or other proceeding with
respect to Taxes. Such cooperation will include the retention and
(upon the other Party’s request) the provision of records and
information that are available and reasonably relevant to any such
audit, litigation, or other proceeding and making employees
available on a mutually convenient basis to provide additional
information and explanation of any material provided
hereunder.
23
9.3.
Agreement Not To
Compete.
(a) For
a period ending on the earlier of: (i) the termination of this
Agreement, or (ii) five (5) years from and after the First Closing
Date (the “Restricted
Period”), each Transferor
and A. Xxxx Xxxxxxx (the “Obligated
Parties”) shall not, and
shall cause its Affiliates not to, directly or indirectly, own,
operate, lease, manage, control, engage in, invest in, lend to, own
any debt or equity security of, permit its or his name to be used
by, act as consultant or advisor to, render services for (alone or
in association with any person, firm, corporate or other business
organization) or otherwise assist in any manner or be involved in
any other capacity with any business that engages in business
activities competitive with the Business (a
“Competing
Business”) (including any
Person engaged in whole or in part in any Competing Business) from
a physical location anywhere in Nevada; provided, however, that
nothing herein shall prohibit any Obligated Party from (i) taking
any of the foregoing actions or acting in any of the foregoing
capacities with respect to a business that is a Competitive
Business solely by reason of producing, manufacturing, marketing
and selling hemp CBD products or (ii) being a passive beneficial
owner (including “group” that is a beneficial owner) of
less than two percent (2%) of any class of securities of any entity
that is registered pursuant to the Securities Act and traded on a
national securities exchange.
(b) During
the Restricted Period, no Obligated Party shall, and each shall
cause its Affiliates not to, directly or indirectly: (i) induce or
attempt to induce any of employee or consultant to leave the employ
of, or engagement with, Buyer, or materially interfere with the
relationship between Buyer and any employee or consultant, (ii)
hire or engage any employee or consultant of the Planet 13 Parties
or any of their Affiliates (or any person who was an employee or
consultant of any Planet 13 Party or any of its Affiliates within
the preceding 12 months, unless such employment or consulting
relationship was terminated by Buyer) or (iii) induce or attempt to
induce any person or entity who is or was within the prior two
years a customer, supplier, licensee, licensor, franchisee or other
business relation of any Transferor to cease doing business with
any of the Planet 13 Parties or materially interfere with the
relationship between any Planet 13 Party and any such
Person.
(c) During
the Restricted Period, each Obligated Party shall not, and shall
cause its Affiliates not to, make or publish any statement or
communication which is disparaging, negative or unflattering with
respect to any of the Planet 13 Parties or any of their respective
Affiliates, members, officers, managers, directors or employees.
For purposes of this Section
9.3(c), a statement shall be
deemed to be made by an Obligated Party only if made by an
individual Obligated Party or by a member, officer, manager,
director or senior managerial employee of a non-individual
Obligated Party.
(d) Obligated
Parties acknowledge and agree that the covenants and agreements set
forth in this Section 9.3
were a material inducement to the
Planet 13 Parties to enter into this Agreement and to perform its
obligations hereunder and that the Planet 13 Parties would not have
entered into this Agreement but for each Obligated Party’s
agreement to the restrictions set forth in this Section
9.3. Obligated
Parties further acknowledge and agree that the Planet 13 Parties
would be irreparably damaged if any Obligated Party were to engage
directly or indirectly in any Competing Business, that any such
competition by any Obligated Party would result in a significant
loss of goodwill by the Planet 13 Parties and that money damages
would not be an adequate remedy for any such breach. Therefore, in
the event a breach or threatened breach of this Section
9.3, the Planet 13 Parties and
each of their Affiliates or their respective successors and
assigns, in addition to other rights and remedies existing in their
favor, shall be entitled to specific performance, injunctive and
other equitable relief from a court of competent jurisdiction in
order to enforce, or prevent any violations of, the provisions
hereof (without posting a bond or other surety and at the expense
of such Obligated Party, including reasonable attorneys’ fees
and expenses). The restrictive covenants set forth in this
Section
9.3 shall be construed as
agreements independent of any other provision in this Agreement,
and the existence of any claim or cause of action of any Obligated
Party against The Planet 13 Parties, whether predicated upon this
Agreement or otherwise,
24
shall not constitute a defense to the enforcement by The Planet 13
Parties of any restrictive covenant contained in this
Section
9.3. In the event of a breach
or violation by any Obligated Party of this Section 9.3, the
Restricted Period shall be tolled with respect to such Obligated
Party until such breach or violation has been duly
cured.
(e) Each
Obligated Party agrees that the restrictions contained in this
Section 9.3 are reasonable. If the final judgment of a court of
competent jurisdiction nevertheless declares any term or provision
of this Section 9.3
to be invalid or unenforceable, the
Parties agree 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 Agreement shall be
enforceable as so modified to cover the maximum duration, scope or
area permitted by Law.
ARTICLE 10
MISCELLANEOUS
10.1. Further
Assurances. Following the First
Closing and Second Closing, each Party will cooperate in good faith
with each other Party and will take all appropriate action and
execute any agreement, instrument or other writing of any kind
which may be reasonably necessary or advisable to carry out and
consummate the Transaction.
10.2.
Notices. Unless otherwise provided in this Agreement, any
agreement, notice, request, instruction or other communication to
be given hereunder by any Party to the other will be in writing and
(a) delivered personally (such delivered notice to be effective on
the date it is delivered), (b) deposited with a reputable overnight
courier service for next Business Day delivery (such couriered
notice to be effective one (1) Business Day after the date it is
sent by courier; provided it is actually sent to be delivered on
one (1) Business Day after the date it is sent; otherwise, when
actually delivered), (c) sent by e-mail (with electronic
confirmation of delivery or receipt), as follows:
To
any Planet 13 Party: Planet 13 Holdings, Inc.
BLC
Management Company, LLC
0000
Xxxx Xxxxxx Xxx Xxxx
Xxx
Xxxxx, Xxxxxx 00000
Attn:
Xxxxxxxx Xxxxxxx
Fax:
702
[REDACTED]
with
a mandatory copy to (which shall not constitute
Notice):
Xxxxxx
Xxxxxx Ltd.
000
X. Xxxxxx Xxxxxx, Xxxxx Xxxxx
Attn: Xxxxxxx Xxxxxxx, Esq.
[REDACTED]
If
to Seller or W Vapes, to:
W
the Brand, LLC
West
Coast Development Nevada, LLC
25
[REDACTED]
c/o
A. Xxxx Xxxxxxx
[REDACTED]
If to Xxxxxxx: R. Xxxxx
Xxxxxxx
[REDACTED]
With a copy (which shall not constitute notice) to:
Xxxxxxx
Law, PLLC
00000
Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx,
XX 00000
Fax:
N/A
Attn:
Xxxxxxx Xxxxxxx, Esq.
Any
Party may designate in a writing to any other Party any other
address or facsimile number to which, and any other Person to whom
or which, a copy of any such notice, request, instruction or other
communication should be sent.
10.3. Governing Law: Dispute
Resolution.
(a) Governing
Law. All issues and questions
concerning the application, construction, validity, interpretation,
and enforcement of this Agreement shall be governed by and
construed in accordance with the internal Laws of the State of
Nevada, without giving effect to any choice or conflict of law
provision or rule (whether of the State of Nevada or any other
jurisdiction) that would cause the application of Laws of any
jurisdiction other than those of the State of
Nevada.
(b) Jurisdiction:
Venue. The Parties hereby agree
that any suit, action, or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated
hereby, whether in contract, tort, or otherwise, shall be brought
exclusively in the state courts of the State of Nevada located in
Xxxxx County thereafter. Each of the Parties hereby irrevocably
consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action, or proceeding
and irrevocably waives, to the fullest extent permitted by Law, any
objection that it may now or hereafter have to the laying of the
venue of any such suit, action, or proceeding in any such court or
that any such suit, action, or proceeding which is brought in any
such court has been brought in an inconvenient
forum.
(c) Waiver
of July Trial. EACH OF THE
PARTIES WAIVES THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OR RELATED TO
THIS AGREEMENT IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY
TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY
AFFILIATE OF ANY OTHER SUCH PARTY, WHETHER WITH RESPECT TO CONTRACT
CLAIMS, TORT CLAIMS OR OTHERWISE. THE PARTIES AGREE THAT ANY SUCH
CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT
TRIAL
26
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER
AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY
OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE
VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION
HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT.
(d)Cannabis
Laws. This Agreement is subject
to strict requirements for ongoing
regulatory compliance by the Parties, including, without
limitation, requirements that the Parties take no action in
violation of either the marijuana establishment Laws of any
jurisdiction or jurisdictions to which Seller or any of its
subsidiaries are, or may at any time become, subject, including,
without limitation, the Nevada Cannabis Laws. The Parties
acknowledge and understand that the Nevada Cannabis Laws and/or the
requirements of the Regulatory Authorities are subject to change
and are evolving as the marketplace for state-compliant cannabis
businesses continues to evolve. If necessary to comply with the
requirements of the Nevada Cannabis Laws and/or the Regulatory
Authorities, the Parties hereby agree to (and to cause their
respective Affiliates and Representatives to) use their respective
commercially reasonable efforts to take all actions reasonably
requested to ensure compliance with the Nevada Cannabis Laws and/or
the Regulatory Authorities, including, without limitation,
negotiating in good faith to amend, restate, amend and restate,
supplement, or otherwise modify this Agreement to reflect terms
that most closely approximate the Parties’ original
intentions but are responsive to and compliant with the
requirements of the Nevada Cannabis Laws and/or the Regulatory
Authorities. In furtherance of the foregoing, the Parties further
agree to cooperate with the Regulatory Authorities to promptly
respond to any informational requests, supplemental disclosure
requirements, or other correspondence from the Regulatory
Authorities and, to the extent permitted by the Regulatory
Authorities, keep all other parties hereto fully and promptly
informed as to any such requests, requirements, or
correspondence.
10.4. Expenses.
Except as expressly provided otherwise in this Agreement, (a)
Seller will pay all legal, accounting and other expenses of Seller
related to this Agreement and (b) Buyer will pay all legal,
accounting and other expenses of Buyer related to this Agreement;
provided, however, that any costs incurred to consummate the
Transaction pursuant to the Nevada Cannabis Laws, including any
costs required to be reimbursed to the Regulatory Authority (but
excluding fees or penalties assessed against the Transferors
arising out of or related to the sole act or omission by a
Transferor) shall be paid by the Buyer.
10.5. Titles.
The headings of the articles and sections of this Agreement are
inserted for convenience of reference only and will not affect the
meaning or interpretation of this Agreement.
10.6. Waiver.
No failure of any Party to require, and no delay by any Party in
requiring, any other Party to comply with any provision of this
Agreement will constitute a waiver of the right to require such
compliance. No failure of any Party to exercise, and no delay by
any Party in exercising, any right or remedy under this Agreement
will constitute a waiver of such right or remedy. No waiver by any
Party of any right or remedy under this Agreement will be effective
unless made in writing. Any waiver by any Party of any right or
remedy under this Agreement will be limited to the specific
instance and will not constitute a waiver of such right or remedy
in the future.
10.7. Effective;
Binding. This Agreement will be
effective upon the due execution hereof by all of the Parties. Upon
becoming effective, this Agreement will be binding upon each Party
and upon each successor and assignee of each Party and will inure
to the benefit of, and be enforceable by, each Party and each
successor, designee and assignee of each Party; provided,
however,
that, except as provided for in the immediately following sentence,
no Party may assign any right or obligation arising pursuant to
this Agreement without first obtaining the written consent of the
other Party. Buyer may assign all or a portion
27
of its rights and obligations under this Agreement to one or more
designees of Buyer upon prior written notice to Seller,
provided
that: (i) the assignment to any
designee of Buyer will not materially negatively affect the ability
to perform the obligations of Buyer under this Agreement, (ii) the
designee of Buyer purchasing the Purchased Assets and paying the
Purchase Price shall have the requisite resources and funds to
perform Buyer’s obligations hereunder and any designee of
Buyer purchasing the Assets shall have the necessary qualifications
to obtain all necessary consents and approvals under Nevada
Cannabis Laws; and (iii) the designee shall assume the obligations
under the respective ancillary agreements hereto to the extent the
designee succeeds to the interests and obligations of Buyer that
are the subject of such ancillary agreements. Buyer will remain
liable hereunder notwithstanding any such assignment to one or more
designees.
10.8. Entire
Agreement. This Agreement
contains the entire agreement between the Parties with respect to
the subject matter of this Agreement and supersedes each course of
conduct previously pursued, accepted or acquiesced in, and each
written or oral agreement and representation previously made, by
the Parties with respect to the subject matter of this
Agreement.
10.9. Modification.
No course of performance or other conduct hereafter pursued,
accepted or acquiesced in, and no oral agreement or representation
made in the future, by any Party, whether or not relied or acted
upon, and no usage of trade, whether or not relied or acted upon,
will modify or terminate this Agreement, impair or otherwise affect
any obligation of any Party pursuant to this Agreement or otherwise
operate as a waiver of any such right or remedy. No modification of
this Agreement or waiver of any such right or remedy will be
effective unless made in writing duly executed by the
Parties.
10.10. Counterparts;
Electronic Copies. This
Agreement may be executed in one or more counterparts, each of
which will be deemed an original and all of which taken together
will constitute one and the same instrument. Documents executed,
scanned and transmitted electronically and electronic signatures
shall be deemed original signatures for purposes of this Agreement
and all matters related thereto, with such scanned and electronic
signatures having the same legal effect as original signatures. The
Parties agree that this Agreement or any other document necessary
for the consummation of the transactions contemplated by this
Agreement may be accepted, executed or agreed to through the use of
an electronic signature in accordance with the Electronic
Signatures in Global and National Commerce Act
("E-Sign
Act"), Xxxxx 00, Xxxxxx Xxxxxx
Code, Sections 7001 et seq., the Uniform Electronic Transaction Act
("UETA")
and any applicable state law. Any document accepted, executed or
agreed to in conformity with such laws will be binding on all
Parties the same as if it were physically executed and each Party
hereby consents to the use of any third party electronic signature
capture service providers as may be chosen and utilized by any
Party.
10.11. Cannabis
Carve-Out. Notwithstanding any
provision in this Agreement to the contrary, the Parties
acknowledge that they are aware of and fully understand that
despite the medical and retail cannabis laws of the State of Nevada
and the terms, conditions and covenants of this Agreement,
individuals and entities engaged in the cultivation,
transportation, sale, distribution or possession of medical and
retail cannabis may still be arrested by federal and some state
officers and prosecuted under Federal Cannabis Law; consequently,
such activities are expressly excluded from any and all
representations, warranties, obligations and covenants applicable
to the Transferors under this Agreement. The Parties hereby waive
illegality as a defense to any contract enforcement
action.
[SIGNATURE PAGE FOLLOWS]
28
IN WITNESS
WHEREOF, the Parties have
caused this Asset Purchase Agreement to be executed as of the
Effective Date.
Planet 13 Parties:
By:
/s/ Xxxxx Xxxxxxxxx
Name: Xxxxx Xxxxxxxxx
Title: Co-CEO
By:
/s/ Xxxxxx Xxxxxxxxx
Name: Xxxxxx Xxxxxxxxx
Title: Co-CEO
MM
Development Company, Inc.
By: /s/ Xxxxx
Xxxxxxxxx
Name: Xxxxx Xxxxxxxxx
Title: Manager
By: /s/ Xxxxxx
Xxxxxxxxx
Name: Xxxxxx Xxxxxxxxx
Title: Manager
Transferors:
West
Coast Development Nevada, LLC
By: /s/ R. Xxxxx
Xxxxxxx
Name: R. Xxxxx Xxxxxxx
Title: Manager
W
the Brand, LLC
By: /s/ R. Xxxxx
Xxxxxxx
Name: R. Xxxxx Xxxxxxx
Title: Manager
29
Execution
EXHIBITS
Exhibit
A
Management
Agreement
Exhibit B
Intentionally
Omitted
Exhibit C
Lease
Exhibit D
Xxxx
of Sale
Exhibit E
Assignment
and Assumption Agreement
Exhibit F
Share
Escrow Agreement
Exhibit
G
Release
Agreement
Exhibit
H
Questionnaire
30
SCHEDULES
Schedule 1
Defined
Terms
Schedule
1.1(u)
MRB
Licenses
Schedule 2.1(a)(iii)
Additional
Equipment
Schedule 2.1(a)(iv)
Assumed
Contracts
Schedule 2.1(a)(vi)
Permits
Schedule
2.2(a)(iii)
MRB
Contracts
Schedule
2.4(b)
Nevada
Licenses
Schedule 4.2
Seller
Consent and Approvals
Schedule 4.4
Financial
Statements
Schedule 4.7
Tangible
Personal Property
Schedule 4.8
Subsequent
Events
Schedule 4.11
Material
Contracts
Schedule 4.12
Labor
Matters
Schedule
4.15
Compliance
with Law
Schedule 4.17
Environmental
Schedule
4.18
Insurance
Schedule
5.3
Buyer’s
Consents and Approvals
31
SCHEDULE 1
DEFINED TERMS
Defined Terms. As used in this
Agreement, the following terms will have the following
meanings:
(a) “Affiliate”
means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition,
“control” (including, with its correlative meanings,
“controlled by” and “under common control
with”) means possession, directly or indirectly, of power to
direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership
interests, by contract or otherwise).
(b) “Affiliate
Agreements” means each of
the following documents in substantially the forms attached hereto:
(i) the Management Agreement in the form attached hereto as
Exhibit
A, and (ii) the Lease Agreement
in the form attached hereto as Exhibit
C.
(c) “Agreement”
means, unless the context otherwise requires, this Asset Purchase
Agreement, as it may be amended from time to time, together with
the Schedules and Exhibits attached hereto.
(d) “Applications”
means any and all applications, documentation, change requests and
correspondence provided to, and received from, the Regulatory
Authorities or a state, county, city or local Governmental
Authority involving the applications for, issuance of, or transfer
of the Permits or MRB Licenses.
(e) “Benefit
Plan” includes all
“employee benefit plans” as defined in Section 3(3) of
ERISA, and any other pension plans or employee benefit agreements,
arrangements, programs or payroll practices (including severance
pay, other termination benefits or compensation, vacation pay,
salary, company awards, stock option, stock purchase, salary
continuation for disability, sick leave, retirement, deferred
compensation, bonus or other incentive compensation, stock purchase
arrangements or policies, hospitalization, medical insurance, life
insurance and scholarship programs) (whether funded or unfunded,
written or oral, qualified or nonqualified), sponsored, maintained
or contributed to or required to be contributed to by Seller or by
any trade or business, whether or not incorporated, that together
with a Seller would be deemed a “single employer”
within the meaning of Section 4001 of ERISA for the benefit of any
employee, leased employee, director, officer, shareholder or
independent contractor (in each case either current or former) of
Seller or Seller ERISA Affiliate.
(f) “Business”
means the cultivation, manufacture, internal testing, marketing,
promotion, and wholesale distribution of products containing
cannabis and products that enable persons to consume cannabis in
different forms, and other cannabis related products, for both
medicinal and recreational uses, in each case within the State of
Nevada.
(g) “Business
Day” means any day other
than a Saturday, Sunday or a legal holiday on which banks are not
open for general business in the State of
Nevada.
(h) “Cash
Purchase Price” means the
sum of (i) One Million Six Hundred Thousand U.S. Dollars
(US$1,600,000), plus
(ii) Three Thousand Three Hundred
Thirty-Three and 33/100 U.S.
32
Dollars (US$3,333.33) for every day after June 30, 2020 up to and
including the First Closing Date (the “Per
Diem”).
(i) “Code”
means the Internal Revenue Code of 1986, as
amended.
(j) “Consideration
Shares” has the meaning
given such term in Section
2.3.
(k) “Contract”
means all contracts, agreements and obligations currently in force
relating to the Purchased Assets, and Seller including, without
limitation, all sale, management, construction, insurance,
commission, architectural, engineering, operating, employment,
service, supply and maintenance agreements.
(l) “Encumbrance”
means any claim, lien, mortgage, pledge, option, charge, security
interest, right of way, encroachment, Tax, reservation,
restriction, encumbrance, or other right of any Person, or any
other restriction or limitation of any nature whatsoever, affecting
title to, any assets of Seller.
(m) “Escrow
Holder” means Odyssey
Trust Company.
(n) “Environmental
Liabilities” means any
Liability arising from or under any Environmental Law (including as
a result of any breach thereof or compliance
therewith).
(o) “Environmental
Law” means any Law as now
or hereafter in effect in any way relating to the protection of the
environment or natural resources or, in relation thereto, human
health and safety, including the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. § 9601 et
seq.), the Hazardous Materials Transportation Act (49 U.S.C. App.
§ 1801 et seq.), the Resource Conservation and Recovery Act
(42 U.S.C. § 6901 et seq.), the Clean Water 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 Federal Insecticide, Fungicide, and Rodenticide Act (7
U.S.C. § 136 et seq.) and the Occupational Safety and Health
Act (29 U.S.C. § 651 et seq.), as those Laws have been
amended, any analogous state and local Laws and the regulations
promulgated pursuant thereto.
(p) “ERISA”
means the Employment Retirement Income Security Act of 1974 and the
regulations promulgated pursuant thereto, each as
amended.
(q) “Excluded
Management Agreement”
means the Management Services Agreement between Seller, W Vapes.
and Indus, effective January 31, 2020.
(r) “Excluded
MRB Inventory” means
expired or otherwise unsaleable MRB inventory that is scheduled for
destruction, and any cannabis distillate or vape oil
products.
(s) “Federal
Cannabis Laws” means any
U.S. federal laws, civil, criminal or otherwise, as such relate,
either directly or indirectly, to the cultivation, harvesting,
production, distribution, sale and possession of cannabis,
marijuana or related substances or products containing or relating
to the same, including, without limitation, the prohibition on drug
trafficking under 21 U.S.C. § 841(a), et seq., the conspiracy
statute under 18 U.S.C. § 846, the bar against aiding and
abetting the conduct of an offense under 18 U.S.C. § 2, the
bar against misprision of a felony (concealing another’s
felonious conduct) under 18 U.S.C. § 4, the bar against being
an accessory after the fact to criminal conduct under 18 U.S.C.
§ 3, and federal money laundering statutes under 18 U.S.C.
§§ 1956, 1957, and 1960 and the regulations and rules
promulgated under any of the foregoing.
33
(t) “First
Closing Documents” means
each of the following documents, in substantially the forms
attached hereto, to be entered into on the First Closing Date: (i)
the Affiliate Agreements in the forms attached hereto as
Exhibits
A and C, (ii) a xxxx of sale
for the Purchased Assets in the form attached hereto as
Exhibit
D (the
“Xxxx of
Sale”), (iii) an
assignment and assumption agreement in the form attached hereto
as Exhibit E
the “Assignment and
Assumption Agreement”),
(iv) evidence that a certificate representing that number of
Consideration Shares having an aggregate value of Two Million Five
Hundred Thousand U.S. Dollars (US$2,500,000) as established
pursuant to Section
2.3(b) has
been issued in the name of Seller and has been deposited with the
Escrow Holder to the held pursuant to the terms of the Share Escrow
Agreement (v) the escrow agreement for the Consideration Shares in
the form attached hereto as Exhibit F
(the “Share Escrow
Agreement”), (vi) a
release and indemnity agreement from Indus in the form attached
hereto as Exhibit G
(the “Release
Agreement”), and (vii)
all other ancillary agreements, contracts and documents to be
entered into in connection with this Agreement.
(u) “Governmental
Authority” means any
federal, state, commonwealth, provincial, municipal, local or
foreign government, or any political subdivision thereof, or any
court, agency or other entity, body, organization or group,
exercising any executive, legislative, judicial, quasi-judicial,
regulatory or administrative function of government, or any
supranational body, arbitrator, court or tribunal of competent
jurisdiction.
(v) “Hazardous
Material” means any
substance, material or waste that is regulated, classified or
otherwise characterized under or pursuant to any Environmental Law
as “hazardous,” “toxic,”
“pollutant,” “contaminant,”
“radioactive,” “medical waste,”
“biohazard” or words of similar meaning or effect,
including petroleum and its by-products, asbestos, polychlorinated
biphenyls, radon, mold or other fungi, and urea formaldehyde
insulation.
(w) “Indebtedness”
shall mean all obligations of: (i) for borrowed money; (ii)
evidenced by notes, bonds, debentures or similar instruments; (iii)
for the deferred purchase price of goods or services (other than
trade payables or accruals incurred in the Ordinary Course of
Business); (iv) under capital leases; and (v) in the nature of
guarantees of the obligations described in clauses (i) through
(iv) above of any other
Person.
(x) “Indus”
shall mean Indus Nevada, LLC, a Nevada limited liability
company.
(y) “Intellectual
Property” means any and
all intellectual property and rights in or to intellectual
property, including (a) any and all trademarks, service marks,
brand names, certification marks, trade dress, assumed names, trade
names, logos and other indications of origin, sponsorship or
affiliation, together with the goodwill associated therewith
(whether the foregoing are registered or unregistered);
registrations thereof in any jurisdiction and applications to
register any of the foregoing in any jurisdiction, and any
extension, modification or renewal of any such registration or
application; (b) any and all inventions, developments,
improvements, discoveries, know how, concepts and ideas, whether
patentable or not in any jurisdiction; (c) any and all patents,
revalidations, industrial designs, industrial models and utility
models, patent applications (including reissues, continuations,
divisions, continuations in-part and extensions) and patent
disclosures; (d) any and all mask works and other semiconductor
chip rights and registrations thereof; (e) any and all non-public
information, trade secrets and proprietary or confidential
information and rights in any jurisdiction to limit the use or
disclosure thereof by any Person; (f) any and all writings and
other works, whether copyrighted, copyrightable or not in any
jurisdiction, such works including computer programs and software
(including source code, object code, data and databases); (g) any
and all copyrights, copyright registrations and applications for
registration of copyrights in any jurisdiction, and any renewals or
extensions thereof; (h) any and all other intellectual property or
proprietary rights; (i) any and all agreements, licenses,
immunities, covenants not to xxx and
34
the like relating to any of the foregoing; and (j) any and all
claims or causes of action arising out of or related to any
infringement or misappropriation of any of the foregoing.
Notwithstanding the foregoing, “Intellectual Property”
shall not mean any and all of the foregoing to the extent it
relates to or pertains to any of the Excluded Assets.
(z) “Inventory”
means all raw materials, ingredients and finished cannabis goods
inventory of the Business.
(aa) “Knowledge”
and similar phrases using the term “Knowledge” means
the actual knowledge of the subject Person with respect to the
matters which are relevant to the representation, warranty,
covenant or agreement being made or given.
(bb) “Knowledge of
Seller” mean the
Knowledge of A. Xxxx Xxxxxxx, R. Xxxxx Xxxxxxx, Xxxxx Xxxxxxxx, or
Xxxx Xxxxxxxxxx
(cc) “Law”
means any federal, state, local, municipal, provincial, foreign or
other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, consent order, consent decree,
decree, Order, judgment, rule, regulation, ruling, guideline,
notice, protocol, directive, regulatory guidance, agreement or
requirement issued, enacted, adopted, promulgated, implemented or
otherwise put into effect by or with or under the authority of any
Governmental Authority, whether or not having the force of
law.
(dd) “Lease”
means the lease agreement relating to the Leased Premises between
Seller and Rx Land in the form attached hereto as
Exhibit
C.
(ee) “Leased
Premises” means the real
property located at 0000 Xxxx Xxxx Xxxxx, Xxx Xxxxx, Xxxxxx,
Assessor’s Parcel No. 162-20-104-003.
(ff) “Liabilities”
shall mean all Indebtedness, obligations and other liabilities of a
Person (whether absolute, accrued, contingent, fixed or otherwise,
or whether due or to become due).
(gg) “Losses”
mean all out-of-pocket, losses, liabilities, obligations, Taxes,
Encumbrances, deficiencies and damages, encumbrances, fines,
penalties, claims, demands, orders, dues, costs and other expenses
(including all fines, interest, penalties and other amounts paid
pursuant to a judgment, compromise or settlement, or costs
associated with enforcing any right to indemnification hereunder),
court costs and reasonable legal and accounting fees and
disbursements; provided, however, that “Losses” will
not include incidental or consequential damages, or punitive
damages, except to the extent such punitive damages are payable to
a third party.
(hh) “Material Adverse
Effect” shall mean any
event or circumstance that has or will have, or could reasonably be
expected to have, a material adverse effect on the Business,
Purchased Assets, operations, financial condition, or results of
operations of the Seller taken as a whole, after the First Closing
Date or Second Closing Date, it being understood that in no event
shall any of the following be deemed by itself or by themselves,
either individually or in the aggregate, to constitute a Material
Adverse Effect: (a) a failure by Seller to meet internal earnings,
revenue or other projections or earnings, revenue or other
predictions of any analyst, (b) any event, circumstance or market
condition occurring as a general economic or financial conditions
or other developments that are not unique to Seller, or (c) the
appointment of a receiver to operate the Business, the operation of
the Business by such a receiver and the results of operations of
the Business during such period of operation, the imposition of
monetary penalties that shall constitute Excluded
Liabilities.
35
(ii) “MRB
Inventory” means any and
all Inventory of Seller to be transferred to Buyer at the First
Closing, including but not limited to all items listed as held by
the Seller on their Metrc system as of June 16, 2020, and all
flower, trim, bud, kief, and all biological assets and all
intellectual property rights to those biological assets such as
strains and genetics currently located within the Leased Premises
of Seller, and any biological assets or inventory resulting
therefrom entered into Metrc following June 16, 2020 and up through
the Effective Date of this Agreement.
(jj)
“MRB
Licenses” means any and
all Permits required by or requested from any Regulatory Authority
for the conduct of the Business, excluding the Excluded Assets,
that cannot, without Regulatory Approvals, be transferred to Buyer
at the First Closing, a list of which are set forth on
Schedule
1.1(u).
(kk) “Nevada Cannabis
Laws” means the marijuana
establishment laws of any jurisdictions within the State of Nevada
to which Seller is or may at any time become, subject, including,
without limitation, Chapter 453A of the Nevada Revised Statutes, as
amended, 453D of the Nevada Revised Statutes, as amended, Title 60
of the Nevada Revised Statutes codifying NV AB533 and the rules and
regulations adopted by the Nevada Division of Public and Behavioral
Health, the Nevada Department of Taxation, the Nevada Cannabis
Compliance Board, the City of Las Vegas, NV or any other state or
local government agency with authority to regulate any marijuana
operation (or proposed marijuana operation) including the guidance
or instruction of any other state or local government agency with
authority to regulate any marijuana operation (or proposed
operation).
(ll) “Option
Agreement” means an
option agreement whereby Rx Land and Buyer grants to Seller the
option to reacquire the Real Property for $3,3000,00 and the
Tangible Personal Property for $500,000, respectively, upon the
happening of certain events.
(mm) “Order”
means any order, writ, assessment, decision, injunction, decree,
judgment, ruling, award, settlement or stipulation issued,
promulgated or entered into by or with any Governmental
Authority.
(nn) “Ordinary Course of
Business” means actions
taken by a Person in the ordinary and usual course of normal
day-to-day operations of such Person’s business, consistent
with past practice.
(oo) “Permits”
mean all permits, licenses, consents, franchises, approvals,
registrations, certificates, variances and other authorizations
required to be obtained from any Governmental Authority or other
Person in connection with the operation of the Business and
necessary to conduct the Business presently conducted or planned to
be conducted.
(pp) “Permitted
Encumbrances” means any
easement, right of way, encroachment, conflict, discrepancy,
overlapping of improvements, protrusion, lien, encumbrance,
restriction, condition, covenant, exception, including the Lease
and Assumed Liabilities, or other matter with respect to the Real
Property, Premises, Purchased Assets or the Business approved by
the Planet 13 Parties.
(qq) “Personal
Data” shall mean a
person’s name, street address, telephone number, email
address, date of birth, gender, photograph, Social Security Number
or Tax identification number, driver’s license number,
passport number, credit card number, bank account information and
other financial information, account numbers, account access codes
and passwords, or any other piece of information that allows the
identification of such person or enables access to such
person’s financial information, or as that term is otherwise
defined by applicable Law.
36
(rr)“Person”
means any Governmental Authority, individual, association,
joint
venture, partnership, corporation, limited liability company, trust
or other entity.
(ss)“Proceeding”
means any claim, demand, action, suit, litigation, dispute,
order,
writ, injunction, judgment, assessment, decree, grievance, arbitral
action, investigation or other proceeding.
(tt)“Real
Property” means the
Leased Premises together with (i) all buildings
and
improvements located thereon and (ii) all rights, privileges,
interests, easements, hereditaments and appurtenances thereunto in
any way incident, appertaining or belonging thereto.
(uu) “Regulatory
Approvals” shall mean the
consent and approval of the Regulatory Authorities to the sale,
transfer, conveyance, substitution and/or delivery of the MRB
Licenses to Buyer or, issuance of any new MRB Licenses to Buyer to
the extent any such MRB License is non-transferable (as submitted
in the Applications to the Regulatory Authorities in accordance
with Section
6.6).
(vv) “Regulatory
Authorities” or
“Regulatory
Authority” means any
Governmental Authorities with actual authority over the
Applications for or sale, transfer, conveyance, issuance,
substitution and/or delivery of the MRB
Licenses.
(ww) “Representative”
means any manager, officer, director, principal, attorney,
accountant, agent, employee or other representative of any
Person.
(xx)‘Second Closing
Documents” shall mean a
(i) Xxxx of Sale for MRB Assets to be
purchased on the Second Closing, (ii) an Assignment and Assumption
Agreement for the MRB Contracts assumed on the Second Closing,
(iii) instructions to the Escrow Holder to release all
Consideration Shares to Seller, and (iv) all other ancillary
agreements, contracts and documents to be entered into in
connection with this Agreement.
(yy) “Rx
Land” means Rx Land, LLC,
a Nevada limited liability company.
(zz)“Tangible Personal
Property” means all
tangible personal property (other than
Inventory) owned or leased by Seller or in which Seller has any
interest and relating to the Business, including vehicles and
production and processing equipment, warehouse equipment, computer
hardware, furniture and fixtures, leasehold improvements, supplies
and other tangible assets, together with any transferable
manufacturer or vendor warranties related thereto.
(aaa) “Tax” or “Taxes”
means any federal, state, local or non-U.S. income, gross receipts,
license, payroll, employment, excise, severance, startup, stamp,
occupation, premium, windfall profits, environmental, customs
duties, capital stock, franchise, profits, withholding, social
security (or similar), health, unemployment, disability, real
property, personal property, intangible property, abandoned
property or escheat, sales, use, ad valorem, transfer,
registration, value added, goods and services, harmonized,
alternative or add-on minimum, estimated, or other tax or similar
obligation of any kind whatsoever to any Tax authority, including
any interest, penalty or addition thereto, whether disputed or
not.
(bbb) “Tax
Return” means any return,
declaration, report, form, claim for refund, election or
information return or statement relating to Taxes, including any
schedule or attachment thereto, and any amendment
thereof.
(ccc) “Transaction”
means the asset purchases contemplated under this
Agreement.
37
(ddd) “Transaction
Documents” means this
Agreement and any other document, agreement, certificate or
instrument required to be delivered at the Closing pursuant to the
terms hereof. For the avoidance of doubt, the Management Agreement
shall not be deemed to be a Transaction
Document.
(eee) “Transaction
Expenses” means the
aggregate amount of all fees, costs and expenses incurred or
subject to reimbursement by Seller in connection with this
Agreement or the transactions contemplated hereby (whether incurred
prior to or after the date hereof) and not previously paid,
including: (i) all fees, expenses, costs, commissions and
disbursements of any broker, finder, financial advisor, consultant,
accountant or legal counsel incurred by or on behalf of Seller in
connection with this Agreement and the transactions contemplated
hereby, (ii) any and all transaction, success, change-of-control or
similar bonuses payable to employees, directors, managers or
consultants of Seller (including any applicable payroll Taxes
related thereto) as a result of the Transaction contemplated
hereby; and (iii) expenses or payments resulting from the change of
control of Seller or otherwise payable in connection with receipt
of any consent or approval in connection with the transactions
contemplated hereby (but excluding, for the avoidance of doubt, any
expenses of the Planet 13 Parties).
(fff) “Transfer
Taxes” means any sales,
use, stock transfer, value added, real property transfer, transfer,
stamp, registration, documentary, recording or similar duties or
taxes together with any interest thereon, penalties, fines, costs,
fees, additions to tax or additional amounts with respect thereto
incurred in connection with the transactions contemplated by this
Agreement. Notwithstanding the foregoing, "transfer Taxes" shall
specifically exclude any and all of the foregoing described taxes
that pertain to or result from the issuance and transfers of the
Consideration Shares (the "Stock Transfer
Taxes").
Additional Definitions
Term
Section
Agreement
Preamble
Alternative
Transaction
6.1(c)
Annual Financial
Statement
4.9
Assignment and Assumption
Agreement
Definition
(l)
Assumed
Contracts
2.1(a)
Balance
Sheet
4.4
Balance Sheet
Date
4.4
Basket
9.1(f)
Xxxx of
Sale
Definition
(l)
Buyer
Preamble
Closing
Indebtedness
2.8
Xxxxxxx
Preamble
Competing
Busines
9.3(a)
Consideration
Shares
2.3(b)
Disclosure
Schedules
Article
4
Effective
Date
Preamble
Excluded
Assets
2.1(b)
Excluded
Liabilities
2.1(c)
Financial
Statements
4.4
Final Indemnification
Claim
9.1(e)
First
Closing
3.1
38
First Closing Assumed
Liabilities
2.1(c)
First Closing
Date
3.1
Indemnified
Party
9.1(d)
Indemnifying
Parties
9.1(d)
Interim Balance
Sheet
4.4
Interim Balance Sheet
Date
4.4
Interim Financial
Statements
4.4
IP
Agreements
4.10
Labor and Employment legal Requirements 4.12
Material
Contracts
4.11
MRB
Assets
2.2(a)
MRB
Contracts
2.2(a)
Obligated
Parties
9.3(a)
Party
Preamble
Parties
Preamble
Per
Diem
Definition
(h)
Planet
13
Preamble
Planet 13
Parties
Preamble
Pre-Closing
Statement
2.8
Prior
APA
7.3(f)
Purchase Price
Allocation
2.6
Purchase Price Cap
9.1(f)
Purchased
Assets
2.1(a)
Questionnaire
4.4(c)(ii)
Release
Agreement
Definition
(l)
Representatives
6.1(c)
Restricted
Period
9.3(a)
Second
Closing
3.2(b)
Second Closing MRB
Assets
2,2(a)
Second Closing Date Assumed Liabilities 2.2(a)
Second Closing
Date
3.2(b)
Seller
Preamble
Seller
Parties
9.1(c)
Share Escrow
Agreement
Definition
(l)
Third-Party
Claim
9.1(d)
Transfer
Taxes
9.1(b)
Transferors
Preamble
W
Vapes
Preamble
39
DISCLOSURE SCHEDULES
BY AND AMONG
PLANET 13 HOLDINGS INC., AND MM DEVELOPMENT COMPANY,
INC.
AND
W THE BRAND, LLC, WEST COAST DEVELOPMENT NEVADA, LLC,
AND R. XXXXX XXXXXXX.
SELLER’S DISCLOSURE SCHEDULE
Schedule
1.1(jj)
MRB
Licenses
Schedule
2.1(a)(iii)
Equipment
Schedule
2.1(a)(iv)
Assumed
Contracts
Schedule
2.1(a)(vi)
Permits
Schedule
2.2(a)(iii)
MRB
Contracts
Schedule
2.4(b)
Nevada
Licenses
Schedule 4.2
Seller
Consent and Approvals
Schedule
4.4
Financial
Statements
Schedule
4.7
Tangible
Personal Property
Schedule
4.10(b)
Intellectual
Property
Schedule
4.11
Material
Contracts
Schedule
4.12
Labor
Matters
Schedule 4.15
Compliance
with Law
Schedule
4.17
Environmental
Schedule
4.18
Insurance
Schedule 5.3
Buyer’s
Consents and Approvals
40
BY AND AMONG
PLANET 13 HOLDINGS INC., AND MM DEVELOPMENT COMPANY,
INC.,
AND
W THE BRAND, LLC, WEST COAST DEVELOPMENT NEVADA, LLC,
AND R. XXXXX XXXXXXX.
SELLER’S DISCLOSURE SCHEDULE
INTRODUCTION
This Disclosure Schedule (the
“Disclosure
Schedule”) is delivered
in connection with the execution of that certain Asset Purchase
Agreement between and among Planet 13 Holdings Inc., a corporation
organized under the Business Corporations
Act (British Columbia)
(“Planet
13”), MM Development
Company, Inc., a Nevada corporation (“Buyer”,
and together with Planet 13 the “Planet 13
Parties”), and W the
Brand, LLC, a Delaware limited liability company (“W
Vapes”),
and West Coast Development Nevada, LLC, a Nevada limited liability
company (“Seller”)
and R. Xxxxx Xxxxxxx, a North Carolina resident
(“Xxxxxxx”
and together with Seller and W Vapes, the
“Transferors”).
Capitalized terms used herein but not defined shall have the
identical meaning assigned to such terms in the Agreement. The
numbers below correspond to the section numbers of the
Agreement.
41
Schedule 1.1(jj)
MRB Licenses
1.
State
of Nevada - Marijuana Cultivation Facility License No.
C06757708763289160503743 and License No. RC067-17755737390295686365
(Expires 6/30/19)
2.
State
of Nevada - Marijuana Product Manufacturing License No.
P03417968777460576775552 and License No. RP034-13351121953140240442
(Expires 6/30/19)
3.
Xxxxx County Business License No. 2000024.MMR-301,
and License No. 20000251MMR-301
issued in the names of Sweet Goldy,
LLC and Sweet Goldy Production, LLC,
respectively.
42
Schedule 2.1(a)(iii)
Computer Hardware; Furniture; Vehicles
Nevada
Furniture
1. L-Office
Desk - 3
2. Admin
Desk - 1
3. Couch-
2
4. Lounge
Chair - 2
5. Coffee
Table - 1
6. Conference
Table - 2
7. 4
Desk cubicle - 1
8. Uline
Desk - 1
9. Desk
Chairs - 10
10. Chair
- 8
11. Folding
Chair - 8
12. Lab
Bench - 2
13. Lab
Island - 2
14. Lab
Stool- 2
15. Tables
- 2
16. Folding
Table - 3
17. Microwave
- 2
18. Water
Dispenser - 2
19. Small
Step Ladder - 2
20. Step
Ladder - 2
21. File
Cabinet - 2
Computer Hardware
1. Printer
- 3
2. Desktop
Computer - 3
3. Laptops
- 6
4. Monitors
- 8
5. Label
Printer - 3
6. TVs-4
7. DVR-2
8. Data
Center - 1
(See
Additional Specific Description Schedule 4.7(b))
Vehicles
1. 2017 Ford F-150 owned by West Coast Development Nevada,
LLC.
Equipment
1. Waters
SFE Bio-Botanical Extraction Systems - 2
2. Argus
Nutrient Water Application System
43
Schedule 2.1(a)(iv)
Assumed Contracts
Waters Tech Lease for Waters SFE Bio-Botanical Extraction System
with TAW dated April 7, 2017.
44
Schedule 2.1(a)(vi)
Transferable Permits
MRB Licenses – State of Nevada licenses subject to CCB
Approval
2.
State of Nevada - Marijuana Cultivation Facility License No.
C06757708763289160503743 and License No. RC067-17755737390295686365
(Expires 6/30/19)
4. State
of Nevada - Marijuana Product Manufacturing License No.
P03417968777460576775552 and License No. RP034-13351121953140240442
(Expires 6/30/19)
5. Xxxxx
County Business License No. 2000024.MMR-301, and License No.
20000251MMR-301
issued in the names of Sweet Goldy,
LLC and Sweet Goldy Production, LLC,
respectively.
45
Schedule 2.1(c)
Excluded Liabilities
1.
The
Restricted Equity Grant dated February 1,2018 outstanding to Xxxx
Xxxxxxxx that provides for an award of up to 300,000 Membership
Units in W The Brand, LLC. Such Units vest 50% after his 18th month
employment anniversary, and 50% after his 36th month employment
anniversary. There is also an acceleration provision that vests the
Units in their entirety upon a sale of all or substantially all of
the assets of W The Brand, LLC.
2.
The Xxxx Xxxxxxxx Employment Agreement. that That
certain Executive Employment Agreement, dated February 1, 2018, by
and between Xxxx Xxxxxxxx and W The Brand, LLC (the
"Xxxx Xxxxxxxx
Employment Agreement").
3.
Asset
Purchase Agreement dated as of May 14, 2019, as amended, among
Indus Brand Management LLC, a Delaware limited liability company
(“Brand Purchaser”), Indus Nevada LLC, a Nevada limited
liability company (“Nevada Purchaser”), and Indus
Oregon LLC, an Oregon limited liability company (“Oregon
Purchaser”, and collectively with Brand Purchaser and Nevada
Purchaser, the “Purchaser Parties”), and W The Brand,
LLC (“W”), West Coast Development Nevada LLC
(“WCDN”) and West Coast Development Oregon LLC
(WCDO”), each a Delaware limited liability company
(collectively, W, WCDN and WCDO are referred to herein as the
“Sellers”).
4.
Excluded
Management Agreement (as defined in Agreement)
5.
The
Release (as defined in the Agreement)
6.
Termination
Agreement among Indus Brand Management LLC, a Delaware limited
liability company (“Brand Purchaser”), Indus Nevada
LLC, a Nevada limited liability company (“Nevada
Purchaser”), and Indus Oregon LLC, an Oregon limited
liability company (“Oregon Purchaser”, and collectively
with Brand Purchaser and Nevada Purchaser, the “Purchaser
Parties”), and W The Brand, LLC (“W”), West Coast
Development Nevada LLC (“WCDN”) and West Coast
Development Oregon LLC (WCDO”), each a Delaware limited
liability company (collectively, W, WCDN and WCDO are referred to
herein as the “Sellers”).
7.
The
DCL Loan (as hereinafter defined).
8.
The B Nevada Loan. Loan Agreement, dated April 17,
2017 (as amended, the "B Nevada
Loan"), by and between West
Coast Development Nevada, LLC and B Nevada, LLC
("B
Nevada"), as amended by that
certain First Amendment to Loan Agreement, effective as of April
17, 2017, B Nevada has been awarded a 30% equity interest in West
Coast Development Nevada, LLC with such award having vested upon
the completion of the transfer of certain marijuana licenses from
Sweet Goldy, LLC and Sweet Goldy Production, LLC. The grant of the
award is conditioned upon the State of Nevada's approval of B
Nevada to be qualified to conduct marijuana cultivation
and
46
manufacturing
activities and is also immediately triggered upon a sale of all or
substantially all of the assets of Seller.
9.
The
Xxxxxxxx Loan (as hereinafter defined).
10.
The
Edge Loan (as hereinafter defined).
11.
The
Xxxx Xxxxx Settlement Agreement (as hereinafter
defined).
12.
Offer
Letter Re: State of Nevada v. W The Brand, LLC, et at, dated March
18, 2019, by The State of Nevada Office of the Attorney General, to
W The Brand, LLC.
13.
All
liabilities as disclosed by WCDN to Planet 13 Holdings, Inc. and MM
Development Company, Inc. in the 5/31/2020 dated WCDN Balance
Sheet, as such may be or have been updated through the Effective
Date of this Agreement, an extract of which is provided
below:
Liabilities
Current Liabilities
Accounts Payable (A!P)
Credit Cards
Credit Card - CC Master Card
Credit Card - CC Visa
|
01 NV
76,751.58
7,615.13
9,558.94
|
10
OR
35,590.79
|
Not
Specified
|
Total
112,342.37
7,615.13
9,558.94
|
|
$
|
$
|
$
|
$
|
Total Credit Cards
|
17,174.07
|
0.00
|
0.00
|
17,174.07
|
Other Current Liabilities
|
|
|
|
|
Insurances Payable
|
23,186.35
|
|
|
23,186.35
|
Loan from Xxxxx Xxxxxxx
|
|
|
287,600.00
|
287,600.00
|
Xxxxx Xxxxxxx Interest
|
|
|
|
|
Payable
|
|
|
51,242.55
|
51,242.55
|
Total Loan from Xxxxx
|
$
|
$
|
$
|
$
|
Xxxxxxx
|
0.00
|
0.00
|
338,842.55
|
338,842.55
|
Related Party - Indus
|
|
|
|
|
Holdings
|
1,987,133.12
|
228,344.86
|
|
2,215,477.98
|
Related Party - Sweet Goldy
|
-161,589.50
|
|
|
-161,589.50
|
|
$
|
$
|
$
|
|
Total Other Current Liabilities
|
1,848,729.97
|
228,344.86
|
338,842.55
|
$2,415,917.38
|
|
$
|
$
|
$
|
|
Total Current Liabilities
|
1,942,655.62
|
263,935.65
|
338,842.55
|
$2,545,433.82
|
Long-Term Liabilities Due to B Nevada
|
|
|
5,000,000.00
|
5,000,000.00
|
Interest Payable to BV
|
|
|
924,999.95
|
924,999.95
|
|
$
|
$
|
$
|
|
Total Due to B Nevada
|
0.00
|
0.00
|
5,924,999.95
|
$5,924,999.95
|
Due to W The Brand (0308 !
|
|
|
|
|
1738)
|
|
|
6,043,290.69
|
6,043,290.69
|
Interest Payable to W The
|
|
|
|
|
Brand
|
|
|
408,960.43
|
408,960.43
|
Total Due to W The Brand (0308 !
|
$
|
$
|
$
|
|
1738)
|
0.00
|
0.00
|
6,452,251.12
|
$6,452,251.12
|
|
$
|
$
|
$
|
|
Total Long-Term Liabilities
|
0.00
|
0.00
|
12,377,251.07
|
$12,377,251.07
|
|
$
|
$
|
$
|
|
Total Liabilities
|
1,942,655.62
|
263,935.65
|
12,716,093.62
|
$14,922,684.89
|
47
Schedule 2.2(a)(iii)
MRB Contracts
48
*
Schedule 4.2
Sellers' Required Consents
1. The
consent of the landlord under the Nevada Lease.
2. The
consent of Waters Technologies Corporation under the Nevada Waters
Tech Agreement .
3. Recreational
Marijuana Retail Application, upon completion of application within
7 days of Effective Date of APA. The cover-letter to this
application shall also re-confirm the withdrawal of the previous
WCDN request to transfer ownership to Indus Parties.
49
Schedule 4.4
Financial Statements
See attached.
50
Schedule 4.7
Property, Plant, and Equipment
Nevada
Count
Equipment
1
2”
Xxxx Distiller + equipment
1
4”
Xxxx Distiller + equipment
2
Accucold
FFAR1-=<ED
2
Bio
Lion XC-CSA
1
BR
Instruments Distiller + computer
3
Cascade
TVO 5 oven
1
Chemtech
Distiller
6
Computer
4
Camp2Dry
Dehumidifier
1
Data
Center w/security DVRs
1
Dropbox’
safe
1
EL
Cold EL51XLLT Freezer
1
Futurola
SH-110 Shredder
1
Gas
Chromatograph
60
Hurricane
fans
1
Hyperlogic
CWF Hydro-44A-216
3
IKIA
MVP 10 B
3
IKA
RC2 C control
3
IKA
RV10 C rotovap
1
Large
gun safe
7
Leader
Ecojet R110 Pump
1
Leader
Ecojet R240 Pump
4
Leader
Ecojet R90 Pump
4
Locker
36
Multifan
1
Oman
LAR 25PMB
1
Paychex
Punch station
3
Printer
4
Quest
air movers
1
Quest
Dry 150 Dehumidifier
1
Quest
Dry 180 Dehumidifier
9
Quest
Dry 240 Dehumidifier
1
Quest
Dry 40 Dehumidifier
1
Sasquash
Rosin Press
1
Security
computer
1
Small
safe
180
Soleil
Model 50/hps lights
90
Solistek
A1 277V Lights
1
STM
RB 453 pre roll machine
51
9
Sun
System LEC315
43
Sun
System T5HO48
4
Televisions
1
Xxxxxxxx
Xxxx MCF1 Filling machine
2
Water
SFE Bio-Botanical Extraction Systems + computer
2
Whirlpool
Refrigerators
52
Schedule 4.7(b) continued: Generally, all assets represented by the
accounting schedule on the following two pages showing cost basis
of assets as at 12/31/2018, and as such may have been updated
through 07/17/2020, notwithstanding whether such asset is included
of the named assets listed above under Schedules 4.7(b)
“Property, Plant, and Equipment” and 2.1(a)(iii)
“Computer Hardware; Furniture; Vehicles”, exclusive of
the “Licenses” asset listed as item 42 on the schedule
below.
53
-
-
-
|
|
Beginning Balance
12/31/2017
|
Audit
Additions DisposalsAdjustments
|
Ending Balance
12/31/2018
|
Beginning Balance
12/31/2017 IRC
179 Bonus
|
Audit
Additions Disposals Adjustments
|
Ending Balance
12/31/2018 NBV
|
|||||||
9
Cultivation5/17/2017
|
61,353.00
|
- - -
|
61,353.00
|
(35,060.00) -
|
- (7,512.00) - -
|
(42,572.00) 18,781.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
10
Cultivation5/31/2017
|
4,772.00
|
- - -
|
4,772.00
|
(2,727.00) -
|
- (584.00) - -
|
(3,311.00) 1,461.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
11
Cultivation8/7/2017
|
11,640.00
|
- - -
|
11,640.00
|
(6,652.00) -
|
- (1,425.00) - -
|
(8,077.00) 3,563.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
12
Cultivation8/8/2017
|
3,394.00
|
- - -
|
3,394.00
|
(1,940.00) -
|
- (415.00) - -
|
(2,355.00) 1,039.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
13
Cultivation8/23/2017
|
3,086.00
|
- - -
|
3,086.00
|
(1,764.00) -
|
- (378.00) - -
|
(2,142.00) 944.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
14
Cultivation8/24/2017
|
4,725.00
|
- - -
|
4,725.00
|
(2,701.00) -
|
- (578.00) - -
|
(3,279.00) 1,446.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
15
Cultivation8/29/2017
|
3,151.00
|
- - -
|
3,151.00
|
(1,801.00) -
|
- (386.00) - -
|
(2,187.00) 964.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
16
Cultivation8/31/2017
|
2,722.00
|
- - -
|
2,722.00
|
(1,556.00) -
|
- (333.00) - -
|
(1,889.00) 833.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
17
Cultivation9/12/2017
|
10,500.00
|
- - -
|
10,500.00
|
(6,000.00) -
|
- (1,286.00) - -
|
(7,286.00) 3,214.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
18
Cultivation9/14/2017
|
3,227.00
|
- - -
|
3,227.00
|
(1,845.00) -
|
- (395.00) - -
|
(2,240.00) 987.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
19
Cultivation9/21/2017
|
2,326.00
|
- - -
|
2,326.00
|
(1,329.00) -
|
- (285.00) - -
|
(1,614.00) 712.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
20 Lab 4/7/2017
|
97,736.00
|
- - -
|
97,736.00
|
(58,642.00) -
|
- (15,638.00) - -
|
(74,280.00) 23,456.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
21 Lab 4/27/2017
|
3,750.00
|
- - -
|
3,750.00
|
(2,250.00) -
|
- (600.00) - -
|
(2,850.00) 900.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
22 Lab 4/28/2017
|
3,968.00
|
- - -
|
3,968.00
|
(2,381.00) -
|
- (635.00) - -
|
(3,016.00) 952.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
23 Lab 5/9/2017
|
9,068.00
|
- - -
|
9,068.00
|
(5,441.00) -
|
- (1,451.00) - -
|
(6,892.00) 2,176.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
24 Lab 5/12/2017
|
15,613.00
|
- - -
|
15,613.00
|
(9,368.00) -
|
- (2,498.00) - -
|
(11,866.00) 3,747.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
25 Lab 5/19/2017
|
33,418.00
|
- - -
|
33,418.00
|
(20,051.00) -
|
- (5,347.00) - -
|
(25,398.00) 8,020.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
26 Lab 5/23/2017
|
6,331.00
|
- - -
|
6,331.00
|
(3,799.00) -
|
- (1,013.00) - -
|
(4,812.00) 1,519.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
27 Lab 5/26/2017
|
6,247.00
|
- - -
|
6,247.00
|
(3,749.00) -
|
- (999.00) - -
|
(4,748.00) 1,499.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
28 Lab 5/30/2017
|
13,552.00
|
- - -
|
13,552.00
|
(8,131.00) -
|
- (2,168.00) - -
|
(10,299.00) 3,253.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
29 Lab 6/23/2017
|
26,054.00
|
- - -
|
26,054.00
|
(15,633.00) -
|
- (4,168.00) - -
|
(19,801.00) 6,253.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
30 Lab 7/24/2017
|
5,387.00
|
- - -
|
5,387.00
|
(3,233.00) -
|
- (862.00) - -
|
(4,095.00) 1,292.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
31 Lab 8/1/2017
|
31,065.00
|
- - -
|
31,065.00
|
(18,640.00) -
|
- (4,970.00) - -
|
(23,610.00) 7,455.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
32 Office 5/10/2017
|
2,558.00
|
- - -
|
2,558.00
|
(1,535.00) -
|
- (409.00) - -
|
(1,944.00) 614.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
33 Office 5/23/2017
|
3,407.00
|
- - -
|
3,407.00
|
(2,045.00) -
|
- (545.00) - -
|
(2,590.00) 817.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
34 Office 5/23/2017
|
2,806.00
|
- - -
|
2,806.00
|
(1,684.00) -
|
- (449.00) - -
|
(2,133.00) 673.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
35 Truck 5/1/2017
|
41,000.00
|
- - -
|
41,000.00
|
(24,600.00) -
|
- (6,560.00) - -
|
(31,160.00) 9,840.00
|
|||||||
36
Warehouse5/12/2017
|
17,080.00
|
- - -
|
17,080.00
|
(9,760.00) -
|
- (2,091.00) - -
|
(11,851.00) 5,229.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
37
Warehouse7/5/2017
|
46,312.00
|
- - -
|
46,312.00
|
(26,464.00) -
|
(5,671.00) - -
|
(32,135.00) 14,177.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
38
Warehouse8/8/2017
|
3,694.00
|
- - -
|
3,694.00
|
(2,111.00) -
|
- (452.00) - -
|
(2,563.00) 1,131.00
|
|||||||
Equipment
|
|
|
|
|
|
|
|||||||
39 Building 3/13/2017
|
306,726.00
|
- - -
|
306,726.00
|
(6,226.00) -
|
- (7,865.00) - -
|
(14,091.00)292,635.00
|
|||||||
Improvements
|
|
|
|
|
|
|
|||||||
40 3/30/2017
|
15,000.00
|
- - -
|
15,000.00
|
(305.00) -
|
- (385.00) - -
|
(690.00) 14,310.00
|
|||||||
Architectural
Costs
|
|
|
|
|
|
|
|||||||
41 Building 4/7/2017
|
100,000.00
|
- - -
|
100,000.00
|
(1,816.00) -
|
- (2,564.00) - -
|
(4,380.00) 95,620.00
|
|||||||
Improvements
|
|
|
|
|
|
|
|||||||
43
Leasehold5/31/2017
|
980,953.00
|
- - -
|
980,953.00
|
(515,001.00) -
|
- (46,595.00) - -
|
(561,596.00)419,357.00
|
|||||||
Improvements
|
|
|
|
|
|
|
|||||||
44 Building 4/25/2017
|
25,000.00
|
- - -
|
25,000.00
|
(454.00) -
|
- (641.00) - -
|
(1,095.00) 23,905.00
|
|||||||
Improvements
|
|
|
|
|
|
|
|||||||
45 Building 4/26/2017
|
43,198.00
|
- - -
|
43,198.00
|
(785.00) -
|
- (1,108.00) - -
|
(1,893.00) 41,305.00
|
|||||||
Improvements
- Alarm
|
|
|
|
|
|
|
|||||||
46 Land 5/25/2017
|
3,926.00
|
- - -
|
3,926.00
|
(2,061.00) -
|
- (187.00) - -
|
(2,248.00) 1,678.00
|
|||||||
Improvements
|
|
|
|
|
|
|
|||||||
47 6/5/2017
|
14,661.00
|
- - -
|
14,661.00
|
(204.00) -
|
- (376.00) - -
|
(580.00) 14,081.00
|
|||||||
Architectural
Costs
|
|
|
|
|
|
|
|||||||
48 7/25/2017
|
5,359.00
|
- - -
|
5,359.00
|
(63.00) -
|
- (137.00) - -
|
(200.00) 5,159.00
|
|||||||
Architectural
Costs
|
|
|
|
|
|
|
|||||||
49 Building 6/23/2017
|
78,610.00
|
- - -
|
78,610.00
|
(1,092.00) -
|
- (2,016.00) - -
|
(3,108.00) 75,502.00
|
|||||||
Improvements
|
|
|
|
|
|
|
|||||||
50
Machinery8/11/2017
|
5,200.00
|
- - -
|
5,200.00
|
(3,120.00) -
|
- (832.00) - -
|
(3,952.00) 1,248.00
|
|||||||
&
Equipment
|
|
|
|
|
|
|
|||||||
51
Machinery8/18/2017
|
2,925.00
|
- - -
|
2,925.00
|
(1,756.00) -
|
- (468.00) - -
|
(2,224.00) 701.00
|
|||||||
&
Equipment
|
|
|
|
|
|
|
|||||||
52 Building 8/23/2017
|
2,550.00
|
- - -
|
2,550.00
|
(24.00) -
|
- (65.00) - -
|
(89.00) 2,461.00
|
|||||||
Improvements
|
|
|
|
|
|
|
|||||||
53 Building 9/5/2017
|
7,538.00
|
- - -
|
7,538.00
|
(56.00) -
|
- (193.00) - -
|
(249.00) 7,289.00
|
|||||||
Improvements
|
|
|
|
|
|
|
|||||||
54 HVAC's 5/31/2017
|
128,016.00
|
- - -
|
128,016.00
|
(2,051.00) -
|
- (3,282.00) - -
|
(5,333.00) 122,683.00
|
|||||||
55 Water 5/31/2017
|
17,307.00
|
- - -
|
17,307.00
|
(10,385.00) -
|
- (2,769.00) - -
|
(13,154.00) 4,153.00
|
|||||||
Filtration
|
|
|
|
|
|
|
|||||||
56 Bench 5/31/2017
|
21,595.00
|
- - -
|
21,595.00
|
(12,341.00) -
|
- (2,644.00) -
|
( 14,985.00) 6,610.00
|
|||||||
System
|
|
|
|
|
|
|
|||||||
57 Lighting 5/31/2017
|
29,133.00
|
- - -
|
29,133.00
|
0 (16,648.00) -
|
- (3,567.00) - -
|
(20,215.00) 8,918.00
|
|||||||
63
Leasehold 02/27/2018
|
-
|
8,990.00 - -
|
8,990.00
|
- -
|
(202.00) - -
|
(202.00) 8,788.00
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
64
Leasehold 03/15/2018
|
-
|
5,981.50 - -
|
5,981.50
|
- -
|
(121.00) - -
|
(121.00) 5,860.50
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
65
Leasehold 04/17/2018
|
-
|
5,981.50 - -
|
5,981.50
|
- -
|
(108.00) - -
|
(108.00) 5,873.50
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
66
Leasehold 06/04/2018
|
-
|
350,000.00 - -
|
350,000.00
|
- -
|
(4,861.00) - -
|
(4,861.00) 345,139.00
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
67
Leasehold 06/13/2018
|
-
|
150,000.00 - -
|
150,000.00
|
- -
|
(2,083.00) - -
|
(2,083.00) 147,917.00
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
68
Leasehold 06/18/2018
|
-
|
9,500.00 - -
|
9,500.00
|
- -
|
(132.00) - -
|
(132.00) 9,368.00
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
69
Leasehold 07/16/2018
|
-
|
128,315.29 - -
|
128,315.29
|
- -
|
(1,508.00) - -
|
(1,508.00) 126,807.29
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
70
Leasehold 07/26/2018
|
-
|
26,470.23 - -
|
26,470.23
|
- -
|
(311.00) - -
|
(311.00) 26,159.23
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
71
Leasehold 07/27/2018
|
-
|
200,000.00 - -
|
200,000.00
|
- -
|
(2,350.00) - -
|
(2,350.00) 197,650.00
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
72
Leasehold 07/30/2018
|
-
|
3,200.00 - -
|
3,200.00
|
- -
|
(38.00) - -
|
(38.00) 3,162.00
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
73
Leasehold 08/03/2018
|
-
|
100,000.00 - -
|
100,000.00
|
- -
|
(962.00) - -
|
(962.00) 99,038.00
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
74
Leasehold 08/08/2018
|
-
|
6,546.03 - -
|
6,546.03
|
- -
|
(63.00) - -
|
(63.00) 6,483.03
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
75
Leasehold 08/08/2018
|
-
|
12,694.34 - -
|
12,694.34
|
- -
|
(122.00) - -
|
(122.00) 12,572.34
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
76
Leasehold 08/09/2018
|
-
|
400,000.00 - -
|
400,000.00
|
- -
|
(3,846.00) - -
|
(3,846.00) 396,154.00
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
77
Leasehold 08/17/2018
|
-
|
140,000.00 - -
|
140,000.00
|
- -
|
(1,346.00) - -
|
(1,346.00) 138,654.00
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
78
Leasehold 08/17/2018
|
-
|
200,000.00 - -
|
200,000.00
|
- -
|
(1,923.00) - -
|
(1,923.00) 198,077.00
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
79
Leasehold 08/23/2018
|
-
|
5,089.59 - -
|
5,089.59
|
- -
|
(49.00) - -
|
(49.00) 5,040.59
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
80
Leasehold 08/31/2018
|
-
|
100,000.00 - -
|
100,000.00
|
- -
|
(962.00) - -
|
(962.00) 99,038.00
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
81
Leasehold 10/12/2018
|
-
|
2,725.00 - -
|
2,725.00
|
- -
|
(15.00) - -
|
(15.00) 2,710.00
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
82
Leasehold 11/01/2018
|
-
|
147,560.00 - -
|
147,560.00
|
- -
|
(473.00) - -
|
(473.00) 147,087.00
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
83
Leasehold 11/16/2018
|
-
|
14,905.00 - -
|
14,905.00
|
- -
|
(48.00) - -
|
(48.00) 14,857.00
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
84
Leasehold 11/20/2018
|
-
|
25,800.00 - -
|
25,800.00
|
- -
|
(83.00) - -
|
(83.00) 25,717.00
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
85
Leasehold 12/14/2018
|
-
|
100,000.00 - -
|
100,000.00
|
- -
|
(107.00) - -
|
(107.00) 99,893.00
|
|||||||
Improvements
|
|
|
|
-
|
|
|
|||||||
86
Cultivation 03/06/2018
|
-
|
19,193.00 - -
|
19,193.00
|
- -
|
(390.00) - -
|
(390.00) 18,803.00
|
|||||||
Expansion
|
|
|
|
-
|
|
|
|||||||
87
Cultivation 03/26/2018
|
-
|
100,000.00 - -
|
100,000.00
|
- -
|
(2,030.00) - -
|
(2,030.00) 97,970.00
|
|||||||
Expansion
|
|
|
|
-
|
|
|
|||||||
88
Cultivation 05/17/2018 Expansion
|
-
|
100,000.00 - -
|
100,000.00
|
- -
-
|
(1,603.00) - -
|
(1,603.00) 98,397.00
|
|||||||
89
Lab Equipment
|
02/22/2018
|
|
30,674.0
|
- -
30,674.00
|
- -
(30,674
00)
|
-
(30,674.00)
|
|
|
|||||
|
|
0
|
|
|
|
|
|
|
|||||
90 Lab
|
02/28/2018
|
|
|
- -
|
- -
|
-
|
|
|
|||||
Equipment
|
|
|
10,100.0
|
10,100.00
|
(10,100
00)
|
(10,100.00)
|
|
|
|||||
|
|
0
|
|
|
|
|
|
|
|||||
91 Lab
|
06/12/2018
|
|
|
- -
|
- -
|
-
|
|
|
|||||
Equipment
|
|
|
52,167.1
|
52,167.16
|
(52,167
16)
|
(52,167.16)
|
|
|
|||||
|
|
6
|
|
|
|
|
|
|
|||||
92 Lab
|
06/12/2018
|
|
|
|
|
|
|
|
54
Equipment
|
|
|
10,100.0
|
10,100.00
|
|
(10,100
00)
|
|
(10,100.00)
|
|
|
0
|
|
|
|
|
|
|
|
|
93
Lab
|
06/15/2018
|
|
|
-
|
|
-
|
-
|
-
|
-
|
Equipment
|
|
|
7,036.2
|
7,036.25
|
|
(7,036.25)
|
|
(7,036.25)
|
|
|
5
-
|
|
-
-
|
- -
|
|
-
-
|
-
|
-
-
|
-
|
42
Licenses
|
5/31/2017
|
1,443,224.00
|
- -
|
- 1,443,224.00
|
(56,125.00) -
|
-
|
(96,215.00) -
|
|
- (152,340.00) 1,290,884.00
|
|
|
3,710,863.00
|
2,473,028.89 -
|
- 6,183,891.89
|
(913,405.00) -
|
(110,077.41)
|
(267,748.00) -
|
|
- (1,291,230.41) 4,892,661.48
|
55
Schedule 4.10(b)
Intellectual Property
All intellectual property rights to those biological assets such as
strains and genetics currently located within
the Leased Premises of Seller, and any biological assets or
inventory resulting therefrom entered into
Metrc following June 16, 2020 and up through the Effective Date of
this Agreement.
56
Schedule 4.11
Contracts
(i)
None.
(ii)
0.Xxxxx Agreement, dated April 7, 2017, by and
between Waters Technologies Corporation and West Coast Development
Nevada, LLC (the "Nevada Waters Tech
Agreement").
(iii)
1. The
Option.
(iv)
1. The
Option
2. The
Nevada Lease.
(iv)
None.
(vi)
None.
(vii)
None.
(viii)
1. The
Xxxx Xxxxx Settlement Agreement.
2. The
Option.
(ix)
57
1. The
DCL Loan.
2. The B
Nevada Loan.
3. Promissory Note, dated May 2, 2017, by W The
Brand LLC, in favor of Xxxxx X. Xxxxxxxx, as modified by that
certain Loan Modification Agreement, dated September 7, 2017, by
and among W The Brand, LLC, Xxxxx X. Xxxxxxxx, R. Xxxxx Xxxxxxx,
Xxxxxxxx Food & Beverage, Inc. KCD Holdings, LLC, BDWK, LLC,
Xxxxxxxx Xxxxx Properties, LLC, and Midnight Diner, LLC, and that
certain Second Loan Modification, dated October 31, 2018
(collectively, the "Xxxxxxxx
Loan").
4.
The Nevada Lease.
(x)
None.
(xi)
1. The
Xxxx Xxxxxxxx Employment Agreement
2. The
Restricted Equity Grant.
(xii)
None.
(xiii)
1. The
Restricted Equity Grant.
2. The
DCL Loan.
3. The
B Nevada Loan.
(xiv)
None
(xv)
None.
58
(xvi)
None
(xvii)
None.
(xviii)
1. The
Nevada Lease.
(xix)
None.
(xx)
None.
(xxi)
None.
59
Schedule 4.12(a) and (b)
Employee Census
(a) Employee
Census
1. See attached.
(b) Fringe
Benefits
1. See attached.
60
Schedule 4.12(c)
Labor Matters
1. On March 4, 2019, Xxxxx
Xxxxx, a former Regional Sales Manager of W Vapes and Seller, filed
a complaint in the Eighth Judicial District Court of Xxxxx County,
Nevada (Case No. A-19790393-C), alleging that she was owed 5% in
commissions on her gross sales and was only paid 2.5% commission.
The complaint seeks relief for (i) wage and benefits deprivation;
(ii) failure to timely pay all wages due and owing upon termination
pursuant to NRS 608.140 and 608.020.050; and (iii) unjust
enrichment/quantum meruit.
61
Schedule 4.15(a)
Compliance with Laws; Permits
1. Seller may be in violation of Xxxxx County law requiring a Xxxxx
County Marijuana Support Business License be obtained by a
purchaser of a business during the transition period after its
purchase of the Nevada licenses from the Sweet Goldy, LLC and Sweet
Goldy Production, LLC until such time as those licenses are
transferred to West Coast Development Nevada, LLC. To date, Nevada
Seller has not obtained such Xxxxx County Marijuana Support
Business License.
62
Schedule 4.17
Environmental Matters
None.
63
Schedule 4.18(a)
Insurance Policies
Insurer
|
Policy
No.
|
Nature
of Coverage
|
Risk
Insured
|
Deductible
|
Policy
Period
|
Traveler’s
|
6JUB-
|
Workers
|
Bodily
Injury
|
N/A
|
06/30/2018
–
|
Property
and
|
1K47406-A-
|
Compensation
|
by
Accident;
|
|
06/30/2019
|
Casualty
Company of
|
18
|
and
Employers
|
Bodily
Injury by Disease
|
|
|
America
|
|
Liability
|
|
|
|
|
|
Policy
|
|
|
|
Country
|
P27A5108162
|
Automobile
|
Bodily
Injury
|
$500
|
05/27/2019
–
|
Preferred
|
|
Policy
|
Liability;
|
|
11/27-2019
|
Insurance
|
|
|
Property
|
|
|
Company
|
|
|
Damage
|
|
|
|
|
|
Liability
|
|
|
64