PURCHASE AGREEMENT BY AND AMONG LOWELL SR, LLC, LOWELL FARMS INC., MICHAEL GREGORY, C QUADRANT LLC AND AMAG HOLDINGS, LLC JUNE 29, 2021
Exhibit
10.1
BY AND AMONG
XXXXXX XX, LLC,
XXXXXX FARMS INC.,
XXXXXXX XXXXXXX,
C QUADRANT LLC
AND
AMAG HOLDINGS, LLC
TABLE
OF CONTENTS
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ARTICLE I PURCHASE AND SALE
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Page
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Section
1.1
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Purchased
Assets.
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1
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Section
1.2
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Closing
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3
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Section
1.3
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Purchase
Price; Closing Payments and Deliveries.
|
3
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|
Section
1.4
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Tax
Withholding.
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6
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Section
1.5
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Purchase
Price Allocation
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7
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ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLERS
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|
|
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Section
2.1
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Organization
and Related Matters.
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7
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Section
2.2
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Authorization
and Enforceability
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7
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|
Section
2.3
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Ownership
of Seller Entities.
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8
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Section
2.4
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Conflicts;
Consents of Third Parties.
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8
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Section
2.5
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Balance
Sheet
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9
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Section
2.6
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No
Undisclosed Liabilities.
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9
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Section
2.7
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Absence
of Certain Developments.
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9
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Section
2.8
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Taxes.
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9
|
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Section
2.9
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Personal
Property Assets; Title; Condition of Assets
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10
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Section
2.10
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Intellectual
Property.
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10
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|
Section
2.11
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Compliance
with Laws; Permits.
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10
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Section
2.12
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Employee
Benefits.
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11
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Section
2.13
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Litigation.
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11
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Section
2.14
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Environmental
Matters.
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12
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Section
2.15
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Insurance.
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12
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Section
2.16
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Real
Property.
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12
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Section
2.17
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Related
Party Transactions
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14
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Section
2.18
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Brokers
Fees
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14
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|
Section
2.19
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Investment
Representations.
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14
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Section
2.20
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No
Misrepresentation
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15
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ARTICLE
III REPRESENTATIONS AND WARRANTIES OF PARENT AND
PURCHASER
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|
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Section
3.1
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Organization
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15
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Section
3.2
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Authorization
and Enforceability
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15
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Section
3.3
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Capitalization.
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15
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Section
3.4
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Conflicts;
Consent of Third Parties
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16
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Section
3.5
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Share
Consideration
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16
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Section
3.6
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Brokers
Fees
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16
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ARTICLE IV COVENANTS
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|
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Section
4.1
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Conduct
Prior to Closing
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16
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Section
4.2
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Access
to Information
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17
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Section
4.3
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Further
Assurances.
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17
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Section
4.4
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Share
Registration.
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18
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Section
4.5
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Transfer
Restrictions.
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21
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Section
4.6
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Record
Retention
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23
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Section
4.7
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Public
Announcements
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24
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Section
4.8
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Tax
Covenants.
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24
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Section
4.9
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Confidentiality
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24
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Section
4.10
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Non-Competition
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25
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Section
4.11
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Non-Solicitation.
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25
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Section
4.12
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Release
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25
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Section
4.13
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Exclusivity
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26
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Section
4.14
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Notices
of Events
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27
|
i
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ARTICLE V CONDITIONS TO CLOSING
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|
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Section
5.1
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Closing
Conditions of Purchaser
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27
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Section
5.2
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Closing
Conditions of the Sellers
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28
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ARTICLE VI Termination
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|
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Section
6.1
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Termination
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28
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Section
6.2
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Effect
of Termination
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29
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ARTICLE VII
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INDEMNIFICATION
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Section
7.1
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Survival
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29
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Section
7.2
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Indemnity
Obligations of Seller Parties.
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29
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Section
7.3
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Indemnity
Obligations of Purchaser.
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30
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Section
7.4
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Indemnification
Procedures; Limitations.
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30
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Section
7.5
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Certain
Determinations
|
32
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Section
7.6
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Release
of Escrow Shares
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32
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Section
7.7
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Treatment
of Indemnification Payments
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32
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ARTICLE VIII MISCELLANEOUS
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|
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Section
8.1
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The
Representative.
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32
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Section
8.2
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Expenses
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33
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Section
8.3
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Governing
Law; Jurisdiction; Venue
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33
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Section
8.4
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Entire
Agreement; Amendments and Waivers
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34
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Section
8.5
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Section
Headings
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34
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Section
8.6
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Notices
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34
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Section
8.7
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Severability
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35
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Section
8.8
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Binding
Effect; Assignment; Third-Party Beneficiaries
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35
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Section
8.9
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Counterparts
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35
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Section
8.10
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Remedies
Cumulative
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36
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Section
8.11
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Exhibits
and Schedules
|
36
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Section
8.12
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Interpretation
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36
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Section
8.13
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Arm’s
Length Negotiations
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36
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Section
8.14
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Construction
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36
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Section
8.15
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Specific
Performance
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37
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Section
8.16
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Waiver
of Jury Trial
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37
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ARTICLE IX CERTAIN DEFINITIONS
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Section
9.1
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Definitions.
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37
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Exhibit
A:
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Escrow
Agreement
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Exhibit
B:
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Title Policy Pro
Forma
|
ii
THIS PURCHASE
AGREEMENT (this “Agreement”), dated as of
June 29, 2021, is by and among
Xxxxxx XX, LLC, a California limited liability company (“Purchaser”), Xxxxxx Farms
Inc., a British Columbia corporation (“Parent”), Xxxxxxx Xxxxxxx
(“Controlling
Owner” and, together with Sellers (as defined below),
“Seller
Parties”), C Quadrant LLC, a California limited liability company
(“C
Quadrant”), AMAG Holdings, LLC, a Wyoming limited
liability company (“AMAG”
and, together with C Quadrant, “Sellers,”
and each, a “Seller”),
and Xxxxxxx Xxxxxxx, as representative under Section 8.1 (in such capacity,
the “Representative”). Seller
Parties, Purchaser and Parent are sometimes referred to herein
collectively as the “Parties,” and each
individually as a “Party.” Capitalized terms
used and not otherwise defined herein have the meanings assigned to
them in ARTICLE
IX.
WHEREAS, C Quadrant
(a) owns certain equipment and other tangible personal property and
certain intellectual property described herein, (b) is the sole
member of AMAG, which owns real property located at 20800 Xxxxxx
Road in Salinas, California and (c) is the sole member of 20800
Xxxxxx Xx LLC, a California limited liability company
(“Xxxxxx
Xx” and, together with C Quadrant and AMAG,
“Seller
Entities”), which holds certain State of California
and Monterey County permits and licenses described herein to
conduct the business of cannabis drying, trimming, packaging,
extraction and processing at the Xxxxxx Road Real Property (the
“Business”);
and
WHEREAS, on the
Closing Date, the Parties desire for Purchaser to purchase the
Assets and assume the Assumed Liabilities, in each case, subject to
the terms and conditions set forth herein.
NOW, THEREFORE, in
consideration of the mutual covenants, representations and
warranties made herein and other good and valuable consideration,
the receipt and sufficiency of which hereby are acknowledged, the
Parties agree as follows:
ARTICLE
I
(a) Acquisition of Real Property
Assets. Subject to the terms and conditions set forth
herein, on the Closing Date, (i) AMAG shall sell, assign, transfer,
convey and deliver to Purchaser, and Purchaser shall purchase from
AMAG, good and marketable title to the Xxxxxx Road Real Property,
free and clear of all Liens, other than Permitted Liens, and (ii)
Sellers shall sell, assign, transfer, convey and deliver to
Purchaser, and Purchaser shall purchase from Sellers, all of
Sellers’ right, title and interest in the remaining Real
Property Assets, free and clear of all Liens, other than Permitted
Liens.
(b) Acquisition of Personal Property
Assets. On the terms and conditions set forth herein, on the
Closing Date, Sellers shall sell, assign, transfer, convey and
deliver to Purchaser, and Purchaser shall purchase from Sellers,
free and clear of all Liens, other than Permitted Liens, all of
Sellers’ right, title and interest in and to the
Sellers’ assets other than the Real Property Assets and the
Excluded Assets (collectively, the “Personal Property
Assets”), including the following:
(i) all tangible
personal property, including the furniture, fixtures, equipment and
other personal property set forth on Schedule 1.1(b)(i) hereto (the
“Equipment”);
(ii) the Tower Site
Lease Agreement dated May 11, 2020 between C Quadrant and
Razzolink, Inc. (the “Razzolink
Lease”);
(iii) all Intellectual
Property Rights, including the API GMP extraction and manufacturing
process designs, protocols and know-how listed or described on
Schedule
1.1(b)(iii) hereto;
(iv) the outstanding
membership interests in Xxxxxx Xx (the “Xxxxxx Xx
Equity”);
(v) all Books and
Records; and
(vi) all Actions and
rights of recovery available to Sellers against third parties
(including insurers) with respect to the Assets or the Assumed
Liabilities, whether arising by way of direct claim, counterclaim
or otherwise.
(c) Excluded Assets.
Notwithstanding the foregoing, the Assets shall not include any of
following assets (all such assets listed in clauses (i) to (iv) below, collectively, the
“Excluded
Assets”):
(i) All cash and
deposit accounts;
(ii) the advances and
pre-paid deposits listed on Schedule
1.1(c)(ii);
(iii) any Equity
Interests held by any of Sellers other than the Xxxxxx Xx
Equity;
(iv) Contracts other
than the Razzolink Lease (the “Excluded Contracts”), it
being understood that the AT&T Dedicated Internet Pricing
Schedule between Xxxxxx Xx and AT&T Corp. (the
“AT&T
Agreement”) will remain with Xxxxxx Xx following the
Closing;
(v) other than with
respect to Xxxxxx Xx, Sellers’ organizational records, such
as minute books, seals and similar items;
(vi) all insurance
policies maintained by Sellers; and
(vii) the rights which
accrue or will accrue to Sellers under this Agreement and the other
Transaction Documents.
(d) Assumed Liabilities. Subject to
the terms and conditions set forth herein, effective as of the
Closing, Purchaser shall assume and agree to pay, perform and
discharge those Liabilities of C Quadrant arising under the
Razzolink Lease after the Closing (other than any such Liabilities
that are based on, arise from or relate to any breach, default or
violation thereof by C Quadrant on or prior to the Closing Date)
(collectively, the “Assumed
Liabilities”).
(e) Excluded Liabilities.
Notwithstanding any other provision in this Agreement to the
contrary, Purchaser shall not assume and shall not be responsible
to pay, perform or discharge any Liabilities of Sellers or any of
their Affiliates of any kind or nature whatsoever, whether
presently in existence or arising hereafter, other than the Assumed
Liabilities (the “Excluded Liabilities”).
Sellers shall be solely responsible for all Excluded Liabilities
and shall, and shall cause each of their Affiliates to, pay and
satisfy in due course all Excluded Liabilities. Without limiting
the generality of the foregoing, the Excluded Liabilities shall
include the following:
2
(i) all Liabilities of
Sellers arising or incurred in connection with the negotiation,
preparation, investigation and performance of this Agreement, the
other Transaction Documents and the transactions contemplated
hereby and thereby;
(ii) all Liabilities of
Sellers for Indemnified Taxes;
(iii) all Liabilities in
respect of any pending or threatened Action;
(iv) all Environmental
Claims and all other Liabilities under Environmental Laws arising
out of or relating to any actions or omissions of Sellers or any
facts, circumstances or conditions existing on or prior to the
Closing;
(v) all Liabilities to
indemnify, reimburse or advance amounts to any present or former
officer, director, employee or agent of any Seller (including with
respect to any breach of fiduciary obligations by
same);
(vi) all Liabilities
under the Excluded Contracts;
(vii) all Indebtedness of
any Seller and all Liabilities associated therewith;
(viii) all Liabilities
arising out of, in respect of or in connection with the failure by
any Seller or any of its Affiliates to comply with any Law or
Order;
(ix) Liabilities of any
kind or nature whatsoever to any direct or indirect investor in C
Quadrant or any of its Affiliates; and
(x) all Liabilities of
any Seller to the extent arising out of the operation or conduct by
such Seller of any business or operating activities.
Section
1.2 Closing. Upon the terms
and subject to the conditions set forth in this Agreement, the
closing of the Transaction (the “Closing”) shall take
place at the offices of Akerman LLP, 1251 Avenue of the Xxxxxxxx,
00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as shall be
agreed to by Purchaser and the Representative, at 10:00 a.m.
Pacific time on the third (3rd) business day
following the satisfaction or waiver of each of the conditions set
forth in Article VI
(excluding conditions that, by their terms, cannot be satisfied
until the Closing, but the Closing shall be subject to the
satisfaction or waiver of those conditions) or at such other time
or on such other date as shall be agreed to by Purchaser and the
Representative. The date upon which the Closing occurs hereunder is
referred to herein as the “Closing
Date.”
(a) The aggregate
consideration to be paid by Purchaser for the Assets shall consist
of $9,000,000 in cash (the “Cash Consideration”) and
7,997,520 Parent Shares (the “Share
Consideration”).
(b)
(i) The following items
shall be allocated between Purchaser and Sellers as of the Closing
Date as follows:
(A) Real property
Taxes, which shall be prorated between Purchaser and Sellers for
the year in which the Closing occurs based on the number of days
elapsed prior Closing. Such Taxes shall be prorated at Closing
based on the most recent invoices received, subject to further
adjustment when the rate and assessed value for the applicable
period is fixed.
3
(B) All other personal
property and ad valorem Taxes assessable against any of the Assets,
which shall be prorated between Purchaser and Sellers for the year
in which the Closing occurs based on the number of days elapsed
prior Closing. Such Taxes shall be prorated at Closing based on the
most recent invoices received, subject to further adjustment when
the rate and assessed value for the applicable period is
fixed.
(C) Utility charges
shall be paid by Sellers through the Closing Date. Any xxxx that
covers a period both before and after the Closing Date, whether
payable prior to or after the Closing Date, will be prorated
between Purchaser and Sellers as of the Closing Date. Deposits held
by utility companies will be refunded to Sellers.
(D) The cost of the
AT&T Agreement shall be prorated between Purchaser and Sellers
for the month in which the Closing occurs based on the number of
days elapsed prior Closing.
(ii) Purchaser and the
Representative shall prepare a calculation of the above allocations
and the net amount due to Sellers (the “Proration Amount”), which
may be positive or negative, will be paid to Sellers or deducted
from the Cash Consideration, as applicable, at the Closing. If any
amounts cannot be determined or if adjustments or errors in the
initial calculation of the Proration Amount are discovered or occur
after the Closing (including because of a reassessment of the
Xxxxxx Road Real Property by any taxing authority), Purchaser and
the Representative shall prepare a reconciliation and make such
additional adjustments post-Closing as are necessary to give effect
to the above allocations. For the avoidance of doubt, Sellers shall
bear the entire cost of any retroactive reassessment of the Xxxxxx
Road Real Property by any taxing authority.
(c) At least three (3)
Business Days prior to the Closing Date, the Representative shall
have prepared, executed and delivered to Purchaser a certificate,
which shall be reasonably acceptable to Purchaser (the
“Closing Payoff
Certificate”), setting forth (i) the amount of all
outstanding Indebtedness of Seller Entities and their subsidiaries
as of immediately prior to the Closing and instructions regarding
the payoff or discharge of all such Indebtedness and (ii) the
Proration Amount.
(d) At the Closing,
Purchaser shall:
(A) (x) pay the
amount of all Indebtedness as provided in the Closing Payoff
Certificate to the Persons to whom such payments are due and (y)
pay an amount equal to (I) the Cash Consideration minus (II) the amount of such
Indebtedness minus
(III) the cost of the owner’s title policy issued to
Purchaser by the Title Company in respect of the Closing (excluding
the cost of extended coverage and related endorsements)
plus (IV) the
Proration Amount to Sellers in accordance with payments
instructions provided by the Representative to
Purchaser;
4
(B) issue to C
Quadrant, in accordance with instructions provided by the
Representative, a number of Parent Shares equal to the Share
Consideration minus the Escrow Shares; and
(C) deposit with the
Escrow Agent the Escrow Shares in accordance with the terms of an
escrow agreement by and among Purchaser, the Representative and the
Escrow Agent, in substantially the form attached hereto as
Exhibit A (the
“Escrow
Agreement”);
(e) At the Closing,
Sellers shall deliver (or caused to be delivered) the following to
Purchaser:
(i) (A) the Xxxxxx Road
Real Property Deed and all affidavits and other instruments
required to convey good and marketable title to the Xxxxxx Road
Real Property to Purchaser and/or required by a title company
selected by Purchaser (the “Title Company”) to issue
owner’s and lender’s ALTA (or TLTA, as appropriate)
title policies for the Xxxxxx Road Real Property in amounts
determined by Purchaser and its lenders, respectively, including
owner’s affidavits, no-lien, possession and gap affidavits
and non-imputation affidavits and indemnifications, (B) a xxxx of
sale (the “Xxxx of
Sale”), duly executed by Sellers, transferring the
Personal Property Assets and the personal property included in the
Real Property Assets to Purchaser, (C) such other customary
instruments of transfer, assumptions and other filings and
documents as may be required by Purchaser to give effect to the
assignment, transfer and conveyance of the Assets, all in form and
substance satisfactory to Purchaser and its lenders and the Title
Company and (D) an instrument in form and substance satisfactory to
Purchaser pursuant to which Seller Parties and their Affiliates
relinquish all leasehold, license, occupancy, easement or other
rights with respect to the Xxxxxx Road Real Property and all other
interests in the Assets (the “Seller
Quitclaim”);
(ii) an assignment and
assumption agreement in form and substance satisfactory to
Purchaser (the “Assumption Agreement”)
and duly executed by Sellers, effecting the assignment to and
assumption by Purchaser of the Assumed Liabilities;
(iii) undertakings from
(A) each Seller and (B) Controlling Owner, as the sole manager of
each Seller, not to liquidate any Seller unless adequate provision
is made for the payment and satisfaction of its Liabilities,
including any Liabilities under ARTICLE VII;
(iv) the Escrow
Agreement, duly executed by the Representative and the Escrow
Agent;
(v) payoff letters from
the applicable lenders with respect to all outstanding Indebtedness
of Sellers and evidence reasonably satisfactory to Purchaser that
all Liens (other than Permitted Liens) affecting the Assets will be
released upon the consummation of the Closing (including, where
applicable, Lien releases in recordable form and UCC termination
statements authorized to be filed by Purchaser upon the
consummation of the Closing);
(vi) evidence reasonably
acceptable to Purchaser that all State of California and Monterey
County permits and licenses necessary for the post-Closing
operation of the Business at the Xxxxxx Road Real Estate have been
obtained and are in full force and effect and good
standing;
(vii) [Omitted];
(viii) evidence of
cancellation of all insurance policies maintained by Xxxxxx
Xx;
5
(ix) [Omitted];
(x) a certificate of
non-foreign status as described in Treasury Regulation Section
1.1445-2(b)(2) for each Seller;
(xi) a certificate
(which certificate shall be in form and substance reasonably
satisfactory to Purchaser) signed by the Sellers and dated as of
the Closing Date to the effect that each of the conditions
specified in Sections
5.1(a) through (c) has been satisfied in all
respects; and
(xii) certificates,
signed by an authorized officer of each Seller Entity, dated as of
the Closing Date, attaching certified copies of the organizational
documents of such Seller Entity and resolutions of each Seller
Entity’s board of managers and/or members, as applicable,
approving this Agreement and the transactions contemplated hereby
on behalf of each such Person.
(f) As a condition to
consummation of the Closing, Purchaser shall have confirmed to its
satisfaction that (i) all State of California and Monterey County
Permits (including cannabis Permits) necessary for the post-Closing
operation of the Business at the Xxxxxx Road Real Estate in
accordance with applicable State of California and Monterey County
law have been obtained and are in full force and effect and good
standing and (ii) ownership of the Xxxxxx Xx Equity may be
transferred to Purchaser in accordance with applicable State of
California and Monterey County law, including through the
continuation of Controlling Owner as a control person and
individual registrant under all State of California and Monterey
County Permits (including cannabis Permits) and applications
therefor until such time as final approvals have been received for
the change of control of Xxxxxx Xx to Purchaser and of
Purchaser’s control persons on such Permits.
(g) At the Closing,
Purchaser shall deliver the following to Sellers:
(i) the Xxxx of Sale
and the Assumption Agreement, each duly executed by
Purchaser;
(ii) the Escrow
Agreement, duly executed by Purchaser; and
(iii) a certificate
(which certificate shall be in form and substance reasonably
satisfactory to Sellers) signed on behalf of Purchaser by an
executive officer of Purchaser and dated as of the Closing Date to
the effect that each of the conditions specified in Sections 5.2(a) and
(b) has been
satisfied in all respects.
(h) The Representative
shall allocate the Cash Consideration and any proceeds from the
sale or disposition of the Share Consideration among AMAG and C
Quadrant and their owners at such time or times and in such manner
as the Representative may determine, and Purchaser shall have no
liability therefor.
Section
1.4 Tax Withholding.
Notwithstanding
anything in this Agreement to the contrary, Purchaser shall be
entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any Person such amounts as it
is required to deduct and withhold from such Person with respect to
the making of such payment under the Code and the rules and
regulations promulgated thereunder, or any provision of any Law
relating to Taxes. To the extent that amounts are so withheld by
Purchaser and remitted to the appropriate Governmental Authority,
such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to such Person in respect of which
such deduction and withholding was made by Purchaser. Purchaser
shall furnish to the Person in respect of which such withholding
was made reasonably satisfactory evidence of the remittance of any
such Taxes to the appropriate Governmental Authority.
6
Section
1.5 Purchase Price
Allocation. The purchase
price payable hereunder (including the Cash Consideration, the
Share Consideration based on its aggregate fair market value at the
end of trading on the Closing Date, the Assumed Liabilities and any
other amounts to the extent treated as part of the “amount
realized” for income Tax purposes) (collectively, the
“Purchase
Price”) shall be allocated as set forth on
Schedule 1.5 by
mutual agreement of Purchaser and the Representative in accordance
with the provisions of Section 1060 of the Code. Purchaser and
Sellers shall each file with the IRS and any state or local Tax
authorities, as part of their respective income Tax Returns for the
year in which the Closing occurs, IRS Form 8954 (and any state or
local equivalent forms), which will set forth the allocation
determined in accordance with this Section 1.5. In the event the
Parties agree on any adjustment to the allocation of the Purchase
Price, Purchaser and Sellers shall file amended IRS Forms 8954 in
accordance with all applicable deadlines.
ARTICLE
II
Seller Parties
jointly and severally represent and warrant to Purchaser that the
following statements are true, correct and complete.
(a) Each Seller Entity
is duly organized, validly existing and in good standing under the
Laws of its state of organization. Each Seller Entity has all
requisite company power and authority to own and operate the Assets
owned and operated by such Seller Entity. Each Seller Entity is a
U.S. person within the meaning of Rule 902 of Regulation S under
the Securities Act.
(b) Except for C
Quadrant’s ownership of AMAG and Xxxxxx Xx, no Seller Entity
has any subsidiaries or owns any equity interest in any other
Person.
(c) True, correct and
complete copies of the Governing Documents of each Seller Entity
have been made available to Purchaser and there are no claims that
any such Governing Document is invalid or unenforceable in whole or
in part or that such Governing Documents are not a complete
statement of the rights and obligations of Seller Entities and
their respective members or other equity owners with respect to
governance matters involving Seller Entities.
Section
2.2 Authorization and
Enforceability. Each Seller Party
that is not an individual has all requisite company power and
authority to execute and deliver this Agreement and each of the
other Transaction Documents to which such Seller Party is or will
be a party and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance by each such
Seller Party of each of the Transaction Documents to which such
Seller Party is or will, pursuant to the terms of this Agreement,
become a party has been or will be (as applicable) duly authorized
by all necessary action on the part of such Seller Party and its
direct and/or indirect equity owners, and no other proceedings or
actions on the part of any such Seller Party or any direct and/or
indirect equity owners of any such Seller Party are necessary to
authorize the execution, delivery and performance by such Seller
Party of this Agreement and the other Transaction Documents.
Controlling Owner has all necessary capacity to execute and deliver
this Agreement and each of the other Transaction Documents to which
Controlling Owner is or will be a party and to consummate the
transactions contemplated hereby and thereby. This Agreement and
the other Transaction Documents to which each Seller Party is or
will, pursuant to the terms of this Agreement, become a party have
been or will be (as applicable) duly and validly executed and
delivered by such Seller Party and, assuming due authorization,
execution and delivery by the other parties thereto (other than
other Seller Parties), constitute legal, valid and binding
obligations of such Seller Party, enforceable against such Seller
Party in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar Laws affecting
creditors’ rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding at Law or in
equity).
7
(a) Section 2.3(a) of the
Disclosure Schedule sets forth all of the outstanding Equity
Interests in C Quadrant and the record holders and beneficial
owners thereof. Except as set forth in Section 2.3(a) of the
Disclosure Schedule, there are no voting agreements, voting trusts,
proxies, registration rights agreements, equity holder agreements
or other Contracts with respect to any of the Equity Interests of C
Quadrant.
(b) C Quadrant owns one
hundred percent (100%) of the outstanding Equity Interests in each
of AMAG and Xxxxxx Xx. Except for the Equity Interests owned by C
Quadrant, as set forth in Section 2.3(b) of the
Disclosure Schedule, there are no voting agreements, voting trusts,
proxies, registration rights agreements, equity holder agreements
or other Contracts with respect to any of the Equity Interests of
AMAG or Xxxxxx Xx.
(c) Except as set forth
in Section 2.3(a)
and Section 2.3(b)
of the Disclosure Schedule, no equity or voting interests in any
Seller Entity are authorized, issued, reserved for issuance or
outstanding. No current or former equity owner of any Seller Entity
or any other Person is contesting (whether or not pursuant to any
Action) the legal or beneficial ownership of the outstanding Equity
Interests of any Seller Entity or any distributions or
contributions relating thereto or asserting that Equity Interests
other than those set forth on Section 2.3(a) and Section 2.3(b) of the
Disclosure Schedule are or should be outstanding. All of the
outstanding Equity Interests of each Seller Entity have been duly
authorized and validly issued and were not issued in violation of
any preemptive or other rights. No Person is a party to any
outstanding or authorized option, warrant, right (including any
preemptive right), subscription, claim of any character, Contract,
obligation, convertible or exchangeable securities, or other
commitments, contingent or otherwise, pursuant to which any Seller
Entity is or may become obligated to issue, deliver or sell, or
cause to be issued, delivered or sold, Equity Interests in any
Seller Entity or any securities convertible into, exchangeable or
exercisable for, or evidencing the right to subscribe for or
acquire, any Equity Interests in any Seller Entity.
Section
2.4 Conflicts; Consents of Third
Parties. The execution and
delivery of this Agreement and the other Transaction Documents to
which each Seller is a party, the consummation of the transactions
contemplated hereby and thereby, and compliance by such Seller with
the provisions hereof and thereof do not and will not: (a) conflict
with, or result in the breach of, any provision of the Governing
Documents of any Seller Entity; (b) conflict with, violate,
result in the breach or termination of, constitute a default under,
modify the rights of any party under, result in an acceleration of
or create in any party the right to accelerate, terminate, modify
or cancel any Contract to which any Seller Entity is a party or by
which any Seller Entity or any of the properties or assets of any
of them are bound, or require a Consent from any Person in order to
avoid any such conflict, violation, breach, termination, default,
modification or acceleration; (c) violate any Law or Order
applicable to any Seller Entity or the Assets; or (d) result in the
creation of any Lien upon any of the properties or assets of
any Seller Entity. No Consent, Order, waiver, declaration or filing
with, or notification to any Governmental Authority is required on
the part of any Seller Entity in connection with the execution,
delivery and performance of this Agreement or the other Transaction
Documents or the compliance by any Seller Entity with any of the
provisions hereof or thereof. No Seller is a party to any Contract,
including any collective bargaining agreement or other labor
agreement, that is binding or purports to be binding, on a
transferee of the Assets. Xxxxxx Xx is not a party to any Contract
other than the AT&T Agreement.
8
Included as
Section 2.5 of the
Disclosure Schedule is a true and complete copy of the consolidated
balance sheet of C Quadrant as of May 31, 2021 (the
“Balance Sheet
Date” and the balance sheet as of such date the
“Balance
Sheet”), which Balance Sheet fairly represents the
financial condition of C Quadrant in all material
respects.
(a) The
Seller Entities have no Liabilities (and there is no basis for any
present or future Action against any Seller Entity giving rise to
any Liability) except (a) to the extent specifically reflected
and accrued for or specifically reserved against in the Balance
Sheet, and (b) for current Liabilities incurred subsequent to the
Balance Sheet Date in the Ordinary Course of Business (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).
(b) To
the Knowledge of Sellers, the Road Agreement dated July 3, 1975
among Rubicon Construction Company, Xxx X. Xxxxxx, Xxxxxxx X.
Xxxxxx, Xxx X. Xxxxxx, Xx., Wajewco, and Western Title Insurance
Company is no longer operative or being sought to be enforced. No
Seller Party has been requested to make any contribution to road
maintenance or any other payments pursuant to such
agreement.
(a) the Assets have
been owned, operated and maintained in the Ordinary Course of
Business;
(b) the Assets have not
suffered any damage, destruction or loss, whether or not covered by
insurance;
(c) Seller Parties have
not made or committed to make any capital improvements or
modifications to the Xxxxxx Road Real Property; and
(d) there has been no
Material Adverse Change.
(a) All Taxes owed by
any Seller Entity (whether or not shown on any Tax Return) have
been paid and Seller Entities have no Liability for any Taxes other
than, in the case of C Quadrant and AMAG, Taxes which are not yet
due, all of which are Excluded Liabilities and for which Purchaser
and its Affiliates shall have no Liability following the Closing.
There are no Liens on any of the assets of any Seller Entity that
have arisen in connection with any failure (or alleged failure) to
pay any Tax, whether or not payment of such Tax was subsequently
cured. There is no examination or audit in progress, pending, or,
to the Knowledge of Sellers, proposed or threatened against or with
respect to any Seller Entity regarding Taxes.
(b) No Seller Entity is
a beneficiary of any extension of time within which to file any Tax
Return, except extensions automatically granted by Law. No Seller
Entity has waived or extended any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to the
assessment, payment or collection of any Tax. No Seller Entity has
been a member of an affiliated group (as defined in Section 1504 of
the Code), filed or been included in a combined, consolidated or
unitary income Tax Return or been a partner, member, owner or
beneficiary of any entity treated as a partnership or a trust for
Tax purposes. No Seller Entity is a party to or bound by any
agreement the principal purpose of which is the allocation or
sharing of Taxes.
9
(c) No Seller Entity
has participated in any reportable transaction as contemplated in
Treasury Regulations Section 1.6011-4.
(d) C Quadrant is, and
has at all times been a limited liability company taxed as a
partnership for U.S. Federal and state and local income tax
purposes. Each Seller Entity other than C Quadrant is, and has been
since such Seller Entity’s formation, classified as a
disregarded entity for U.S. federal and state and local income tax
purposes.
Section
2.9 Personal Property Assets; Title;
Condition of Assets. Sellers
exclusively own and have good and valid title, free and clear of
all Liens other than Permitted Liens, to all of the Personal
Property Assets. Upon the consummation of the Closing, Purchaser
shall exclusively own and have good and valid title, free and clear
of all Liens other than Permitted Liens, to all of the Personal
Property Assets. All of the Personal Property Assets are in good
operating condition, ordinary wear and tear excepted. The Assets
are adequate and suitable for the purposes for which they are
presently being used. No direct or indirect equity owner of any
Seller Entity (other than C Quadrant, with respect to the Xxxxxx Xx
Equity) has any interest in the Assets.
(a) The Assets include
all Intellectual Property Rights used by Seller Entities in
connection with their operations as currently conducted and that
are useful in the conduct of the Business (the “Seller Entity IP”).
Seller Entities exclusively own all of the Seller Entity IP. Seller
Entities have good, valid and marketable title to the Seller Entity
IP, free and clear of any and all Liens except any Permitted Liens.
No Seller Entity IP is subject to any Order, settlement agreement
or Contract that restricts in any manner the use, transfer,
licensing or enforcing thereof by Seller Entities or may affect the
validity, use or enforceability thereof. The Seller Entity IP
includes all Intellectual Property Rights listed or described in
Schedule
1.1(b)(iii).
(b) No Seller Entity
has granted any license of or right to use, or authorized the
retention of any rights to use or joint ownership of, any Seller
Entity IP to any Person.
(c) The operations of
Seller Entities as currently conducted or proposed to be conducted
do not infringe or misappropriate any Intellectual Property Rights
of any Person, or constitute unfair competition or trade practices
under the Laws of any jurisdiction in which a Seller Entity
operates. No Seller Entity has received notice from any Person
claiming that such operations infringe or misappropriate any
Intellectual Property Rights of any Person, violates any right of
any Person (including any right to privacy or publicity), or
constitutes unfair competition or trade practices under the Laws of
any jurisdiction. To the Knowledge of Sellers, no Person is
infringing or misappropriating any Seller Entity IP.
(a) Seller Entities
are, and have at all times been, in material compliance with all
Laws (including Marijuana Laws other than Federal Marijuana Laws).
No Seller Entity has received notice from any Governmental
Authority or any other Person of any failure to comply with any Law
applicable to the ownership and use of the Assets, and to the
Knowledge of Sellers, there has been no failure by any Seller
Entity to comply with any such Law (including Marijuana Laws other
than Federal Marijuana Laws). To the Knowledge of Sellers, there is
no investigation by a Governmental Authority pending or threatened
(and no Seller Entity has previously received notice of any such
pending or threatened investigation) against any Seller Entity
related to the ownership or use of the Assets.
10
(b) Section 2.11(b) of the
Disclosure Schedule contains a complete and accurate list of each
Permit that is held by any Seller Entity, all of which are held by
Xxxxxx Xx. Each such Permit held by Xxxxxx Xx is valid and in full
force and effect. Except as set forth in Section 2.11(b) of the
Disclosure Schedule, (i) Xxxxxx Xx is, and has been, in compliance
in all material respects with all of the terms and requirements of
each of its Permits, (ii) no event has occurred or circumstance
exists that may result in the revocation, withdrawal, suspension,
cancellation or termination of, or any modification to, any Permit;
(iii) Xxxxxx Xx has not received any notice from any Governmental
Authority or any other Person regarding (A) any actual or potential
violation of any Permit or (B) any actual or potential revocation,
withdrawal, suspension, cancellation, termination or modification
of any Permit; and (iv) all applications for renewal and other
filings required to have been made with respect to Xxxxxx
Rd’s Permits have been duly made on a timely basis with the
appropriate Governmental Authorities. The Permits identified in
Section 2.11(b) of
the Disclosure Schedule collectively constitute all of the Permits
that would be necessary to enable Seller Entities and, following
the Closing, Purchaser and its Affiliates to conduct and operate
the Business at the Xxxxxx Road Real Estate and to own and use the
Assets as currently conducted, in compliance with all Laws
(provided that Seller Parties do not make any representation or
warranty regarding Permits required under Laws specific to the
farming, growth, manufacturing, production, processing, extraction,
packaging, sale or distribution of marijuana or marijuana-related
products).
Section
2.12 Employee Benefits.
Section 2.12 of the Disclosure
Schedule sets forth each Employee Benefit Plan in which any
employee or any spouse or dependent of any employee participates,
and Seller Entities have provided or made available to Purchaser,
to the extent applicable, complete and correct copies of each such
Employee Benefit Plan. Neither any Seller Entity, nor any ERISA
Affiliate, sponsors, maintains or contributes to, or has ever
sponsored, maintained or contributed to (or been obligated to
sponsor, maintain or contribute to), or has any direct, indirect or
contingent liability with respect to (i) any “multiemployer
plan”, as that term is defined in Section 3(37) or 4001(a)(3)
of ERISA; (ii) any “employee benefit plan” subject to
Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code;
or (iii) any employee benefit plan, program, policy or arrangement
covering employees outside of the United States or subject to the
laws of any jurisdiction other than the United States. None of the
Employee Benefit Plans provides severance, life insurance, medical
or other welfare benefits (within the meaning of Section 3(1) of
ERISA) to any current or former employee of a Seller Entity or any
ERISA Affiliate, or to any other person, after his or her
retirement or other termination of employment or service, and
neither any Seller Entity, nor any ERISA Affiliate, has ever
represented, promised or contracted to any employee or former
employee, or to any other person, that such benefits would be
provided, except to the extent required by Part 6 of Subtitle B of
Title I of ERISA or Section 4980B(f) of the Code. Each Employee
Benefit Plan is, and at all times since inception has been,
maintained, administered, operated and funded in accordance with
its terms and in material compliance with ERISA, the Code and all
other applicable Laws.
Section
2.13 Litigation. Except as
set forth in Section
2.13 of the Disclosure Schedule, there is not now and there
has never been any Action pending or, to the Knowledge of Sellers,
threatened (and no Seller Entity has received notice of any such
threatened Action) against (a) any Seller Entity or (b) to the
extent related to or affecting Seller Entities, the Assets or the
Assumed Liabilities, Controlling Owner or any other officer,
manager, director or employee of any Seller Entity before any
Governmental Authority, and there is no basis for any such Action.
Except as set forth in Section 2.13 of the Disclosure
Schedule, no Seller Entity has engaged in any Action relating to or
affecting the Assets or the Assumed Liabilities to recover monies
due it or for damages sustained by it. Except as set forth in
Schedule 2.13 of the Disclosure Schedule, no Seller Entity is
subject to any Order.
11
Section
2.14 Environmental Matters.
Except
for the Xxxxxx Road Real Property, Seller Entities do not and have
not ever owned or leased any interest in real property. Except as
disclosed in Section
2.14 of the Disclosure Schedule: (a) Seller Entities are,
and in the past five years have been, in compliance with all
applicable Environmental Laws, including the possession of (and
compliance with) all Permits required for their respective
facilities and operations under Environmental Laws; (b) except for
matters that have been resolved, no Seller Entity has received a
notice, citation, complaint, decree or other communication alleging
Liability under or any actual, alleged or potential violation of or
failure to comply with any Environmental Law, and no such
proceeding is pending or, to the knowledge of the Seller Entities,
threatened; (c) no releases of Hazardous Substances have occurred
at, from or onto the Xxxxxx Road Real Property, or, to the
Knowledge of Sellers, any real property formerly owned or operated
by any Seller Entity, or for which any Seller Entity could incur
Liability under any Environmental Law; (d) no Seller Entity has
treated, stored, recycled or disposed of any Hazardous Substances
on any real property currently or formerly owned, used, operated or
leased by any Seller Entity in a manner not in compliance with the
Environmental Laws, and to the Knowledge of Sellers, no other
Person has treated, stored, recycled or disposed of any Hazardous
Substance on real property owned, used or leased by such Seller
Entity; (e) there have been no Hazardous Substances generated by
any Seller Entity that have been disposed of or come to rest at any
site that has been included in any published U.S. federal, state or
local “superfund” site list or any other similar list
of hazardous or toxic waste sites; (f) no Seller Entity has entered
into any agreement with any Person regarding any Environmental Law,
remedial action or other environmental Liability or expense; (g) to
the Knowledge of Sellers, there are no underground storage tanks,
septic tanks, landfills, surface impoundments or disposal areas
located on, and no polychlorinated biphenyls or equipment
containing polychlorinated biphenyls used or stored on, any site
owned or operated by any Seller Entity; and (h) no “hazardous
waste” as defined by the Resource Conservation and Recovery
Act, as amended, is stored on any site owned or operated by any
Seller Entity. Seller Entities have provided to Purchaser complete
copies of all environmental audits, reports and other documents
relating to Environmental Laws or Environmental Claims within
Seller Entities’ possession or control relating to the
Assets.
Section
2.15 Insurance. Section 2.15 of the Disclosure
Schedule includes a complete and correct list and description,
including policy number, coverage and deductible, of all insurance
policies owned by Seller Entities relating to the Assets, the
Assumed Liabilities or the Excluded Liabilities, complete copies of
which policies have been provided to Purchaser by Seller Entities.
Such policies are in full force and effect, all premiums due
thereon have been paid and no Seller Entity is in default
thereunder. No Seller Entity has received any notice of
cancellation or intent to cancel or increase or intent to increase
premiums with respect to such insurance policies nor, to the
Knowledge of Sellers, is there any basis for any such action.
Section 2.15 of the
Disclosure Schedule also contains a list of all pending and prior
claims made to any insurance company by any Seller Entity and any
instances of a denial of coverage by any insurance
company.
(a) AMAG has good and
clear marketable and insurable fee simple title in and to the
Xxxxxx Road Real Property, free and clear of all Liens other than
Permitted Liens. No Person has any option to purchase, or a right
of first refusal in respect of the sale of, all or any portion of
the Xxxxxx Road Real Property. Each of the parcels constituting the
Xxxxxx Road Real Property is assessed as a separate tax lot or tax
parcel, independent of any other parcels or assets not being
conveyed hereunder, and each of the parcels constituting the Xxxxxx
Road Real Property has been or will be prior to the Closing Date
legally subdivided from all other property for conveyance and other
purposes.
(b) Except for the
Razzolink Lease, there are no written or oral leases, subleases,
licenses, concessions, occupancy rights or other Contracts granting
to any Person other than C Quadrant the right to use or occupy any
portion of the Xxxxxx Road Real Property and there is no Person in
possession or occupancy of any portion of the Xxxxxx Road Real
Property other than C Quadrant. All such rights of C Quadrant will
terminate as of the Closing pursuant to the Seller Quitclaim. The
Razzolink Lease is a valid and binding agreement of C Quadrant and
is in full force and effect in accordance with its terms. C
Quadrant has not violated or breached the Razzolink Lease, and, to
the Knowledge of Sellers, Razzolink, Inc. has not violated or
breached, or committed any default under, the Razzolink Lease.
There are no disputes pending with respect to the Razzolink Lease.
Sellers have made available to Purchaser a true and correct copy of
the Razzolink Lease (including all amendments, supplements and
other modifications thereto).
12
(c) There is no pending
or, to the Knowledge of Sellers, threatened litigation,
condemnation, expropriation, eminent domain or similar proceeding
affecting all or any part of the Xxxxxx Road Real Property, and
neither any Seller nor Xxxxxx Xx has received any notice
thereof.
(d) The Xxxxxx Road
Real Property has received all approvals of Governmental
Authorities required to be obtained in connection with the
operation thereof and have been operated and maintained in all
material respects in accordance with applicable Laws. There are no
defects in any of the Xxxxxx Road Improvements, including, but not
limited to, the roof, structural elements thereof, and the heating,
ventilation, air conditioning, plumbing, electrical, mechanical,
sewer, waste water, storm water, paving and parking equipment and
facilities included therein. No portion of the Xxxxxx Road Real
Property has suffered any damage by fire or other casualty which
has not been completely repaired and restored. All Xxxxxx Road
Improvements are in good operating condition and repair, ordinary
wear and tear excepted, there are no ongoing repairs, renovations
or capital improvements being undertaken at the Xxxxxx Road Real
Property and all prior repairs, renovations and capital
improvements have been paid for in full.
(e) The Xxxxxx Road
Real Property is properly zoned for current use of the Xxxxxx Road
Real Property and the planned operation of the Business. The Xxxxxx
Road Real Property is in compliance with all restrictive covenants,
applicable zoning ordinances or other applicable Laws, including
all of the foregoing relating to the planned operation of the
Business. No Seller has received any notice of any violation of any
applicable zoning ordinance or other Law relating to the Xxxxxx
Road Real Property. There is no Action pending or, to
Sellers’ Knowledge, threatened to change the zoning or
building ordinances or any other Laws affecting the Xxxxxx Road
Real Property.
(f) There are no
unsatisfied assessments against the Xxxxxx Road Real Property.
Sellers have not filed, and have not retained anyone to file,
notices of protests against, or to commence action to review, real
property tax or other assessments against the Xxxxxx Road Real
Property. Sellers have not received notice of any assessments by a
public body, whether municipal, county or state, imposed,
contemplated or confirmed and ratified against the Xxxxxx Road Real
Property for public or private improvements which are now or
hereafter payable. There are no deferred fees or assessments (other
than ongoing assessments disclosed in Section 2.16(f) of the
Disclosure Schedule) that will become due and payable after Closing
with respect to the Xxxxxx Road Real Property.
(g) Except as set forth
in the Title Policy Pro Forma, no commitments have been made nor
will any commitments be made by any Seller to any governmental or
quasi-governmental authority, utility company, school board, church
or other religious body, any homeowner’s or property
owner’s association or any other person or entity relating to
the Xxxxxx Road Real Property which would impose an obligation on
Purchaser or its successors to make any contribution or dedication
of land or money to construct, install or maintain any improvements
of a public or private nature on or off the Xxxxxx Road Real
Property. There are no agreements, covenants, restrictions or other
instruments that will be binding upon the Xxxxxx Road Real Property
after Closing other than as set forth in the Title Policy Pro Forma
and applicable Law.
13
Section
2.17 Related Party
Transactions. Except as
described in Section
2.17 of the Disclosure Schedule, no Seller Party or any
Affiliate thereof (i) has any interest in, or is a party to a
Contract affecting, any of the Assets (including the Xxxxxx Road
Real Property), (ii) is or has been a party to any transaction with
Xxxxxx Xx or (iii) has any interest in a competitor of the
contemplated post-Closing Business.
Section
2.18 Brokers Fees. No Seller Entity
has any Liability to pay any fees, commissions or other amounts to
any investment banker, broker, finder or agent with respect to the
transactions contemplated by this Agreement.
(a) Each Seller that
acquires any portion of the Share Consideration (each a
“Selling
Shareholder”) is knowledgeable, sophisticated and
experienced in financial and business matters, is making, and is
qualified to make, decisions with respect to investments in shares,
including investments in securities issued by Parent and comparable
entities, and has the ability to bear the economic risks of an
investment in Parent Shares. Each Selling Shareholder understands
that its investment in the Share Consideration involves a
significant degree of risk, including a risk of total loss of each
Selling Shareholder’s investment, and each Selling
Shareholder has full cognizance of and understands all of the risk
factors related to each Selling Shareholder’s acquisition of
the Share Consideration.
(b) Each Selling
Shareholder has, in connection with its decision to acquire its
Share Consideration, relied solely upon the representations and
warranties of Parent contained herein. Each Selling Shareholder has
had an opportunity to (i) ask questions and receive answers from
representatives of Parent concerning the merits and risks of
investing in Parent Shares, (ii) access to information about Parent
and its financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to
evaluate its investment and (iii) the opportunity to obtain such
additional information that Parent possesses or can acquire without
unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment. Each
Selling Shareholder has undertaken an independent analysis of the
merits and risks of an investment in Parent Shares based on its own
financial circumstances. Each Selling Shareholder understands that
nothing in this Agreement or any other materials presented to each
Selling Shareholder in connection with the acquisition of the Share
Consideration constitutes legal, tax or investment advice. Each
Selling Shareholder has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its acquisition of the Share
Consideration.
(c) Each Selling
Shareholder shall acquire Parent Shares for its own account for
investment only and with no present intention of engaging in a
distribution (within the meaning of applicable securities laws)
with respect to the Parent Shares or entering into any arrangement
or understanding with any other persons regarding such a
distribution, provided that this representation and warranty shall
not limit any Selling Shareholder’s right to sell pursuant to
the Resale Registration Statement. No Selling Shareholder will,
directly or indirectly, offer, sell, pledge, transfer or otherwise
dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any Parent Shares except in compliance
with the Securities Act and applicable state securities laws. Each
Selling Shareholder acknowledges that Rule 144 under the Securities
Act is not available for the resale of Parent Shares and will not
be available for such resale until Parent has become a registrant
under the Securities Act and has met all of the requirements of
Rule 144(i). Notwithstanding the foregoing, nothing in this
provision is meant to prevent such Seller from liquidating or
distributing Parent Shares to its equityholders in accordance with
applicable Securities Laws.
(d) Each Selling
Shareholder understands that the Share Consideration is being
offered to it in reliance upon specific exemptions from the
registration requirements of the Securities Act and state
securities laws and that Parent is relying upon the truth and
accuracy of, and each Selling Shareholder’s compliance with,
the representations, warranties, agreements, acknowledgments and
understandings of the Selling Shareholders set forth herein in
order to determine the availability of such exemptions and the
eligibility of each Selling Shareholder to acquire the Share
Consideration.
14
Section
2.20 No
Misrepresentation. No representation
or warranty of Seller Parties or any of them contained in this
Agreement or any other Transaction Document or in the Disclosure
Schedule hereto or in any certificate or other instrument furnished
to Purchaser in connection herewith contains or will contain any
untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein
not misleading.
ARTICLE
III
Parent and
Purchaser represent and warrant to Sellers that the following
statements are true, correct and complete.
Section
3.1 Organization. Each of Parent
and Purchaser is duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its organization or
formation, and has all requisite limited liability company or
corporate power and authority to own, lease and operate its
properties and to carry on its business. Each of Parent and
Purchaser is duly qualified or authorized to do business as a
foreign company and is in good standing under the Laws of each
jurisdiction in which the conduct of its business or the ownership
of its properties requires such qualification or
authorization.
Section
3.2 Authorization and
Enforceability. The execution,
delivery and performance of this Agreement and all Transaction
Documents to which either Parent or Purchaser is a party has been
duly authorized by all necessary action by or on behalf of Parent
or Purchaser, as applicable. Each of Parent and Purchaser has full
corporate or company power and authority to execute and deliver
this Agreement and each other Transaction Document to which it is a
party, and to perform its obligations hereunder and thereunder.
This Agreement and each Transaction Document to which Parent or
Purchaser is or will be a party has been or will be duly and
validly executed and delivered and constitutes the valid and
legally binding obligation of Parent or Purchaser, as applicable,
enforceable against Parent or Purchaser in accordance with its
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 (regardless of
whether enforcement is sought in a proceeding at Law or in
equity).
(a) The authorized
capital stock of the Company consists of an unlimited number of
Parent Shares and an unlimited number of Super Voting
Shares.
(b) As of June 2,
2021:
(i) 70,612,253 Parent
Shares and 202,590 Super Voting Shares were issued and
outstanding;
(ii) 13,803,168 Parent
Shares were issuable upon the redemption of all of the Class B
Common Shares of Indus Holding Company;
15
(iii) 77,628,692 Parent
Shares were issuable upon the redemption of all of the Class C
Common Shares of Indus Holding Company issuable upon conversion of
convertible debentures of Indus Holding Company (excluding accrued
and unpaid interest);
(iv) 93,092,778 Parent
Shares were issuable upon the exercise of outstanding warrants of
the Company;
(v) 780,140 Parent
Shares were issuable upon the exercise of compensation options held
by financial advisors to the Company and/or Indus Holding Company;
and
(vi) 8,882,250 Parent
Shares were issuable upon the exercise of options issued or
reserved for issuance pursuant to the Company’s equity
incentive plans.
(c) Purchaser is a
wholly-owned subsidiary of Indus Holding Company, a Delaware
corporation, 100% of the voting securities of which are owned by
Parent.
Section
3.4 Conflicts; Consent of Third
Parties. Neither the
execution and the delivery by Parent and Purchaser of this
Agreement and the other Transaction Documents to which Parent or
Purchaser is a party, nor the consummation of the transactions
contemplated hereby and thereby on the part of Parent and
Purchaser, will, with or without the passage of time or the giving
of notice (a) conflict with, or result in the breach of, any
provision of the Governing Documents of Parent or Purchaser or (b)
conflict with, violate, result in the breach or termination of, or
constitute a default under, result in an acceleration of, or create
in any party the right to accelerate, terminate, modify or cancel,
any Contract to which Parent or Purchaser is a party or by which
Parent or Purchaser or their respective properties or assets are
bound.
Section
3.5 Share
Consideration. Upon issuance,
the Share Consideration will be duly authorized and validly issued,
fully paid and non-assessable and will not have been issued in
violation of applicable Law (it being understood that no
representation or warranty is made by Parent or Purchaser with
respect to any Federal Marijuana Law) or any preemptive right,
right of first refusal or similar right of any Person to subscribe
for or purchase securities of Parent.
Section
3.6 Brokers Fees. Neither Parent
nor Purchaser has any Liability to pay any fees, commissions or
other amounts to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
ARTICLE
IV
Section
4.1 Conduct Prior to
Closing. From the date of
this Agreement until the Closing (or until the earlier termination
of this Agreement in accordance with its terms), except as required
by applicable Law or with the consent in writing of Purchaser,
Seller Parties shall use, own and operate the Assets in the
Ordinary Course of Business and shall use reasonable best efforts
to maintain and to preserve the rights, franchises, goodwill and
relationships with Persons having business relationships with
Seller Parties in relation to the Assets. Without limiting the
generality of the foregoing, except as required by applicable Law
or set forth on Section
4.1 of the Disclosure Schedule or as consented to in writing
by Purchaser (which consent shall not be unreasonably withheld),
Seller Parties shall not:
(a) fail to maintain
the Assets in the same condition as on the date
hereof;
16
(b) enter into any new
Contract affecting any of the Assets or Assumed
Liabilities;
(c) make any capital
improvements or other modifications to the Xxxxxx Road Real
Property except as required to comply with Monterey County
regulations;
(d) modify, assign,
terminate or waive any rights under the AT&T Agreement or the
Razzolink Lease;
(e) sell, lease,
transfer or otherwise dispose of any Assets or create or permit the
creation of any Lien on any Assets;
(f) institute, settle,
waive or release any Action with respect to the
Assets;
(g) issue, create,
incur, assume or guarantee any Indebtedness of any Seller Entity
(other than Indebtedness to be discharged at the Closing) or any
Lien on any of the Assets;
(h) cancel or permit
the lapse of any insurance policy covering the Assets;
(i) adopt any plan of
merger, consolidation, reorganization, liquidation, or dissolution,
or file a petition in bankruptcy under any provisions of federal or
state bankruptcy Law involving Seller Entities;
(j) transfer, assign or
grant any license or sublicense of any material rights under or
with respect to any Seller Entity IP; or
(k) contract, commit or
agree to do any of the foregoing.
Section
4.2 Access to
Information. From the date of
this Agreement until the Closing (or until the earlier termination
of this Agreement in accordance with its terms), upon reasonable
notice, Seller Parties shall, as promptly as reasonably
practicable: (a) afford Purchaser and its representatives
(including any financing sources or prospective financing sources
and their respective representatives) reasonable access to
personnel, properties, books and records of the Assets and Seller
Entities; and (b) furnish to Purchaser and its representatives such
additional information with regard to the Assets and Seller
Entities as Purchaser may from time to time reasonably request;
provided, however, that any such access or furnishing of
information shall be conducted at Purchaser’s expense, during
normal business hours.
(a) If any further
action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action
(including the execution and delivery of such further instruments
and documents) as any other Party reasonably may request;
provided,
however, that the
Parties shall not be required to incur any material out-of-pocket
expense in connection therewith. For a reasonable amount of time
following the Closing, Seller Parties shall, and shall cause their
Affiliates to, reasonably cooperate with Purchaser to encourage
each business relation of Seller Entities with respect to the
Assets to maintain the same business relationship with Purchaser
after the Closing as it maintained with Seller Entities prior to
the Closing; provided that
Seller Entities shall not be liable for any Losses in connection
with such a business relation’s decision to not continue a
business relationship with Purchaser at any time after the
Closing.
17
(b) Without limitation
of Section 4.3(a),
Controlling Owner shall (i) use his best efforts to take and cause
Seller Entities to take all actions that Purchaser may reasonably
request (A) to enable the post-Closing operation of the Business at
the Xxxxxx Road Real Estate in accordance with all State of
California and Monterey County Permits (including cannabis Permits)
and (B) to facilitate the approval of the transfer of ownership of
the Xxxxxx Xx Equity to Purchaser in accordance with applicable
State of California and Monterey County law and (ii) continue as a
control person and individual registrant under all State of
California and Monterey County Permits (including cannabis Permits)
and applications therefor until such time as (x) final approvals
have been received for the change of control of Xxxxxx Xx to
Purchaser and of Purchaser’s control persons on such Permits
and (y) the removal of Controlling Owner will not result in
enforcement action on or revocation of any such
Permits.
(c) Following the
Closing, in the event and for so long as Purchaser actively is
involved in, contesting or defending against any Action in
connection with any fact, situation, circumstances, status,
condition, activity, practice, plan, occurrence, event, incident,
action, Tax matter, failure to act, or transaction involving the
Assets or the Assumed Liabilities which occurred or existed prior
to the Closing, Seller Parties shall, and shall cause their
Affiliates to, reasonably cooperate with Purchaser and
Purchaser’s counsel in such involvement, contest or defense,
and provide such testimony and access to its books and records as
shall be reasonably necessary in connection with such contest or
defense, all at the sole reasonable cost and expense of Purchaser
(unless Purchaser is entitled to indemnification therefor
hereunder).
(a) Within 60 days
following the Closing, Parent shall prepare and file with the
Securities and Exchange Commission (the “SEC”) a registration
statement (the “Resale Registration
Statement”) on Form S-1 (or any other available form)
relating to the resale of the Share Consideration by the Selling
Shareholders. Parent shall use its commercially reasonable best
efforts to (i) file the Resale Registration Statement as promptly
as practicable and (ii) subject to receipt of necessary information
from the Selling Shareholders, cause the Resale Registration
Statement to become effective as promptly as is reasonably
practicable. Parent shall promptly prepare and file with the SEC
such amendments and supplements to the Resale Registration
Statement and the prospectus used in connection therewith (the
“Prospectus”) as may be
necessary to keep the Resale Registration Statement effective until
the earlier of (A) two (2) years after the effective date of the
Resale Registration Statement or (B) such time as the remaining
Share Consideration has become eligible for resale without any
volume limitations or other restrictions pursuant to Rule 144 under
the Securities Act. Parent may amend the Resale Registration
Statement on Form S-3 at any time it is eligible to do
so.
(b) For not more than
ninety (90) days in any twelve (12) month period, Parent may
suspend the use of any Prospectus included in the Resale
Registration Statement contemplated by this Section in the event
that Parent determines in good faith that such suspension is
necessary to (A) delay the disclosure of material non-public
information concerning Parent, the disclosure of which at the time
is not, in the good faith opinion of Parent, in the best interests
of Parent or (B) amend or supplement the Resale Registration
Statement or the related Prospectus so that the Resale Registration
Statement or Prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the
case of the Prospectus in light of the circumstances under which
they were made, not misleading (an “Allowed Delay”);
provided, that Parent shall promptly (I) notify the Representative
in writing of the commencement of an Allowed Delay, but shall not
(without the prior written consent of the Representative) disclose
to the Representative or any Selling Shareholder any material
non-public information giving rise to an Allowed Delay, (II) advise
the Representative in writing to cease, and cause the Selling
Shareholders to cease, all sales under the Resale Registration
Statement until the end of the Allowed Delay, and (III) use
commercially reasonable efforts to terminate an Allowed Delay as
promptly as is reasonably practicable.
18
(c) Parent shall use
commercially reasonable efforts to effect the registration of the
Share Consideration in accordance with the terms hereof, and
pursuant thereto Parent will, as expeditiously as
possible:
(i) prepare and file
with the SEC such amendments and post-effective amendments to the
Resale Registration Statement and the related Prospectus as may be
necessary to keep the Resale Registration Statement effective for
the period in which the Resale Registration Statement is required
to be kept effective and to comply with the provisions of the
Securities Act and the Exchange Act with respect to the
distribution of all of the Share Consideration covered
thereby;
(ii) provide copies to
and permit any counsel designated by the Representative to review
the Resale Registration Statement and all amendments and
supplements thereto no fewer than three (3) days prior to their
filing with the SEC;
(iii) furnish to
each Selling Shareholder (A) promptly after the same is prepared
and filed with the SEC, if requested by the Selling Shareholder,
one (1) copy of any Resale Registration Statement and any amendment
thereto, each preliminary prospectus and Prospectus and each
amendment or supplement thereto, and each letter written by or on
behalf of Parent to the SEC or the staff of the SEC, and each item
of correspondence from the SEC or the staff of the SEC, in each
case relating to such Registration Statement (other than any
portion of any thereof which contains information for which Parent
has sought confidential treatment), and (B) such number of copies
of a Prospectus, including a preliminary prospectus, and all
amendments and supplements thereto and such other documents as the
Selling Shareholder may reasonably request in order to facilitate
the disposition of the Share Consideration owned by the Selling
Shareholder;
(iv) use commercially
reasonable efforts to (A) prevent the issuance of any stop order or
other suspension of effectiveness and, (B) if such order is issued,
obtain the withdrawal of any such order at the earliest practical
moment;
(v) use commercially
reasonable efforts to register or qualify or cooperate with any
Selling Shareholder and its counsel in connection with the
registration or qualification of the Share Consideration for offer
and sale under the securities or blue sky laws of such
jurisdictions requested by such Selling Shareholder and do any and
all other commercially reasonable acts or things necessary or
advisable to enable the distribution in such jurisdictions of the
Share Consideration covered by the Resale Registration Statement;
provided,
however, that
Parent shall not be required in connection therewith or as a
condition thereto to (A) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
provision, (B) subject itself to general taxation in any
jurisdiction where it would not otherwise be so subject but for
this Section
4.4(c)(v), or (C) file a general consent to service of
process in any such jurisdiction;
(vi) promptly notify the
Representative, upon discovery that, or upon the happening of any
event as a result of which, the Prospectus includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing,
and promptly prepare, file with the SEC and furnish to the Selling
Shareholders a supplement to or an amendment of such Prospectus as
may be necessary so that such Prospectus shall not include an
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances
then existing;
19
(vii) use commercially
reasonable efforts to comply with all applicable rules and
regulations of the SEC under the Securities Act and the Exchange
Act in connection with the Resale Registration Statement;
and
(viii) with a view to
making available to the Selling Shareholders the benefits of Rule
144 (or its successor rule) and any other rule or regulation of the
SEC that may at any time permit the Selling Shareholders to sell
shares included in the Share Consideration to the public without
registration, Parent covenants and agrees from and after the date
it becomes registered and for so long as it remains registered
under the Exchange Act, to (A) file with the SEC in a timely manner
all reports and other documents required of Parent under the
Exchange Act and (B) furnish to each Selling Shareholder upon
request, as long as such Selling Shareholder owns any Share
Consideration, (I) a written statement by Parent that it has
complied with the reporting requirements of the Exchange Act, (II)
a copy of Parent’s most recent Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, and (III) such other information as
may be reasonably requested in order to avail such Selling
Shareholder of any rule or regulation of the SEC that permits the
selling of any such Share Consideration without
registration.
(d) In the event that
the SEC for any reason limits the number of Parent Shares that may
be included and sold by the Selling Shareholders in the Resale
Registration Statement, Parent shall reduce the number of Parent
Shares included in the Resale Registration Statement on behalf of
the Selling Shareholders accordingly (such portion shall be
allocated pro rata among the Selling Shareholders) (such excluded
shares, the “Reduction Securities”).
Parent shall not be liable for any Losses in connection with the
exclusion of such Reduction Securities or in connection with any
delay in the effectiveness of the Resale Registration Statement
arising from any interactions between Parent and the SEC with
respect to the number of Parent Shares that may be included and
sold by the Selling Shareholders in the Resale Registration
Statement. Parent shall use commercially reasonable efforts to
register the Reduction Securities for resale as soon as is
reasonably practicable pursuant to a new registration statement
covering the Reduction Securities (or such portion thereof as the
SEC will allow to be registered for resale at such time) for an
offering to be made on a continuous basis pursuant to Rule
415.
(e) Parent shall bear
all expenses in connection with the procedures in clauses (a) through
(d) of this
Section 4.4 and the
registration of the Share Consideration on behalf of the Selling
Shareholders pursuant to the Resale Registration Statement, other
than fees and expenses, if any, of legal counsel or other advisers
to the Selling Shareholders and underwriting discounts, brokerage
fees and commissions incurred by the Selling Shareholders, if any,
in connection with the offering of the Share Consideration on
behalf of the Selling Shareholders pursuant to the Resale
Registration Statement or any new registration statement(s)
covering the Reduction Securities.
(f) Each Selling
Shareholder shall complete a resale registration statement
questionnaire provided by Parent for use in preparation of the
Resale Registration Statement, and the answers thereto shall be
true and correct in all material respects as of the date thereof
and as of the effective date of the Resale Registration Statement.
Each Selling Shareholder will notify Parent immediately of any
material change in any such information until such time as such
Selling Shareholder has sold all of its Share Consideration or
until Parent is no longer required to keep the Resale Registration
Statement effective. All other written information furnished to
Parent by or on behalf of any Selling Shareholder for inclusion in
the Resale Registration Statement will be true and correct in all
material respects as of the date such other written information is
provided and as of the effective date of the Resale Registration
Statement, and each Selling Shareholder will notify Parent
immediately of any material change in any such other written
information until such time as Selling Shareholder has sold all of
its Share Consideration or until Parent is no longer required to
keep the Resale Registration Statement effective.
20
(g) Without limitation
of Section 4.4(f),
each Seller Party covenants and agrees to execute, deliver and file
or assist, including by way of providing requisite information to,
Parent in filing or in causing the filing of such disclosure
documents, reports, undertakings and other documents with respect
to or in connection with the issuance of the Share Consideration
and the completion of any associated transactions as may be
required by any securities commission, stock exchange or other
regulatory authority pursuant to applicable securities Laws or rule
or policies or as they may otherwise require.
(h) Each Selling
Shareholder agrees that it will not effect any disposition of the
Share Consideration that would constitute a sale within the meaning
of the Securities Act or pursuant to any applicable state
securities laws, except as contemplated in the Resale Registration
Statement referred to in this Section 4.4 or as otherwise
permitted by Law, and will promptly notify Parent of any changes in
the information set forth in the Resale Registration Statement
regarding such Selling Shareholder or its plan of
distribution.
(i) Seller Parties
shall provide to Parent as promptly as practicable such information
(including any required financial information) concerning the
Seller Entities and their business affairs as Parent may reasonably
require, and shall direct that their counsel and accountants
cooperate with Parent’s counsel and accountants, in
connection with the preparation of the Resale Registration
Statement or any other securities filings made by Parent after the
Closing that require information regarding Seller Entities. None of
the information supplied, or to be supplied, by Seller Parties for
inclusion in the Resale Registration Statement or any other
securities filings shall contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading. If any
event occurs with respect to any Seller Entity, or any change
occurs with respect to the information provided by any Seller
Entity, that causes any such information to contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they are
made, not misleading, Seller Parties shall notify Parent promptly
of such event or change and supplement such information so that it
does not include any misstatement of a material fact or omit to
state any material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading.
(a) Until the later of
the 120th
day following the Closing and the effectiveness of the Resale
Registration Statement, no Selling Shareholder shall (i) lend;
offer; pledge; sell; contract to sell; sell any option or contract
to purchase; purchase any option or contract to sell; grant any
option, right, or warrant to purchase; or otherwise transfer or
dispose of, directly or indirectly, any Parent Shares or any
securities convertible into or exercisable or exchangeable
(directly or indirectly) for any Parent Shares or (ii) enter into
any swap or other arrangement that transfers to another, in whole
or in part, any of the economic consequences of ownership of such
securities, whether any such transaction described in clause (i) or
(ii) above is to be settled by delivery of Parent Shares or other
securities, in cash, or otherwise. Thereafter, no Selling
Shareholder shall take any action described in the preceding
sentence without the prior written consent of Parent, which may be
granted or withheld in Parent’s sole discretion, except
for:
(i) transactions
executed through the facilities of a securities exchange on which
the Parent Shares are listed pursuant to the Resale Registration
Statement or any additional resale registration statement as
contemplated by Section
4.4(d); or
(ii) pursuant to Rule
144 under the Securities Act, if and to the extent Rule 144 is
available.
21
(b)
(i) In connection with
any underwritten offering by Parent of its equity securities
pursuant to an effective registration statement filed under the
Securities Act, neither a Selling Shareholder nor any holder of a
share the ownership of which was derived through a transfer from a
Selling Shareholder (other than a transfer executed on a securities
exchange on which the Parent Shares are then listed) (each a
“Lock-Up
Holder”) shall (i) lend; offer; pledge; sell; contract
to sell; sell any option or contract to purchase; purchase any
option or contract to sell; grant any option, right, or warrant to
purchase; or otherwise transfer or dispose of, directly or
indirectly, any Parent Shares or any securities convertible into or
exercisable or exchangeable (directly or indirectly) for Parent
Shares or (ii) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic
consequences of ownership of such securities, whether any such
transaction described in clause (i) or (ii) above is to be settled
by delivery of Parent Shares or other securities, in cash, or
otherwise. The foregoing provisions of this Section 4.5(b) shall not apply
to transfers to Affiliates of Lock-Up Holders; purchases made in
the open market following the completion of any offering covered by
this Section
4.5(b); the sale of any shares to an underwriter pursuant to
an underwriting agreement; to bona fide gifts to a member of the
immediate family of a Lock-Up Holder; or to the transfer of any
shares to any trust or other estate planning vehicle for the direct
or indirect benefit of a Lock-Up Holder and/or the members of such
Lock-Up Holder’s immediate family, provided that the donee, Affiliate or
the trustee of the trust or controlling person of any other estate
planning vehicle agrees to be bound in writing by the restrictions
set forth in this Section
4.5(b), and provided
further that any such transfer shall not involve a
disposition for value. The underwriters in connection with such
registration are intended third-party beneficiaries of this
Section 4.5(b) and
shall have the right, power and authority to enforce the provisions
hereof as though they were a party hereto. Each Lock-Up Holder
further agrees to execute such agreements as may be reasonably
requested by the underwriters in connection with such registration
that are consistent with this Section 4.5(b) or that are
necessary to give further effect thereto. Such restriction (the
“Market
Stand-Off”) shall be in effect for such period of time
from and after the effective date of the final prospectus for the
offering as may be requested by Parent or such underwriters. In no
event, however, shall such period exceed one hundred eighty (180)
days following the effective date of the registration statement
(the “Lock-Up
Period”). Notwithstanding the foregoing, in the event
that Parent is not exempt from the application of NASD
Rule 2711(f)(4) or any successor rule, if (y) during the
period that begins on the date that is seventeen (17) days before
the last day of the Lock-Up Period and ends on the last day of the
Lock-Up Period, Parent issues an earnings release or material news
or a material event relating to Parent occurs; or (z) prior to the
expiration of the Lock-Up Period Parent announces that it will
release earnings results during the sixteen (16) day period
beginning on the last day of the Lock-Up Period, then the
restrictions imposed herein shall continue to apply until the
expiration of the date that is eighteen (18) days after the date on
which the issuance of the earnings release or material news or
material event occurs.
(ii) A Lock-Up Holder
shall be subject to the Market Stand-Off only if all officers and
directors of Parent are similarly bound and Parent has used
commercially reasonable efforts to cause all stockholders (other
than officers and directors) individually owning more than one
percent (1%) of Parent’s outstanding subordinate voting
shares (assuming full conversion or deemed conversion of all
outstanding convertible and exercisable securities) to be similarly
bound (it being understood that a party that does not comply with
this Section 4.5(b)
in response to Parent’s commercially reasonable efforts shall
be deemed to be in material breach of this Agreement).
22
(iii) As a condition to
any transfer of Parent Shares by a Selling Shareholder, other than
through the facilities of a securities exchange on which the Parent
Shares are listed, to a transferee who would beneficially own more
than 500,000 Parent Share (adjusted for stock splits,
recombinations and other similar events after the date hereof)
following such transfer, such Selling Shareholder shall obtain from
such transferee for the benefit of Parent and deliver to Parent an
undertaking by such transferee to comply with the obligations of a
Lock-Up Holder under this Section 4.5(b).
(c) Each Selling
Shareholder acknowledges that the securities constituting the Share
Consideration shall have attached to them, whether through the
electronic deposit system of CDS Clearing and Depository Services
Inc., entered into a direct registration or other electronic
book-entry system, or on any certificates that may be issued, the
following legends:
THIS SECURITY HAS
NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS.
UNLESS PERMITTED
UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT
TRADE THE SECURITY BEFORE OCTOBER ___, 2021.
(d) Each Selling
Shareholder acknowledges that the Share Consideration may only be
disposed of in compliance with applicable Law, including Canadian
and United States state and federal securities laws. If any Share
Consideration is sold pursuant to a registration statement, it will
be sold in compliance with the plan of distribution set forth
therein. If after the effective date of the registration statement,
such registration statement ceases to be effective and Parent has
provided notice to such Selling Shareholder to that effect, such
Selling Shareholder will sell Share Consideration only in
compliance with an exemption from the registration requirements of
the Securities Act; and acknowledges that the removal of the
restrictive legend from the Share Consideration due to the
effectiveness of a registration statement is predicated upon
Parent’s reliance upon this Agreement.
(e) Without limitation
of Section 4.5(a),
in connection with any transfer of the Share Consideration other
than pursuant to an effective registration statement, Parent may
require the transferor thereof to provide to Parent an opinion of
counsel selected by the transferor and reasonably acceptable to
Parent, the form and substance of which opinion shall be reasonably
satisfactory to Parent, to the effect that such transfer does not
require registration of such transferred Share Consideration under
the Securities Act. As a condition of transfer, any such transferee
shall, to the extent required by Parent, agree in writing to be
bound by the terms of this Section 4.5.
Section
4.6 Record
Retention. Each Party
agrees, on behalf of itself and its Affiliates, that for a period
of not less than six (6) years following the Closing Date, it shall
not destroy or otherwise dispose of any of the books and records
relating to the Assets, the Excluded Assets, the Assumed
Liabilities or the Excluded Assets with respect to periods prior to
the Closing and shall make such books and records available to one
another for any lawful purpose upon reasonable prior written
notice. Each Party shall have the right to destroy all or part of
such books and records after the sixth anniversary of the Closing
Date or, at an earlier time by giving each other party hereto 10
days’ prior written notice of such intended disposition and
by offering to deliver to the other Party, at the other
Party’s expense, custody of such books and records as such
first party may intend to destroy. This Section 4.6 is not intended to
alter the normal rules of discovery in connection with any dispute
among the Parties.
23
Section
4.7 Public
Announcements. Unless otherwise
required by applicable Law, Seller Parties shall not, and shall
cause their Affiliates, agents, professionals and other
representatives not to, make any disclosure or public announcements
in respect of this Agreement or the transactions contemplated
hereby (including price and terms) or otherwise communicate with
any news media without the prior written consent of
Purchaser.
(a) All transfer, sales
and use, value added, registration, documentary, stamp and similar
Taxes (including any penalties, interest, additions to Tax and
costs and expenses relating to such Taxes, but excluding any
transfer gains Taxes), whether for real or personal property,
imposed in connection with the transaction that occurs pursuant to
this Agreement or the other Transaction Documents (collectively,
“Transfer
Taxes”) shall be borne by Sellers. Sellers shall, at
their sole expense, timely file any Tax Return or other document
with respect to any Transfer Taxes (and Purchaser shall reasonably
cooperate with respect thereto as necessary).
(b) All Taxes and Tax
Liabilities with respect to the Assets that relate to any Straddle
Period shall be apportioned between Sellers and Purchaser as
follows: (i) in the case of ad valorem or other property Taxes, on
a per diem basis; and (ii) in the case of income, sales and use and
withholding Taxes, employment Taxes, or other Taxes based on or
measured by income, receipts or profits, as determined from the
closing of the books and records of Sellers as of 11:59 p.m. on the
Closing Date.
(c) After the Closing
Date, Purchaser and Sellers shall furnish or cause to be furnished
to each other, upon request, as promptly as practicable, such
information and assistance (including access to books, records,
work papers and Tax Returns for Pre-Closing Periods) relating to
the Assets as is reasonably necessary for the preparation of any
Tax Return, claim for refund or audit, and the prosecution or
defense of any claim, suit or proceeding relating to any proposed
Tax adjustment (it being understood that Sellers shall, at their
sole expense, be responsible to prepare all post-Closing Tax
Returns of Sellers). Upon reasonable notice, Sellers and Purchaser
shall make their employees and facilities available on a mutually
convenient basis to provide reasonable explanation of any documents
or information provided hereunder. Any request for information or
documents pursuant to this Section 4.8(c) shall be made by
the requesting party in writing. The other party hereto shall
promptly (and in no event later than 30 days after receipt of the
request) provide the requested information. The requesting party
shall indemnify the other party for any out-of-pocket expenses
incurred by such other party in connection with providing any
information or documentation pursuant to this Section 4.8(c). Any information
obtained under this Section 4.8(c) shall be kept
confidential, except as otherwise reasonably may be necessary in
connection with the filing of Tax Returns or claims for Tax refunds
or in conducting any Tax audit, dispute or contest.
Section
4.9 Confidentiality.
Each Seller Party shall, and shall cause its Affiliates to, hold in
confidence (and not disclose or provide access to any other Person)
any and all information, whether written or oral, concerning the
Assets and the Assumed Liabilities, except to the extent that such
Seller Party can show that such information (i) is generally
available to and known by the public through no fault of such
Seller Party or any of its respective Affiliates or
representatives; or (ii) is required to be disclosed by judicial or
administrative process or by other requirements of Law. If any
Seller Party or any of its Affiliates or representatives are
compelled to disclose any information by judicial or administrative
process or by other requirements of Law, such Seller Party shall
promptly notify Purchaser in writing and shall disclose or permit
disclosure of only that portion of such information which such
Seller Party is advised by its counsel in writing is legally
required to be disclosed; provided, however, that such Seller Party
shall use its best efforts to obtain an appropriate protective
order or other reasonable assurance that confidential treatment
will be accorded such information. For the avoidance of doubt,
Purchaser shall cover all reasonable out-of-pocket costs and
expenses incurred by any Seller Party or any of its Affiliates in
connection with complying with the provisions of this Section 4.9,
including the obtaining of legal counsel and an appropriate
protective order. In the event a breach or threatened breach of
this Section 4.9,
Purchaser and each of its 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 shall be
entitled to be indemnified with respect thereto by Seller Parties.
The requesting party shall indemnify the other party for any
out-of-pocket expenses incurred by such party in connection with
providing any information or documentation pursuant to this
Section 4.9. Any
information obtained under this Section 4.9 shall be kept
confidential, except as otherwise reasonably may be necessary in
connection with the filing of Tax Returns or claims for Tax refunds
or in conducting any Tax audit, dispute or contest.
24
Section
4.10 Non-Competition.
For a period of four (4) years commencing on the Closing Date
(the “Restricted
Period”), each of the Seller Parties shall not, and
shall cause its Affiliates not to, directly or indirectly (whether
by itself or in partnership or conjunction with any other Person),
(a) anywhere in the State of California, engage in, own,
manage, operate, control, be employed by, be a consultant to,
participate in or have a financial interest in, or be connected in
any manner (including as an employee, consultant, officer,
director, owner, franchisee of a third party or lender) with the
ownership, management, operation or conduct of any Person engaged
in a business competitive with the current or planned Business,
except that Seller Parties are permitted to maintain in the
aggregate up to a five percent (5%) passive interest in any company
having equity securities listed on a national stock exchange, or
(b) divert, take away, solicit, or accept business from any Person
which then is or has been within the prior twelve (12) months a
client, customer or account of Purchaser or any of its Affiliates
with respect to the Business. For the avoidance of doubt, for
purposes of this Section
4.10, the term “Business” shall exclude
cultivation activities.
Section
4.11 Non-Solicitation.
During the Restricted Period, each of the Seller Parties shall not
and shall cause its Affiliates not to, directly or indirectly
(whether by itself or in partnership or conjunction with any other
Person), solicit, entice, encourage or influence, or attempt to
solicit or entice, encourage or influence, any employee of or
independent contractor or consultant to Purchaser or any of its
Affiliates to resign or leave the employ of or terminate its
engagement with Purchaser or any of its Affiliates.
Section
4.12 Release . Seller Parties,
on behalf of themselves and their Affiliates, and the predecessors,
successors and assigns of the foregoing (collectively, the
“Releasors”), hereby
unconditionally release (a) (i) Purchaser, Parent and their
Affiliates, (ii) the directors, officers, employees, managers,
members, partners, direct and indirect investors, advisors, agents
and other representatives of Purchaser, Parent and their Affiliates
and (iii) the predecessors, successors, assigns, heirs, executors,
administrators and personal representatives of the foregoing
(collectively, the “Purchaser Releasees”)
from and against any and all claims, causes of actions, damages,
judgments, expenses and other Liabilities, at law or in equity, to
which any Releasee might otherwise succeed as a result of the
transactions contemplated by the Transaction Documents (the
“Purchaser Released
Claims”) and (b) (i) Xxxxxx Xx, (ii) the directors,
officers, employees, managers, members, partners, direct and
indirect investors, advisors, agents and other representatives of
Xxxxxx Xx and (iii) the predecessors, successors, assigns, heirs,
executors, administrators and personal representatives of the
foregoing (collectively, the “Xxxxxx Xx Releasees” and,
together with the Purchaser Releasees, the “Releasees”) from and
against any and all claims, causes of actions, damages, judgments,
expenses and other Liabilities, at law or in equity, which the
Releasors had, have or may in the future have against the Xxxxxx Xx
Releasees based on any state of facts or circumstances from the
beginning of the world to the date of this Agreement (the
“Xxxxxx Xx Released
Claims” and, together with the Purchaser Released
Claims, collectively, the “Released Claims”). For
the avoidance of doubt, Seller Parties’ rights under the
Transaction Documents are excluded from the Released Claims. Seller
Parties, on behalf of the Releasors, agree to, upon the request of
any Releasee, release or reduce any claim asserted against a third
party that would be a Released Claim if asserted by a Seller Party
against a Releasee to discharge the third party claim asserted
against such Releasee.
25
Seller Parties, on
behalf of Releasors, hereby agree that this agreement shall apply
to all unknown or unanticipated Released Claims as well as those
known and anticipated, and upon advice of counsel, Seller Parties
hereby knowingly waive all rights and protections
under California Civil Code
Section 1542, which reads as follows:
“A GENERAL
RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW
OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.”
Seller
Parties’ waiver of all rights and benefits afforded by
Section 1542 is done with their respective understanding and
acknowledgement of the significance of such a specific waiver of
Section 1542. Notwithstanding the provisions of Section 1542, and
for the purpose of implementing a full and complete release and
discharge Releasees, Seller Parties expressly acknowledge that this
release is intended to include in its effect (without limitation)
all claims that Seller Parties do not know or suspect to exist in
their favor at the xxxx Xxxxxx Parties execute this Agreement,
which contemplates the extinguishment of any such claims, but the
foregoing shall not act to release Seller Parties from their
obligations under this Agreement. This waiver also applies to any
other relevant re-codification or similar laws implemented
hereafter substantially covering the subject matter of Section
1542.
Section
4.13 Exclusivity. From the date of
this Agreement until the Closing (or until the earlier termination
of this Agreement in accordance with its terms), no Seller Party
nor its Affiliates, directors, officers, employees, agents or
representatives shall (a) initiate, solicit, entertain, negotiate,
accept, discuss or knowingly encourage, directly or indirectly, any
proposal or offer (an “Acquisition Proposal”) by
any Person (other than Purchaser) regarding the direct or indirect
sale, license, lease, sublease, joint venture or other disposition
in whole or in part (however structured) of any Assets or, unless
the Assets are effectively excluded therefrom without preventing or
impairing the consummation of the transactions contemplated hereby
without any additional expense or Liability to Purchaser, any
equity interest in any Seller Party (each of the actions referred
to a “Third Party
Acquisition”), (b) except as otherwise required by Law
or to customers and suppliers in the Ordinary Course of Business,
provide any non-public financial or other confidential or
proprietary information regarding the Assets or the Assumed
Liabilities to any Person (other than Purchaser), (c) take any
other action with the purpose of facilitating any inquiries or the
making of any proposal that constitutes, or could reasonably be
expected to result in, a Third Party Acquisition, (d) enter into
any written or oral agreement, arrangement or understanding
requiring any Seller Party to abandon, terminate or fail to
consummate the transactions contemplated by this Agreement, or (e)
enter into any written or oral agreement or understanding with any
Person (other than Purchaser) authorizing a Third Party
Acquisition. Seller Parties agree to promptly, and in any event
within one (1) business day following receipt, notify Purchaser (if
orally, followed by written notice) if any Seller Party or any
Affiliate of any Seller Party or, to the Knowledge of Sellers, any
of the directors, officers, employees, agents or representatives of
any Seller Party receives any indications of interest, requests for
information or offers in respect of an Acquisition Proposal,
including the identity of the counterparty and all relevant terms
thereof (and a copy thereof if the same has been received in
writing).
26
Section
4.14 Notices of
Events. From the date of
this Agreement until the Closing (or until the earlier termination
of this Agreement), Seller Parties shall promptly notify Purchaser
if they becomes aware of (i) the occurrence or non-occurrence of
any change, condition or event, the occurrence or non-occurrence of
which would render any representation or warranty of any Seller
Party contained in this Agreement, if made on or immediately
following the date of such change, condition or event, untrue or
inaccurate, (ii) any failure of any Seller Party to comply with or
satisfy any covenant or agreement to be complied with or satisfied
by it hereunder, (iii) any event or condition that would result in
the non-fulfillment of any of the conditions to Purchaser’s
obligations hereunder, (iv) any notice or other communication from
any Person alleging that the consent of such Person is or may be
required in connection with the consummation of the transactions
contemplated by this Agreement or any of the other Transaction
Documents or (v) any Action pending or, to the Knowledge of
Sellers, threatened against any Party relating to the transactions
contemplated by this Agreement or any of the other Transaction
Documents.
ARTICLE
V
Section
5.1 Closing Conditions of
Purchaser. The obligations
of Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the
Closing of each of the following conditions, any of which may only
be waived exclusively by Purchaser:
(a) Accuracy of Seller Representations and
Warranties. The representations and warranties of Seller
Parties, or any of them, set forth in the Transaction Documents
shall be true and correct on and as of the date hereof and on and
as of the Closing Date (with the same force and effect as if made
on and as of the Closing Date), other than any such representations
and warranties that address matters only as of a specified date,
which shall be true and correct or true and correct as of such
date.
(b) Compliance with Covenants.
Seller Parties shall have performed and complied in all material
respects with the covenants and obligations under this Agreement
required to be performed by and complied with by the Seller Parties
prior to the Closing.
(c) Title Policy. The Title Company
shall have agreed to issue an ALTA (or TLTA as appropriate) policy
of title insurance in the form of the Title Policy Pro Forma (with
only such changes, if any, as are approved Purchaser in its sole
discretion) for the parcels included in the Xxxxxx Road Real
Property, in an amount determined by Purchaser.
(d) No Material Adverse Effect.
Since December 31, 2020, no Material Adverse Effect shall have
occurred.
(e) Closing Deliverables. Sellers
shall have delivered (or caused to be delivered) to Purchaser the
Closing deliverables listed in Section 1.3(e).
(f) Absence of Legal Restraints. No
Governmental Authority shall have enacted, issued or promulgated
any Law or order that has the effect of rendering the Transaction,
or the Parties’ performance under any of the Transaction
Documents, illegal or otherwise prohibits or otherwise restrains
the consummation of the transactions contemplated by this Agreement
or the Parties’ performance under any of the Transaction
Documents.
(g) Due Diligence; Financing.
Purchaser and its sources of financing shall have completed and be
satisfied in their sole discretion with the results of their due
diligence review of the Business, the Assets and the Assumed
Liabilities and all lender actions and approvals required for
funding of the Cash Consideration at the Closing and the
consummation of the transactions contemplated hereby shall have
been completed and received.
27
Section
5.2 Closing Conditions of the
Sellers. The obligations
of the Sellers to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the
Closing of each of the following conditions, any of which may only
be waived exclusively by the Representative:
(a) Accuracy of Purchaser Representations
and Warranties. The representations and warranties of
Purchaser set forth in the Transaction Documents shall be true and
correct on and as of the date hereof and on and as of the Closing
Date (with the same force and effect as if made on and as of the
Closing Date), other than any such representations and warranties
that address matters only as of a specified date, which shall be
true and correct or true and correct as of such date.
(b) Compliance with Covenants.
Purchaser shall have performed and complied in all material
respects with the covenants and obligations under this Agreement
required to be performed by and complied with by Purchaser prior to
the Closing.
(c) Closing Deliverables. Purchaser
shall have delivered (or caused to be delivered) to the Sellers the
Closing deliverables listed in Section 1.3(g) (it being
understood that the payments to be made by Purchaser shall be made
after all other Closing conditions have been
satisfied).
(d) Absence of Legal Restraints. No
Governmental Authority shall have enacted, issued or promulgated
any Law or order that has the effect of rendering the transactions
contemplated by this Agreement, or the Parties’ performance
under any of the Transaction Documents, illegal or otherwise
prohibits or otherwise restrains the consummation of the
transactions contemplated by this Agreement or the Parties’
performance under any of the Transaction Documents.
ARTICLE
VI
Section
6.1 Termination. This Agreement
may be terminated at any time prior to the Closing, as
follows:
(a) by the mutual
written consent of the Representative and Purchaser;
(b) by either the
Representative or Purchaser if the transactions contemplated by
this Agreement are not consummated on or before 60 days from the
date hereof (the “Outside Date”), unless
the failure to consummate the transactions by such date was
proximately caused by a breach of this Agreement by the Party
seeking to terminate this Agreement (which, if the Representative
is the terminating party, shall be deemed to refer to each Seller
Party);
(c) by Purchaser by
giving written notice to the Representative at any time prior to
the Closing in the event any Seller Party has breached or failed to
perform any of its representations, warranties, covenants or
agreements set forth in this Agreement, which breach or failure to
perform (i) would result in the failure of a condition set forth in
Section 5.1 and
(ii) is not capable of being cured by the Outside Date or, if
capable of being cured, shall not have been cured on or before the
earlier of (x) the Outside Date and (y) the date that is 20
calendar days following Purchaser’s delivery of written
notice to the Representative of such breach or failure to perform;
and
(d) by the
Representative by giving written notice to Purchaser at any time
prior to the Closing in the event Purchaser has breached or failed
to perform any of its representations, warranties, covenants or
agreements set forth in this Agreement, which breach or failure to
perform (i) would result in the failure of a condition set forth in
Section 5.2 and
(ii) is not capable of being cured by Purchaser by the Outside Date
or, if capable of being cured, shall not have been cured by
Purchaser on or before the earlier of (x) the Outside Date and (y)
the date that is 20 calendar days following the
Representative’s delivery of written notice to Purchaser of
such breach or failure to perform.
28
Section
6.2 Effect of
Termination. Any termination
of this Agreement pursuant to and in compliance with Section 6.1
shall be effective immediately upon delivery of written notice
thereof by the terminating party to the other party, specifying the
provisions hereof pursuant to which such termination is made (other
than Section 6.1(a), which termination shall be upon the
effectiveness of such mutual written consent), and this Agreement
shall become null and void and there shall be no liability on the
part of any Party, and all rights and obligations of any Party
shall cease; provided, however, that no such termination shall
relieve any Party of any liability or damages resulting from fraud
or any breach of this Agreement prior to such termination, in which
case, the aggrieved party shall be entitled to all remedies
available at Law or in equity, or from liability for any expenses
for which such party is expressly responsible hereunder; and
provided, further, that the provisions of Section 4.7, this Article VI and Article VIII shall survive the
termination of this Agreement pursuant to Section 6.1.
INDEMNIFICATION
Section
7.1 Survival. All
representations and warranties contained in this Agreement shall
survive until the date which is twelve (12) months after the
Closing Date; provided, however, that (a) the
representations and warranties stated in Section 2.8, Section 2.14 and Section 2.16 shall survive for
the full period of all applicable statutes of limitations (giving
effect to any waiver, mitigation or extension thereof) and (b) the
representations and warranties stated in Section 2.1, Section 2.2, Section 2.3, Section 2.9, Section 2.17, Section 2.18, Section 3.1, Section 3.2, Section 3.4 or Section 3.5 shall survive
indefinitely. The representations and warranties specified in
clauses (a) and (b) of the preceding sentence are referred to
herein as the “Fundamental
Representations”. The covenants and agreements of any
Party set forth in this Agreement or any of the other Transaction
Documents shall survive and remain in full force and effect until
fully performed. In the event that an Indemnified Party shall
deliver written notice of a claim for indemnification to an
Indemnifying Party prior to the expiration of any applicable
survival period set forth above, then such claim shall survive the
expiration of such survival period until the final resolution
thereof. The foregoing survival period limitations shall not apply
to any claim based upon fraud, intentional misrepresentation or
willful misconduct.
Section
7.2 Indemnity Obligations of Seller
Parties. Seller
Parties covenant and agree to and shall, jointly and severally,
defend, indemnify and hold harmless Purchaser, Parent, their
Affiliates and their respective directors, officers, employees,
managers, members, partners, advisors, agents and other
representatives (collectively, the “Purchaser Indemnitees”)
from and against, and to pay or reimburse Purchaser Indemnitees
for, any and all claims, Liabilities, obligations, losses, fines,
costs, proceedings or damages, including all reasonable fees and
disbursements of counsel incurred in the investigation or defense
of any of the same or in asserting any of their respective rights
hereunder (collectively, “Losses”), based on,
resulting from, arising out of or relating to (a) any breach of any
representation or warranty of any Seller Party contained in the
Transaction Documents; (b) any breach of or failure to perform any
covenant or agreement of Seller Parties or any of them or any of
their Affiliates contained in the Transaction Documents or any
other closing deliverables or the failure to fulfill any obligation
in respect thereof; (c) any Excluded Liability (including for the
avoidance of doubt any Indebtedness or Indemnified Taxes) or
Excluded Asset; and (d) any item set forth in Section 7.2(d) of the
Disclosure Schedule.
29
Section
7.3 Indemnity Obligations of
Purchaser. Parent and
Purchaser covenant and agree to and shall, jointly and severally,
defend, indemnify and hold harmless Seller Parties, their
Affiliates and their respective directors, officers, employees,
managers, members, partners, advisors, agents and other
representatives (collectively, the “Seller Indemnitees”) from
and against, and to pay or reimburse Seller Indemnitees for, any
and all Losses based on, resulting from, arising out of or relating
to (a) any breach of any representation or warranty of Parent or
Purchaser contained in the Transaction Documents; and (b) any
breach of or failure to perform any covenant or agreement of Parent
or Purchaser or any of their Affiliates contained in the
Transaction Documents or any other closing deliverables or the
failure to fulfill any obligation in respect thereof.
(a) Third Party Claims. In the case
of any claim asserted by a third party (a “Third Party Claim”)
against a party entitled to indemnification under this Agreement
(the “Indemnified
Party”), notice shall be given by the Indemnified
Party to the party required to provide indemnification (the
“Indemnifying
Party”) promptly after such Indemnified Party has
actual knowledge of any claim as to which indemnity may be sought.
If the Indemnifying Party provides a written notice to the
Indemnified Party within 30 days after its receipt of notice of
such claim that it will indemnify and hold the Indemnified Parties
harmless from all Losses related to such Third Party Claim, the
Indemnified Party shall permit the Indemnifying Party (at the
expense of such Indemnifying Party) to assume the defense of such
Third Party Claim or any litigation with a third party resulting
therefrom; provided, however, that (i) the counsel for the
Indemnifying Party who shall conduct the defense of such claim or
litigation shall be subject to the reasonable approval of the
Indemnified Party, (ii) the Indemnified Party may participate in
such defense at such Indemnified Party’s expense, (iii) the
failure by any Indemnified Party to give notice of a Third Party
Claim to the Indemnifying Party as provided herein shall not
relieve the Indemnifying Party of its indemnification obligation
under this Agreement except and only to the extent that, as a
result of such failure to give notice, the defense against such
claim is materially impaired, and (iv) the fees and expenses
incurred by the Indemnified Party prior to the assumption of a
Third Party Claim hereunder by the Indemnifying Party shall be
borne by the Indemnifying Party. Except with the prior written
consent of the Indemnified Party, no Indemnifying Party, in the
defense of any Third Party Claim, shall consent to entry of any
judgment or enter into any settlement that provides for injunctive
or other nonmonetary relief affecting the Indemnified Party, that
does not include as an unconditional term thereof the giving by
each claimant or plaintiff to such Indemnified Party of a general
release from any and all liability with respect to such Third Party
Claim or that includes any admission of wrongdoing by the
Indemnified Party. Notwithstanding anything herein to the contrary,
the Indemnifying Party shall not be entitled to assume (or, if
applicable, to maintain) control of the defense against a Third
Party Claim if (1) the claim for indemnification relates to or
arises in connection with any criminal or quasi criminal
proceeding, action, indictment, allegation or investigation; (2)
the claim seeks an injunction, specific performance or any other
equitable or non-monetary relief against the Indemnified Party; (3)
the Indemnified Party reasonably believes an adverse determination
with respect to the Third Party Claim would be materially
detrimental to or materially injure the Indemnified Party’s
reputation or future business prospects; (4) the Indemnified Party
has been advised by counsel that a reasonable likelihood exists of
a conflict of interest between the Indemnifying Party and the
Indemnified Party; or (5) the Indemnifying Party fails to
vigorously prosecute or defend such claim. If the Indemnifying
Party does not accept the defense of a Third Party Claim within 30
days after receipt of the written notice thereof from the
Indemnified Party described above, the Indemnified Party shall have
the full right to defend against any such claim or demand. In any
event, the Indemnifying Party and the Indemnified Party shall
reasonably cooperate in the defense of any Third Party Claim and
the records of each shall be reasonably available to the other with
respect to such defense.
(b) Non-Third Party Claims. With
respect to any claim for indemnification hereunder which does not
involve a Third Party Claim, the Indemnified Party will give the
Indemnifying Party written notice of such claim. The Indemnifying
Party may acknowledge and agree by notice to the Indemnified Party
in writing to satisfy such claim within 30 days of receipt of
notice of such claim from the Indemnified Party. If the
Indemnifying Party shall dispute such claim, the Indemnifying Party
shall provide written notice of such dispute to the Indemnified
Party within such 30-day period. If the Indemnifying Party shall
fail to provide written notice to the Indemnified Party within
thirty (30) days of receipt of notice from the Indemnified Party
that the Indemnifying Party either acknowledges and agrees to pay
such claim or disputes such claim, the Indemnifying Party shall be
deemed to have acknowledged and agreed to pay such claim in full
and to have waived any right to dispute such claim.
30
(c) Certain
Limitations.
(i) The cumulative
indemnification obligations of Seller Parties pursuant to
Sections 7.2(a)
shall not exceed in the aggregate an amount equal to the Share
Consideration Amount (the “Cap”), provided that the
limitations in this Section 7.4(c)(i) shall not
apply to Losses arising from a breach of or inaccuracy in any of
the Fundamental Representations or any claim based on fraud or
intentional misrepresentation by any Seller Party (and Losses
arising from a breach of or inaccuracy in any of the Fundamental
Representations or any claim based on fraud or intentional
misrepresentation by any Seller Party shall not count against the
Cap).
(ii) The cumulative
indemnification obligations of Parent and Purchaser pursuant to
Sections 7.3(a)
shall not exceed in the aggregate an amount equal to the Cap,
provided that the limitation in this Section 7.4(c)(ii) shall not
apply to Losses arising from a breach of or inaccuracy in any of
the Fundamental Representations or any claim based on fraud or
intentional misrepresentation by Parent or Purchaser (and Losses
arising from a breach of or inaccuracy in any of the Fundamental
Representations or any claim based on fraud or intentional
misrepresentation by Parent or Purchaser shall not count against
the Cap).
(d) Escrow Claims. Upon any claim
for indemnification in favor of a Purchaser Indemnitee being
determined (whether by way of an Order of a Governmental Authority
or a settlement or agreement between Purchaser and the
Representative, on behalf of Seller Parties), Purchaser and the
Representative shall instruct the Escrow Agent to release to
Purchaser a number of Escrow Shares having a value equal to the
amount of such indemnification claim. To the extent there are
insufficient Escrow Shares remaining in escrow to satisfy any such
claim in favor of a Purchaser Indemnitee, Seller Parties shall be
jointly and severally liable for the direct payment
thereof.
(e) Escrow Shares. For purposes of
this Article VII,
and for any other matter arising hereunder that requires the Escrow
Shares to be valued, the Escrow Shares shall be deemed to have a
value equal to US $1.613 per share (the “Deemed Share
Value”).
(f) Collateral Sources. The amount
of any Losses for which indemnification is provided under
Section 7.2 or
Section 7.3 shall
be reduced by (i) any amounts that are actually recovered by the
Indemnified Party from any third party with respect to such Losses
and (ii) any insurance proceeds or other cash receipts or source of
reimbursement that are actually received by an Indemnified Party
with respect to such Losses (net of reasonable costs of recovery or
collection and any retention or deductible related to an insurance
claim in respect of Losses thereof). For the avoidance of doubt,
the Indemnified Party shall be obligated to make all reasonable
efforts to claim, seek or otherwise obtain any such third-party
recoveries or insurance proceeds or other reimbursement to which it
may be entitled.
(g) Right of Set-Off. Seller
Parties hereby agree that if Seller Parties fail to pay any claim
for Losses for which Seller Parties are responsible hereunder or
any other amounts which any Seller Party or any of its respective
Affiliates is responsible to pay to Purchaser or any of its
Affiliates (including Xxxxxx Xx after the Closing), Purchaser may
in its discretion satisfy all or any portion of such Losses or any
such other amounts by set-off and recourse against any amounts
payable by Purchaser to Sellers or any of their Affiliates. To the
extent that it is ultimately determined that Seller Parties are not
liable for the full amount so set off, Purchaser shall promptly
thereafter return to Sellers such portion of the claimed set-off
amount to which Sellers are entitled.
31
(h) Waiver of Subrogation. With
respect to any claim brought by a Purchaser Indemnitee against any
Seller Party relating to this Agreement, Seller Parties expressly
waive any right of subrogation, contribution, advancement,
indemnification or other claim against any Purchaser Indemnified
Party with respect to any amounts owed by any Seller Party to any
Purchaser Indemnitee.
Section
7.5 Certain
Determinations. Notwithstanding
anything to the contrary contained in this Agreement, for the sole
purpose of determining any Losses with respect to any claim for
breach of any representation or warranty that is subject to
indemnification hereunder (and not for purposes of determining
whether there is a breach of any such representation or warranty),
each representation and warranty in any of the Transaction
Documents shall be read without regard and without giving effect to
the term(s) “material” or “Material Adverse
Effect” or similar qualifiers as if such words were deleted
from such representation and warranties. The right to
indemnification, payment of Losses of an Indemnified Person or for
other remedies based on any representation, warranty, covenant or
agreement contained in or made pursuant to any of the Transaction
Documents shall not be affected by any investigation conducted with
respect to, or any knowledge acquired (or capable of being
acquired) at any time with respect to the accuracy or inaccuracy
of, compliance with, or performance or fulfillment of, any such
representation, warranty, covenant or agreement.
Section
7.6 Release of Escrow
Shares. On the first
anniversary of the Closing (the “Release Date”), the
Representative and Purchaser shall instruct the Escrow Agent to
release the remaining Escrow Shares to Sellers. The number of
Escrow Shares to be released to Sellers shall be reduced by a
number of Escrow Shares having an aggregate value equal to the
amount of any indemnity claim asserted by a Purchaser Indemnitee
pursuant to this ARTICLE
VII that has not been resolved as of such release date.
Promptly, and in any event not later than three (3) Business Days,
following the resolution of any indemnity claim with respect to
which Escrow Shares are withheld on the Release Date, the
Representative and Purchaser shall instruct the Escrow Agent to
release to Sellers the portion of the Escrow Shares that were
withheld on the basis of such claim and that are not required to be
used to satisfy such claim (provided that if there are then other
indemnity claims pending against the Escrow Shares, such Escrow
Shares shall continue to be withheld to the extent required to
secure satisfaction of such other indemnity claims and shall be
released in the same manner upon the resolution of such other
indemnity claims).
Section
7.7 Treatment of Indemnification
Payments. All
indemnification payments made under this Agreement shall be treated
by the Parties as an adjustment to the Purchase Price to the extent
permitted by applicable Law.
ARTICLE
VIII
(a) Each Seller Party
hereby irrevocably appoints the Representative as the sole and
exclusive representative of such Seller Party regarding any matter
relating to or arising under this Agreement, the other Transaction
Documents and the transactions contemplated hereby and
thereby.
32
(b) Each Seller Party
hereby appoints the Representative as such Seller Party’s
true and lawful attorney-in-fact and agent, with full powers of
substitution and resubstitution. This power of attorney, all
authority hereby conferred and the powers, immunities and rights to
indemnification granted to the Representative hereunder are
granted and shall be irrevocable and shall not be terminated by any
act of any Seller Party, by operation of applicable Law, whether by
death, disability, protective supervision, bankruptcy, liquidation,
incompetence or any other event. All actions taken by the
Representative under any of the Transaction Documents shall be
binding upon each Seller Party and each such Seller Party’s
successors as if expressly confirmed and ratified in writing by
such Seller Party, and all defenses which may be available to any
Seller Party to contest, negate or disaffirm the action of the
Representative taken in good faith under any of the Transaction
Documents are waived. Without limitation of the foregoing, any
notice provided to the Representative shall be deemed to have been
provided to each Seller Party. The Representative shall promptly
deliver to each Seller Party any notice received by the
Representative concerning this Agreement. Without limiting the
generality of the foregoing, the Representative has full power and
authority, on behalf of each Seller Party and each Seller
Party’s successors and assigns, to: (i) interpret the
terms and provisions of the Transaction Documents and the documents
to be executed and delivered by such Seller Party in connection
herewith and therewith, (ii) execute and deliver and receive
deliveries of all agreements, certificates, statements, notices,
approvals, extensions, waivers, undertakings, amendments, and other
documents required or permitted to be given in connection with the
consummation of the Transaction Documents and the transactions
contemplated hereunder and thereunder, (iii) receive service
of process in connection with any claims under this Agreement,
(iv) agree to, negotiate, enter into settlements and
compromises of, assume the defense of claims, and demand
arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all actions
necessary or appropriate in the judgment of the Representative for
the accomplishment of the foregoing, (v) give and receive
notices and communications, and (vi) take all actions
necessary or appropriate in the judgment of the Representative on
behalf of Seller Parties in connection with the Transaction
Documents. The Representative shall be entitled to: (i) rely
upon any signature of a Seller Party believed by it to be genuine
and (ii) reasonably assume that a signatory has proper
authorization to sign on behalf of the applicable Seller
Party.
(c) Purchaser may rely
exclusively, without independent verification or investigation,
upon all decisions, communications or writings made, given or
executed by the Representative in connection with this Agreement
and the transactions contemplated hereby. Purchaser is entitled to
deal exclusively with the Representative on all matters relating to
this Agreement and the transactions contemplated hereby. Any action
taken or not taken or decisions, communications or writings made,
given or executed by the Representative, for or on behalf of any
Seller Party, shall be deemed an action taken or not taken or
decisions, communications or writings made, given or executed by
such Seller Party. Any notice or communication delivered by
Purchaser to the Representative shall be deemed to have been
delivered to all Seller Parties. Purchaser shall be entitled to
disregard any decisions, communications or writings made, given or
executed by any Seller Party in connection with this Agreement and
the transactions contemplated hereby unless the same is made, given
or executed by the Representative.
Section
8.2 Expenses. Except as
otherwise provided in this Agreement and the Transaction Documents,
each of the Parties shall bear its own fees, costs and expenses
(including legal, accounting, consulting and investment advisory
fees and expenses) incurred in connection with this Agreement and
the transactions contemplated hereby.
Section
8.3 Governing Law; Jurisdiction;
Venue. This Agreement
shall be governed by and construed in accordance with the internal
laws of the State of California (without giving effect to any
choice or conflict of law provision or rule (whether of the State
of California or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of
California). Without intending to limit the provisions set forth in
Section 8.15, the
Parties agree, on behalf of themselves, Purchaser Indemnitees and
the Seller Indemnitees, that any dispute or Action based on,
arising out of, or relating to this Agreement or any other
Transaction Documents or closing deliverables or any breach thereof
(a “Dispute”), shall be
resolved by arbitration in accordance with the then-applicable
Commercial Arbitration
Rules of the American Arbitration Association
(“AAA
Rules”; see
xxx.xxx.xxx). The arbitration shall be conducted in the City of Los
Angeles, California by one sole arbitrator. The sole arbitrator
shall be appointed in accordance with the AAA Rules. The arbitrator
shall follow the then-applicable ICDR Guidelines for Arbitrators Concerning
Exchanges of Information in managing and ruling on requests
for discovery. The sole arbitrator, by accepting appointment, shall
undertake to exert her or his best efforts to conduct the process
so as to issue an award within six (6) months of her or his
appointment, but failure to meet that timetable shall not affect
the validity of the award. The sole arbitrator shall decide the
Dispute in accordance with the substantive law of the State of
California, without regard to the conflict of laws rules thereof,
and shall not award any damages, fees, cost, expenses or any other
amounts that the Parties have agreed to exclude pursuant to this
Agreement. The award of the sole arbitrator may be entered in any
court of competent jurisdiction.
33
Section
8.4 Entire Agreement; Amendments and
Waivers. This Agreement
(including the schedules and exhibits hereto) represents the entire
understanding and agreement between the Parties with respect to the
subject matter hereof and can be amended, supplemented or changed,
and any provision hereof can be waived, only by written instrument
making specific reference to this Agreement signed by Purchaser, in
the case of an amendment, supplement, modification or waiver sought
to be enforced against Parent or Purchaser, or the Representative,
in the case of an amendment, supplement, modification or waiver
sought to be enforced against a Seller. The waiver by any Party of
a breach of any provision of this Agreement shall not operate or be
construed as a further or continuing waiver of such breach or as a
waiver of any other or subsequent breach. No failure on the part of
any Party to exercise, and no delay in exercising, any right, power
or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of such right, power or remedy by
such Party preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other
remedies provided by Law.
Section
8.5 Section
Headings. The section
headings of this Agreement are for reference purposes only and are
to be given no effect in the construction or interpretation of this
Agreement.
Section
8.6 Notices. All notices,
requests, consents, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to
have been given (a) when delivered, if personally delivered; (b) on
the next Business Day after dispatch, if sent postage pre-paid by
nationally recognized, overnight courier guaranteeing next Business
Day delivery; (c) if sent by e-mail of a PDF document, the date
when sent by email sent to the email address for the sender stated
in this Section 8.6
(provided that receipt of such email is subsequently acknowledged
or such notice sent by email is subsequently delivered by another
method in accordance with this Section 8.6), or (d) on the
third day after the date mailed, by certified or registered mail,
return receipt requested, postage prepaid. Such communications must
be sent to the respective Parties at the following addresses (or at
such other address for a Party as shall be specified in a notice
given in accordance with this Section 8.6):
|
If to a Seller
Party, to:
such Seller Party
in care of
Xxxxxxx
Xxxxxxx
in care of Xxxxxx
Xxxxxxxx, LLP
00000 Xxxxxx
Xxxxxx, Xxxxx 000
Xxxxxx, XX
00000
Email: xxxxxxxx@xxxxxxxxx.xxx
|
|
34
|
With a copy (which
shall not constitute notice) to:
Xxxxxx Xxxxxxxx,
LLP
00000 Xxxxxx
Xxxxxx, Xxxxx 000
Xxxxxx, XX
00000
Attn: Xxxxxxxxxxx
X. Xxxxxx
Email:
xxxxxxx@xxxxxxxxxxxxxxx.xxx
|
|
|
If to Purchaser,
to:
Indus SR,
LLC
Indus Holding
Company
00 Xxxxx Xxx
Xxxxxx
Xxxxxxx, Xxxxxxxxxx
00000
Attn: Xxxx
Xxxxxxxxx
Email: xxxx@xxxxxxxxxxxxxx.xxx
With a copy (which
shall not constitute notice) to:
Akerman
LLP1251
Avenue of the
Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx
00000
Attn: Xxxxxxx X.
Xxxxxxxxxx
Email: xxxxxxx.xxxxxxxxxx@xxxxxxx.xxx
|
|
Section
8.7 Severability. If any provision
of this Agreement is invalid, illegal or unenforceable, the balance
of this Agreement shall remain in effect. Upon such determination
that any term or other provision is invalid, illegal or
unenforceable, the Parties shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the Parties
as closely as possible in a mutually acceptable manner in order
that the transactions contemplated hereby be consummated as
originally contemplated to the greatest extent
possible.
Section
8.8 Binding Effect; Assignment;
Third-Party Beneficiaries. This Agreement
shall be binding upon and shall inure to the benefit of the Parties
and their respective successors and permitted assigns; provided,
however, that no Party may assign its rights and/or obligations
hereunder without the consent of the other Parties. Notwithstanding
the foregoing, Parent or Purchaser may assign its rights and
obligations pursuant to this Agreement, in whole or in part, in
connection with any disposition or transfer of all or any portion
of Parent or Purchaser or its business in any form of transaction
without the consent of any of the other Parties. In addition,
Parent or Purchaser may assign any or all of its rights pursuant to
this Agreement to any lender to Parent or Purchaser as collateral
security without the consent of any of the other Parties. Except as
provided in Section
4.5(b)(i) with respect to underwriters entitled to enforce
such provision and ARTICLE
VII with respect to Persons entitled to indemnification
thereunder, nothing in this Agreement shall create or be deemed to
create any third-party beneficiary rights in any
Person.
Section
8.9 Counterparts. This Agreement
may be executed in one or more counterparts, each of which shall be
deemed an original but all of which together will constitute one
and the same instrument. Delivery of an executed counterpart of a
signature page to this Agreement by facsimile, portable document
format or other electronic means shall be effective as delivery of
a manually executed counterpart to this Agreement.
35
Section
8.10 Remedies
Cumulative. Except as
otherwise provided herein, no remedy herein conferred upon a Party
hereto is intended to be exclusive of any other remedy. No single
or partial exercise by a Party hereto of any right, power or remedy
hereunder shall preclude any other or further exercise
thereof.
Section
8.11 Exhibits and
Schedules. The exhibits and
schedules referred to herein are attached hereto and incorporated
herein by this reference. The disclosure schedule delivered by
Sellers to Parent and Purchaser in connection with the execution of
this Agreement (the “Disclosure Schedule”)
shall be arranged to correspond to the specific sections and
subsections of this Agreement. Any information disclosed in one
Section of the Disclosure Schedule shall be deemed to be disclosed
in all other Sections of the Disclosure Schedule where (i) an
express reference thereto is made or (ii) the information on the
face of such disclosure is sufficient to alert a reasonable person
of its applicability to such other Sections of the Disclosure
Schedule. Nothing in the Disclosure Schedule will be deemed
adequate to disclose an exception to a representation or warranty
made herein, unless the Disclosure Schedule identifies the
exception with particularity and describes the relevant facts in
detail. The mere listing (or inclusion of a copy) of a document or
other item in the Disclosure Schedule will not be deemed adequate
to disclose an exception to a representation or warranty made in
this Agreement (unless the representation or warranty pertains to
the existence of the document or other item itself).
Section
8.12 Interpretation.
When a reference is made in this Agreement to an article, section,
paragraph, clause, schedule or exhibit, such reference shall be
deemed to be to this Agreement unless otherwise indicated. The text
of all schedules is incorporated herein by reference. Whenever the
words “include,” “includes” or
“including” are used in this Agreement, they shall be
deemed to be followed by the words “without
limitation.” As used herein, words in the singular will be
held to include the plural and vice versa (unless the context
otherwise requires), words of one gender shall be held to include
the other gender (or the neuter) as the context requires, and the
terms “hereof”, “herein”, and
“herewith” and words of similar import will, unless
otherwise stated, be construed to refer to this Agreement as a
whole and not to any particular provision of this Agreement. The
phrases “delivered,” “provided” or
“made available” shall mean that the document or
information referred to has been delivered by email to Xxxxxx
Xxxxxxx, xxxxxxxxx@xxxxx.xxx
at least three (3) Business Days prior to the Closing Date. The
Parties intend that each representation, warranty and covenant
contained herein will have independent significance. If any party
has breached or violated, or if there is an inaccuracy in, any
representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter or any
adjustment with respect thereto (regardless of the relative levels
of specificity) which the party has not breached or violated, or in
respect of which there is not an inaccuracy or with respect to
which there has been an adjustment, will not detract from or
mitigate the fact that the party has breached or violated, or that
there is an inaccuracy in, the first representation, warranty or
covenant.
Section
8.13 Arm’s Length
Negotiations. Each Party herein
expressly represents and warrants to all other Parties hereto that
(a) said Party has had the opportunity to seek and has obtained the
advice of its own legal, tax and business advisors before executing
this Agreement; and (b) this Agreement is the result of arm’s
length negotiations conducted by and among the Parties and their
respective counsel.
Section
8.14 Construction. The Parties agree
and acknowledge that they have jointly participated in the
negotiation and drafting of this Agreement. In the event of an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties
and no presumptions or burdens of proof shall arise favoring any
Party by virtue of the authorship of any of the provisions of this
Agreement.
36
Section
8.15 Specific
Performance. Each Party
acknowledges and agrees that the other Parties would be damaged
irreparably in the event any provision of this Agreement is not
performed in accordance with its specific terms or otherwise is
breached, and therefore a Party shall be entitled to injunctive
relief to prevent breaches of the provisions of this Agreement and
to enforce specifically this Agreement and the terms and provisions
hereof (without posting a bond or other surety) in addition to any
other remedy to which such Party may be entitled, at law or in
equity. No limitation herein shall restrict any Party from seeking
and obtaining equitable relief.
Section
8.16 Waiver of Jury
Trial. EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION ARISING OUT OF OR RELATED TO THIS AGREEMENT,
ANY OTHER TRANSACTION DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
ARTICLE
IX
(a) For purposes of
this Agreement, the following terms shall have the meanings
specified in this Section
9.1:
“Action” means any
judicial, administrative or arbitral actions, suits, proceedings
(public or private), claims, hearings, investigations, charges,
complaints, demands or governmental proceedings.
“Affiliate” means, with
respect to any Person, any other Person directly or indirectly
controlling, controlled by or under common control with such
Person, and in the case of any natural Person shall include all
relatives and family members of such Person.
“Assets” means the Real
Property Assets and the Personal Property Assets.
“Books and Records” means
all books and records relating to the Assets, including all books
and records of Xxxxxx Xx.
“Business Day” means any
day of the year on which national banking institutions in the City
of New York are open to the public for conducting business and are
not required or authorized to close.
“Code” means the Internal
Revenue Code of 1986, as amended.
“Consent” means any
consent, approval, authorization, waiver, permit, grant, franchise,
concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or
notice to, any Person, including any Governmental
Authority.
“Contract” means any
contract, agreement, indenture, note, bond, loan, mortgage,
license, instrument, lease, understanding, purchase order,
commitment or other arrangement or agreement, whether written or
oral.
“Employee Benefit Plan”
means any employee benefit plan (as defined in Section 3(3) of
ERISA), and any bonus, profit sharing, savings, pension,
retirement, scheme, fund, deferred compensation, medical, dental,
vision, life or accidental dismemberment, disability, accident,
sick pay, sick leave, accrued leave, vacation, paid time off,
holiday, termination, severance, incentive, commission,
post-retirement health or welfare benefit, stock option, stock
purchase, restricted stock, equity compensation, stock appreciation
right, performance share, performance share unit, restricted stock
unit, or other fringe benefit plan, agreement, policy or
arrangement (whether or not subject to ERISA and whether written or
unwritten, insured or self-insured) that is or has been maintained,
sponsored or contributed to by any Seller or any ERISA Affiliate,
or to which any Seller or any ERISA Affiliate has or could have
Liability.
37
“Environmental Claim”
means any Action, Order, lien, fine, penalty, or, as to each, any
settlement or judgment arising therefrom, by or from any Person
alleging Liability of whatever kind or nature (including Liability
or responsibility for the costs of enforcement proceedings,
investigations, cleanup, governmental response, removal or
remediation, natural resources damages, property damages, personal
injuries, medical monitoring, penalties, contribution,
indemnification and injunctive relief) arising out of, based on or
resulting from: (a) the presence, Release of, or exposure to any
Hazardous Materials; or (b) any actual or alleged non-compliance
with any Environmental Law or term or condition of any
Environmental Permit.
“Environmental Laws” means
any and all Laws relating to the environment or natural resources
or the protection of human health and safety with respect to the
foregoing.
“Equity Interest” means,
with respect to any Person, (i) any capital stock, partnership or
membership interest, unit of participation or other similar
interest (however designated) in such Person and (ii) any option,
warrant, purchase right, conversion right, exchange right or other
Contract which would entitle any other Person to acquire any such
interest in such Person or otherwise entitle any other Person to
share in the equity, profits, earnings losses or gains of such
Person, including stock appreciation, phantom stock, profit
participation or other similar rights.
“ERISA” means the Employee
Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means
each Person or entity under common control with any Seller within
the meaning of Section 414(b), (c), (m) or (o) of the Code and the
regulations issued thereunder.
“Escrow Agent” means
Odyssey Trust Company.
“Escrow Shares” means
309,981 Parent Shares.
“Exchange Act” means the
Securities Exchange Act of 1934, as amended.
“Federal Marijuana Laws”
means The Federal Comprehensive Drug Abuse Prevention and Control
Act of 1970, the Controlled Substances Act of 1910 (21 U.S.C.
§ 801 et seq.), and any other U.S. federal Law the violation
of which is predicated upon a violation of the foregoing as it
applies to marijuana.
“Governing Documents”
means, with respect to any Seller Entity, the articles of
organization and operating agreement of such Seller
Entity.
“Governmental Authority”
means any government or quasi-governmental entity, or political
subdivision thereof, whether federal, state, county, municipal,
city, national, provincial or municipal, or any authority, agency
or commission entitled to exercise any administrative, executive,
judicial, legislative, police, regulatory or Tax authority or
power, or any court, arbitrator (public or private) or tribunal (or
any department, bureau or division thereof).
“Hazardous Material(s)”
means any substance, material or waste that is regulated,
classified or otherwise characterized under or pursuant to any
Environmental Laws 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.
38
“Indebtedness” of any
Person means, without duplication, (i) the principal of and premium
(if any) in respect of (A) indebtedness of such Person for money
borrowed (which shall include, in the case of Sellers, the
outstanding balances of any corporate credit card accounts) and (B)
indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is responsible or
liable; (ii) all obligations of such Person issued or assumed as
the deferred purchase price of property or services, all
conditional sale obligations of such Person and all obligations of
such Person under any title retention agreement (but excluding
trade accounts payable arising in the Ordinary Course of Business
that either (x) are not more than 60 days past due or (y) are set
forth under the caption “Paid by Sellers” on Schedule I
to the Closing Statement); (iii) all obligations of such Person
under leases that would be required to be capitalized in accordance
with GAAP (including any such liabilities that are not
capitalized); (iv) all obligations of such Person under any letter
of credit, banker’s acceptance or similar credit transaction
or any book overdraft; (v) all obligations of such Person under
interest rate cap, swap, collar or similar transactions or currency
hedging transactions; (vi) the liquidation value of all redeemable
preferred securities of such Person; (vii) all unpaid Taxes with
respect to the Assets for any period prior to the period in which
the Closing occurs (including for the avoidance of doubt the
October 1, 2020 installment of real property tax due November 1,
2020 with respect to the Xxxxxx Road Real Property); (viii) any
accrued interest, penalties and other obligations relating to the
foregoing; (ix) all obligations of the type referred to in clauses
(i) through (viii) of any Persons for the payment of which such
Person is responsible or liable, directly or indirectly, as
obligor, guarantor, surety or otherwise, including guarantees of
such obligations; and (x) all obligations of the type referred to
in clauses (i) through (ix) of other Persons secured by any Lien on
any property or asset of such Person (whether or not such
obligation is assumed by such Person). Indebtedness shall also
include any pre-payment penalties, “breakage costs,”
redemption fees, premiums and similar amounts.
“Indemnified Taxes” means,
without duplication, (a) all Taxes (or the non-payment thereof) of
Sellers or any of their Affiliates (other than Xxxxxx Xx) for any
and all tax periods, (b) all Taxes of Xxxxxx Xx for any and all
Pre-Closing Tax Periods, including any Taxes attributable to the
portion of a Straddle Period ending on and including the Closing
Date (as determined in accordance with Section 4.8(b)), (c) all Taxes
of any member of an affiliated group of which any Seller (including
Xxxxxx Xx) or any predecessor is or was a member on or prior to the
Closing Date, including pursuant to Treasury Regulation
§1.1502-6 (or any analogous or similar state, local, or
foreign Law or regulation), (d) any and all Taxes of any Person
imposed on any Seller (including Xxxxxx Xx) as a transferee or
successor, by Contract or pursuant to any Law, rule, regulation, or
otherwise, (e) all Taxes imposed on any Seller or for which any
Seller may be liable, as a result of any transaction contemplated
by this Agreement or the other Transaction Documents (including the
employer-share of any employment Taxes on any compensatory payments
due or made on or before the Closing Date) and (f) all Transfer
Taxes.
“Intellectual Property
Rights” means any and all proprietary and intellectual
property rights, in any jurisdiction, including those rights in and
to (A) inventions and discoveries (whether or not patentable or
reduced to practice), improvements thereto, and invention
disclosures (“Inventions”), (B) patents
and patent applications (including applications or registrations
for industrial design, mask works and statutory Invention
registrations), together with extensions, reissuances, divisionals,
provisionals, continuations, continuations-in-part and
reexaminations thereof (“Patents”), (C)
trademarks, trademark applications and registrations, service
marks, brand names, certification marks, trade dress, slogans,
symbols, logos, trade names and corporate names, fictitious names,
domain names and social media accounts, together with the goodwill
associated therewith (in each case, whether registered or
unregistered) (“Trademarks”), (D)
copyrights, published and unpublished works of authorship, whether
copyrightable or not (including software and related algorithms),
moral rights and rights equivalent thereto, including the rights of
attribution, assignation and integrity (in each case, whether
registered or unregistered) (“Copyrights”), (E) all
trade secrets and confidential business information including, but
not limited to, confidential ideas, technical data, customer lists,
pricing and cost information, marketing plans, research and
development, know-how, formulas, compositions, manufacturing and
production processes and techniques, (F) all proprietary breeds,
cultivars, varietals and germplasm, (G) all other intellectual or
industrial property or proprietary rights of any kind, including
but not limited to any tradenames, (H) all applications to
register, registrations and renewals, substitutions or extensions
of the foregoing and (I) all copies and tangible embodiments of the
foregoing.
39
“IRS” means the United
States Internal Revenue Service.
“Knowledge of Sellers,” or
“Sellers’
Knowledge,” or words of similar effect, regardless of
case, means the actual knowledge of Xxxxxxx Xxxxxxx and the
knowledge Xxxxxxx Xxxxxxx would have after conducting a reasonable
investigation and inquiry into the relevant matter or
matters.
“Law” means any law,
statute, standard ordinance, code, treaty, resolution,
promulgation, rule or regulation of a Governmental Authority,
including the common law, and any order, judgment, writ,
injunction, decree or other determination of an arbitrator or court
or other Governmental Authority. Any reference to any federal,
state, local, or foreign Law shall be deemed also to refer to all
rules and regulations promulgated thereunder.
“Liability” means any
liability, obligation or commitment of any nature whatsoever
(whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated,
matured or unmatured, or due or to become due, or otherwise),
including any liability for Taxes.
“Lien” means any lien
(including any Tax lien), pledge, mortgage, deed of trust, security
interest, claim, demand, lease, charge, option, warrant, call,
right of first refusal, easement, servitude, transfer restriction
or any other encumbrance, restriction or limitation
whatsoever.
“Marijuana Law” means any
Law relating to the farming, growth, manufacturing, production,
processing, extraction, packaging, sale or distribution of any
marijuana or marijuana-related product, including any cannabidiol
product.
“Material Adverse Effect”
or “Material Adverse
Change” means any change, event, circumstance or
effect that, individually or in the aggregate with all other
changes, events, circumstances and effects, has had or would
reasonably be expected to have a material adverse effect on the
Assets (taken as a whole) or the Assumed Liabilities(taken as a
whole) or on the ability of Sellers to consummate the transactions
contemplated hereby.
“Order” means any order,
judgment, award, decision, decree, injunction, ruling, writ or
assessment of any Governmental Authority.
“Ordinary Course of
Business” means, with respect to any action, that such
action (a) is consistent in nature, scope and magnitude with
the past practices of Seller Entities and is taken in the ordinary
course of the normal, day-to-day operations of Seller Entities; and
(b) is similar in nature, scope and magnitude to actions
customarily taken in the ordinary course of the normal, day-to-day
operations of other Persons that are in the same line of business
as Seller Entities. No violation of Law or breach of Contract, or
any indemnity, infringement or other obligations with respect
thereto, shall be deemed in the Ordinary Course of
Business.
40
“Parent Shares” means
subordinate voting shares of Parent.
“Permits” means all
permits, approvals, registrations, certifications, clearances,
consents, concessions, grants, franchises, licenses and other
evidence of authority issued or granted to, conferred upon or
otherwise created for any Seller by any Governmental Authority or
any third-party organization or pursuant to Law.
“Permitted Liens” means
(a) Liens for Taxes and water and sewer charges which are not yet
due and payable, (b) covenants, restrictions and rights and all
easements and agreements for the erection and/or maintenance of
water, gas, steam, electric, telephone, sewer or other utility
pipelines, poles, wires, conduits or other like facilities, and
appurtenances thereto, over, across and under the Xxxxxx Road Real
Property which (i) are either (A) presently existing or (B) granted
to a public utility in the ordinary course prior to the Closing and
(ii) do not allow for the benefitted party or parties to require
the removal of any of the Xxxxxx Road Improvements, (c) zoning,
building, environmental and other laws, ordinances, codes,
restrictions and regulations of all governmental authorities having
jurisdiction with respect to the Xxxxxx Road Real Property,
including, without limitation, landmark designations and all zoning
variances and special exceptions, if any, and (d) such other
easements, restrictions and encumbrances as are shown on the Title
Policy Pro Forma.
“Person” means any
individual, corporation, partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated
organization, Governmental Authority or other entity.
“Pre-Closing Tax Period”
means any taxable period or portion thereof ending on or before the
Closing Date (including the portion of any Straddle Period ending
on the Closing Date).
“Real Property Assets”
means (i) the Xxxxxx Road Real Property; (ii) all warranties and
guaranties, if any, related to the Xxxxxx Road Real Property; (iii)
all consents, approvals, authorizations, waivers or variances,
permits, grants, concessions, licenses, utility contracts, contract
rights, development rights, plans and specifications, engineering
and architectural drawings, plans and studies, floor plans,
surveys, environmental reports, and entitlements, orders,
resolutions, grants, rights and approvals from any Governmental
Authority, pertaining to or accruing for the benefit of the Xxxxxx
Road Real Property; and (iv) to the extent in Seller’s
possession or control, all files and records, and other documents,
records, correspondence and files and any rights thereto relating
to the construction, operation, management, occupancy, repair and
maintenance of the Xxxxxx Road Real Property.
“Related Party” means as
to any Person (a) any Affiliate, (b) any Person that directly or
indirectly owns, or in which such Person directly or indirectly
owns, more than five percent (5%) of any class of capital stock or
other equity interest of such Person or any Affiliate of such
Person, (c) when referring to a legal entity, any officer, manager,
director, employee, member, shareholder or partner of such legal
entity, (d) when referring to a trust, any trustee or beneficiary
of such trust, (e) any parent, spouse, sibling or child of any
individual described in clauses (a) through (d) above, and (f) any
trust for the benefit in whole or in part of such Person and/or any
individual described in clause (e) above.
“Release” means any actual
or threatened release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, migration or
leaching into the indoor or outdoor environment, or into or out of
any property.
“Securities Act” means the
Securities Act of 1933, as amended.
“Share Consideration
Amount” means $12,900,000.
41
“Xxxxxx Xx Equity” means
the outstanding Equity Interests in Xxxxxx Xx.
“Xxxxxx Road Improvements”
means the existing buildings, facilities, structures, fixtures, and
all other improvements currently situated on the Xxxxxx Road Land,
including the buildings and components of buildings located at
20000 Xxxxxx Xxxx, Xxxxxxx, XX 00000, including, without
limitation, any and all of the following: the roof, structural
elements thereof; the heating, ventilation, air conditioning,
humidifying and dehumidifying, plumbing, electrical, mechanical,
solar, sewer, waste water, storm water, paving and parking
equipment and facilities included therein; all boilers,
incinerators and the appliances, machinery, fixtures and equipment
pertaining thereto; and all landscaping, sidewalks, signs,
elevators, light fixtures and security devices situated thereon,
owned by Sellers and used in connection with the operation and
occupancy thereof, and any other structures and improvements
existing from time to time on the Xxxxxx Road Land.
“Xxxxxx Road Land” means
those certain tracts or parcels of real property owned by AMAG, as
described on Schedule
I attached hereto and made a part hereof, together with all
of AMAG’s rights, privileges and easements appurtenant to
said real property, and all right, title and interest of AMAG, if
any, in and to all strips, gores, easements, privileges,
rights-of-way, reversions, remainders, riparian and other water
rights, rights to lands underlying any adjacent streets or roads,
and other tenements, hereditaments and appurtenances, if any,
pertaining to or accruing for the benefit of such real
property.
“Xxxxxx Road Real
Property” means (i) the Xxxxxx Road Land and (ii) the
Xxxxxx Road Improvements.
“Xxxxxx Road Real Property
Deed” mean a grant deed in form and substance
satisfactory to Purchaser and the Title Company and related
documents customary for real property transactions in California
transferring fee simple, insurable, and good, marketable title to
the Xxxxxx Road Real Property to Purchaser.
“Straddle Period” means
any taxable year or other taxable period beginning on or before and
ending after the Closing Date.
“Subsidiary” means, with
respect to any Person, any corporation, limited liability company,
partnership, association, or other business entity of which (a) if
a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors thereof is at the
time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a
combination thereof or (b) if a limited liability company,
partnership, association, or other business entity (other than a
corporation), a majority of partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more Subsidiaries of that
Person or a combination thereof and for this purpose, a Person or
Persons owns a majority ownership interest in such a business
entity (other than a corporation) if such Person or Persons shall
be allocated a majority of such business entity’s gains or
losses or otherwise control the managing director, managing member,
general partner or other managing Person of such limited liability
company, partnership, association, or other business
entity.
“Tax” or
“Taxes”
means any federal, state, provincial, local or foreign income,
alternative minimum, accumulated earnings, personal holding
company, franchise, capital stock, net worth, capital, profits,
windfall profits, gross receipts, value added, sales, use, goods
and services, excise, transfer, conveyance, mortgage, registration,
stamp, documentary, recording, premium, severance, environmental
(including taxes under Section 59A of the Code or any
analogous or similar provision of any state, local or foreign Law
or regulation), real property, personal property, ad valorem,
intangibles, rent, occupancy, license, occupational, employment,
unemployment insurance, social security, disability, workers’
compensation, payroll, health care, or withholding tax, including
any estimated tax, any customs duties or tariffs, including from
imports prior to the Closing that have not been liquidated, any
Liabilities for unclaimed property, and any other tax, duty or
similar governmental charge or assessment or deficiency, including
any interest, penalties or additions attributable to the
foregoing.
42
“Tax Return” means any
return, report, declaration, form, claim for refund or information
return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment
thereof.
“Title Policy Pro Forma”
means the title policy pro forma attached hereto as Exhibit B.
“Transaction Documents”
means this Agreement and each other agreement, document, instrument
or certificate contemplated by this Agreement to be executed in
connection with the transactions contemplated hereby.
“Treasury Regulations”
means the regulations promulgated under the Code, including
temporary and proposed regulations.
(b) Each of the
following terms is defined in the Section set forth opposite such
term:
|
Term
|
Section
|
|
AAA
Rules
|
Section
8.3
|
|
Acquisition
Proposal
|
Section
4.13
|
|
Agreement
|
Preamble
|
|
Allocation
Schedule
|
Section
1.5
|
|
Allowed
Delay
|
Section
4.4(b)
|
|
AMAG
|
Preamble
|
|
Assumed
Liabilities
|
Section
1.1(d)
|
|
Assumption
Agreement
|
Section
1.3(d)
|
|
AT&T
Agreement
|
Section
1.1(c)
|
|
Balance
Sheet
|
Section
2.5
|
|
Balance Sheet
Date
|
Section
2.5
|
|
Xxxx of
Sale
|
Section
1.3(d)
|
|
Bulk Sales
Laws
|
Section
4.10
|
|
Business
|
Recitals
|
|
C
Quadrant
|
Preamble
|
|
Cash
Consideration
|
Section
1.3
|
|
Closing
|
Section
1.2
|
|
Closing
Date
|
Section
1.2
|
|
Closing Payoff
Certificate
|
Section
1.3
|
|
Controlling
Owner
|
Preamble
|
|
Deemed Share
Value
|
Section
7.4(e)
|
|
Disclosure
Schedule
|
Section
8.11
|
|
Dispute
|
Section
8.3
|
|
Escrow
Agreement
|
Section
1.3(c)
|
|
Equipment
|
Section
1.1(b)
|
|
Excluded
Assets
|
Section
1.1(c)
|
|
Excluded
Contracts
|
Section
1.1(c)
|
|
Excluded
Liabilities
|
Section
1.1(e)
|
|
Fundamental
Representations
|
Section
7.1
|
43
|
Indemnified
Party
|
Section
7.4(a)
|
|
Indemnifying
Party
|
Section
7.4(a)
|
|
Purchased
Assets
|
Section
1.1(a)
|
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Lock-Up
Holder
|
Section
4.5(b)
|
|
Losses
|
Section
7.2
|
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Market
Stand-Off
|
Section
4.5(b)
|
|
Outside
Date
|
Section
6.1(b)
|
|
Parent
|
Preamble
|
|
Party
|
Preamble
|
|
Personal Property
Assets
|
Section
1.1(b)
|
|
Proration
Amount
|
Section
1.3(b)(ii)
|
|
Prospectus
|
Section
4.4(a)
|
|
Purchase
Price
|
Section
1.5
|
|
Purchaser
|
Preamble
|
|
Purchaser
Indemnitees
|
Section
7.2
|
|
Razzolink
Lease
|
Section
1.1(b)
|
|
Reduction
Securities
|
Section
4.4(d)
|
|
Release
Date
|
Section
7.6
|
|
Releasees
|
Section
4.12
|
|
Released
Claims
|
Section
4.12
|
|
Releasors
|
Section
4.12
|
|
Representative
|
Preamble
|
|
Resale Registration
Statement
|
Section
4.4(a)
|
|
Restricted
Period
|
Section
4.10
|
|
SEC
|
Section
4.4(a)
|
|
Seller Entity
IP
|
Section
2.10
|
|
Seller
Entities
|
Recitals
|
|
Seller
Indemnitees
|
Section
7.3
|
|
Seller
Parties
|
Preamble
|
|
Seller
Quitclaim
|
Section
1.3(d)
|
|
Sellers
|
Preamble
|
|
Selling
Shareholder
|
Section
2.19(a)
|
|
Share
Consideration
|
Section
1.3
|
|
Xxxxxx
Xx
|
Recitals
|
|
Third Party
Acquisition
|
Section
4.13
|
|
Third Party
Claim
|
Section
7.4(a)
|
|
Title
Company
|
Section
1.3(d)
|
|
Transfer
Taxes
|
Section
4.8(a)
|
* * * *
*
44
IN WITNESS WHEREOF,
this Asset Purchase Agreement has been executed by or on behalf of
each of the Parties as of the day first written above.
|
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SELLER PARTIES:
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XXXXXXX
XXXXXXX
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/s/ Xxxxxxx
Xxxxxxx
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Xxxxxxx
Xxxxxxx
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C QUADRANT LLC
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By:
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/s/ Xxxxxxx
Xxxxxxx
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Xxxxxxx
Xxxxxxx
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Sole
Manager
|
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AMAG HOLDINGS, LLC
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By:
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/s/ Xxxxxxx
Xxxxxxx
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Xxxxxxx
Xxxxxxx
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Sole
Manager
|
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PURCHASER:
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XXXXXX
XX, LLC
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By:
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/s/ Xxxx
Xxxxxxxxx
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Xxxx
Xxxxxxxxx
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Chief Executive
Officer
|
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PARENT:
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XXXXXX FARMS INC.
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By:
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/s/ Xxxx
Xxxxxxxxx
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Xxxx
Xxxxxxxxx
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|
|
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Chief Executive
Officer
|
|
[Signature Page to Purchase
Agreement]
Schedule I
Xxxxxx Road Land
Legal Description
Parcel
I:
Parcel 1, in the
Unincorporated Area in the County of Monterey, State of California,
as shown and designated on that certain Parcel Map filed March 16,
1977 in Volume 11 of Parcel Maps, at Page 85, records of Monterey
County.
Excepting therefrom
that mobile home located thereon.
Parcel
II:
A non-exclusive
right of way, for road and utility purposes, over the Northeasterly
30 feet of the 60 foot right of way along the Northeasterly line of
Parcel 1, as shown on said map referred to hereinabove, adjacent to
said Parcel 1.
Parcel
III:
A non-exclusive
right of way 60 feet wide, for drainage purposes, over and across
the 60 foot right of way along the Northeasterly line of Parcel 2,
as shown on said map referred to hereinabove, and extending from
the most Northerly corner of Parcel 1 to the most Northerly corner
of Parcel 2, as said right of way and Parcels are shown on the
Parcel Map referred to in Parcel I above.
Parcel
IV:
A non-exclusive
right of way 60 feet wide, for drainage purposes, over and across
the 60 foot right of way along the Northeasterly line of Parcel B,
and extending from the most Northerly corner of Parcel A to the
most Northerly of Parcel B, as said right of way and parcels are
shown on that certain Parcel Map filed February 29, 1975 in Volume
8 of Parcel Maps, at Page 62, Records of Monterey
County.
Parcel
V:
A non-exclusive
right of way 60 feet wide, for drainage purposes, along a
Northwesterly and Northeasterly line of Parcel B, as said Parcel is
shown on the Parcel Maps recorded February 28, 1975 in Volume 8 of
Parcel Maps, at Page 62, the centerline of said right of way
beginning at the most Easterly North corner of said Parcel B,
thence S. 52’ 45’ West, along said Northwesterly Lot
Line, 490.90 feet; thence N. 66° 57’ 35’, along
said Northeasterly Lot Line, 621.71 feet to the most Westerly North
corner of said Parcel B.
[Signature Page to Purchase
Agreement]
