Exhibit 10.1
WAIVER AND SECOND AMENDMENT TO NOTE PURCHASE AGREEMENT
This WAIVER AND SECOND AMENDMENT TO NOTE PURCHASE AGREEMENT
(this “Amendment”), dated as of May 22, 2023 to be effective as of May 15, 2023 (the “Second Amendment Effective Date”), is entered into by and among Neptune Wellness Solutions Inc., a corporation incorporated under the Business Corporations Act (Québec) and domiciled in Canada (the “Company”), the Guarantors party hereto, Sprout Foods, Inc., a Delaware corporation (“Sprout”), Neptune Growth Ventures, Inc., a Delaware corporation (“NGV”), CCUR Holdings, Inc., a Delaware corporation, as collateral agent (in such capacity, “Collateral Agent”) and a Purchaser, and the other Purchasers party hereto.
RECITALS:
WHEREAS, reference is made to the Note Purchase Agreement dated as of January 12, 2023 (as amended by that certain Waiver and First Amendment to Note Purchase Agreement, dated March 9, 2023, as amended by this Amendment and as further amended, restated, supplemented or otherwise modified from time to time as of the date hereof, the “Note Purchase Agreement”; capitalized terms used in this Amendment but not otherwise defined herein have the meanings given to such terms in the Note Purchase Agreement) among the Company, the Guarantors from time to time party thereto, the Collateral Agent, and the Purchasers from time to time party thereto;
WHEREAS, the Company has requested that the Purchasers (i) waive, in part, the required prepayment due as of May 15, 2023 (other than the Partial Prepayment (as defined below)) set forth in Section 3.2(d)(ii) of the Note Purchase Agreement (the “Non-Compliance Event”) and (ii) amend the Note Purchase Agreement to, among other things, extend the deadline to make any remaining prepayment required under Section 3.2(d)(ii) of the Note Purchase Agreement (after giving effect to the Partial Prepayment);
WHEREAS, subject to the satisfaction of the conditions set forth herein, the Purchasers signatory hereto are willing to do so, on the terms set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto hereby agree as follows:
Section 1. Waiver. Subject to the satisfaction of the conditions precedent set forth in Section 5 of this Amendment, and in reliance upon the representations and warranties of the Loan Parties set forth in Section 4 below, the Collateral Agent and the Purchasers hereby waive the Non-Compliance Event and, except as otherwise provided for herein, their right to take any action under the Note Purchase Agreement or the other Note Documents that they may otherwise have had solely as a result of the Non-Compliance Event (the “Waiver”). The Waiver is a limited, one time waiver and, except as expressly set forth herein, shall not be deemed to: (a) constitute a waiver of or consent to any Event of Default or any other breach of the Note Purchase Agreement or any of the other Note Documents, whether now existing or hereafter
arising, (b) constitute a waiver of any right or remedy of the Collateral Agent or any of the Purchasers under the Note Documents which does not arise as a result of the Non-Compliance Event (all such rights and remedies being expressly reserved by the Collateral Agent and the Purchasers), or (c) establish a custom or course of dealing or conduct between the Collateral Agent and the Purchasers, on the one hand, and the Company or any other Loan Party on the other hand.
Section 2. Amendments to Note Purchase Agreement. Effective as of the Second Amendment Effective Date, subject to the satisfaction of the conditions precedent set forth in Section 5 of this Amendment, the Note Purchase Agreement (exclusive of Appendices and Exhibits thereto) shall be amended by deleting the stricken text (indicated textually in the same manner as the following example: stricken text), and (ii) adding the double underlined text (indicated textually in the same manner as the following example: double-underlined text) as set forth in the amended Note Purchase Agreement attached hereto as Annex I.
Section 3. Interest Rate Changes. Notwithstanding anything to the contrary in Section 3.1 of the Note Purchase Agreement, for the period beginning on March 31, 2023, through and including the date that the Holders receive the Second Amendment Obligation and that portion of the Exit Fee due and payable on July 31, 2023 (as may be extended), interest on the sum of the outstanding principal amount of each Note shall accrue at the rate of twenty four percent (24%) per annum; thereafter, interest will revert to the rate otherwise provided under Section 3.1 of the Note Purchase Agreement.
Section 4. Note Collateral. Notwithstanding the Waiver, the Non-Compliance Event shall be deemed a Triggering Event under that certain Pledge and Collateral Assignment of Sprout Documents dated as of January 12, 2023, by and among NGV, the Collateral Agent and Sprout (the “Pledge Agreement”). Until such time as the Holders receive the Second Amendment Obligation due and payable on July 31, 2023 (as may be extended), each of NGV and Sprout hereby agree that Collateral Agent shall have the rights and authority granted to it pursuant to Section 3 of the Pledge Agreement. For the avoidance of doubt, the agreements in this Section 4 shall terminate from and after the date the Holders receive the Second Amendment Obligation; provided that the foregoing termination of this Section 4 as to the Triggering Event caused by the Non-Compliance Event does not amend or modify the Pledge Agreement or the rights granted to the Collateral Agent therein if a Triggering Event has occurred and is continuing at any time.
Section 5. Loan Parties’ Certifications. The Loan Parties hereby certify to each Purchaser that:
(a)immediately prior to and after the Second Amendment Effective Date, (i) all representations and warranties by the Loan Parties contained herein and in any of the other Note Documents (including, without limitation, Article 6 of the Note Purchase Agreement) are true and correct in all material respects (without duplication of any materiality qualifier contained therein) as of the Second Amendment Effective Date, except to the extent that such representation or warranty expressly relates to an earlier date (in which event such representations and warranties are true and correct in all material respects (without duplication of any materiality qualifier contained therein) as of such earlier date);
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(b)no Default or Event of Default has occurred or is continuing;
(c)no event, circumstance or change has occurred that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect; and
(d)since the Closing Date, there have been no amendments or modifications made to any of the Sprout Pledged Debt
Section 6. Conditions to Effectiveness. This Amendment shall become effective upon the Purchasers’ reasonable satisfaction that the following conditions precedent have been satisfied:
(a)the execution and delivery of this Amendment by the Loan Parties, the Collateral Agent and the Purchasers party hereto;
(b)The Collateral Agent shall have received a written acknowledgement by NH Expansion Credit Fund Holdings LP (“MS”), acknowledging (i) the assumption by the Collateral Agent of all of Assignor’s (as defined in the Pledge Agreement) rights with respect to the Sprout Pledged Debt in a manner consistent with Section 3 thereof, and (ii) that such Person shall treat the Collateral Agent as having all rights under Section 3 of the Pledge Agreement until such time as Collateral Agent has confirmed receipt of the Second Amendment Obligation due and payable on July 31, 2023 (as may be extended).
(c)Until the indefeasible payment in full in Cash of all of the Obligations (excluding contingent indemnification obligations for which no claims have been made), the Company shall cause Sprout to give the Collateral Agent notice of (in the same manner notice is given to directors, managers, governors or individuals acting in similar capacities), and permit one representative of Collateral Agent (the “Board Observer”) to attend as an observer (but with no voting rights), each meeting (whether telephonic or in-person) of Sprout’s board of directors, any subsidiary boards and all committees thereof, and meetings of the holders of their Capital Stock (other than routine calls with such holders), and shall provide the Board Observer with copies of all materials given to members of such board or committee thereof in connection with each such meeting as and when distributed to the members. Notwithstanding the foregoing, neither Collateral Agent nor any Purchaser nor such Board Observer shall have the right to receive any information that would jeopardize or otherwise impair Sprout’s or any of their Affiliates’ attorney-client privilege, as determined in Sprout’s reasonable discretion upon advice of counsel. As a condition to attending any meetings or receiving any information described herein, Board Observer shall have entered into a confidentiality agreement on terms satisfactory to the Company and Sprout. The necessary and reasonable documented travel expenses incurred by the Board Observer in attending any board or committee meeting held in-person shall be promptly reimbursed by Xxxxxx. Sprout will cause its board of directors to meet telephonically or in- person not less often than quarterly. Board Observer may elect to attend each meeting in-person (if such meeting is being held in-person) or telephonically. Subject to the conditions set forth herein, Collateral Agent may change the individual identified as its Board Observer from time to time at its sole discretion. The Collateral Agent’s Board Observer rights shall automatically terminate upon the indefeasible payment in full in Cash of all of the Obligations (excluding contingent indemnification obligations for which no claims have been made). Sprout
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acknowledges and agrees that the Board Observer shall not owe any fiduciary or other duties to the Sprout or equityholders of Sprout or any Subsidiary or otherwise have any managerial or other duties or liabilities to such Persons, its Affiliates or their equityholders while participating as an observer. The Loan Parties and Sprout shall jointly and severally indemnify and hold harmless the Collateral Agent from and against all losses related to, caused by, resulting or arising from or in connection with the exercise of the rights granted by this Section 6(c); provided, that the Collateral Agent shall not be indemnified by any Loan Party or any of its Subsidiaries for any expenses, liabilities or losses to the extent that a court of competent jurisdiction has finally determined that such are attributable to the Collateral Agent’s (i) bad faith, gross negligence, willful malfeasance or fraud or (ii) knowing and material violation of law.
(d)the Purchasers shall have received a cumulative prepayment from the Company of
$1,000,000 towards the principal amount of the outstanding Notes owed to the Purchasers pursuant to Section 3.2(d)(ii) of the Note Purchase Agreement as of the date hereof (the “Partial Prepayment”);
(e)the Purchasers shall have received payment of reasonable documented out-of- pocket fees, expenses and disbursements (including the legal fees and expenses of K&L Gates LLP)1 required to be reimbursed or paid by the Company hereunder, under Section 2.2(a) of the Note Purchase Agreement or under any other Note Document;
(f)the Purchasers shall have received such documentation as any Purchaser shall reasonably request, all in form and substance satisfactory to the Purchasers, including, without limitation, written consents and secretary’s certificates with respect to the Loan Parties (with customary attachments); and
(g)all certifications, representations and warranties set forth in Section 4 above shall be true and correct and complete.
Section 7. Counterparts. This Amendment may be executed by one or more of the parties to this Amendment in any number of separate counterparts, each of which when so executed, shall be deemed an original and all said counterparts when taken together shall be deemed to constitute but one and the same instrument. Any signature page to this Amendment delivered by facsimile transmission or e-mail (.pdf format) shall have the same force and effect as if the original thereof had been delivered. The words “execution,” “signed,” “signature,” and words of like import in this Agreement and the other Note Documents, including any assignment agreement or in any amendment, waiver, modification or consent relating hereto shall be deemed to include electronic signatures or electronic records, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable laws, including the Federal Electronic Signatures in Global and National Commerce Act, the
1 NTD: To include payment of any legal fees that exceed the $60K deposit Neptune previously delivered to CCUR.
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New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
Section 8. Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their successors and assigns.
Section 9. Further Assurance. The Company and each Purchaser hereby agrees from time to time, as and when requested by the Required Holder, to execute and deliver or cause to be executed and delivered, all such documents, instruments and agreements and to take or cause to be taken such further or other action as the Required Holders may reasonably deem necessary or desirable in order to carry out the intent and purposes of this Amendment.
Section 10. Governing Law. The laws of the State of New York shall govern all matters arising out of, in connection with or relating to this Amendment, including, without limitation, its validity, interpretation, construction, performance and enforcement (including, without limitation, any claims sounding in contract or tort law arising out of the subject matter hereof and any determinations with respect to post-judgment interest).
Section 11. Severability. The illegality or unenforceability of any provision of this Amendment or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Amendment or any instrument or agreement required hereunder.
Section 12. Effects of Amendment on Note Documents. Each party hereto acknowledges and agrees that, on and after the Second Amendment Effective Date, (i) this Amendment shall constitute a Note Document for all purposes under the Note Purchase Agreement and (ii) each reference in any Note Document, and in any other document or instrument incidental thereto, to the “Note Purchase Agreement” shall mean and be a reference to the Note Purchase Agreement, as amended by this Amendment.
Section 13. Reaffirmation. Each Loan Party signatory hereto, as debtor, grantor, pledgor, guarantor, assignor, or in any other similar capacity in which such Person grants liens or security interests in its property or otherwise acts as accommodation party or guarantor, as the case may be, hereby (i) ratifies and reaffirms all of its payment and performance obligations, contingent or otherwise, under each of the Note Documents to which it is a party (after giving effect to this Amendment), (ii) confirms that, as of May 15, 2023, and assuming no further repayment of any such Notes prior thereto, the principal amount of the Notes outstanding under the Note Purchase Agreement shall be $4,758,816, and the principal amount of the Delayed Draw Term Notes outstanding under the Note Purchase Agreement (as amended by this Amendment) shall be $0.00 (which amount is exclusive of the Delayed Draw Note Commitment Fee), and (iii) to the extent such Person granted liens on or security interests in any of its property pursuant to any such Note Document as security for or otherwise guaranteed all or any portion of the Obligations under or with respect to the Note Documents, ratifies and reaffirms such guarantee and grant of security interests and liens and confirms and agrees that such security interests and liens hereafter secure all of the Obligations purported to be secured by such Note Documents, as amended hereby. Each Loan Party hereby consents to this Amendment and acknowledges that each of the Note Documents, as amended hereby, remains in full force and
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effect and is hereby ratified and reaffirmed.
Section 14. General Release. In consideration of, among other things, the Purchasers’ and the Collateral Agent’s execution and delivery of this Amendment, the Company and each other Loan Party, on behalf of itself and its agents, representatives, officers, directors, advisors, employees, subsidiaries, affiliates, successors and assigns (collectively, “Releasors”), hereby forever agrees and covenants not to sue or prosecute against any Releasee (as hereinafter defined) and hereby forever waives, releases and discharges, to the fullest extent permitted by law, each Releasee from any and all claims (including, without limitation, crossclaims, counterclaims, rights of set-off and recoupment), actions, causes of action, suits, debts, accounts, interests, liens, promises, warranties, damages and consequential damages, demands, agreements, bonds, bills, specialties, covenants, controversies, variances, trespasses, judgments, executions, costs, expenses or claims whatsoever, that such Releasor now has or hereafter may have, of whatsoever nature and kind, whether known or unknown, whether now existing or hereafter arising, whether arising at law or in equity (collectively, the “Claims”), against the Collateral Agent and Purchasers in any capacity and their affiliates, subsidiaries, shareholders and “controlling persons” (within the meaning of the federal securities laws), and their respective successors and assigns and each and all of the officers, directors, employees, agents, attorneys, advisors and other representatives of each of the foregoing (collectively, the “Releasees”), based in whole or in part on facts, whether or not now known, existing on or before the Second Amendment Effective Date, that relate to, arise out of or otherwise are in connection with: (i) any or all of the Note Documents or transactions contemplated thereby or any actions or omissions in connection therewith, (ii) any aspect of the dealings or relationships between or among the Company and the other Loan Parties, on the one hand, and the Collateral Agent and/or the Purchasers, on the other hand, relating to any or all of the documents, transactions, actions or omissions referenced in clause (i) hereof, or (iii) any aspect of the dealings or relationships between or among any or all of the Loan Parties, on the one hand, and the Purchasers, on the other hand, but only to the extent such dealings or relationships relate to any or all of the documents, transactions, actions or omissions referenced in clause (i) hereof. The receipt by the Company or any other Loan Party of the proceeds of any Notes or other financial accommodations made by the Collateral Agent and the Purchasers after the Second Amendment Effective Date shall constitute a ratification, adoption, and confirmation by such party of the foregoing general release of all Claims against the Releasees that are based in whole or in part on facts, whether or not now known or unknown, existing on or prior to the date of receipt of any such proceeds or other financial accommodations. In entering into this Amendment, the Company and each other Loan Party consulted with, and has been represented by, legal counsel and expressly disclaim any reliance on any representations, acts or omissions by any of the Releasees and hereby agree and acknowledge that the validity and effectiveness of the releases set forth above do not depend in any way on any such representations, acts and/or omissions or the accuracy, completeness or validity thereof. The provisions of this Section shall survive the termination of this Amendment, the Note Purchase Agreement, the other Note Documents and payment in full of the Obligations.
Section 15. Covenant Not to Sue. Each Releasor, on behalf of itself and its successors, assigns and other legal representatives, hereby absolutely, unconditionally and irrevocably covenants and agrees with and in favor of each Releasee that such Releasor will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Releasee on the basis of
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any Claim released, remised and discharged by the Releasors pursuant to Section 14 hereof. If the Releasors or any of their respective successors, assigns or other legal representatives violate the foregoing covenant, each Releasor, for itself and its successors, assigns and legal representatives, agrees to pay, in addition to such other damages as any Releasee may sustain as a result of such violation, all reasonable attorneys’ fees and costs incurred by any Releasee as a result of such violation.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first set forth above.
Company:
NEPTUNE WELLNESS SOLUTIONS
INC., a Québec Corporation
By: /s/ Xxxxxxx Xxxxxxx
Name: Xxxxxxx Xxxxxxx
Title: CFO
NEPTUNE GROWTH VENTURES,
INC. (acknowledging Section 4 of this Amendment)
By: /s/ Xxxxxxx Xxxxxxx
Name: Xxxxxxx Xxxxxxx
Title: Treasurer
SPROUT FOODS, INC. (acknowledging Sections 4 and 6(b)-(c) of this Amendment)
By: /s/ Xxxxx Xxxxx
Name: Xxxxx Xxxxx
Title: CEO
Second Waiver and Amendment to Note Purchase Agreement
Collateral Agent:
CCUR HOLDINGS, INC.
By: /s/ Xxxx Xxxxxxxxx
Name: Xxxx Xxxxxxxxx
Title: CEO
Second Waiver and Amendment to Note Purchase Agreement
Purchasers:
CCUR HOLDINGS, INC.
By: /s/ Xxxx Xxxxxxxxx
Name: Xxxx Xxxxxxxxx
Title: CEO
ADDRESS:
0000 X. Xxxxx Xxxx. Suite 200
Austin, TX 78756
Attention: Xxxx Xxxxxxxxx, Xxxxxxx Xxxxxxxxx Email:
SYMBOLIC LOGIC, INC.
By: /s/ Xxxx Xxxxxxxxx
Name: Xxxx Xxxxxxxxx
Title: CEO
ADDRESS:
0000 X. Xxxxx Xxxx. Suite 200
Austin, TX 78756 Attention: Xxxx Xxxxxxxxx Email:
Second Waiver and Amendment to Note Purchase Agreement
Annex I
Execution Version
ANNEX I TO WAIVER AND SECOND AMENDMENT CONFORMED NOTE PURCHASE AGREEMENT THROUGH SECOND AMENDMENT
NOTE PURCHASE AGREEMENT
by and among
NEPTUNE WELLNESS SOLUTIONS INC.
as Company, CCUR HOLDINGS, INC.
as Collateral Agent and
the Purchasers from time to time party hereto
Dated as of January 12, 2023
As amended by that certain Waiver and First Amendment to Note Purchase Agreement dated as of March 9, 2023 and as further amended by that certain Waiver and Second Amendment to Note Purchase Agreement dated as of May 22, 2023
313510594_25
TABLE OF CONTENTS
Page
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ARTICLE 1 DEFINITIONS 1
ARTICLE 2 TERM LOANS 12
2.1Purchase, Sale and Issuance of the Notes 12
ARTICLE 3 INTEREST AND PAYMENTS 14
3.2Redemption of Notes 15
ARTICLE 4 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS 17
4.1Conditions to the Obligations of the Purchasers to Purchase the Initial Notes on the Initial Closing Date 17
4.2Conditions to the Obligations of the Purchasers to Purchase the Delayed Draw Notes on the Second Closing Date 19
ARTICLE 5 CONDITIONS TO OBLIGATIONS OF THE LOAN PARTIES 20
5.1Representations and Warranties 20
5.2Compliance with this Agreement 20
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES 20
6.1Existence and Power 20
6.2Corporate Authorization; No Contravention 20
6.3Governmental Authorization; Third Party Consents 21
6.6Compliance with Laws 21
6.7No Default or Breach 21
6.8Title to Properties 21
6.9Absence of Certain Changes 21
6.11Financial Condition 22
6.13Holding Subsidiaries 23
6.14Investment Company/Government Regulations 23
6.18Broker’s, Xxxxxx’s or Similar Fees 24
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6.20Employee Benefit Plans 24
6.21Intellectual Property 24
6.22Potential Conflicts of Interest 26
6.25Material Contracts 27
6.28Licenses and Approvals 27
6.29OFAC; Special Economic Measures Act 27
6.32Government Contracts 28
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS 28
7.1Authorization; No Contravention 28
7.5Governmental Authorization; Third Party Consent 29
ARTICLE 8 AFFIRMATIVE COVENANTS 29
8.1Delivery of Financial and Other Information 29
8.4Conduct of Business 31
8.7Compliance with Laws 32
8.8Maintenance of Properties 32
8.9Audits and Inspection 32
8.11Employee Benefit Plans 32
8.12Regulatory Compliance 33
8.14Delivery of Information by Holders 33
8.15Execution of Supplemental Documents 33
8.17Post-Closing Covenants 33
8.18Further Assurances 34
ARTICLE 9 NEGATIVE COVENANTS 34
9.1Limitations on Debt 34
9.3Restricted Payments 35
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9.6Mergers, Consolidations, Sales 35
9.8Amendment to Organizational Documents 36
9.9Restrictive Agreements 37
9.10Capital Expenditures 37
9.11Transactions with Affiliates 37
9.12Additional Negative Pledges 37
9.14Fiscal Year and Accounting Changes 37
9.15Limitations on Holding Subsidiaries 37
ARTICLE 10 AGENCY PROVISIONS 38
10.1Appointment and Authority 38
10.2Rights as a Holder 39
10.3Exculpatory Provisions; Indemnification 39
10.5Delegation of Duties 40
10.6Resignation of the Collateral Agent 40
10.7Collateral Matters 41
10.8Sharing of Collateral 41
10.9Erroneous Payments 41
ARTICLE 11 EVENTS OF DEFAULT 44
11.4Cumulative Remedies 46
ARTICLE 12 INDEMNIFICATION 46
12.2Procedure; Notification 47
ARTICLE 13 MISCELLANEOUS 47
13.1Survival of Representations and Warranties 47
13.3Successors and Assigns 48
13.4Amendment and Waiver 49
13.5Signatures; Counterparts; Electronic Execution 49
13.8JURISDICTION, JURY TRIAL WAIVER, ETC 50
13.10Rules of Construction 50
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13.14Further Assurances 51
13.15No Strict Construction 51
13.17Interest Act (Canada) Disclosure 52
13.18“Interest” Reduction 52
13.19Québec Interpretation 53
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Exhibits
BForm of Budget Certificate
CForm of Common Share Purchase Warrant
DForm of Registration Rights Agreement
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NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT, dated as of January 12, 2023, by and among NEPTUNE WELLNESS SOLUTIONS INC., a corporation incorporated under the Business Corporations Act (Québec) and domiciled in Canada (the “Company”), certain subsidiaries of the Company party hereto from time to time as Guarantors, CCUR HOLDINGS, INC., a Delaware corporation as collateral agent (in such capacity, “Collateral Agent”) and purchaser (and together with any other purchaser party hereto from time to time, the “Purchasers”).
STATEMENT OF PURPOSE:
WHEREAS, the Company wishes to sell to the Purchasers, and the Purchasers wish to purchase on the terms and conditions set forth herein, senior secured promissory notes issued by the Company to the Purchasers in an aggregate principal amount of $5,000,000, substantially in the form of Exhibit A hereto; and
WHEREAS, the Company is willing to secure all of the Obligations by granting to the Collateral Agent, for the benefit of the Holders, a Lien upon substantially all of its assets subject to any limitations set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1 DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms have the meanings indicated:
“Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation (a) with respect to any such Person that is an entity, any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person and (b) with respect to any such Person that is an individual, such individual’s spouse, lineal ancestors, lineal blood or adopted descendants, and any trust or other estate planning vehicle for any of their benefit or any entity in which only such persons own equity interests. A Person shall be deemed to control another Person if the controlling Person owns ten percent (10%) or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of Capital Stock, by contract or otherwise. None of the Collateral Agent, Purchaser, the Holders nor any of their respective Affiliates shall be, or be deemed to be, an Affiliate of any Loan Party.
“Agreement” means this Note Purchase Agreement, including the exhibits and schedules attached hereto, as the same may be amended, supplemented or modified in accordance with the terms hereof.
“Applicable Insolvency Laws” means the United States Bankruptcy Code (11 USC § 101, et seq.) and all other liquidation, bankruptcy, assignment for the benefit of creditors,
conservatorship, moratorium, receivership, insolvency, rearrangement, reorganization or similar debtor relief laws of the United States or any political subdivision thereof or other applicable jurisdictions in effect from time to time.
“Assignment of Claims Act” means, collectively, the Assignment of Claims Act of 1940, as amended, any applicable rules, regulations and interpretations issued pursuant thereto and any amendments to any of the foregoing.
“Biodroga” means Biodroga Nutraceuticals Inc., a corporation incorporated under the Business Corporations Act (Québec) and domiciled in Canada.
“Biodroga Assets” means all assets and receivables of Biodroga.
“Biodroga LP” means Biodroga Nutraceuticals L.P., a limited partnership organized in Quebec and domiciled in Canada.
“Board” means the board of directors of the Company.
“Budget” means revenue, income statement and cash flow budgets and projections for the Company and its Subsidiaries, in each case, (i) prepared by management of the Company in good faith based upon reasonable assumptions, (ii) consistent in scope with the Financial Statements referred to in Section 6.11 and (iii) in form and substance reasonably satisfactory to the Required Holders.
“Budget Certificate” means a budget certificate in the form attached hereto as Exhibit
B.
“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in the State of New York are authorized or required by law or executive order to close.
“Capital Expenditure” means any expenditure for any purchase or other acquisition of any asset which would be classified as a fixed or capital asset on a balance sheet prepared in accordance with GAAP (including, without limitation, the capitalized portion of any software development costs), excluding (a) the cost of assets acquired pursuant to Capitalized Leases, (b) expenditures of insurance proceeds (or other similar recoveries) to rebuild or replace any asset after a casualty loss or cash awards of compensation arising from the taking of eminent domain or condemnation (c) leasehold improvement expenditures for which the Person is reimbursed promptly by the lessor.
“Capital Stock” means (a) any capital stock, partnership, membership, joint venture or other ownership or equity interest, participation or securities (whether voting or non-voting, whether preferred, common or otherwise), and (b) any option, warrant, security or other right (including Debt securities or other evidence of Debt) directly or indirectly convertible into or exercisable or exchangeable for, or otherwise to acquire directly or indirectly, any capital stock, partnership, membership, joint venture or other ownership or equity interest, participation or security described in clause (a) above.
“Capitalized Lease” of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP.
“Capitalized Lease Obligations” of any Person shall mean the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with GAAP.
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“Cash” means the currency of the United States of America.
“Cash Equivalents” means (a) short-term obligations of, or fully guaranteed by, the United States of America or any agency or instrumentality thereof, (b) commercial paper rated A-1 or better by S&P or P-1 or better by Xxxxx’x, (c) demand deposit accounts maintained in the ordinary course of business, and (d) certificates of deposit issued by and time deposits with commercial banks (whether domestic or foreign) having capital and surplus in excess of $100,000,000; provided in each case that the same provides for payment of both principal and interest (and not principal alone or interest alone) and is not subject to any contingency regarding the payment of principal or interest.
“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended.
“Change of Control” means (i) the consummation of a merger, consolidation, reorganization, amalgamation, arrangement, sale of Capital Stock by the Company or any holder of the Company’s Capital Stock, sale or other disposition of all or substantially all of the consolidated assets of the Company (other than Permitted Asset Dispositions and Specified Asset Dispositions) that results in
(A) any change in the selection or composition of a majority of the Board as in effect on the Initial Closing Date or (B) any person or “group” (within the meaning of Rules 13d-3 and 13d-5 of the Exchange Act) directly or indirectly owning or controlling in excess of fifty percent (50%) of the economic or voting interests of the Company that does not, as of the Initial Closing Date, directly or indirectly, own or control in excess of 50% of the voting interests of the Company, (ii) the failure of the Company to beneficially own and control, directly or directly, in the same manner it owns on the Initial Closing Date the Capital Stock of its Subsidiaries) on the Initial Closing Date (other than the Capital Stock of Biodroga or 9354-7537 Québec Inc., subject to the Company’s compliance with Section 3.2(d)(ii)), or (iii) the failure of the Company to maintain the power to elect a majority of the board of directors (or similar governing body) of each Subsidiary and to direct the management policies and decisions of each Subsidiary (including with respect to Sprout).
“Claims Assignment” means an assignment in a form approved by the Required Holders, properly completed and signed by an officer of the Company.
“Closing” has the meaning assigned to that term in Section 2.3.
“Closing Dates” has the meaning assigned to that term in Section 2.3.
“Code” means the Internal Revenue Code of 1986, as amended, or any successor statute
thereto.
“Collateral” has the meaning set forth in the Security Agreement.
“Collateral Documents” means the Security Agreement, the Intellectual Property Security Agreements, each deposit account control agreement and each other agreement or writing pursuant to which the Company or any Subsidiary thereof purports to pledge or grant a security interest in any property or assets securing the Obligations, or any such Person purports to guarantee the payment and/or performance of the Obligations, in each case, as amended, restated, supplemented or otherwise modified from time to time.
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“Commission” means the U.S. Securities and Exchange Commission or any similar agency then having jurisdiction to enforce the Securities Act or the applicable securities laws of such jurisdiction.
“Company” has the meaning given to that term in the preamble hereof and shall extend to all permitted successors and assigns of such Person.
“Confidential Information” means all information disclosed by a Loan Party that (a) relates to such Loan Party’s business, properties, liabilities (other than the Obligations), technology, Intellectual Property assets, trade secrets, inventions, know-how, software programs, software source documents, financial or business plans, financial projections and affairs, employment arrangements, financial statements, internal management tools and systems, products and product development plans, marketing plans, customers, clients and contracts, and (b) to the extent such information is provided following the Initial Closing Date (other than information provided as required by the terms of this Agreement, which shall be deemed to be Confidential Information), is designated by such Loan Party as confidential by means of appropriate markings. Confidential Information will not include any information or data (i) that has become publicly known through no wrongful act of the recipient of such information, (ii) has been received by the recipient from a third party not known by the recipient to be under any obligation of confidentiality to a Loan Party without breach by the recipient of this Agreement or any other agreement with any Loan Party, or (iii) has been approved for release by written authorization of such Loan Party.
“Cannabis Operations” means all cannabis disposal group assets listed on the Company’s balance sheet for the fiscal quarter ending June 30, 2022 and classified as assets held for sale in connection with the planned divestiture of the Canadian cannabis business (including, without limitation, (i) the licenses of any Subsidiary related to the ownership, production, sale or similar such rights in the operation of the Cannabis business and (ii) the manufacturing plant of the Company used in the operation of cannabis located at 000 Xxx Xxxxx, Xxxxxxxxxx, XX X0X 0X0, Xxxxxx (the “Plant”).
“Cannabis Sale” has the meaning given to that term in Section 4.1(d).
“Controlled Group” means a “controlled group of corporations” (as defined in Section 1563(a) of the Code) in which the Company is a member.
“Contractual Obligations” means as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument or arrangement (whether in writing or otherwise), other than a Note Document, to which such Person is a party or by which it or any of such Person’s property is bound.
“Debt” of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money; (b) all obligations issued, undertaken or assumed by such Person as the deferred purchase price of property or services (other than trade payables entered into in the ordinary course of business on ordinary terms); (c) all obligations of such Person evidenced by notes, bonds, debentures or similar instruments; (d) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); (e) all Capitalized Lease Obligations of such Person; (f) all indebtedness of such Person referred to in clauses (a) through (e) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt (it being understood that if such
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Person has not assumed or otherwise become personally liable for any such Debt, the amount of the Debt of such Person in connection therewith shall be limited to the lesser of the face amount of such Debt or the fair market value of all property of such Person securing such Debt); and (g) all guaranties of such Person of any Debt of another Person.
“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.
“Default Rate” has the meaning given to that term in Section 3.1(c). “Delayed Draw Commitment Termination Date” means February 28, 2023. “Delayed Draw Note” has the meaning set forth in Section 2.1(b).
“Delayed Draw Note Commitment” means, with respect to each Purchaser, the commitment, if any, of such Purchaser to purchase the Delayed Draw Notes, expressed as an amount representing the maximum principal amount of the Delayed Draw Notes to be purchased by such Purchaser. The amount of each Purchaser’s Delayed Draw Note Commitment is set forth on Schedule
2.1. The aggregate amount of the Purchasers’ Delayed Draw Note Commitment shall not exceed
$1,000,000.00.
“Delayed Draw Note Commitment Fee” has the meaning given to that term in Section
2.2(c).
“Delayed Draw Purchase Price” has the meaning given to that term in Section 2.1(b).
“Distributions” by a Person means (a) dividends or other distributions on any now or hereafter outstanding Capital Stock of such Person, (b) the redemption, repurchase, defeasance or acquisition of such Capital Stock or of warrants, rights or other options to purchase such Capital Stock, and (c) any loans or advances (other than salaries, bonuses or reimbursement of employee expenses in the ordinary course of business), to any stockholder(s), partner(s) or member(s) of such Person.
“Dollar” and the sign “$” mean lawful money of the United States of America.
“Environmental Laws” means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, Licenses, concessions, grants, franchises, agreements and other governmental restrictions relating to
(a) the protection of the environment, (b) the effect of the environment on human health, (c) emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into surface water, ground water, air or land, or (d) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof, including, without limitation, the Clean Air Act, 42 U.S.C. § 7401 et seq., the Clean Water Act, 33 U.S.C. § 1251 et seq., the Solid Waste Disposal Act (as amended by the Resource Conservation and Recovery Act), 42 U.S.C. § 6901 et seq., and CERCLA.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended and the rules and regulations promulgated thereunder.
“ERISA Affiliate” means a corporation that is or was a member of a controlled group of corporations with the Company within the meaning of Section 4001(a) or (b) of ERISA or Section 414(b) of the Code, a trade or business (including a sole proprietorship, partnership, trust, estate or corporation)
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that is under common control with any Loan Party within the meaning of Section 414(m) of the Code, or a trade or business which together with any Loan Party is treated as a single employer under Section 414(o) of the Code.
“Erroneous Payment” has the meaning assigned to it in Section 10.9(a).
“Erroneous Payment Deficiency Assignment” has the meaning assigned to it in Section 10.9(d)(i).
“Erroneous Payment Impacted Class” has the meaning assigned to it in Section
10.9(d)(i).
“Erroneous Payment Return Deficiency” has the meaning assigned to it in Section
10.9(d)(i).
“Erroneous Payment Subrogation Rights” has the meaning assigned to it in Section
10.9(e).
“Event of Default” has the meaning assigned to that term in Section 11.1.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Excluded Subsidiary” means each of (i) Sprout, (ii) the Inactive Affiliates and N Real Estate L.P., in each case, on the condition that such Person continues to hold no assets or carry on any activities other than assets or activities of the type permitted by Sections 6.13 and 9.15, and (iii) each other Subsidiary approved by the Required Holders in their sole discretion.
“Exit Fee” has the meaning assigned to that term in Section 2.2(d).
“Extension Fee” has the meaning assigned to that term in Section 2.2(e).
“Extraordinary Receipt” means any Cash received by or paid to or for the account of any Loan Party not in the ordinary course of business (and not consisting of proceeds described in any of Section 3.2(d)(i), (ii), (iii) or (v), proceeds of any equity or equity-linked financing or any other proceeds to the extent that such proceeds are received by any Loan Party in respect of any third party claim against such Loan Party for actual losses (and not any special, consequential or punitive damages) and applied to pay (or reimburse such Loan Party for its prior payment of) such claim plus related costs and expenses).
“FDA Laws” means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, Licenses, concessions, and other governmental restrictions relating to the ownership, testing, development, manufacture, packaging, processing, holding, use, distribution, marketing, labeling, promotion, sale, offer for sale, storage, import, export or disposal of food, cosmetic, and/or dietary supplement products, including without limitation, (i) the Federal Food, Drug and Cosmetic Act and all applicable regulations and requirements adopted by the U.S. Food and Drug Administration (“FDA”), (ii) the Organic Foods Production Act of 1990 and all other applicable statutes, regulations and requirements adopted by the
U.S. Department of Agriculture (“USDA”); (iii) all applicable statutes enforced by the U.S. Federal Trade Commission (“FTC”) and the applicable FTC regulations and requirements; and (iv) any applicable requirements established by any other federal, state, county, city, local or foreign Governmental Authority responsible for regulating food, cosmetic, and/or dietary supplement products.
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“Financial Statements” has the meaning given that term in Section 6.11(a).
“First Amendment” means that certain Waiver and First Amendment to Note Purchase Agreement, dated as of March 9, 2023, by and among the Company, the other Loan Parties party thereto, the Collateral Agent, and the Purchasers party thereto.
“First Amendment Effective Date” means March 9, 2023.
“Fiscal Quarter” means in respect of a date as of which the applicable financial covenant is being calculated or financial report is being furnished, any fiscal quarter of a Fiscal Year (currently the three month periods ending on or about each March 31, June 30, September 30 and December 31 annually).
“Fiscal Year” means the fiscal year for financial accounting and reporting purposes of the Company (currently the fiscal year ending March 31).
“Funded Debt” means, as of any date of determination, all outstanding Debt of the types described in clauses (a), (b), (c), (d) and (f) of the definition of “Debt” as of such date.
“GAAP” means generally accepted accounting principles in effect within the United States from time to time, consistently applied, not giving effect to FASB ASC 842.
“Government” means the United States government or any agency, department or instrumentality thereof.
“Government Contract” means a Government Prime Contract or a Government
Subcontract.
“Government Prime Contract” means any written agreement, commitment, contract or instrument or other binding arrangement between the Company and the Government where the Company is the prime contractor.
“Government Subcontract” means any written agreement, commitment, contract or instrument or other binding arrangement between the Company and any Person that is the prime contractor under a related contract with the Government where the Company is a subcontractor of such prime contractor.
“Governmental Authority” means the government of any nation, state, city, locality or other political subdivision of any thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, regulation or compliance, including, without limitation, any federal, state or local public utility commission, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.
“Guarantor(s)” means each of the Company’s Subsidiaries (other than any Excluded Subsidiary) and each other Person, if any, that executes the Security Agreement, a guaranty or other similar agreement in favor of Collateral Agent, for ratable benefit of the Holders, in connection with the transactions contemplated by this Agreement and the other Note Documents.
“Holder” means each holder of a Note hereunder.
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“Inactive Affiliates” means, collectively, Neptune Wellness Solutions, L.P., 9463-5521 Québec Inc., 9463-5463 Québec Inc., Neptune Wellness Brands Canada, L.P., 9463-5513 Québec Inc., Neptune Bio Nutraceuticals L.P. and Biodroga LP.
“Incremental Equity Issuance” means the sale by the Company of Capital Stock (not constituting Disqualified Equity) following the Initial Closing Date but prior to the Delayed Draw Commitment Termination Date.
“Indemnified Party” has the meaning given to that term in Section 12.1.
“Insolvency Proceeding” means, with respect to any Person, (a) any case, action or proceeding with respect to such Person before any court or other governmental authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors (including any proceeding under the United States Bankruptcy Code, the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada) or any Applicable Insolvency Law) or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other, similar arrangement in respect of such Person’s creditors generally or any substantial portion of such creditors.
“Intellectual Property” has the meaning ascribed to such term in the Security
Agreement.
“Interest Property License” has the meaning given to that term in Section 6.22(f).
“Intellectual Property Security Agreement” means each trademark security agreement, patent security agreement and copyright security agreement, between any Loan Party and the Collateral Agent, as amended, restated, supplemented or otherwise modified from time to time.
“Interest Rate” has the meaning given to that term in Section 3.1(a).
“Liabilities” has the meaning given to that term in Section 12.1.
“Licenses” means all licenses, permits, authorizations, determinations, and registrations issued by any Governmental Authority to any Loan Party or any Subsidiary in connection with the conduct of its business.
“Lien” means any security interest, mortgage, deed of trust, pledge, hypothecation, assignment, license, charge or deposit arrangement, encumbrance, lien (statutory or other) or preferential arrangement of any kind or nature whatsoever in respect of any property (including those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a capital lease, or any financing lease having substantially the same economic effect as any of the foregoing, but not including the interest of a lessor under an operating lease and including any exclusive or non-exclusive license of Intellectual Property).
“Loan Parties” means the Company and each Guarantor.
“Major Casualty Proceeds” means (i) the aggregate insurance proceeds received in Cash connection with one or more related events under any property insurance policy or business interruption insurance policy or (ii) any award or other compensation received in Cash with respect to any eminent domain, condemnation of property or similar proceedings (or any transfer or disposition of property in lieu of condemnation), if the amount of such aggregate insurance proceeds or award or other compensation
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exceeds $150,000, in each case, less (a) any out-of-pocket fees, costs and expenses
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reasonably incurred by the Company or any Subsidiary in connection therewith, (b) the amount of any Debt secured by a Permitted Lien on the related asset and discharged from the proceeds of such event, (c) any Taxes paid or reasonably estimated by the applicable Loan Party or Subsidiary to be payable by such Person as a consequence of such event (provided, that if the actual amount of Taxes actually paid is less than the estimated amount, the difference shall immediately constitute Major Casualty Proceeds), (d) the amount of any reserve established in accordance with GAAP (provided that such reserved amounts shall be Major Casualty Proceeds to the extent and at the time of any reversal (without the satisfaction of any applicable liabilities in a corresponding amount) of any such reserve) and (e) proceeds, awards and compensation applied towards the repair, restoration or replacement of property or assets.
“Material Adverse Effect” means an effect that results in or causes (a) a material adverse change in, or a material adverse effect upon, the assets, liabilities, business, properties, operations, or condition (financial or otherwise) of the Company and its Subsidiaries, (b) a material adverse effect upon the legality, validity, binding effect or enforceability against the Company or any of its Subsidiaries of any Note Document or (c) material adverse effect upon the validity of any Intellectual Property of the Company or its Subsidiaries or any of the Company’s or its Subsidiaries’ rights or interests in respect thereof or thereto, including but not limited to as a result of an adverse order, determination or decision by a Governmental Authority.
“Material Contract” means as of any date of determination, any written contracts, agreements, commitments and other Contractual Obligations of any Loan Party that accounts for five percent (5%) or more of the revenue of the Loan Parties, taken as a whole, over the twelve-month trailing period ending on such date.
“Maturity Date” has the meaning given to that term in Section 3.2(a).
“Moody’s” means Xxxxx’x Investors Service, Inc.
“N Real Estate” means N Real Estate L.P., an Ontario limited partnership “Neptune Holding” means Neptune Holding USA, Inc., a Delaware corporation “Neptune Growth” means Neptune Growth Ventures, Inc., a Delaware corporation
“Net Cash Proceeds” means, with respect to any transaction or event, an amount equal to the Cash proceeds received by any Loan Party (or any Subsidiary) from or in respect of such transaction or event (including Cash proceeds of any non-Cash proceeds of such transaction), less (i) any out-of-pocket expenses paid to a Person that are reasonably incurred by such Loan Party or Subsidiary in connection therewith, (ii) the amount of any reserve established (provided that such reserved amounts shall be Net Cash Proceeds to the extent and at the time of any reversal (without the satisfaction of any applicable liabilities in a corresponding amount) of any such reserve) and (iii) taxes paid or payable or reasonably estimated to be paid or payable as a result thereof in that year or the next succeeding year.
“Notes” has the meaning given to that term in Section 2.1(a).
“Note Documents” means this Agreement, the Warrants, the Registration Rights Agreement, the Notes, the Collateral Documents and each other agreement, document or certificate delivered pursuant to this Agreement or the Notes, in each case, as amended, restated, supplemented or otherwise modified from time to time.
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“Obligations” means all obligations of every nature of the Company or any other Loan Party, as applicable, from time to time owed to the Collateral Agent or any Holder under the Note Documents, whether for principal, interest, fees, expenses, indemnification or otherwise; provided, however, for the avoidance of doubt, no obligations owing by any Loan Party to any Holder or any Affiliate of any Holder, or their respective successors or assigns, in respect of or pursuant to any equity investment made by any Holder or any Affiliate of any Holder, or their respective successors and assigns, in the Company or any other Loan Party shall be included in the Obligations.
“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets
Control.
“Organizational Documents” means the limited liability company agreement or bylaws (as applicable), certificate or articles of formation or certificate or articles of incorporation (as applicable), shareholders’ agreement, membership agreement or any other agreements among equity holders that are known to the Company, and other similar organizational and governing documents of the Company and its Subsidiaries.
“Origination Fee” has the meaning given to that term in Section 2.2(b). “Payment Recipient” has the meaning assigned to it in Section 10.9(a).
“Permitted Asset Disposition” means (i) dispositions of inventory or used, obsolete, worn-out or surplus equipment, all in the ordinary course of the Loan Parties’ business, (ii) dispositions of Cash and Cash Equivalents and (iii) sales, transfers and other dispositions of accounts receivable in connection with the compromise, settlement or collection thereof in the ordinary course of the Loan Parties’ business.
“Permitted Liens” means those Liens permitted pursuant to Section 9.2.
“Person” means any individual, firm, corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, Governmental Authority or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity.
“Plant” has the meaning given to that term in the definition of “Plant Operations”.
“Premium” has the meaning given to that term in Section 3.2(d)(vi).
“Pro Forma Balance Sheet” has the meaning set forth in Section 6.1.
“Pro Rata Share” means, with respect to each Holder, the share of Notes held by such Holder in proportion to the aggregate outstanding Notes held by all Holders or each Holder’s unfunded commitment to purchase Notes in proportion to the aggregate commitment of all Holders to purchase Notes, as applicable.
“Property” of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person.
“Purchase Price” has the meaning given to that term in Section 2.1.
“Purchaser(s)” has the meaning given to that term in the preamble hereof.
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“Registration Rights Agreement” means the Registration Rights Agreement to be dated as of the Initial Closing Date and entered into by the Company and such other Persons party thereto, in the form attached hereto as Exhibit D.
“Related Person(s)” means, with respect to any Person, each Affiliate of such Person and each director, officer, employee, agent, trustee, representative, attorney, accountant and each insurance, environmental, legal, financial and other advisor and other consultants and agents of or to such Person or any of its Affiliates.
“Reportable Event” means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within thirty (30) days of the occurrence of such event; provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code.
“Required Holders” means the Holders of more than fifty percent (50%) of the outstanding principal balance of the Notes.
“Requirements of Law” means as to any Person, provisions of the Organizational Documents of such Person, or any law, treaty, code, rule, regulation, right, policy having compulsory effect, privilege, qualification, License or franchise or determination of an arbitrator or a court or other Governmental Authority, including without limitation the FDA Laws and the rules and regulations of the Commission, in each case applicable to such Person or any of such Person’s property or to which such Person or any of such Person’s property is subject or pertaining to any or all of the transactions contemplated or referred to herein.
“Sanctioned Entity” means (a) an agency of the government of, (b) an organization directly or indirectly controlled by, or (c) a Person resident in a country that is subject to a sanctions program identified on the list maintained by OFAC and available at xxxx://xxx.xxxxx.xxx/xxxxxxx/xxxxxxxxxxx/xxxx/xxxxxxxx, or as otherwise published from time to time as such program may be applicable to such agency, organization or person.
“Sanctioned Person” means a Person named on the list of Specially Designated Nationals or Blocked Persons maintained by OFAC available at xxxx://xxx.xxxxx.xxx/xxxxxxx/ enforcement/ofac/sdn/index.html, or as otherwise published from time to time.
“Second Amendment” means that certain Waiver and Second Amendment to Note Purchase Agreement, dated as of May 22, 2023, by and among the Company, the other Loan Parties party thereto, the Collateral Agent, and the Purchasers party thereto.
“Second Amendment Effective Date” means May 15, 2023.
“Second Amendment Obligation” has the meaning given to that term in Section
3.2(d)(ii).
“Securities Act” means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations thereunder as the same shall be in effect at the time.
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“Security Agreement” means the Guarantee and Security Agreement, among the Loan Parties, the Collateral Agent, and the other parties thereto, as amended, restated, supplemented or otherwise modified from time to time.
“Specified Asset Disposition” means any sale or other consensual disposition of (i) all or part of the Capital Stock of Biodroga or (ii) all or any substantial portion of the Biodroga Assets, in each case, excluding all Permitted Asset Dispositions.
“Sprout” means Sprout Foods, Inc., a Delaware corporation.
“Sprout Incremental Note” has the meaning given to that term in Section 8.17(c).
“S&P” means S&P Global Ratings.
“Subsidiary” means, with respect to any Person, a corporation or other entity of which more than fifty percent (50%) of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person.
“Tax” means (a) any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on-minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto and (b) liability for the payment of any amounts of the type described in clause (a) as a transferee or successor, by contract, from any express or implied obligation to indemnify or otherwise assume or succeed to the liability of any other Person, or otherwise.
“Tax Return” means any return, declaration, report, or information return or statement relating to Taxes required to be filed with a Governmental Authority responsible for the administration of Taxes, including any schedule or attachment thereto, and including any amendment thereof.
“Transactions” means, collectively, (a) the issuance of the Notes and (b) the payment of all fees and expenses in connection therewith.
“Warrants” means the five-year warrants issued to the Holders on the Initial Closing Date, granting such Holders the right to purchase up to 850,000 shares of Common Stock of the Company, in the form attached hereto as Exhibit C.
ARTICLE 2 TERM LOANS
2.1Purchase, Sale and Issuance of the Notes.
(a)Initial Notes. Subject to the terms and conditions herein set forth, on the Initial Closing Date, the Company will issue to the Purchasers, and each Purchaser will acquire, severally and not jointly, from the Company senior secured promissory notes in the applicable principal amount set forth to such Purchaser’s name on Schedule 2.1 hereto (the “Purchase Price”). The $4,000,000 in aggregate principal amount of senior secured promissory notes to be issued on the Initial Closing Date are referred to herein as the “Initial Notes”.
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(i)On or before the Delayed Draw Commitment Termination Date, and subject to satisfaction of the conditions set forth in Section 4.2, the Company may request that the Purchasers purchase, severally and not jointly, from the Company additional senior secured promissory notes to be issued on the Second Closing Date (the “Delayed Draw Notes”, and together with the Initial Notes, the “Notes”) in an aggregate principal amount not to exceed the lesser of (i) $1,000,000 and (ii) 25% of the proceeds actually received from the Incremental Equity Issuance (the “Delayed Draw Purchase Price”) of the Company on or before the Delayed Draw Commitment Termination Date. The Company may request the issuance of Delayed Draw Notes by sending an irrevocable written notice to the Purchasers not later than noon (New York City time) of such request. Each such notice must (A) specify a reasonably detailed calculation of the Delayed Draw Purchase Price, (B) specify the requested funding date for the Second Closing Date and (C) certify that (I) immediately before and after giving effect to the Second Closing Date giving effect to such issuance of Delayed Draw Notes, no Default or Event of Default shall have occurred or be continuing and (II) all of the conditions to the funding of the Delayed Draw Note set forth in Section 4.2 shall be satisfied.
(iii)Each Holder shall purchase each Delayed Draw Note issued hereunder on the proposed Second Closing Date thereof by wire transfer of immediately available funds by 3:00
p.m. (New York City time) to the account of the Company most recently designated by it for such purpose by notice to the Holders. The Delayed Draw Notes issued to the Holders on the Second Closing Date shall be purchased by the Holders ratably in accordance with their respective Delayed Draw Note Commitments. The failure of any Holder to pay its Pro Rata Share of such Delayed Draw Purchase Price or portion thereof required to be made by it shall not relieve any other Holder of its obligations hereunder; provided, that the Delayed Draw Note Commitments of the Holders are several and no Holder shall be responsible for any other Holder’s failure to purchase its Pro Rata Share of the Delayed Draw Note as required.
(iv)The Delayed Draw Notes shall constitute Notes under, and shall be entitled to all the benefits afforded by, this Agreement and the other Note Documents, and shall, without limiting the foregoing, benefit equally and ratably from any guarantees and the security interests created by the Note Documents. The Company shall take any actions reasonably required by the Purchaser to ensure and demonstrate that the Liens and security interests granted by the Note Documents continue to be perfected under the UCC or otherwise after giving effect to the establishment of any such Delayed Draw Notes.
(a)Reimbursement of Expenses. At each Closing, the Company agrees to reimburse the Purchasers’ reasonable fees and expenses (including, without limitation, fees, charges and disbursements of professionals and consultants, and other out-of-pocket expenses, including, without limitation, travel expenses), incurred in connection with (i) the negotiation and execution and delivery of this Agreement and the Note Documents, (ii) Purchasers’ due diligence investigation, and (iii) the other transactions contemplated by this Agreement and the Note Documents (including filings or other actions required to perfect the security interests granted under the Collateral Documents); provided that in no event shall the Company be required to reimburse any fees or expenses pursuant to this clause (a) in connection with the origination of the Notes issued on the date hereof in an amount in excess of
$125,000.
(b)Origination Fee. At the Initial Closing, the Company shall pay to the Purchasers a fee in the aggregate amount of $250,000 (the “Origination Fee”) allocated to each Purchaser pro rata based on such Purchaser’s commitment as set forth on Schedule 2.1 hereto, which shall be non-refundable and fully earned on the Initial Closing Date, and the Company hereby authorizes
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Purchasers to withhold their respective Origination Fee from the delivery of their respective portion of the Purchase Price.
(c)Delayed Draw Note Commitment Fee. The Company shall pay a commitment fee (the “Delayed Draw Notes Commitment Fee”) to the Purchasers on a pro rata basis in accordance with the amounts set forth next to the Purchasers’ names on Schedule 2.1 under “Delayed Draw Notes”, which shall accrue at a rate of eight and one-quarter percent (8.25%) per annum multiplied by the aggregate amount of all unfunded Delayed Draw Note Commitments (as may be reduced from time to time), based on the average daily amount of the Delayed Draw Note Commitments from the Initial Closing Date through the Delayed Draw Commitment Termination Date. The Delayed Draw Notes Commitment Fee shall cease to accrue as of the earlier of (i) the Second Closing and (ii) the Delayed Draw Commitment Termination Date. Accrued Delayed Draw Note Commitment Fees shall be payable on each Interest Payment Date (as defined in Section 3.1(a) below) and on the date on which the Delayed Draw Note Commitments terminate, commencing on the first such date to occur after the date hereof. All Delayed Draw Note Commitment Fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).
(d)Exit Fee. The Company shall pay to the Purchasers an exit fee (the “Exit Fee”) in the aggregate amount of $200,000, allocated to each Purchaser pro rata based on such Purchaser’s commitment set forth on Schedule 2.1 hereto, which shall be non-refundable and fully earned on the First Amendment Effective Date, and which shall be payable as follows: (i) on or prior to July 31, 2023,
$100,000 (provided that if the Company files a Form S-1 Registration Statement for an offering on a “reasonable best efforts basis” of the Company’s common shares and warrants for common shares by no later than July 31, 2023, then the Company shall instead be obligated to prepay the $100,000 payment amount provided for herein by no later than August 30, 2023), and (ii) on the Maturity Date, $100,000.
(e)Extension Fee. The Company shall pay to the Purchasers an extension fee (the “Extension Fee”) in an aggregate amount of $138,606, allocated to each Purchaser pro rata based on such Purchaser’s commitment set forth on Schedule 2.1 hereto, which shall be fully earned on May 15, 2023, and which shall be added to the principal amount of the Note due on the Maturity Date and shall accrue Interest together with the sum of the outstanding principal amount for all Notes as set forth in Section 3.1.
(a)The purchase and issuance of the Initial Notes, the issuance of the Warrants and the execution and delivery of the Registration Rights Agreement shall take place at the closing (the “Initial Closing”) on the date hereof (the “Initial Closing Date”). At the Initial Closing, the Company shall deliver the Initial Notes to the Collateral Agent of the Initial Purchase Price, which is payable by wire transfer of immediately available funds.
(b)The purchase and issuance of the Delayed Draw Notes, if any, shall take place at a closing (the “Second Closing”) on the date requested pursuant to Section 2.1(b) (the “Second Closing Date”), in each case subject only to the satisfaction of the applicable conditions set forth in Section 2.1(b) and Article 4. The Initial Closing and the Second Closing are referred to herein collectively as “Closings” and each of the Initial Closing Date and Second Closing Date are referred to herein collectively as “Closing Dates”. On the Second Closing Date, the Company shall deliver the Delayed Draw Note to the applicable Purchaser, and such Purchaser shall deliver its respective portion of the Delayed Draw Purchase Price, which is payable by wire transfer of immediately available funds.
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ARTICLE 3 INTEREST AND PAYMENTS
(a)Interest Rate; Payments. Interest on the sum of the outstanding principal amount of each Note (including any previously compounded PIK Interest thereon plus any default interest added thereto pursuant to Section 3.1(b)) shall accrue from the applicable Closing Date until full and final repayment of the principal amount of such Note and the payment of all interest in full at the rate of sixteen and one-half percent (16.5%) per annum (the “Interest Rate”), of which (i) for the first six Interest Payment Dates followingfrom the Initial Closing Date through May 15, 2023, the full sixteen and one-half percent (16.5%) shall be paid in kind as set forth in Section 3.1(d) below (“PIK Interest”) and (ii) thereafter, such payments shall be made in Cash (the “Cash Rate”) in an aggregate amount equal to the Interest Rate. Interest shall be computed on the basis of the actual number of days elapsed and a 360-day year. On the last Business Day of each calendar month in which the Notes are outstanding, commencing on January 31, 2023, the Company shall pay in arrears, as applicable, (i) in Cash by ACH or automatic bank draft accrued interest on the outstanding principal amount of the Notes in an amount equal to the interest due and payable at the Cash Rate and (ii) all PIK Interest then accrued shall be added to the principal amount of the Note pursuant to Section 3.1(d). If any day on which Cash interest is to be paid is not a Business Day, such interest shall be paid on the next succeeding Business Day to occur following such date. Each date upon which interest shall be so payable, an “Interest Payment Date”.
(b)Default Rate of Interest. Notwithstanding the foregoing provisions of this Section 3.1, but subject to any applicable Requirement of Law, during the occurrence of any Event of Default, upon notice from the Required Holders (which notice shall not be required in connection with an Event of Default pursuant to Sections 11.1(a), (h) or (i)), the outstanding principal amount of the Note shall bear interest from the date such Event of Default occurred until such Event of Default is cured or waived at a rate equal to twenty-four percent (24%) per annum (the “Default Rate”). The portion of the Default Rate in excess of the Interest Rate shall be payable in cash on demand.
(c)No Usurious Interest. In the event that any interest rate(s) provided for in this Section 3.1, shall be determined to exceed any limitation on interest under any applicable Requirement of Law, such interest rate(s) shall be computed at the highest rate permitted by such Requirement of Law. Any payment by the Company of any interest amount in excess of that permitted by law shall be considered a mistake, with the excess being applied to the principal amount of the affected Notes without prepayment premium or penalty, provided that if no such principal amount is outstanding, such excess shall be returned to the Company.
(d)PIK Interest. On each Interest Payment Date whereupon any such PIK Interest is not paid in cash (regardless of whether such date is a Business Day), all such unpaid interest shall be added to the principal amount of the Note and shall thereafter be treated as principal for all purposes and shall be payable with the first payment of the principal amount of the Note if not otherwise paid prior to such date; provided, that all accrued PIK Interest shall accrue cumulatively whether or not the Company shall have capital, surplus, earnings or other amounts sufficient to lawfully pay such amounts.
(a)Maturity Date. The Company shall redeem the Notes on the earliest to occur of
(i) January 12, 2024 (the “Scheduled Maturity Date”) or (ii) acceleration of the Note in accordance with the terms hereof (the earlier of clauses (i) and (ii), the “Maturity Date”), by payment in Cash in full of
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the entire outstanding principal balance thereof, together with any unpaid interest accrued thereon to such date.
(b)Prepayment; Prepayment Premium. The Company may prepay or redeem the entire balance of the Notes, in whole or in part, subject to the payment of the Premium, but without any other premium or penalty.
(c)Optional Redemption by the Holders. Upon the occurrence of a Change of Control (and concurrent with the closing of any such transaction), each Holder may elect to sell to the Company and the Company shall be required to purchase all Notes held by such Holder in full by payment of an amount equal to (i) the unpaid principal balance thereof, plus (ii) all unpaid interest accrued thereon through the date of redemption, plus (iii) all outstanding and unpaid fees and expenses payable by the Company to such Holder through the date of redemption, plus (iv) the Premium.
(d)Mandatory Prepayments. The Company shall prepay the Notes in the following amounts and at the following times, including the Premium.
(i)Casualty and Other Insurance Proceeds. Within five (5) Business Days after any Loan Party or any Subsidiary other than Sprout (or Collateral Agent as loss payee or assignee) receives any Major Casualty Proceeds, an amount equal to one hundred percent (100%) of such Major Casualty Proceeds.
(ii)Specified Asset Disposition Proceeds. Within five (5) Business Days after any Loan Party or any Subsidiary other than Sprout receives the proceeds of a Specified Asset Disposition that is consummated (I) on or prior to March 31, 2023, the Company shall prepay the Notes with the Net Cash Proceeds thereof in an amount equal to fifty percent (50%) of the Notes outstanding under this Agreement on the date of such sale or (II) at any time after March 31, 2023, the Company shall prepay $1,000,000 of the Notes; provided, that if the Company does not consummate a Specified Asset Disposition on or prior to March 31, 2023, it shall be obligated to prepay $2,000,000 in principal amount of the outstanding Notes, and such payment shall not release the Company from its obligation to further prepay the Notes pursuant to clause (II) above.”
(ii)Second Amendment Obligation. On or prior to July 31, 2023, the Company shall be obligated to prepay $2,000,000 in principal amount of the outstanding Notes together with accrued interest thereon (including any PIK Interest) and the Premium minus the Partial Prepayment (as defined in the Second Amendment) and the Exit Fee (such amounts, the “Second Amendment Obligation”); provided, that if the Company files a Form S-1 Registration Statement for an offering on a “reasonable best efforts basis” of the Company’s common shares and/or warrants for common shares by no later than July 31, 2023, then the Company shall instead be obligated to prepay the Second Amendment Obligation by no later than August 30, 2023.
(iii)Debt Financing Proceeds. Within five (5) Business Days after any Loan Party or any Subsidiary other than Sprout receives the proceeds of any financings by the issuance of Debt (other than Permitted Debt), the Company shall prepay the Notes in an amount equal to one hundred percent (100%) of the Net Cash Proceeds of such financing.
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(iv)Extraordinary Receipts. Within five (5) Business Days of the receipt by any Loan Party or any Subsidiary other than Sprout of any Extraordinary Receipt, in an amount equal to the Net Cash Proceeds of such Extraordinary Receipt.
(v)Sprout Pledged Debt. Within five (5) Business Days of the receipt by any Credit Party of any payment, whether of principal, interest, fees or any other proceeds from Sprout relating, directly or indirectly, to the Sprout Pledged Debt, the Company shall prepay the Notes in an amount equal to one hundred percent (100%) of the Net Cash Proceeds of such payment.
(vi)Premium. In the event that the principal amount of the Notes or the Obligations are paid, repaid or prepaid (whether on or before the Maturity Date, or before or after acceleration or the occurrence of an Event of Default pursuant to Section 11.1(h) or Section 11.1(i)), or the Notes cease to otherwise be outstanding, then, on the effective date of such payment, prepayment or repayment or on the date on which the Notes cease to be outstanding, the Company shall pay to the Holders, in addition to all other Obligations, a premium (the “Premium”) in an amount equal to ten percent (10%) of the principal amount of Notes being repaid (other than principal in respect of PIK Interest), less the aggregate amount of Cash Interest paid on the Notes being repaid on or before the date of such prepayment. For the avoidance of doubt, in no event shall the Company be obligated to make any payments of Premium in an aggregate amount in excess of $500,000, if the Second Closing occurs and as a result $5,000,000 in aggregate principal amount of Notes are issued, or $400,000, if the Second Closing does not occur.
Any Premium payable in accordance with this Section 3.2 shall be presumed to be equal to the liquidated damages sustained by the Holders as the result of the occurrence of any event triggering the prepayment of such Premium and the Company agrees that it is reasonable under the circumstances currently existing. The parties hereto acknowledge that the Premium shall survive acceleration of the Obligations and/or the occurrence of any Insolvency Proceeding, and shall automatically accrue to the principal amount of the Notes and shall constitute part of the Obligations for all purposes herein. If the Notes are accelerated for any reason pursuant to the terms herein, the Premium shall be calculated as if the date of acceleration of the Notes was the date of prepayment of the Notes. THE COMPANY EXPRESSLY WAIVES THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE OR LAW THAT PROHIBITS OR MAY PROHIBIT THE COLLECTION OF THE FOREGOING PREMIUM IN CONNECTION WITH
ANY ACCELERATION. The Company expressly agrees that: (A) the Premium is reasonable and is the product of an arm’s length transaction between sophisticated business people, ably represented by counsel; (B) the Premium shall be payable notwithstanding the then prevailing market rates at the time payment is made; (C) there has been a course of conduct between Holders and the Company giving specific consideration in this transaction for such agreement to pay the Premium; (D) the Company shall be estopped hereafter from claiming differently than as agreed to in this paragraph; (E) the Company’s agreement to pay the Premium is a material inducement to Holders to purchase the Notes; and (F) the Premium represents a good faith, reasonable estimate and calculation of the lost profits or damages of Holders and that it would be impractical and extremely difficult to ascertain the actual amount of damages to the Holders or profits lost by the Holders as a result of such event triggering payment of the Premium.
(e)Acceleration. In addition, the Notes shall be subject to acceleration as set forth
in Section 11.2.
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(a)Unless otherwise specifically stated herein, all payments hereunder shall be made in Cash. All fees, interest, premium and principal payable in Cash in respect of the Notes shall be paid by automatic bank draft or wire transfer of immediately available funds to an account at a bank designated in writing by the Holder of each of the Notes. In the absence of any such written designation, any such payment shall be deemed made on the date a check in the applicable amount payable to the Holder thereof is received by such Holder at its last address as reflected in the Note Register (as defined in the Notes).
(b)All payments made by the Company (pursuant to this Article 3 or otherwise) upon the Obligations relating to the Notes and all net proceeds from the enforcement of the Obligations shall be applied (i) first, to that portion of the Obligations constituting fees, indemnities and expenses (including attorney fees) payable to the Holders, (ii) second, to the payment of that portion of the Obligations constituting accrued and unpaid interest on the Notes, (iii) third,to the Premium, (iv) fourth, to the payment of that portion of the Obligations constituting unpaid principal of the Notes, (v) last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Company or as otherwise required by any Requirements of Law.
(c)Subject to Section 3.3(b), all payments made by the Company upon the Notes (including, without limitation, payments of principal if prepaid or upon earlier acceleration) shall be paid proportionally among the Holders of the Notes, based upon the outstanding principal amounts of such Notes.
ARTICLE 4
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS
4.1Conditions to the Obligations of the Purchasers to Purchase the Initial Notes on the Initial Closing Date. The obligation of each Purchaser to purchase its respective Initial Note, fund its respective portion of the Initial Purchase Price on the Initial Closing Date and perform any obligations hereunder shall be subject to the reasonable satisfaction as determined by, or waived by, the Purchaser of the following conditions on or before the Initial Closing Date, as applicable; provided, that any waiver of a condition shall not be deemed a waiver of any breach of any representation, warranty, agreement, term or covenant, as specifically set forth elsewhere in this Agreement, or of any misrepresentation by the Company.
(a)Representations and Warranties. The representations and warranties contained in Article 6 hereof shall be true and correct in all material respects at and as of such Closing Date after giving effect to the Transactions.
(b)Compliance with this Agreement. The Company shall have performed and complied with all of its agreements and conditions set forth or contemplated herein and the other Note Documents in all material respects that are required to be performed or complied with by the Company on or before such Closing Date, there shall be no Default under this Agreement and the Collateral Agent shall have received at the Closing a certificate to the foregoing effect, dated the Initial Closing Date, and executed by the chief executive officer or chief financial officer on behalf of the Company.
(c)Secretary’s Certificates. The Collateral Agent shall have received a certificate from each Loan Party, dated as of the Initial Closing Date and signed by the secretary, an assistant secretary, the chief financial officer or the chief executive officer of such Loan Party, as applicable, certifying (i) that the attached copies of the Organizational Documents of such Loan Party and
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resolutions of the board of directors or similar governing body of such Loan Party approving the Note Documents to which it is a party and the Transactions are all true, complete and correct and remain unamended and in full force and effect and (ii) the incumbency and specimen signature of each officer of such Loan Party executing any Note Document to which it is a party or any other document delivered in connection herewith and therewith on behalf of such Loan Party.
(d)Sale of Cannabis Operations. The Company shall have consummated the sale of the Company’s Cannabis Operations (including the sale of the Plant) (the “Cannabis Sale”) on terms and in form reasonably satisfactory to the Collateral Agent.
(e)Documents. The Collateral Agent shall have received true, complete and correct copies of the Note Documents, the Warrants and the Registration Rights Agreements signed by each Loan Party party thereto.
(f)Good Standing Certificates. The Company shall have delivered to the Collateral Agent as of a date not more than fifteen (15) days before the Initial Closing Date, good standing certificates and/or certificates of existence, as the case may be, for each Loan Party for which such a certificate is issuable by a Governmental Authority for such Loan Party’s jurisdiction of incorporation or formation and all other jurisdictions where it does business.
(g)Budget. The Loan Parties shall have delivered to the Collateral Agent on or before the Initial Closing Date a draft Budget in the form which is to be presented to the Board of Directors of Borrower, which shall cover (i) the consolidated operations of Borrower and its Subsidiaries, and (ii) the consolidating cash flow of each of Biodroga and Sprout, in each case for Fiscal Year 2023, in form and substance reasonably satisfactory to the Collateral Agent.
(h)No Litigation. No action, suit or proceeding before any court or any Governmental Authority shall have been commenced or threatened in writing, no investigation by any Governmental Authority shall have been commenced and no action, suit or proceeding by any Governmental Authority shall have been threatened in writing against Purchaser or the Loan Parties, in any such case seeking to restrain, prevent or change the transactions contemplated hereby or questioning the validity or legality of any of such transactions.
(i)Fees, Etc. On the Initial Closing Date, the Company shall have paid to the Purchasers and Collateral Agent all costs, fees and expenses (including, without limitation, reasonable legal fees and expenses) payable to the Purchasers and Collateral Agent in accordance with the terms of the Note Documents.
(j)Consents. All consents, exemptions, authorizations, or other actions by, or notices to, or filings with, Governmental Authorities and other Persons in respect of all Requirements of Law and with respect to those Contractual Obligations of the Loan Parties reasonably necessary in connection with the execution, delivery or performance by the Loan Parties, or enforcement against the Loan Parties, of the Note Documents to which they are a party shall have been made or obtained and be in full force and effect, and the Collateral Agent shall have been furnished with appropriate evidence thereof.
(k)Sprout Debt. (A) The Collateral Agent shall have received a written acknowledgement by NH Expansion Credit Fund Holdings LP, as collateral agent for the holders of certain notes issued by Sprout, in a form reasonably acceptable to the Collateral Agent, regarding, among other things, the ability of Neptune Growth Ventures, LLC (“NGV”), a Subsidiary of the Company, to grant to the Collateral Agent a lien on NGV’s interest in all Debt of Sprout that is payable to the
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Company or any of its Domestic Subsidiaries (whether in existence as of the Initial Closing Date or as may be incurred hereafter (including, without limitation, the Sprout Incremental Note and any investments permitted under Section 9.5(g) or (h)), “Sprout’s Pledged Debt”) and the ability, upon the occurrence of a default on Sprout’s Pledged Debt or an Event of Default, of NGV to assign or otherwise transfer Sprout Pledged Debt to the Collateral Agent.
(B) The Collateral Agent shall have received instruments evidencing Sprout’s Pledged Debt required to be pledged pursuant to the Note Documents, indorsed in blank to the Collateral Agent or accompanied by an allonge indorsement in blank.
(l)Movable Hypothec and Assignment of Claims. The Collateral Agent shall have received confirmation that a Movable Hypothec and Assignment of Claims in favor of the Collateral Agent shall have been executed and delivered by the Loan Parties and Subsidiaries governed by the laws of Canada or any province thereof before a notary of the Province of Quebec, Canada with respect to all of their respective movable assets and accounts receivable and duly registered in the Quebec Register of Personal and Movable Real Rights, with no intervening registrations since the date of the searches carried out by Canadian counsel.
(m)Movable Hypothec with Delivery. The Collateral Agent shall have received confirmation that a Movable Hypothec with Delivery in favor of the Collateral Agent shall have been executed and delivered by the Loan Parties and Subsidiaries governed by the laws of Canada or any province thereof before a notary of the Province of Quebec, Canada respecting all shares and securities held by such persons and there has been delivery to the Collateral Agent of certificates representing such shares and securities.
(n)Additional Documents. The Collateral Agent shall have received each additional document, instrument or other item reasonably requested.
4.2Conditions to the Obligations of the Purchasers to Purchase the Delayed Draw Notes on the Second Closing Date. The obligation of each Purchaser to purchase its respective Delayed Draw Note, fund its respective portion of the Delayed Draw Purchase Price on the Second Closing Date and perform any obligations hereunder shall be subject to the reasonable satisfaction as determined by, or waived by, such Purchaser of the following conditions on or before the Second Closing Date, as applicable; provided, that any waiver of a condition shall not be deemed a waiver of any breach of any representation, warranty, agreement, term or covenant, as specifically set forth elsewhere in this Agreement, or of any misrepresentation by the Company.
(a)Representations and Warranties. The representations and warranties contained in Article 6 hereof shall be true and correct in all material respects at and as of such Closing Date after giving effect to the Second Closing Date.
(b)Delayed Draw Commitment Termination Date. The Delayed Draw Commitment Termination Date shall not have occurred.
(c)Delayed Draw Note Request. The requested amount of Delayed Draw Notes shall not exceed the maximum amount permitted pursuant to Section 2.1(b).
(d)Compliance with this Agreement. The Company shall have performed and complied with all of its agreements and conditions set forth or contemplated herein and the other Note Documents in all material respects that are required to be performed or complied with by the Company on or before such Closing Date, there shall be no Default or Event of Default under this Agreement and the Collateral Agent shall have received at the Closing a certificate to the foregoing effect, dated the
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Second Closing Date, and executed by the chief executive officer or chief financial officer on behalf of the Company.
(e)Fees, Etc. On the Second Closing Date, the Company shall have paid to the Purchasers and Collateral Agent all costs, fees and expenses (including, without limitation, reasonable legal fees and expenses) payable to the Purchasers and Collateral Agent in accordance with the terms of the Note Documents.
(f)Capital Raise. (i) The Company shall have received up to $5,000,000 in proceeds from the Incremental Equity Issuance by no later than January 31, 2023; (ii) the Collateral Agent shall have received evidence of the proceeds actually received from the Incremental Equity Issuance; and (iii) the Company shall have delivered executed versions of all definitive documentation consummated in connection with the Incremental Equity Issuance in advance of the Second Closing Date and in form and substance reasonably satisfactory to the Collateral Agent.
(g)Additional Documents. The Collateral Agent shall have received each additional document, instrument or other item reasonably requested.
ARTICLE 5
CONDITIONS TO OBLIGATIONS OF THE LOAN PARTIES
The obligations of the applicable Loan Parties to issue the Notes and to perform their other obligations hereunder on each Closing Date shall be subject to the reasonable satisfaction as determined by, or waived by, the Company of the following conditions on or before such Closing Date:
5.1Representations and Warranties. The representations and warranties of each Purchaser contained in Article 7 hereof shall be true and correct in all material respects at and as of such Closing Date as if made at and as of such date (and if as of another date, then as of such other date).
5.2Compliance with this Agreement. Each Purchaser shall have performed and complied in all material respects with all of the agreements and conditions set forth or contemplated herein that are required to be performed or complied with by it on or before such Closing Date.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES
The following representations and warranties by the Company to the Purchasers are qualified by the Disclosure Schedules, which set forth certain disclosures concerning the Company and its business. The Company hereby represents and warrants to the Purchaser as of the date hereof as follows:
6.1Existence and Power. Each Loan Party that is not a natural Person: (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, (b) has all requisite power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently, or is currently proposed to be, engaged, except to the extent that the failure to so own, operate, lease or conduct would not reasonably be expected to have a Material Adverse Effect, (c) is duly qualified as a foreign entity, licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to so qualify would not result in a material liability to the Company or any of its Subsidiaries and (d) has the power and authority to execute, deliver and perform its obligations under each Note Document to which it is or
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will be a party and to borrow hereunder. The jurisdictions in which each Loan Party is organized and qualified to do business as of the Initial Closing Date are listed on Schedule 6.1.
6.2Corporate Authorization; No Contravention. The execution, delivery and performance by each Loan Party that is not a natural Person of each Note Document to which it is or will be a party and the consummation of the Transactions: (a) has been duly authorized by all necessary action on the part of such Loan Party, (b) do not and will not contravene or violate the terms of the Organizational Documents of any Loan Party or any amendment thereto or any Requirement of Law applicable to any Loan Party or any Loan Party’s assets, business or properties, (c) do not and will not (i) conflict with, contravene, result in any violation or breach of or default under any material Contractual Obligation of any Loan Party (with or without the giving of notice or the lapse of time or both) other than any right to consent, which consents have been obtained, (ii) create in any other Person a right or claim of termination or amendment of any material Contractual Obligation of any Loan Party, or (iii) require modification, acceleration or cancellation of any material Contractual Obligation of any Loan Party which could result in a material adverse effect, (d) do not and will not result in the creation of any Lien (or obligation to create a Lien) against any property, asset or business of any Loan Party (other than Liens securing the Notes and Permitted Liens) and (e) with respect to each Loan Party and their Affiliates that are incorporated in Canada or any province thereof, is not subject to any unanimous shareholder agreement or any declaration by the sole shareholder thereof that restricts the powers of the directors (or similar governing body) of such Loan Party.
6.3Governmental Authorization; Third Party Consents. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person in respect of any Requirement of Law or any material Contractual Obligation, and no lapse of a waiting period under a Requirement of Law or any material Contractual Obligation, is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party (other than any Loan Party that is a natural Person) of the Note Documents to which it is a party or the consummation of the Transactions, except (i) such as have been obtained or made and are in full force and effect, (ii) filings necessary to perfect Liens created by the Note Documents and (iii) consents, approvals, exemptions, authorizations or other actions that are not material to any Loan Party.
6.4Binding Effect. Each Loan Party has duly executed and delivered the Note Documents to which it is a party and such Note Documents constitute the legal, valid and binding obligations of such Loan Party enforceable against it in accordance with their respective terms, except as enforceability may be limited by Applicable Insolvency Laws and similar laws of general applicability relating to or affecting creditors’ rights and by general principles of equity.
6.5Litigation. Except as set forth on Schedule 6.5, there are no legal actions, suits, proceedings, claims or disputes pending or, to the knowledge of any Loan Party, threatened, at law, in equity, in arbitration or before any Governmental Authority against or affecting any Loan Party that could reasonably be expected to have individually or in the aggregate, a Material Adverse Effect. No injunction, writ, temporary restraining order, decree or any order or determination of any nature by any arbitrator, court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of the Note Documents or, to the knowledge of any Loan Party, which relates to the assets or the business of the Loan Parties, is outstanding.
6.6Compliance with Laws. Except as set forth on Schedule 6.6, each Loan Party is in compliance with all Requirements of Law, except for such noncompliance that could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
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6.7No Default or Breach. No event has occurred and is continuing or would result from the incurring of Obligations by the Loan Parties under the Note Documents which constitutes or, with the giving of notice or lapse of time or both, would constitute an Event of Default. No Loan Party is in default under or with respect to any material Contractual Obligation.
6.8Title to Properties. As of the Initial Closing Date, (i) except as set forth on Schedule 6.8, no Loan Party owns any real property, (ii) all real property leased by the Loan Parties is correctly set forth on Schedule 6.8 and (iii) except as set forth on Schedule 6.8, each Loan Party has a valid leasehold interest in all its leased real property. The Loan Parties have good title to, or a valid leasehold interest in, all other Property necessary to the conduct of its business and none of such Property is subject to any Lien, except for Liens permitted pursuant to Section 9.2.
6.9Absence of Certain Changes. Since the date of the Company’s most recent audited financial statements contained in its Form 10-K for the fiscal year ended March 31, 2022, there has been no material adverse change, and no other material adverse developments, in the business, assets, liabilities, properties, operations (including results thereof), or condition (financial or otherwise) of the Company or any of its Subsidiaries. Since the date of the Company’s most recent audited financial statements contained in a Form 10-K, neither the Company nor any of its Subsidiaries has (i) declared or paid any dividends, (ii) sold any assets, individually or in the aggregate, outside of the ordinary course of business or (iii) made any Capital Expenditures, individually or in the aggregate, outside of the ordinary course of business. Neither the Company nor any of its Subsidiaries has taken any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation or winding up, nor does the Company or any Subsidiary have any knowledge or reason to believe that any of their respective creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so.
(a)Except as set forth on Schedule 6.10, each Loan Party has timely filed all federal, state, provincial and other Tax Returns that it was required to file. All such Tax Returns were correct and complete in all material respects. All federal, state, provincial and other material Taxes due and payable by each Loan Party shown on any Tax Return have been paid or adequately reserved for in the Financial Statements. Except as set forth on Schedule 6.10, no Loan Party is currently the beneficiary of any extension of time within which to file any Tax Return. No Loan Party has ever received a written claim by a Governmental Authority in a jurisdiction where any Loan Party does not file Tax Returns that any Loan Party is or may be subject to taxation by that jurisdiction. There are no Liens on any of the assets of any Loan Party that arose in connection with any failure to timely pay any Tax.
(b)Except as set forth on Schedule 6.10, there is no action, suit, proceeding, investigation, examination, audit, or claim now pending or, to the knowledge of any Loan Party, threatened or scheduled by any Governmental Authority regarding any Taxes relating to any Loan Party. No Loan Party has entered into an agreement or waiver extending any statute of limitations relating to the payment or collection of Taxes of such Person. No Loan Party has incurred, or will incur, any material Tax liability in connection with the Transactions.
(a)SEC Documents; Financial Statements. Since March 31, 2022, except as set forth on Schedule 6.11(a), the Company has timely filed all reports, schedules, forms, proxy statements, statements and other documents required to be filed by it with the Commission pursuant to the reporting
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requirements of the Exchange Act (all of the foregoing filed prior to the date hereof and all exhibits and appendices included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”). As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the Commission, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents complied in all material respects with applicable accounting requirements and the published rules and regulations of the Commission with respect thereto as in effect as of the time of filing. Such financial statements have been prepared in accordance with GAAP, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments which will not be material, either individually or in the aggregate). The Company is not currently contemplating amending or restating any of the financial statements (including, without limitation, any notes or any letter of the independent accountants of the Company with respect thereto) included in the SEC Documents (the “Financial Statements”), nor is the Company currently aware of facts or circumstances which would require the Company to amend or restate any of the Financial Statements, in each case, in order for any of the Financials Statements to be in compliance with GAAP and the rules and regulations of the Commission. The Company has not been informed by its independent accountants that they recommend that the Company amend or restate any of the Financial Statements or that there is any need for the Company to amend or restate any of the Financial Statements.
(b)Internal Accounting and Disclosure Controls. The Company and each of its Subsidiaries maintains internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that is effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, including that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference. The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) that are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Commission, including, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer or officers and its principal financial officer or officers, as appropriate, to allow timely decisions regarding required disclosure. Except as set forth in the SEC Documents, neither the Company nor any of its Subsidiaries has received any notice or correspondence from any accountant, Governmental Authority or other Person relating to any potential
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material weakness or significant deficiency in any part of the internal controls over financial reporting of the Company or any of its Subsidiaries.
6.13Holding Subsidiaries. None of (i) Neptune Holding (ii) Neptune Growth, (iii) N Real Estate and (iv) Biodroga LP has any material assets or liabilities other than:
(a)in the case of Neptune Holding, ownership of the Equity Interests of Neptune
Growth; and
(b)in the case of Neptune Growth, ownership of Equity Interests in Sprout and the
Sprout Pledged Debt.
6.14Investment Company/Government Regulations. The Company is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended. No Loan Party is subject to regulation under the Public Utility Holding Company Act of 1935, as amended, the Federal Power Act, the Interstate Commerce Act, or any federal or state statute or regulation limiting its ability to incur Debt.
6.15Subsidiaries. Except as set forth in Schedule 6.15, as of the Initial Closing Date, the Company does not (a) have any other Subsidiaries or (b) own of record or beneficially, directly or indirectly, any (i) Capital Stock issued by any other Person or (ii) equity, voting or participating interest in any joint venture or other enterprise.
6.16Capitalization. As of the Initial Closing Date, after giving effect to the transactions contemplated under the Note Documents, the number of shares of issued and outstanding Capital Stock for each Subsidiary thereof shall be as set forth on Schedule 6.16, and such shares of Capital Stock are owned by the Persons in the respective amounts set forth on Schedule 6.16. All such outstanding Capital Stock has been duly authorized by all necessary action of the Company or such Subsidiary and has been validly issued and is free and clear of all Liens (other than Liens permitted under the Note Documents). The issuance of the foregoing Capital Stock is not and has not been subject to preemptive rights or any other similar rights or Liens (other than Liens permitted under the Note Documents) in favor of any Person other than such rights that have been waived and will not result in the issuance of any additional Capital Stock of the Company or any Subsidiary or the triggering of any anti-dilution or similar rights contained in any options, warrant, debentures or other securities or agreements of the Company or such Subsidiary. On the Initial Closing Date, there will be no outstanding securities convertible into or exchangeable for Capital Stock of the Company or any Subsidiary or options, warrants or other rights to purchase or subscribe to Capital Stock of the Company or any Subsidiary or contracts, commitments, agreements, understandings or arrangements of any kind to which any Loan Party is a party (other than the Organizational Documents of such Loan Party) relating to the issuance of any Capital Stock of such Loan Party, any such convertible or exchangeable securities or any such options, warrants or rights. Neither the Company nor any Subsidiary has any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement.
6.17Private Offering. No form of general solicitation or general advertising was used by any Loan Party or its representatives in connection with the offer or sale of the Notes to the Purchasers pursuant to this Agreement. Assuming the accuracy of the Purchasers’ representations and warranties contained in Article 7, no registration of the Notes pursuant to the provisions of the Securities Act or the
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state securities or “blue sky” laws will be required for the offer, sale or issuance of the Notes by any Loan Party to the Purchasers pursuant to this Agreement.
6.18Broker’s, Finder’s or Similar Fees. Except as set forth on Schedule 6.18, there are no brokerage commissions, finder’s fees or similar fees or commissions payable in connection with the Transactions based on any agreement, arrangement or understanding with any Loan Party or any action taken by any Loan Party.
6.19Labor Relations. No Loan Party is a party to any collective bargaining agreement.
6.20Employee Benefit Plans. Within the five-consecutive-year period immediately preceding the first day of the year in which the Initial Closing Date occurs neither any Loan Party nor any ERISA Affiliate thereof has contributed to, or has any actual or contingent, direct or indirect, liability in respect of, any employee benefit plan (as defined in Section 3(3) of ERISA) or other employee benefit arrangement.
6.21Intellectual Property.
(a)Ownership and Use. Each Loan Party owns or has the right to use all Intellectual Property it currently uses in the operation of the business of the Company as presently conducted. Each item of Intellectual Property owned, licensed or used by any Loan Party immediately prior to the Closing will be owned, licensed or available for use by such Loan Party on substantially similar terms and conditions immediately following the Closing. To the knowledge of the Loan Parties, each item of Intellectual Property owned, licensed or used by such Loan Party is valid and enforceable and otherwise fully complies in all material respects with all laws applicable to the enforceability thereof.
(b)No Violation or Infringement. No Loan Party has violated, misappropriated or infringed upon or otherwise come into conflict with any Intellectual Property of third parties, and no Loan Party has received any notice alleging any such violation, infringement or other conflict. To the knowledge of each Loan Party, no third party has infringed upon, misappropriated or otherwise come into conflict with any Intellectual Property of any Loan Party.
(c)Intellectual Property Listing. Schedule 6.21(c) identifies each patent or registration (including copyright, trademark, service mark and domain name) owned by a Loan Party (which is active and in force) with respect to any of such Loan Party’s Intellectual Property, identifies each patent application or application for registration (including pending applications) that such Loan Party has made with respect to any of its Intellectual Property, and identifies each material license, agreement or other permission that such Loan Party has granted to any third party (whether active and in force) with respect to any of its Intellectual Property. Schedule 6.21(c) also identifies each trade name or unregistered trademark or service mark owned by each Loan Party. With respect to each item of Intellectual Property required to be identified in Schedule 6.21(c) and except as expressly set forth on Schedule 6.21(c): (i) each Loan Party possesses all right, title and interest in and to the item, free and clear of any Liens other than Permitted Liens; (ii) the item is not subject to any order, award, decision, injunction, judgment, ruling, decree, charge, writ, subpoena or verdict entered, issued, made or rendered by any Governmental Authority or arbitrator (each, an “Order”); (iii) no proceeding, charge, complaint, claim, demand, notice, action, suit, litigation, hearing, audit, investigation, arbitration or mediation (in each case, whether civil, criminal, administrative, investigative or informal) is pending before any Governmental Authority, arbitrator or mediator (each, a “Proceeding”) or, to the knowledge of each Loan Party, is threatened or anticipated that challenges the legality, validity, enforceability, use or
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ownership of the item; and (iv) no Loan Party has agreed to indemnify any Person for or against any interference, infringement, misappropriation or other conflict with respect to the item.
(d)Founder and Employees. All Intellectual Property related to the business of the Loan Parties and created by the Loan Parties’ founders, employees, contractors or other Persons for or on behalf of the Loan Parties has been irrevocably assigned to the Loan Parties. The Loan Parties have taken commercially reasonable action to maintain and protect each item of Intellectual Property that each Loan Party owns, licenses or uses, and have maintained the confidentiality of all proprietary information held by the Loan Parties, or purported to be held by the Loan Party, as a trade secret, including any confidential information or trade secrets provided to the Loan Parties by any Person under an obligation of confidentiality, and no such proprietary information has been authorized to be disclosed or has actually been disclosed to any Person other than pursuant to a written confidentiality agreement restricting the disclosure and use of proprietary information.
(e)Intellectual Property Licenses. Schedule 6.21(e) identifies each item of material Intellectual Property other than off the shelf software that any Person other than any Loan Party owns and that such Loan Party uses pursuant to license, agreement or permission (an “Intellectual Property License”). With respect to each item of Intellectual Property required to be identified on Schedule 6.21(e) and except as expressly set forth on Schedule 6.21(e): (i) to the knowledge of each Loan Party, such item is not subject to any Order; (ii) to the knowledge of each Loan Party, no Proceeding is pending or is threatened or anticipated that challenges the legality, validity or enforceability of such item; and (iii) such Loan Party has not granted any sublicense or similar right with respect to the Intellectual Property License relating to such item.
6.22Potential Conflicts of Interest. Other than as set forth on Schedule 6.22, no officer, director or manager (or equivalent Person), partner, stockholder or other security holder of the Company or any Subsidiary: (a) is an officer, director, manager, employee or consultant of, any Person that is, or is engaged in business as, a competitor, lessor, lessee, supplier, distributor, sales agent or customer of, or lender to or borrower from, the Company or its Subsidiaries; (b) has been a party to any material transaction with the Company or any Subsidiary; (c) owns, directly or indirectly, in whole or in part, any tangible or intangible property that the Company or any Subsidiary uses or contemplates using in the conduct of business; or (d) has any cause of action or other claim whatsoever against, or owes or has advanced any amount to the Company or any Subsidiary, except for advances in the ordinary course of business such as for accrued vacation pay, accrued benefits under employee benefit plans, reasonable and customary expense reimbursements, and similar matters and agreements existing on the date hereof.
(a)Each Loan Party complies, and has complied since its inception, in all material respects with the FDA Laws. The foregoing includes any applicable good manufacturing practices and sanitation requirements, labeling and advertising requirements, requirements relating to food or color additives, food standards, product composition requirements, testing requirements or protocols, recordkeeping or reporting requirements, monitoring requirements, packaging (including co-packing and re-packing) requirements, laboratory controls, storage and warehousing procedures, shipping requirements, import and export requirements, supply chain security, food handling, and shelf-life requirements. No Loan Party has received any notification asserting, nor does any Loan Party have knowledge of, any failure to comply with or violation of the FDA Laws.
(b)Neither any Loan Party nor any of its respective facilities has received any FDA Form 483s, Notices of Adverse Findings, Warning Letters, untitled letters or other correspondence or notice from the FDA or any other Governmental Authority alleging or asserting material noncompliance
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with any FDA Laws. No Loan Party has received any written or oral notice that the FDA or any other Governmental Authority has commenced, or threatened to initiate, any action to revoke such Loan Party’s registration, to request a recall, or to halt distribution of any of such Loan Party’s products, or commenced or threatened to initiate any action to seize, or enjoin the production of, any of such products. Neither any Loan Party nor its respective facilities are subject to consent decrees.
(c)No Loan Party has, either voluntarily or involuntarily, initiated, conducted, or issued, any recall, market withdrawal or replacement, safety alert, post-sale warning, or other notice or action relating to the alleged lack of safety of any product or any alleged product defect or violation. Each Loan Party has established and administers a food safety compliance program, including but not limited to, a written food safety plan and food defense plan applicable to such Loan Party, to assist such Loan Party and the directors, officers and employees of such Loan Party in complying with FDA Laws.
(d)No Loan Party has failed to file with the applicable Governmental Authority any filing, declaration, listing, registration, report or submission required by the FDA Laws; all such filings, declarations, listing, registrations, reports or submission were in compliance with applicable FDA Laws when filed and no deficiencies have been asserted by any applicable regulatory authority. Neither any Loan Party nor any officer, employee or agent of such Loan Party has made an untrue statement of a material fact or fraudulent statement to the FDA or any other Governmental Authority with substantially similar regulatory responsibilities, or failed to disclose a material fact required to be disclosed to any Governmental Authority.
(e)All “organic” goods that any Loan Party produces, manufactures, packs, holds, markets, and/or sells are processed, tested, stored, handled, transported, and delivered in accordance with standards that meet or exceed the: (i) the Organic Foods Production Act of 1990; (ii) 7 C.F.R. Section 205, et seq. (USDA Organic standards); (iii) verification from a USDA-accredited certifying agent, dated January 1, 2013 or later; and (iv) any comparable applicable state laws or regulations.
6.24Debt. Schedule 6.24 lists (a) the amount of all Debt of the Loan Parties and their Subsidiaries (other than Debt under this Agreement and any Debt being repaid on the date hereof) as of the Closing, (b) the Liens that relate to such Debt and that encumber the assets of such Persons, (c) the name of each lender thereof, and (d) the amount of any unfunded commitments, if any, available to such Persons in connection with any such Debt facilities.
6.25Material Contracts. Each of the Material Contracts is in full force and effect. Each Loan Party has satisfied in full or provided for all of its liabilities and obligations under each Material Contract requiring performance prior to the date hereof in all material respects, and is not in default under any of them, nor does any condition exist that with notice or lapse of time or both would constitute such a default. To the knowledge of each Loan Party, no other party to any such Material Contract is in default thereunder, nor does any condition exist that with notice or lapse of time or both would constitute such a default. No approval or consent of any Person is needed for the Material Contracts to continue to be in full force and effect after giving effect to the Transactions.
6.26Insurance. Schedule 6.26 accurately summarizes all of the insurance policies or programs of the Loan Parties in effect as of the date hereof, and indicates the insurer’s name, policy number, expiration date, amount of coverage, type of coverage, annual premiums, exclusions and deductibles, and also indicates any self-insurance program that is in effect. All such policies will remain in full force and effect and will not terminate or lapse by reason of any of the Transactions.
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6.28Licenses and Approvals. Except as set forth on Schedule 6.28 hereto, no Loan Party is a party to and has no knowledge of any investigation, notice of apparent liability, violation, forfeiture or other order or complaint issued by or before any court or regulatory body or of any other proceedings which could be reasonably expected to materially and adversely affect the validity or continued effectiveness of the material Licenses of any Loan Party. No Loan Party has reason to believe that such material Licenses will not be renewed in the ordinary course. Each Loan Party has filed in a timely manner all material reports, applications, documents, instruments and information required to be filed by it pursuant to applicable rules and regulations or requests of every regulatory body having jurisdiction over any of its material Licenses.
6.29OFAC; Special Economic Measures Act. Neither any Loan Party nor any Affiliate of any Loan Party:
(a) (i) is a Sanctioned Person, (ii) has any assets in Sanctioned Entities, or (iii) derives any operating income from investments in, or transactions with Sanctioned Persons or Sanctioned Entities. The proceeds of the Notes will not be used and have not been used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity.
(b)(i) had any dealing in any property, wherever situated, that is owned, held or controlled, directly or indirectly by;(ii) exported, sold, supplied or shipped any goods wherever situated to, or had any other dealing in any goods wherever situated destined for; (iii)transferred, provided or communicated any technical data to; (iv) imported, purchased, acquired or shipped any goods that are exported, supplied or shipped from (after an order is issued with respect to); or (v) provided or acquired financial services or any other services to, from or for the benefit of or on the direction or order of; any foreign state, any person in that foreign state, or a national of that foreign state that is subject to any sanctions order pursuant to the Special Economic Measures Act (Canada).
6.30Disclosure. This Agreement, together with all exhibits and schedules hereto, the Note Documents, and the agreements, certificates and other documents and written information furnished to the Collateral Agent or any Purchaser by any Loan Party, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which they were made, not misleading.
6.31No Default. No Default or Event of Default exists or would result from the incurring of the Obligations by any Loan Party or the grant or perfection of the Liens on the Collateral or the consummation of the Transactions.
6.32Government Contracts. No Loan Party is party to any Government Contracts.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby represents and warrants as follows:
7.1Authorization; No Contravention. The execution, delivery and performance by such Purchaser of this Agreement: (a) is within its power and authority and has been duly authorized by all
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necessary action; and (b) does not contravene or violate the terms of its organizational documents or any amendment thereof.
7.2Binding Effect. This Agreement has been duly executed and delivered by such Purchaser and this Agreement constitutes such Purchaser’s legal, valid and binding obligation, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability.
7.3No Legal Bar. The execution, delivery and performance of this Agreement by such Purchaser will not violate any Requirements of Law applicable to it.
(a)The Notes are being or will be acquired by such Purchaser hereunder for its own account, not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof in any transaction which would be in violation of state or federal securities laws or which would require the issuance and sale of the Notes hereunder to be registered under the Securities Act, subject, however, to the disposition of such Purchaser’s property being at all times within its control.
(b)Such Purchaser is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. Such Purchaser is an accredited investor within the meaning of National Instrument 45-106 - Prospectus Exemptions of the Canadian Securities Administrators or within Section 73.3(3) of the Securities Act (Ontario) if the Purchaser is a resident in the Province of Ontario. The Purchaser shall execute all required documents in order to evidence its status as an accredited investor.
(c)Such Purchaser understands that (i) the Notes constitute “restricted securities” under the Securities Act, (ii) the offer and sale of the Notes hereunder is not registered under the Securities Act or under any “blue sky” laws in reliance upon certain exemptions from such registration and that the Company is relying on the representations made herein by such Purchaser in its determination of whether such specific exemptions are available, and (iii) the Notes may not be transferred except pursuant to an effective registration statement under the Securities Act, or under an exemption from such registration available under the Securities Act and under applicable “blue sky” laws or in a transaction exempt from such registration.
7.5Governmental Authorization; Third Party Consent. No approval, consent, compliance, exemption or authorization of any Governmental Authority or any other Person in respect of any Requirements of Law, and no lapse of a waiting period under Requirements of Law, is necessary or required in connection with the execution, delivery or performance by it or enforcement against such Purchaser of this Agreement.
ARTICLE 8 AFFIRMATIVE COVENANTS
Until the indefeasible payment in full in Cash of all of the Obligations (excluding contingent indemnification obligations for which no claims have been made), the Loan Parties hereby jointly and severally covenant and agree with the Holders as follows:
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8.1Delivery of Financial and Other Information. The Company shall deliver or cause to be delivered to the Collateral Agent and each Holder the following (it being acknowledged and agreed that the obligations listed in clause (a) and (b) below shall be deemed satisfied if the information required thereby is publicly available on the SEC’s XXXXX website (or any replacement thereof)):
(a)Within one hundred twenty (120) days after the close of each fiscal year of the Company (commencing with the fiscal year ending March 31, 2023), an unqualified audit report certified by independent certified public accountants selected by Company and reasonably acceptable to the Required Holders, prepared in accordance with GAAP, including a consolidated balance sheet of the Company and its Subsidiaries as of the end of such Fiscal Year and the related consolidated statements of income, retained earnings and cash flows for such Fiscal Year, all such financial statements to be prepared in accordance with GAAP and accompanied by any management letter prepared by said accountants and a narrative report containing management’s discussion and analysis of the financial position and financial performance for such fiscal year in reasonable form and detail.
(b)For each month that is also the end of a fiscal quarter of the Company or the end of a fiscal year of the Company, within forty-five (45) days after the end of the Company’s fiscal quarter (commencing with the fiscal quarter ending December 31, 2022), an unaudited consolidated balance sheet of Company and its Subsidiaries and the related consolidated statements of income, retained earnings and cash flows for such fiscal quarter, and for the portion of the Company’s fiscal year ended at the end of such fiscal quarter (but excluding any fiscal quarters ending prior to the Initial Closing Date), and commencing with the fiscal quarter ending December 31, 2022, setting forth in each case in comparative form, the figures for the corresponding fiscal quarter and the corresponding portion of the Company’s previous Fiscal Year, in reasonable detail and reasonably satisfactory in form to the Required Holders and all prepared in accordance with GAAP (subject to year-end adjustments and absence of footnotes) and certified by an officer of the Company and a narrative report containing management’s discussion and analysis of the financial position and financial performance for such fiscal quarter in reasonable form and detail.
(c)Promptly and in any event no later than five (5) Business Days after the filing thereof, copies of the annual federal and state income Tax Returns (and any requests for extension with respect thereto) of the Company and each of its Subsidiaries for the immediately preceding year and, if requested by the Required Holders, copies of all material reports filed with any federal, state or local Governmental Authority.
(d)Promptly and in any event no later than five (5) Business Days after receipt by any Loan Party or any Subsidiary, notice of any delinquency or default, given to any such Person by any other creditor for any payables or other obligations of the Company or any Subsidiary in excess of
$150,000, individually or in the aggregate.
(e)Promptly and in any event no later than five (5) Business Days after obtaining knowledge thereof, written notice of (i) any default under or termination of any contract for a term of greater than one year or that involves the receipt or payment of $250,000 or more in any one year and (ii) any claim, litigation, suit or administrative proceeding affecting any Loan Party or any Subsidiary, whether or not the claim is covered by insurance, and of any litigation, suit or administrative proceeding, which in any such case affects the Collateral or which would reasonably be expected to have a Material Adverse Effect.
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(g)Promptly and in any event within seven (7) Business Days after receipt by any Loan Party or any Subsidiary, notice of any payment default, oral or written, given to such Loan Party or such Subsidiary by any lessor in connection with any lease by such Loan Party or such Subsidiary of real property.
(h)Promptly and in any event within one (1) Business Day following receipt by any Loan Party or any Subsidiary, written notice of any adverse ruling by any Governmental Authority with respect to any Intellectual Property of any Loan Party or any Subsidiary.
(i)As soon as possible and in any event within five (5) days after the receipt by any Loan Party from any Governmental Authority or filing or receipt thereof by any Loan Party, provide to the Collateral Agent any citation, notice of violation or order to show cause issued by such Governmental Authority with respect to any Loan Party which is available to any Loan Party, in each case which could reasonably be expected to have a Material Adverse Effect.
(j)As soon as possible and in any event within five (5) days after the receipt thereof by any Loan Party, such Loan Party will give the Collateral Agent notice of any lapse, termination or relinquishment of any license, permit or other authorization from any Governmental Authority held by such Loan Party or any failure of such Governmental Authority to renew or extend any such license, permit or other authorization for the usual period thereof and of any complaint or other matter filed with or communicated to such Governmental Authority, of which any Loan Party has knowledge and in any such case which could reasonably be expected to have a Material Adverse Effect.
(k)As soon as available, but in any event no later than thirty (30) days after the close of each fiscal year ending on or after the date hereof (or in the case of the fiscal year ending March 31, 2024, no later than February 15, 2023) of the Company, the Company shall deliver a Budget Certificate attaching (i) a Budget for the next four fiscal quarter period (or in the case of the fiscal year ending March 31, 2023, a Budget for the next eight fiscal quarter period ending March 31, 2025), in form and substance reasonably satisfactory to the Required Holders, and (ii) a description of the underlying assumptions applicable to such Budget and the principal assumptions on which such Budget is based.
(l)Such other information (including non-financial information, but excluding any budgets other than as required by the preceding clause (k)) as the Collateral Agent or any Holder may from time to time reasonably request.
8.2Use of Proceeds. The Company shall use the proceeds of the Initial Notes hereunder only as follows: (i) first, for the payment of fees and expenses in connection with the Transactions contemplated hereunder and in the other Note Documents, and (ii) second, to fund operating expenses and for general working capital purposes. The Company shall use the proceeds of the Delayed Draw Notes hereunder only for general working capital purposes.
8.3Notice of Default. Promptly, and in any event within two (2) Business Days of becoming aware, each Loan Party will give notice in writing to the Collateral Agent upon becoming aware of the following: (a) the occurrence of any Default or Event of Default under this Agreement and specify the nature and period of existence thereof and what action such Loan Party is taking (and proposes to take) with respect thereto and (b) any development or other information outside the ordinary course of business of such Loan Party or any of its Subsidiaries (excluding matters of a general economic, financial or political nature) which could reasonably be expected to have a Material Adverse Effect.
8.4Conduct of Business. The Company and its Subsidiaries will, and will cause each of its Subsidiaries to, carry on and conduct its business in substantially the same manner and in substantially
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the same fields of enterprise as it is presently conducted and do all things necessary to remain duly incorporated or organized, validly existing and (to the extent such concept applies to such entity) in good standing as a domestic corporation, partnership or limited liability company in its jurisdiction of incorporation or organization, as the case may be, and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted to the extent that the failure to maintain such qualification would not reasonably be expected to have a Material Adverse Effect; provided that the Company may (i) liquidate, wind-up or dissolve any Excluded Subsidiary so long as all assets of such Excluded Subsidiary are transferred to a Loan Party in connection with such transaction or merge a Excluded Subsidiary into a Loan Party, in each case upon written notice to the Collateral Agent, and (ii) transfer, sell or dispose of assets and properties in connection with Permitted Asset Dispositions and Specified Asset Dispositions, subject to compliance with the other provisions of this Agreement.
8.5Taxes and Claims. Each Loan Party will, and will cause each of its Subsidiaries to, timely file United States federal and state and other material Tax Returns required by law and which Tax Returns shall be complete and correct in all material respects and pay when due all Taxes of such Loan Party or such Subsidiary, except those which are being contested in good faith by appropriate proceedings and with respect to which it maintains adequate reserves in accordance with GAAP, which deferment of payment is permissible so long as no Lien other than a lien permitted hereunder has been entered and such Loan Party’s and its Subsidiaries’ title to, and its right to use, its Properties are not materially adversely affected thereby.
(a)Each Loan Party will, and will cause each of its Subsidiaries to, maintain insurance in such form and with such companies as are reasonably satisfactory to the Required Holders (it being acknowledged that the Loan Parties’ and Subsidiaries’ insurance companies as of the Initial Closing Date are satisfactory), on all its Property in such amounts and covering such risks as is consistent with sound business practice, and maintain such insurance as is required by the terms of any Collateral Document (it being acknowledged that the Loan Parties’ and Subsidiaries’ insurance in force as of the Initial Closing Date is satisfactory). Each Loan Party will, and will cause each of its Subsidiaries to, furnish to the Holders upon request full information as to the insurance carried by it.
(b)Each Loan Party will, and will cause each of its Subsidiaries to, at all times keep its real and personal Property which is subject to the Lien of the Holders insured and cause such insurance relating to such Property or business to name the Collateral Agent, on behalf of the Holders, as an additional insured and loss payee, as appropriate. At or prior to the Closing, each Loan Party shall furnish certificates of insurance issued on applicable Xxxxx Forms for such Loan Party.
(c)If any Loan Party or any of its Subsidiaries shall fail to maintain all insurance in accordance with this Section 8.6 or Section 8.17 or to timely pay or cause to be paid the premium(s) on any such insurance, or if any Loan Party shall fail to deliver all certificates with respect thereto, the Collateral Agent shall have the right (but shall be under no obligation), upon prior written notice to such Loan Party or such Subsidiary, to procure such insurance or pay such premiums, and such Loan Party agrees to reimburse the Collateral Agent, on demand, for all costs and expenses relating thereto.
8.7Compliance with Laws. Each Loan Party will, and will cause each of its Subsidiaries to, comply with any and all Requirements of Law to which it may be subject including, without limitation, all FDA Laws and Environmental Laws and obtain any and all licenses, permits, franchises or other governmental authorizations necessary to the ownership of its Property or to the conduct of its businesses, except where failure to do so could not reasonably be expected to have a Material Adverse Effect. Each Loan Party will, and will cause each of its Subsidiaries to, timely satisfy all material assessments, fines, costs and penalties imposed (after exhaustion of all appeals, provided a stay has been
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put in effect during such appeal) by any Governmental Authority against such Person or any Property of such Person.
8.8Maintenance of Properties. Each Loan Party will, and will cause each of its Subsidiaries to, do all things necessary to maintain, preserve, protect and keep its Property (other than Property that is obsolete, surplus, or no longer used or useful in the ordinary conduct of its business) in good repair, working order and condition, make all necessary and proper repairs, renewals and replacements such that its business can be carried on in connection therewith and be properly conducted at all times and pay and discharge when due the cost of repairs and maintenance to its Property, and pay all rentals when due for all real estate leased by such Person.
8.9Audits and Inspection. After the date hereof, each Loan Party will, and will cause each of its Subsidiaries to, (i) permit any of the representatives of the Collateral Agent, at reasonable times during normal business hours and upon two (2) days’ prior notice not more frequently than once per Fiscal Quarter (or, during the occurrence and continuance of an Event of Default, upon one (1) day notice and without limitation), to visit and inspect any of its Property, books of account, records and reports to examine, audit and make copies thereof and (ii) promptly upon request thereof, but not less than weekly, schedule and hold calls with the senior management of the Company, and to discuss its affairs, finances and accounts with, and to be advised as to the same by, its officers, employees and independent certified public accountants at such reasonable times and intervals as the Collateral Agent may designate, in each case, at such Loan Party’s expense, plus the Collateral Agent’s reasonable out-of-pocket expenses (including without limitation any travel expenses).
8.10Issue Taxes. Each Loan Party shall pay all stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Note Document, excluding, for the avoidance of doubt, any income Tax.
8.11Employee Benefit Plans.. Each Loan Party shall, and shall cause each of its Subsidiaries to, (a) make contributions to all such Plans in a timely manner and in a sufficient amount to comply with the minimum funding standards of ERISA, (b) comply in all material respects with all applicable requirements of ERISA, (c) notify the Holders promptly upon receipt by such Loan Party or any Subsidiary of any notice concerning the imposition of any withdrawal liability or of the institution of any proceeding or other action which may result in the termination of any such Plans or the appointment of a trustee to administer such Plans, and (d) promptly advise the Holders of the occurrence of any Reportable Event with respect to any such Plans.
8.12Regulatory Compliance. Each Loan Party shall, and shall cause each of their respective Subsidiaries to, comply in all material respects with all terms and conditions of all federal, state and local laws, all rules, regulations and administrative orders of any Governmental Authority and all state and local commissions or authorities which are applicable to such Loan Party and/or their respective Subsidiaries.
8.14Delivery of Information by Holders. Each Holder is hereby authorized, to deliver a copy of any financial statement or other information made available by the Loan Parties or their Subsidiaries in connection herewith to any regulatory authority having jurisdiction over such Holder, pursuant to any request therefor by such regulatory authority, and may further divulge to any assignee or purchaser of any portion of the Notes or any prospective assignee or purchaser of any portion of the Notes, all information, and furnish to such Person copies of any reports, financial statements, certificates,
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and documents obtained under any provision of this Agreement, or related agreements and documents, provided that such prospective assignee or purchaser shall agree to maintain the confidentiality of such information.
8.15Execution of Supplemental Documents. Each Loan Party will, and will cause each of its Subsidiaries to, execute and deliver to the Holders from time to time, upon demand, such supplemental agreements, statements, assignments and transfers, or instructions or documents relating to the Collateral, and such other instruments as the Collateral Agent or Required Holders may reasonably request, in order that the full intent of this Agreement or the Security Agreement, as applicable, may be carried into effect.
8.17Post-Closing Covenants.
(a)Deposit Account Control Agreements. Within thirty (30) days (or such longer period as may be agreed to by the Required Holders acting in their sole discretion) of the Initial Closing Date, each Loan Party agrees to deliver or to cause to be delivered to the Collateral Agent, in form and substance reasonably satisfactory to the Required Holders, a control agreement for each deposit account (excluding Excluded Deposit Accounts) (as defined in the Security Agreement).
(b)Insurance Endorsements. Within thirty (30) days (or such longer period as may be agreed to by the Required Holders acting in their sole discretion) of the Initial Closing Date, each Loan Party agrees to deliver or cause to be delivered to the Collateral Agent the insurance endorsements required by Section 8.6.
(c)Sprout Incremental Note. Within five (5) days (or such longer period as may be agreed by the Required Holders acting in their sole discretion) of the Initial Closing Date, the Company shall contribute $2,000,000 in proceeds from the Cannabis Sale to NGV, and NGV will in turn contribute such proceeds to Sprout in exchange for a promissory note (the “Sprout Incremental Note”) to be issued to NGV in form and substance reasonably satisfactory to the Collateral Agent, which Note shall be delivered to the Collateral Agent, together with all endorsements or other documents necessary or reasonably requested by the Collateral Agent in order to provide the Collateral Agent with a first priority, perfected security interest, in such Sprout Incremental Note.
8.18Further Assurances. Each Loan Party will, and will cause each of its Subsidiaries to, take any action reasonably requested by the Collateral Agent or the Required Holders in order to effectuate the purposes and terms contained in this Agreement and any of the Note Documents.
ARTICLE 9 NEGATIVE COVENANTS
Until the payment in full in Cash of all of the Obligations (excluding contingent indemnification obligations for which no claims have been made), the Loan Parties hereby jointly and severally covenant and agree with the Holders as follows:
9.1Limitations on Debt. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Debt, without the Required Holders’ prior written consent (which may be withheld in Required Holders’ sole discretion), except for (a) the Obligations, (b) the Debt set forth on Schedule 6.24, (c) any Debt incurred by Sprout so long as such Debt is pari passu with or is subordinated in right of payment to Sprout’s Pledged Debt, and (d) any
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unsecured Debt of a Loan Party that is subordinated in right of payment to the Obligations on terms acceptable to the Collateral Agent in its sole discretion; provided that (i) the maturity date of such unsecured Debt is not earlier than the date that is 90 days after the Scheduled Maturity Date, and (ii) such Debt does not require any payments of interest in cash of any currency (clauses (a) through (d), “Permitted Debt”).
9.2Liens. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to, create or permit to exist any Lien on any of its real or personal properties, assets or rights of whatsoever nature (whether now owned or hereafter acquired), except:
(a)Liens for Taxes or other governmental charges not at the time delinquent or thereafter payable without penalty or being contested in good faith by appropriate proceedings and, in each case, for which it maintains adequate reserves in accordance with GAAP;
(b)Liens on assets arising out of pledge or deposits under workers’ compensation, unemployment insurance, pension, social security, retirement benefits or similar legislation in the ordinary course of business consistent with past practice;
(c)capital leases to the extent permitted under Section 9.1;
(d)Liens subordinated to the Liens securing the Obligations on terms and conditions acceptable to Required Holders in their sole discretion;
(e)Liens securing the Obligations;
(f)deposits to secure the performance of bids, trade contracts and leases (other than Debt), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;
(g)easements, rights-of-way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person;
(h)Liens securing judgments for the payment of money not constituting an Event of Default under Section 11.1(j);
(i)any interest of title of a lessor under, and Liens arising from UCC financing statements (or equivalent filings, registrations or agreements in foreign jurisdictions) relating to, leases permitted by this Agreement;
(j)Liens (including the right of set-off) in favor of a bank or other depository institution arising as a matter of law encumbering deposits;
(k)Liens of a collecting bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection;
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9.1; and
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Liens on assets of Sprout to the extent securing Debt permitted under Section
(l)Liens set forth on Schedule 9.2.
9.3Restricted Payments. Except for (a) dividends and distributions among Loan Parties
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and (b) the exercise by Holders of any of the Warrants, none of the Company nor any of its Subsidiaries shall (i) declare or pay any cash dividends on any of its Capital Stock, (ii) purchase or redeem any Capital Stock, (iii) make any other distribution of cash to holders of its Capital Stock, (iv) prepay, purchase or redeem any other Debt that is subordinated to the Obligations, or (v) set aside funds for any of the foregoing.
9.4Loans. The Company shall not, nor shall the Company permit any of its Subsidiaries to, make any loans or pay any advances of any nature whatsoever to any Person, except advances in the ordinary course of business to (a) other Loan Parties, vendors, suppliers and contractors and (b) officers, managers and employees for travel and other business expenses in accordance with the policies of the Company or such Subsidiary as in effect on the date hereof.
9.5Investments. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to, make or suffer to exist any investments or commitments therefor, without the prior written consent of the Required Holders, except (a) Cash Equivalents (b) investments in (i) Loan Parties or (ii) provided that no Default or Event of Default has occurred and is continuing, non-Loan Parties in an aggregate amount not to exceed $100,000 per Fiscal Year, (c) extensions of credit in the nature of accounts receivable or notes receivable arising from the sales of goods or services to unaffiliated third parties in the ordinary course of business; (d) investments received in connection with any Insolvency Proceedings in respect of any customers, suppliers or clients of the Company; (e) investments in the Subsidiaries existing on the date hereof; (f) Capital Expenditures permitted by Section 9.11; (g) investments in the form of promissory notes issued by Sprout and held by NGV in an aggregate principal amount not to exceed $2,000,000 so long as such investments are pledged to the Collateral Agent on terms acceptable to the Collateral Agent or that otherwise comply with Section 8.17(c); and (h) investments by NGV in the form of promissory notes issued by Sprout so long as such investments are (i) pledged to the Collateral Agent on terms acceptable to the Collateral Agent and (ii) are made with the proceeds of equity issued after the Initial Closing Date or the incurrence of Debt issued pursuant to Section 9.1(d) contemporaneously with the issuance of such promissory notes.
9.6Mergers, Consolidations, Sales. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to, without the prior written consent of the Required Holders, be a party to any merger or consolidation, or purchase or otherwise acquire all or substantially all of the assets or any stock of any class of, or any partnership or joint venture interest in, any other Person, or, except in the ordinary course of its business, sell, transfer, convey or lease all or any substantial part of its assets (other than Permitted Asset Dispositions and Specified Asset Dispositions), unless in connection with any such transaction all Obligations (excluding contingent indemnification obligations for which no claims have been made) are indefeasibly paid in full in Cash. Notwithstanding the foregoing provisions of this Section 9.6, (a) any Subsidiary of the Company may be merged or consolidated with or into the Company and (b) any Subsidiary of the Company may sell, lease, transfer or otherwise dispose of its Property (upon voluntary liquidation or otherwise) to the Company.
(a)The Company will, on the Initial Closing Date (or as otherwise contemplated by Section 8.17), cause each of its Subsidiaries (other than any Excluded Subsidiary) to (i) grant to the
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Collateral Agent, for the benefit of the Holders, a perfected security interest in, and Lien on, all Collateral owned by such Person by delivering to the Collateral Agent the Security Agreement, each other Collateral Document or such other document as the Collateral Agent shall deem appropriate for such purpose and comply with the terms of each Collateral Document, (ii) execute the Security Agreement as a Guarantor of the Obligations, (iii) deliver to the Collateral Agent such documents and certificates referred to in Section 4.1 as may be reasonably requested by the Required Holders or otherwise necessary or desirable to create or perfect Collateral Agent’s Lien on the Collateral, and (iv) deliver to the Collateral Agent and the Holders such other documents as may be reasonably requested by the Collateral Agent and the Required Holders, in each case, in form, content and scope reasonably satisfactory to the Required Holders.
(b)The Company shall not create any Subsidiary or invest in or acquire minority interests in any other entity without the prior written consent of the Required Holders. Subject to the first sentence of this Section 9.7(b), if any Loan Party creates, forms or acquires any Subsidiary on or after the Initial Closing Date, such Subsidiary shall become a Loan Party hereunder and agrees to assume all obligations of Company hereunder as if such Subsidiary was an issuer of the Note on the Initial Closing Date. The Company will promptly thereafter (and in any event within three (3) days after such creation or acquisition), cause such Person to (i) grant to the Collateral Agent, for the benefit of the Holders, a perfected security interest in, and Lien on, all Collateral owned by such Person by delivering to the Collateral Agent a duly executed supplement to each Collateral Document or such other document as the Collateral Agent shall deem appropriate for such purpose and comply with the terms of each Collateral Document, (ii) deliver to the Collateral Agent such original Capital Stock or other certificates and stock or other transfer powers evidencing the Capital Stock of such Person (if such Capital Stock is certificated), (iii) if such Capital Stock is not certificated, deliver an irrevocable proxy and other documentation reasonably requested by the Collateral Agent to perfect the Collateral Agent’s security interest in such Capital Stock, in form and substance reasonably satisfactory to the Required Holders, (iv) execute a joinder to the Security Agreement joining such Subsidiary as a Guarantor of the Obligations, as if such Subsidiary had been a guarantor of the Obligations on the Initial Closing Date, (v) deliver to the Collateral Agent such documents and certificates referred to in Section 4.1 as may be reasonably requested by the Required Holders, (vi) deliver to the Collateral Agent and the Holders such updated schedules to the Note Documents as requested by the Required Holders with regard to such Person and
(vii) deliver to the Collateral Agent and the Holders such other documents as may be reasonably
requested by the Collateral Agent and the Required Holders, in each case, in form, content and scope reasonably satisfactory to the Required Holders.
9.8Amendment to Organizational Documents. Except for an amendment and restatement of the Organizational Documents of the Company or any of its Subsidiaries providing for customary updates and modernization, the Company will not, nor will it permit any of its Subsidiaries to amend, modify or waive any term or material provision of such Person’s Organizational Documents unless (a) required by law or (b) such amendment, modification or waiver would not be adverse to the Holders’ rights under the Note Documents or any Loan Party’s obligations under the Note Documents, and the Loan Parties provide the Holders not less than ten (10) Business Days’ prior written notice of such amendment, modification or waiver.
9.9Restrictive Agreements. No Loan Party will be or become, or cause or permit any Subsidiary to be or become, a party to any contract or agreement which at the time of becoming a party to such contract or agreement materially limits such Person’s ability to perform under this Agreement or under any other Note Document without the prior written consent of the Required Holders.
9.10Capital Expenditures. No Loan Party shall make, or cause or permit any Subsidiary to make, any Capital Expenditure or enter into any Capitalized Lease if the aggregate amount of all Capital
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Expenditures (including the Capital Expenditure in question) made by the Loan Parties and their Subsidiaries, determined on a consolidated basis, during any Fiscal Year made or required to be made by the Loan Parties and their Subsidiaries, determined on a consolidated basis during such Fiscal Year would exceed $100,000.
9.11Transactions with Affiliates. No Loan Party shall, nor permit any of its Subsidiaries to, directly or indirectly enter into or permit to exist any material transaction with any Affiliate of any Loan Party or any of its Subsidiaries (other than another Loan Party) except for the transactions set forth on Schedule 9.11, or other transactions that are in the ordinary course of any Loan Parties’ and its Subsidiaries’ business, upon fair and reasonable terms that are no less favorable to such Loan Party or such Subsidiary than would be obtained in an arm’s length transaction with a non-affiliated Person.
9.12Additional Negative Pledges. Create or otherwise cause or suffer to exist or become effective, directly or indirectly, (a) any prohibition or restriction (including any agreement to provide equal and ratable security to any other Person in the event a Lien is granted to the Collateral Agent or for the benefit of the Holders) on the creation or existence of any Lien upon the assets of the Company or any Subsidiary, other than Permitted Liens or (b) any Contractual Obligation which may restrict or inhibit the Collateral Agent’s or any Holder’s rights or ability to sell or otherwise dispose of the Collateral or any part thereof after the occurrence of an Event of Default.
9.13Use of Proceeds. No Loan Party shall use any proceeds of the sale of the Notes hereunder to, directly or indirectly, purchase or carry any “margin stock” (as defined in Regulation U of the Board of Governors of the Federal Reserve System) or to extend credit to others for the purpose of purchasing or carrying any “margin stock” in violation of the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System.
9.14Fiscal Year and Accounting Changes. No Loan Party shall change its fiscal year from March 31 or make any material change (a) in accounting treatment and reporting practices except as required by GAAP or (b) in Tax reporting treatment except as required by law.
9.15Limitations on Holding Subsidiaries.
(a)Notwithstanding anything herein to the contrary, none of Neptune Holding, Neptune Growth, N Real Estate or Biodroga shall (i) other than with respect to its own Equity Interests or the ownership of Equity Interests of a Note Party existing on the Initial Closing Date or, in the case of N Real Estate, ownership of the Plant, enter into or permit to exist any transaction or agreement (including any agreement for the incurrence or assumption of Debt, other than (A) under the Note Documents to which it is a party on the Initial Closing Date, (B) other Note Documents, or any amendments or modifications thereof to the extent permitted hereby, or (C) Guarantees of any obligations of Loan Parties (other than under the Note Documents) and their respective Subsidiaries in the ordinary course of business, any purchase, sale, lease or exchange of any property or the rendering of any service), between itself and any other Person, (ii) engage in any business or conduct any activity (including the making of any Investment or payment other than payments permitted hereunder with respect to its own Equity Interests or the ownership of Equity Interests of such Person existing on the Initial Closing Date) or transfer any of its assets, other than Investments in the Company and the other Loan Parties and Subsidiaries thereof (to the extent permitted under Section 9.5) and the performance of ministerial or administrative activities and payment of taxes and administrative fees necessary for the maintenance of its existence, (iii) consolidate or merge with or into any other Person, or (iv) create or suffer to exist any Lien upon any property or assets now owned or hereafter acquired by Parent other than the Liens created under the Note Documents to which it is a party and any Liens that would be Permitted Liens if Parent were subject to Section 5.2 and the exceptions thereto were applicable to it; provided, however, that each of Neptune Holding, Neptune Growth and N Real Estate shall expressly be
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permitted to engage in the following: (I) the maintenance of its legal existence (including the ability to incur fees, costs and expenses related to such maintenance); (II) the performance of its obligations under the Note Documents; (III) participating in Tax, accounting and other administrative matters as a member of the consolidated group of the Company and the Subsidiaries, in each case, not otherwise prohibited hereunder; and (IV) any Permitted Asset Dispositions or Specified Asset Dispositions.
(b)Furthermore, the Company represents and warrants that:
i.none of the Inactive Affiliates hold any assets or have carried on any activities other than those necessary for their creation and maintenance as partnerships or corporations, as the case may be, and covenants and agrees that none of the Inactive Affiliates shall be permitted to carry on any activities except for the performance of ministerial or administrative activities and payment of taxes and administrative fees necessary for the maintenance of their respective existences, the filing of tax or other governmental returns required in connection with their existence, the granting of guarantees and/or security as contemplated hereby (to the extent required by the Collateral Agent), and such steps as may be necessary or desirable for the winding-up and dissolution of such Inactive Affiliate, to the extent the Company wishes to cause such winding-up and/or dissolution; and
ii.(a) N Real Estate L.P. holds no assets and carries on no activities, and shall hold no assets and carry on no activities, except as otherwise permitted by this Agreement, other than the ownership and holding of title to the Plant and movable assets situated thereon and used exclusively in the Cannabis Operations, such ministerial or administrative activities and payment of taxes and administrative fees necessary for the maintenance of its existence, the filing of tax or other governmental returns required, such activities as may be necessary or advisable to manage the immovable property it holds, the borrowing of funds from the Company from time to time for the purposes of paying taxes and charges in respect of the immovable property it holds, the granting of guarantees and/or security as contemplated hereby (to the extent required by the Collateral Agent), and such acts with respect to encumbrances or potential encumbrances on the immovable property it holds as may be necessary or desirable, and (b) 9463-5455 Québec Inc. holds no assets and had carried on no activities, and shall hold no assets nor carry on any activities, other than those necessary to its functions as general partner of N Real Estate L.P., such ministerial or administrative activities and payment of taxes and administrative fees necessary for the maintenance of its existence and the filing of tax or other governmental returns required.
ARTICLE 10 AGENCY PROVISIONS
10.1Appointment and Authority. Each Holder hereby irrevocably appoints CCUR Holdings, Inc. to act on its behalf as Collateral Agent hereunder and under all of the other Collateral Documents and authorizes the Collateral Agent to take such actions on its behalf and to exercise such powers as are delegated to the Collateral Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. Except as specifically set forth in Section 10.4(b), the provisions of this Article 10 are solely for the benefit of the Collateral Agent and the Holders, and no other party shall have (a) obligations under this Article 10 or (b) rights as a third party beneficiary of any of such provisions.
10.2Rights as a Holder. The Person serving as Collateral Agent hereunder shall have the same rights and powers in its capacity as a Holder as any other Holder and may exercise the same as though it were not Collateral Agent and the term “Holder” or “Holders” shall, unless otherwise expressly
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indicated or unless the context otherwise requires, include the Person serving as Collateral Agent hereunder in its individual capacity.
10.3Exculpatory Provisions; Indemnification. The Collateral Agent shall not have any duties or obligations except those expressly set forth herein and in the other Note Documents. Without limiting the generality of the foregoing, the Collateral Agent:
(a)shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;
(b)shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Note Documents that the Collateral Agent is required to exercise as directed in writing by the Required Holders (or such other number or percentage of Holders as shall be expressly provided for herein or in the other Note Documents), provided, however, that the Collateral Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Collateral Agent to liability or that is contrary to any Note Document or applicable Requirements of Law;
(c)shall not, except as expressly set forth herein and in the other Note Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Loan Parties or any of its Affiliates that is communicated to or obtained by the Person serving as Collateral Agent or any of its Affiliates in any capacity;
(d)shall not be liable to any Holder for any action taken or not taken by it the absence of its own gross negligence or willful misconduct;
(e)shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Collateral Agent in its capacity as such by a Loan Party or a Holder; and
(f)shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement, the Security Agreement or any other Note Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Note Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in any Note Document, other than to confirm receipt of items expressly required to be delivered to the Collateral Agent in its capacity as such.
By accepting the benefits of this Agreement, each Holder severally agrees (A) to reimburse the Collateral Agent, on demand, in the amount of its ratable share from time to time (based on the principal amount of the Notes of such Holder) for any expenses referred to in this Agreement or in any document securing Obligations owed to such Holder and/or any other reasonable expenses incurred by the Collateral Agent in connection with the enforcement and protection of the rights of the Collateral Agent and the Holders which shall not have been paid or reimbursed by any Loan Party or paid from the proceeds of Collateral or as provided herein or therein and (B) to indemnify and hold harmless the Collateral Agent and its Affiliates and its and their respective directors, officers, employees, agents and attorneys on demand, in the amount of such ratable share, from and against any and all liabilities, Taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements referred to in this Agreement and/or incurred by the Collateral Agent in connection with this Agreement
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or in any document securing the Obligations or the enforcement and protection of the rights of Holders, to the extent the same shall not have been reimbursed by any Loan Party or paid from the proceeds of Collateral as provided herein; provided, however, in each case, that no Holder shall be liable to the Collateral Agent and its Affiliates and its and their respective directors, officers, employees, agents and attorneys for any portion of such expenses, liabilities, Taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of such Person.
(a)The Collateral Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Collateral Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. The Collateral Agent may consult with legal counsel, independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
(b)The Loan Parties shall be entitled to rely, and shall be fully protected in relying (without investigation or inquiry), upon the Collateral Agent in any instance where the Collateral Agent purports to be acting on behalf of one or more Holders or the Required Holders.
10.5Delegation of Duties. The Collateral Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Note Document by or through any one or more sub agents appointed by the Collateral Agent. The Collateral Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Affiliates. The exculpatory provisions of this Article 10 shall apply to any such sub-agent and to the Affiliates of the Collateral Agent and any such sub-agent.
10.6Resignation of the Collateral Agent. The Collateral Agent may at any time give notice of its resignation to each Holder and the Company. Upon receipt of any such notice of resignation, the Required Holders shall have the right, in consultation with Holdings and the Company, to appoint a successor. If no such successor shall have been so appointed by the Required Holders and shall have accepted such appointment within thirty (30) days after the retiring Collateral Agent gives notice of its resignation, then such resignation shall nonetheless become effective in accordance with such notice and
(a) the retiring Collateral Agent shall be discharged from its duties and obligations hereunder and under the other Note Documents and (b) all payments, communications and determinations provided to be made by, to or through the Collateral Agent shall instead be made by or to each Holder directly, until such time as the Required Holders appoint a successor Collateral Agent as provided for above in this paragraph. Upon the acceptance of a successor’s appointment as Collateral Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Collateral Agent, and the retiring Collateral Agent shall be discharged from all of its duties and obligations hereunder or under the other Note Documents (if not already discharged therefrom as provided above in this paragraph). After the retiring Collateral Agent’s resignation hereunder and under the other Note Documents, the provisions of this Article 10 shall continue in effect for the benefit of such retiring Collateral Agent, its sub-agents and their respective Affiliates in respect of any actions taken or omitted to be taken by any of them while the retiring Collateral Agent was acting as Collateral Agent.
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10.7Collateral Matters. The Holders irrevocably authorize the Collateral Agent, subject to the approval of the Required Holders, at its option and in its discretion:
(a)to release any Lien on any Collateral granted to or held by the Collateral Agent, for the ratable benefit of itself and the Holders, under this Agreement or any other Note Document (A) upon repayment in full of the Obligations, (B) that is sold or to be sold as part of or in connection with any sale permitted hereunder or under any other Note Document, or (C) subject to the terms of this Agreement, if approved, authorized or ratified in writing by the Required Holders; and
(b)to subordinate any Lien on any Collateral granted to or held by the Collateral Agent under any Note Document to the holder of any Lien on such Collateral that is permitted by Section 9.2 hereof.
Upon request by the Collateral Agent at any time, the Holders will confirm in writing the Collateral Agent’s authority to release or subordinate its interest in particular types or items of property pursuant to this Section 10.7.
10.8Sharing of Collateral. Until all of the Obligations are paid in full, all Collateral or proceeds thereof received by any Holder other than the Collateral Agent, in connection with the exercise of any right or remedy relating to the Collateral or otherwise shall be segregated and held in trust and forthwith paid over or delivered (a) to the Collateral Agent, for the ratable benefit of itself and the other Holders, in the same form as received together with any necessary endorsements, or (b) as a court of competent jurisdictions may otherwise direct.
(a)If the Collateral Agent (x) notifies a Holder or any Person who has received funds on behalf of a Holder (any such Holder or other recipient (and each of their respective successors and assigns), a “Payment Recipient”) that the Collateral Agent has determined in its sole discretion (whether or not after receipt of any notice under immediately succeeding clause (b)) that any funds (as set forth in such notice from the Collateral Agent) received by such Payment Recipient from the Collateral Agent or any of its Affiliates were erroneously or mistakenly transmitted to, or otherwise erroneously or mistakenly received by, such Payment Recipient (whether or not known to such Holder Party or other Payment Recipient on its behalf) (any such funds, whether transmitted or received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise, individually and collectively, an “Erroneous Payment”) and (y) demands in writing the return of such Erroneous Payment (or a portion thereof), such Erroneous Payment shall at all times remain the property of the Collateral Agent pending its return or repayment as contemplated below in this Section 10.9 and held in trust for the benefit of the Collateral Agent, and such Holder shall (or, with respect to any Payment Recipient who received such funds on its behalf, shall cause such Payment Recipient to) promptly, but in no event later than three (3) Business Days thereafter (or such later date as the Collateral Agent may, in its sole discretion, specify in writing), return to the Collateral Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made, in same day funds (in the currency so received). A notice of the Collateral Agent to any Payment Recipient under this clause (a) shall be conclusive, absent manifest error.
(b)Without limiting immediately preceding clause (a), each Holder or any Person who has received funds on behalf of a Holder (and each of their respective successors and assigns), agrees that if it receives a payment, prepayment or repayment (whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise) from the Collateral Agent (or any of its Affiliates) (x) that is in a different amount than, or on a different date from, that specified in
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this Agreement or in a notice of payment, prepayment or repayment sent by the Collateral Agent (or any of its Affiliates) with respect to such payment, prepayment or repayment, (y) that was not preceded or accompanied by a notice of payment, prepayment or repayment sent by the Collateral Agent (or any of its Affiliates), or (z) that such Holder, or other such recipient, otherwise becomes aware was transmitted, or received, in error or by mistake (in whole or in part), then in each such case:
(i)it acknowledges and agrees that (A) in the case of immediately preceding clauses
(x) or (y), an error and mistake shall be presumed to have been made (absent written confirmation from the Collateral Agent to the contrary) or (B) an error and mistake has been made (in the case of immediately preceding clause (z)), in each case, with respect to such payment, prepayment or repayment; and
(ii)such Holder shall use commercially reasonable efforts to (and shall use commercially reasonable efforts to cause any other recipient that receives funds on its respective behalf to) promptly (and, in all events, within two Business Days of its knowledge of the occurrence of any of the circumstances described in immediately preceding clauses (x), (y) and (z)) notify the Collateral Agent of its receipt of such payment, prepayment or repayment, the details thereof (in reasonable detail) and that it is so notifying the Collateral Agent pursuant to this Section 10.9(b).
For the avoidance of doubt, the failure to deliver a notice to the Collateral Agent pursuant to this Section 10.9(b) shall not have any effect on a Payment Recipient’s obligations pursuant to Section 10.9(a) or on whether or not an Erroneous Payment has been made.
(c)Each Holder hereby authorizes the Collateral Agent to set off, net and apply any and all amounts at any time owing to such Holder under any Note Document, or otherwise payable or distributable by the Collateral Agent to such holder under any Note Document with respect to any payment of principal, interest, fees or other amounts, against any amount that the Collateral Agent has demanded to be returned under immediately preceding clause (a).
(d)(i) In the event that an Erroneous Payment (or portion thereof) is not recovered by the Collateral Agent for any reason, after demand therefor in accordance with immediately preceding clause (a), from any Holder that has received such Erroneous Payment (or portion thereof) (and/or from any Payment Recipient who received such Erroneous Payment (or portion thereof) on its respective behalf) (such unrecovered amount, an “Erroneous Payment Return Deficiency”), upon the Collateral Agent’s notice to such Holder at any time, then effective immediately (with the consideration therefor being acknowledged by the parties hereto), (A) such Holder shall be deemed to have assigned its Notes (but not any commitments to purchase Notes) with respect to which such Erroneous Payment was made (the “Erroneous Payment Impacted Class”) in an amount equal to the Erroneous Payment Return Deficiency (or such lesser amount as the Collateral Agent may specify) (such assignment of the Notes (but not commitments to purchase Notes) of the Erroneous Payment Impacted Class, the “Erroneous Payment Deficiency Assignment”) (on a cashless basis and such amount calculated at par plus any accrued and unpaid interest (with the assignment fee to be waived by the Collateral Agent in such instance)), and is hereby (together with the Company) deemed to execute and deliver an assignment and assumption as to which the Collateral Agent and such parties are participants with respect to such Erroneous Payment Deficiency Assignment, and such Holder shall deliver any Notes to the Company or
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the Collateral Agent (but the failure of such Person to deliver any such Notes shall not affect the effectiveness of the foregoing assignment), (B) the Collateral Agent as the assignee Holder shall be deemed to have acquired the Erroneous Payment Deficiency Assignment, (C) upon such deemed acquisition, the Collateral Agent as the assignee Holder shall become a Holder, as applicable, hereunder with respect to such Erroneous Payment Deficiency Assignment and the assigning Holder shall cease to be a Holder, as applicable, hereunder with respect to such Erroneous Payment Deficiency Assignment, excluding, for the avoidance of doubt, its obligations under the indemnification provisions of this Agreement and its applicable commitments to purchase Notes which shall survive as to such assigning Holder, (D) the Collateral Agent and the Company shall each be deemed to have waived any consents required under this Agreement to any such Erroneous Payment Deficiency Assignment, and (E) the Collateral Agent will reflect in the register its ownership interest in the Notes subject to the Erroneous Payment Deficiency Assignment. For the avoidance of doubt, no Erroneous Payment Deficiency Assignment will reduce the commitments of any Holder to purchase Notes and such commitments to purchase Notes shall remain available in accordance with the terms of this Agreement.
(ii) Subject to Section 13.3 (but excluding, in all events, any assignment consent or approval requirements (whether from the Company or otherwise)), the Collateral Agent may, in its discretion, sell any Notes acquired pursuant to an Erroneous Payment Deficiency Assignment and upon receipt of the proceeds of such sale, the Erroneous Payment Return Deficiency owing by the applicable Holder shall be reduced by the net proceeds of the sale of such Note (or portion thereof), and the Collateral Agent shall retain all other rights, remedies and claims against such Xxxxxx (and/or against any recipient that receives funds on its respective behalf). In addition, an Erroneous Payment Return Deficiency owing by the applicable Holder (x) shall be reduced by the proceeds of prepayments or repayments of principal and interest, or other distribution in respect of principal and interest, received by the Collateral Agent on or with respect to any such Notes acquired from such Holder pursuant to an Erroneous Payment Deficiency Assignment (to the extent that any such Notes are then owned by the Collateral Agent) and (y) may, in the sole discretion of the Collateral Agent, be reduced by any amount specified by the Collateral Agent in writing to the applicable Holder from time to time.
(e)The parties hereto agree that (x) irrespective of whether the Collateral Agent may be equitably subrogated, in the event that an Erroneous Payment (or portion thereof) is not recovered from any Payment Recipient that has received such Erroneous Payment (or portion thereof) for any reason, the Collateral Agent shall be subrogated to all the rights and interests of such Payment Recipient (and, in the case of any Payment Recipient who has received funds on behalf of a Holder, to the rights and interests of such Holder) under the Note Documents with respect to such amount (the “Erroneous Payment Subrogation Rights”) (provided that the Loan Parties’ Obligations under the Note Documents in respect of the Erroneous Payment Subrogation Rights shall not be duplicative of such Obligations in respect of Notes that have been assigned to the Collateral Agent under an Erroneous Payment Deficiency Assignment) and (y) an Erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by the Company or any other Loan Party; provided that this Section 10.9 shall not be interpreted to increase (or accelerate the due date for), or have the effect of increasing (or accelerating the due date for), the Obligations of the Company relative to the amount (and/or timing for payment) of the Obligations that would have been payable had such Erroneous Payment not been made by the Collateral Agent; provided, further, that for the avoidance of doubt, immediately preceding clauses (x) and (y) shall not apply to the extent any such Erroneous Payment is, and solely with respect to the amount of such Erroneous Payment that is, comprised of funds received by the Collateral Agent from the Company for the purpose of making such Erroneous Payment.
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(f)To the extent permitted by applicable law, no Payment Recipient shall assert any right or claim to an Erroneous Payment, and hereby waives, and is deemed to waive, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Collateral Agent for the return of any Erroneous Payment received, including, without limitation, any defense based on “discharge for value” or any similar doctrine.
(g)Each party’s obligations, agreements and waivers under this Section 10.9 shall survive the resignation or replacement of the Collateral Agent, any transfer of rights or obligations by, or the replacement of, a Holder, and/or the repayment, satisfaction or discharge of all Obligations (or any portion thereof) under any Note Document.
ARTICLE 11 EVENTS OF DEFAULT
11.1Events of Default. The occurrence of any one or more of the following events shall constitute an “Event of Default”:
(a)Default in the payment, after such amounts become due, of the principal (including capitalized interest added to principal in accordance with Section 3.1(d)) of the Notes (whether at redemption, upon acceleration or otherwise), any cash interest accrued thereon (if such interest payment default continues for three (3) Business Days after payment of such interest is due), any fees payable in connection therewith or any Premium;
(c)Any representation or warranty made by or on behalf of any Loan Party in any of the Note Documents (including the Warrants and the Registration Rights Agreement), or any document contemplated by the Note Documents, is incorrect in any material respect (or in any respect if such representation, warranty, or financial statement is by its terms already qualified as to materiality) when made (or deemed made);
(d)Failure by the Company or any of its Subsidiaries to comply with any term, covenant or provision contained in