PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of November 1, 2021, among S Flower N Phoenix, Inc. (“S Flower”), an Arizona non- profit corporation and ANR Management, LLC, an Arizona limited liability company (“ANR; together with S Flower, “Purchasers”); Arizona Natural Remedies Inc. (“Remedies”), an Arizona non- profit corporation, Elephant Head Farms LLC (“Elephant Head”), an Arizona limited liability company and Retail Management Associates LLC, an Arizona limited liability company (“Retail”; collectively with Remedies and Elephant Head, “Sellers”) and Kyle Kingsley (“Kingsley”) and Amber Shimpa (“Shimpa”) (Kingsley and Shimpa, jointly and severally with Sellers, “Seller Parties”).
WHEREAS, Remedies holds the following licenses issued by the Arizona Department of Health Services specified in Schedule I hereto (the “Seller Licenses”): the Marijuana Establishment License Registration Certificate ID No. 00000093ESRF39774783, and Medical Marijuana Dispensary Registration Certificate ID NO. 000000028DCGV00174888;
WHEREAS, Elephant Head and Retail (together, “Managers”) have exclusive management rights related to the Seller Licenses (“Management Rights”) for Seller Licenses-related cannabis operations, including retail dispensary and cultivation operations (“Licensed Business”);
WHEREAS, Remedies desires to assign to S Flower, and S Flower desires to purchase from Remedies, the Seller Licenses and Managers desire to assign to ANR, and ANR desires to purchase from Managers, any and all the Management Rights and the remainder of the Purchased Assets, all on the terms and subject to the conditions herein set forth; and,
WHEREAS, the assignment of the Seller Licenses is subject to, and may not be consummated without the prior consent of the Arizona Department of Health Services.
NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants, conditions and agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE 1 DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set forth or referenced below:
“ADHS” means the Arizona Department of Health Services or any successor agency thereof.
“ADHS Law” is defined in Section 3.5(c).
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“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, alone or through one or more intermediaries, controls, is controlled by or is under common control with that Person. For purposes of this definition, “control” (including the terms “controlling” and “controlled”) means the power to direct or cause the direction of the management and policies of a Person, directly or indirectly, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise.
“Agreement” means this Agreement and all Exhibits and Schedules hereto, as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof.
“Business Day” means any day, other than a Saturday or Sunday, on which commercial banks and foreign exchange markets are open for business in Maricopa County, AZ.
“Chosen Courts” is defined in Section 9.6. “Closing” is defined in Section 2.3. “Closing Date” is defined in Section 2.3.
“Confidential Information” means any and all confidential and/or proprietary information regarding the business, finances, operations, products, services and customers of the Person specified and its Affiliates, in written or oral form or in any other medium.
“Consents” means all consents and approvals of Governmental Authorities or other third parties necessary to authorize, approve or permit the parties hereto to consummate the Transactions.
“Constituent Documents” means articles or certificates of incorporation and bylaws of a corporation, or similar constituent documents for entities that are not corporations, including but not limited to certificates or articles of formation or organization, limited liability company agreements and similar documents.
“Escrow Deposit” means the deposit paid by Purchaser simultaneously with the execution of this Agreement as further described in Section 2.2.
“Governmental Authority” means a Federal, state or local court, legislature, governmental agency, commission or regulatory or administrative authority or instrumentality.
“Instrument of Assignment” is defined in Section 6.3(d).
“Law” means applicable common law and any statute, ordinance, code or other
law, rule, permit, permit condition, regulation, order, decree, technical or other standard,
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requirement or procedure enacted, adopted, promulgated, applied or followed by any Governmental Authority.
“License” means a license, permit, certificate of authority, waiver, approval, certificate of public convenience and necessity, registration or other authorization, consent or clearance to construct and/or operate a cannabis cultivation and dispensary facility (or facilities), in each case issued or granted by a Governmental Authority.
“Liens and Encumbrances” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest, pledge, easement, conditional sale or other title retention agreement, defect in title, covenant, right of first refusal or right of others therein, incursion or encumbrance of any nature whatsoever in respect of such asset, other than liens created by this Agreement or by any Purchaser.
“Losses” is defined in Section 8.2.
“Person” means any general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business trust, Governmental Authority, cooperative, association, individual or other entity, and the heirs, executors, administrators, legal representatives, successors, and assigns of such person as the context may require.
“Purchase Price” is defined in Section 2.1. “Purchaser” is defined in the preamble. “Purchased Assets” is defined in Section 2.1
“Purchaser Indemnified Persons” is defined in Section 8.2. “Seller” is defined in the preamble.
“Seller Indemnified Persons” is defined in Section 8.3. “Seller License” is defined in the recitals.
“Transactions” means the transactions contemplated by this Agreement. “Transaction Documents” means this Agreement and all ancillary documents.
ARTICLE 2
PURCHASE AND SALE OF LICENSE
Section 2.1. Purchase and Sale
Upon the terms and subject to the conditions of this Agreement, at the Closing, Sellers shall sell, transfer, assign, convey, and deliver to Purchasers, free and clear of all Liens and Encumbrances, and Purchasers shall purchase from Sellers the following assets (“Purchased Assets”) as follows:
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The Seller Licenses and all licenses, permits, permissions and other authorizations relating to the Seller Licenses-related cannabis operations of the Seller issued by the ADHS or any other governmental agency, including but not limited to those listed on Schedule 1, and all applications for modification, extension or renewal of the Seller License, and any pending applications for any new licenses, permits, permissions or authorizations pending on the Closing Date, including, but not limited to, those listed on Schedule 1; and
All cannabis and non-cannabis inventory, equipment, fixtures and all other personal property located at the dispensary maintained by Remedies, pursuant to a bill of sale in the form attached hereto as Exhibit C;
“Working Capital” shall mean the sum of the following, if and to the extent physically located in the marijuana dispensary facility currently operated by Remedies, having an address at 22041 North 23rd Avenue, Phoenix, Arizona, and carried on Remedies’ financial records at 8:00pm Arizona time on the day immediately preceding the Closing Date: (1) cash and (2) finished goods inventory, at net cost, not to exceed the value of
$125,000.00.
the Management Rights and all real property leases, zoning entitlements, product or licensing agreements and all material revenue producing contracts (including all material vendor and service contracts) related to the Licensed Business.
Section 2.2Escrow DepositPurchaser has deposited the sum of Five Hundred Thousand Dollars ($500,000.00) (the “Escrow Deposit”) with Greystone Title Agency, LLC, escrow agent (“Escrow Agent”), as required in the term sheet executed by Remedies and Copperstate Farms, LLC, on September 20, 2021. At Closing, the Escrow Deposit shall be paid to Seller and credited in full against the Purchase Price, with any interest earned being paid to Purchaser. In the event that Closing does not occur for any reason other than the ADHS’s failure to approve the assignment or termination by Purchasers pursuant to the terms of this Agreement, or failure of Sellers to satisfy their obligations under this Agreement, the Escrow Deposit shall be paid over to Seller as liquidated damages.
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Section 2.3 Closing
Upon the terms and subject to the conditions hereof, the closing of the sale of the Seller Licenses and the other Purchased Assets (the “Closing”) shall take place at 10:00
a.m. Mountain Standard Time by electronic signatures no later than five Business Days following the date on which all conditions under Section 6.1 have been satisfied or waived, or at such other time and place as the parties may mutually agree. The date on which the Closing occurs is called the “Closing Date.”
Section 2.4 Due Diligence; Confidentiality
Purchasers and their agents have completed due diligence. Except as set forth herein, Purchasers shall hold and maintain in confidence all information, documents, data and records of Sellers examined by it, and shall not use the same to its benefit in any manner except in connection with the transactions contemplated under this Agreement and operation of the Purchased Assets and shall not disclose the same to any person for any reason without Sellers’ prior written consent; provided that nothing herein shall prevent Sellers from disclosing any financial statements, financial accounting data, information documents, data or records about Purchasers upon the request or demands of any governmental authority or as required by law. Purchasers shall maintain in confidence any and all financial statements and financial accounting data of Sellers and not disclose the same to any person for any reason without Sellers’ prior written consent; provided that nothing herein shall prevent Purchasers from disclosing any financial statements, financial accounting data, information documents, data or records about Sellers (i) upon the request or demands of any governmental authority or as required by law or (ii) in connection with the exercise of any remedy in connection herewith.
Section 2.5Omitted
Section 2.6Allocation.
The Purchase Price shall be allocated to the Purchased Assets as set forth on Schedule II hereto and such allocation shall become a part of this Agreement. Each party agrees to complete Internal Revenue Service Form 8594, Asset Acquisition Statement under Section 1060 of the Internal Revenue Code of 1986, as amended (the “Code”) and each party shall file Form 8594 consistent with such allocation in a timely manner. No party shall file any return or take a position with any taxing authority that is inconsistent with such allocation.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
The indicated Seller or Sellers represent, warrant to and covenant with Purchasers as follows:
Section 3.1. Organization
Remedies represents and warrants (1) it is an Arizona non-profit corporation duly organized, validly existing and in good standing, (2)it has all requisite legal power and authority (i) to own, lease and operate its properties and carry on its business as presently conducted and (ii) to execute, deliver and perform its obligations under this Agreement, and each other instrument, document, certificate and agreement required or contemplated hereby to be executed, delivered and performed by Remedies, and (3) it is duly qualified to do business in each jurisdiction where the character of its properties owned or leased or the nature of its activities makes such qualification necessary, other than any such jurisdiction in which the failure to be so qualified would not materially adversely affect the Transactions or Remedies’ ability to perform its obligations under this Agreement.
Each Manager represents and warrants (1) it is an Arizona limited liability company duly organized, validly existing and in good standing, (2) it has all requisite legal power and authority (i) to own, lease and operate its properties and carry on its business as presently conducted and (ii) to execute, deliver and perform its obligations under this Agreement, and each other instrument, document, certificate and agreement required or contemplated hereby to be executed, delivered and performed by such Manager, and (3) it is duly qualified to do business in each jurisdiction where the character of its properties owned or leased or the nature of its activities makes such qualification necessary, other than any such jurisdiction in which the failure to be so qualified would not materially adversely affect the Transactions or such Manager’s ability to perform its obligations under this Agreement.
Section 3.2. Authorization
Remedies represents and warrants that the execution and delivery of this Agreement, and the performance by Remedies of its obligations hereunder, have been duly authorized by all necessary corporate action on the part of Remedies and its board of directors.
Each Manager represents and warrants that the execution and delivery of this Agreement, and the performance by such Manager of its obligations hereunder, have been duly authorized by all necessary company action on the part of such Manager and its managers and members.
Section 3.3. Enforceability
Each Seller represents and warrants severally, and not jointly, that (1) this Agreement has been duly executed and delivered by such Seller Party and is, when executed and delivered by such Seller, a legal, valid and binding obligation of each of
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such Seller, enforceable against such Seller in accordance with its terms, as the same may be modified, qualified or prohibited by the effect of any or all of the following: (1) bankruptcy, insolvency, moratorium, preference, reorganization, and other similar laws relating to or affecting creditors’ rights or remedies; (2) general principles of equity, whether considered in a proceeding in equity or at law; (3) concepts of fair dealing, good faith, materiality and reasonableness; (4) the discretion of the court before which a proceeding is brought; and (5) unenforceability under certain circumstances of provisions for indemnification, exculpation, or contribution.
Section 3.4. No Conflicts or Consents
Each Seller represents and warrants severally, and not jointly, that neither the execution, delivery and performance by such Seller of this Agreement, nor the consummation of the Transactions by such Seller, will (i) conflict with, or result in a breach or violation of, any provision of such Seller Party’s organizational documents; (ii) constitute, with or without the giving of notice or passage of time or both, a breach, violation or default by such Seller Party, create any Liens or Encumbrances, or give rise to any right of termination, modification, cancellation, prepayment or acceleration, under
Section 3.5 ADHS Matters
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Shimpa became affiliated with Remedies, Seller and its Affiliates have complied in all material respects with ADHS Laws applicable to the Seller License. Since Kingsley and Shimpa became affiliated with Remedies, Seller and its Affiliates have complied in all material respects with all of the terms and conditions of the Seller License. To Seller’s and its Affiliates’ actual knowledge, the Seller License is not subject to any conditions other than those appearing on its face and those imposed by the Arizona Medical Marijuana Act and the Smart and Safe Act as amended, and the rules, regulations and policies of the ADHS (“ADHS Law”). A copy of the current license is attached hereto in Schedule 1.
Section 3.6. Litigation
Each Seller represents and warrants severally, and not jointly, that there is no action, proceeding or investigation pending or, to such Seller’s knowledge, threatened against such Seller, the Seller License or any other Purchased Asset that would be reasonably expected to have a material, adverse effect on such Seller’s ability to consummate the Transactions or which seeks to prevent or challenge the Transactions.
Section 3.7.License Taxes
Remedies represents and warrants that it has paid all taxes and fees presently due and payable with respect to or as a result of its ownership of the Seller Licenses. Each of the Sellers represents that it has disclosed to Purchasers any and all tax obligations of such Seller of which it has actual knowledge.
Section 3.8 Brokers
Each Seller represents and warrants that is has not employed any broker or finder or incurred any liability for any brokerage or finder’s fees or commissions in connection with the Transactions.
Section 3.9 No Adverse Change.
Each Seller represents severally, and not jointly, as follows: Since June 30, 2021, there has been no (a) material adverse change in the Licensed Business or the Purchased Assets, other than changes in the ordinary course of business, (b) transactions by Sellers, other than in the ordinary course of business, none of which have had any material adverse effect on the Licensed Business or the Purchased Assets, (c) sale, transfer or other disposition of any material asset used in the Licensed Business that was not replaced, (d) change in accounting methods or practices of Sellers (including, without limitation, depreciation and amortization practices) (e) acceleration of the recognition of any revenue or delay of the recognition of any liabilities or expenses except in the ordinary course of business, (f) destruction, damage to, or loss of any asset (whether or not covered by insurance) used in the Licensed Business or any other event that had or would likely be expected to have a material adverse effect on the Licensed Business or the Purchased Assets, individually or in the aggregate, or (g) material change in the manner of conducting the Licensed Business. The term “material adverse effect” or “material adverse change”, as used in this Agreement, means any circumstance, change
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in or effect that is, or is reasonably likely in the future to be, materially adverse to the value of operations, financial condition, earnings or results of operations, or the business (financial or otherwise), of the applicable entity or, if applicable, the Licensed Business; provided, however, that such terms shall not include any event, circumstance, change, occurrence or effect, directly or indirectly, arising out of: (i) general economic or political conditions; (ii) conditions generally affecting the industries in which the Licensed Business operates; (iii) any changes in financial, banking or securities markets in general;
Section 3.11 Purchased Assets and Related Matters
Each Seller represents severally, and not jointly, that (i) All Purchased Assets other than Seller Licenses and all Cannabis Materials are owned by Managers, free and clear of all mortgages, liens, security interests and encumbrances, they will be free and clear of any and all of such adverse interests upon sale and transfer to ANR, and such Seller Party will defend the same against claims and demands of any and all persons and entities based upon acts or omissions occurring prior to the Closing Date, (ii) the Licensed Business, to such Seller’s actual knowledge, has conformed and presently conforms in all material respects with all requirements of applicable ordinances, statutes, rules, regulations, laws, orders, judgments and decrees, including those relating to and protecting the environment, (iii) the insurance coverages maintained by such Seller is reasonably consistent insurance coverages maintained by companies engaged in similar businesses in the same general geographic area ; (iv) such Seller will pay on or before the Closing Date all debts and obligations incurred by it prior to the Closing Date in connection with the Licensed Business and the Purchased Assets; (v) such Seller has filed, and through the Closing will, duly and timely file all federal, state, local and other tax returns, estimates and reports required to be filed by it and all such returns are, or will be when filed, true, complete and correct in all material respects and such Seller has paid or will pay all federal, state and local income, profits, gross receipts, environmental, franchise, sales, use, occupation, real or personal property, value-added, ad valorem, withholding, social security, payroll, excise and other taxes, charges, levies, tariffs, duties, liabilities, assessments, fees and governmental charges (including all interest and
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penalties) (collectively “Taxes”) imposed upon or claimed to be owed by, such Seller, which are due and payable or claimed by any taxing authority to be due and payable through periods ending on or before the Closing Date, in each case to the extent Buyer would incur liability for such Seller’s failure to file such returns or pay such Taxes. All sales taxes required to be collected and remitted by such Seller have been properly paid up to and including the Closing Date; and (vii) each Purchaser hereby assumes no liabilities of such Seller, direct or indirect, whether fixed or contingent, current or future, including, without limitation, no liabilities, claims or actions alleging or relating to any tort, product liability, environmental liability, taxes, trade payables or breach of contract or otherwise seeking damages.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Purchasers represent and warrant to Sellers as follows:
Section 4.1. Organization
S Flower is a non-profit corporation duly organized, validly existing and in good standing under the laws of the State of Arizona. Such Purchaser has all requisite corporate power and authority (i) to own, lease and operate its properties and carry on its business as presently conducted and (ii) to execute, deliver and perform its obligations under this Agreement and each other instrument, document, certificate and agreement required or contemplated hereby to be executed, delivered and performed by such Purchaser. Such Purchaser is duly qualified to do business in each jurisdiction where the character of its properties owned or leased or the nature of its activities makes such qualification necessary, other than any such jurisdiction in which the failure to be so qualified would not materially adversely affect the Transactions or such Purchaser’s ability to perform its obligations under this Agreement.
ANR is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Arizona. Such Purchaser has all requisite company power and authority (i) to own, lease and operate its properties and carry on its business as presently conducted and (ii) to execute, deliver and perform its obligations under this Agreement and each other instrument, document, certificate and agreement required or contemplated hereby to be executed, delivered and performed by such Purchaser. Such Purchaser is duly qualified to do business in each jurisdiction where the character of its properties owned or leased or the nature of its activities makes such qualification necessary, other than any such jurisdiction in which the failure to be so qualified would not materially adversely affect the Transactions or such Purchaser’s ability to perform its obligations under this Agreement.
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Section 4.2. Authorization
The execution and delivery of this Agreement and the performance by S Flower of its obligations hereunder, have been duly authorized by all necessary corporate action on the part of such Purchaser and its board of directors.
The execution and delivery of this Agreement and the performance by ANR of its obligations hereunder, have been duly authorized by all necessary company action on the part of such Purchaser and its managers and members.
Section 4.3. Enforceability
This Agreement has been duly executed and delivered by Purchasers and is, when executed and delivered by Purchasers, a legal, valid and binding obligation of Purchasers, enforceable against Purchasers in accordance with its terms, as the same may be modified, qualified or prohibited by the effect of any or all of the following: (1) bankruptcy, insolvency, moratorium, preference, reorganization, and other similar laws relating to or affecting creditors’ rights or remedies; (2) general principles of equity, whether considered in a proceeding in equity or at law; (3) concepts of fair dealing, good faith, materiality and reasonableness; (4) the discretion of the court before which a proceeding is brought; and (5) unenforceability under certain circumstances of provisions for indemnification, exculpation, or contribution.
Section 4.4. No Conflicts or Consents
Neither the execution, delivery and performance by Purchasers of this Agreement, nor the consummation of the Transactions by each Purchaser, will (i) conflict with, or result in a breach or violation of, any provision of such Purchaser’s organizational documents; (ii) constitute, with or without the giving of notice or passage of time or both, a breach, violation or default by such Purchaser or any of its Affiliates, create a Lien or Encumbrance, or give rise to any right of termination, modification, cancellation, prepayment or acceleration, under (x) any Law or License (subject to receipt of the Consent of the ADHS to the Transactions) or (y) any note, bond, mortgage, indenture, lease, agreement or other instrument, in each case which is applicable to or binding upon such Purchaser or any of its assets; or (iii) require any Consent, other than the Consent of the ADHS, except, in the case of clauses (ii) and (iii), where such breach, violation, default, Lien or Encumbrance, right, or the failure to obtain or give such Consent would not have a material adverse effect on such Purchaser or materially adversely affect the Transactions or such Purchaser’s ability to perform its obligations under this Agreement.
Section 4.5. ADHS Matters
To the knowledge of Purchasers, S Flower is legally qualified to (i) acquire and hold Arizona Department of Health Services cannabis licenses generally, (ii) acquire and hold the Seller Licenses (and the consummation of the Transactions will not cause S Flower to be ineligible to hold the Seller Licenses) and (iii) obtain any authorization or approval from any Governmental Authority necessary for S Flower to acquire the Seller License.
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Section 4.6Litigation
There is no action, proceeding or investigation pending or, to Purchasers’ knowledge, threatened against any Purchaser or any of its properties or assets that would be reasonably expected to have an adverse effect on its ability to consummate the Transactions, or which seeks to prevent or challenge the Transactions.
Section 4.7 Brokers
No Purchaser has employed any broker or finder or incurred any liability for any
brokerage or finder’s fees or commissions in connection with the Transactions.
ARTICLE 5
COVENANTS AND OTHER AGREEMENTS
Section 5.1. Consummation of Transactions
Each party shall use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable and consistent with applicable Law to perform its obligations under this Agreement and to consummate the Transactions in accordance with the provisions of this Agreement.
Section 5.2. Compliance with Law
Prior to Closing, Sellers shall comply in all material respects with Laws applicable to the Seller Licenses and the other Purchased Assets.
Section 5.3. Maintenance of Seller License
Section 5.4. Consents
The parties shall use commercially reasonable efforts to obtain all Consents as soon as reasonably practicable, and shall cooperate to prepare and file with Governmental Authorities and other Persons, no later than five (5) Business Days following the date hereof, complete applications, notices, petitions and other documents necessary or
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advisable to obtain all Consents including an application seeking ADHS consent to assign the Seller Licenses to S Flower. The parties hereto will cooperate in the preparation of such applications, notices, petitions and other documents (including the furnishing to each other of copies of such applications and requests prior to filing) and will diligently take, or cooperate in the taking of, all necessary and desirable steps, to provide any additional information required and otherwise use their best efforts to prosecute the applications, and to obtain promptly the requested consent and approval of the ADHS to the assignment of the Seller Licenses to the S Flower. Each party shall furnish to the other party all information concerning such party and its Affiliates reasonably required for inclusion in any application or filing to be made in connection with the Transactions or to determine compliance with ADHS Law. Each party shall notify the other parties hereto in the event it becomes aware of any other facts, actions, communications or occurrences that might directly or indirectly affect the parties’ intent or ability to effect prompt ADHS approval of the Transactions contemplated by this Agreement. Sellers and Purchasers shall vigorously oppose any petitions to deny or other objections filed with respect to the application filed with the ADHS that are directed to Sellers or Purchasers.
Section 5.5. Certain Notices
Each party shall promptly notify the other party in reasonable detail:
Section 5.6. Confidentiality
Each party shall keep confidential the existence and terms of this Agreement except as may be otherwise required by Law. Any and all Confidential Information or other non-public information, written or oral, provided by one party (or its Affiliates) to
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the other party (or its Affiliates) under this Agreement, whether in connection with the defense of a claim or otherwise, shall be kept confidential by the receiving party and its Affiliates, and shall not be used or disclosed by the receiving party or its Affiliates except to the extent required in connection with the performance of the receiving party’s obligations under this Agreement or as required by Law, and then only after the receiving party has provided the disclosing party with a reasonable opportunity to seek confidential treatment, a protective order or other limitation on such disclosure. The receiving party shall cooperate with the disclosing party in seeking such confidential treatment to the maximum extent permitted by Law.
Section 5.7. Further Assurances
Each party shall forthwith upon request execute and deliver such documents and take such actions as may reasonably be requested by the other party in order to effectuate the purposes of this Agreement.
ARTICLE 6 CONDITIONS TO CLOSING; CLOSING
Section 6.1. Conditions to the Obligations of Both Parties
Each party’s obligation to consummate the Transactions contemplated by this Agreement is subject to the satisfaction or waiver, on or prior to the Closing Date, of each of the following conditions, as applicable to the party specified:
Section 6.2. Conditions to the Obligations of Seller
Sellers’ obligation to consummate the transactions contemplated by this Agreement are subject to the satisfaction or waiver on or prior to the Closing Date of each of the following conditions:
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received a certificate to such effect dated the Closing Date and executed by a duly authorized officer of Purchaser;
Section 6.3. Conditions to the Obligations of Purchaser
Each Purchaser’s obligation to consummate the transactions contemplated by this Agreement are subject to the satisfaction or waiver on or prior to the Closing Date of each of the following conditions:
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are qualified as to materiality, which shall be true and correct) as of the Closing as if made on and as of the Closing Date (except that representations and warranties that are made as of a specific date need be so true and correct only as of such date), and Purchasers shall have received a certificate to such effect dated the Closing Date and executed by a duly authorized agent of Seller Parties;
(i) There shall be no changes to Arizona statutes or current Federal enforcement policy regarding state marijuana laws that would materially impact the ongoing viability of the Licensed Business;
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Section 6.4 Closing Process
On the Closing Date, the following actions shall occur in the designated sequence:
ARTICLE 7 TERMINATION
Section 7.1. Termination
This Agreement may be terminated, and the Transactions abandoned, without further obligation of either party except as set forth herein, at any time prior to the Closing Date under the following conditions:
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Section 7.2. Effect of Termination
In the event of a termination of this Agreement, neither party shall have any liability or further obligation to the other, except that (a) nothing herein will relieve a party from liability for any breach by such party of this Agreement and (b) the provisions of this Article 7, Article 8 and Article 9 shall survive the termination of this Agreement. Whether or not Closing occurs, all costs and expenses incurred in connection with this Agreement and the Transactions shall be paid by the party incurring such expenses. Breach of a representation or warranty by either party shall be grounds for termination by the non-breaching party. In the event that this Agreement is terminated as a result of breach of this Agreement by Purchasers, the Escrow Deposit shall be disbursed to Sellers.
If this Agreement is terminated except as set forth in Section 7.1(a) above, the Escrow Deposit shall be disbursed to Retail, as agent for the Sellers.
ARTICLE 8
SURVIVAL AND INDEMNIFICATION
Section 8.1. Survival
The representations, warranties and covenants contained in this Agreement shall survive the Closing until fifteen (15) months after the Closing Date and shall expire at such time.
Section 8.2. Indemnification by Sellers
Each Seller severally, and not jointly agrees to indemnify and hold harmless Purchasers and their Affiliates, and their respective successors and assigns, and the shareholders, directors, officers, employees and agents of any and all of the foregoing (the “Purchaser Indemnified Persons”), from and against any and all demands, claims, losses, liabilities, actions or causes of action, assessments, damages, fines, taxes, penalties, and reasonable costs and expenses (whether such costs and expenses relate to claims asserted by Persons indemnified under this Agreement or by third parties), including, without limitation, interest, reasonable expenses of investigation, and reasonable fees and disbursements of counsel, accountants and other experts (collectively “Losses”), incurred or suffered by any Purchaser Indemnified Person arising out of, in connection with or relating to (a) any breach of any of the representations or warranties made by such Seller in this Agreement or, (b) any failure by such Seller to perform any of its covenants or agreements contained in this Agreement or any related document, or
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its Affiliates prior to the Closing or any claim related to the management of the Licensed Business by such Seller or its Affiliates or any taxes or other claims for payment related to the Seller Licenses or the Licensed Business prior to the Closing. Notwithstanding anything to the contrary: (i) in no event shall any Seller be obligated to indemnify any Purchaser Indemnified Person unless and until the aggregate of all Losses suffered by Purchaser Indemnified Persons shall equal $75,000 or more and (ii) in no event shall the aggregate liability of all Sellers to indemnify all Purchaser Indemnified Persons exceed
$1,000,000.
All indemnification payments made under this Agreement shall be treated by all parties as an adjustment to the Purchase Price.
Section 8.3. Indemnification by Purchaser
Purchasers shall indemnify and hold harmless Sellers and their Affiliates, and their respective successors and assigns, and the shareholders, directors, officers, employees and agents of any and all of the foregoing (the “Seller Indemnified Persons”), from and against any and all Losses incurred or suffered by any Seller Indemnified Person arising out of, in connection with or relating to (a) any breach prior to Closing of any of the representations or warranties made by Purchasers in this Agreement, (b) any failure by any Purchaser to perform any of its covenants or agreements contained in this Agreement, or (c) any claims by third parties arising out of, in connection with or relating to acts or omissions in the use of the Seller Licenses by S Flower or its Affiliates after the Closing.
Section 8.4. Remedies
ARTICLE 9 MISCELLANEOUS
Section 9.1. Entire Agreement
This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof and thereof and supersedes all prior and contemporaneous
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agreements, understandings, negotiations and discussions, whether oral or written, of the parties with respect to the subject matter hereof and thereof.
Section 9.2. Amendments and Waivers
Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed (in the case of an amendment) by Seller Parties and Purchasers or (in the case of a waiver) by the party against whom the waiver is to be effective. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.
Section 9.3. Remedies Cumulative; Prevailing Party
Except as otherwise provided herein, all rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by a party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party.
In the event that any party commences any action or proceeding against the other party to this Agreement by reason of any breach or claimed breach of any provision, covenant, or representation of this Agreement, or commences any arbitration, action or proceeding in any way connected with this Agreement (including any bankruptcy proceeding or proceeding in a court of appeals), or seeks a judicial declaration of rights under this Agreement, the prevailing party in such action or proceeding shall be entitled to recover from the other party the prevailing party’s reasonable attorneys’ fees, and all costs recoverable by law, and any costs or expenses of collection, including reasonable attorneys’ fees.
Section 9.4. Assignment
This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement may not be assigned by either party without the prior written consent of the other party, except that the any Purchaser may assign its interest in the Agreement to a wholly owned subsidiary or other Affiliate of any Purchaser.
Section 9.5. Notices
All notices or other communications hereunder shall be in writing and shall be deemed to have been duly given or made (i) upon delivery if delivered personally (by courier service or otherwise), as evidenced by written receipt or other written proof of delivery (which may be a printout of the tracking information of a courier service that made such delivery), or (ii) upon confirmation of dispatch if sent by facsimile transmission (which confirmation shall be sufficient if shown by evidence produced by
20
the facsimile machine used for such transmission), in each case to the applicable addresses set forth below (or such other address which either party may from time to time specify):
If to Purchaser:
S Flower N Phoenix, Inc.
5090 N. 40th Street, Suite 170
Phoenix, AZ 85018 Attention: Ryan Hurley ryanh@copperstatefarms.com
ANR Management, LLC
5090 N. 40th Street, Suite 170
Phoenix, AZ 85018 Attention: Ryan Hurley ryanh@copperstatefarms.com
If to Seller:
Arizona Natural Remedies Inc.
207 South 9th Street Minneapolis MN 55402 Attention: General Counsel
Email: michaelschroeder@vireohealth.com
Section 9.6. Governing Law; Jurisdiction; Forum; Waiver of Jury Trial
21
(B)THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS.
Section 9.7. Expenses
Except as otherwise expressly provided in this Agreement, whether or not the Transactions are consummated, the parties shall bear their respective expenses (including, but not limited to, all compensation and expenses of counsel, financial advisors, consultants, actuaries and independent accountants) incurred in connection with this Agreement and the Transactions. All filing fees required to be paid to any Governmental Authority in connection with satisfying the conditions set forth in Section 6.1(a) will be paid by Purchasers.
Section 9.8. Invalidity
In the event that any of the provisions contained in this Agreement or in any other instrument referred to herein, shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or such other instrument and such provision will be ineffective only to the extent of such invalidity, illegality or unenforceability, unless the consummation of the Transactions is impaired thereby.
Section 9.9. Counterparts; Electronic Signatures
This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
Closing may be via the exchange of this Agreement and the ancillary agreements hereto and the parties’ signatures thereto by electronic mail, courier and/or hand delivery. Purchasers shall receive delivery of all of the Purchased Assets on the date of Closing. Following Closing, Sellers will also execute and use commercially reasonable efforts to deliver to Purchasers promptly from time to time all documents or instruments necessary or expedient to transfer the Purchased Assets to Purchasers (including releases of all encumbrances, if any, pertaining to the Purchased Assets) or to evidence such transfer or to effect a registration in the name of any Purchaser of any rights (copyright, trademark or other property right of any type) in or to any of the Purchased Assets with any governmental authority. Time is of the essence of this Agreement. Delivery of an executed counterpart of a signature page of this Amendment by fax or other electronic transmission (which shall include “PDF” or “TIFF” format) shall be as effective as delivery of a manually executed counterpart of this Amendment. The words “execution,” “signed,” “signature,” and words of like import in this Amendment and the other Transaction Documents 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 law, including the
22
Federal Electronic Signatures in Global and National Commerce Act, the Arizona Electronic Transactions Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
Section 9.10 Headings
The headings of the Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.
[SIGNATURE PAGE(S) FOLLOW]
23
EXECUTION VERSION
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written.
SELLER PARTIES:
Arizona Natural Remedies Inc., an Arizona non- profit corporation
By: Name: Kyle Kingsley
Title: Board Member
Retail Management Associates LLC, an Arizona limited liability company
By: Name: Kyle Kingsley
Title: CEO
Elephant Head Farms, LLC, an Arizona limited liability company
By: Name: Kyle Kingsley
Title: CEO
i
PURCHASERS:
S Flower N Phoenix, Inc., an Arizona non- profit corporation
By: Name:
Title:
ANR Management, LLC, an Arizona limited liability company
By: Name:
Title:
ii
Exhibit A
INSTRUMENT OF ASSIGNMENT
INSTRUMENT OF ASSIGNMENT (the “Instrument of Assignment”), dated as of
[ ], 2021, by and between Arizona Natural Remedies Inc. (“Assignor”) and S Flower N Phoenix, Inc. (“Assignee”). Capitalized terms used herein without definition shall have the respective meanings assigned to them in the Purchase Agreement (as defined below).
WHEREAS, Assignor, the other Seller Parties and Assignee have entered into a
Purchase Agreement (the “Purchase Agreement”), dated as of [ ], 2021,
pursuant to which Assignor agreed to convey to Assignee, and Assignee agreed to acquire, the Seller Licenses;
WHEREAS, Assignor and Assignee have filed an application with the ADHS requesting consent to the assignment of the Seller Licenses to Assignee; and
WHEREAS, the ADHS has granted its consent to such application.
NOW, THEREFORE, in consideration of the promises and the mutual representations, warranties, covenants, conditions, and agreements hereinafter set forth, the parties agree as follows:
of Assignment shall in any way supersede, modify, replace, amend, change, rescind, waive, exceed, expand, enlarge, or in any way affect the provisions of the Purchase Agreement, including the warranties, covenants, agreements, conditions and representations contained in the Purchase Agreement and, in general, any of the rights and remedies, and any of the obligations and indemnifications, of Assignor or Assignee set forth in the Purchase Agreement.
and deliver any additional documents and instruments and perform any additional acts that may be reasonably necessary or desirable to effectuate and perform more fully the provisions of this Instrument of Assignment and the assignments provided for in Section 1 hereof.
IN WITNESS WHEREOF, Assignor and Assignee have each caused this Instrument of Assignment to be duly executed and delivered as of the date first above written.
Arizona Natural Remedies Inc., an Arizona non- profit corporation
By: Name:
Title:
S Flower N Phoenix, Inc., an Arizona non- profit corporation
By: Name:
Title:
Exhibit B
INSTRUMENT OF ASSIGNMENT
INSTRUMENT OF ASSIGNMENT (the “Instrument of Assignment”), dated as of
[ ], 2021, by and among Retail Management Associates LLC and Elephant Head Farms, LLC (together, “Assignor”) and ANR Management, LLC (“Assignee”). Capitalized terms used herein without definition shall have the respective meanings assigned to them in the Purchase Agreement (as defined below).
WHEREAS, Assignor, the other Seller Parties and Assignee have entered into a
Purchase Agreement (the “Purchase Agreement”), dated as of [ ], 2021,
pursuant to which Assignor agreed to convey to Assignee, and Assignee agreed to acquire,
the Purchased Assets other than the Seller Licenses (the (“Management Transferred Assets”);
WHEREAS, S Flower and Remedies have filed an application with the ADHS requesting consent to the assignment of the Seller Licenses related to the Transferred Assets to S Flower; and
WHEREAS, the ADHS has granted its consent to such application.
NOW, THEREFORE, in consideration of the promises and the mutual representations, warranties, covenants, conditions, and agreements hereinafter set forth, the parties agree as follows:
of Assignment shall in any way supersede, modify, replace, amend, change, rescind, waive, exceed, expand, enlarge, or in any way affect the provisions of the Purchase Agreement, including the warranties, covenants, agreements, conditions and representations contained in the Purchase Agreement and, in general, any of the rights and remedies, and any of the obligations and indemnifications, of Assignor or Assignee set forth in the Purchase Agreement.
own or any other name, it being understood that this authorization and power- of-attorney are coupled with an interest and are irrevocable.
IN WITNESS WHEREOF, Assignor and Assignee have each caused this Instrument of Assignment to be duly executed and delivered as of the date first above written.
Retail Management Associates LLC, an Arizona limited liability company
By: Name:
Title:
Elephant Head Farms, LLC, an Arizona limited liability company
By: Name:
Title:
.
ANR Management, LLC, an Arizona limited liability company
By: Name:
Title:
Exhibit C
BILL OF SALE
For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Arizona Natural Remedies, Inc., an Arizona non-profit corporation ("Seller"), does hereby transfer sell, set over and assign unto Sol Flower N Phoenix, Inc., an Arizona non-profit corporation ("Buyer"), its successors and assigns, all of the cannabis and non-cannabis inventory, equipment, fixtures and all other personal property owned by Seller and identified on Schedule "1" attached hereto and incorporated herein by this reference (collectively the "Property").
Seller hereby represents and warrants to Buyer that Seller has title to and holds the entire interest in the Property and that the Property is hereby transferred to Buyer free and clear of all liens and encumbrances.
DATED as of the day of
, 2021.
Arizona Natural Remedies, Inc. An Arizona non-profit corporation
By
Its
SELLER
STATE OF ARIZONA)
) ss.
County of Maricopa)
This Bill of Sale consisting of pages dated was SUBSCRIBED AND SWORN to before me this day of , 2021, by .
Notary Public
My commission expires:
SCHEDULE 1
DESCRIPTION OF PROPERTY
Property Located at 22041 N 23rd Ave, Phoenix, AZ 85027
Property Located at 2731 East Frontage Road, Amado, AZ 85646
Exhibit D
RETAIL SHELF SPACE AGREEMENT
This Retail Shelf Space Agreement (the “Agreement”) is made as of the Effective Date between EHF Cultivation Management LLC, an Arizona limited liability company (“Provider”) and Retailer identified below (each, a “Party”; together, the “Parties”).
DEFINED TERMS
|
Retailer |
Sol Flower N Phoenix, Inc. |
|
Locations |
22041 N 23rd Ave, Phoenix, AZ 85027 |
|
Products |
Medical and adult-use branded cannabis flower and products, as agreed between Provider and Retailer from time to time. |
|
Effective Date |
11/ /2021 |
|
Term |
Two (2) Years |
|
Fees |
$10.00 per year |
|
Payment Terms |
1st payment due from Provider to Retailer on the Effective date and then annually thereafter on each November 1 |
|
Provider Contact |
Patrick Peters, EVP Retail patrickpeters@vireohealth.com |
|
Retailer Contact |
[Dan Hayden danielh@copperstatefarms.com] [other] |
TERMS & CONDITIONS
activities during the Term of the Agreement, including the actions of their respective representatives, employees and other related persons or entities.
RETAILER:
By: Date:
Name: Title: _
PROVIDER:
By: Date:
Name: Title:
2
Exhibit E
CULTIVATION MANAGEMENT SERVICES AGREEMENT
This Cultivation Management Services Agreement (the “Agreement”) is entered into on this day of November, 2021 (the “Effective Date”), by and between S Flower N Phoenix, Inc., an Arizona non-profit corporation with its principal place of business located at 22041 N. 23rd Ave., Phoenix, AZ 85027) (“Dispensary”), and [EHF Management, LLC], an Arizona limited liability company with its principal place of business located at 207 S. 9th Street, Minneapolis, MN 55402 (“Cultivator”). (Dispensary and Cultivator are sometimes collectively referred to herein as the “Parties” or each, individually, as a “Party”).
RECITALS
WHEREAS, pursuant to and in compliance with Title 9; Chapter 17 Department of Health Services Medical Marijuana Program (the “AZDHS Rules”) and A.R.S. § 36- 2801 et seq., as amended from time to time (the “Act”) (the AZDHS Rules and the Act collectively referred to herein as the “AMMA”), the Arizona Department of Health Services (“AZDHS”) awarded Dispensary NP Medical Marijuana Dispensary Registration Certificate ID No. 000000028DCGV00174888 (the “AMMA Certificate”) for the operation of a Nonprofit Medical Marijuana Dispensary, as defined in A.R.S. § 36-2801 (12) (the “Dispensary Business”), currently located at 2201 N. 23rd Avenue, Phoenix, AZ 85027 (the “Dispensary Location”), which AMMA Certificate is as of the Effective Date current and in good standing with the AZDHS. A true, accurate and complete copy of the AMMA Certificate is attached hereto as Exhibit 1;
WHEREAS, pursuant to the AMMA and the AMMA Certificate, AZDHS issued to Dispensary an approval to operate the Dispensary Business at the Dispensary Location (“AMMA Dispensary ATO”);
WHEREAS, pursuant to the AMMA Certificate and the AMMA, Dispensary operates a licensed medical Marijuana dispensary at the Dispensary Location;
WHEREAS, pursuant to the AMMA and the AMMA Certificate, Dispensary is authorized to operate, and the Dispensary Business is allowed to include, the cultivation, harvesting, preparation, packaging and transporting of medical Marijuana, as defined in
A.R.S. § 36-2801 (10) (“Medical Marijuana”), as well as extraction, refining, infusion, production, manufacture and derivation of edible and non-edible products which contain Medical Marijuana (collectively referred to herein as “Medical Marijuana Products”) for retail sale at the Dispensary Location or for wholesale to any other duly licensed dispensaries in the State of Arizona;
WHEREAS, pursuant to the AMMA and the AMMA Certificate, in addition to the Dispensary Business at the Dispensary Location, Dispensary is authorized to operate: (a) one cultivation facility at the Dispensary Location (“Onsite AMMA Cultivation Facility”); and
| (b) | one facility for cultivation, including extraction and/or infusion, of Marijuana at a |
location other than the Onsite AMMA Cultivation Facility (the “Offsite AMMA Cultivation Facility”). As of the Effective Date, Dispensary operates both an Offsite AMMA Cultivation Facility and an Onsite AMMA Cultivation Facility;
WHEREAS, pursuant to A.R.S. § 36-2850 et seq., as amended from time to time, and rules and regulations promulgated thereunder (collectively, the “SSAA”), Dispensary operates a licensed Marijuana Establishment, as defined in A.R.S. § 36-2850 (18) (“Marijuana Establishment”), and is permitted to sell Marijuana, as defined in A.R.S. § 36- 2850 (16) (“Recreational Marijuana”), to adults for recreational use as a Marijuana Establishment and/or Dual Licensee (as defined in the SSAA) from the Dispensary Location, pursuant to registration certificate 00000093ESRF39774783 (the “SSAA Certificate”). The SSAA Certificate is as of the Effective Date current and in good standing with the AZDHS. A true, accurate and complete copy of the SSAA Certificate is attached hereto as Exhibit 2;
WHEREAS, pursuant to Title 9; Chapter 18 of the State of Arizona Administrative Code, Department of Health Services Adult Use - Marijuana Program, as adopted and amended (the “DHS SSAA Rules”), and the SSAA, and together with the AZDHS SSAA Rules, the “AZML”), the SSAA Certificate authorizes Dispensary to operate one off-site cultivation location at which Dispensary may cultivate Recreational Marijuana, process Recreational Marijuana and manufacture Marijuana Products for recreational use (“Recreational Marijuana Products”), but from which Recreational Marijuana and Recreational Marijuana Products may not be transferred or sold to consumers (the “SSAA Cultivation Facility”) and one off-site location at which Dispensary may manufacture Recreational Marijuana Products and package and store Recreational Marijuana and Recreational Marijuana Products, but from which Recreational Marijuana and Recreational Marijuana Products may not be transferred or sold to consumers (the “SSAA Manufacture Facility”);
WHEREAS, as of the Effective Date, as a Dual Licensee, Dispensary operates a single facility as the exclusive location of Dispensary’s SSAA Cultivation Facility with respect to the SSAA Certificate and its single Offsite AMMA Cultivation Facility with respect to the AMMA Certificate, both at the same site, being that certain real property located at 2731 E. Frontage Road, Amado AZ 85645 (“Cultivation Facility”);
WHEREAS, pursuant to this Agreement, Dispensary desires to exclusively engage Cultivator to perform the Cultivation Services (defined below) on behalf of the Dispensary at Dispensary’s co-located SSAA Cultivation Facility and Offsite AMMA Cultivation Facility, exclusively at the Cultivation Facility, upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, Dispensary has not yet designated a location for the operation of an SSAA Cultivation Facility or the SSAA Manufacture Facility, but has the right to do so under the SSAA and the SSAA Certificate;
WHEREAS, pursuant to the SSAA and the SSAA Certificate, Dispensary has the right to designate the Cultivation Facility or another facility with respect to the SSAA Certificate for the purpose of AZDHS issuing to Dispensary an approval to operate the
Cultivation Facility or such other facility on the terms and provisions described in this Agreement (the “SSAA Cultivation Facility ATO”);
WHEREAS, pursuant to the AMMA and the AMMA Certificate, Dispensary has designated the Cultivation Facility with respect to the AMMA Certificate for the purpose of AZDHS issuing to Dispensary an approval to operate the Cultivation Facility on the terms and provisions described in this Agreement (the “AMMA Cultivation Facility ATO”);
WHEREAS, the Cultivation Facility is leased by written agreement from Oswald Cattle Company (“Landlord”), as property owner and landlord, dated June 15, 2015, to Arizona Natural Remedies, Inc., as tenant, as amended by a letter agreement dated March 15, 2019, a Second Amendment to Lease Agreement dated May 11, 2020, and a Third Amendment to Lease Agreement dated April 22, 2021 (collectively, the “Cultivation Lease”);
WHEREAS, Cultivator is engaged in the business of, among other things, providing certain cultivation services, which include but are not limited to the following: (i) the extraction, refinement and production of high quality Medical Marijuana Products and Recreational Marijuana Products (collectively, “Marijuana Products”); and (ii) the cultivation, harvest and preparation of high quality Marijuana strains in compliance with the AMMA, the AZML and all other applicable rules, regulations and requirements;
WHEREAS Dispensary desires to retain Cultivator for the purpose of rendering the Cultivation Services (defined herein) on behalf of Dispensary solely from or at the Cultivation Facility pursuant to the AMMA and the Offsite AMMA Cultivation Certificate, and Cultivator desires to be retained by Dispensary to provide the Cultivation Services;
WHEREAS, Cultivator acknowledges and agrees that notwithstanding anything in this Agreement to the contrary, this Agreement does not grant Cultivator any right to take any actions or provide any services not permitted to be taken at the Cultivation Facility under the SSAA Certificate or under the AMMA Certificate; and
WHEREAS, the parties hereto are aware that the cultivation, production and sale of Marijuana and Marijuana Products remain illegal under laws of the United States of America, despite enactment by the State of Arizona (“State”) of the AMMA and AZML, and that Marijuana remains an illegal controlled substance under Federal law. The Federal government regulates Marijuana possession and use through the Controlled Substances Act, 21 U.S.C. § 812(b) which makes it a crime, among other things, to possess or use Marijuana even for medical reasons, and despite valid State laws authorizing the medical use of Marijuana. 21 U.S.C. §§ 841 to 864. The parties hereto acknowledge that their respective clear and unambiguous compliance with the AMMA and the AZML does not create a legal defense to a violation of the Controlled Substances Act.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual terms, obligations and provisions set forth herein, the Parties hereto agree as follows:
| (a) | Term. This Agreement shall commence on the Effective Date and continue |
for a period of five (5) years thereafter (the “Initial Term”).
| (b) | Right to Renew. Not later than 180 days prior to the end of the Initial Term, |
if this Agreement is then in full force and effect and Cultivator shall have fully performed all of its obligations pursuant to this Agreement Cultivator shall have the right to elect to renew this Agreement (“First Right to Renew”) for five (5) years (“First Renewal Term”). Not later than 180 days prior to the end of the First Renewal Term, if this Agreement is then in full force and effect and Cultivator shall have fully performed all of its obligations pursuant to this Agreement, Cultivator shall have the right to elect to renew this Agreement (“Second Right to Renew”) for five (5) years (“Second Renewal Term”). Not later than 180 days prior to the end of the Second Renewal Term, if this Agreement is then in full force and effect and Cultivator shall have fully performed all of its obligations pursuant to this Agreement, Cultivator shall have the right to elect to renew this Agreement (“Third Right to Renew” and the First Right to Renew, Second Right to Renew and Third Right to Renew are each a “Right to Renew”) for five (5) years (“Third Renewal Term” and the First Renewal Term, Second Renewal Term and Third Renewal Term are each a “Renewal Term”). To exercise a Right to Renew, Cultivator shall notify Dispensary in writing (“Renewal Notice”). The terms “Initial Term” and “Renewal Term” or “Renewal Terms” shall be collectively referred to as the “Term”. Notwithstanding the language in this Subsection 1(b), Cultivator shall not have the right to renew this Agreement if Cultivator is in default of any material term in this Agreement at the time of renewal after written notice to Cultivator and the expiration of the applicable period to cure such default. So long as any such default is not cured, Cultivator shall be required to obtain Dispensary’s prior written consent to renew this Agreement.
Agreement without penalty prior to the expiration of the Term on fifteen (15) business days’ written notice to the other Party but without any cure period, upon the occurrence of any one (1) or more of the following events (each, an “Immediate Termination Event” and, collectively, the “Immediate Termination Events”):
materially violate the SSAA or the AMMA or AML in such a way or to the extent that revocation or cancellation of the SSAA Certificate or the AMMA Certificate by AZDHS is more than a remote possibility, (b) if AZDHS files an application to revoke the SSAA Certificate or the AMMA Certificate or threatens in writing to revoke the SSAA Certificate or the AMMA Certificate, for events occurring at or directly related Cultivator’s operation of the Cultivation Facility; or (c) if Cultivator files for bankruptcy or has a receiver placed over its business operations or Cultivator is insolvent; or (d) if Cultivator repeatedly fails to cure violations of the AMMA or AML after notice by dispensary and reasonable opportunity to cure; or (e) if Cultivator fails to produce any Marijuana or Marijuana Products from the Cultivation Facility for a period of ninety (90) consecutive days.
| d. | Unauthorized Change of Control. |
(12) month period, does not have actual or effective control of the management of the Cultivation Facility; (ii) a receiver is appointed over Cultivator; or (iii) Cultivator’s Manager enters into any agreement (verbal or written) to, or does, transfer actual or effective management of Cultivator or the Cultivation Facility to another person or entity (except an Affiliate of Cultivator) in every case without the prior written consent of Dispensary, not to be unreasonably withheld, conditioned or delayed; or (iv) after designating a location as a SSAA Cultivation or SSAA pursuant to the terms herein, enters into any agreement (verbal or written) to, or does, transfer actual or effective management of said facility to another person or entity without the prior written consent of Dispensary in Dispensary’s sole and absolute discretion.
| e. | Cultivator’s Rights on Termination Under this Section 1 |
If Cultivator exercises its right to terminate this agreement pursuant to the provisions of subsection (c)(viii) of this Section 1, the Unauthorized Change of Control giving rise to Cultivator’s right to exercise such termination right shall be deemed a material breach of this Agreement by Dispensary and Cultivator shall be entitled to seek all available damages and other remedies at law and in equity, on account of such material breach by Dispensary, arising out of or related to its inability to operate the Cultivation Services for the entire Term, including the First Renewal Term, the Second Renewal Term, and the Third Renewal Term; provided, however, that Cultivator shall not be entitled to any special damages in connection therewith.
assignment, sale or conveyance of the AMMA Certificate or the SSAA Certificate to Cultivator or any of Cultivator’s successors, affiliates, agents, employees or independent contractors.
all Medical Marijuana, Medical Marijuana Products, Recreational Marijuana and Recreational Marijuana Products produced at the Cultivation Facility and provided to Dispensary, shall be sold on a wholesale or retail basis through Dispensary’s AMMA Certificate or Dispensary’s SSAA Certificate and shall be accounted for in Dispensary’s point of sale operating system in conjunction with the AZDHS approved operating system.
| (b) | Facility Agent Cards. Cultivator is responsible for ensuring that all of |
its employees, agents, contractors and volunteers who enter the Cultivation Facility have obtained Dispensary Facility Agent Cards or Dispensary Agent Cards required by the SSAA or the AMMA (collectively, the “Agent Cards”) and Dispensary shall upon notice by Cultivator that such Agent Cards have been obtained, link the agent cards to the AMMA Certificate, or to the SSAA Certificate if Cultivator shall have given the SSAACF Trigger Notice or the SSAAMF Trigger Notice, for employees, agents, contractors and volunteers who will be working at the SSAA Cultivation Facility or the SSAA Manufacture Facility . Cultivator agrees that all its employees, agents, contractors and volunteers who first enter the Cultivation Facility after the date of this Agreement or whose existing Dispensary Agent cards expire, obtain Dispensary Facility Agent Cards and not Dispensary Agent Cards.
| (d) | Product Transfers. Dispensary shall reasonably approve or deny all |
product transfer requests, including transfer requests to and/or from duly licensed Medical
Marijuana or Recreational Marijuana processing facilities, within [______] hours after receipt of Cultivator’s written request therefor. Cultivator will make all such requests by via email and text to an email address and phone number designated by Dispensary. Dispensary’s failure to timely approve or deny such request will constitute Dispensary’s deemed approval thereof if the product transfer is otherwise in full compliance with the terms, conditions and requirements of this Agreement.
reasonably necessary for Cultivator to perform the Cultivation Services and all other of Cultivator’s obligations under this Agreement, including without limitation the ability to create and generate all reports reasonably required by Cultivator. Cultivator shall be responsible for the costs of obtaining a license of the software for the Cultivation Facility. However, Dispensary shall have the sole and absolute discretion and authority with respect to any information input into software selected by Dispensary. During the Term of this Agreement and upon the expiration or earlier termination for any or no reason, Dispensary shall reasonably cooperate with Cultivator in making backup copies of the data in the software programs used by Dispensary with respect to Dispensary’s obligations, rights and remedies under this Agreement relative the Cultivation Facility.
of sale system(s) (collectively, the “Wholesale Sales”). Dispensary shall also accept any lawful purchases of Medical Marijuana, Medical Marijuana Products, Recreational Marijuana or Recreational Marijuana Products arranged by Cultivator only from other duly licensed dispensaries in the State of Arizona in compliance with the SSAA,) provided that the processing of the purchases arranged by Cultivator shall be transacted exclusively through Dispensary’s AMMA Certificate or SSAA Certificate and point of sale system(s).
procedures or any amendments thereto, as reasonably approved and adopted by Dispensary for the Cultivation Facility;
transportation, and compliance with local and state rules and regulations, as well as the AMMA and the AZML (collectively referred to herein as the “Cultivation Facility Costs and Expenses”).
and agree there is a great deal of cost and expenses related to the maintenance, operation and management of the Dispensary, in compliance with the terms and covenants contained herein, local and state regulations, the AMMA and the AZML. The Parties acknowledge and agree, Dispensary, shall be solely responsible for the ongoing costs and expenses related to the management, maintenance and operation of its Dispensary. Such costs and expenses may include but shall not be limited to expenditures related to its facility, security, labor, equipment, qualifying patient and registered caregiver education and support, and compliance with local and state rules and regulations, as well as the AMMA and the AZML (collectively referred to herein as the “Dispensary Costs and Expenses”).
shall be destroyed at Cultivator’s sole cost and expense unless otherwise agreed in writing. Dispensary agrees that it will not use or seek to use any of the plants, clones, mothers, seeds, or tissue cultures after the termination of this Agreement. The terms and provisions of this Section 15 shall survive the expiration or earlier termination of this Agreement.
| 12. | Independent Contractor Status; Authority. |
whatsoever to any spouse, entity, trust, owner, or other person affiliated with Dispensary that is not designated in this Agreement as Dispensary.
| 15. | Non-Disclosure of Proprietary Information. The Parties acknowledge that, |
the Parties shall have access to materials, records, processes, data and information regarding the other Party and its businesses, which is confidential and proprietary in nature and not generally available to the public. For purposes of this Section 14, the Party disclosing any such information shall be referred to as the “Disclosing Party” and the Party receiving such information shall be referred to as the “Receiving Party”. Accordingly, the Receiving Party shall hold in confidence and will not directly or indirectly disclose, the Disclosing Party’s Proprietary Information (defined herein). For purposes herein “Proprietary Information” shall include, but is not be limited to, concepts or theories, employee training materials and programs, processes for cultivation, harvest and preparation of Medical Marijuana or Recreational Marijuana, processes for the production, refinement and infusion of Medical Marijuana Products or Recreational Marijuana Products, patient education and support, policies and procedures, specifications, composition and potency of various cannabis strains, various cannabis genotypes, calculations, data, notes and memoranda, methods of operation, strategies and plans, contracts and agreements, financial information, professional fee information, cost and revenue information, record keeping practices, software, administrative and operational matters and practices, patient, caregiver and vendor information, development and research work, marketing programs, plans, proposals, and other information about internal systems, processes, concepts, practices, and procedures or other confidential information related to regarding the Disclosing Party or its business regardless of whether any of the foregoing materials are marked confidential. The covenants of this Section 14 shall survive the termination of this Agreement.
deemed to be rectified or cured if the breaching Party, within the Cure Period, shall have commenced to rectify or cure the Default and shall thereafter diligently and continuously prosecute same to completion, even if such cure does not occur until after the expiration of the Cure Period), after receipt of written notice from the non-breaching Party to the breaching Party identifying such failure or non-performance (each, a “Default”), the non- breaching Party may, at its sole option and in its sole discretion, elect to (i) pursue all remedies available at law and equity (including, without limitation, action for damages and specific performance) in a court of competent jurisdiction; (ii) seek resolution and remedies as provided in Section 17 herein; and/or (iii) terminate this Agreement effective immediately and without penalty. The rights and remedies set forth in this Section 15 shall be in addition to, and not to the exclusion or limitation of, the rights and remedies of the Parties set forth in Section 1.
| 21. | Attorneys’ Fees. In the event of mediation, arbitration or litigation between |
the Parties to enforce or interpret any provision of or rights under this Agreement, the prevailing Party shall be awarded its reasonable attorneys’ fees costs, and expenses, including fees and costs on appeal.
| 22. | Good Faith. The Parties hereto agree to operate in good faith to accomplish |
the purposes of this Agreement. Any consent required under this Agreement shall not be unreasonably withheld.
harvested, prepared, extracted, refined, produced and stored by Cultivator at the Cultivation Facility.
| 25. | Cultivator’s Right to Designate Facilities. |
| 26. | Waiver. The failure of a Party to enforce any provision of this Agreement |
at any time, to exercise any election or option provided herein, or to require at any time the performance of any provisions herein will not in any way constitute a waiver of such provision.
IN WITNESS WHEREOF, the Parties hereby execute this Agreement as of the Execution Date Effective Date and intend for it to be effective as of the Effective Date.
“DISPENSARY”
S Flower N Phoenix, Inc., an Arizona non- profit corporation
By: _ Name:
Title:
“CULTIVATOR”
Elephant Head Farms LLC, an Arizona limited liability company
By: _ Name:
Title:
EXHIBIT 4
MANAGEMENT FEES AND ADMINISTRATIVE FEES
The Parties acknowledge and agree, as of this day of November, 2021, pursuant to the provisions provided in this Cultivation Management Services Agreement, Dispensary shall pay to Cultivator, the following Management Fees and Administrative Fees, as good and valuable compensation for Cultivator rendering the Management Services on behalf of Dispensary and its Cultivation Facility. The Management Fees and Administrative Fees are defined as follows:
