☒
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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British Columbia, Canada
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98-1463868
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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366 Madison Avenue, 11th Floor
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New York
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New York
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10017
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(Address of Principal Executive Offices)
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(Zip Code)
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
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x
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Smaller reporting company
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☐
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Emerging growth company
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☒
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PART I
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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PART II
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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PART III
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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PART IV
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Item 15.
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Item 16.
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State
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Entity
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Adult-Use / Medicinal
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Dispensary Licenses
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Cultivation / Processing / Distribution Licenses
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Operational Dispensaries
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Operational Cultivation / Processing Facilities
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California3,4
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CWG Botanicals, Inc.2,5
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Adult-Use / Medicinal
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—
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3
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—
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1
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Kanna, Inc.
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Adult-Use / Medicinal
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1
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—
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—
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—
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Gravenstein Foods LLC
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Adult-Use / Medicinal
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—
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1
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—
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—
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Connecticut
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D&B Wellness, LLC
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Medicinal
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1
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—
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1
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—
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Prime Wellness of Connecticut, LLC
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Medicinal
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1
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—
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1
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—
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Thames Valley Apothecary, LLC
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Medicinal
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1
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—
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1
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—
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Florida
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Acreage Florida, Inc.
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Medicinal
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40
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2
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1
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2
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Illinois
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In Grown Farms LLC 2
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Adult-Use / Medicinal
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—
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1
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—
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1
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NCC LLC
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Adult-Use / Medicinal
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1
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—
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1
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—
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Maine
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Wellness Connection of Maine2
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Medicinal
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4
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1
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4
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1
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Massachusetts
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The Botanist, Inc.
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Medicinal
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3
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1
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1
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1
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Michigan1
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N/A
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Medicinal
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—
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—
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—
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—
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New Hampshire2
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Prime Alternative Treatment Centers of NH, Inc.
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Medicinal
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1
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1
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1
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1
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New Jersey
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Compassionate Care Foundation, Inc.2
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Medicinal
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3
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1
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2
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1
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New York
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NYCANNA, LLC (d/b/a The Botanist)
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Medicinal
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4
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1
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4
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1
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Ohio
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Greenleaf Apothecaries, LLC2
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Medicinal
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5
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—
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5
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—
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Greenleaf Therapeutics, LLC2
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Medicinal
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—
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1
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—
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—
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Greenleaf Gardens, LLC2
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Medicinal
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—
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1
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—
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—
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Oklahoma
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Acreage OK Holdings, LLC2
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Medicinal
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—
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2
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—
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—
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Acreage Relief Holdings OK, LLC2
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Medicinal
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1
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—
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—
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—
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Oregon
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HSCP Oregon, LLC
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Adult-Use
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2
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1
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2
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1
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22nd & Burn, Inc.
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Adult-Use
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1
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—
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1
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—
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The Firestation 23, Inc.
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Adult-Use
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1
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—
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1
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—
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East 11th, Inc.
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Adult-Use
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1
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—
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1
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—
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Gesundheit Foods LLC7
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Adult-Use
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—
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2
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—
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—
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Pennsylvania
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Prime Wellness of Pennsylvania, LLC
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Medicinal
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—
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1
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—
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1
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Total
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71
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20
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27
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11
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(1)
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Michigan licenses are in the process of being granted by the state, Acreage has a relationship in the state to develop our footprint there.
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(2)
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Acreage provides goods and/or services including but not limited to financing, management, consulting and/or administrative services with these license holders to assist in the operations of their cannabis businesses.
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(3)
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Separate grow/process licenses.
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(4)
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A distribution license has been issued in this U.S. state.
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(5)
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Acreage has entered into an agreement to acquire CWG. The acquisition remains subject to regulatory approval.
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•
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The last day of our first fiscal year during which we have total annual gross revenues of $1 billion or more;
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The last day of our fiscal year following the fifth anniversary of the date of our initial public offering;
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The date on which we have issued more than $1 billion in non-convertible debt during the prior three-year period; or
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The date on which we qualify as a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (qualifying as a large accelerated filer means, among other things, having a public float in excess of $700 million).
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•
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ensure that its operations are compliant with all licensing requirements as established by the applicable state, county, municipality, town, township, borough, and other political/administrative divisions;
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ensure that its cannabis related activities adhere to the scope of the licensing obtained (for example: in the states where cannabis is permitted only for adult-use, the products are only sold to individuals who meet the requisite age requirements);
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implement policies and procedures to ensure that cannabis products are not distributed to minors;
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implement policies and procedures in place to ensure that funds are not distributed to criminal enterprises, gangs or cartels;
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implement an inventory tracking system and necessary procedures to ensure that such compliance system is effective in tracking inventory and preventing diversion of cannabis or cannabis products into those states where cannabis is not permitted by state law, or cross any state lines in general;
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ensure that its state-authorized cannabis business activity is not used as a cover or pretense for trafficking of other illegal drugs, and is not engaged in any other illegal activity, or any activities that are contrary to any applicable anti-money laundering statutes; and
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ensure that its products comply with applicable regulations and contain necessary disclaimers about the contents of the products to prevent adverse public health consequences from cannabis use and prevent impaired driving.
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Industry Involvement
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Specific Disclosure Necessary to Fairly Present all Material Facts, Risks and Uncertainties
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Annual Report Cross Reference
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Industry Involvement
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Specific Disclosure Necessary to Fairly Present all Material Facts, Risks and Uncertainties
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Annual Report Cross Reference
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All Issuers with U.S. Marijuana-Related Activities
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Describe the nature of the Company’s involvement in the U.S. marijuana industry and include the disclosures indicated for at least one of the direct, indirect and ancillary industry involvement types noted in this table.
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“Description of the Business”
“Regulatory Overview”
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Prominently state that marijuana is illegal under U.S. federal law and that enforcement of relevant laws is a significant risk.
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“Regulatory Overview - United States Federal Overview”
“Risk Factors - Risks Related to the United States Regulatory System - The Company’s business activities, while compliant with applicable state and local U.S. law, are illegal under U.S. federal law” |
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Discuss any statements and other available guidance made by federal authorities or prosecutors regarding the risk of enforcement action in any jurisdiction where the Company conducts U.S. marijuana-related activities.
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“Regulatory Overview - United States Federal Overview”
“Risk Factors - Risks Related to Regulatory Matters - The Company’s Business Activities are Illegal under U.S. Federal Law”
“Risk Factors - Risks Related to Regulatory Matters - U.S. State Regulatory Uncertainty”
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Outline related risks including, among others, the risk that third-party service providers could suspend or withdraw services and the risk that regulatory bodies could impose certain restrictions on the Company’s ability to operate in the U.S.
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“Risk Factors - Risks Related to Regulatory Matters - The Company’s Business Activities are Illegal under U.S. Federal Law”
“Risk Factors - Risks Generally Related to the Company - Service Providers”
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Given the illegality of marijuana under U.S. federal law, discuss the Company’s ability to access both public and private capital and indicate what financing options are / are not available in order to support continuing operations.
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“Risk Factors - Risks Generally Related to the Company - Ability to Access Public and Private Capital”
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Quantify the Company’s balance sheet and operating statement exposure to U.S. marijuana-related activities.
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At the date of this Annual Report on Form 10-K, 100% of the Company’s operations are in the United States.
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Disclose if legal advice has not been obtained, either in the form of a legal opinion or otherwise, regarding (a) compliance with applicable state regulatory frameworks and (b) potential exposure and implications arising from U.S. federal law.
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The Company and its subsidiaries have obtained legal advice regarding (a) compliance with applicable state regulatory frameworks, and (b) potential exposure and implications arising from U.S. federal law.
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Industry Involvement
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Specific Disclosure Necessary to Fairly Present all Material Facts, Risks and Uncertainties
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Annual Report Cross Reference
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U.S. Marijuana Issuers with direct involvement in cultivation or distribution
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Outline the regulations for U.S. states in which the Company operates and confirm how the Company complies with applicable licensing requirements and the regulatory framework enacted by the applicable U.S. state.
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“Description of the Business”
“Regulatory Overview - State-Level Overview & Compliance Summary”
“Regulatory Overview - The Regulatory Landscape on a U.S. State Level - California”
“Regulatory Overview - The Regulatory Landscape on a U.S. State Level - Connecticut”
“Regulatory Overview - The Regulatory Landscape on a U.S. State Level - Florida”
“Regulatory Overview - The Regulatory Landscape on a U.S. State Level - Illinois”
“Regulatory Overview - The Regulatory Landscape on a U.S. State Level - Maine”
“Regulatory Overview - The Regulatory Landscape on a U.S. State Level - Massachusetts”
“Regulatory Overview - The Regulatory Landscape on a U.S. State Level - Michigan”
“Regulatory Overview - The Regulatory Landscape on a U.S. State Level - New Hampshire”
“Regulatory Overview - The Regulatory Landscape on a U.S. State Level - New Jersey”
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“Regulatory Overview - The Regulatory Landscape on a U.S. State Level - New York”
“Regulatory Overview - The Regulatory Landscape on a U.S. State Level - Ohio”
“Regulatory Overview - The Regulatory Landscape on a U.S. State Level - Oklahoma”
“Regulatory Overview - The Regulatory Landscape on a U.S. State Level - Oregon”
“Regulatory Overview - The Regulatory Landscape on a U.S. State Level - Pennsylvania”
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Discuss the Company’s program for monitoring compliance with U.S. state law on an ongoing basis, outline internal compliance procedures and provide a positive statement indicating that the Company is in compliance with U.S. state law and the related licensing framework. Promptly disclose any non-compliance, citations or notices of violation which may have an impact on the Company’s license, business activities or operations.
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“Regulatory Overview - State-Level Overview & Compliance Summary”
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State
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Entity
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Adult-Use / Medicinal
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Direct / Indirect / Ancillary
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Dispensary Licenses
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Cultivation / Processing / Distribution
Licenses
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Operational Dispensaries
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Operational Cultivation / Processing Facilities
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California
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CWG Botanicals, Inc.2, 3, 5
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Adult-Use / Medicinal
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Ancillary
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—
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3
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—
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1
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Kanna, Inc.
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Adult-Use / Medicinal
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Direct
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1
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—
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—
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—
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Gravenstein Foods LLC4
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Adult-Use / Medicinal
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Direct
|
—
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1
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—
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—
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Connecticut
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D&B Wellness, LLC
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Medicinal
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Direct
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1
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—
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1
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—
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Prime Wellness of Connecticut, LLC
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Medicinal
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Direct
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1
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—
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1
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—
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Thames Valley Apothecary, LLC
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Medicinal
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Direct
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1
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—
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1
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—
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Florida
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Acreage Florida, Inc.
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Medicinal
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Direct
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40
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2
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1
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1
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Illinois
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In Grown Farms LLC 2
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Adult-Use / Medicinal
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Direct
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—
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1
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—
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1
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NCC LLC
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Adult-Use / Medicinal
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Direct
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1
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—
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1
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—
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Maine
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Wellness Connection of Maine2
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Medicinal
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Ancillary
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4
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1
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4
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1
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Massachusetts
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The Botanist, Inc.
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Medicinal
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Direct
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3
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1
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1
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1
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Michigan
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N/A
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Medicinal
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Direct
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—
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—
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—
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—
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New Hampshire2
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Prime Alternative Treatment Centers of NH, Inc.
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Medicinal
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Ancillary
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1
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1
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1
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1
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New Jersey
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Compassionate Care Foundation, Inc.2
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Medicinal
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Ancillary
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3
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1
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2
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1
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New York
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NYCANNA, LLC
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Medicinal
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Direct
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4
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1
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4
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1
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Ohio
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Greenleaf Apothecaries, LLC2
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Medicinal
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Ancillary
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5
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—
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5
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—
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Greenleaf Therapeutics, LLC2
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Medicinal
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Ancillary
|
—
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1
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—
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—
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Greenleaf Gardens, LLC2
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Medicinal
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Ancillary
|
—
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1
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—
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—
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Oklahoma
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Acreage OK Holdings, LLC2
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Medicinal
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Ancillary
|
—
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2
|
—
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—
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Acreage Relief Holdings OK, LLC2
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Medicinal
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Ancillary
|
1
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—
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—
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—
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(1)
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Michigan licenses are in the process of being granted by the state and municipalities - Acreage has a pending relationship in the state to develop our footprint there .
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(2)
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Acreage provides goods and/or services including but not limited to financing, management, consulting and/or administrative services with these license holders to assist in the operations of their cannabis businesses.
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(3)
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Separate grow/process licenses.
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(4)
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A distribution license has been issued in this U.S. state.
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(5)
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Acreage has entered into an agreement to acquire CWG. The acquisition remains subject to regulatory approval.
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•
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importance of compliance with state and local laws
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•
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dispensing procedures
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•
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patient privacy
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•
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security and safety policies and procedures
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•
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inventory control
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•
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quality control
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•
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cash management and control
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•
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transportation procedures
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•
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Ensure the operations are compliant with all licensing requirements that are set forth with regards to cannabis operation by the applicable state, county, municipality, town, township, borough, and other political/administrative divisions. To this end, the Company uses its internal Legal Department including its Legal Compliance team and retains appropriately experienced legal counsel to conduct the necessary due diligence to ensure compliance of such operations with all applicable regulations;
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•
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The activities relating to cannabis business adhere to the scope of the licensing obtained. For example, in Florida only medical cannabis is permitted and therefore the products are only sold to patients who have the appropriate recommendation in the state registry and have a valid state-issued medical identification card;
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•
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The Company only works through licensed operators, which must pass a range of requirements, adhere to strict business practice standards and be subjected to strict regulatory oversight whereby sufficient checks and balances ensure that no revenue is distributed to criminal enterprises, gangs and cartels; and
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•
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The Company conducts reviews of products and product packaging to ensure that the products comply with applicable regulations and contain necessary disclaimers about the contents of the products to prevent adverse public health consequences from cannabis use and prevent impaired driving.
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Subsidiary
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License Number
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City
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Expiration Date
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Description
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CWG Botanicals, Inc.
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CCL18-0000104
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Oakland
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4/17/2021
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Grow
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CWG Botanicals, Inc.
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CDPH- 10002775
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Oakland
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4/24/2021
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Manufacturing
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CWG Botanicals, Inc.
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C11-0000434-LIC
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Oakland
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6/19/2020
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Distribution
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Gravenstein Foods LLC
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CDPH-10003051
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Oakland
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5/1/2020(1)
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Manufacturing
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Kanna, Inc.
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C10-0000419-LIC
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Oakland
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7/14/2020
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Retailer
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(1)
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Renewal is in process.
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Subsidiary
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License number
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City
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Expiration Date
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Description
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D&B Wellness, LLC
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MMDF.0000003
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Bethel
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5/13/2021
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Dispensary Facility
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Prime Wellness of Connecticut, LLC
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MMDF.0000004
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South Windsor
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4/10/2021
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Dispensary Facility
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Thames Valley Apothecary, LLC
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MMDF.0000005
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Uncasville
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4/15/2021
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Dispensary Facility
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Subsidiary
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License number
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City
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Expiration
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Description
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NCC
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DISP.000024
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Rolling Meadows
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1/22/2021
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Medical Cannabis Dispensary Facility
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NCC
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AUDO.000050
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Rolling Meadows
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3/31/2021
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Registered Adult Use Dispensing Organization
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IGF
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1503060729
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Freeport
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3/9/2020
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Medical Cannabis Cultivation/
Processing Facility
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IGF
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1503060729-EA
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Freeport
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3/21/2021
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Early Approval Adult Use Cultivation
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IGF
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1204-321
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Freeport
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12/31/2022
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Registered Industrial Hemp Processor
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•
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Illinois Residents: 30 grams of flower, 500 mg THC in cannabis infused products, and/or 5 grams of cannabis concentrate.
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•
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Non-Illinois Residents: 15 grams of flower, 250 mg THC in cannabis infused products, and/or 2.5 grams of cannabis concentrate.
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•
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Complete a shipping manifest using a form prescribed by the IL DA; and
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•
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Securely transmit a copy of the manifest to the dispensary facility that will receive the products and to the IL DA before the close of business the day prior to transport. The manifest must be made available to the Illinois State Police upon request.
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•
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Only be transported in a locked, safe and secure storage compartment that is part of the motor vehicle transporting the cannabis, or in a locked storage container that has a separate key or combination pad; and
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•
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Not be visible from outside the motor vehicle.
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MSA Party
|
Certificate of Registration
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City
|
Expiration Date
|
Description
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WCM
|
DSP107
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Portland
|
4/11/2021
|
Dispensary
|
WCM
|
DSP102
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South Portland
|
9/16/2020
|
Dispensary
|
WCM
|
DSP103
|
Gardiner
|
12/22/2020
|
Dispensary
|
WCM
|
DSP108
|
Brewer
|
6/15/2020
|
Dispensary
|
WCM
|
DSP102
|
Auburn
|
9/16/2020
|
Cultivation
|
•
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A warning that marijuana has not been analyzed or approved by the FDA, that there is limited information on side effects, that there may be health risks associated with using marijuana, and that it should be kept away from children;
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•
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A warning that when under the influence of marijuana, driving is prohibited by M.G.L. c. 90, § 24, and machinery should not be operated;
|
•
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Information to assist in the selection of marijuana, describing the potential differing effects of various strains of marijuana, as well as various forms and routes of administration;
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•
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Materials offered to consumers to enable them to track the strains used and their associated effects;
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•
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Information describing proper dosage and titration for different routes of administration, with an emphasis on using the smallest amount possible to achieve the desired effect;
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•
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A discussion of tolerance, dependence, and withdrawal;
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•
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Facts regarding substance abuse signs and symptoms, as well as referral information for substance abuse treatment programs;
|
•
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A statement that consumers may not sell marijuana to any other individual;
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•
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Information regarding penalties for possession or distribution of marijuana in violation of Massachusetts law; and
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•
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Any other information required by the CCC.
|
•
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Positively identifying individuals seeking access to the premises of the Marijuana Establishment or to whom or marijuana products are being transported pursuant to 935 CMR 500.105(14) to limit access solely to individuals 21 years of age or older;
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•
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Adopting procedures to prevent loitering and ensure that only individuals engaging in activity expressly or by necessary implication permitted by these regulations and its enabling statute are allowed to remain on the premises;
|
•
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Disposing of marijuana in accordance with 935 CMR 500.105(12) in excess of the quantity required for normal, efficient operation as established within 935 CMR 500.105;
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•
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Securing all entrances to the Marijuana Establishment to prevent unauthorized access;
|
•
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Establishing limited access areas pursuant to 935 CMR 500.110(4), which shall be accessible only to specifically authorized personnel limited to include only the minimum number of employees essential for efficient operation;
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•
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Storing all finished marijuana products in a secure, locked safe or vault in such a manner as to prevent diversion, theft and loss;
|
•
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Keeping all safes, vaults, and any other equipment or areas used for the production, cultivation, harvesting, processing or storage of marijuana products securely locked and protected from entry, except for the actual time required to remove or replace marijuana;
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•
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Keeping all locks and security equipment in good working order;
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•
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Prohibiting keys, if any, from being left in the locks or stored or placed in a location accessible to persons other than specifically authorized personnel;
|
•
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Prohibiting accessibility of security measures, such as combination numbers, passwords or electronic or biometric security systems, to persons other than specifically authorized personnel;
|
•
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Ensuring that the outside perimeter of the marijuana establishment is sufficiently lit to facilitate surveillance, where applicable;
|
•
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Ensuring that all marijuana products are kept out of plain sight and are not visible from a public place without the use of binoculars, optical aids or aircraft;
|
•
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Developing emergency policies and procedures for securing all product following any instance of diversion, theft or loss of marijuana, and conduct an assessment to determine whether additional safeguards are necessary;
|
•
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Developing sufficient additional safeguards as required by the CCC for marijuana establishments that present special security concerns; and
|
•
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Sharing the marijuana establishment's security plan and procedures with law enforcement authorities and fire services and periodically updating law enforcement authorities and fire services if the plans or procedures are modified in a material way.
|
•
|
Marijuana must be stored in special limited access areas, and alarm systems must meet certain technical requirements, including the ability to record footage to be retained for at least 90 days.
|
MSA Party
|
License Number
|
City
|
Expiration Date
|
Description
|
Prime Alternative Treatment Centers of NH, Inc.
|
ATC-001
|
Merrimack
|
6/30/2020
|
Grow / Manufacturing and Dispensary
|
MSA Party
|
Permit Number
|
City
|
Expiration Date
|
Description
|
CCF
|
10042013
|
Egg Harbor
|
12/31/2020
|
Cultivate and Dispense
|
CCF
|
10042013
|
Atlantic City
|
12/31/2020
|
Dispense
|
Subsidiary
|
License number
|
City
|
Expiration Date
|
Description
|
NYCANNA, LLC
|
MM0601M
|
Dewitt
|
7/31/2021
|
Acquiring possession, sale, transporting, distributing and dispensing medical marijuana
|
NYCANNA, LLC
|
MM0602D
|
Jamaica
|
7/31/2021
|
Acquiring possession, sale, transporting, distributing and dispensing medical marijuana
|
NYCANNA, LLC
|
MM0603D
|
Farmingdale
|
7/31/2021
|
Acquiring possession, sale, transporting, distributing and dispensing medical marijuana
|
NYCANNA, LLC
|
MM0604D
|
Buffalo
|
7/31/2021
|
Acquiring possession, sale, transporting, distributing and dispensing medical marijuana
|
NYCANNA, LLC
|
MM0605D
|
Wallkill
|
7/31/2021
|
Acquiring possession, sale, transporting, distributing and dispensing medical marijuana
|
MSA Party
|
License Number
|
City
|
Expiration Date
|
Description
|
GLA
|
MMD.0700044
|
Akron
|
12/4/2020
|
Dispensary Facility
|
GLA
|
MMD.0700042
|
Cleveland
|
12/4/2020
|
Dispensary Facility
|
GLA
|
MMD.0700004
|
Canton
|
12/4/2020
|
Dispensary Facility
|
GLA
|
MMD.0700005
|
Wickliffe
|
12/4/2020
|
Dispensary Facility
|
GLA
|
MMD.0700043
|
Columbus
|
12/4/2020
|
Dispensary Facility
|
GLT
|
MMCPP00064
|
Middlefield
|
3/8/2021
|
Processing
|
GLG
|
ID TBD
|
Middlefield
|
2/28/2020
|
Grow
|
MSA Party
|
License Number
|
City
|
Expiration Date
|
Description
|
Acreage OK Holdings, LLC
|
GAAA-N1LP-BYSH
|
Pocasset
|
1/19/2021
|
Commercial Grower
|
Acreage OK Holdings, LLC
|
PAAA-4KSX-AVD9
|
Pocasset
|
4/1/2021
|
Commercial Processor
|
Subsidiary
|
License Number
|
City
|
Expiration Date
|
Description
|
East 11th Incorporated
|
1004151A29E
|
Eugene
|
See below
|
Dispensary Facility
|
22nd and Burn Inc.
|
100400192AC
|
Portland
|
See below
|
Dispensary Facility
|
The Firestation 23 Inc.
|
1003660E75D
|
Portland
|
See below
|
Dispensary Facility
|
HSCP Oregon, LLC
|
1004152E8C9
|
Springfield
|
6/4/2020
|
Producer License
|
HSCP Oregon, LLC
|
1003642197C
|
Milwaukie
|
6/4/2020
|
Producer License
|
HSCP Oregon, LLC
|
020-1003642197C
|
Medford
|
6/4/2020
|
Producer License
|
HSCP Oregon, LLC
|
10026747951
|
Portland
|
See below
|
Dispensary Facility
|
Gesundheit Foods LLC
|
1013975ABC8
|
Milwaukie
|
7/18/2020
|
Processor
|
Gesundheit Foods LLC
|
1013984A526
|
Eugene
|
7/18/2020
|
Wholesaler
|
Subsidiary
|
Permit
|
City
|
Expiration Date
|
Description
|
Prime Wellness of Pennsylvania, LLC
|
GP-1005-17
|
Sinking Spring
|
6/20/2020
|
Grow/Processing Facility
|
•
|
changes in the valuation of deferred tax assets and liabilities;
|
•
|
expected timing and amount of the release of any tax valuation allowances;
|
•
|
tax effects of share-based compensation;
|
•
|
changes in tax laws, regulations or interpretations thereof; or
|
•
|
future earnings being lower than anticipated in countries where the Company has lower statutory tax rates and higher than anticipated earnings in countries where the Company has higher statutory tax rates.
|
Regions
|
Operational
|
In Development
|
Owned
|
Leased
|
New England
|
|
|||
Connecticut
|
3
|
—
|
—
|
3
|
Maine(1)
|
4
|
—
|
—
|
4
|
Massachusetts(1)
|
1
|
2
|
—
|
3
|
New Hampshire(1)
|
1
|
—
|
—
|
1
|
Mid-Atlantic
|
|
|||
New Jersey(1)(2)
|
2
|
1
|
—
|
3
|
New York
|
4
|
—
|
—
|
4
|
Midwest
|
|
|
|
|
Illinois
|
1
|
1
|
—
|
2
|
Michigan
|
—
|
3
|
3
|
—
|
Ohio(1)
|
5
|
—
|
—
|
5
|
West
|
|
|||
California
|
—
|
1
|
—
|
1
|
Oregon
|
5
|
—
|
—
|
5
|
South
|
|
|||
Florida
|
1
|
7
|
—
|
8
|
Total
|
27
|
15
|
3
|
39
|
(1)
|
Acreage provides services including but not limited to financing, management, consulting and/or administrative services with these license holders to assist in the operations of their cannabis businesses.
|
(2)
|
Pending acquisition.
|
Regions
|
Operational
|
In Development
|
Owned
|
Leased
|
New England
|
|
|
|
|
Maine(1)
|
1
|
—
|
—
|
1
|
Massachusetts(1)
|
1
|
1
|
—
|
1
|
New Hampshire(1)
|
1
|
—
|
—
|
1
|
Mid-Atlantic
|
|
|
|
|
New Jersey(1)(2)
|
1
|
1
|
1
|
1
|
New York
|
1
|
—
|
—
|
1
|
Pennsylvania
|
1
|
—
|
—
|
1
|
Midwest
|
|
|
|
|
Illinois
|
1
|
—
|
1
|
—
|
Iowa(3)
|
—
|
—
|
1
|
—
|
Ohio(1)
|
—
|
1
|
1
|
—
|
Oklahoma
|
—
|
1
|
—
|
1
|
West
|
|
|
|
|
California
|
2
|
—
|
—
|
2
|
Oregon
|
2
|
—
|
—
|
2
|
South
|
|
|
|
|
Florida
|
2
|
—
|
—
|
2
|
Total
|
13
|
4
|
4
|
13
|
(1)
|
Acreage provides services including but not limited to financing, management, consulting and/or administrative services with these license holders to assist in the operations of their cannabis businesses.
|
(2)
|
Pending acquisition.
|
(3)
|
Acreage owns a property in Iowa but it is not operational at this time.
|
–
|
Trulieve Cannabis Corp.
|
–
|
MedMen Enterprises Inc.
|
–
|
Cresco Labs Inc.
|
–
|
Green Thumb Industries Inc.
|
–
|
Curaleaf Holdings, Inc.
|
–
|
Harvest Health and Recreation, Inc.
|
–
|
iAnthus Capital Holdings, Inc.
|
Selected Financial Data
|
|
Year Ended December 31,
|
||||||||||
(in thousands, except per share amounts)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Revenues, net
|
|
$
|
74,109
|
|
|
$
|
21,124
|
|
|
$
|
7,743
|
|
Net operating loss
|
|
(191,444
|
)
|
|
(41,133
|
)
|
|
(7,047
|
)
|
|||
Net loss
|
|
(195,162
|
)
|
|
(32,261
|
)
|
|
(9,536
|
)
|
|||
Net loss attributable to Acreage
|
|
(150,268
|
)
|
|
(27,483
|
)
|
|
(8,543
|
)
|
|||
Net loss per share attributable Acreage, basic and diluted
|
|
(1.74
|
)
|
|
(0.41
|
)
|
|
(0.19
|
)
|
|||
Weighted average shares outstanding, basic and diluted
|
|
86,185
|
|
|
66,699
|
|
|
45,076
|
|
|
|
December 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Total assets
|
|
$
|
691,677
|
|
|
$
|
554,582
|
|
Total long-term liabilities
|
|
139,730
|
|
|
35,447
|
|
•
|
We closed our acquisition of Acreage Florida, Inc. effective January 4, 2019. Acreage Florida has a vertically integrated cannabis license in Florida, which allows for growing, processing, and retail dispensary operations in Florida.
|
•
|
We closed our acquisition of Kanna, Inc., a dispensary license holder in California.
|
•
|
We closed our acquisition of Form Factory Holdings, LLC (“Form Factory”), a manufacturer and distributor of cannabis-based edibles and beverages.
|
•
|
We entered into an arrangement agreement giving Canopy Growth Corporation (“Canopy Growth”), a world-leading diversified cannabis and hemp company, the right to acquire 100% of the shares of Acreage, with a requirement to do so at such time as cannabis production and sale become federally legal in the U.S. A payment of $300 million was made to Acreage shareholders upon implementation of the arrangement, which occurred effective June 27, 2019. In addition, Acreage is entitled to use certain of Canopy Growth Corporation’s portfolio of intellectual property on a no-fee basis. Please see Item 1 of this Form 10-K for additional information about the arrangement with Canopy Growth.
|
•
|
We entered into a definitive agreement to acquire all of the outstanding equity interests in Deep Roots Medical LLC (“Deep Roots”), a vertically integrated cannabis operator in Nevada. We announced the termination of the agreement by Deep Roots on April 3, 2020 following March 31, 2020, the end date for consummating the transaction. The agreement was terminated due to the ongoing moratorium imposed by the Nevada Department of Taxation. The delay prevented the parties from obtaining the consents, approvals and authorizations necessary to consummate the merger prior to the outside date provided in the agreement.
|
•
|
We acquired all remaining interests in NCC LLC (“NCC”), a licensed medicinal dispensary in Illinois. NCC subsequently acquired an adult-use license in February 2020 and is now a licensed adult-use dispensary as well.
|
•
|
We closed on our definitive agreement to purchase Thames Valley Apothecary, LLC, a licensed dispensary in Connecticut, increasing our footprint to three dispensaries in the state.
|
•
|
We entered into an agreement to acquire Compassionate Care Foundation, Inc. (“CCF”) on November 15, 2019. CCF is currently a nonprofit medicinal cannabis cultivator and dispenser in New Jersey. Upon the closing of the transaction, CCF’s successor will become a wholly owned subsidiary of High Street.
|
Summary Results of Operations
|
|
|
|
|
|
|
|
Better/(Worse)
|
|
Better/(Worse)
|
||||||||||||||||
in thousands, except per share amounts
|
|
Year Ended December 31,
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||||||||||||||||
|
|
2019
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Revenues, net
|
|
$
|
74,109
|
|
|
$
|
21,124
|
|
|
$
|
7,743
|
|
|
$
|
52,985
|
|
|
251
|
%
|
|
$
|
13,381
|
|
|
173
|
%
|
Operating loss
|
|
(191,444
|
)
|
|
(41,133
|
)
|
|
(7,047
|
)
|
|
(150,311
|
)
|
|
(365
|
)
|
|
(34,086
|
)
|
|
(484
|
)
|
|||||
Net loss attributable to Acreage
|
|
(150,268
|
)
|
|
(27,483
|
)
|
|
(8,543
|
)
|
|
(122,785
|
)
|
|
(447
|
)
|
|
(18,940
|
)
|
|
(222
|
)
|
|||||
Basic and diluted loss per share attributable to Acreage
|
|
$
|
(1.74
|
)
|
|
$
|
(0.41
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(1.33
|
)
|
|
(324
|
)%
|
|
$
|
(0.22
|
)
|
|
(116
|
)%
|
Gross profit
|
|
|
|
|
|
|
|
Better/(Worse)
|
|
Better/(Worse)
|
||||||||||||||||
in thousands
|
|
Year Ended December 31,
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||||||||||||||||
|
|
2019
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Retail revenue, net
|
|
$
|
54,401
|
|
|
$
|
17,475
|
|
|
$
|
7,743
|
|
|
$
|
36,926
|
|
|
211
|
%
|
|
$
|
9,732
|
|
|
126
|
%
|
Wholesale revenue, net
|
|
18,539
|
|
|
2,969
|
|
|
—
|
|
|
15,570
|
|
|
524
|
|
|
2,969
|
|
|
n/m
|
|
|||||
Other revenue, net
|
|
1,169
|
|
|
680
|
|
|
—
|
|
|
489
|
|
|
72
|
|
|
680
|
|
|
n/m
|
|
|||||
Total revenues, net
|
|
$
|
74,109
|
|
|
$
|
21,124
|
|
|
$
|
7,743
|
|
|
$
|
52,985
|
|
|
251
|
%
|
|
$
|
13,381
|
|
|
173
|
%
|
Cost of goods sold, retail
|
|
(33,844
|
)
|
|
(10,038
|
)
|
|
(4,308
|
)
|
|
(23,806
|
)
|
|
(237
|
)
|
|
(5,730
|
)
|
|
(133
|
)
|
|||||
Cost of goods sold, wholesale
|
|
(9,821
|
)
|
|
(1,666
|
)
|
|
—
|
|
|
(8,155
|
)
|
|
(489
|
)
|
|
(1,666
|
)
|
|
n/m
|
|
|||||
Total cost of goods sold
|
|
$
|
(43,665
|
)
|
|
$
|
(11,704
|
)
|
|
$
|
(4,308
|
)
|
|
$
|
(31,961
|
)
|
|
(273
|
)%
|
|
$
|
(7,396
|
)
|
|
(172
|
)%
|
Gross profit
|
|
$
|
30,444
|
|
|
$
|
9,420
|
|
|
$
|
3,435
|
|
|
$
|
21,024
|
|
|
223
|
%
|
|
$
|
5,985
|
|
|
174
|
%
|
Gross margin
|
|
41
|
%
|
|
45
|
%
|
|
44
|
%
|
|
|
|
(4
|
)%
|
|
|
|
1
|
%
|
|||||||
n/m - Not Meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (loss)
|
|
|
|
|
|
|
|
Better/(Worse)
|
|
Better/(Worse)
|
||||||||||||||||
in thousands
|
|
Year Ended December 31,
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||||||||||||||||
|
|
2019
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Income (loss) from investments, net
|
|
$
|
(480
|
)
|
|
$
|
21,777
|
|
|
$
|
406
|
|
|
$
|
(22,257
|
)
|
|
n/m
|
|
|
$
|
21,371
|
|
|
n/m
|
|
Interest income from loans receivable
|
|
3,978
|
|
|
1,178
|
|
|
330
|
|
|
2,800
|
|
|
238
|
|
|
848
|
|
|
257
|
|
|||||
Interest expense
|
|
(1,194
|
)
|
|
(4,617
|
)
|
|
(1,215
|
)
|
|
3,423
|
|
|
74
|
|
|
(3,402
|
)
|
|
(280
|
)
|
|||||
Other loss, net
|
|
(1,033
|
)
|
|
(7,930
|
)
|
|
(1,040
|
)
|
|
6,897
|
|
|
87
|
|
|
(6,890
|
)
|
|
(663
|
)
|
|||||
Total other income (loss)
|
|
$
|
1,271
|
|
|
$
|
10,408
|
|
|
$
|
(1,519
|
)
|
|
$
|
(9,137
|
)
|
|
(88
|
)%
|
|
$
|
11,927
|
|
|
n/m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
n/m - Not Meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
Better/(Worse)
|
|
Better/(Worse)
|
||||||||||||||||
in thousands
|
|
Year Ended December 31,
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||||||||||||||||
|
|
2019
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Net loss
|
|
$
|
(195,162
|
)
|
|
$
|
(32,261
|
)
|
|
$
|
(9,536
|
)
|
|
$
|
(162,901
|
)
|
|
(505
|
)%
|
|
$
|
(22,725
|
)
|
|
(238
|
)%
|
Less: net loss attributable to non-controlling interests
|
|
(44,894
|
)
|
|
(4,778
|
)
|
|
(993
|
)
|
|
(40,116
|
)
|
|
(840
|
)
|
|
(3,785
|
)
|
|
(381
|
)
|
|||||
Net loss attributable to Acreage Holdings, Inc.
|
|
$
|
(150,268
|
)
|
|
$
|
(27,483
|
)
|
|
$
|
(8,543
|
)
|
|
$
|
(122,785
|
)
|
|
(447
|
)%
|
|
$
|
(18,940
|
)
|
|
(222
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
n/m - Not Meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows
|
|
|
|
|
|
|
|
Better/(Worse)
|
|
Better/(Worse)
|
||||||||||||||||
in thousands
|
|
Year Ended December 31,
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||||||||||||||||
|
|
2019
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Net cash used in operating activities
|
|
$
|
(70,879
|
)
|
|
$
|
(35,536
|
)
|
|
$
|
(5,557
|
)
|
|
$
|
(35,343
|
)
|
|
(99
|
)%
|
|
$
|
(29,979
|
)
|
|
(539
|
)%
|
Net cash used in investing activities
|
|
(14,609
|
)
|
|
(235,692
|
)
|
|
(19,382
|
)
|
|
221,083
|
|
|
94
|
|
|
(216,310
|
)
|
|
n/m
|
|
|||||
Net cash provided by financing activities
|
|
7,050
|
|
|
359,766
|
|
|
36,143
|
|
|
(352,716
|
)
|
|
(98
|
)
|
|
323,623
|
|
|
895
|
|
|||||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
|
$
|
(78,438
|
)
|
|
$
|
88,538
|
|
|
$
|
11,204
|
|
|
$
|
(166,976
|
)
|
|
n/m
|
|
|
$
|
77,334
|
|
|
690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
n/m - Not Meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt balances
|
December 31, 2019
|
|
December 31, 2018
|
||||
NCCRE loan
|
$
|
492
|
|
|
$
|
511
|
|
Seller’s notes
|
2,810
|
|
|
15,124
|
|
||
Related party debt
|
15,000
|
|
|
—
|
|
||
Financing liability
|
19,052
|
|
|
—
|
|
||
Finance lease liabilities
|
6,132
|
|
|
—
|
|
||
Total debt
|
$
|
43,486
|
|
|
$
|
15,635
|
|
Less: current portion of debt
|
15,300
|
|
|
15,144
|
|
||
Total long-term debt
|
$
|
28,186
|
|
|
$
|
491
|
|
•
|
Revenue multiples of comparable industry peers.
|
•
|
Expected cash flows underlying our business plans for the periods 2020 through 2024.
|
•
|
Cash flows beyond 2024 are projected to grow at a perpetual growth rate, which was estimated to be 1%.
|
•
|
In order to risk-adjust the cash flow projections in determining value in use, we utilized an after-tax discount rate of approximately 11.8%.
|
|
|
|
|
|
|
|
|
|
|
ACREAGE HOLDINGS, INC.
|
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
(in thousands)
|
December 31, 2019
|
|
December 31, 2018
|
||||
ASSETS
|
|
|
|
||||
Cash and cash equivalents
|
$
|
26,505
|
|
|
$
|
104,943
|
|
Restricted cash
|
95
|
|
|
95
|
|
||
Short-term investments
|
—
|
|
|
149,090
|
|
||
Inventory
|
18,083
|
|
|
8,857
|
|
||
Notes receivable, current
|
2,146
|
|
|
3,114
|
|
||
Other current assets
|
8,506
|
|
|
2,716
|
|
||
Total current assets
|
55,335
|
|
|
268,815
|
|
||
Long-term investments
|
4,499
|
|
|
3,844
|
|
||
Notes receivable, non-current
|
79,479
|
|
|
27,431
|
|
||
Capital assets, net
|
106,047
|
|
|
45,043
|
|
||
Operating lease right-of-use assets
|
51,950
|
|
|
—
|
|
||
Intangible assets, net
|
285,972
|
|
|
153,953
|
|
||
Goodwill
|
105,757
|
|
|
32,116
|
|
||
Deferred acquisition costs and deposits
|
—
|
|
|
22,100
|
|
||
Other non-current assets
|
2,638
|
|
|
1,280
|
|
||
Total non-current assets
|
636,342
|
|
|
285,767
|
|
||
TOTAL ASSETS
|
$
|
691,677
|
|
|
$
|
554,582
|
|
|
|
|
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
||||
Accounts payable and accrued liabilities
|
$
|
32,459
|
|
|
$
|
5,337
|
|
Taxes payable
|
4,740
|
|
|
962
|
|
||
Interest payable
|
291
|
|
|
541
|
|
||
Operating lease liability, current
|
2,759
|
|
|
—
|
|
||
Debt, current
|
15,300
|
|
|
15,144
|
|
||
Other current liabilities
|
1,604
|
|
|
10,875
|
|
||
Total current liabilities
|
57,153
|
|
|
32,859
|
|
||
Debt, non-current
|
28,186
|
|
|
491
|
|
||
Operating lease liability, non-current
|
47,522
|
|
|
—
|
|
||
Deferred tax liability
|
63,997
|
|
|
33,827
|
|
||
Other liabilities
|
25
|
|
|
1,129
|
|
||
Total non-current liabilities
|
139,730
|
|
|
35,447
|
|
||
TOTAL LIABILITIES
|
196,883
|
|
|
68,306
|
|
||
Commitments and contingencies (Note 13)
|
|
|
|
||||
Common stock, no par value (Note 11) - unlimited authorized, 90,646 and 79,164 issued and outstanding, respectively
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
615,678
|
|
|
414,757
|
|
||
Treasury stock, 842 SVS held in treasury
|
(21,054
|
)
|
|
(21,054
|
)
|
||
Accumulated deficit
|
(188,617
|
)
|
|
(38,349
|
)
|
||
Total Acreage Shareholders' equity
|
406,007
|
|
|
355,354
|
|
||
Non-controlling interests
|
88,787
|
|
|
130,922
|
|
||
TOTAL EQUITY
|
494,794
|
|
|
486,276
|
|
||
|
|
|
|
||||
TOTAL LIABILITIES AND EQUITY
|
$
|
691,677
|
|
|
$
|
554,582
|
|
ACREAGE HOLDINGS, INC.
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
Year Ended December 31,
|
||||||||||
(in thousands, except per share amounts)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Retail revenue, net
|
|
$
|
54,401
|
|
|
$
|
17,475
|
|
|
$
|
7,743
|
|
Wholesale revenue, net
|
|
18,539
|
|
|
2,969
|
|
|
—
|
|
|||
Other revenue, net
|
|
1,169
|
|
|
680
|
|
|
—
|
|
|||
Total revenues, net
|
|
74,109
|
|
|
21,124
|
|
|
7,743
|
|
|||
Cost of goods sold, retail
|
|
(33,844
|
)
|
|
(10,038
|
)
|
|
(4,308
|
)
|
|||
Cost of goods sold, wholesale
|
|
(9,821
|
)
|
|
(1,666
|
)
|
|
—
|
|
|||
Total cost of goods sold
|
|
(43,665
|
)
|
|
(11,704
|
)
|
|
(4,308
|
)
|
|||
Gross profit
|
|
30,444
|
|
|
9,420
|
|
|
3,435
|
|
|||
|
|
|
|
|
|
|
||||||
OPERATING EXPENSES
|
|
|
|
|
|
|
||||||
General and administrative
|
|
56,224
|
|
|
18,647
|
|
|
4,560
|
|
|||
Compensation expense
|
|
42,061
|
|
|
15,356
|
|
|
3,853
|
|
|||
Equity-based compensation expense
|
|
97,538
|
|
|
11,230
|
|
|
1,837
|
|
|||
Marketing
|
|
5,009
|
|
|
1,571
|
|
|
212
|
|
|||
Loss on impairment
|
|
13,463
|
|
|
—
|
|
|
—
|
|
|||
Depreciation and amortization
|
|
7,593
|
|
|
3,749
|
|
|
20
|
|
|||
Total operating expenses
|
|
221,888
|
|
|
50,553
|
|
|
10,482
|
|
|||
|
|
|
|
|
|
|
||||||
Net operating loss
|
|
$
|
(191,444
|
)
|
|
$
|
(41,133
|
)
|
|
$
|
(7,047
|
)
|
|
|
|
|
|
|
|
||||||
Income (loss) from investments, net
|
|
(480
|
)
|
|
21,777
|
|
|
406
|
|
|||
Interest income from loans receivable
|
|
3,978
|
|
|
1,178
|
|
|
330
|
|
|||
Interest expense
|
|
(1,194
|
)
|
|
(4,617
|
)
|
|
(1,215
|
)
|
|||
Other loss, net
|
|
(1,033
|
)
|
|
(7,930
|
)
|
|
(1,040
|
)
|
|||
Total other income (loss)
|
|
1,271
|
|
|
10,408
|
|
|
(1,519
|
)
|
|||
|
|
|
|
|
|
|
||||||
Loss before income taxes
|
|
$
|
(190,173
|
)
|
|
$
|
(30,725
|
)
|
|
$
|
(8,566
|
)
|
|
|
|
|
|
|
|
||||||
Income tax expense
|
|
(4,989
|
)
|
|
(1,536
|
)
|
|
(970
|
)
|
|||
|
|
|
|
|
|
|
||||||
Net loss
|
|
$
|
(195,162
|
)
|
|
$
|
(32,261
|
)
|
|
$
|
(9,536
|
)
|
|
|
|
|
|
|
|
||||||
Less: net loss attributable to non-controlling interests
|
|
(44,894
|
)
|
|
(4,778
|
)
|
|
(993
|
)
|
|||
|
|
|
|
|
|
|
||||||
Net loss attributable to Acreage Holdings, Inc.
|
|
$
|
(150,268
|
)
|
|
$
|
(27,483
|
)
|
|
$
|
(8,543
|
)
|
|
|
|
|
|
|
|
||||||
Net loss per share attributable to Acreage Holdings, Inc. - basic and diluted:
|
|
$
|
(1.74
|
)
|
|
$
|
(0.41
|
)
|
|
$
|
(0.19
|
)
|
|
|
|
|
|
|
|
||||||
Weighted average shares outstanding - basic and diluted
|
|
86,185
|
|
|
66,699
|
|
|
45,076
|
|
ACREAGE HOLDINGS, INC.
|
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
Attributable to shareholders of the parent
|
|
|
|
|
||||||||||||||||||||
(in thousands)
|
|
LLC Membership Units
|
|
Pubco Shares (as converted)
|
|
Share Capital
|
|
Treasury Stock
|
|
Accumulated Deficit
|
|
Shareholders’ Equity
|
|
Non-controlling Interests
|
|
Total Equity
|
||||||||||||||
December 31, 2016
|
|
40,000
|
|
|
—
|
|
|
$
|
26,697
|
|
|
$
|
—
|
|
|
$
|
(2,318
|
)
|
|
$
|
24,379
|
|
|
$
|
4,562
|
|
|
$
|
28,941
|
|
Issuance of Class C units for in-kind contributions
|
|
6,000
|
|
|
—
|
|
|
630
|
|
|
—
|
|
|
—
|
|
|
630
|
|
|
—
|
|
|
630
|
|
||||||
Interest expense settled with PIK units
|
|
125
|
|
|
—
|
|
|
605
|
|
|
—
|
|
|
—
|
|
|
605
|
|
|
—
|
|
|
605
|
|
||||||
Capital contributions, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,461
|
|
|
6,461
|
|
||||||
Equity-based compensation expense and related issuances
|
|
3,250
|
|
|
—
|
|
|
1,522
|
|
|
—
|
|
|
—
|
|
|
1,522
|
|
|
—
|
|
|
1,522
|
|
||||||
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,543
|
)
|
|
(8,543
|
)
|
|
(993
|
)
|
|
(9,536
|
)
|
||||||
December 31, 2017
|
|
49,375
|
|
|
—
|
|
|
29,454
|
|
|
—
|
|
|
(10,861
|
)
|
|
18,593
|
|
|
10,030
|
|
|
28,623
|
|
||||||
Issuance of Class D units
|
|
17,018
|
|
|
—
|
|
|
105,514
|
|
|
—
|
|
|
—
|
|
|
105,514
|
|
|
—
|
|
|
105,514
|
|
||||||
Issuance of Class E units, net
|
|
19,352
|
|
|
—
|
|
|
116,124
|
|
|
—
|
|
|
—
|
|
|
116,124
|
|
|
—
|
|
|
116,124
|
|
||||||
Interest expense settled with PIK units
|
|
330
|
|
|
66
|
|
|
1,912
|
|
|
—
|
|
|
—
|
|
|
1,912
|
|
|
—
|
|
|
1,912
|
|
||||||
Conversion of notes to equity
|
|
6,473
|
|
|
—
|
|
|
30,759
|
|
|
—
|
|
|
—
|
|
|
30,759
|
|
|
—
|
|
|
30,759
|
|
||||||
Issuance of warrants
|
|
—
|
|
|
—
|
|
|
3,285
|
|
|
—
|
|
|
—
|
|
|
3,285
|
|
|
—
|
|
|
3,285
|
|
||||||
Issuance of Pubco shares in redemption of membership units
|
|
(66,820
|
)
|
|
65,978
|
|
|
280
|
|
|
(21,054
|
)
|
|
—
|
|
|
(20,774
|
)
|
|
—
|
|
|
(20,774
|
)
|
||||||
RTO-related issuances, net
|
|
—
|
|
|
12,626
|
|
|
298,004
|
|
|
—
|
|
|
—
|
|
|
298,004
|
|
|
—
|
|
|
298,004
|
|
||||||
Formation of NCI at RTO and adjustments for changes in ownership
|
|
(27,340
|
)
|
|
—
|
|
|
(133,943
|
)
|
|
—
|
|
|
—
|
|
|
(133,943
|
)
|
|
133,943
|
|
|
—
|
|
||||||
Establishment of deferred tax liability due to RTO
|
|
—
|
|
|
—
|
|
|
(30,175
|
)
|
|
—
|
|
|
—
|
|
|
(30,175
|
)
|
|
—
|
|
|
(30,175
|
)
|
||||||
Capital contributions, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,767
|
|
|
2,767
|
|
||||||
Increase in non-controlling interests from business acquisitions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,241
|
|
|
7,241
|
|
||||||
Purchase of non-controlling interests
|
|
—
|
|
|
—
|
|
|
(21,798
|
)
|
|
—
|
|
|
—
|
|
|
(21,798
|
)
|
|
(12,305
|
)
|
|
(34,103
|
)
|
||||||
Other equity transactions
|
|
—
|
|
|
398
|
|
|
4,426
|
|
|
—
|
|
|
(5
|
)
|
|
4,421
|
|
|
(5,976
|
)
|
|
(1,555
|
)
|
||||||
Equity-based compensation expense and related issuances
|
|
1,612
|
|
|
96
|
|
|
10,915
|
|
|
—
|
|
|
—
|
|
|
10,915
|
|
|
—
|
|
|
10,915
|
|
||||||
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,483
|
)
|
|
(27,483
|
)
|
|
(4,778
|
)
|
|
(32,261
|
)
|
||||||
December 31, 2018
|
|
—
|
|
|
79,164
|
|
|
$
|
414,757
|
|
|
$
|
(21,054
|
)
|
|
$
|
(38,349
|
)
|
|
$
|
355,354
|
|
|
$
|
130,922
|
|
|
$
|
486,276
|
|
Issuances for business acquisitions/purchases of intangible assets
|
|
—
|
|
|
5,364
|
|
|
104,748
|
|
|
—
|
|
|
—
|
|
|
104,748
|
|
|
4,356
|
|
|
109,104
|
|
||||||
NCI adjustments for changes in ownership
|
|
—
|
|
|
2,784
|
|
|
(2,766
|
)
|
|
—
|
|
|
—
|
|
|
(2,766
|
)
|
|
2,766
|
|
|
—
|
|
||||||
Capital distributions, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,363
|
)
|
|
(4,363
|
)
|
||||||
Other equity transactions
|
|
—
|
|
|
589
|
|
|
11,707
|
|
|
—
|
|
|
—
|
|
|
11,707
|
|
|
—
|
|
|
11,707
|
|
||||||
Equity-based compensation expense and related issuances
|
|
—
|
|
|
2,745
|
|
|
87,232
|
|
|
—
|
|
|
—
|
|
|
87,232
|
|
|
—
|
|
|
87,232
|
|
||||||
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(150,268
|
)
|
|
(150,268
|
)
|
|
(44,894
|
)
|
|
(195,162
|
)
|
||||||
December 31, 2019
|
|
—
|
|
|
90,646
|
|
|
$
|
615,678
|
|
|
$
|
(21,054
|
)
|
|
$
|
(188,617
|
)
|
|
$
|
406,007
|
|
|
$
|
88,787
|
|
|
$
|
494,794
|
|
ACREAGE HOLDINGS, INC.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
Year Ended December 31,
|
||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
||||||
Net loss
|
|
$
|
(195,162
|
)
|
|
$
|
(32,261
|
)
|
|
$
|
(9,536
|
)
|
Adjustments for:
|
|
|
|
|
|
|
||||||
Depreciation and amortization
|
|
7,593
|
|
|
3,749
|
|
|
20
|
|
|||
Equity-settled expenses, including compensation
|
|
102,898
|
|
|
19,360
|
|
|
1,837
|
|
|||
Gain on sale of investment
|
|
—
|
|
|
(1,500
|
)
|
|
—
|
|
|||
Loss on disposal of capital assets
|
|
363
|
|
|
—
|
|
|
—
|
|
|||
Loss on impairment
|
|
13,463
|
|
|
—
|
|
|
—
|
|
|||
Non-cash interest expense
|
|
67
|
|
|
2,838
|
|
|
737
|
|
|||
Non-cash operating lease expense
|
|
1,684
|
|
|
—
|
|
|
—
|
|
|||
Deferred tax (income) expense
|
|
(3,844
|
)
|
|
(56
|
)
|
|
—
|
|
|||
Non-cash (income) loss from investments, net
|
|
1,272
|
|
|
(19,340
|
)
|
|
(255
|
)
|
|||
Other non-cash (income) expense, net
|
|
(2,394
|
)
|
|
469
|
|
|
4
|
|
|||
Change, net of acquisitions in:
|
|
|
|
|
|
|
||||||
Inventory
|
|
(6,941
|
)
|
|
(3,641
|
)
|
|
(155
|
)
|
|||
Other assets
|
|
(5,053
|
)
|
|
(3,075
|
)
|
|
(503
|
)
|
|||
Interest receivable
|
|
(4,002
|
)
|
|
(1,208
|
)
|
|
(258
|
)
|
|||
Accounts payable and accrued liabilities
|
|
17,217
|
|
|
95
|
|
|
1,503
|
|
|||
Taxes payable
|
|
3,778
|
|
|
(152
|
)
|
|
705
|
|
|||
Interest payable
|
|
(250
|
)
|
|
398
|
|
|
143
|
|
|||
Other liabilities
|
|
(1,568
|
)
|
|
(1,212
|
)
|
|
201
|
|
|||
Net cash used in operating activities
|
|
$
|
(70,879
|
)
|
|
$
|
(35,536
|
)
|
|
$
|
(5,557
|
)
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
||||||
Purchases of capital assets
|
|
$
|
(47,085
|
)
|
|
$
|
(22,351
|
)
|
|
$
|
(4,704
|
)
|
Investments in notes receivable
|
|
(39,145
|
)
|
|
(15,483
|
)
|
|
(3,823
|
)
|
|||
Collection of notes receivable
|
|
3,164
|
|
|
4,519
|
|
|
—
|
|
|||
Cash paid for long-term investments
|
|
(4,158
|
)
|
|
(2,201
|
)
|
|
(10,985
|
)
|
|||
Proceeds from sale of investment
|
|
—
|
|
|
9,634
|
|
|
—
|
|
|||
Proceeds from sale of capital assets
|
|
172
|
|
|
—
|
|
|
—
|
|
|||
Business acquisitions, net of cash acquired
|
|
(21,205
|
)
|
|
(32,147
|
)
|
|
—
|
|
|||
Purchases of intangible assets
|
|
(58,488
|
)
|
|
(6,445
|
)
|
|
(200
|
)
|
|||
Deferred acquisition costs and deposits
|
|
2,076
|
|
|
(22,675
|
)
|
|
—
|
|
|||
Distributions from investments
|
|
232
|
|
|
141
|
|
|
330
|
|
|||
Proceeds from (purchase of) short-term investments
|
|
149,828
|
|
|
(148,684
|
)
|
|
—
|
|
|||
Net cash used in investing activities
|
|
$
|
(14,609
|
)
|
|
$
|
(235,692
|
)
|
|
$
|
(19,382
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
||||||
Proceeds from related party debt
|
|
$
|
15,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Proceeds from financing
|
|
19,052
|
|
|
—
|
|
|
—
|
|
|||
Proceeds from issuance of membership units, net
|
|
—
|
|
|
116,890
|
|
|
—
|
|
|||
Proceeds from issuance of subscription receipts, net
|
|
—
|
|
|
298,644
|
|
|
—
|
|
|||
Proceeds from convertible note, net of deferred costs
|
|
—
|
|
|
—
|
|
|
29,701
|
|
|||
Settlement of taxes withheld
|
|
(10,306
|
)
|
|
(21,054
|
)
|
|
—
|
|
|||
Purchase of non-controlling interest
|
|
—
|
|
|
(19,643
|
)
|
|
—
|
|
|||
Repayment of debt
|
|
(12,333
|
)
|
|
(17,838
|
)
|
|
(19
|
)
|
|||
Capital contributions (distributions) - non-controlling interests, net
|
|
(4,363
|
)
|
|
2,767
|
|
|
6,461
|
|
|||
Net cash provided by financing activities
|
|
$
|
7,050
|
|
|
$
|
359,766
|
|
|
$
|
36,143
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
|
$
|
(78,438
|
)
|
|
$
|
88,538
|
|
|
$
|
11,204
|
|
Cash, cash equivalents and restricted cash - Beginning of period
|
|
105,038
|
|
|
16,500
|
|
|
5,296
|
|
|||
Cash, cash equivalents and restricted cash - End of period
|
|
$
|
26,600
|
|
|
$
|
105,038
|
|
|
$
|
16,500
|
|
ACREAGE HOLDINGS, INC.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
Year Ended December 31,
|
||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
||||||
Interest paid - non-lease
|
|
$
|
685
|
|
|
$
|
1,381
|
|
|
$
|
335
|
|
Income taxes paid
|
|
4,555
|
|
|
1,744
|
|
|
101
|
|
|||
OTHER NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
||||||
Capital assets not yet paid for
|
|
$
|
8,188
|
|
|
$
|
393
|
|
|
$
|
5,717
|
|
Issuance of Class D units for land
|
|
—
|
|
|
2,600
|
|
|
—
|
|
|||
Issuance of SVS for operating lease
|
|
3,353
|
|
|
—
|
|
|
—
|
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
•
|
Level 1 - quoted prices (unadjusted) that are in active markets for identical assets or liabilities
|
•
|
Level 2 - inputs that are observable for the asset or liability, either directly (prices) for similar assets or liabilities in active markets or indirectly (derived from prices) for identical assets or liabilities in markets with insufficient volume or infrequent transactions
|
•
|
Level 3 - inputs for assets or liabilities that are not based upon observable market data
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
1.
|
Identify the contract with a customer;
|
2.
|
Identify the performance obligation(s);
|
3.
|
Determine the transaction price;
|
4.
|
Allocate the transaction price to the performance obligation(s);
|
5.
|
Recognize revenue when/as performance obligation(s) are satisfied.
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
Purchase Price Allocation
|
|
Thames Valley
(1)
|
|
NCC
(2)
|
|
Form Factory (3)
|
|
Total
|
||||||||
Assets acquired:
|
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
|
$
|
106
|
|
|
$
|
696
|
|
|
$
|
4,276
|
|
|
$
|
5,078
|
|
Inventory
|
|
39
|
|
|
170
|
|
|
520
|
|
|
729
|
|
||||
Other current assets
|
|
1
|
|
|
36
|
|
|
1,136
|
|
|
1,173
|
|
||||
Capital assets, net
|
|
—
|
|
|
539
|
|
|
3,988
|
|
|
4,527
|
|
||||
Operating lease ROU asset
|
|
—
|
|
|
—
|
|
|
10,477
|
|
|
10,477
|
|
||||
Goodwill
|
|
3,596
|
|
|
4,192
|
|
|
65,303
|
|
|
73,091
|
|
||||
Intangible assets - cannabis licenses
|
|
14,850
|
|
|
2,500
|
|
|
40,372
|
|
|
57,722
|
|
||||
Intangible assets - customer relationships
|
|
—
|
|
|
—
|
|
|
4,600
|
|
|
4,600
|
|
||||
Intangible assets - developed technology
|
|
—
|
|
|
—
|
|
|
3,100
|
|
|
3,100
|
|
||||
Other non-current assets
|
|
—
|
|
|
25
|
|
|
403
|
|
|
428
|
|
||||
Liabilities assumed:
|
|
|
|
|
|
|
|
|
|
|||||||
Accounts payable and accrued liabilities
|
|
(121
|
)
|
|
(24
|
)
|
|
(1,572
|
)
|
|
(1,717
|
)
|
||||
Other current liabilities
|
|
—
|
|
|
(621
|
)
|
|
(74
|
)
|
|
(695
|
)
|
||||
Debt
|
|
—
|
|
|
—
|
|
|
(494
|
)
|
|
(494
|
)
|
||||
Operating lease liability
|
|
—
|
|
|
—
|
|
|
(10,477
|
)
|
|
(10,477
|
)
|
||||
Deferred tax liability
|
|
(3,399
|
)
|
|
(461
|
)
|
|
(14,519
|
)
|
|
(18,379
|
)
|
||||
Other liabilities
|
|
—
|
|
|
(175
|
)
|
|
(23
|
)
|
|
(198
|
)
|
||||
Fair value of net assets acquired
|
|
$
|
15,072
|
|
|
$
|
6,877
|
|
|
$
|
107,016
|
|
|
$
|
128,965
|
|
|
|
|
|
|
|
|
|
|
||||||||
Consideration paid:
|
|
|
|
|
|
|
|
|
||||||||
Cash
|
|
$
|
15,072
|
|
|
$
|
—
|
|
|
$
|
3,711
|
|
|
$
|
18,783
|
|
Deferred acquisition costs and deposits
|
|
—
|
|
|
100
|
|
|
—
|
|
|
100
|
|
||||
Subordinate Voting Shares
|
|
—
|
|
|
3,948
|
|
|
95,266
|
|
|
99,214
|
|
||||
Settlement of pre-existing relationship
|
|
—
|
|
|
830
|
|
|
8,039
|
|
|
8,869
|
|
||||
Fair value of previously held interest
|
|
—
|
|
|
1,999
|
|
|
—
|
|
|
1,999
|
|
||||
Total consideration
|
|
$
|
15,072
|
|
|
$
|
6,877
|
|
|
$
|
107,016
|
|
|
$
|
128,965
|
|
|
|
|
|
|
|
|
|
|
||||||||
Subordinate Voting Shares issued
|
|
—
|
|
|
211
|
|
|
4,770
|
|
|
4,981
|
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
Purchase Price Allocation
|
|
D&B
(1)
|
|
WPMC
(2)
|
|
PATCC
(3)
|
|
PWC
(4)
|
|
NYCANNA
(5)
|
|
PWCT
(6)
|
|
IGF
(7)
|
|
Total
|
||||||||||||||||
Assets acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Cash and cash equivalents
|
|
$
|
308
|
|
|
$
|
62
|
|
|
$
|
36
|
|
|
$
|
19
|
|
|
$
|
453
|
|
|
$
|
662
|
|
|
$
|
4
|
|
|
$
|
1,544
|
|
Inventory
|
|
120
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,385
|
|
|
205
|
|
|
319
|
|
|
4,029
|
|
||||||||
Other current assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
67
|
|
|
1
|
|
|
29
|
|
|
97
|
|
||||||||
Notes receivable
|
|
—
|
|
|
814
|
|
|
6,181
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,995
|
|
||||||||
Capital assets, net
|
|
24
|
|
|
—
|
|
|
—
|
|
|
5,614
|
|
|
5,996
|
|
|
723
|
|
|
3,119
|
|
|
15,476
|
|
||||||||
Goodwill
|
|
1,328
|
|
|
11,586
|
|
|
5,636
|
|
|
6,241
|
|
|
1,626
|
|
|
1,491
|
|
|
2,017
|
|
|
29,925
|
|
||||||||
Intangible assets - cannabis licenses
|
|
13,100
|
|
|
—
|
|
|
—
|
|
|
15,300
|
|
|
39,800
|
|
|
9,399
|
|
|
10,298
|
|
|
87,897
|
|
||||||||
Intangible assets - management contracts
|
|
—
|
|
|
31,200
|
|
|
6,401
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
37,601
|
|
||||||||
Other non-current assets
|
|
5
|
|
|
—
|
|
|
—
|
|
|
123
|
|
|
69
|
|
|
7
|
|
|
—
|
|
|
204
|
|
||||||||
Liabilities assumed:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Accounts payable and accrued liabilities
|
|
(382
|
)
|
|
(41
|
)
|
|
—
|
|
|
(872
|
)
|
|
(1,153
|
)
|
|
(275
|
)
|
|
(41
|
)
|
|
(2,764
|
)
|
||||||||
Deferred tax liability
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,708
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,708
|
)
|
||||||||
Other liabilities
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(49
|
)
|
|
—
|
|
|
—
|
|
|
(52
|
)
|
||||||||
Fair value of net assets acquired
|
|
$
|
14,500
|
|
|
$
|
43,621
|
|
|
$
|
18,254
|
|
|
$
|
22,717
|
|
|
$
|
50,194
|
|
|
$
|
12,213
|
|
|
$
|
15,745
|
|
|
$
|
177,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Consideration paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Cash paid in 2018
|
|
$
|
250
|
|
|
$
|
8,168
|
|
|
$
|
—
|
|
|
$
|
750
|
|
|
$
|
13,833
|
|
|
$
|
2,475
|
|
|
$
|
8,215
|
|
|
$
|
33,691
|
|
Cash paid in 2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,500
|
|
|
$
|
7,500
|
|
|||||||
Class D units
|
|
3,100
|
|
|
11,200
|
|
|
14,964
|
|
|
21,046
|
|
|
21,575
|
|
|
7,122
|
|
|
—
|
|
|
79,007
|
|
||||||||
Subordinate Voting Shares (“SVS”)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
30
|
|
||||||||
Seller’s notes (Note 10)
|
|
11,150
|
|
|
—
|
|
|
1,118
|
|
|
921
|
|
|
2,238
|
|
|
479
|
|
|
—
|
|
|
15,906
|
|
||||||||
Fair value of previously held interest
|
|
—
|
|
|
17,012
|
|
|
2,172
|
|
|
—
|
|
|
12,548
|
|
|
2,137
|
|
|
—
|
|
|
33,869
|
|
||||||||
Fair value of non-controlling interest
|
|
—
|
|
|
7,241
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,241
|
|
||||||||
Total consideration
|
|
$
|
14,500
|
|
|
$
|
43,621
|
|
|
$
|
18,254
|
|
|
$
|
22,717
|
|
|
$
|
50,194
|
|
|
$
|
12,213
|
|
|
$
|
15,745
|
|
|
$
|
177,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Class D units/SVS issued
|
|
500
|
|
|
1,806
|
|
|
2,414
|
|
|
3,394
|
|
|
3,480
|
|
|
1,149
|
|
|
1
|
|
|
12,744
|
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
Pro forma results (unaudited)
|
|
Revenues, net
|
|
Gross profit
|
|
Net operating income (loss)
|
|
Net income (loss)
|
||||||||
Consolidated results
|
|
$
|
21,124
|
|
|
$
|
9,420
|
|
|
$
|
(41,133
|
)
|
|
$
|
(32,261
|
)
|
D&B/PWCT pre-acquisition
|
|
11,077
|
|
|
4,661
|
|
|
2,685
|
|
|
2,502
|
|
||||
Pro forma results
|
|
$
|
32,201
|
|
|
$
|
14,081
|
|
|
$
|
(38,448
|
)
|
|
$
|
(29,759
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
D&B/PWCT post-acquisition
|
|
$
|
8,357
|
|
|
$
|
2,899
|
|
|
$
|
1,791
|
|
|
$
|
1,800
|
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
Acquisition Target
|
|
December 31, 2018
|
||
Nature’s Way Nursery of Miami, Inc.
|
|
$
|
12,000
|
|
Form Factory (1)
|
|
10,000
|
|
|
NCC
|
|
100
|
|
|
Deferred acquisition costs and deposits
|
|
$
|
22,100
|
|
Intangibles
|
|
December 31, 2019
|
|
December 31, 2018
|
||||
Finite-lived intangible assets:
|
|
|
|
|
||||
Management contracts
|
|
$
|
52,438
|
|
|
$
|
68,384
|
|
Customer relationships
|
|
4,600
|
|
|
—
|
|
||
Developed technology
|
|
3,100
|
|
|
—
|
|
||
|
|
60,138
|
|
|
68,384
|
|
||
Accumulated amortization on finite-lived intangible assets:
|
|
|
|
|
||||
Management contracts
|
|
(5,750
|
)
|
|
(3,128
|
)
|
||
Customer relationships
|
|
(649
|
)
|
|
—
|
|
||
Developed technology
|
|
(114
|
)
|
|
—
|
|
||
|
|
(6,513
|
)
|
|
(3,128
|
)
|
||
Finite-lived intangible assets, net
|
|
53,625
|
|
|
65,256
|
|
||
|
|
|
|
|
||||
Indefinite-lived intangible assets
|
|
|
|
|
||||
Cannabis licenses
|
|
232,347
|
|
|
88,697
|
|
||
|
|
|
|
|
||||
Total intangibles, net
|
|
$
|
285,972
|
|
|
$
|
153,953
|
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
•
|
On January 4, 2019, the Company purchased a vertically-integrated license in Florida to operate a cultivation and processing facility and up to 40 medical cannabis dispensaries by acquiring Acreage Florida, Inc. (formerly known as Nature’s Way Nursery of Miami, Inc.). Total consideration of $70,103 included: (i) $53,747 in cash, (ii) $12,000 of previously-paid deferred acquisition costs and (iii) $4,356 in HSCP units (198 units). The HSCP units issued were valued based on the market price of SVS (for which HSCP units are convertible) at the transaction date, which was $22.00 per share. In addition to the intangible asset purchased, the Company also acquired $361 of equipment, recorded in Capital assets, net and a $190 surety bond, recorded in Other non-current assets in the Consolidated Statements of Financial Position. A deferred tax liability of $16,049 was also recorded in connection with this purchase.
|
•
|
On July 2, 2019, the Company acquired Kanna, Inc. (“Kanna”), a dispensary license holder in Oakland, California, for total consideration of $7,525 which included: (i) $1,991 in cash and (ii) $5,534 in Subordinate Voting Shares (383 shares). A deferred tax liability of $2,316 was also recorded in connection with this purchase. The SVS issued were valued based on the market price at the transaction date, which was $15.81 per share. Certain SVS are subject to clawback should certain indemnity conditions arise and as such, a discount for lack of marketability was applied that correlates to the period of time these shares are subject to restriction.
|
•
|
On May 4, 2018, the Company obtained a management contract with a useful life of 20 years through acquisition of South Shore BioPharma, LLC (“SSBP”), a management company located in Massachusetts, for total consideration of $4,277, which included: (i) $416 of cash, (ii) $1,805 in Class D units (291 units) and (iii) $2,056 in seller’s notes.
|
•
|
The Company entered into management contracts with GLA to operate five dispensaries, Greenleaf Therapeutics, LLC to operate a processing facility, and Greenleaf Gardens, LLC to operate a cultivation facility (together “Greenleaf”) on July 2, August 8 and December 20, 2018, respectively. The useful lives of the management contracts are 10 years. Total consideration of $23,272 consisted of: (i) $8,245 in cash ($2,750 of which was paid in 2019), (ii) $5,494 in Class D units (886 units), (iii) $6,095 in seller’s notes and (iv) $3,438 in SVS (269 shares, valued at $12.84 per share, the closing price on the date of the cultivation facility management contract purchase). As part of this arrangement, the Company also issued a secured line of credit for use in build-out of the managed facilities (refer to Note 6 for further information).
|
•
|
On July 30, 2018, the Company purchased a management contract with a useful life of 7 years by acquiring the remaining 55% ownership interest in HSRC NorCal, LLC (“NorCal”). Total consideration of $7,409 included: (i) $534 in cash, $3,446 in Class D units (556 units), (iii) $86 settlement of pre-existing relationship and (iv) $3,343 fair value of previously held interest. As a result of this acquisition, the Company’s previously held equity method investment in NorCal was re-measured, resulting in a gain of $255, which was recorded in Income from investments, net in the Consolidated Statements of Operations during the year ended December 31, 2018. As part of this purchase, the Company also acquired a secured line of credit with an outstanding balance of $4,175 at the time of purchase for use in build-out of the managed facilities (refer to Note 6 for further information).
|
Amortization of Intangibles
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
||||||||||
Amortization expense
|
|
$
|
5,234
|
|
|
$
|
5,234
|
|
|
$
|
5,234
|
|
|
$
|
5,234
|
|
|
$
|
4,585
|
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
Goodwill
|
|
Total
|
||
December 31, 2017
|
|
$
|
2,191
|
|
Acquisitions
|
|
29,925
|
|
|
December 31, 2018
|
|
$
|
32,116
|
|
Acquisitions
|
|
73,091
|
|
|
Adjustment to purchase price allocation
|
|
550
|
|
|
December 31, 2019
|
|
$
|
105,757
|
|
Investments
|
|
December 31, 2019
|
|
December 31, 2018
|
||||
Total short-term investments
|
|
$
|
—
|
|
|
$
|
149,090
|
|
|
|
|
|
|
||||
Investments held at FV-NI
|
|
4,376
|
|
|
2,869
|
|
||
Equity method investments
|
|
123
|
|
|
975
|
|
||
Total long-term investments
|
|
$
|
4,499
|
|
|
$
|
3,844
|
|
Investment income
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Short-term investments
|
|
$
|
738
|
|
|
$
|
406
|
|
|
$
|
—
|
|
Investments without readily determinable fair value
|
|
—
|
|
|
—
|
|
|
150
|
|
|||
Investments held at FV-NI
|
|
(2,218
|
)
|
|
6,570
|
|
|
—
|
|
|||
Equity method investments
|
|
1,000
|
|
|
13,301
|
|
|
256
|
|
|||
Gain from investments held for sale
|
|
—
|
|
|
1,500
|
|
|
—
|
|
|||
Income from investments, net
|
|
$
|
(480
|
)
|
|
$
|
21,777
|
|
|
$
|
406
|
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
|
|
December 31, 2019
|
|
December 31, 2018
|
||||
Notes receivable
|
|
$
|
75,851
|
|
|
$
|
27,920
|
|
Interest receivable
|
|
5,774
|
|
|
2,625
|
|
||
Total notes receivable
|
|
$
|
81,625
|
|
|
$
|
30,545
|
|
Less: Notes receivable, current
|
|
2,146
|
|
|
3,114
|
|
||
Notes receivable, non-current
|
|
$
|
79,479
|
|
|
$
|
27,431
|
|
Lines of Credit
|
|
|
|
|
|
Balance as of
|
||||||||
Counterparty
|
|
Maximum Obligation
|
|
Interest Rate
|
|
December 31, 2019
|
|
December 31, 2018
|
||||||
Greenleaf (1)
|
|
$
|
29,286
|
|
|
4.75% - 5%
|
|
$
|
22,569
|
|
|
$
|
7,030
|
|
CWG Botanicals, Inc. ("CWG") (2)
|
|
12,000
|
|
|
8%
|
|
9,152
|
|
|
4,587
|
|
|||
Compassionate Care Foundation, Inc. (“CCF”) (3)
|
|
12,500
|
|
|
18%
|
|
7,152
|
|
|
5,616
|
|
|||
Prime Alternative Treatment Center, Inc. ("PATC") (4)
|
|
4,650
|
|
|
15%
|
|
4,650
|
|
|
4,650
|
|
|||
Patient Centric of Martha’s Vineyard, Ltd. (“PCMV”) (5)
|
|
9,000
|
|
|
15%
|
|
5,758
|
|
|
856
|
|
|||
Health Circle, Inc. (6)
|
|
8,000
|
|
|
15%
|
|
3,988
|
|
|
1,519
|
|
|||
Total
|
|
$
|
75,436
|
|
|
|
|
$
|
53,269
|
|
|
$
|
24,258
|
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
|
|
December 31, 2019
|
|
December 31, 2018
|
||||
Land
|
|
$
|
9,839
|
|
|
$
|
6,241
|
|
Building
|
|
34,522
|
|
|
14,364
|
|
||
Right-of-use asset, finance leases
|
|
5,954
|
|
|
—
|
|
||
Construction in progress
|
|
17,288
|
|
|
5,569
|
|
||
Furniture, fixtures and equipment
|
|
21,019
|
|
|
8,156
|
|
||
Leasehold improvements
|
|
22,682
|
|
|
12,115
|
|
||
Capital assets, gross
|
|
$
|
111,304
|
|
|
$
|
46,445
|
|
Less: accumulated depreciation
|
|
(5,257
|
)
|
|
(1,402
|
)
|
||
Capital assets, net
|
|
$
|
106,047
|
|
|
$
|
45,043
|
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
Balance Sheet Information
|
|
Classification
|
|
December 31, 2019
|
||
Right-of-use assets
|
|
|
|
|
||
Operating
|
|
Operating lease right-of-use assets
|
|
$
|
51,950
|
|
Finance
|
|
Capital assets, net
|
|
5,832
|
|
|
Total right-of-use assets
|
|
|
|
$
|
57,782
|
|
|
|
|
|
|
||
Lease liabilities
|
|
|
|
|
||
Current
|
|
|
|
|
||
Operating
|
|
Operating lease liability, current
|
|
$
|
2,759
|
|
Financing
|
|
Debt, current
|
|
49
|
|
|
Non-current
|
|
|
|
|
||
Operating
|
|
Operating lease liability, non-current
|
|
47,522
|
|
|
Financing
|
|
Debt, non-current
|
|
6,083
|
|
|
Total lease liabilities
|
|
|
|
$
|
56,413
|
|
|
|
|
|
|
||
Statement of Operations Information
|
|
Classification
|
|
Year Ended
December 31, 2019 |
||
Short-term lease expense
|
|
General and administrative
|
|
$
|
1,262
|
|
Operating lease expense
|
|
General and administrative
|
|
5,351
|
|
|
Finance lease expense:
|
|
|
|
|
||
Amortization of right of use asset
|
|
Depreciation and amortization
|
|
122
|
|
|
Interest expense on lease liabilities
|
|
Interest expense
|
|
290
|
|
|
Sublease income
|
|
Other loss, net
|
|
(110
|
)
|
|
Net lease cost
|
|
|
|
$
|
5,653
|
|
|
|
|
|
|
||
Statement of Cash Flows Information
|
|
Classification
|
|
Year Ended
December 31, 2019 |
||
Cash paid for operating leases
|
|
Net cash used in operating activities
|
|
$
|
3,667
|
|
Cash paid for finance leases - interest
|
|
Net cash used in operating activities
|
|
$
|
223
|
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
Maturity of lease liabilities
|
|
Operating Leases
|
|
Finance Leases
|
||||
2020
|
|
$
|
7,329
|
|
|
$
|
832
|
|
2021
|
|
8,035
|
|
|
873
|
|
||
2022
|
|
7,884
|
|
|
893
|
|
||
2023
|
|
7,704
|
|
|
914
|
|
||
2024
|
|
7,396
|
|
|
936
|
|
||
Thereafter
|
|
49,921
|
|
|
18,740
|
|
||
Total lease payments
|
|
$
|
88,269
|
|
|
$
|
23,188
|
|
Less: interest
|
|
37,988
|
|
|
17,056
|
|
||
Present value of lease liabilities
|
|
$
|
50,281
|
|
|
$
|
6,132
|
|
|
|
|
|
|
||||
Weighted average remaining lease term (years)
|
|
11
|
|
24
|
||||
Weighted average discount rate
|
|
10%
|
|
14%
|
|
|
December 31, 2019
|
|
December 31, 2018
|
||||
Retail inventory
|
|
$
|
1,784
|
|
|
$
|
1,101
|
|
Wholesale inventory
|
|
11,993
|
|
|
4,848
|
|
||
Cultivation inventory
|
|
3,021
|
|
|
2,400
|
|
||
Supplies & other
|
|
1,285
|
|
|
508
|
|
||
Total
|
|
$
|
18,083
|
|
|
$
|
8,857
|
|
Debt balances
|
December 31, 2019
|
|
December 31, 2018
|
||||
NCCRE loan
|
$
|
492
|
|
|
$
|
511
|
|
Seller’s notes
|
2,810
|
|
|
15,124
|
|
||
Related party debt
|
15,000
|
|
|
—
|
|
||
Financing liability
|
19,052
|
|
|
—
|
|
||
Finance lease liabilities
|
6,132
|
|
|
—
|
|
||
Total debt
|
$
|
43,486
|
|
|
$
|
15,635
|
|
Less: current portion of debt
|
15,300
|
|
|
15,144
|
|
||
Total long-term debt
|
$
|
28,186
|
|
|
$
|
491
|
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
Interest Expense
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Convertible notes:
|
|
|
|
|
|
|
||||||
Cash interest
|
|
$
|
—
|
|
|
$
|
869
|
|
|
$
|
456
|
|
PIK interest
|
|
—
|
|
|
1,912
|
|
|
605
|
|
|||
Accretion
|
|
—
|
|
|
926
|
|
|
132
|
|
|||
Convertible note interest
|
|
$
|
—
|
|
|
$
|
3,707
|
|
|
$
|
1,193
|
|
NCCRE loan
|
|
19
|
|
|
22
|
|
|
22
|
|
|||
Seller’s notes
|
|
416
|
|
|
888
|
|
|
—
|
|
|||
Interest expense on financing liability
|
|
469
|
|
|
—
|
|
|
—
|
|
|||
Interest expense on finance lease liability
|
|
290
|
|
|
—
|
|
|
—
|
|
|||
Total interest expense
|
|
$
|
1,194
|
|
|
$
|
4,617
|
|
|
$
|
1,215
|
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
Shareholders’ Equity
|
|
Subordinate Voting Shares
|
|
Subordinate Voting Shares Held in Treasury
|
|
Proportionate Voting Shares (as converted)
|
|
Multiple Voting Shares
|
|
Total Shares Outstanding
|
|||||
December 31, 2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Existing unitholders transfer
|
|
8,817
|
|
|
(842
|
)
|
|
57,835
|
|
|
168
|
|
|
65,978
|
|
Private placement
|
|
12,566
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,566
|
|
Issuances
|
|
560
|
|
|
—
|
|
|
60
|
|
|
—
|
|
|
620
|
|
December 31, 2018
|
|
21,943
|
|
|
(842
|
)
|
|
57,895
|
|
|
168
|
|
|
79,164
|
|
Issuances
|
|
8,698
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,698
|
|
NCI conversions
|
|
2,784
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,784
|
|
PVS conversions
|
|
34,752
|
|
|
—
|
|
|
(34,752
|
)
|
|
—
|
|
|
—
|
|
December 31, 2019
|
|
68,177
|
|
|
(842
|
)
|
|
23,143
|
|
|
168
|
|
|
90,646
|
|
Warrants
|
|
Year Ended December 31,
|
||||
|
|
2019
|
|
2018
|
||
Beginning balance
|
|
2,259
|
|
|
—
|
|
Granted
|
|
4
|
|
|
2,259
|
|
Expired
|
|
(223
|
)
|
|
—
|
|
Ending balance
|
|
2,040
|
|
|
2,259
|
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
HSCP net asset reconciliation
|
December 31, 2019
|
|
December 31, 2018
|
||||
Current assets
|
$
|
55,296
|
|
|
$
|
268,817
|
|
Non-current assets
|
584,812
|
|
|
282,058
|
|
||
Current liabilities
|
(46,434
|
)
|
|
(32,626
|
)
|
||
Non-current liabilities
|
(75,219
|
)
|
|
(1,622
|
)
|
||
Other NCI balances
|
(1,041
|
)
|
|
(1,130
|
)
|
||
Accumulated equity-settled expenses
|
(111,934
|
)
|
|
(9,878
|
)
|
||
Net assets
|
$
|
405,480
|
|
|
$
|
505,619
|
|
HSCP/USCo2 ownership % of HSCP
|
21.64
|
%
|
|
25.67
|
%
|
||
Net assets allocated to USCo2/HSCP
|
$
|
87,746
|
|
|
$
|
129,792
|
|
Net assets attributable to other NCIs
|
1,041
|
|
|
1,130
|
|
||
Total NCI
|
$
|
88,787
|
|
|
$
|
130,922
|
|
|
Year Ended December 31,
|
||||||
HSCP Summarized Statement of Operations
|
2019
|
|
2018
|
||||
Net loss allocable to HSCP/USCo2 (1)
|
$
|
(191,511
|
)
|
|
$
|
(16,080
|
)
|
HSCP/USCo2 weighted average ownership % of HSCP (1)
|
23.44
|
%
|
|
25.67
|
%
|
||
Net loss allocated to HSCP/USCo2
|
$
|
(44,890
|
)
|
|
$
|
(4,128
|
)
|
Net loss allocated to other NCIs
|
(4
|
)
|
|
(650
|
)
|
||
Net loss attributable to NCIs
|
$
|
(44,894
|
)
|
|
$
|
(4,778
|
)
|
|
|
|
|
||||
(1) Net loss and ownership percentage for the year ended December 31, 2018 were calculated from the RTO date through the end of the year.
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
|
|
Year Ended December 31,
|
||||
Convertible Units
|
|
2019
|
|
2018
|
||
Beginning balance
|
|
27,340
|
|
|
49,350
|
|
Issuance of NCI units
|
|
198
|
|
|
43,198
|
|
Vested LLC C-1s canceled
|
|
(416
|
)
|
|
—
|
|
LLC C-1s vested
|
|
755
|
|
|
1,612
|
|
NCI units settled in cash
|
|
(58
|
)
|
|
—
|
|
NCI units converted to Pubco
|
|
(2,784
|
)
|
|
(66,820
|
)
|
Ending balance
|
|
25,035
|
|
|
27,340
|
|
2018 NCI purchases
|
|
Total
|
||
Cash
|
|
$
|
19,643
|
|
Class D units
|
|
5,475
|
|
|
Seller’s notes
|
|
8,885
|
|
|
Forgiveness of shareholder advance
|
|
100
|
|
|
Total consideration
|
|
$
|
34,103
|
|
Carrying value on transaction date
|
|
12,305
|
|
|
Decrease in additional paid in capital
|
|
$
|
(21,798
|
)
|
Equity-based compensation expense
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Equity-based compensation - Plan
|
|
$
|
62,946
|
|
|
$
|
9,862
|
|
|
$
|
—
|
|
Equity-based compensation - Plan (CGC Awards)
|
|
23,056
|
|
|
—
|
|
|
—
|
|
|||
Equity-based compensation - other
|
|
11,536
|
|
|
1,368
|
|
|
1,837
|
|
|||
Total equity-based compensation expense
|
|
$
|
97,538
|
|
|
$
|
11,230
|
|
|
$
|
1,837
|
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
|
|
Year Ended
December 31, 2019 |
|
Year Ended
December 31, 2018 |
||||||||||
Restricted Share Units
(Fair value information expressed in whole dollars)
|
|
RSUs
|
|
Weighted Average Grant Date Fair Value
|
|
RSUs
|
|
Weighted Average Grant Date Fair Value
|
||||||
Unvested, beginning of period
|
|
2,032
|
|
|
$
|
24.53
|
|
|
—
|
|
|
$
|
—
|
|
Granted (1)
|
|
7,986
|
|
|
14.28
|
|
|
2,128
|
|
|
24.62
|
|
||
Forfeited
|
|
(117
|
)
|
|
17.85
|
|
|
—
|
|
|
—
|
|
||
Vested
|
|
(2,058
|
)
|
|
21.06
|
|
|
(96
|
)
|
|
25.00
|
|
||
Unvested, end of period
|
|
7,843
|
|
|
$
|
15.10
|
|
|
2,032
|
|
|
$
|
24.53
|
|
|
|
Year Ended
December 31, 2019 |
|
Year Ended
December 31, 2018 |
||||||||||
Stock Options
(Exercise price expressed in whole dollars) |
|
Options
|
|
Weighted Average Exercise Price
|
|
Options
|
|
Weighted Average Exercise Price
|
||||||
Options outstanding, beginning of period
|
|
4,605
|
|
|
$
|
25.00
|
|
|
—
|
|
|
$
|
—
|
|
Granted
|
|
1,785
|
|
|
14.04
|
|
|
4,605
|
|
|
25.00
|
|
||
Forfeited
|
|
(782
|
)
|
|
24.68
|
|
|
—
|
|
|
—
|
|
||
Exercised
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Options outstanding, end of period
|
|
5,608
|
|
|
$
|
21.56
|
|
|
4,605
|
|
|
$
|
25.00
|
|
|
|
|
|
|
|
|
|
|
||||||
Options exercisable, end of period
|
|
1,427
|
|
|
$
|
24.80
|
|
|
—
|
|
|
$
|
—
|
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
Black-Scholes inputs
|
|
Year Ended December 31,
|
||
|
|
2019
|
|
2018
|
Weighted average grant date fair value range
|
|
$4.76 - $16.72
|
|
$12.04 - $18.70
|
Assumption ranges:
|
|
|
|
|
Risk-free rate
|
|
1.50% - 2.60%
|
|
2.78% - 2.92%
|
Expected dividend yield
|
|
—%
|
|
—%
|
Expected term (in years)
|
|
6
|
|
6
|
Expected volatility
|
|
75% - 85%
|
|
87%
|
|
|
Year Ended
December 31, 2019 |
|
Year Ended
December 31, 2018 |
|
Year Ended
December 31, 2017 |
|||||||||||||||
Profits Interests
(Fair value information expressed in whole dollars)
|
|
Number of Units
|
|
Weighted Average Grant Date Fair Value
|
|
Number of Units
|
|
Weighted Average Grant Date Fair Value
|
|
Number of Units
|
|
Weighted Average Grant Date Fair Value
|
|||||||||
Unvested, beginning of period
|
|
1,825
|
|
|
$
|
0.43
|
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Class C-1 units granted
|
|
—
|
|
|
—
|
|
|
4,284
|
|
|
0.48
|
|
|
3,250
|
|
|
0.47
|
|
|||
Class C-1 units canceled
|
|
(70
|
)
|
|
0.43
|
|
|
(847
|
)
|
|
0.64
|
|
|
—
|
|
|
—
|
|
|||
Class C-1 vested
|
|
(755
|
)
|
|
0.43
|
|
|
(1,612
|
)
|
|
0.43
|
|
|
(3,250
|
)
|
|
0.47
|
|
|||
Unvested, end of period
|
|
1,000
|
|
|
$
|
0.43
|
|
|
1,825
|
|
|
$
|
0.43
|
|
|
—
|
|
|
$
|
—
|
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
Income tax provision
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Current taxes:
|
|
|
|
|
|
|
||||||
Federal
|
|
$
|
6,351
|
|
|
$
|
1,117
|
|
|
$
|
895
|
|
State
|
|
2,482
|
|
|
475
|
|
|
75
|
|
|||
Total current
|
|
8,833
|
|
|
1,592
|
|
|
970
|
|
|||
Deferred taxes:
|
|
|
|
|
|
|
||||||
Federal
|
|
(2,625
|
)
|
|
(38
|
)
|
|
—
|
|
|||
State
|
|
(1,219
|
)
|
|
(18
|
)
|
|
—
|
|
|||
Total deferred
|
|
(3,844
|
)
|
|
(56
|
)
|
|
—
|
|
|||
Total income tax provision
|
|
$
|
4,989
|
|
|
$
|
1,536
|
|
|
$
|
970
|
|
Unrecognized tax benefits
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Balance at beginning of period
|
|
$
|
1,394
|
|
|
$
|
1,391
|
|
|
$
|
1,189
|
|
Increase based on tax positions related to current period
|
|
—
|
|
|
—
|
|
|
165
|
|
|||
Increase based on tax positions related to prior period
|
|
500
|
|
|
3
|
|
|
37
|
|
|||
Decrease related to settlements with taxing authorities
|
|
(27
|
)
|
|
—
|
|
|
—
|
|
|||
Balance at end of period
|
|
$
|
1,867
|
|
|
$
|
1,394
|
|
|
$
|
1,391
|
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
Deferred taxes
|
|
December 31, 2019
|
|
December 31, 2018
|
||||
Deferred tax assets:
|
|
|
|
|
||||
Net operating losses
|
|
$
|
1,295
|
|
|
$
|
66
|
|
Other
|
|
670
|
|
|
83
|
|
||
Total deferred tax assets
|
|
1,965
|
|
|
149
|
|
||
Valuation allowance
|
|
(1,965
|
)
|
|
(149
|
)
|
||
Net deferred tax asset
|
|
—
|
|
|
—
|
|
||
Deferred tax liabilities:
|
|
|
|
|
||||
Partnership basis difference
|
|
(63,997
|
)
|
|
(33,827
|
)
|
||
Net deferred tax liability
|
|
(63,997
|
)
|
|
(33,827
|
)
|
||
|
|
|
|
|
||||
Net deferred tax liabilities
|
|
$
|
(63,997
|
)
|
|
$
|
(33,827
|
)
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
ACREAGE HOLDINGS, INC.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share data)
|
|
|
Quarter Ended
|
||||||||||||||
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
||||||||
2019
|
|
|
|
|
|
|
|
|
||||||||
Total revenues, net
|
|
$
|
12,897
|
|
|
$
|
17,745
|
|
|
$
|
22,402
|
|
|
$
|
21,065
|
|
Gross profit
|
|
5,320
|
|
|
7,613
|
|
|
9,694
|
|
|
7,817
|
|
||||
Net loss
|
|
(30,804
|
)
|
|
(49,265
|
)
|
|
(49,502
|
)
|
|
(65,591
|
)
|
||||
Net loss attributable to Acreage
|
|
(23,377
|
)
|
|
(37,541
|
)
|
|
(38,716
|
)
|
|
(50,634
|
)
|
||||
Net loss attributable to Acreage, basic and diluted
|
|
$
|
(0.29
|
)
|
|
$
|
(0.44
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(0.56
|
)
|
2018
|
|
|
|
|
|
|
|
|
||||||||
Total revenues, net
|
|
$
|
2,197
|
|
|
$
|
2,991
|
|
|
$
|
5,755
|
|
|
$
|
10,181
|
|
Gross profit
|
|
841
|
|
|
1,343
|
|
|
2,661
|
|
|
4,575
|
|
||||
Net income (loss)
|
|
(4,992
|
)
|
|
14,809
|
|
|
(12,317
|
)
|
|
(29,761
|
)
|
||||
Net income (loss) attributable to Acreage
|
|
(4,836
|
)
|
|
14,962
|
|
|
(12,022
|
)
|
|
(25,587
|
)
|
||||
Net income (loss) attributable to Acreage, basic and diluted
|
|
$
|
(0.10
|
)
|
|
$
|
0.29
|
|
|
$
|
(0.15
|
)
|
|
$
|
(0.31
|
)
|
(i)
|
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;
|
(ii)
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and
|
(iii)
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
|
Name, Municipality
of Residence and Title(1)
|
Principal Occupation for the Past Five (5) Years(1)
|
Director of the Company Since
|
John Boehner(2)
Director
Marco Island, Florida, U.S.
|
Former Speaker of the U.S. House of Representatives
|
November 14, 2018
|
Kevin P. Murphy(2)
Director & Chief Executive Officer
New York, New York, U.S.
|
Chief Executive Officer, Acreage Holdings, Inc. and High Street Capital Partners, LLC
|
November 14, 2018
|
Douglas Maine(3)
Lead Independent Director
Bedford Corners, New York, U.S.
|
Director of Albemarle Corporation
|
November 14, 2018
|
Brian Mulroney (3)
Director
Montreal, Quebec, Canada
|
Senior Partner and Consultant, Norton Rose Fulbright
|
November 14, 2018
|
William C. Van Faasen(3)
Director
Boston, Massachusetts, U.S.
|
Chair Emeritus of Blue Cross Blue Shield of Massachusetts
|
November 14, 2018
|
(1)
|
The information as to municipality of residence and principal occupation has been furnished by the respective directors and officers of the Company individually.
|
(2)
|
Member of the Compensation and Corporate Governance Committee.
|
(3)
|
Member of the Audit Committee.
|
Name of Director
|
Other Reporting Issuers
|
Brian Mulroney
|
Quebecor Inc. (TSX: QBR)
|
|
The Blackstone Group L.P. (NYSE:BX)
|
|
Wyndham Hotels & Resorts, Inc. (NYSE:WH)
|
John Boehner
|
Titan Mining Corporation (TSX:TI)
|
Douglas Maine
|
Albemarle Corporation (NYSE:ALB)
|
William van Faasen
|
Eversource Energy (NYSE:ES)
|
1.
|
is, as of the date of this Form 10-K, or has been within the ten years prior to the date of this Form 10-K, a director, chief executive officer or chief financial officer of any company, including the Company, that:
|
(a)
|
was subject to a cease trade order, a similar order or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than thirty (30) consecutive days; or,
|
(b)
|
was subject to a cease trade order, a similar order or an order that denied the relevant company access to any exemption under securities legislation that was in effect for a period of more than thirty (30) consecutive days, that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer; or,
|
(c)
|
within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the proposed director.
|
2.
|
has, within the ten years before the date of this Form 10-K, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director.
|
1.
|
any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or,
|
2.
|
any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in deciding whether to vote for a proposed director.
|
•
|
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
|
•
|
avoidance of conflicts of interest with the interests of the Company;
|
•
|
protection and proper use of corporate assets and opportunities;
|
•
|
compliance with applicable governmental laws, rules and regulations;
|
•
|
the prompt reporting of any violations of the Code to an appropriate person or person identified in the Code; and
|
•
|
accountability for adherence to the Code.
|
•
|
Time-Vesting RSUs. Restricted Share Units or “RSUs” represent the right to receive shares of our common stock upon vesting. The Time-Vesting RSUs that we granted during 2019 vest contingent on the grantee’s continued employment over a period of time, with the specific vesting dates disclosed below in the footnotes to the “Outstanding Equity Awards” table; and
|
•
|
Special Canopy Growth RSUs. In addition to the Time-Vesting RSUs, we also granted our Named Executive Officers a second award of RSUs that vest as follows: one quarter will vest in June of each of 2020 and 2021, and half vest solely if and when Canopy Growth acquires Acreage.
|
•
|
Make-Whole RSUs. Also in connection with the Canopy Growth transaction, on July 31, 2019, the Company issued 981,836 RSUs to the Named Executive Officers with unvested RSUs and stock options (“make-whole awards”) as of June 27, 2019. The RSUs were issued to all employees, including the Named Executive Officers, to provide additional incentive for employees that were not eligible to receive the option premium paid by Canopy Growth to our shareholders as of the close of business on June 26, 2019. The vesting conditions of the make-whole awards are subject to the same vesting terms as the unvested options and RSUs held as of the grant date.
|
Name and Principal Position
|
Fiscal
Year
|
Salary (US$)
|
Bonus
(US$)
|
Stock Awards (US$)(1)
|
Option Awards (US$)
|
Non-Equity Incentive Plan Compensation (US$)
|
All Other Compensation (US$)(2)
|
Total Compensation (US$)
|
Kevin P. Murphy
Chief Executive Officer
|
2019
2018
|
$375,000
$375,000
|
— — |
$16,627,588
—
|
— $10,098,000 |
—
—
|
$36,230
-
|
$17,038,818
$10,473,000
|
Robert Daino
Chief Operating Officer
|
2019
2018
|
$350,000
$196,212
|
— — |
$16,627,588
$15,000,000
|
— $4,488,000 |
— — |
$128,114
$23,801
|
$17,105,702
$19,708,013
|
Tyson Macdonald
EVP Corporate Development
|
2019
2018
|
$275,000
$193,750
|
— — |
$16,720,589
$2,437,500
|
— $2,337,500 |
— — |
$93,622
$20,719
|
$17,089,211
$5,064,469
|
(1)
|
Represents the aggregate grant date fair value of all RSUs (including the Special Canopy Growth RSUs) that the Company granted to each Named Executive Officer during 2019, as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, which excludes the effect of estimated forfeitures. Further information regarding the valuation of equity awards can be found in Note 12 to our Consolidated Financial Statements in this Form 10-K.
|
(2)
|
For Mr. Murphy, represents the cost of the apartment that the Company provides for him to use when he is required to be present at the Company’s office in New York City ($26,377) plus a tax gross up on such benefit ($9,853). For Mr. Daino, includes the cost of the apartment that the Company provides for him to use when he is required to be present at the Company’s office in New York City ($48,775); reimbursement for travel expenses to New York City ($20,218); and a tax gross up on the foregoing benefits ($59,121). For Mr. Macdonald, includes the cost of the apartment that the Company provides for him to use when he is required to be present at the Company’s office in New York City ($17,686); reimbursement for travel expenses to New York City ($35,163); and a tax gross up on the foregoing benefits ($40,773).
|
Name
|
Option Awards
|
Stock Awards
|
||||
Number of Securities Underlying Unexercised Options - Exercisable
(#)(1)
|
Number of Securities Underlying Unexercised Options - Unexercisable
(#)(1)
|
Option Exercise Price (US$)
|
Option Expiration Date
|
Number of Shares or Units of Stock that Have Not Vested (#)
|
Market Value of Shares or Units of Stock That Have Not Vested (US$)(2)
|
|
Kevin P. Murphy
|
180,000
|
360,000
|
$25.00
|
11/14/2028
|
1,064,300(3)
|
$6,300,656
|
Robert
Daino
|
80,000
|
160,000
|
$25.00
|
11/14/2028
|
1,202,847(4)
|
$7,120,854
|
Tyson Macdonald
|
41,666
|
83,334
|
$25.00
|
11/14/2028
|
1,023,972(5)
|
$6,061,914
|
(1)
|
All option awards were granted on November 14, 2018, and vest in eight substantially equal quarterly installments beginning on February 14, 2020.
|
(2)
|
Calculated as the Number of Shares or Units of Stock that Have Not Vested multiplied by the closing market price of our common stock on December 31, 2019, which was $5.92.
|
(3)
|
Represents 82,464 RSUs that were granted on July 31, 2019 and that vest in quarterly installments beginning on February 14, 2020 and 981,836 RSUs that were granted on June 27, 2019, half of which vest on the three-month anniversary of the closing of Canopy Growth’s acquisition of Acreage and the other half of which vest in two equal installments on June 27, 2020 and June 27, 2021.
|
(4)
|
Represents 71,011 RSUs that were granted on July 31, 2019 and that vest 17,180 on each of March 11, 2020 and June 11, 2020, and then in eight substantially equal quarterly installments beginning on February 14, 2020; 981,836 RSUs that were granted on June 27, 2019, half of which vest on the three-month anniversary of the closing of Canopy Growth’s acquisition of Acreage and the other half of which vest in two equal installments on June 27, 2020 and June 27, 2021; and 150,000 RSUs that were granted on November 14, 2018 and that vest in two equal installments on March 11, 2020 and June 11, 2020.
|
(5)
|
Represents 23,385 RSUs that were granted on July 31, 2019 and that vest 4,296 on March 15, 2020 and the remainder of which vest in eight substantially quarterly installments beginning on February 14,2020; 981,836 RSUs that were granted on June 27, 2019, half of which vest on the three-month anniversary of the closing of Canopy Growth’s acquisition of Acreage and the other half of which vest in two equal installments on June 27, 2020 and June 27, 2021; and RSUs granted on March 12, 2019 and November 14, 2018 in the amount of 6,563 and 12,188, respectively, that all vest on March 15, 2020.
|
•
|
As disclosed above, half of the Special Canopy Growth RSUs granted to each of the Named Executive Officers vest solely upon the three-month anniversary of Canopy Growth’s acquisition of Acreage. In addition, under the terms of the Special Canopy Growth RSUs, the Named Executive Officers are subject to a non-compete covenant that continues for one year after their termination of employment for any reason, but if the Company terminates their employment without cause, then we would be required to pay them one year of severance to enforce the non-compete.
|
•
|
Pursuant to the terms of our Omnibus Incentive Plan, all outstanding stock options will become fully exercisable immediately before a change in control, and any RSUs (other than the Special Canopy Growth RSUs, which are subject to the conditions described above) will become fully vested upon the change in control (assuming, if applicable, that any performance criteria were achieved at the target level), unless the surviving entity agrees to assume the awards or issue substitute awards.
|
Name
|
Fees Earned
(US$)
|
Share-Based Awards (US$)(1)(2)
|
Option Awards
(US$)(3)
|
All Other Compensation (US$)
|
Total (US$)
|
John Boehner
|
—
|
$855,545
|
—
|
—
|
$855,545
|
William F. Weld(4)
|
—
|
$855,545
|
—
|
—
|
$855,545
|
Larissa L. Herda(5)
|
—
|
$580,922
|
—
|
—
|
$580,922
|
Douglas Maine
|
—
|
$580,922
|
—
|
—
|
$580,922
|
Brian Mulroney
|
—
|
$1,423,241
|
—
|
—
|
$1,423,241
|
William C. Van Faasen
|
—
|
$580,922
|
—
|
—
|
$580,922
|
(1)
|
Represents the grant date fair value, as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, of the following number of make-whole awards granted on July 31, 2019 and that vest in two installments on November 14 of 2020 and 2021, contingent on the director’s continued service: Mr. Boehner and Mr. Weld - 67,472; Ms. Herda, Mr. Maine, and Mr. Van Faasen - 45,814; Mr. Mulroney - 112,243 . The make-whole awards were not granted as compensation to directors for their service on the Board, but rather to provide incentive to unvested equity holders who were not eligible to receive the option premium paid by Canopy Growth to shareholders as of the close of business on June 26, 2019. Further information regarding the valuation of equity awards can be found in Note 12 to our Consolidated Financial Statements.
|
(2)
|
As of December 31, 2019, the directors had the following number of stock awards outstanding: Mr. Boehner and Mr. Weld - 67,472 RSUs and 312,500 C-1 Units; Mr. Van Faasen and Mr. Maine - 57,211 RSUs; Mr. Mulroney - 214,830 RSUs; and Ms. Herda - 73,597 RSUs. The C-1 Units are profit interests in High Street Capital Partners, LLC which are potentially convertible into common units of High Street Capital Partners, LLC. Common units of High Street Capital Partners, LLC are convertible into Subordinate Voting Shares.
|
(3)
|
As of December 31, 2019, the directors had the following number of option awards outstanding: Mr. Boehner and Mr. Weld - none; Ms. Herda, Mr. Maine and Mr. Van Faasen - 160,000; Mr. Mulroney - 280,000.
|
(4)
|
Mr. Weld resigned as a director on February 14, 2020.
|
(5)
|
Ms. Herda resigned as a director on March 24, 2020.
|
•
|
executive and director compensation;
|
•
|
executive compensation disclosure;
|
•
|
management development and succession;
|
•
|
the Company’s overall approach to corporate governance;
|
•
|
the size, composition and structure of the Board and its committees;
|
•
|
orientation and continuing education for directors;
|
•
|
related party transactions and other matters involving conflicts of interest; and
|
•
|
any additional matters delegated to the Compensation and Corporate Governance Committee by the Board.
|
|
|
|
|
|
|
|
|
|
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
|
|
Weighted-average exercise price of outstanding options, warrants and rights
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
|
|
|
|
|
|
|||
|
|
|
|
|
|||
Plan Category
|
|
|
|
|
|
|
|
Equity compensation plans approved by security holders
|
|
5,607,377
|
|
$
|
21.56
|
|
4,903,545
|
Equity compensation plans not approved by security holders
|
|
—
|
|
|
—
|
|
—
|
Total
|
|
5,607,377
|
|
$
|
21.56
|
|
4,903,545
|
Name of Beneficial Owner/Class of Stock(1)
|
Share Ownership and Percentage of Class(2)
|
Percentage of Aggregate Voting Power
|
John Boehner
|
|
*
|
Class A Subordinate Voting Shares(3)
|
109,139
|
|
|
*
|
|
Class B Proportionate Voting Shares
|
—
|
|
|
|
|
Class C Multiple Voting Shares
|
—
|
|
|
|
|
Common Units of High Street Capital Partners, LLC
|
360,107
|
|
|
*
|
|
Kevin P. Murphy
|
|
84.5%
|
Class A Subordinate Voting Shares(3)
|
1,676,407
|
|
|
1.9%
|
|
Class B Proportionate Voting Shares
|
113,102
|
|
|
20.3%
|
|
Class C Multiple Voting Shares
|
168,000
|
|
|
100%
|
|
Common Units of High Street Capital Partners, LLC
|
15,957,908
|
|
|
12.99%
|
|
Douglas Maine
|
|
*
|
Class A Subordinate Voting Shares(3)
|
185,814
|
|
|
*
|
|
Class B Proportionate Voting Shares
|
—
|
|
|
—
|
|
Class C Multiple Voting Shares
|
—
|
|
|
—
|
|
Common Units of High Street Capital Partners, LLC
|
—
|
|
|
—
|
|
Brian Mulroney
|
|
*
|
Class A Subordinate Voting Shares(3)
|
457,243
|
|
|
*
|
|
Class B Proportionate Voting Shares
|
—
|
|
|
|
|
Class C Multiple Voting Shares
|
—
|
|
|
|
|
Common Units of High Street Capital Partners, LLC
|
—
|
|
|
|
|
William C. Van Faasen
|
|
*
|
Class A Subordinate Voting Shares(3)
|
193,814
|
|
|
*
|
|
Class B Proportionate Voting Shares
|
4,973
|
|
|
*
|
|
Class C Multiple Voting Shares
|
—
|
|
|
|
|
Common Units of High Street Capital Partners, LLC
|
—
|
|
|
|
|
Robert Daino
|
|
*
|
Class A Subordinate Voting Shares(3)
|
1,887,023
|
|
Name of Beneficial Owner/Class of Stock(1)
|
Share Ownership and Percentage of Class(2)
|
Percentage of Aggregate Voting Power
|
|
2.1%
|
|
Class B Proportionate Voting Shares
|
—
|
|
|
|
|
Class C Multiple Voting Shares
|
—
|
|
|
|
|
Common Units of High Street Capital Partners, LLC
|
—
|
|
|
|
|
All directors and executive officers as a group (8 people)
|
|
84.7%
|
Class A Subordinate Voting Shares(3)
|
7,491,497
|
|
|
8.3%
|
|
Class B Proportionate Voting Shares
|
118,075
|
|
|
*
|
|
Class C Multiple Voting Shares
|
168,000
|
|
|
100%
|
|
Common Units of High Street Capital Partners, LLC
|
16,744,452
|
|
|
13.57%
|
|
*
|
Less than 1%.
|
(1)
|
Unless otherwise indicated, the address for each beneficial owners is 366 Madison Ave, 11th Floor, New York, NY 10017.
|
(2)
|
All information with respect to beneficial ownership is based upon filings made by the respective beneficial owners with the SEC or information provided to us by such beneficial owners. Except as indicated in the footnotes to this table, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws.
|
(3)
|
Includes 0 Class A Subordinate Voting Shares subject to acquisition by John Boehner, 270,000 Class A Subordinate Voting Shares subject to acquisition by Kevin P. Murphy, 53,333 Class A Subordinate Voting Shares subject to acquisition by Douglas Maine, 53,333 Class A Subordinate Voting Shares subject to acquisition by William C. Van Faasen, 93,333 Class A Subordinate Voting Shares subject to acquisition by Brian Mulroney, 120,000 Class A Subordinate Voting Shares subject to acquisition by Robert Daino, in each case, pursuant to the exercise of stock options held as of May 27, 2020 that were then vested or that will vest within 60 days thereafter.
|
(4)
|
Includes 41,667 Class A Subordinate Voting Shares subject to acquisition by John Boehner, 1,053,992 Class A Subordinate Voting Shares subject to acquisition by Kevin P. Murphy, 103,878 Class A Subordinate Voting Shares subject to acquisition by Douglas Maine, 103,878 Class A Subordinate Voting Shares subject to acquisition by William C. Van Faasen, 107,413 Class A Subordinate Voting Shares subject to acquisition by Brian Mulroney, 1,439,419 Class A Subordinate Voting Shares subject to acquisition by Robert Daino, in each case, pursuant to the exercise of restricted stock units held as of May 27, 2020 that were then vested or that will vest within 60 days thereafter.
|
(1)
|
Fees billed for services by Marcum LLP for financial diligence for transactions.
|
|
November 14 - December 31, 2018
(US$)
|
January 1 - October 3, 2019 (US$)
|
Audit Fees
|
$500,000
|
$106,690
|
Audit Related Fees
|
—
|
$425,769
|
Tax Fees
|
—
|
—
|
All Other Fees
|
$29,000(1)
|
$92,370
|
(1)
|
Fees billed for services by MNP LLP in 2019 for preparation of a shelf prospectus, the management information circular, consent fees and due diligence relating to transactions; in 2018, the fees billed were in connection with matters related to the RTO.
|
|
August 31, 2018
(C$)
|
September 1 -November 14, 2018(1)
(C$)
|
Audit Fees
|
$6,300
|
—
|
Audit Related Fees(2)
|
$4,200
|
—
|
Tax Fees(3)
|
$1,575
|
—
|
All Other Fees
|
—
|
—
|
(1)
|
In connection with the completion of the RTO, the Company’s year end was changed from August 31 to December 31, 2018. Fees billed for audit services from the period from completion of the Company’s year end prior to completion of the RTO to the completion of the Company’s post-RTO year end.
|
(2)
|
Fees billed for assurance and related services by RSM Canada LLP in connection with the Company’s interim review procedures.
|
(3)
|
Fees billed for professional services rendered by RSM Canada LLP for tax compliance, tax advice, and tax planning for the subject year.
|
|
|
Incorporated by Reference
|
|
|
||||||||||||
Exhibit No.
|
Description of Document
|
Schedule Form
|
File Number
|
Exhibit
|
|
Filing Date
|
|
Filed or Furnished Herewith
|
||||||||
2.1
|
Arrangement Agreement between Canopy Growth Corporation and Acreage Holdings Inc. dated April 18, 2019.†
|
6-K
|
000-56021
|
|
4/30/2019
|
|
|
|||||||||
2.2
|
First Amendment to Arrangement Agreement between Canopy Growth Corporation and Acreage Holdings, Inc., dated May 15, 2019.
|
6-K
|
000-56021
|
|
6/20/2019
|
|
|
|||||||||
2.3
|
Agency Agreement, between Canaccord Genuity Corp. and Acreage Holdings, Inc., dated February 10, 2020.
|
8-K
|
000-56021
|
|
2/13/2020
|
|
|
|||||||||
Articles of Incorporation.
|
|
|
|
|
|
|
X
|
|||||||||
4.1
|
Form of Indenture.
|
F-10
|
333-232313
|
|
6/24/2019
|
|
|
|||||||||
4.2
|
Credit Agreement dated February 7, 2020.
|
8-K
|
000-56021
|
|
2/13/2020
|
|
|
|||||||||
4.3
|
Special Warrant Indenture, between Acreage Holdings, Inc. and Odyssey Trust Company, dated February 10, 2020.
|
8-K
|
000-56021
|
|
2/13/2020
|
|
|
|||||||||
4.4
|
Warrant Indenture, between Acreage Holdings, Inc. and Odyssey Trust Company, dated February 10, 2020.
|
8-K
|
000-56021
|
|
2/13/2020
|
|
|
|
|
Incorporated by Reference
|
|
|
||||||||||||
Exhibit No.
|
Description of Document
|
Schedule Form
|
File Number
|
Exhibit
|
|
Filing Date
|
|
Filed or Furnished Herewith
|
||||||||
Credit Agreement, dated March 11, 2020, by and among Acreage Finance Delaware, LLC, Acreage IP Holdings, LLC, Prime Wellness of Connecticut, LLC, D&B Wellness, LLC, Thames Valley Apothecary, LLC and IP Investment Company, LLC.
|
|
|
|
|
|
|
X
|
|||||||||
Security Agreement, dated March 11, 2020, by and among Acreage IP Holdings, LLC and IP Investment Company, LLC
|
|
|
|
|
|
|
X
|
|||||||||
Guaranty, dated March 11, 2020, of Acreage IP Holdings, LLC to IP Investment Company, LLC.
|
|
|
|
|
|
|
X
|
|||||||||
Second Amending Agreement, effective March 11, 2020.
|
|
|
|
|
|
|
X
|
|||||||||
Description of Securities
|
|
|
|
|
|
|
X
|
|||||||||
Acreage Holdings, Inc. Omnibus Incentive Plan, as amended and restated August 19, 2019.+
|
|
|
|
|
|
|
X
|
|||||||||
Form of Stock Option Award Agreement.+
|
|
|
|
|
|
|
X
|
|||||||||
Form of Restricted Stock Award Agreement.+
|
|
|
|
|
|
|
X
|
|||||||||
Form of Indemnity Agreement.
|
|
|
|
|
|
|
X
|
|||||||||
10.5
|
Third Amended and Restated Limited Liability Agreement, dated November 14, 2018.
|
40-F
|
000-56021
|
|
1/29/2019
|
|
|
|||||||||
First Amendment to Third Amended and Restated Limited Liability Agreement, dated November 14, 2018, dated May 10, 2019.
|
|
|
|
|
|
|
X
|
|||||||||
Second Amendment to Third Amended and Restated Limited Liability Agreement, dated November 14, 2018, dated June 27, 2019.
|
|
|
|
|
|
|
X
|
|||||||||
10.8
|
Tax Receivables Agreement, by and among Acreage Holdings America, Inc., High Street Capital Partners, LLC and the members of the High Street Capital Partners, LLC, dated November 14, 2018.
|
40-F
|
000-56021
|
|
1/29/2019
|
|
|
|||||||||
10.9
|
Coattail Agreement, between Acreage Holdings, Inc. and Odyssey Trust Fund, dated November 14, 2018.
|
40-F
|
000-56021
|
|
1/29/2019
|
|
|
|||||||||
10.10
|
Support Agreement, between Acreage Holdings, Inc. and Acreage Holdings WC, Inc., dated November 14, 2018.
|
40-F
|
000-56021
|
|
1/29/2019
|
|
|
|||||||||
10.11
|
Support Agreement, by and among Acreage Holdings, Inc., Acreage Holdings America, Inc. and High Street Capital Partners, dated November 14, 2018.
|
40-F
|
000-56021
|
|
1/29/2019
|
|
|
|||||||||
Subsidiaries as of December 31, 2019.
|
|
|
|
|
|
|
X
|
|||||||||
Consent of Marcum LLP, the Independent Registered Public Accounting Firm of Acreage Holdings, Inc.
|
|
|
|
|
|
|
X
|
|||||||||
24.1
|
Power of Attorney (included on the signature page).
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
|
|
||||||||||||
Exhibit No.
|
Description of Document
|
Schedule Form
|
File Number
|
Exhibit
|
|
Filing Date
|
|
Filed or Furnished Herewith
|
||||||||
Certification of Periodic Report by Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
X
|
|||||||||
Certification of Periodic Report by Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
X
|
|||||||||
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
|
|
|
X
|
|||||||||
101
|
Attached as Exhibit 101 to this report are the following documents formatted in iXBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Operations for the years ended December 31, 2017, 2018, 2019, (ii) Consolidated Balance Sheets at December 31, 2018 and 2019, (iv) Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2017, 2018 and 2019, (v) Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2018 and 2019, and (vi) Notes to Consolidated Financial Statements for the year ended December 31, 2019.
|
|
|
|
|
|
|
X
|
||||||||
|
|
|
|
|
|
|
|
|
|
Acreage Holdings, Inc.
|
||
|
|
|
|
|
By:
|
|
/s/ Glen Leibowitz
|
|
|
|
Glen Leibowitz
|
|
|
|
Chief Financial Officer
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Kevin Murphy
|
|
Chairman and Chief Executive Officer
(Principal Executive Officer)
|
|
May 29, 2020
|
Kevin Murphy
|
|
|
|
|
|
|
|
|
|
/s/ Glen Leibowitz
|
|
Chief Financial Officer
(Principal Financial Officer)
|
|
May 29, 2020
|
Glen Leibowitz
|
|
|
|
|
|
|
|
|
|
/s/ Todd Fisher
|
|
Chief Accounting Officer
(Principal Accounting Officer)
|
|
May 29, 2020
|
Todd Fisher
|
|
|
|
|
|
|
|
|
|
/s/ John Boehner
|
|
Director
|
|
May 29, 2020
|
John Boehner
|
|
|
|
|
|
|
|
|
|
/s/ Douglas Maine
|
|
Director
|
|
May 29, 2020
|
Douglas Maine
|
|
|
|
|
|
|
|
|
|
/s/ Brian Mulroney
|
|
Director
|
|
May 29, 2020
|
Brian Mulroney
|
|
|
|
|
|
|
|
|
|
/s/ William Van Faasen
|
|
Director
|
|
May 29, 2020
|
William Van Faasen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full name and signature of a director
|
Date of Signing
|
||
|
|
||
Signature
|
|
|
|
Name of Director:
|
|
|
, 2018
|
|
|
|
|
Article 1
|
INTERPRETATION
|
3
|
|
Article 2
|
SHARES AND SHARE CERTIFICATES
|
4
|
|
Article 3
|
ISSUE OF SHARES
|
5
|
|
Article 4
|
SHARE REGISTERS
|
6
|
|
Article 5
|
SHARE TRANSFERS
|
7
|
|
Article 6
|
TRANSMISSION OF SHARES
|
8
|
|
Article 7
|
PURCHASE OF SHARES
|
8
|
|
Article 8
|
BORROWING POWERS
|
9
|
|
Article 9
|
ALTERATIONS
|
9
|
|
Article 10
|
MEETINGS OF SHAREHOLDERS
|
10
|
|
Article 11
|
PROCEEDINGS AT MEETINGS OF SHAREHOLDERS
|
12
|
|
Article 12
|
VOTES OF SHAREHOLDERS
|
16
|
|
Article 13
|
DIRECTORS
|
19
|
|
Article 14
|
ELECTION AND REMOVAL OF DIRECTORS
|
20
|
|
Article 15
|
POWERS AND DUTIES OF DIRECTORS
|
22
|
|
Article 16
|
DISCLOSURE OF INTEREST OF DIRECTORS
|
23
|
|
Article 17
|
DIRECTORS
|
24
|
|
Article 18
|
EXECUTIVE AND OTHER COMMITTEES
|
26
|
|
Article 19
|
OFFICERS
|
27
|
|
Article 20
|
INDEMNIFICATION
|
28
|
|
Article 21
|
DIVIDENDS
|
29
|
|
Article 22
|
DOCUMENTS, RECORDS AND REPORTS
|
31
|
|
Article 23
|
NOTICES
|
31
|
|
Article 24
|
SEAL
|
33
|
|
Article 25
|
PROHIBITIONS
|
33
|
|
Article 26
|
SPECIAL RIGHTS AND RESTRICTIONS ATTACHED TO SUBORDINATE VOTING SHARES
|
34
|
|
Article 27
|
SPECIAL RIGHTS AND RESTRICTIONS ATTACHED TO PROPORTIONATE VOTING SHARES
|
35
|
|
Article 28
|
SPECIAL RIGHTS AND RESTRICTIONS ATTACHED TO MULTIPLE VOTING SHARES
|
40
|
|
Article 29
|
ADVANCE NOTICE PROVISIONS
|
42
|
|
Article 30
|
FORUM SELECTION
|
44
|
|
APPENDIX A
|
|
46
|
|
1.1
|
Definitions
|
(a)
|
“Act” means the Business Corporations Act (British Columbia) from time to time in force and all amendments thereto and includes all regulations and amendments thereto made pursuant to that Act;
|
(b)
|
“appropriate person” has the meaning assigned in the Securities Transfer Act;
|
(c)
|
“board of directors”, “directors” and “board” mean the directors or sole director of the Company for the time being;
|
(d)
|
“Interpretation Act” means the Interpretation Act (British Columbia) from time to time in force and all amendments thereto and includes all regulations and amendments thereto made pursuant to that Act;
|
(e)
|
“legal personal representative” means the personal or other legal representative of the shareholder;
|
(f)
|
“protected purchaser” has the meaning assigned in the Securities Transfer Act;
|
(g)
|
“registered address” of a shareholder means the shareholder's address as recorded in the central securities register;
|
(h)
|
“seal” means the seal of the Company, if any;
|
(i)
|
“securities legislation” means statutes concerning the regulation of securities markets and trading in securities and the regulations, rules, forms and schedules under those statutes, all as amended from time to time, and the blanket rulings and orders, as amended from time to time, issued by the securities commissions or similar regulatory authorities appointed under or pursuant to those statutes; “Canadian securities legislation” means the securities legislation in any province or territory of Canada and includes the Securities Act (British Columbia); and “U.S. securities legislation” means the securities legislation in the federal jurisdiction of the United States and in any state of the United States and includes the Securities Act of 1933 and the Securities Exchange Act of 1934;
|
(j)
|
“Securities Transfer Act” means the Securities Transfer Act (British Columbia) from time to time in force and all amendments thereto and includes all regulations and amendments thereto made pursuant to that Act; and
|
(k)
|
“Statutory Reporting Company Provisions” has the meaning assigned in the Act.
|
1.2
|
Applicable Definitions and Rules of Interpretation
|
2.1
|
Authorized Share Structure
|
2.2
|
Form of Share Certificate
|
2.3
|
Shareholder Entitled to Certificate or Acknowledgment
|
2.4
|
Delivery by Mail
|
2.5
|
Replacement of Worn Out or Defaced Certificate or Acknowledgement
|
(a)
|
order the share certificate or acknowledgment, as the case may be, to be cancelled; and
|
(b)
|
issue a replacement share certificate or acknowledgment, as the case may be.
|
2.6
|
Replacement of Lost, Stolen or Destroyed Certificate or Acknowledgment
|
(a)
|
proof satisfactory to them that the share certificate or acknowledgment is lost, stolen or destroyed; and
|
(b)
|
any indemnity the directors consider adequate.
|
2.7
|
Recovery of New Share Certificate
|
2.8
|
Splitting Share Certificates
|
2.9
|
Certificate Fee
|
2.10
|
Recognition of Trusts
|
2.11
|
Direct Registration System
|
3.1
|
Directors Authorized
|
3.2
|
Commissions and Discounts
|
3.3
|
Brokerage
|
3.4
|
Conditions of Issue
|
(a)
|
consideration is provided to the Company for the issue of the share by one or more of the following:
|
(i)
|
past services performed for the Company;
|
(ii)
|
property;
|
(iii)
|
money; and
|
(b)
|
the value of the consideration received by the Company equals or exceeds the issue price set for the share under Article 3.1.
|
3.5
|
Share Purchase Warrants and Rights
|
4.1
|
Central Securities Register
|
4.2
|
Closing Register
|
5.1
|
Registering Transfers
|
(a)
|
in the case of a share certificate that has been issued by the Company in respect of the share to be transferred, that share certificate and a written instrument of transfer made by the shareholder or other appropriate person or by an agent who has actual authority to act on behalf of that person;
|
(b)
|
in the case of a non-transferable written acknowledgement of the shareholder’s right to obtain a share certificate that has been issued by the Company in respect of the share to be transferred, a written instrument of transfer that directs that the transfer of the shares be registered, made by the shareholder or other appropriate person or by an agent who has actual authority to act on behalf of that person;
|
(c)
|
in the case of a share that is an uncertificated share, a written instrument of transfer that directs that the transfer of the share be registered, made by the shareholder or other appropriate person or by an agent who has actual authority to act on behalf of that person; and
|
(d)
|
such other evidence, if any, as the Company or the transfer agent or registrar for the class or series of shares to be transferred may require to prove the title of the transferor or the transferor’s right to transfer the share, that the written instrument of transfer is genuine and authorized and that the transfer is rightful or to a protected purchaser.
|
5.2
|
Form of Instrument of Transfer
|
5.3
|
Transferor Remains Shareholder
|
5.4
|
Signing of Instrument of Transfer
|
(a)
|
in the name of the person named as transferee in that instrument of transfer; or
|
(b)
|
if no person is named as transferee in that instrument of transfer, in the name of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered.
|
5.5
|
Enquiry as to Title Not Required
|
5.6
|
Transfer Fee
|
6.1
|
Legal Personal Representative Recognized on Death
|
6.2
|
Rights of Legal Personal Representative
|
7.1
|
Company Authorized to Purchase Shares
|
7.2
|
Purchase When Insolvent
|
(a)
|
the Company is insolvent; or
|
(b)
|
making the payment or providing the consideration would render the Company insolvent.
|
7.3
|
Sale and Voting of Purchased Shares
|
(a)
|
is not entitled to vote the share at a meeting of its shareholders;
|
(b)
|
must not pay a dividend in respect of the share; and
|
(c)
|
must not make any other distribution in respect of the share.
|
7.4
|
Redemption
|
(a)
|
borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that they consider appropriate;
|
(b)
|
issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as they consider appropriate;
|
(c)
|
guarantee the repayment of money by any other person or the performance of any obligation of any other person; and
|
(d)
|
mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company.
|
9.1
|
Alteration of Authorized Share Structure
|
(a)
|
create one or more classes or series of shares or, if none of the shares of a class or series of shares are allotted or issued, eliminate that class or series of shares;
|
(b)
|
increase, reduce or eliminate the maximum number of shares that the Company is authorized to issue out of any class or series of shares or establish a maximum number of shares that the Company is authorized to issue out of any class or series of shares for which no maximum is established;
|
(c)
|
subject to Article 26.5 and Article 27.5, subdivide or consolidate all or any of its unissued, or fully paid issued, shares;
|
(d)
|
if the Company is authorized to issue shares of a class of shares with par value:
|
(i)
|
decrease the par value of those shares; or
|
(ii)
|
if none of the shares of that class of shares are allotted or issued, increase the par value of those shares;
|
(e)
|
change all or any of its unissued, or fully paid issued, shares with par value into shares without par value or any of its unissued shares without par value into shares with par value;
|
(f)
|
alter the identifying name of any of its shares; or
|
(g)
|
otherwise alter its shares or authorized share structure when required or permitted to do so by the Act.
|
9.2
|
Special Rights and Restrictions
|
(a)
|
create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, whether or not any or all of those shares have been issued; or
|
(b)
|
vary or delete any special rights or restrictions attached to the shares of any class or series of shares, whether or not any or all of those shares have been issued;
|
9.3
|
Change of Name
|
9.4
|
Other Alterations
|
10.1
|
Annual General Meetings
|
10.2
|
Resolution Instead of Annual General Meeting
|
10.3
|
Calling of Meetings of Shareholders
|
10.4
|
Notice for Meetings of Shareholders
|
(a)
|
if and for so long as the Company is a public company, 21 days;
|
(b)
|
otherwise, 10 days.
|
10.5
|
Notice of Resolution to Which Shareholders May Dissent
|
10.6
|
Record Date for Notice
|
(a)
|
if and for so long as the Company is a public company, 21 days;
|
(b)
|
otherwise, 10 days.
|
10.7
|
Record Date for Voting
|
10.8
|
Failure to Give Notice and Waiver of Notice
|
10.9
|
Notice of Special Business at Meetings of Shareholders
|
(a)
|
state the general nature of the special business; and
|
(b)
|
if the special business includes considering, approving, ratifying, adopting or authorizing any document or the signing of or giving of effect to any document, have attached to it a copy of the document or state that a copy of the document will be available for inspection by shareholders:
|
(i)
|
at the Company's records office, or at such other reasonably accessible location in British Columbia or by electronic access as is specified in the notice; and
|
(ii)
|
during statutory business hours on any one or more specified days before the day set for the holding of the meeting.
|
10.10
|
Location of Annual General Meeting
|
10.11
|
Notice of Dissent Rights
|
(a)
|
if and for so long as the Company is a public company, 21 days; or
|
(b)
|
otherwise, 10 days.
|
11.1
|
Special Business
|
(a)
|
at a meeting of shareholders that is not an annual general meeting, all business is special business except business relating to the conduct of or voting at the meeting;
|
(b)
|
at an annual general meeting, all business is special business except for the following:
|
(i)
|
business relating to the conduct of or voting at the meeting;
|
(ii)
|
consideration of any financial statements of the Company presented to the meeting;
|
(iii)
|
consideration of any reports of the directors or auditor;
|
(iv)
|
the setting or changing of the number of directors;
|
(v)
|
the election or appointment of directors;
|
(vi)
|
the appointment of an auditor;
|
(vii)
|
business arising out of a report of the directors not requiring the passing of a special resolution or an exceptional resolution;
|
(viii)
|
any other business which, under these Articles or the Act, may be transacted at a meeting of shareholders without prior notice of the business being given to the shareholders.
|
11.2
|
Special Majority
|
11.3
|
Quorum
|
11.4
|
One Shareholder May Constitute Quorum
|
(a)
|
the quorum is one person who is, or who represents by proxy, that shareholder, and
|
(b)
|
that shareholder, present in person or by proxy, may constitute the meeting.
|
11.5
|
Other Persons May Attend
|
11.6
|
Requirement of Quorum
|
11.7
|
Lack of Quorum
|
(a)
|
in the case of a general meeting requisitioned by shareholders, the meeting is dissolved, and
|
(b)
|
in the case of any other meeting of shareholders, the meeting stands adjourned to the same day in the next week at the same time and place.
|
11.8
|
Lack of Quorum at Succeeding Meeting
|
11.9
|
Chair
|
(a)
|
the chair of the board, if any; or
|
(b)
|
if the chair of the board is absent or unwilling to act as chair of the meeting, the president, if any.
|
11.10
|
Selection of Alternate Chair
|
11.11
|
Adjournments
|
11.12
|
Notice of Adjourned Meeting
|
11.13
|
Decisions by Show of Hands or Poll
|
11.14
|
Declaration of Result
|
11.15
|
Motion Need Not be Seconded
|
11.16
|
Casting Vote
|
11.17
|
Manner of Taking Poll
|
(a)
|
the poll must be taken:
|
(i)
|
at the meeting, or within seven days after the date of the meeting, as the chair of the meeting directs; and
|
(ii)
|
in the manner, at the time and at the place that the chair of the meeting directs;
|
(b)
|
the result of the poll is deemed to be the decision of the meeting at which the poll is demanded; and
|
(c)
|
the demand for the poll may be withdrawn by the person who demanded it.
|
11.18
|
Demand for Poll on Adjournment
|
11.19
|
Chair Must Resolve Dispute
|
11.20
|
Casting of Votes
|
11.21
|
Demand for Poll
|
11.22
|
Demand for Poll Not to Prevent Continuance of Meeting
|
11.23
|
Retention of Ballots and Proxies
|
12.1
|
Number of Votes by Shareholder or by Shares
|
(a)
|
on a vote by show of hands, every person present who is a shareholder or proxy holder and entitled to vote on the matter has one vote; and
|
(b)
|
on a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on the matter and held by that shareholder and may exercise that vote either in person or by proxy.
|
12.2
|
Votes of Persons in Representative Capacity
|
12.3
|
Votes by Joint Holders
|
(a)
|
any one of the joint shareholders may vote at any meeting, either personally or by proxy, in respect of the share as if that joint shareholder were solely entitled to it; or
|
(b)
|
if more than one of the joint shareholders is present at any meeting, personally or by proxy, and more than one of them votes in respect of that share, then only the vote of the joint shareholder present whose name stands first on the central securities register in respect of the share will be counted.
|
12.4
|
Legal Personal Representatives as Joint Shareholders
|
12.5
|
Representative of a Corporate Shareholder
|
(a)
|
for that purpose, the instrument appointing a representative must:
|
(i)
|
be received at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of proxies, at least the number of business days specified in the notice for the receipt of proxies, or if no number of days is specified, two business days before the day set for the holding of the meeting; or
|
(ii)
|
be provided, at the meeting, to the chair of the meeting or to a person designated by the chair of the meeting;
|
(b)
|
if a representative is appointed under this Article 12.5:
|
(i)
|
the representative is entitled to exercise in respect of and at that meeting the same rights on behalf of the corporation that the representative represents as that corporation could exercise if it were a shareholder who is an individual, including, without limitation, the right to appoint a proxy holder; and
|
(ii)
|
the representative, if present at the meeting, is to be counted for the purpose of forming a quorum and is deemed to be a shareholder present in person at the meeting.
|
12.6
|
Proxy Provisions Do Not Apply to All Companies
|
12.7
|
Appointment of Proxy Holders
|
12.8
|
Alternate Proxy Holders
|
12.9
|
Deposit of Proxy
|
(a)
|
be received at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of proxies, at least the number of business days specified in the notice, or if no number of days is specified, two business days before the day set for the holding of the meeting; or
|
(b)
|
unless the notice provides otherwise, be provided, at the meeting, to the chair of the meeting or to a person designated by the chair of the meeting.
|
12.10
|
Validity of Proxy Vote
|
(a)
|
at the registered office of the Company, at any time up to and including the last business day before the day set for the holding of the meeting at which the proxy is to be used; or
|
(b)
|
by the chair of the meeting, before the vote is taken.
|
12.11
|
Form of Proxy
|
Signed [month, day, year]
|
|
[Signature of shareholder]
|
|
[Name of shareholder - printed]
|
12.12
|
Revocation of Proxy
|
(a)
|
received at the registered office of the Company at any time up to and including the last business day before the day set for the holding of the meeting at which the proxy is to be used; or
|
(b)
|
provided, at the meeting, to the chair of the meeting.
|
12.13
|
Revocation of Proxy Must Be Signed
|
(a)
|
if the shareholder for whom the proxy holder is appointed is an individual, the instrument must be signed by the shareholder or his or her legal personal representative or trustee in bankruptcy;
|
(b)
|
if the shareholder for whom the proxy holder is appointed is a corporation, the instrument must be signed by the corporation or by a representative appointed for the corporation under Article 12.5.
|
12.14
|
Production of Evidence of Authority to Vote
|
12.15
|
Chair May Determine Validity of Proxy
|
13.1
|
First Directors; Number of Directors
|
(a)
|
subject to paragraphs (b) and (c), the number of directors that is equal to the number of the Company's first directors;
|
(b)
|
if the Company is a public company, the greater of three and the most recently set of:
|
(i)
|
the number of directors set by ordinary resolution (whether or not previous notice of the resolution was given); and
|
(ii)
|
the number of directors set under Article 14.4;
|
(c)
|
if the Company is not a public company, the most recently set of:
|
(i)
|
the number of directors set by ordinary resolution (whether or not previous notice of the resolution was given); and
|
(ii)
|
the number of directors set under Article 14.4.
|
13.2
|
Change in Number of Directors
|
(a)
|
the shareholders may elect or appoint the directors needed to fill any vacancies in the board of directors up to that number;
|
(b)
|
if the shareholders do not elect or appoint the directors needed to fill any vacancies in the board of directors up to that number contemporaneously with the setting of that
|
13.3
|
Directors' Acts Valid Despite Vacancy
|
13.4
|
Qualifications of Directors
|
13.5
|
Remuneration of Directors
|
13.6
|
Reimbursement of Expenses of Directors
|
13.7
|
Special Remuneration for Directors
|
13.8
|
Gratuity, Pension or Allowance on Retirement of Director
|
14.1
|
Election at Annual General Meeting
|
(a)
|
the shareholders entitled to vote at the annual general meeting for the election of directors must elect, or in the unanimous resolution appoint, a board of directors consisting of the number of directors for the time being set under these Articles; and
|
(b)
|
all the directors cease to hold office immediately before the election or appointment of directors under paragraph (a), but are eligible for re-election or re-appointment.
|
14.2
|
Consent to be a Director
|
(a)
|
that individual consents to be a director in the manner provided for in the Act;
|
(b)
|
that individual is elected or appointed at a meeting at which the individual is present and the individual does not refuse, at the meeting, to be a director; or
|
(c)
|
with respect to first directors, the designation is otherwise valid under the Act.
|
14.3
|
Failure to Elect or Appoint Directors
|
(a)
|
the Company fails to hold an annual general meeting, and all the shareholders who are entitled to vote at an annual general meeting fail to pass the unanimous resolution contemplated by Article 10.2, on or before the date by which the annual general meeting is required to be held under the Act; or
|
(b)
|
the shareholders fail, at the annual general meeting or in the unanimous resolution contemplated by Article 10.2, to elect or appoint any directors;
|
(c)
|
the date on which his or her successor is elected or appointed; and
|
(d)
|
the date on which he or she otherwise ceases to hold office under the Act or these Articles.
|
14.4
|
Places of Retiring Directors Not Filled
|
14.5
|
Directors May Fill Casual Vacancies
|
14.6
|
Remaining Directors Power to Act
|
14.7
|
Shareholders May Fill Vacancies
|
14.8
|
Additional Directors
|
(a)
|
one-third of the number of first directors, if, at the time of the appointments, one or more of the first directors have not yet completed their first term of office; or
|
(b)
|
in any other case, one-third of the number of the current directors who were elected or appointed as directors other than under this Article 14.8.
|
14.9
|
Ceasing to be a Director
|
(a)
|
the term of office of the director expires;
|
(b)
|
the director dies;
|
(c)
|
the director resigns as a director by notice in writing provided to the Company or a lawyer for the Company; or
|
(d)
|
the director is removed from office pursuant to Articles 14.10 or 14.11.
|
14.10
|
Removal of Director by Shareholders
|
14.11
|
Removal of Director by Directors
|
15.1
|
Powers of Management
|
15.2
|
Appointment of Attorney of Company
|
15.3
|
Remuneration of the auditor
|
16.1
|
Obligation to Account for Profits
|
16.2
|
Restrictions on Voting by Reason of Interest
|
16.3
|
Interested Director Counted in Quorum
|
16.4
|
Disclosure of Conflict of Interest or Property
|
16.5
|
Director Holding Other Office in the Company
|
16.6
|
No Disqualification
|
16.7
|
Professional Services by Director or Officer
|
16.8
|
Director or Officer in Other Corporations
|
17.1
|
Meetings of Directors
|
17.2
|
Voting at Meetings
|
17.3
|
Chair of Meetings
|
(a)
|
the chair of the board, if any;
|
(b)
|
in the absence of the chair of the board, the president, if any, if the president is a director; or
|
(c)
|
any other director chosen by the directors if:
|
(i)
|
neither the chair of the board nor the president, if a director, is present at the meeting within 15 minutes after the time set for holding the meeting;
|
(ii)
|
neither the chair of the board nor the president, if a director, is willing to chair the meeting; or
|
(iii)
|
the chair of the board and the president, if a director, have advised the secretary, if any, or any other director, that they will not be present at the meeting.
|
17.4
|
Meetings by Telephone or Other Communications Medium
|
17.5
|
Calling of Meetings
|
17.6
|
Notice of Meetings
|
17.7
|
When Notice Not Required
|
(a)
|
the meeting is to be held immediately following a meeting of shareholders at which that director was elected or appointed, or is the meeting of the directors at which that director is appointed; or
|
(b)
|
the director has waived notice of the meeting.
|
17.8
|
Meeting Valid Despite Failure to Give Notice
|
17.9
|
Waiver of Notice of Meetings
|
17.10
|
Quorum
|
17.11
|
Validity of Acts Where Appointment Defective
|
17.12
|
Consent Resolutions in Writing
|
(a)
|
in all cases, if each of the directors entitled to vote on the resolution consents to it in writing; or
|
(b)
|
in the case of a resolution to approve a contract or transaction in respect of which a director has disclosed that he or she has or may have a disclosable interest, if each of the other directors who are entitled to vote on the resolution consents to it in writing.
|
18.1
|
Appointment and Powers of Executive Committee
|
(a)
|
the power to fill vacancies in the board of directors;
|
(b)
|
the power to remove a director;
|
(c)
|
the power to change the membership of, or fill vacancies in, any committee of the directors; and
|
(d)
|
such other powers, if any, as may be set out in the resolution or any subsequent directors' resolution.
|
18.2
|
Appointment and Powers of Other Committees
|
(a)
|
appoint one or more committees (other than the executive committee) consisting of the director or directors that they consider appropriate;
|
(b)
|
delegate to a committee appointed under paragraph (a) any of the directors' powers, except:
|
(i)
|
the power to fill vacancies in the board of directors;
|
(ii)
|
the power to remove a director;
|
(iii)
|
the power to change the membership of, or fill vacancies in, any committee of the directors; and
|
(iv)
|
the power to appoint or remove officers appointed by the directors; and
|
(c)
|
make any delegation referred to in paragraph (b) subject to the conditions set out in the resolution or any subsequent directors' resolution.
|
18.3
|
Obligations of Committees
|
(a)
|
conform to any rules that may from time to time be imposed on it by the directors; and
|
(b)
|
report every act or thing done in exercise of those powers at such times as the directors may require.
|
18.4
|
Powers of Board
|
(a)
|
revoke or alter the authority given to the committee, or override a decision made by the committee, except as to acts done before such revocation, alteration or overriding;
|
(b)
|
terminate the appointment of, or change the membership of, the committee; and
|
(c)
|
fill vacancies in the committee.
|
18.5
|
Committee Meetings
|
(a)
|
the committee may meet and adjourn as it thinks proper;
|
(b)
|
the committee may elect a chair of its meetings but, if no chair of a meeting is elected, or if at a meeting the chair of the meeting is not present within 15 minutes after the time set for holding the meeting, the directors present who are members of the committee may choose one of their members to chair the meeting;
|
(c)
|
a majority of the members of the committee constitutes a quorum of the committee; and
|
(d)
|
questions arising at any meeting of the committee are determined by a majority of votes of the members present, and in case of an equality of votes, the chair of the meeting does not have a second or casting vote.
|
19.1
|
Directors May Appoint Officers
|
19.2
|
Functions, Duties and Powers of Officers
|
(a)
|
determine the functions and duties of the officer;
|
(b)
|
entrust to and confer on the officer any of the powers exercisable by the directors on such terms and conditions and with such restrictions as the directors think fit; and
|
(c)
|
revoke, withdraw, alter or vary all or any of the functions, duties and powers of the officer.
|
19.3
|
Qualifications
|
19.4
|
Remuneration and Terms of Appointment
|
20.1
|
Definitions
|
(a)
|
“eligible party” means an individual who:
|
(i)
|
is or was a director or officer of the Company;
|
(ii)
|
is or was a director or officer of another corporation,
|
A.
|
at a time when the corporation is or was an affiliate of the Company, or
|
B.
|
at the request of the Company; or
|
(iii)
|
at the request of the Company, is or was, or holds or held a position equivalent to that of, a director or officer of a partnership, trust, joint venture or other unincorporated entity;
|
(b)
|
“eligible penalty” means a judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, an eligible proceeding;
|
(c)
|
“eligible proceeding” means a legal proceeding or investigative action, whether current, threatened, pending or completed, in which an eligible party or any of the heirs and legal personal representatives of the eligible party, by reason of the eligible party being or having been a director or officer of the Company:
|
(i)
|
is or may be joined as a party; or
|
(ii)
|
is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to, the proceeding;
|
(d)
|
“expenses” has the meaning set out in the Act.
|
20.2
|
Mandatory Indemnification of Eligible Parties
|
20.3
|
Indemnification of Other Persons
|
20.4
|
Non-Compliance with Act
|
20.5
|
Company May Purchase Insurance
|
(a)
|
is or was a director, officer, employee or agent of the Company;
|
(b)
|
is or was a director, officer, employee or agent of a corporation at a time when the corporation is or was an affiliate of the Company;
|
(c)
|
at the request of the Company, is or was a director, officer, employee or agent of a corporation or of a partnership, trust, joint venture or other unincorporated entity;
|
(d)
|
at the request of the Company, holds or held a position equivalent to that of a director or officer of a partnership, trust, joint venture or other unincorporated entity;
|
21.1
|
Payment of Dividends Subject to Special Rights
|
21.2
|
Declaration of Dividends
|
21.3
|
No Notice Required
|
21.4
|
Record Date
|
21.5
|
Manner of Paying Dividend
|
21.6
|
Settlement of Difficulties
|
(a)
|
set the value for distribution of specific assets;
|
(b)
|
determine that cash payments in substitution for all or any part of the specific assets to which any shareholders are entitled may be made to any shareholders on the basis of the value so fixed in order to adjust the rights of all parties; and
|
(c)
|
vest any such specific assets in trustees for the persons entitled to the dividend.
|
21.7
|
When Dividend Payable
|
21.8
|
Dividends to be Paid in Accordance with Number of Shares
|
21.9
|
Receipt by Joint Shareholders
|
21.10
|
Dividend Bears No Interest
|
21.11
|
Fractional Dividends
|
21.12
|
Payment of Dividends
|
21.13
|
Capitalization of Surplus
|
22.1
|
Recording of Financial Affairs
|
22.2
|
Inspection of Accounting Records
|
23.1
|
Method of Giving Notice
|
(a)
|
mail addressed to the person at the applicable address for that person as follows:
|
(i)
|
for a record mailed to a shareholder, the shareholder's registered address;
|
(ii)
|
for a record mailed to a director or officer, the prescribed address for mailing shown for the director or officer in the records kept by the Company or the mailing address provided by the recipient for the sending of that record or records of that class;
|
(iii)
|
in any other case, the mailing address of the intended recipient;
|
(b)
|
delivery at the applicable address for that person as follows, addressed to the person:
|
(i)
|
for a record delivered to a shareholder, the shareholder's registered address;
|
(ii)
|
for a record delivered to a director or officer, the prescribed address for delivery shown for the director or officer in the records kept by the Company or the delivery address provided by the recipient for the sending of that record or records of that class;
|
(iii)
|
in any other case, the delivery address of the intended recipient;
|
(c)
|
unless the intended recipient is the auditor of the Company, sending the record by fax to the fax number provided by the intended recipient for the sending of that record or records of that class;
|
(d)
|
unless the intended recipient is the auditor of the Company, sending the record by email to the email address provided by the intended recipient for the sending of that record or records of that class;
|
(e)
|
physical delivery to the intended recipient.
|
23.2
|
Deemed Receipt of Mailing
|
(a)
|
A record that is mailed to a person by ordinary mail to the applicable address for that person referred to in Article 23.1 is deemed to be received by the person to whom it was mailed on the day, Saturdays, Sundays and holidays excepted, following the date of mailing.
|
(b)
|
a record that is faxed to a person referred to in Article 23.1 is deemed to be received by that person on the day it was faxed; and
|
(c)
|
a record that was emailed to a person referred to in Article 23.1 is deemed to be received by the person to whom it was emailed on the day it was emailed.
|
23.3
|
Certificate of Sending
|
23.4
|
Notice to Joint Shareholders
|
23.5
|
Notice to Trustees
|
(a)
|
mailing the record, addressed to them:
|
(i)
|
by name, by the title of the legal personal representative of the deceased or incapacitated shareholder, by the title of trustee of the bankrupt shareholder or by any similar description; and
|
(ii)
|
at the address, if any, supplied to the Company for that purpose by the persons claiming to be so entitled; or
|
(b)
|
if an address referred to in paragraph (a)(ii) has not been supplied to the Company, by giving the notice in a manner in which it might have been given if the death, bankruptcy or incapacity had not occurred.
|
23.6
|
Undelivered Notices
|
24.1
|
Who May Attest Seal
|
(a)
|
any two directors;
|
(b)
|
any officer, together with any director;
|
(c)
|
if the Company only has one director, that director; or
|
(d)
|
any one or more directors or officers or persons as may be determined by the directors.
|
24.2
|
Sealing Copies
|
24.3
|
Signing Authority
|
24.4
|
Mechanical Reproduction of Seal
|
25.1
|
Definitions
|
(a)
|
“designated security” means a security of the Company other than a non-convertible debt security;
|
(b)
|
“security” has the meaning assigned in the Securities Act (British Columbia);
|
25.2
|
Application
|
25.3
|
Consent Required for Transfer of Shares or Designated Securities
|
26.1
|
Voting
|
26.2
|
Alteration to Rights of Subordinate Voting Shares
|
(a)
|
prejudice or interfere with any right or special right attached to the Subordinate Voting Shares; or
|
(b)
|
affect the rights or special rights of the holders of Subordinate Voting Shares, Proportionate Voting Shares or Multiple Voting Shares on a per share basis as provided for herein.
|
26.3
|
Purchaser Call Option
|
(a)
|
“Arrangement Agreement” means the arrangement agreement made April 18, 2019 between Canopy Growth Corporation and the Company;
|
(b)
|
“Plan of Arrangement” means the plan of arrangement contemplated by the Arrangement Agreement implementing an arrangement under Section 288 of the Business Corporations Act (British Columbia) involving the Company and Canopy
|
(c)
|
“Purchaser Call Option” has the meaning ascribed to such term in the Plan of Arrangement containing the terms and conditions in Exhibit B to the Plan of Arrangement, a copy of which is set out in Appendix A to this Exhibit A and forms part of the rights, privileges, restrictions and conditions attached to the Subordinate Voting Shares.
|
26.4
|
Dividends
|
26.5
|
Liquidation Rights
|
26.6
|
Subdivision or Consolidation
|
27.1
|
Voting
|
27.2
|
Alteration to Rights of Proportionate Voting Shares
|
(a)
|
prejudice or interfere with any right or special right attached to the Proportionate Voting Shares; or
|
(b)
|
affect the rights or special rights of the holders of Subordinate Voting Shares, Proportionate Voting Shares or Multiple Voting Shares on a per share basis as provided for herein.
|
27.3
|
Shares Superior to Proportionate Voting Shares
|
27.4
|
Purchaser Call Option
|
(a)
|
“Arrangement Agreement” means the arrangement agreement made April 18, 2019 between Canopy Growth Corporation and the Company;
|
(b)
|
“Plan of Arrangement” means the plan of arrangement contemplated by the Arrangement Agreement implementing an arrangement under Section 288 of the Business Corporations Act (British Columbia) involving the Company and Canopy Growth Corporation, as such plan of arrangement may be amended from time to time in accordance with the Arrangement Agreement; and
|
(c)
|
“Purchaser Call Option” has the meaning ascribed to such term in the Plan of Arrangement containing the terms and conditions in Exhibit B to the Plan of Arrangement, a copy of which is set out in Appendix A to this Exhibit A and forms part
|
27.5
|
Dividends
|
27.6
|
Liquidation Rights
|
27.7
|
Subdivision or Consolidation
|
27.8
|
Voluntary Conversion
|
(a)
|
Right to Convert Proportionate Voting Shares. Each Proportionate Voting Share shall be convertible at the option of the holder into such number of Subordinate Voting Shares as is determined by multiplying the number of Proportionate Voting Shares in respect of which the Share Conversion Right is exercised by 40. Fractions of Proportionate Voting Shares may be converted into such number of Subordinate Voting Shares as is determined by multiplying the fraction by 40.
|
(b)
|
Right to Convert Multiple Voting Shares. Each Multiple Voting Share shall be convertible at the option of the holder into such number of Subordinate Voting Shares as is determined by multiplying the number of Multiple Voting Shares in respect of which the Share Conversion Right is exercised by one. Fractions of Multiple Voting Shares may be converted into such number of Subordinated Voting Shares as is determined by multiplying the fraction by one.
|
(c)
|
Conversion Limitation. Unless already appointed, upon receipt of a Conversion Notice (as defined below), the directors (or a committee thereof) shall designate an officer of the Company who shall determine whether the Conversion Limitation set forth in this Article shall apply to the conversion referred to therein (the “Conversion Limitation Officer”).
|
(d)
|
Foreign Private Issuer Status. The Company shall use commercially reasonable efforts to maintain its status as a “foreign private issuer” (as determined in accordance with Rule 3b-4 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, the Company shall not give effect to any voluntary conversion of Proportionate Voting Shares or Multiple Voting Shares pursuant to this Article 27.8 or otherwise, and the Share Conversion Right will not apply, to the extent that after giving effect to all permitted issuances after such conversion of Proportionate Voting Shares or Multiple Voting Shares, the aggregate number of Subordinate Voting Shares, Proportionate Voting Shares and Multiple Voting Shares (calculated on the basis that each Subordinate Voting Share, Proportionate Voting Share and Multiple Voting Share is counted once, without regard to the number of votes carried by such share) held of record, directly or indirectly, by residents of the United States (as determined in accordance with Rules 3b-4 and 12g3-2(a) under the Exchange Act (“U.S. Residents”) would exceed 40% (the “40% Threshold”) of the aggregate number of Subordinate Voting Shares, Multiple Voting Shares, Proportionate Voting Shares and Multiple Voting Shares (calculated on the same basis) issued and outstanding (the “FPI Restriction”). The directors may by resolution increase the 40% Threshold to a number not to exceed 50%, and if any such resolution is adopted, all references to the 40% Threshold herein shall refer instead to the amended percentage threshold set by the directors in such resolution.
|
(e)
|
Conversion Limitation. In order to give effect to the FPI Restriction, the number of Subordinate Voting Shares issuable to a holder of Proportionate Voting Shares or Multiple Voting Shares upon exercise by such holder of the Share Conversion Right will be subject to the 40% Threshold based on the number of Proportionate Voting Shares or Multiple Voting Shares held by such holder as of the date of issuance of Proportionate Voting Shares or Multiple Voting Shares to such holder, and thereafter at the end of each of the Company's subsequent fiscal quarters (each, a “Determination Date”), calculated as follows:
|
(f)
|
Disputes.
|
(i)
|
Any holder of Proportionate Voting Shares or Multiple Voting Shares who beneficially owns more than 5% of the issued and outstanding Proportionate Voting Shares or Multiple Voting Shares may submit a written dispute as to the calculation of the 40% Threshold or the FPI Restriction by the Conversion Limitation Officer to the directors with the basis for the disputed calculations. The Company shall respond to the holder within five business days of receipt of the notice of such dispute with a written calculation of the 40% Threshold or the FPI Restriction, as applicable. If the holder and the Company are unable to agree upon such calculation of the 40% Threshold or the FPI Restriction, as applicable, within five business days of such response, then the Company and the holder shall, within one business day thereafter submit the disputed calculation of the 40% Threshold or the FPI Restriction to the Company's independent auditor. The Company, at the Company's expense, shall cause the auditor to perform the calculations in dispute and notify the Company and the holder of the results no later than five business days from the time it receives the disputed calculations. The auditor's calculations shall be final and binding on all parties, absent demonstrable error.
|
(ii)
|
In the event of a dispute as to the number of Subordinate Voting Shares issuable to a holder of Proportionate Voting Shares or Multiple Voting Shares in connection with a voluntary conversion of Proportionate Voting Shares or Multiple Voting Shares, the Company shall issue to the holder of Proportionate Voting Shares or Multiple Voting Shares the number of Subordinate Voting Shares not in dispute, and resolve such dispute in accordance with Article 27.8(f)(i).
|
(g)
|
Mechanics of Conversion. Before any holder of Proportionate Voting Shares or Multiple Voting Shares shall be entitled to voluntarily convert Proportionate Voting Shares or Multiple Voting Shares into Subordinate Voting Shares in accordance with Articles 27.8(a) or (b), the holder shall surrender the certificate or certificates representing the Proportionate Voting Shares or Multiple Voting Shares to be converted at the head office of the Company, or the office of any transfer agent for the Proportionate Voting Shares or Multiple Voting Shares, and shall give written notice to the Company at its head office of his or her election to convert such Proportionate Voting Shares or Multiple Voting Shares and shall state therein the name or names in which the certificate or certificates representing the Subordinate Voting Shares are to be issued (a “Conversion Notice”). The Company shall (or shall cause its transfer agent to) as soon as practicable thereafter, issue to such holder or his or her nominee, a certificate or certificates or direct registration statement representing the number of Subordinate Voting Shares to which such holder is entitled upon conversion. Such conversion shall be deemed to have taken place immediately prior to the close of business on the day on which the certificate or certificates representing the Proportionate Voting Shares or Multiple Voting Shares to be converted is surrendered and the Conversion Notice is delivered, and the person or persons entitled to receive the Subordinate Voting Shares issuable upon such conversion shall be treated for all purposes as the holder or holders of record of such Subordinate Voting Shares as of such date.
|
27.9
|
Mandatory Conversion
|
28.1
|
Voting
|
28.2
|
Alteration to Rights of Multiple Voting Shares
|
(a)
|
prejudice or interfere with any right or special right attached to the Multiple Voting Shares; or
|
(b)
|
affect the rights or special rights of the holders of Subordinate Voting Shares, Proportionate Voting Shares and Multiple Voting Shares on a per share basis as provided for herein.
|
28.3
|
Shares Superior to Multiple Voting Shares
|
28.4
|
Purchaser Call Option
|
(a)
|
“Arrangement Agreement” means the arrangement agreement made April 18, 2019 between Canopy Growth Corporation and the Company;
|
(b)
|
“Plan of Arrangement” means the plan of arrangement contemplated by the Arrangement Agreement implementing an arrangement under Section 288 of the Business Corporations Act (British Columbia) involving the Company and Canopy Growth Corporation, as such plan of arrangement may be amended from time to time in accordance with the Arrangement Agreement; and
|
(c)
|
“Purchaser Call Option” has the meaning ascribed to such term in the Plan of Arrangement containing the terms and conditions in Exhibit B to the Plan of Arrangement, a copy of which is set out in Appendix A to this Exhibit A and forms part of the rights, privileges, restrictions and conditions attached to the Multiple Voting Shares.
|
28.5
|
Issuance
|
28.6
|
Dividends
|
28.7
|
Liquidation Rights
|
28.8
|
Subdivision or Consolidation
|
28.9
|
Transfer of Multiple Voting Shares
|
28.10
|
Mandatory Conversion
|
29.1
|
Nomination of Directors
|
(a)
|
Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Company. Nominations of persons for election as directors may be made at any general meeting of shareholders if one of the purposes for which the general meeting was called was the election of directors:
|
(i)
|
by or at the direction of the directors, including pursuant to a notice of meeting;
|
(ii)
|
by or at the direction or request of one or more shareholders pursuant to a proposal made in accordance with the provisions of the Act, or a requisition of the shareholders made in accordance with the provisions of the Act; or
|
(iii)
|
by any person (a “Nominating Shareholder”): (A) who, at the close of business on the date of the giving of the notice provided for below in this Article 29.1 and on the record date for notice of such meeting, is entered in the central securities register as a holder of one or more shares carrying the right to vote at such meeting or who beneficially owns shares that are entitled to be voted at such meeting; and (B) who complies with the notice procedures set forth below in this Article 29.1.
|
(b)
|
In addition to any other applicable requirements, for a nomination to be made by a Nominating Shareholder, the Nominating Shareholder must have given timely notice thereof in proper written form to the Secretary of the Company at the principal executive offices of the Company.
|
(c)
|
To be timely, a Nominating Shareholder's notice to the Secretary of the Company must be given:
|
(i)
|
in the case of an annual general meeting of shareholders, not less than 30 days prior to the date of the annual general meeting of shareholders; provided, however, that in the event that the annual meeting of shareholders is to be held on a date that is less than 50 days after the date (the “Notice Date”) on which the first public announcement of the date of the annual meeting was made, notice by the Nominating Shareholder may be given not later than the close of business on the 10th day following the Notice Date;
|
(ii)
|
in the case of any other general meeting of shareholders called for the purpose of electing directors (whether or not also called for other purposes), not later than the close of business on the 15th day following the day on which the first public announcement of the date of the general meeting of shareholders was made. In no event shall any adjournment or postponement of a general meeting of shareholders or the announcement thereof commence a new time period for the giving of a Nominating Shareholder's notice as described above;
|
(iii)
|
if notice-and-access (as defined in National Instrument 54-101 - Communication with Beneficial Owners of Securities of a Reporting Issuer) is used for delivery of proxy related materials in respect of a meeting described above, and the notice date in respect of the meeting is not fewer than 50 days prior to the date of the applicable meeting, the notice must be received not later than the close of business on the 40th day before the applicable meeting.
|
(d)
|
To be in proper written form, a Nominating Shareholder's notice to the Secretary of the Company must set forth:
|
(i)
|
as to each person whom the Nominating Shareholder proposes to nominate for election as a director: (A) the name, age, business address and residential address of the person; (B) the principal occupation or employment of the person; (C) the class or series and number of shares in the capital of the Company which are controlled or which are owned beneficially or of record by the person as of the record date for the general meeting of shareholders (if such date shall then have been made publicly available and shall have occurred) and as of the date of such notice; and (D) any other information relating to the person that would be required to be disclosed in a dissident's
|
(ii)
|
as to the Nominating Shareholder giving the notice, any proxy, contract, arrangement, understanding or relationship pursuant to which such Nominating Shareholder has a right to vote any shares of the Company and any other information relating to such Nominating Shareholder that would be required to be made in a dissident's proxy circular in connection with solicitations of proxies for election of directors pursuant to Canadian securities legislation.
|
(e)
|
The Company may require any proposed nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility of such proposed nominee to serve as an independent director of the Company or that could be material to a reasonable shareholder's understanding of the independence, or lack thereof, of such proposed nominee.
|
(f)
|
No person shall be eligible for election as a director of the Company unless nominated in accordance with the provisions of this Article 29.1; provided, however, that nothing in this Article 29.1 shall be deemed to preclude discussion by a shareholder (as distinct from the nomination of directors) at a meeting of shareholders of any matter in respect of which it would have been entitled to submit a proposal pursuant to the provisions of the Act. The chair of the meeting shall have the power and duty to determine whether a nomination was made in accordance with the procedures set forth in this Article 29.1 and, if any proposed nomination is not in compliance with such foregoing provisions, to declare that such defective nomination shall be disregarded.
|
(g)
|
For purposes of this Article 29.1, “public announcement” shall mean disclosure in a press release reported by a national news service in Canada, or in a document publicly filed by the Company under its profile on the System for Electronic Document Analysis and Retrieval at www.sedar.com; and
|
(h)
|
Notwithstanding Article 23 and any other provision of this Article 29.1, notice given to the Secretary of the Company pursuant to this Article 29.1 may only be given by personal delivery, facsimile transmission or by email (at such email address as stipulated from time to time by the Secretary of the Company for purposes of this notice), and shall be deemed to have been given and made only at the time it is served by personal delivery, email (at the address as aforesaid) or sent by facsimile transmission (provided that receipt of confirmation of such transmission has been received) to the Secretary at the address of the principal executive offices of the Company; provided that if such delivery or electronic communication is made on a day which is a not a business day or later than 5:00 p.m. (Vancouver time) on a day which is a business day, then such delivery or electronic communication shall be deemed to have been made on the subsequent day that is a business day.
|
(i)
|
Notwithstanding the foregoing, the board may, in its sole discretion, waive any requirement in this Article 29.1.
|
(a)
|
any derivative action or proceeding brought by any person on behalf of the Company;
|
(b)
|
any action or proceeding asserting a claim of breach of a fiduciary duty owed to the Company by any director, officer or other employee of the Company;
|
(c)
|
any action or proceeding asserting a claim arising pursuant to any provision of the Act or these Articles (as either may be amended from time to time; and
|
(d)
|
Any action or proceeding asserting a claim otherwise related to the relationships among the Company, its affiliates and their respective shareholders, directors, officers or any of them, but excluding claims relating to the business carried on by the Company or such affiliates.
|
(e)
|
The personal jurisdiction of the British Columbia Courts in connection with any action or proceeding brought in the British Columbia Courts to enforce the provisions of this Article 30; and
|
(f)
|
service of process in any such action or proceeding upon such shareholder or other securityholder by service upon such shareholder’s counsel in the Foreign Action as agent for such shareholder or other securityholder.
|
ARTICLE 1 INTERPRETATION
|
1
|
|
||
|
Section 1.1
|
Defined Terms
|
1
|
|
|
Section 1.2
|
Gender and Number
|
18
|
|
|
Section 1.3
|
Headings, etc.
|
18
|
|
|
Section 1.4
|
Currency
|
18
|
|
|
Section 1.5
|
Certain Phrases, etc.
|
18
|
|
|
Section 1.6
|
Non-Business Days
|
19
|
|
|
Section 1.7
|
Accounting Terms
|
19
|
|
|
Section 1.8
|
Rateable Portion of Advance
|
19
|
|
|
Section 1.9
|
Incorporation of Schedules and Exhibits
|
19
|
|
|
Section 1.10
|
Conflict
|
19
|
|
|
Section 1.11
|
Certificates
|
20
|
|
|
Section 1.12
|
Permitted Liens
|
20
|
|
|
Section 1.13
|
References to Agreements
|
20
|
|
|
Section 1.14
|
Statutes
|
20
|
|
|
Section 1.15
|
Currency Equivalents Generally
|
20
|
|
ARTICLE 2 CREDIT FACILITIES
|
20
|
|
||
|
Section 2.1
|
Availability and Advances
|
20
|
|
|
Section 2.2
|
Commitments and Facility Limits
|
21
|
|
|
Section 2.3
|
Use of Proceeds
|
21
|
|
|
Section 2.4
|
Mandatory Repayments
|
21
|
|
|
Section 2.5
|
Prepayments; Termination and Reductions of Commitments
|
22
|
|
|
Section 2.6
|
Payments under this Agreement
|
22
|
|
|
Section 2.7
|
Application of Payments and Prepayments
|
23
|
|
|
Section 2.8
|
Computations of Interest
|
23
|
|
ARTICLE 3 ADVANCES
|
23
|
|
||
|
Section 3.1
|
The Advance
|
23
|
|
|
Section 3.2
|
Reliance upon Borrower’s Authority
|
23
|
|
|
Section 3.3
|
Interest on Advances
|
24
|
|
ARTICLE 4 CONDITIONS OF LENDING
|
25
|
|
||
|
Section 4.1
|
Conditions Precedent to the First Advance
|
25
|
|
|
Section 4.2
|
Conditions Precedent to the Second Advance
|
27
|
|
|
Section 4.3
|
Conditions Precedent to any Subsequent Advance
|
27
|
|
|
Section 4.4
|
Waiver of Conditions Precedent
|
28
|
|
ARTICLE 5 REPRESENTATIONS AND WARRANTIES –
|
28
|
|
||
|
Section 5.1
|
Representations and Warranties
|
28
|
|
|
Section 5.2
|
Survival of Representations and Warranties
|
31
|
|
ARTICLE 6 COVENANTS OF THE BORROWER
|
31
|
|
||
|
Section 6.1
|
Affirmative Covenants
|
31
|
|
|
Section 6.2
|
Negative Covenants
|
34
|
|
ARTICLE 7 SECURITY
|
36
|
|
||
|
Section 7.1
|
Security to be Provided by Credit Parties
|
36
|
|
|
Section 7.2
|
Share Certificates
|
36
|
|
ARTICLE 8 CHANGES IN CIRCUMSTANCES
|
37
|
|
||
|
Section 8.1
|
Taxes
|
37
|
|
ARTICLE 9 EVENTS OF DEFAULT
|
38
|
|
||
|
Section 9.1
|
Events of Default
|
38
|
|
|
Section 9.2
|
Acceleration
|
40
|
|
|
Section 9.3
|
Remedies Upon Default
|
40
|
|
ARTICLE 10 THE AGENT AND THE LENDERS
|
42
|
|
||
|
Section 10.1
|
Appointment and Authority
|
42
|
|
|
Section 10.2
|
Rights as a Lender
|
43
|
|
|
Section 10.3
|
Exculpatory Provisions
|
43
|
|
|
Section 10.4
|
Reliance by Agent
|
44
|
|
|
Section 10.5
|
Indemnification of Agents
|
44
|
|
|
Section 10.6
|
Delegation of Duties
|
45
|
|
|
Section 10.7
|
Notices
|
45
|
|
|
Section 10.8
|
Replacement of Agents
|
45
|
|
|
Section 10.9
|
Non-Reliance on Agents
|
46
|
|
|
Section 10.10
|
Holding of Security; Discharges
|
46
|
|
|
Section 10.11
|
Survival
|
46
|
|
ARTICLE 11 MISCELLANEOUS
|
46
|
|
||
|
Section 11.1
|
Amendments, etc.
|
46
|
|
|
Section 11.2
|
Waiver
|
46
|
|
|
Section 11.3
|
Evidence of Debt
|
47
|
|
|
Section 11.4
|
Notices: Effectiveness; Electronic Communication
|
47
|
|
|
Section 11.5
|
Expenses; Indemnity; Damage Waiver
|
48
|
|
|
Section 11.6
|
Successors and Assigns
|
49
|
|
|
Section 11.7
|
Reserved
|
49
|
|
|
Section 11.8
|
Interest on Amounts
|
49
|
|
|
Section 11.9
|
Anti-Terrorism Laws
|
50
|
|
|
Section 11.10
|
Governing Law: Jurisdiction: Etc.
|
50
|
|
|
Section 11.11
|
Waiver of Jury Trial
|
52
|
|
|
Section 11.12
|
Counterparts: Integration: Effectiveness: Electronic Execution
|
53
|
|
|
Section 11.13
|
Treatment of Certain Information: Confidentiality
|
53
|
|
|
Section 11.14
|
Severability
|
54
|
|
|
Section 11.15
|
Time of the Essence
|
55
|
|
|
Section 11.16
|
USA PATRIOT Act
|
55
|
|
|
Section 11.17
|
No Fiduciary Duty
|
55
|
|
(a)
|
that (i) is identified on the list of “Specially Designated Nationals and Blocked Persons” published by OFAC and/or any other similar lists maintained by OFAC pursuant to authorizing statute, executive order or regulation; (ii) (A) is an agency of the government of a country, (B) an organization controlled by a country, or (C) resides, is organized or chartered in a country, region or territory that is the target of comprehensive sanctions under any Sanctions; (iii) a Person listed in any economic or financial sanctions-related or trade embargoes-related list of designated Persons maintained under any of the Anti-Money Laundering and Anti-Terrorism Laws; or (iv) (A) is a Person whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of the Executive Order or any related legislation or any other similar executive order(s) or (B) engages in any
|
(b)
|
that is owned or controlled by or that is acting for or on behalf of, any Person described in clause (a) above.
|
(a)
|
all indebtedness of such Person for borrowed money, including borrowings of commodities, prepaid forward sales of commodities, bankers’ acceptances, letters of credit or letters of guarantee;
|
(b)
|
all indebtedness of such Person for the deferred purchase price of Assets or services, other than for Assets and services purchased in the ordinary course of business and paid for in accordance with customary practice and not represented by a note, bond, debenture or other evidence of Debt;
|
(c)
|
all indebtedness created or arising under any conditional sale or other title retention agreement with respect to Assets 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 Assets);
|
(d)
|
all obligations of such Person represented by a note, bond, debenture or other evidence of Debt;
|
(e)
|
all obligations under Capital Leases and all obligations under synthetic leases, in each case, in respect of which such Person is liable as lessee;
|
(f)
|
all obligations with respect to any Equity Securities in the capital of the Person which, by their terms (or by the terms of any security into which they are convertible or for which they are exchangeable), or upon the happening of any event (i) mature or are mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii) are redeemable for cash or debt at the sole option of the holder, or (iii) provide for scheduled payments of dividends in cash;
|
(g)
|
the net amount payable by such Person under Derivatives Agreements, provided that such amount shall only constitute Debt if such Derivatives Agreements have been closed out or terminated; and
|
(h)
|
all Debt of another entity of a type described in clauses (a) through (g) which is directly or indirectly guaranteed by such Person, which is secured by a Lien on any Assets of such Person, which such Person has agreed (contingently or otherwise) to purchase or otherwise acquire, or in respect of which such Person has otherwise assured a creditor or other entity against loss.
|
(a)
|
the Obligations;
|
(b)
|
all Debt under the [Redacted] Guarantee;
|
(c)
|
any other Debt provided the repayment amount on maturity thereof does not exceed, in aggregate, $51,000,000 plus 10%;
|
(d)
|
in relation to any Credit Party other than the Borrower and the IP Guarantor, any Subordinated Debt;
|
(e)
|
in relation to any Credit Party other than the Borrower and the IP Guarantor, all obligations under Capital Leases;
|
(f)
|
in relation to any Credit Party other than the Borrower and the IP Guarantor, any guarantee or indemnity in respect of Permitted Debt;
|
(g)
|
any other Debt which the Lender agrees in writing is Permitted Debt;
|
(h)
|
in relation to any Credit Party other than the Borrower and the IP Guarantor, any Debt arising under a foreign exchange transaction for spot or forward delivery entered into in connection with protection against fluctuation in currency rates provided that such foreign exchange transaction is not for speculative purposes; and
|
(i)
|
in relation to any Credit Party other than the Borrower and the IP Guarantor, any other Debt provided the aggregate principal amount thereof does not exceed $2,000,000.
|
(a)
|
of inventory in the ordinary course of business;
|
(b)
|
of obsolete or redundant vehicles, plant and equipment for cash;
|
(c)
|
made with the prior written consent of the Lender;
|
(d)
|
of fixed assets where the proceeds of disposal are used to purchase replacement assets comparable or superior as to type, value and quality;
|
(e)
|
of assets for cash where the consideration (when aggregated with the consideration for any other sale, transfer, assignment, lease or other disposal not allowed under paragraphs (a) to (e) above) does not exceed $2,000,000 in any 12 month period.
|
(a)
|
Liens for Taxes which are not due or delinquent or the validity of which is being contested at the time by the Person in good faith by proper legal proceedings if adequate provision has been made for their payment and such Liens are not executed on or enforced against any of the Assets of any Credit Party;
|
(b)
|
Liens in favour of the Agent and the other Secured Creditors created by the Security Documents;
|
(c)
|
any Lien or deposit under workers’ compensation, social security or similar legislation or in connection with bids, tenders, leases or contracts or to secure related public or statutory obligations, surety and appeal bonds where required by law;
|
(d)
|
any builders’, mechanics’, materialman’s, carriers’, warehousemen’s and landlords’ liens and privileges, in each case, which relate to obligations not yet due or delinquent;
|
(e)
|
any right reserved to or vested in any Governmental Authority by the terms of any lease, licence, franchise, grant, claim or permit held or acquired by any Credit Party, or by any statutory provision, to terminate the lease, licence, franchise, grant, claim or permit or to purchase assets used in connection therewith or to require annual or other periodic payments as a condition of the continuance thereof;
|
(f)
|
any Lien created or assumed by any Credit Party in favour of a public utility when required by the utility in connection with the operations of such Credit Party;
|
(g)
|
any reservations, limitations, provisos and conditions expressed in original grants from any Governmental Authority;
|
(h)
|
any applicable municipal and other Governmental Authority restrictions affecting the use of land or the nature of any structures which may be erected thereon, any minor encumbrance, such as easements, rights-of-way, servitudes or other similar rights in land granted to or reserved by other Persons, rights-of-way for sewers, electric lines, telegraph and telephone lines, oil and natural gas pipelines and other similar purposes, or zoning or other restrictions applicable to the use of real property by any Credit Party, or title defects, encroachments or irregularities, that do not detract from the value of the property or impair its use in the operation of the business of any Credit Party;
|
(i)
|
customary Liens in respect of service charges in respect of bank accounts;
|
(j)
|
any Lien over the Restricted Account or any funds in the Restricted Account; and
|
(k)
|
any Lien that secures Permitted Debt referred to under subsections (c), (e) and/or (f) of the definition of “Permitted Debt”;.
|
(1)
|
the First Lender agrees to make the First Advance to the Borrower in accordance with the First Advance Commitment on the First Advance Closing Date;
|
(2)
|
the Second Lender agrees to make the Second Advance to the Borrower in accordance with the Second Advance Commitment on the Second Advance Closing Date; and
|
(3)
|
the Subsequent Lender agrees to make each Subsequent Advance to the Borrower in accordance with the Subsequent Advance Commitment on the applicable Subsequent Advance Closing Date.
|
(1)
|
The First Advance, when made, shall permanently reduce the First Advance Commitment by the amount of the First Advance. The Second Advance, when made, shall permanently reduce the Second Advance Commitment by the amount of the Second Advance. Each Subsequent Advance, when made, shall permanently reduce the Subsequent Advance Commitment by the amount of such Subsequent Advance. The Credit Facility does not revolve and any amount repaid or prepaid, as the case may be, under the Credit Facility cannot be reborrowed and will not increase or re-instate any Commitment, rateably by the amount repaid or prepaid, as the case may be.
|
(a)
|
The Borrower shall repay:
|
(b)
|
If, prior to the date that is four months from the Second Advance Closing Date, Parent or its Affiliates has not (i) borrowed or otherwise raised debt or equity capital from [Redacted - administrative agentʼs name] or another lender of at least an additional US$65,000,000, or (ii) the Borrower has not repaid the Second Advance by (A) paying the amount of the Second Amount Advance and the Applicable Premium thereon to the Second Advance Lender and (B) concurrently with such payment delivering to the Second Advance Lender that number of Interest Shares equal to 480,000 less the number of Second Advance Interest Shares delivered to the Second Advance Lender prior to such repayment date, the Second Advance Lender shall have the right to accelerate the maturity of the Second Advance. If this acceleration occurs, (i) the Borrower shall immediately cause the release of the Connecticut Purchase Agreement from escrow, which provides for the transfer of the collateral described in the Second Advance Security Document described in Section 7.1(a) to the Lender in full satisfaction of the Aggregate Principal Amount of the Second Advance and the Applicable Premium thereon (being, for the avoidance of doubt, US$22,000,000 in principal amount), and (ii) the Borrower will deliver to the Second Advance Lender a number of Interest Shares equal to 480,000 less the number of Second Advance Interest Shares delivered to the Second Advance Lender prior to such date.
|
(1)
|
The Borrower may, in its discretion, prepay the Aggregate Principal Amount of the First Advance, the Second Advance and/or any Subsequent Advance (in whole or in part) then outstanding upon five Business Days’ notice to the Agent (which notice shall state the proposed date of prepayment and the principal amount being prepaid). The Borrower shall, on the date specified in such prepayment notice, pay to the Lender the Aggregate Principal Amount outstanding being prepaid together with the Applicable Premium relating to the amount being prepaid. For greater certainty, the First Advance Lender or the Second Advance Lender, as applicable, shall be entitled to receive all Interest Shares that have yet to be issued to such Lender pursuant to Section 3.3 upon repayment of the First Advance or the Second Advance contemplated in this Section 2.5 as though the Frist Advance or the Second Advance, as applicable, was outstanding until its applicable Maturity Date. Once given a prepayment notice shall be irrevocable.
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(1)
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All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or set-off. Unless otherwise expressly provided in this Agreement, the Borrower shall (i) make any payment required to be made by it to a Lender by depositing the amount of the payment with the Agent in immediately available funds not later than 12:00 p.m. (Toronto, Ontario time) on the date the payment is due, and (ii) with respect to any prepayment, provide to the Agent, upon one (1)
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(2)
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Payments made hereunder shall be made on a Business Day. Payments received by the Agent, before 12:00 p.m (Toronto, Ontario time) on a Business Day will be given value on that Business Day. All payments received by the Agent after 12:00 p.m. (Toronto, Ontario time) will be given value on the next following Business Day.
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(3)
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The Borrower shall make each such payment under the Credit Documents in U.S. Dollars.
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(1)
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All prepayments under the Credit Facility pursuant to Section 2.5, excluding the Applicable Premium, shall be applied by the Agent to the applicable Aggregate Principal Amount.
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(2)
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Subject to Sections 2.4(b), 9.3(2) and 9.4, if at any time insufficient funds are received by and available to the Agent to pay fully all Obligations then due hereunder then such funds shall be applied (i) first, in reduction of the Borrower’s obligation to pay any expenses, claims or losses referred to in Section 11.5, (ii) second, in reduction of the Borrower’s obligation to pay the Applicable Premium, and (iii) third, in reduction of the Borrower’s obligation to pay any amounts due and owing on account of any unpaid principal amount of any unpaid Aggregate Principal Amount which are due and owing.
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(1)
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All computations of interest shall be made by the Agent taking into account the actual number of days occurring in the period for which such interest is payable and on the basis of a year of 365 days.
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(2)
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If any provision of this Agreement or of any of the other Credit Documents would obligate any Credit Party to make any payment of interest or other amount payable to any Lender in an amount or calculated at a rate which would be prohibited by Applicable Law or would result in a receipt by such Lender of interest at a criminal rate then, notwithstanding such provisions, such amount or rate shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by Applicable Law or so result in a receipt by such Lender of interest at a criminal rate, such adjustment to be effected, to the extent necessary, as follows: firstly, by reducing the amount or rate of interest required to be paid to such Lender under the applicable Credit Document (including by reducing the Applicable Premium), and thereafter, by reducing any fees, commissions, premiums and other amounts (including the number of Interest Shares) required to be paid to such Lender which would constitute “interest” for purposes of Applicable Law.
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(1)
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The Borrower shall pay interest on the unpaid principal amount of the Advances as follows:
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(a)
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from the first Advance Closing Date until the principal amount of the First Advance is repaid in full, by the delivery to the Lender of an aggregate of 27,333 Parent Shares per month (the “First Advance Interest Shares”);
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(b)
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from the Second Advance Closing Date until the principal amount of the Second Advance is repaid in full, by the delivery to the Lender of an aggregate of 40,000 Parent Shares per month (the “Second Advance Interest Shares”); and
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(c)
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from any Subsequent Advance Closing Date until the principal amount of such Subsequent Advance is repaid in full, by the delivery to the Lender of an aggregate of Parent Shares to be agreed between the Borrower and the applicable Subsequent Advance Lender (the “Subsequent Advance Interest Shares” and, together with the First Advance Interest Shares and the Second Advance Interest Shares, the “Interest Shares”).
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(2)
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If the Borrower:
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(a)
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prepays the First Advance pursuant to Section 2.5 prior to the First Advance Maturity Date, the Borrower shall deliver to the First Advance Lender such number of Parent Shares as is equal to the difference between 328,000 Parent Shares and the aggregate amount of Interest Shares previously delivered to the First Advance Lender pursuant to Section 3.3(1)(a);
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(b)
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prepays the Second Advance pursuant to Section 2.5 prior to the Second Advance Maturity Date, the Borrower shall deliver to the Second Advance Lender such number of Parent Shares as is equal to the difference between 480,000 Parent Shares and the aggregate amount of Interest Shares previously delivered to the Second Advance Lender pursuant to Section 3.3(1)(b); or
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(c)
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prepays a Subsequent Advance pursuant to Section 2.5 prior to the applicable Subsequent Advance Maturity Date, the Borrower shall deliver to the applicable Subsequent Advance Lender such number of Parent Shares as the Borrower and the applicable Subsequent Lender may agree.
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(3)
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The Borrower shall use its best efforts to cause the Interest Shares to be, when delivered to the Lenders hereunder, Freely Tradable. Notwithstanding any other provision of this Agreement, the Lenders acknowledge and agree that (i) no Interest Shares need be delivered by the Borrower prior to May 31, 2020 or such earlier date as the Borrower may determine (the “First Delivery Date”) (or within 30 days of any date upon which the Interest Shares are deliverable hereunder following the First Delivery Date), (ii) the Borrower’s obligation to deliver Second Advance Interest Shares shall cease at any time while the Second Advance is outstanding should the Borrower fail to deliver Freely Tradeable Second Advance Interest Shares on or prior to the First Delivery Date and, in respect of all Second Advance Interest Shares deliverable after the First Delivery Date, within 30 days of such prescribed delivery date, and (iii) following the cessation of the Borrower’s obligations to deliver Second Advance Interest Shares as contemplated in (ii), the Borrower shall satisfy all deliveries of Second Advance Interest Shares for which Interest Shares have not been previously delivered with a cash payment to the Second Advance Lender in place of Interest Shares on each applicable Second Advance Interest Shares delivery date in an amount equal to the 30 day volume weighted average price per Parent Share on the Exchange multiplied by the applicable number of such Second Advance Interest Shares to be delivered on such date.
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(4)
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Subject to Section 3.3(3) above, Interest Shares shall be payable monthly in arears on the last Business Day of each month during which the applicable Advance is outstanding.
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(5)
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Each Lender shall hold all Interest Shares received by it in a segregated account and shall not comingle the Interest Shares with any other Parent Shares. The Lenders each hereby covenant that they will, promptly, and in any event within 24 hours, advise the Borrower in writing of any disposition of any Interest Share.
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(a)
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no Default or Event of Default has occurred or is continuing or would arise immediately after giving effect to or as a result of the First Advance;
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(b)
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the representations and warranties of the Credit Parties contained in Article 5 and in each of the other Credit Documents are true and correct on the First Advance Closing Date as if such representations and warranties were made on that date;
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(c)
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no litigation is pending or threatened in writing against one or more of the Credit Parties that, if decided adversely, would reasonably be expected to have a Material Adverse Effect;
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(d)
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the First Security shall have been executed and delivered, all registrations necessary or desirable in connection therewith shall have been made, and all legal opinions and other documentation reasonably required by the First Advance Lender in connection therewith shall have been executed and delivered, all in form and substance reasonably satisfactory to the Agent and the First Advance Lender;
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(e)
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the Agent having received, in form and substance and dated a date reasonably satisfactory to the First Advance Lender and its counsel:
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(i)
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an executed copy of this Agreement, the IP Guarantee and the First Advance Security Documents;
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(ii)
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(x) searches shall have been conducted in all jurisdictions and (y) deliveries of all consents, approvals, acknowledgements, confirmations, undertakings, subordinations, discharges, waivers and other documents and instruments to the Agent shall have been made, which, in each case, are desirable or required to make effective the First Advance Security and to ensure the perfection and the first-ranking priority of the First Advance Security subject only to Permitted Liens which rank by law in priority;
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(iii)
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certified copies of (i) the charter documents of each Credit Party; (ii) all resolutions of the Board of Directors or members, as the case may be, of each Credit Party approving the borrowing and other matters contemplated by this Agreement and the other Credit Documents, and (iii) a list of the officers and directors authorized to sign agreements together with their specimen signatures;
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(iv)
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a good standing certificate or like certificate with respect to each Credit Party issued by the appropriate Governmental Authority of the jurisdiction of its organization;
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(v)
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all approvals, acknowledgments and consents of all Governmental Authorities and other Persons which are required to be obtained by the Borrower in order to complete the transactions contemplated by this Agreement and to perform its obligations under any Credit Document to which it is a party;
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(vi)
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opinions from the counsel for each Credit Party regarding its corporate status, the due authorization, execution, delivery and enforceability of the Credit Documents provided by it, and such other matters as the Agent and the Lenders may reasonably require;
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(vii)
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the documentation and other information that is required by the Agent and the First Advance Lender pursuant to Anti-Terrorism Laws and applicable “know your client” laws and regulations; and
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(viii)
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copies of the fully executed [Redacted] Credit Agreement and the other [Redacted] Credit Documents.
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(a)
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no Default or Event of Default has occurred or is continuing or would arise immediately after giving effect to or as a result of the Second Advance;
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(b)
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the Second Security shall have been executed and delivered, all registrations necessary in connection therewith shall have been made, and all legal opinions and other documentation reasonably required by the Second Advance Lender in connection therewith shall have been executed and delivered, all in form and substance reasonably satisfactory to the Agent and the Second Advance Lender;
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(c)
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the Agent having received, in form and substance and dated a date reasonably satisfactory to the Second Advance Lender and its counsel:
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(i)
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an executed copy of the Guarantees (other than the IP Guarantee) and the Security Advance Security Documents; and
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(ii)
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opinions from the counsel for each Credit Party regarding its corporate status, the due authorization, execution, delivery and enforceability of the Second Advance Security Documents.
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(a)
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no Default or Event of Default has occurred or is continuing or would arise immediately after giving effect to or as a result of such Subsequent Advance;
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(b)
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the Subsequent Security (if any) shall have been executed and delivered, all registrations necessary in connection therewith shall have been made, and all legal
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(c)
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the Agent having received, in form and substance and dated a date reasonably satisfactory to such Subsequent Advance Lender and its counsel:
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(i)
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an executed copy of the Subsequent Advance Security Documents (if any); and
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(ii)
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opinions from the counsel for each Credit Party regarding its corporate status, the due authorization, execution, delivery and enforceability of the Subsequent Advance Security Documents (if any).
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(1)
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Incorporation and Qualification. Each of the Credit Parties is a company duly organized and validly existing under the laws of its jurisdiction of organization. Each of the Credit Parties is qualified, licensed or registered to carry on business under the laws applicable to it in all jurisdictions in which such qualification, licensing or registration is necessary or where failure to be so qualified would have a Material Adverse Effect;
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(2)
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Power. Each of the Credit Parties has all requisite entity power and authority to (i) own, lease and operate its properties and assets and to carry on its business as now being conducted by it, and (ii) enter into and perform its obligations under the Credit Documents to which it is a party;
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(3)
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Conflict With Other Instruments. The execution and delivery by each of the Credit Parties and the performance by each of them of their respective obligations under, and compliance with the terms, conditions and provisions of, the Credit Documents to which
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(4)
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Entity Action, Governmental Approvals, etc. The execution and delivery of each of the Credit Documents by each of the Credit Parties, in each case, to the extent a party thereto and the performance by each of the Credit Parties of their respective obligations under the Credit Documents, in each case, to the extent a party thereto, have been duly authorized by all necessary entity action including the obtaining of all necessary equity owner consents. No authorization, consent, approval, registration, qualification, designation, declaration or filing with any Governmental Authority or other Person, is or was necessary to be obtained or made by the Borrower in connection with its execution, delivery and performance of obligations under the Credit Documents except as are in full force and effect, unamended, at the date of this Agreement;
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(5)
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Execution and Binding Obligation. This Agreement and the other Credit Documents have been duly executed and delivered by each of the Credit Parties, in each case, to the extent a party thereto and constitute legal, valid and binding obligations of each such Person enforceable against them in accordance with their respective terms, subject only to any limitation under Applicable Laws relating to (i) bankruptcy, insolvency, arrangement or creditors’ rights generally, and (ii) general equitable principles;
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(6)
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Compliance with Applicable Laws. Each of the Credit Parties is in compliance, in all material respects, with all Applicable Laws (including with respect to the Borrower and the IP Guarantor only, all Federal Cannabis Law);
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(7)
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No Default. No Credit Party is in violation of its organizational documents or any operating agreement applicable to it;
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(8)
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No Default or Event of Default. No Default or Event of Default has occurred and is continuing or would reasonably be expected to arise immediately after giving effect to or as a result of the applicable Advance pursuant to this Agreement;
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(9)
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Books and Records. All books and records of each of the Credit Parties have been fully, properly and accurately kept and completed in all material respects in accordance with GAAP, where applicable, and there are no material inaccuracies or discrepancies of any kind contained or reflected therein;
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(10)
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Financial Statements. The historical financial statements provided to the Lender in connection with this Agreement and the audited consolidated financial statements of the Parent have been prepared in accordance with GAAP and each presents fairly and consistently in all material respects:
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(a)
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the consolidated assets, liabilities, (whether accrued, absolute, contingent or otherwise) and financial position of the Parent as at the respective dates of the relevant statements; and
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(b)
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the consolidated sales and earnings of the Parent during the periods covered by such statements;
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(11)
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Solvency. Each Credit Party is Solvent on an individual basis;
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(12)
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Security.
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(a)
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Each of the Security Documents, when entered into by the applicable Credit Party, shall be effective to create in favour of the Agent for the benefit of the applicable Secured Creditors, legal, valid and perfected first priority Liens (subject only to Permitted Liens which rank by law in priority), enforceable in accordance with their terms against third parties and any trustee in bankruptcy in the Collateral subject thereto, except to the extent a secured creditor’s rights are affected or limited by applicable bankruptcy, insolvency, moratorium, organization and other laws of general application limiting the enforcement of secured creditors’ rights generally;
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(13)
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Issuance of Parent Shares.
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(a)
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the Parent has full corporate power and authority to issue the Parent Shares as contemplated in this Agreement and such Parent Shares, when issued will be duly and validly authorized and will not result in any breach or be in conflict with or constitute a default under or create a state of facts that after notice or lapse of time or both would constitute a default under any term or provision of the Parent’s constating documents, by-laws or resolutions of the directors of the Parent;
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(b)
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the Parent Shares have been duly authorized and, when issued and delivered, will be validly issued and outstanding as fully paid and non-assessable Parent Shares;
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(c)
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the issued and outstanding Parent Shares are listed and posted for trading on the Exchange and, to the knowledge of the Parent, the Parent is not in default of any material listing or filing requirements of the Exchange;
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(d)
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the Parent has made or will make all necessary filings and has done and will do all other things necessary under the rules of the Exchange to list the Parent Shares on the Exchange on the date such Parent Shares are issued; and
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(e)
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no order ceasing or suspending trading in the securities of the Parent or prohibiting the sale of the Parent Shares has been issued to the Parent or its directors or officers and no investigations or proceedings for such purposes are pending or threatened.
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(14)
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Ownership of Assets. The Credit Parties own all assets in all material respects required in order to carry on their businesses as presently conducted. Each Credit Party owns, and possesses its assets free and clear of any and all Liens except for Permitted Liens. No
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(15)
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Intellectual Property. The IP Guarantor possesses or has the right to use all Intellectual Property material to the conduct of its business, each of which is in good standing in all material respects; and has the right to use such Intellectual Property without violation of any material rights of others with respect thereto. No Person has asserted any claim in respect of the validity of such Intellectual Property or the IP Guarantor 's rights therein, and the Borrower and the IP Guarantor are not aware of any basis for the assertion of any such claims. The Borrower and the IP Guarantor are not aware of any material infringement of the IP Guarantor’s rights under such Intellectual Property by other Persons. The conduct and operations of the businesses of the IP Guarantor does not infringe, misappropriate, dilute or violate, in any material respect, any Intellectual Property rights held by any other Person.
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(16)
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Anti-Terrorism, Anti-Corruption Laws. No Credit Party is a Person that is, or is owned or controlled by Persons that are: (i) the subject or target of any Sanctions; or (ii) located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions, including Cuba, Iran, North Korea, Sudan and Syria. None of the Obligations and none of the other amounts payable under the Credit Agreement will be paid by the Borrower or the IP Guarantor with any property or proceeds of any property that was obtained or derived directly or indirectly: (x) as a result of an act or omission anywhere that, if it had occurred in Canada, would have constituted a designated offence (as defined in section 462.31(1) of the Criminal Code); or (y) in contravention of any Federal Cannabis Law; and
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(17)
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Margin Regulations. The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of any Advance will be used to purchase or carry any margin stock.
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(18)
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Taxes. Each Credit Party has paid all Taxes due and owing by it within applicable time periods. Each Credit Party is in compliance in all material respects with Section 280E of the Internal Revenue Code of 1986, as amended.
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(19)
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SPV Status.
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(a)
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Since the date of its incorporation, the Borrower has not (i) conducted any business other than the entry into the Credit Documents and the [Redacted] Credit Documents or (ii) had any employees and, as at the date of this Agreement, it has no employees. The Borrower does not have any assets and it has not incurred any liabilities other than under the Credit Agreement Documents or [Redacted] Credit Documents.
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(1)
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Prompt Payment. The Borrower will pay or cause to be paid all Obligations and other amounts payable under the Credit Documents punctually when due.
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(2)
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Additional Reporting Requirements. Deliver to the Agent (with sufficient copies for the Lender):
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(a)
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as soon as practicable, and in any event within three Business Days after the occurrence of each Default or Event of Default, a statement of the Borrower, signed on its behalf by the chief financial officer of the Borrower or any other officer acceptable to the Agent, setting forth the details of the Default or Event of Default and the action which the Credit Party proposes to take or have taken; and
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(b)
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such other information respecting the condition or operations, financial or otherwise, of any Credit Party or its business as the Agent, on behalf of the Lender, may from time to time reasonably request;
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(3)
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Share Purchases. Upon (i) the First Advance Lender’s request within 10 Business Days following the First Advance Maturity Date, the Borrower shall purchase up to 328,000 Interest Shares delivered to the First Advance Lender (or such Persons as the First Advance Lender may direct) in connection with the First Advance and then held by the First Advance Lender (or such other Persons to which such Interest Shares were issued) at a purchase price of US$4.50 per Interest Share, and (ii) the Second Advance Lender’s request within 10 Business Days following the third anniversary of the Second Advance Closing Date, the Borrower shall purchase up 480,000 Interest Shares delivered to the Second Advance Lender (or the such U.S. person as the Second Advance Lender had instructed such Interest Shares to be issued to) in connection with the Second Advance and then held by the Second Advance Lender (or such U.S. person to which such Interest Shares were issued) at a price of US$4.50 per Interest Share. As a condition to the Borrower’s obligations under this Section, each of the First Advance Lender and the Second Advance Lender shall deliver all evidence reasonably requested by the Borrower to evidence that the holder of the Interest Shares has not transferred such Interest Shares and the proposed shares subject to this provision are the same shares that were issued as Interest Shares.
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(4)
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Existence. Each Credit Party shall maintain its corporate existence in good standing, continue to carry on its business in all applicable jurisdictions, maintain all qualifications
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(5)
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Permitted Uses. Use the proceeds of the Advances hereunder only for the purposes permitted pursuant to Section 2.3;
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(6)
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Intellectual Property. The IP Guarantor shall:
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(a)
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(i) protect, defend and use commercially reasonable efforts to maintain the ownership, validity and enforceability of the material Intellectual Property, (ii) use its best efforts to detect any actions which may be or are infringements, violations, passing off, dilution or other claims of or against the material Intellectual Property and promptly advise the Agent in writing of any litigation relating thereto, and (iii) not allow any of the Intellectual Property to be abandoned, forfeited, cancelled, expunged and/or dedicated to the public without the written consent of the Agent;
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(b)
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use, and make commercially reasonable efforts to ensure that any licensee uses, the Intellectual Property in such manner as to preserve its rights therein provided that it is acknowledged and agreed that the IP Guarantor is under no obligation to use or continue to use any Intellectual Property if it determines that such Intellectual Property is no longer material; and
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(c)
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take such actions as may be necessary or advisable in order to preserve the rights of the Agent under the IP Security Agreement.
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(7)
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Anti-Terrorism Laws. Promptly provide all information with respect to the Credit Parties, their respective directors, authorized signing officers, direct or indirect shareholders or other persons in control of the Credit Parties, including supporting documentation and other evidence, as may be reasonably requested by the Agent or any Lender or, subject to Section 11.6(2), any prospective assignee of the Agent or any Lender, in order to comply with any applicable Anti-Terrorism Laws or such other applicable “know your client” laws and requirements, whether now or hereafter existence.
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(8)
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Inspection. Prior to an Event of Default that is continuing, each Credit Party will permit the Agent and its employees and agents to enter upon and inspect its properties, assets, books and records from time to time during normal business hours upon reasonable prior notice and in a manner which does not materially interfere with its business, and make copies of and abstracts from such books and records and discuss its affairs, finances and accounts with any of its officers, directors, accountants and auditors, and execute and deliver all consents and further assurances as may be necessary or desirable in order for the Agent and its agents to obtain information from Governmental Authorities and other third parties with respect to environmental matters; provided that so long as no Event of Default has occurred and is continuing, such inspection rights shall be limited to no more than once in any twelve month period. During an Event of Default that is continuing, each Credit Party will permit the Agent and its employees and agents to enter upon and inspect its properties, assets, books and records at any time and make copies of and abstracts from such books and records and discuss its affairs, finances and accounts with any of its
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(9)
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Compliance. Comply in all material respects with all Applicable Laws (including, with respect to the Borrower and the IP Guarantor only, all Federal Cannabis Laws).
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(10)
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Perform Obligations. Each Credit Party shall timely fulfil all covenants and obligations required to be performed by it under those Credit Documents to which it is a party.
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(11)
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Payment of Taxes. Pay when due all rents, Taxes, rates, levies, assessments and governmental charges, fees and dues lawfully levied, assessed or imposed in respect of its property which are material to the conduct of its business, and deliver to the Agent upon request receipts evidencing such payments; except for rents, Taxes, rates, levies, assessments and governmental charges, fees or dues in respect of which an appeal or review proceeding has been commenced, a stay of execution pending such appeal or review proceeding has been obtained or reserves have been established in accordance with GAAP; and the amounts in question do not in the aggregate materially detract from the ability of the Credit Parties to carry on their businesses and to perform and satisfy all of their respective obligations hereunder. Comply in all material respects with Section 280E of the Internal Revenue Code of 1986, as amended.
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(12)
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Maintenance of Records. The Credit Parties will maintain good and proper books, accounts and records in accordance with GAAP.
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(13)
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Maintenance of Assets. Each Credit Party will keep its property and assets (except obsolete assets) in good repair and working condition.
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(14)
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Further Assurances. The Credit Parties will provide the Agent with such further information, financial data, documentation and other assurances as the Agent or the Lenders may reasonably require from time to time.
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(15)
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Notice of Certain Events. The Borrower shall provide written notice to the Agent of each of the following promptly after the occurrence thereof:
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(a)
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any Default or Event of Default;
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(b)
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the issuance of any management letter to the Parent or any of the Credit Parties by its auditor;
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(c)
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the results of any facility audit by any Governmental Authority to the extent such results are material and negative; and
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(d)
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the incorrectness of any representation or warranty contained in the Credit Documents in any material respect.
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(1)
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Debt. Create, incur, assume or suffer to exist any Debt except Permitted Debt;
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(2)
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Liens. Create, incur, assume or suffer to exist, or permit any Lien on its Assets other than Permitted Liens;
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(3)
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Disposition of Assets. In the case of the IP Guarantor, directly or indirectly, sell, transfer, assign, lease or otherwise dispose of any of any material party of its Intellectual Property which is the subject of the IP Security Agreement. In the case of any other Credit Party, directly or indirectly, sell, transfer, assign, lease or otherwise dispose of any material part of the Collateral which is subject to the Security except for Permitted Dispositions;
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(4)
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Certain Payments. Make any payment in respect of principal, interest, fees or any other amounts in respect of Subordinated Debt;
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(5)
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Transactions with Related Parties. Enter into any contract, carry out any transaction or otherwise have any dealings with Related Parties except on terms that are fair and reasonable and no less favourable to it than it could reasonably be expected to obtain in any comparable arm's length transaction with a Person that is not a Related Party;
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(6)
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Agreements to Restrict Dividends and Other Payments. Create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Credit Party to:
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(i)
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pay dividends or make any other distributions to the Parent Entities;
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(7)
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Carrying on Business. Cease to carry on its business in the ordinary course, consistent with past practices;
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(8)
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Principal Place of Business. Change a Credit Party’s principal place of business or chief executive office or reorganize a Credit Party in a different jurisdiction without prior written notice to the Agent.
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(9)
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Anti-Money Laundering, Anti-Terrorism Laws, etc. (a)(i) conduct any business or engage in any transaction or dealing with or for the benefit of any Blocked Person, including the making or receiving of any contribution of funds, goods or services to, from or for the benefit of any Blocked Person; (ii) deal in, or otherwise engage in any
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(10)
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Anti-Bribery and Anti-Corruption Laws. (a) offer, promise, pay, give, or authorize the payment or giving of any money, gift or other thing of value, directly or indirectly, to or for the benefit of any Foreign Official for the purpose of: (i) influencing any act or decision of such Foreign Official in his, her, or its official capacity; or (ii) inducing such Foreign Official to do, or omit to do, an act in violation of the lawful duty of such Foreign Official, or (iii) securing any improper advantage, in order to obtain or retain business for, or with, or to direct business to, any Person; or (b) act or attempt to act in any manner which would subject any of the Credit Parties or their Subsidiaries to liability under any Anti-Corruption Law.
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(11)
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Investment Company Act of 1940. Engage in any business, enter into any transaction, use any securities or take any other action or permit any of its subsidiaries to do any of the foregoing, that would cause it or any of its subsidiaries to be required to register under the registration requirements of the Investment Company Act of 1940, as amended, by virtue of being an “investment company” or a company “controlled” by an “investment company” not entitled to an exemption within the meaning of such Act.
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(12)
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Amendments to Documents. Amend or change any of its Governing Documents, except where such amendment is not materially adverse to the interests of the Lender under the Credit Documents.
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1.
|
in relation to the Second Advance only, subject to the receipt of any consents approvals and authorizations from all applicable Governmental Authorities, either (i) a securities pledge agreement pursuant to which the securities in the capital of each Credit Party (other than the Borrower) are pledged in favour of the Agent or (ii) an executed copy of the Connecticut Purchase Agreement; and
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2.
|
in relation to all Advances, the IP Security Agreement, creating an assignment and security interest in respect of Intellectual Property of the IP Guarantor, provided that the remedies in relation to the IP Security Agreement shall be limited to the remedies set out in Section 9.3(1).
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(1)
|
Without limiting the provisions of Section 8.1(1) above, each Credit Party shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with Applicable Law.
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(2)
|
The Credit Parties shall indemnify the Agent and each Lender, within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Agent or such Lender and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Agent), or by the Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.
|
(3)
|
As soon as practicable after any payment of Indemnified Taxes or Other Taxes by a Credit Party to a Governmental Authority, such Credit Party shall deliver to the Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment satisfactory to the Agent.
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(4)
|
Any Foreign Recipient that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Credit Document shall, at the request of the Borrower, deliver to the Borrower (with a copy to the Agent), at the time or times prescribed by Applicable Law or reasonably requested by the Borrower or the Agent, such properly completed and executed documentation prescribed by Applicable Law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender or Foreign Recipient, if requested by the Borrower or the Agent, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by the Borrower or the Agent as will enable the Borrower or the Agent to determine whether or not such Lender or Foreign Recipient is subject to withholding or information reporting requirements.
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(5)
|
If the Agent or a Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by a Credit Party or with respect to which a Credit Party has paid additional amounts pursuant to this Section 8.1 or that, because of the payment of such Taxes or Other Taxes, it has benefited from a reduction in Excluded Taxes otherwise payable by it, it shall pay to such Credit Party an amount equal to such refund or reduction (but only to the extent of indemnity payments made, or additional amounts paid, by such Credit Party under this Section 8.1 with respect to the Taxes or Other Taxes giving rise to such refund or reduction), net of all expenses of the Agent, or such Lender, as the case may be, and without interest (other than any net after Tax interest paid by the relevant Governmental Authority with respect to such refund). Each Credit Party, upon the request of the Agent, or such Lender, agrees to repay the amount paid over to such Credit Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Agent or such Lender if the Agent or such Lender is required to repay such refund or reduction to such Governmental Authority. This Section 8.1(6) shall not be construed to require the Agent, or any Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person, to arrange its affairs in any particular manner or to claim any available refund or reduction.
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(6)
|
The provisions of this Section 8.1 shall survive the termination of this Agreement and the repayment of the Obligations.
|
(a)
|
the Borrower fails to pay any amount of the Aggregate Principal Amount (including the Applicable Premium) when such amount becomes due and payable;
|
(b)
|
the Borrower fails to deliver the Interest Shares when they become due and payable and such failure continues un-remedied for five Business Days;
|
(c)
|
any Credit Party fails to perform, observe or comply with any of the covenants contained in Section 6.1(3), Section 6.1(4) and Section 6.2;
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(d)
|
any Credit Party fails to perform, observe or comply with any of its other covenants, agreements or other obligations in this Agreement or the Credit Documents and such failure continues for a period of thirty (30) days;
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(e)
|
any Credit Party repudiates its obligations under any Credit Document or any material provision thereof, or claims any of the Credit Documents or any material provision thereof to be invalid in whole or in part;
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(f)
|
any one or more of the Credit Documents or any material provision thereof ceases to be, or is determined by a court of competent jurisdiction not to be, a legal, valid and binding obligation of any Credit Party which is a party thereto, or enforceable by the Agent, the Lender or any of them against such Credit Party; or any Credit Party or Parent contests in any manner the validity or enforceability of any material provision of any Credit Document; or any Credit Party or Parent denies that it has any or further liability or obligation under any provision of any Credit Document, or purports to revoke, terminate or rescind any provision of any Credit Document;
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(g)
|
there is a Change of Control;
|
(h)
|
any Credit Party or Parent (i) becomes insolvent or generally not able to pay its debts as they become due, (ii) admits in writing its inability to pay its debts generally or makes a general assignment for the benefit of creditors, (iii) institutes or has instituted against it any proceeding seeking (x) to adjudicate it a bankrupt or insolvent, (y) liquidation, winding up, administration, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any Applicable Law relating to bankruptcy, insolvency, reorganization or relief of debtors including any proceeding under applicable corporate law seeking a compromise or arrangement of, or stay of proceedings to enforce, some or all of the debts of such Person, or (z) the entry of an order for relief or the appointment of a receiver, receiver-manager, administrator, custodian, monitor, trustee or other similar official for it or for any substantial part of its Assets, and in the case of any such proceeding instituted against it (but not instituted by it), either the proceeding remains undismissed or unstayed for a period of 90 days, such Person fails to diligently and actively oppose such proceeding, or any of the actions sought in such
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(i)
|
(A) the Parent Shares ceases to be listed on the Exchange or Parent (or any successor) ceases to be a reporting issuer under Canadian securities laws, or (B) any order is issued, ceasing or suspending trading in the securities of the Parent for a period of five trading days or longer, or prohibiting the sale of the Parent Shares; or
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(j)
|
any Person which has provided a Guarantee in respect of the Obligations terminates or purports to terminate its liability under such Guarantee or its liability thereunder in respect of the Advances, or disputes the validity or enforceability of such Guarantee or any Security provided by such Person.
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(1)
|
Once the Obligations (including the Applicable Premium) become due and payable pursuant to Section 9.2, the Agent shall provide written notice to the Credit Parties of its intention to enforce on the Security (the “Notice of Intent”); provided that, upon the occurrence of an Event of Default under Section 9.1(h), no Notice of Intent shall be required. The terms and conditions of such enforcement are set forth below:
|
(a)
|
Concurrently with the delivery of the Notice of Intent, the Agent shall provide the Third Party a written offer (the “Third Party Offer”) to sell to the Third Party all of the Intellectual Property at a price equal to $110,000,000 (the “Third Party Purchase Price”). The Third Party Offer shall be open for a period of 30 days following the Third Party’s receipt of the Third Party Offer.
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(b)
|
In the event that the Third Party provides written acceptance of the Third Party Offer (the “Acceptance Notice”) to the Agent (i) the IP Guarantor shall transfer the Intellectual Property to the Agent on or before the Third Party IP Purchase Deadline, and (ii) as soon as reasonably practicable (and in any event not later than five days following the date the IP Guarantor transfers the Intellectual Property to the Agent), the Agent shall transfer the Intellectual Property to the Third Party, each
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(2)
|
In the event that the Third Party does not deliver an Acceptance Notice within the 30-day period specified above, the remedies of the Secured Creditors shall be limited as follows:
|
(a)
|
the Agent shall (for the benefit of the Secured Creditors), upon the written direction of the Secured Creditors, direct the Borrower to cause the Parent to offer for sale (whether by private placement or prospectus or registered offering) up to (i) 8,800,000 Parent Shares if the Second Advance is not then outstanding , or up to 20,000,000 Parent Shares if the Second Advance is then outstanding (the “Parent Share Offering”) within 30 days following the written request to do so received from the Agent (following the expiry of such 30-day period), with the number of Parent Shares to be offered, to be determined in the sole discretion of the Parent. The Borrower shall cause all of the net proceeds of the Parent Share Offering to be used to repay the Obligations (with any remaining proceeds being retained by the Borrower or the Parent, as the case may be). To the extent that the net proceeds of the Parent Share Offering is not sufficient to repay all applicable Obligations then outstanding, the proceeds of the Parent Share Offering shall be used for repayment as follows:
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(b)
|
If the Parent Share Offering is not completed within the 30 day period referred to above or the proceeds from the Parent Share Offering remitted to the Agent are not sufficient to satisfy the Obligations relating to the First Advance and the Second Advance as set out in Section 9.3(2)(a) and, if so agreed between the Borrower and the applicable Subsequent Advance Lender, any applicable Subsequent Advance, the Borrower will make a one-time cash payment to the Agent equal to (i) the sum of (A) the First Advance Obligations and (B) the Second Advance Obligations less (ii) the amount of the net proceeds from the Parent Share Offering (if any) previously remitted to the Lender in respect of such Advances, which payment shall be made as soon as practicable following the completion or termination of the Parent Share Offering, but no later than sixty days following the date upon which the Agent delivers written notice to the Lender indicating that the Parent Share Offering is to be undertaken.
|
(c)
|
In the event that the Obligations have still not been indefeasibly paid in full after the exercise of the remedies set out in Section 9.3(1), Section 9.3(2)(a) and Section 9.3(2)(b) above, the Agent, for the benefit of the Secured Creditors, may elect to enforce:
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(d)
|
In the event that the First Advance Obligations have not been repaid in full after the exercise of the remedies set out in Section 9.3(1), Section 9.3(2)(a), Section 9.3(2)(b) and Section 9.3(2)(c) above, the Borrower shall, within 60 days thereafter, cause certain Subsidiaries of the Parent to sell all or any portion of the Pennsylvania Assets. Upon the consummation of the sale of all or any portion of such Pennsylvania Assets, the Borrower shall cause an amount equal to the amount by which the First Advance Obligations have not been repaid to be transferred to the Agent for the account of the First Advance Lender.
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(3)
|
Notwithstanding anything in this Article 9, immediately upon the occurrence of an Event of Default under Section 9.1(h), the Agent and the Lender shall have all of the rights described in Section 9.3.
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(4)
|
All rights and remedies granted to the Agent and the Lender in this Agreement, and any other documents or instruments in existence between the parties or contemplated hereby, and any other rights and remedies available to the Agent and the Lenders at law or in equity, shall be cumulative. The exercise or failure to exercise any of the said remedies
|
(1)
|
The Agent shall not have any duties or obligations except those expressly set forth herein and in the other Credit Documents, and its duties shall be administrative in nature. Without limiting the generality of the foregoing, the Agent shall not:
|
(a)
|
be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing;
|
(b)
|
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 Credit Documents that the Agent is required to exercise as directed in writing by the Lender, but the Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, (i) may expose the Agent to liability, (ii) is contrary to any Credit Document or Applicable Law, (iii) would require the Agent to become registered to do business in any jurisdiction, or (iv) would subject the Agent to taxation; and
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(c)
|
except as expressly set forth herein and in the other Credit Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Agent or any of its Affiliates in any capacity.
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(2)
|
The Agent shall not be (and none of its directors, officers, agents or employees shall be) liable for any action taken or not taken by it (i) with the consent or at the request of the Lender or (ii) in the absence of its own gross negligence or wilful misconduct as determined by a court of competent jurisdiction by final and non-appealable judgment.
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(3)
|
Except as otherwise expressly specified in this Agreement, the Agent 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 or any other Credit 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 Default or Event of Default (and the Agent shall be deemed not to have knowledge of any Default or Event of Default unless and until the Agent has been notified in writing by a Credit Party of such fact or has been notified in writing by a Lender that it considers that a Default or Event of Default has occurred and is continuing, such notification to specify in detail the nature thereof), (iv) the validity, enforceability, effectiveness or genuineness of, or the sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, this Agreement, any other Credit Document or any other agreement, instrument or document (and the Agent shall be entitled to assume that the same are valid, enforceable, effective, genuine, sufficient, supported by value given, have been signed or delivered by the proper parties and are what they purport to be), or (v) the satisfaction of any condition specified in this Agreement, other than to confirm receipt of items expressly required to be delivered to the Agent.
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(4)
|
The Agent is not obliged to (i) take or refrain from taking any action or exercise or refrain from exercising any right or discretion under the Credit Documents, or (ii) incur or subject itself to any cost in connection with the Credit Documents, unless it is first specifically indemnified or furnished with security by the Secured Creditors, in form and substance satisfactory to it (which may include further agreements of indemnity or the deposit of funds).
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(1)
|
The Agent may resign at any time by giving 30 days prior notice of its resignation to the Lender and the Borrower. Upon receipt of any such notice of resignation, the Lender shall have the right to appoint a successor.
|
(2)
|
If no such successor shall have been so appointed by the Lender or shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may on behalf of the Lender, appoint a successor Agent, (i) the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Credit Documents (except that in the case of any Security held by the Agent on behalf of the Secured Creditors under any of the Credit Documents, the retiring Agent shall continue to hold such Security until such time as a successor Agent is appointed) and (ii) except for any indemnity payments owed to the retiring or removed Agent, all payments, communications and determinations provided to be made by, to or through such Agent shall instead be made by or to each Lender directly, until such time as the Lender appoints a successor Agent pursuant to Section 10.8(1).
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(3)
|
Upon a successor’s appointment as Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the former Agent (other than any rights to indemnity payments owed to the former Agent), and the former Agent shall be discharged from all of its duties and obligations hereunder or under the other Credit Documents. The fees payable by the Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the termination of the service of the former Agent, the provisions of this Article 10 and of Section 11.5 shall continue in effect for the benefit of such former Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the former Agent was acting as an Agent.
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(1)
|
All notices and other communications provided for herein shall be in writing and shall be sent by personal delivery or courier service, mailed by certified or registered mail, or sent by e-mail addressed:
|
(a)
|
to a Credit Party at:
|
(b)
|
to the Agent at:
|
(c)
|
and, if to the Lender, to it at its address or e-mail address specified in the Register.
|
(2)
|
A notice is deemed to have been given and received (i) if sent by personal delivery or courier service, or mailed by certified or registered mail, on the date of delivery if it is a Business Day and the delivery was made prior to 4:00 p.m. (local time in place of receipt)
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(3)
|
Any party hereto may change its address or e-mail address for notices and other communications hereunder by notice to the other parties hereto.
|
(1)
|
The Borrower shall indemnify the Agent, (and any sub-agent thereof), each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any third party or by any Credit Party arising out of, in connection with, or as a result of (a) the execution, delivery or enforcement of this Agreement, any other Credit Document or any agreement or instrument contemplated hereby or thereby, the performance or non-performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation or non-consummation of the transactions contemplated hereby or thereby, (b) the Advances or the use or proposed use of the proceeds therefrom, or (c) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by a Credit Party or Parent and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee or the breach of any Credit Document by such Indemnitee.
|
(2)
|
To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under Section 11.5(1) to be paid by it to the Agent (or any sub-agent thereof), or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Agent (or any such sub-agent) or such Related Party, as the case may be, such Lender’s rateable portion (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Agent (or any such sub-agent) in its capacity as such, or against any Related Party of any of the foregoing acting for the Agent (or any such sub-agent) in connection with such capacity.
|
(3)
|
To the fullest extent permitted by Applicable Law, neither the Agent nor any Lender or any Credit Party nor Parent shall assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for indirect, consequential, punitive, aggravated or exemplary damages (as opposed to direct damages) arising out of, in connection with, or as a result of, this Agreement, any other Credit Document or any agreement or instrument contemplated hereby (or any breach thereof), the transactions contemplated hereby or
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(4)
|
All amounts due under this Section 11.5 shall be payable promptly after demand therefor. A certificate of the Agent, or a Lender setting forth the amount or amounts owing to the Agent, Lender or a sub-agent or Related Party, as the case may be, as specified in this Section, including reasonable detail of the basis of calculation of the amount or amounts, and delivered to the Borrower shall be conclusive absent manifest error.
|
(5)
|
The provisions of this Section 11.5 shall survive the termination of this Agreement and the repayment of the Aggregate Principal Amount or all other Obligations. To the extent required by law to give full effect to the rights of the Indemnitees under this Section 11.5, the parties hereto agree and acknowledge that the Agent and Lender is acting as agent for its respective Related Parties and agrees to hold and enforce such rights on behalf of such Related Parties as they may direct. The Borrower acknowledges that neither its obligation to indemnify nor any actual indemnification by it of the Lender, the Agent or any other Indemnitee in respect of such Person’s losses for legal fees and expenses shall in any way affect the confidentiality or privilege relating to any information communicated by such Person to its counsel.
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(1)
|
No Credit Party may assign or otherwise transfer any of its rights or obligations hereunder or any other Credit Document without the prior written consent of the Lender.
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(2)
|
So long as an Event of Default has not occurred and is continuing, the Lender may not sell participations in or assign its rights and obligations hereunder and under any other Credit Document without the consent of any Credit Party. Upon the occurrence and continuance of an Event of Default, the Lender may sell participations in or assign its rights and obligations hereunder and under any other Credit Document without the consent of any Credit Party but in no event may the Lender sell or assign its rights and obligations hereunder to a competitor of any Credit Party. The Lender may exchange information about the Credit Parties with actual or potential participants or assignees.
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(3)
|
The Agent shall maintain at its office in New York City, New York a copy of each Assignment and Assumption delivered to it and a register for the recordation of the name and address of the Lender, and the Commitments of, and principal amounts (and stated interest) of the Aggregate Principal Amount to, the Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, absent manifest error, and the Borrower, the Agent and the Lender shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and the Lender, at any reasonable time and from time to time upon reasonable prior notice.
|
(1)
|
If, upon the written request of the Lender, the Agent has ascertained the identity of the Borrower or any authorized signatories of the Borrower for purposes of Anti-Terrorism Laws, then the Agent:
|
(a)
|
shall be deemed to have done so as an agent for the Lender, and this Agreement shall constitute a “written agreement” in such regard between such Lender and the Agent within the meaning of the applicable Anti-Terrorism Law; and
|
(b)
|
shall provide to the Lender copies of all information obtained in such regard without any representation or warranty as to its accuracy or completeness.
|
(2)
|
Notwithstanding and except as may otherwise be agreed in writing, the Lender agrees that the Agent does not have any obligation to ascertain the identity of the Borrower or any authorized signatories of the Borrower on behalf of the Lender, or to confirm the completeness or accuracy of any information it obtains from the Borrower or any authorized signatory in doing so.
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(1)
|
This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without regard to any laws of the State of New York that would require the application of the laws of another jurisdiction.
|
(2)
|
The Borrower irrevocably and unconditionally submits, for itself and its Assets, to the non-exclusive jurisdiction of the state and federal courts located in the City and State of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Credit Document, or for recognition or enforcement of any judgment, and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or in any other Credit Document shall affect any right that the Agent, or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Credit Document against any Credit Party or its Assets in the courts of any jurisdiction.
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(3)
|
The Borrower irrevocably consents to the service of any and all process in any such action or proceeding to the Borrower at the address provided for it in Section 11.4. Nothing in this Section 11.10(3) limits the right of the Agent or any Lender to serve process in any other manner permitted by Applicable Law.
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(4)
|
The Borrower irrevocably and unconditionally waives, to the fullest extent permitted by Applicable Law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement or any other Credit Document in any court referred to in Section 11.10(2). Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by Applicable Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
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(5)
|
Notwithstanding anything else contained in the Credit Documents, the Borrower and each Credit Party hereby agrees, for the sole benefit of the Lender, upon demand by the Agent, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise arising out of or relating to in any way (i) any Advance, Security and related Credit Documents which are the subject of this Agreement and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii) requests for additional credit. Any arbitration proceeding will (i) proceed in a location in New York, New York selected by the American Arbitration Association (“AAA”), or such other administrator as the parties shall mutually agree upon; (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA’s (or such other administrator’s) commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA’s (or such other administrator’s) optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to, as applicable, as the “Rules”). If there is any inconsistency between the terms
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(1)
|
This Agreement may be executed in any number of counterparts, each of which is deemed to be an original, and such counterparts together constitute one and the same instrument. Transmission of an executed signature page by facsimile, email or other electronic means is as effective as a manually executed counterpart of this Agreement. This Agreement and the other Credit Documents and any separate letter agreements with respect to fees payable to the Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective when it has been executed by the Agent and when the Agent has received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto.
|
(2)
|
The words “execution,” “signed,” “signature,” and words of like import in any Credit Document shall be deemed to include electronic signatures or the keeping of records in electronic form, 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 Parts 2 and 3 of the Personal Information Protection and Electronic Documents Act (Canada), the Electronic Transactions Act (Alberta) and other similar federal or provincial laws based on the Uniform Electronic Commerce Act of the Uniform Law Conference of Canada or its Uniform Electronic Evidence Act and equivalent laws of the United States including Electronic Signatures in Global and National Commerce Act of 2000 (15 USC § 7001 et seq.), the Electronic Signatures and Records Act of 1999 (N.Y. State Tech. Law §§ 301-309), or any other similar state laws based on the Uniform Electronic Transactions Act, as the case may be.
|
(1)
|
Each of the Agent and the Lender agrees, and each of the Credit Parties agree, to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to it, its Affiliates and its and its Affiliates’ respective partners, directors, officers, employees, managers, administrators, trustees, agents, auditors, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority), (c) to the extent required by Applicable Laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Credit Document or any action or proceeding relating to this Agreement or any other Credit Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement in favour of the Credit Parties with privity of contract containing provisions substantially the same as those of this Section 11.13 to (i) any assignee of, or any prospective assignee of, any of its rights or obligations under this
|
(2)
|
For purposes of this Section, “Information” means: (a) with respect to the Agent and the Lender, all information received in connection with this Agreement from each Credit Party relating to such Credit Party or any of their respective businesses, other than any such information that is available to the Agent or the Lender on a non-confidential basis prior to such receipt; and (b) with respect to the Credit Parties, all information contained in this Agreement and all other Credit Documents and all information received from the Agent and the Lender, including the identity of Affiliates and its and its Affiliates’ respective partners, directors, officers, employees, managers, administrators, trustees, agents, auditors, advisors and representatives. Any Person required to maintain the confidentiality of Information as provided in this Section 11.13 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. In addition, the Agent may disclose to any agency or organization that assigns standard identification numbers to loan facilities such basic information describing the facilities provided hereunder as is necessary to assign unique identifiers (and, if requested, supply a copy of this Agreement), it being understood that the Person to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to make available to the public only such Information as such person normally makes available in the course of its business of assigning identification numbers.
|
(3)
|
The Credit Parties agree to provide the Agent with the opportunity to review and comment on any press release in respect of any matter contemplated in any Credit Document. In respect of any Credit Document or other document to be filed on SEDAR (or on any other public filing repository), the Credit Parties agree to redact the names of all parties other than the Agent, the Lender and direct members of the Lender; provided, however, that the foregoing obligations of the Credit Parties are subject to applicable securities laws in the relevant jurisdiction in which the public filings are to be made.
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ACREAGE FINANCE DELAWARE, LLC, as Borrower
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By:
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Name:
Title: |
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By:
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Name:
Title: |
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ACREAGE IP HOLDINGS, LLC, as IP Guarantor
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By:
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Name:
Title: |
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By:
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Name:
Title: |
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IP INVESTMENT COMPANY, LLC, as a Lender and Agent
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By:
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Name:
Title: |
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PRIME WELLNESS OF CONNECTICUT, LLC, as a Guarantor
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By:
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D&B WELLNESS, LLC, as a Guarantor
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By:
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THAMES VALLEY APOTHECARY, LLC, as a Guarantor
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By:
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Name:
Title: |
ASSIGNOR: [•]
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By:
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Name:
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Title:
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Address for Notices:
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Notary Public
|
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Printed Name:
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My Commission Expires: [DATE]]
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AGREED TO AND ACCEPTED:
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ASSIGNEE: [•]
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By:
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Name:
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Title:
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Address for Notices:
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[ACKNOWLEDGMENT
|
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STATE OF [STATE]
COUNTY OF [COUNTY] |
)
)SS. ) |
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Notary Public
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Printed Name:
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My Commission Expires: [DATE]
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Canada
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1993767
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
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NATURAL WONDER
|
Canada
|
1993762
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
|
Canada
|
1993765
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
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TRADEMARK
|
JURISDICTION
|
APPLICATION NO.
|
FILING DATE
|
GOODS
|
LIVE RESIN PROJECT
|
European Union
|
18146035
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
|
|
|
|
|
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
|
European Union
|
18146038
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
SUPERFLUX
|
European Union
|
18146042
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
TRADEMARK
|
JURISDICTION
|
APPLICATION NO.
|
FILING DATE
|
GOODS
|
|
European Union
|
18146041
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana
|
|
|
|
|
for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
NATURAL WONDER
|
European Union
|
18146039
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
|
European Union
|
18146040
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
ACREAGE IP HOLDINGS, LLC
|
|
|
|
By: HIGH STREET CAPITAL PARTNERS, LLC,
|
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a Delaware limited liability company, its sole member
|
|
|
|
By: ACREAGE HOLDINGS AMERICA, INC.,
|
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a Nevada corporation, its sole manager
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By:
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|
Name: Kevin Murphy
|
|
Title: President
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IP INVESTMENT COMPANY, LLC
|
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By:
|
|
Name:
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Title:
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|
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Canada
|
1993767
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
NATURAL WONDER
|
Canada
|
1993762
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
|
Canada
|
1993765
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
TRADEMARK
|
JURISDICTION
|
APPLICATION NO.
|
FILING DATE
|
GOODS
|
LIVE RESIN PROJECT
|
European Union
|
18146035
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
|
|
|
|
|
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
|
European Union
|
18146038
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
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SUPERFLUX
|
European Union
|
18146042
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
TRADEMARK
|
JURISDICTION
|
APPLICATION NO.
|
FILING DATE
|
GOODS
|
|
European Union
|
18146041
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana
|
|
|
|
|
for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
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NATURAL WONDER
|
European Union
|
18146039
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
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|
European Union
|
18146040
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
ASSIGNOR: [•]
|
|
By: _______________________________
Name: Title: Address for Notices: |
My Commission Expires: [DATE]]
|
_______________________________
Notary Public Printed Name: |
AGREED TO AND ACCEPTED:
|
ASSIGNEE: [•]
|
|
By: _______________________________
Name: Title: Address for Notices: |
[ACKNOWLEDGMENT
|
|
STATE OF [STATE]
COUNTY OF [COUNTY] |
)
)SS. ) |
My Commission Expires: [DATE]
|
_______________________________
Notary Public Printed Name: |
|
Canada
|
1993767
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
NATURAL WONDER
|
Canada
|
1993762
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
|
Canada
|
1993765
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
TRADEMARK
|
JURISDICTION
|
APPLICATION NO.
|
FILING DATE
|
GOODS
|
LIVE RESIN PROJECT
|
European Union
|
18146035
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
|
|
|
|
|
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
|
European Union
|
18146038
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
SUPERFLUX
|
European Union
|
18146042
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
TRADEMARK
|
JURISDICTION
|
APPLICATION NO.
|
FILING DATE
|
GOODS
|
|
European Union
|
18146041
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana
|
|
|
|
|
for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
NATURAL WONDER
|
European Union
|
18146039
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
|
European Union
|
18146040
|
November 1, 2019
|
Class 5: Medical marijuana; Cannabis for medical purposes
Class 34: Recreational cannabis and marijuana; cannabis and marijuana for smoking purposes; cannabis extracts, cannabis concentrates, cannabis oils, cannabis tinctures for smoking purposes; derivatives of cannabis, namely resins and oils
|
ACREAGE IP HOLDINGS, LLC,
|
A Nevada limited liability company
|
|
By: HIGH STREET CAPITAL PARTNERS, LLC,
|
a Delaware limited liability company, its sole member
|
|
By: ACREAGE HOLDINGS AMERICA, INC.,
|
a Nevada corporation, its sole manager
|
|
By: /s/ Kevin Murphy
|
Name: Kevin Murphy
|
Title: President
|
|
IP INVESTMENT COMPANY, LLC,
|
a Delaware limited liability company
|
|
By: /s/ Kevin Murray
|
Name: Kevin Murray
|
Title: Manager
|
1.
|
Definitions. All capitalized terms used in this Second Amending Agreement shall, unless otherwise defined herein, have the meanings herein given to them in the Credit Agreement, and:
|
2.
|
Amendments to the Credit Agreement. Effective as of the date of this Second Amending Agreement, but subject to the satisfaction by the Credit Parties of the conditions set forth in Section 3, the Credit Agreement is amended as follows:
|
(a)
|
Section 1.1 of the Credit Agreement is amended by:
|
(i)
|
the definition of “Applicable Law” is deleted in its entirety and replaced with the following:
|
(ii)
|
deleting the reference in the definition of “Drawdown Period” to “24th” and replacing it with “34th”;
|
(iii)
|
adding “and the OID Fee” immediately after “Set-Up Fee” in the definition of “Fees”;
|
(iv)
|
the definition of “IP Credit Agreement” is deleted in its entirety and replaced with the following:
|
(v)
|
adding the following definition in its proper alphabetical order:
|
(b)
|
Section 2.9 of the Credit Agreement is deleted in its entirety and replaced with the following:
|
“(1)
|
The Borrower shall pay to the Administrative Agent the following set-up fees (collectively, the “Set-Up Fees”):
|
(a)
|
an amount equal to 2.00% of the First Advance on the Closing Date;
|
(b)
|
an amount equal to 0.25% of the Second Advance on the date on which the Second Advance is made;
|
(c)
|
an amount equal to 0.50% of the Third Advance on the date on which the Second Advance is made; and
|
(d)
|
such fee on the Fourth Advance that is agreed to between the Borrower and the Administrative Agent pursuant to Section 4.3(1)(h)(i).
|
(2)
|
The Borrower shall pay the Administrative Agent a fee of US$250,000 (the “OID Fee”) fee which amount shall be fully earned at the time the Third Advance is made and shall be payable on the earlier of the Maturity Date and the date on which the Aggregate Principal Amount is repaid in full. The Borrower hereby authorizes the Administrative Agent to retain US$250,000 from the Third Advance in order to pay the OID Fee when it becomes due and payable and the Borrower shall not pay interest on such retained US$250,000.”
|
(c)
|
Section 3.1 of the Credit Agreement is deleted in its entirety and replaced with the following:
|
(a)
|
an Advance of $21,000,000 on the Closing Date (the “First Advance”);
|
(b)
|
an Advance of $27,000,000 on a date that is not later than the tenth day after the Closing Date (the “Second Advance”);
|
(c)
|
an Advance in an amount up to the remaining amount of the Commitment at such time subject to compliance with Section 6.1(j)(i)(A) (taking into account such Advance) as requested by the Borrower in writing (the “Third Advance”); and
|
(d)
|
an Advance in an amount up to the remaining amount of the Commitment at such time subject to compliance with Section 6.1(j)(i)(A) (taking into account such Advance) as requested by the Borrower in writing (the “Fourth Advance”).”
|
(d)
|
Section 3.4(1) of the Credit Agreement is deleted in its entirety and replaced with the following:
|
(a)
|
3.55% per annum on the principal amount of the First Advance;
|
(b)
|
1.85% per annum on the principal amount of the Second Advance;
|
(c)
|
1.55% per annum on the principal amount of the Third Advance; and
|
(d)
|
a per annum interest rate to be agreed between the Borrower and the Lenders on the principal amounts of the Fourth Advance pursuant to Section 4.3(1)(h)(i).”
|
(e)
|
Section 4.2(b) of the Credit Agreement is amended by adding “(including any Federal Cannabis Law)” after “Applicable Law” and before the “;”;
|
(f)
|
Section 4.3(1)(d) of the Credit Agreement is amended by adding “(including any Federal Cannabis Law)” after “Applicable Law” and before the “;”;
|
(g)
|
Section 4.3(1)(g) of the Credit Agreement is amended by:
|
(i)
|
deleting “with respect to the Second Advance” and replacing it with “with respect to each of the Second Advance and the Third Advance”; and
|
(ii)
|
deleting the “and” at the end of the subparagraph (i), adding an “and” at the end of subparagraph (ii) and adding the following new subparagraph (iii):
|
“(iii)
|
a certified copy of the Second Advance Security Documents (as defined in the IP Credit Agreement);”
|
(h)
|
Section 4.3(1)(h) of the Credit Agreement is amended by:
|
(i)
|
deleting the reference to “with respect to the Third Advance” and replacing it with “with respect to the Fourth Advance”; and
|
(ii)
|
deleting the “and” at the end of the subparagraph (ii), adding an “and” at the end of subparagraph (iii) and adding the following new subparagraph (iv):
|
“(iv)
|
a certified copy of the Subsequent Advance Security Documents (as defined in the IP Credit Agreement).”
|
(i)
|
Section 5.1(c) of the Credit Agreement is amended by adding “(including any Federal Cannabis Law)” after “Applicable Law” and before the “,”;
|
(j)
|
Section 5.1(h)(ii)(iii) of the Credit Agreement is amended by adding “(except for Equity Securities in the Parent acquired pursuant to the IP Credit Agreement) after “Person” and before the “;”;
|
(k)
|
Section 5.1(i) of the Credit Agreement is amended by adding “(including, with respect to each of the Credit Parties only, all Federal Cannabis Laws)” after “Applicable Laws” and before “except”;
|
(l)
|
Section 5.1(w) of the Credit Agreement is amended by deleting the second last sentence and replacing it with the following:
|
(m)
|
Section 6.1(f) of the Credit Agreement is amended by adding “(including, with respect to each of the Credit Parties only, all Federal Cannabis Laws)” after each reference to “Applicable Laws” and before “except” or “would”, as applicable;
|
(n)
|
Section 6.2(i) of the Credit Agreement is amended by deleting the second last sentence and replacing it with the following:
|
(o)
|
Section 6.3 of the Credit Agreement is hereby deleted in its entirety and replaced by the following:
|
(a)
|
has not and shall not engage in any business or activity other than the transactions contemplated by this Agreement and the IP Credit Documents;
|
(b)
|
has not and shall not acquire or own any Assets other than (A) the Restricted Account and the Restricted Account Collateral and (B) such incidental personal property as may be necessary for the ownership of the foregoing;
|
(c)
|
has not and shall not (i) liquidate or dissolve (or suffer any liquidation or dissolution), terminate, or otherwise dispose of, directly, indirectly or by operation of law, all or substantially all of its Assets; (ii) reorganize or change its legal structure without the Administrative Agent’s prior written consent; (iii) change its name, address or the name under which such SPV Party conducts its business without promptly notifying the Administrative Agent; (iv) enter into or consummate any merger, amalgamation, consolidation, sale, transfer, assignment, liquidation or dissolution involving any or all of the Assets of such SPV Party or any managing member of such SPV Party; or (v) enter into or consummate any transaction or acquisition, merger, amalgamation or consolidation or otherwise acquire by purchase or otherwise all or any portion of the business or Assets of, or any Equity Securities or other evidence of beneficial ownership of, any Person;
|
(d)
|
has not incurred and shall not incur any secured or unsecured debt except for the debt and guarantees contemplated by this Agreement and the IP Credit Documents, as in effect on the date hereof;
|
(e)
|
has not and shall not, nor shall any member, partner (whether limited or general) or shareholder thereof, as applicable, or any other party, amend, modify or otherwise change its partnership certificate, partnership agreement, articles of incorporation, by‑laws, operating agreement, articles of organization or other formation agreement or document, as applicable, or governing agreement or document, in any material term or manner, or in a manner which adversely affects such SPV Party’s existence as a single purpose entity or such SPV Party’s compliance with this Section 6.3(e);
|
(f)
|
such SPV Party shall utilize and maintain its own separate stationery, invoices and checks bearing its own name;
|
(g)
|
has and shall maintain its own separate bank accounts and correct, complete and separate books of account;
|
(h)
|
has and shall file or cause to be filed its own separate tax returns;
|
(i)
|
has and shall hold itself out to the public (including any of its Affiliates’ creditors) under such SPV Party’s own name and as a separate and distinct entity and not as a department, division or otherwise of any Affiliate of same;
|
(j)
|
has and shall observe all customary formalities regarding the existence of such SPV Party, including holding meetings and maintaining current and accurate minute books separate from those of any Affiliate of same;
|
(k)
|
has and shall hold title to its Assets in its own name and act solely in its own name and through its own duly authorized officers and agents. No Affiliate of same shall be appointed or act as agent of such SPV Party;
|
(l)
|
except as expressly contemplated by this Agreement or the IP Credit Documents, has not and shall not guarantee or otherwise agree to be liable for (whether conditionally or unconditionally), pledge or assume or hold itself out or permit itself to be held out as having guaranteed, pledged or assumed any liabilities or obligations of any partner (whether limited or general), member, shareholder or any Affiliate of such SPV Party, as applicable, or any other party, nor shall it make any loans;
|
(m)
|
has and shall at all times been, is now and as of the date hereof intends to remain Solvent;
|
(n)
|
has and shall separately identify, maintain and segregate its Assets. Such SPV Party’s Assets shall at all times be held by or on behalf of such SPV Party and, if held on behalf of SPV Party by another entity, shall at all times be kept identifiable (in accordance with customary usages) as Assets owned by such SPV Party. This restriction requires, among other things, that (i) such SPV Party’s funds shall be deposited or invested in such SPV Party’s name, (ii) such SPV Party’s funds shall not be commingled with the funds of any Affiliate of same or any other Person, (iii) such SPV Party shall maintain all accounts in its own name and with its own tax identification number, separate from those of any Affiliate of same or any other Person, and (iv) such SPV Party funds shall be used only for the business of such SPV Party;
|
(o)
|
has and shall maintain its Assets in such a manner that it is not costly or difficult to segregate, ascertain or identify its individual Assets from those of any Affiliate of same or other person or entity;
|
(p)
|
has and shall pay or cause to be paid its own liabilities and expenses of any kind only out of its own separate funds and Assets;
|
(q)
|
has not and shall not invest any of such SPV Party’s funds in securities issued by, nor shall such SPV Party acquire the indebtedness or obligation of, any Affiliate of same;
|
(r)
|
has and shall maintain an arm’s length relationship with each of its Affiliates and may not enter into contracts or transact business with its Affiliates other than on commercially reasonable terms that are no less favorable to such SPV Party than is obtainable in the market from a Person or entity that is not an Affiliate of same;
|
(s)
|
has and shall correct any misunderstanding that is known by such SPV Party regarding its name or separate identity; and
|
(t)
|
shall not, without the prior written vote of one hundred percent (100%) of its partners, members, or shareholders, as applicable, institute proceedings to be adjudicated bankrupt or insolvent; or consent to the institution of bankruptcy or
|
(p)
|
Sections 8.1(d), (e) and (f) of the Credit Agreement are amended by deleting each of the references to “the Borrower” and replacing them with “any Credit Party”; and
|
(q)
|
Section 8.1(g) of the Credit Agreement is amended by deleting each of the references to “Canopy Offer” and replacing them with “Third Party Offer”.
|
3.
|
Conditions Precedent. The amendments to the Credit Agreement set forth in Section 2 of this Second Amending Agreement shall be effective upon the following conditions having been fulfilled to the satisfaction of the Administrative Agent on behalf of the Lenders:
|
(a)
|
the Administrative Agent shall have received a fully executed copy of this Second Amending Agreement; and
|
(b)
|
the Borrower shall have paid to the Administrative Agent, on behalf of the Lenders, an amendment fee equal to US$275,000.
|
4.
|
Representations and Warranties. To confirm each Lender’s understanding concerning each Credit Party and its business, properties and obligations, and to induce the Administrative Agent and each Lender to enter into this Second Amending Agreement, each Credit Party jointly and severally hereby reaffirms to the Administrative Agent and each Lender that, as of the date of this Second Amending Agreement, its representations and warranties contained in Section 5.1 of the Credit Agreement, as amended by this Second Amending Agreement, and except to the extent such representations and warranties relate solely to an earlier date, are true and correct in all material respects (provided that any such representations and warranties which are already qualified by materiality, material adverse effect or similar language shall be true and correct in all respects) and additionally represents and warrants as follows on the date of this Second Amending Agreement:
|
(a)
|
all necessary action has been taken to authorize the execution, delivery and performance of this Second Amending Agreement;
|
(b)
|
this Second Amending Agreement has been duly executed and delivered by each of the Credit Parties and constitutes legal, valid and binding obligations of each of the Credit Parties enforceable against them in accordance with its terms, subject only to any limitation under Applicable Laws relating to (i) bankruptcy, insolvency, arrangement or creditors’ rights generally, and (ii) the discretion that a court may exercise in the granting of equitable remedies;
|
(c)
|
the execution and delivery by each of the Credit Parties and the performance by each of them of their respective obligations under this Second Amending Agreement will not conflict with or result in a breach of any of the terms or conditions of their respective constating documents or by-laws, any Applicable Law or any contractual restriction binding on or affecting them or their respective Assets;
|
(d)
|
no Default or Event of Default exists under the Credit Agreement; and
|
(e)
|
the Amended Credit Agreement and each of the other Credit Documents remains in full force and effect, unamended, and are enforceable against each of the Credit Parties, in each case, to the extent party thereto in accordance with their respective terms, subject only to
|
5.
|
Confirmations. Each of the Parties acknowledges and agrees that the Credit Agreement, as amended by this Second Amending Agreement, and all other Credit Documents are and will continue to be in full force and effect, and are hereby ratified and confirmed, and the rights and obligations of all Parties thereunder will not be affected in any manner by the provisions of this Second Amending Agreement, except as expressly provided in Section 2 of this Second Amending Agreement.
|
6.
|
Credit Document. This Second Amending Agreement constitutes a Credit Document.
|
7.
|
Governing Law.
|
(a)
|
This Second Amending Agreement shall be governed by, and construed in accordance with, the laws of the Province of Alberta and the laws of Canada applicable in that Province.
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(b)
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The Credit Parties irrevocably attorns and submits to the non-exclusive jurisdiction of any court of competent jurisdiction of the Province of Alberta sitting in Calgary, Alberta in any action or proceeding arising out of or relating to this Second Amending Agreement. Each Credit Party irrevocably waives objection to the venue of any action or proceeding in such court or that such court provides an inconvenient forum. Nothing in this Section limits the right of the Administrative Agent to bring proceedings against any Credit Party in the courts of any other jurisdiction.
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8.
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Further Assurances. The Credit Parties will from time to time forthwith, at the Administrative Agent’s request and at the Borrower’s own cost and expense, do, make, execute and deliver, or cause to be done, made, executed and delivered, all such further documents, financing statements, assignments, acts, manners and things which may be reasonably required by the Administrative Agent and are consistent with the intention of the Parties as evidenced herein, with respect to all matters arising under this Second Amending Agreement or the Amended Credit Agreement.
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9.
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Expenses. Without in any way limiting the provisions of Section 10.5 of the Credit Agreement, the Borrower will be liable for all expenses of the Administrative Agent and the Lenders, including legal fees and other out-of-pocket expenses, in connection with the negotiation, preparation, execution and delivery of this Second Amending Agreement.
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10.
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Counterparts. This Second Amending Agreement may be executed in any number of counterparts (including by facsimile or other electronic transmission), each of which when executed and delivered will be deemed to be an original, and all of which when taken together shall constitute one and the same instrument.
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BORROWER:
HSCP CN HOLDINGS ULC
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By:
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“Kevin Murphy”
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Name: Kevin Murphy
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Title: Director & President
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GUARANTOR:
ACREAGE FINANCE DELAWARE, LLC
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By:
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“Kevin Murphy”
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Name: Kevin Murphy
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Title: Manager
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ADMINISTRATIVE AGENT:
[Redacted - Agentʼs name]
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By:
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Name:
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Title:
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LENDER:
[Redacted - Lenderʼs name]
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By:
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Name:
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Title:
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1
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History; Effective Date.
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2
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2
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Purpose.
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2
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3
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Definitions.
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2
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4
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Administration.
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8
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5
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Shares.
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10
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6
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Participation.
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12
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7
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Awards.
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12
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8
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Withholding of Taxes.
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17
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9
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Transferability of Awards.
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18
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10
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Adjustments for Corporate Transactions and Other Events.
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18
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11
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Change in Control Provisions.
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20
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12
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Substitution of Awards in Mergers and Acquisitions.
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21
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13
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Compliance with Securities Laws; Listing and Registration.
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21
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14
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Section 409A Compliance.
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22
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15
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Plan Duration; Amendment and Discontinuance.
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23
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16
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General Provisions.
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23
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1.
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History; Effective Date.
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2.
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Purpose.
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(a)
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promote the long-term financial interests and growth of Acreage and its Subsidiaries (together, the “Company”) by attracting and retaining management and other personnel and key service providers with the training, experience and ability to enable them to make a substantial contribution to the success of the Company’s business;
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(b)
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motivate management personnel by means of growth-related incentives to achieve long-range goals; and
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(c)
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further the alignment of interests of Participants with those of the shareholders of Acreage through opportunities for increased stock or stock-based ownership in Acreage.
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3.
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Definitions.
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(a)
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A “Change in Ownership of Acreage” shall occur on the date that any one Person acquires, or Persons Acting as a Group acquire, ownership of the capital stock of Acreage that, together with the stock held by such Person or Group, constitutes more than 50% of the total fair market value or total voting power of the capital stock of Acreage. However, if any one Person is, or Persons Acting as a Group are, considered to own more than 50%, on a fully diluted basis, of the total fair market value or total voting power of the capital stock of Acreage, the acquisition of additional stock by the same Person or Persons Acting as a Group is not considered to cause a Change in Ownership of Acreage or to cause a Change in Effective Control of Acreage (as described below). An increase in the percentage of capital stock owned by any one Person, or Persons Acting as a Group, as a result of a transaction in which Acreage acquires its stock in exchange for property will be treated as an acquisition of stock.
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(b)
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A “Change in Effective Control of Acreage” shall occur on the date either (A) a majority of members of Acreage’s Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of Acreage’s Board before the date of the appointment or election, or (B) any one Person (excluding Kevin Murphy and his affiliates), or Persons Acting as a Group (excluding Kevin Murphy and his affiliates), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) ownership of stock of Acreage possessing 50% or more of the total voting power of the stock of Acreage.
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(c)
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A “Change in the Ownership of Assets of Acreage” shall occur on the date that any one Person acquires, or Persons Acting as a Group acquire (or has or have acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons), assets from Acreage that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of Acreage immediately before such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of Acreage, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
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(i)
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A “Person” means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended, other than employee benefit plans sponsored or maintained by Acreage and by entities controlled by Acreage or an underwriter, initial purchaser or placement agent temporarily holding the capital stock of Acreage pursuant to a registered public offering.
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(ii)
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Persons will be considered to be Persons Acting as a Group (or Group) if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the corporation. If a Person owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a Group with other shareholders only with respect to the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. Persons will not be considered to be acting as a Group solely because they purchase assets of the same corporation at the same time or purchase or own stock of the same corporation at the same time, or as a result of the same public offering.
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(iii)
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A Change in Control shall not include a transfer to a related person as described in Code section 409A or a public offering of capital stock of Acreage.
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(iv)
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For purposes of the definition of Change in Control, Section 318(a) of the Code applies to determine stock ownership. Stock underlying a vested option is considered owned by the individual who holds the vested option (and the stock underlying an unvested option is not considered owned by the individual who holds the unvested option). For purposes of the preceding sentence, however, if a vested option is exercisable for stock that is not substantially vested (as defined by Treasury Regulation §1.83-3(b) and (j)), the stock underlying the option is not treated as owned by the individual who holds the option.
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(a)
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if the principal market for the Subordinate Voting Shares (as determined by the Administrator if the Subordinate Voting Shares are listed or admitted to trading on more than one exchange or market) is a national securities exchange or an established securities market, the official closing price per Subordinate Voting Share for the regular market session on that date on the principal exchange or market on which the Subordinate Voting Shares are then listed or admitted to trading or, if no sale is reported for that date, on the last preceding day on which a sale was reported, all as reported by such source as the Administrator may select;
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(b)
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if the principal market for the Subordinate Voting Shares is not a national securities exchange or an established securities market, but the Subordinate Voting Shares are quoted by a national quotation system, the average of the highest bid and lowest asked prices for the Subordinate Voting Shares on that date as reported on a national quotation system or, if no prices are reported for that date, on the last preceding day on which prices were reported, all as reported by such source as the Administrator may select; or
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(c)
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if the Subordinate Voting Shares are neither listed or admitted to trading on a national securities exchange or an established securities market, nor quoted by a national quotation system, the value determined by the Administrator in good faith by the reasonable application of a reasonable valuation method, which method may, but need not, include taking into account an appraisal of the fair market value of the Subordinate Voting Shares conducted by a nationally recognized appraisal firm selected by the Administrator.
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(a)
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Earnings or Profitability Metrics: any derivative of revenue; earnings/loss (gross, operating, net, or adjusted); earnings/loss before interest and taxes (“EBIT”); earnings/loss before interest, taxes, depreciation and amortization (“EBITDA”); profit margins; operating margins; expense levels or ratios; provided that any of the foregoing metrics may be adjusted to eliminate the effect of any one or more of the following: interest expense, asset impairments or investment losses, early extinguishment of debt or stock-based compensation expense;
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(b)
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Return Metrics: any derivative of return on investment, assets, equity or capital (total or invested);
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(c)
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Investment Metrics: relative risk-adjusted investment performance; investment performance of assets under management;
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(d)
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Cash Flow Metrics: any derivative of operating cash flow; cash flow sufficient to achieve financial ratios or a specified cash balance; free cash flow; cash flow return on capital; net cash provided by operating activities; cash flow per share; working capital;
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(e)
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Liquidity Metrics: any derivative of debt leverage (including debt to capital, net debt-to-capital, debt-to-EBITDA or other liquidity ratios);
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(f)
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Stock Price and Equity Metrics: any derivative of return on shareholders’ equity; total shareholder return; stock price; stock price appreciation; market capitalization; earnings/loss per share (basic or diluted) (before or after taxes);
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(g)
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Strategic Metrics: product research and development; completion of an identified special project; clinical trials; regulatory filings or approvals; patent application or issuance; manufacturing or process development; sales or net sales; market share; market penetration; economic value added; customer service; customer satisfaction; inventory control; balance of cash, cash equivalents and marketable securities; growth in assets; key hires; employee satisfaction; employee retention; business expansion; acquisitions, divestitures, joint ventures or financing; legal compliance or safety and risk reduction; and/or
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(h)
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Any such personal performance objectives as determined by the Plan Administrator.
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4.
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Administration.
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(a)
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Administration of the Plan. The Plan shall be administered by the Administrator. Nothing in this Plan shall derogate from the Board’s authority to approve the grant of Awards and the issuance of any Shares pursuant thereto.
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(b)
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Powers of the Administrator. The Administrator shall, except as otherwise provided under the Plan, have full authority, subject to Board approval, to grant Awards pursuant to the terms of the Plan to Eligible Individuals and to take all other actions necessary or desirable to carry out the purpose and intent of the Plan. Among other things, the Administrator shall have the authority, in its sole and absolute discretion, subject to the terms and conditions of the Plan to:
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(i)
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determine the Eligible Individuals to whom, and the time or times at which, Awards shall be granted;
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(ii)
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determine the types of Awards to be granted any Eligible Individual;
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(iii)
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determine the number of Subordinate Voting Shares to be covered by or used for reference purposes for each Award or the value to be transferred pursuant to any Award;
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(iv)
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determine the terms, conditions and restrictions applicable to each Award (which need not be identical) and any shares acquired pursuant thereto, including, without limitation, (A) the purchase price of any Subordinate Voting Shares, (B) the method of payment for shares purchased pursuant to any Award, (C) the method for satisfying any tax withholding obligation arising in connection with any Award, including by the withholding or delivery of Subordinate Voting Shares, (D) subject to Section 7(b), the timing, terms and conditions of the exercisability, vesting or payout of any Award or any shares acquired pursuant thereto, (E) the Performance Criteria applicable to any Award and the extent to which such Performance Criteria have been attained, (F) the time of the expiration of any Award, (G) the effect of the Participant’s Termination of Service on any of the foregoing, and (H) all other terms, conditions and restrictions applicable to any Award or shares acquired pursuant thereto as the Administrator shall consider to be appropriate and not inconsistent with the terms of the Plan;
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(v)
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subject to Sections 7(f), 10(c) and 15, modify, amend or adjust the terms and conditions of any Award;
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(vi)
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subject to Section 7(b), accelerate or otherwise change the time at or during which an Award may be exercised or becomes payable and waive or accelerate the lapse, in whole or in part, of any restriction, condition or risk of forfeiture with respect to such Award; provided, however, that, except in connection with death, disability or a Change in Control,
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(vii)
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determine whether an Award will be paid or settled in cash, Subordinate Voting Shares, or in any combination thereof and whether, to what extent and under what circumstances cash or Subordinate Voting Shares payable with respect to an Award shall be deferred either automatically or at the election of the Participant;
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(viii)
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for any purpose, including but not limited to, qualifying for preferred or beneficial tax treatment, accommodating the customs or administrative challenges or otherwise complying with the tax, accounting or regulatory requirements of one or more jurisdictions, adopt, amend, modify, administer or terminate sub-plans, appendices, special provisions or supplements applicable to Awards regulated by the laws of a particular jurisdiction, which sub-plans, appendices, supplements and special provisions may take precedence over other provisions of the Plan, and prescribe, amend and/or rescind rules and regulations relating to such sub-plans, supplements and/or special provisions;
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(ix)
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establish any “blackout” period, during which transactions affecting Awards may not be effected, that the Administrator in its sole discretion deems necessary or advisable;
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(x)
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determine the Fair Market Value of Subordinate Voting Shares or other property for any purpose under the Plan or any Award;
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(xi)
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administer, construe and interpret the Plan, Award Agreements and all other documents relevant to the Plan and Awards issued thereunder, and decide all other matters to be determined in connection with an Award;
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(xii)
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establish, amend, rescind and interpret such administrative rules, regulations, agreements, guidelines, instruments and practices for the administration of the Plan and for the conduct of its business as the Administrator deems necessary or advisable;
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(xiii)
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correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award or Award Agreement in the manner and to the extent the Administrator shall consider it desirable to carry it into effect; and
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(xiv)
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specify that vesting conditions in respect of Awards shall not extend beyond applicable limitations such that the Award complies at all times with the exception in paragraph (k) of the definition of “salary deferral arrangement” in subsection 248(1) of the Income Tax Act (Canada) or comparable legislation of any jurisdiction; and
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(xv)
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otherwise administer the Plan and all Awards granted under the Plan.
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(c)
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Delegation of Administrative Authority. The Administrator may designate officers or employees of the Company to assist the Administrator in the administration of the Plan and, to the extent permitted by applicable law and stock exchange rules, the Administrator may delegate to officers or other employees of the Company any of the Administrator’s duties and powers under the Plan, subject to such conditions and limitations as the Administrator shall prescribe, including without limitation the authority to execute agreements or other documents on behalf of the Administrator; provided, however, that such delegation of authority shall not extend to the granting of, or exercise of discretion with respect to, Awards to Eligible Individuals who are officers under Section 16 of the Exchange Act.
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(d)
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Non-Uniform Determinations. The Administrator’s determinations under the Plan (including without limitation, determinations of the persons to receive Awards, the form, amount and timing
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(e)
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Limited Liability; Advisors. To the maximum extent permitted by law, no member of the Administrator shall be liable for any action taken or decision made in good faith relating to the Plan or any Award thereunder. The Administrator may employ counsel, consultants, accountants, appraisers, brokers or other persons. The Administrator, Acreage, and the officers and directors of Acreage shall be entitled to rely upon the advice, opinions or valuations of any such persons.
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(f)
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Indemnification. To the maximum extent permitted by law, by Acreage’s Notice and Articles of Incorporation, and by any directors’ and officers’ liability insurance coverage which may be in effect from time to time, the members of the Administrator and any agent or delegate of the Administrator who is a director, officer or employee of Acreage or an Affiliate shall be indemnified by Acreage against any and all liabilities and expenses to which they may be subjected by reason of any act or failure to act with respect to their duties on behalf of the Plan.
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(g)
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Effect of Administrator’s Decision. All actions taken and determinations made by the Administrator on all matters relating to the Plan or any Award pursuant to the powers vested in it hereunder shall be in the Administrator’s sole and absolute discretion, unless in contravention of any express term of the Plan, including, without limitation, any determination involving the appropriateness or equitableness of any action. All determinations made by the Administrator shall be conclusive, final and binding on all parties concerned, including Acreage, its shareholders, any Participants and any other employee, consultant, or director of Acreage and its Affiliates, and their respective successors in interest. No member of the Administrator, nor any director, officer, employee or representative of Acreage shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or Awards.
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5.
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Shares.
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(a)
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Adjustments. On and after the Effective Date, the Share Pool shall be adjusted, in addition to any adjustments to be made pursuant to Section 10 of the Plan, as follows:
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(i)
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The Share Pool shall be reduced, on the date of grant, by one share for each stock option or stock appreciation right granted under the Plan and by one share for each Stock Award, Restricted Share Unit, Performance Share and/or Other Stock-Based Award granted under the Plan; provided that Awards that are valued by reference to Subordinate Voting Shares but are required to be paid in cash pursuant to their terms shall not reduce the Share Pool;
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(ii)
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If and to the extent options or stock appreciation rights originating from the Share Pool terminate, expire, or are canceled, forfeited, exchanged, or surrendered without having been exercised, or if any Stock Awards, Restricted Share Units, Performance Shares and/or Other Stock-Based Awards are forfeited, the Subordinate Voting Shares subject to such Awards shall again be available for Awards under the Share Pool, and shall increase the Share Pool by one share for each stock option or stock appreciation right and one share for each Stock Award, Restricted Share Unit, Performance Share and/or Other Stock-Based
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(iii)
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Notwithstanding the foregoing, the following Subordinate Voting Shares shall not become available for issuance under the Plan: (A) shares tendered by Participants, or withheld by the Company, as full or partial payment to the Company upon the exercise of stock options granted under the Plan, until such Shares are cancelled; (B) shares reserved for issuance upon the grant of stock appreciation rights, to the extent the number of reserved shares exceeds the number of shares actually issued upon the exercise of the stock appreciation rights; and (C) shares withheld by, or otherwise remitted to, the Company to satisfy a Participant’s tax withholding obligations upon the lapse of restrictions on Stock Awards or the exercise of stock options or stock appreciation rights granted under the Plan, until such shares are cancelled.
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(b)
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ISO Limits. The following limitations shall apply to awards of Incentive Stock Options, notwithstanding any generally applicable contrary provisions in the Plan. Any Award of Incentive Stock Options which does not comply with the provisions of this paragraph shall be deemed to be an award of Non-Qualified Stock Options to the extent of such non-compliance. (i) Subject to adjustment pursuant to Section 10 of the Plan, and also subject to the total number of the maximum number of Subordinate Voting Shares available for all Grants under this Plan, the total number of Subordinate Voting Shares that may be issued pursuant to stock options granted under the Plan that are intended to qualify as Incentive Stock Options within the meaning of Section 422 of the Code shall be 2,000,000. (ii) To the extent that the aggregate Fair Market Value of (x) the Subordinate Voting Shares with respect to Incentive Stock Options, plus (y) the Subordinate Voting Shares with respect to which other Incentive Stock Options are first exercisable by a Participant during any calendar year under all plans of the Company and any Affiliate exceeds $100,000, such Incentive Stock Options shall be treated as Nonqualified Stock Options. For purposes of the preceding sentence, the Fair Market Value of the Subordinate Voting Shares shall be determined as of the time the Option or other incentive stock option is granted. (iii) No Incentive Stock Options may be granted pursuant to the Plan after the day immediately prior to the tenth anniversary of the Effective Date. (iv) During a Participant’s lifetime, an Incentive Stock Option may be exercised only by the Participant or, in the case of the Participant’s Disability, by the Participant’s guardian or legal representative. (v) No Incentive Stock Option may be granted to any non-employee of the Company or an Affiliate.
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(c)
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Source of Shares. The Subordinate Voting Shares with respect to which Awards may be made under the Plan shall be shares authorized by Acreage for issuance but unissued, or issued and reacquired, including without limitation shares purchased in the open market or in private transactions.
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(d)
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Stock Exchange Limits.
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(i)
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The number of Subordinate Voting Shares subject to Awards granted to any one Participant shall be determined by the Board, but no one Participant shall be granted Awards which exceed, in aggregate, the maximum number permitted by the Exchange, if applicable.
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(ii)
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Subject to the aggregate limit and adjustment provisions in Section 5 of this Plan, the aggregate number of Subordinate Voting Shares that may be issued to “Insiders” (as defined in the Securities Act (Ontario) and includes an associate and Affiliate, as defined in the Securities Act (Ontario) pursuant to the exercise of Awards under the Plan and all other security based compensation arrangements of the Company are subject, in all respects, to Exchange policies.
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6.
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Participation.
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7.
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Awards.
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(a)
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Awards, In General. The Administrator, in its sole discretion, shall establish the terms of all Awards granted under the Plan consistent with the terms of the Plan. Awards may be granted individually or in tandem with other types of Awards, concurrently with or with respect to outstanding Awards. All Awards are subject to the terms and conditions of the Plan and as provided in the Award Agreement, which shall be delivered to the Participant receiving such Award upon, or as promptly as is reasonably practicable following, the grant of such Award. Unless otherwise specified by the Administrator, in its sole discretion, or otherwise provided in the Award Agreement, an Award shall not be effective unless the Award Agreement is signed or otherwise accepted by Acreage and the Participant receiving the Award (including by electronic delivery and/or electronic signature). Unless the Administrator determines otherwise, any failure by the Participant to sign and return the Award Agreement within such period of time following the granting of the Award as the Administrator shall prescribe shall cause such Award to the Participant to be null and void. The Administrator may direct that any stock certificate evidencing shares issued pursuant to the Plan shall bear a legend setting forth such restrictions on transferability as may apply to such shares pursuant to the Plan.
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(b)
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Minimum Restriction Period for Full Value Awards. Except as provided below and notwithstanding any provision of the Plan to the contrary, each Award granted under the Plan shall be subject to a minimum Restriction Period of 12 months from the date of grant if vesting of or lapse of restrictions on such Award is based on the satisfaction of Performance Criteria and a minimum Restriction Period of 36 months from the date of grant, applied in either pro rata installments or a single installment, if vesting of or lapse of restrictions on such Award is based solely on the Participant’s satisfaction of specified service requirements with the Company. If the grant of a Performance Award is conditioned on satisfaction of Performance Criteria, the Performance Period shall not be less than 12 months’ duration, but no additional minimum Restriction Period need apply to such Award. Except as provided below and notwithstanding any provision of the Plan to the contrary, the Administrator shall not have discretionary authority to waive the minimum Restriction Period applicable to a Full Value Award, except in the case of death, disability, retirement, or a Change in Control. Notwithstanding the foregoing, the provisions of this Section 7(b) shall not apply and/or may be waived, in the Administrator’s sole discretion, with respect to up to the number of Full Value Awards that is equal to 10% of the aggregate Share Pool as of the Effective Date. Notwithstanding the foregoing, the minimum Restriction Period may be less than 36 months in order to ensure that an Award complies at all times with the exception in paragraph (k) of the definition of “salary deferral arrangement” in subsection 248(1) of the Income Tax Act (Canada) or comparable legislation of any jurisdiction.
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(c)
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Stock Options.
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(i)
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Grants. A stock option means a right to purchase a specified number of Subordinate Voting Shares from Acreage at a specified price during a specified period of time. The Administrator may from time to time grant to Eligible Individuals Awards of Incentive Stock Options or Non-qualified Options; provided, however, that Awards of Incentive Stock Options shall be limited to employees of Acreage or of any current or hereafter existing “parent corporation” or “subsidiary corporation,” as defined in Sections 424(e) and 424(f) of the Code, respectively, of Acreage, and any other Eligible Individuals who are eligible to receive Incentive Stock Options under the provisions of Section 422 of the Code. No stock option shall be an Incentive Stock Option unless so designated by the Administrator at the time of grant or in the applicable Award Agreement.
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(ii)
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Exercise. Stock options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator; provided, however, that Awards of stock options may not have a term in excess of ten years’ duration unless required otherwise by applicable law. The exercise price per share subject to a stock option granted under the Plan shall not be less than the Fair Market Value of one Subordinate Voting Share on the date of grant of the stock option, except as provided under applicable law or with respect to stock options that are granted in substitution of similar types of awards of a company acquired by Acreage or a Subsidiary or with which Acreage or a Subsidiary combines (whether in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock, or otherwise) to preserve the intrinsic value of such awards. Notwithstanding the foregoing, An Incentive Stock Option shall not be granted to any individual who, at the date of grant, owns Stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or any Affiliate, unless the exercise price per share is at least 110% of the Fair Market Value per share of Stock at the date of grant, and the Option expires no later than five years after the date of grant. Should the expiry date of a stock option fall within a period during which the relevant Participant is prohibited from exercising a Nonqualified Option due to trading restrictions imposed by the Company pursuant to any policy of the Company respecting restrictions on trading that is in effect at that time (a “blackout period”) or within nine Business Days following the expiration of a blackout period, such expiry date of the Nonqualified Option shall be automatically extended without any further act or formality to that date which is the tenth Business Day after the end of the blackout period (but not beyond the first to occur of the original term of the option or the 10th anniversary of the original grant date of the option), such tenth Business Day to be considered the expiry date for such Nonqualified Option for all purposes under the Plan. The ten Business Day period referred to in this paragraph may not be extended by the Board.
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(iii)
|
Termination of Service. Except as provided in the applicable Award Agreement or otherwise determined by the Administrator, to the extent stock options are not vested and exercisable, a Participant’s stock options shall be forfeited upon his or her Termination of Service.
|
(iv)
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Additional Terms and Conditions. The Administrator may, by way of the Award Agreement or otherwise, determine such other terms, conditions, restrictions, and/or limitations, if any, of any Award of stock options, provided they are not inconsistent with the Plan.
|
(d)
|
Limitation on Reload Options. The Administrator shall not grant stock options under this Plan that contain a reload or replenishment feature pursuant to which a new stock option would be granted automatically upon receipt of delivery of Subordinate Voting Shares to Acreage in payment of the exercise price or any tax withholding obligation under any other stock option.
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(e)
|
Stock Appreciation Rights.
|
(i)
|
Grants. The Administrator may from time to time grant to Eligible Individuals Awards of stock appreciation rights. A stock appreciation right entitles the Participant to receive, subject to the provisions of the Plan and the Award Agreement, a payment having an aggregate value equal to the product of (i) the excess of (A) the Fair Market Value on the exercise date of one Subordinate Voting Share over (B) the base price per share specified in the Award Agreement, times (ii) the number of shares specified by the stock appreciation right, or portion thereof, which is exercised. The base price per share specified in the Award Agreement shall not be less than the Fair Market Value on the date of grant, or with respect to stock appreciation rights that are granted in substitution of similar types of awards of a company acquired by Acreage or a Subsidiary or with which Acreage or a Subsidiary combines (whether in connection with a corporate transaction, such as a merger,
|
(ii)
|
Exercise. Stock appreciation rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator; provided, however, that stock appreciation rights granted under the Plan may not have a term in excess of ten years’ duration unless required otherwise by applicable law. The applicable Award Agreement shall specify whether payment by Acreage of the amount receivable upon any exercise of a stock appreciation right is to be made in cash or Subordinate Voting Shares or a combination of both, or shall reserve to the Administrator or the Participant the right to make that determination prior to or upon the exercise of the stock appreciation right. If upon the exercise of a stock appreciation right a Participant is to receive a portion of such payment in Subordinate Voting Shares, the number of shares shall be determined by dividing such portion by the Fair Market Value of a Subordinate Voting Share on the exercise date. No fractional shares shall be used for such payment and the Administrator shall determine whether cash shall be given in lieu of such fractional shares or whether such fractional shares shall be eliminated.
|
(iii)
|
Termination of Service. Except as provided in the applicable Award Agreement or otherwise determined by the Administrator, to the extent stock appreciation rights are not vested and exercisable, a Participant’s stock appreciation rights shall be forfeited upon his or her Termination of Service.
|
(iv)
|
Additional Terms and Conditions. The Administrator may, by way of the Award Agreement or otherwise, determine such other terms, conditions, restrictions, and/or limitations, if any, of any Award of stock appreciation rights, provided they are not inconsistent with the Plan.
|
(f)
|
Repricing. Notwithstanding anything herein to the contrary, except in connection with a corporate transaction involving Acreage (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of stock options and stock appreciation rights granted under the Plan may not be amended, after the date of grant, to reduce the exercise price of such stock options or stock appreciation rights, nor may outstanding stock options or stock appreciation rights be canceled in exchange for (i) cash, (ii) stock options or stock appreciation rights with an exercise price or base price that is less than the exercise price or base price of the original outstanding stock options or stock appreciation rights, or (iii) other Awards, unless such action is approved by Acreage’s shareholders.
|
(g)
|
Stock Awards.
|
(i)
|
Grants. The Administrator may from time to time grant to Eligible Individuals Awards of unrestricted Subordinate Voting Shares or Restricted Stock (collectively, “Stock Awards”) on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by law, as the Administrator shall determine, subject to the limitations set forth in Section 7(b). Stock Awards shall be evidenced in such manner as the Administrator may deem appropriate, including via book-entry registration.
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(ii)
|
Vesting. Restricted Stock shall be subject to such vesting, restrictions on transferability and other restrictions, if any, and/or risk of forfeiture as the Administrator may impose at the date of grant or thereafter. The Restriction Period to which such vesting, restrictions and/or risk of forfeiture apply may lapse under such circumstances, including without limitation upon the attainment of Performance Criteria, in such installments, or otherwise, as the Administrator may determine. Subject to the provisions of the Plan, the applicable Award Agreement and applicable law, during the Restriction Period, the Participant shall
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(iii)
|
Rights of a Shareholder; Dividends. Except to the extent restricted under the Award Agreement relating to the Restricted Stock, a Participant granted Restricted Stock shall have all of the rights of a shareholder of Subordinate Voting Shares including, without limitation, the right to vote Restricted Stock upon the expiry of the Restriction Period. Subject to shareholder approval, cash dividends declared payable on Subordinate Voting Shares shall be paid, with respect to outstanding Restricted Stock, as determined by the Administrator, and shall be paid in cash or as unrestricted Subordinate Voting Shares having a Fair Market Value equal to the amount of such dividends or may be reinvested in additional shares of Restricted Stock as determined by the Administrator; provided, however, that dividends declared payable on Restricted Stock that is granted as a Performance Award shall be held by Acreage and made subject to forfeiture at least until achievement of the applicable Performance Goal related to such shares of Restricted Stock. Stock distributed in connection with a stock split or stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Subordinate Voting Shares or other property has been distributed. As soon as is practicable following the date on which restrictions on any shares of Restricted Stock lapse, Acreage shall deliver to the Participant the certificates for such shares or shall cause the shares to be registered in the Participant’s name in book-entry form, in either case with the restrictions removed, provided that the Participant shall have complied with all conditions for delivery of such shares contained in the Award Agreement or otherwise reasonably required by Acreage.
|
(iv)
|
Termination of Service. Except as provided in the applicable Award Agreement, upon Termination of Service during the applicable Restriction Period, Restricted Stock and any accrued but unpaid dividends that are at that time subject to restrictions shall be forfeited; provided that, subject to the limitations set forth in Section 7(b), the Administrator may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and the Administrator may in other cases waive in whole or in part the forfeiture of Restricted Stock.
|
(v)
|
Additional Terms and Conditions. The Administrator may, by way of the Award Agreement or otherwise, determine such other terms, conditions, restrictions, and/or limitations, if any, of any Award of Restricted Stock, provided they are not inconsistent with the Plan.
|
(h)
|
Share Units.
|
(i)
|
Grants. The Administrator may from time to time grant to Eligible Individuals Awards of unrestricted stock Units or Restricted Share Units on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by law, as the Administrator shall determine, subject to the limitations set forth in Section 7(b). Restricted Share Units represent a contractual obligation by Acreage to deliver a number of Subordinate Voting Shares, an amount in cash equal to the Fair Market Value of the specified number of shares subject to the Award, or a combination of Subordinate Voting Shares and cash, in accordance with the terms and conditions set forth in the Plan and any applicable Award Agreement.
|
(ii)
|
Vesting and Payment. Restricted Share Units shall be subject to such vesting, risk of forfeiture and/or payment provisions as the Administrator may impose at the date of grant. The Restriction Period to which such vesting and/or risk of forfeiture apply may lapse under such circumstances, including without limitation upon the attainment of
|
(iii)
|
No Rights of a Shareholder; Dividend Equivalents. Until Subordinate Voting Shares are issued to the Participant in settlement of stock Units, the Participant shall not have any rights of a shareholder of Acreage with respect to the stock Units or the shares issuable thereunder. The Administrator may grant to the Participant the right to receive Dividend Equivalents on stock Units, on a current, reinvested and/or restricted basis, subject to such terms as the Administrator may determine provided, however, that Dividend Equivalents payable on stock Units that are granted as a Performance Award shall, rather than be paid on a current basis, be accrued and made subject to forfeiture at least until achievement of the applicable Performance Goal related to such stock Units.
|
(iv)
|
Termination of Service. Upon Termination of Service during the applicable deferral period or portion thereof to which forfeiture conditions apply, or upon failure to satisfy any other conditions precedent to the delivery of Subordinate Voting Shares or cash to which such Restricted Share Units relate, all Restricted Share Units and any accrued but unpaid Dividend Equivalents with respect to such Restricted Share Units that are then subject to deferral or restriction shall be forfeited; provided that, subject to the limitations set forth in Section 7(b), the Administrator may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Share Units will be waived in whole or in part in the event of termination resulting from specified causes, and the Administrator may in other cases waive in whole or in part the forfeiture of Restricted Share Units.
|
(v)
|
Additional Terms and Conditions. The Administrator may, by way of the Award Agreement or otherwise, determine such other terms, conditions, restrictions, and/or limitations, if any, of any Award of stock Units, provided they are not inconsistent with the Plan.
|
(i)
|
Performance Shares and Performance Units.
|
(i)
|
Grants. The Administrator may from time to time grant to Eligible Individuals Awards in the form of Performance Shares and Performance Units. Performance Shares, as that term is used in this Plan, shall refer to Subordinate Voting Shares or Units that are expressed in terms of Subordinate Voting Shares, the issuance, vesting, lapse of restrictions on or payment of which is contingent on performance as measured against predetermined objectives over a specified Performance Period. Performance Units, as that term is used in this Plan, shall refer to dollar-denominated Units valued by reference to designated criteria established by the Administrator, other than Subordinate Voting Shares, the issuance, vesting, lapse of restrictions on or payment of which is contingent on performance as measured against predetermined objectives over a specified Performance Period. The applicable Award Agreement shall specify whether Performance Shares and Performance Units will be settled or paid in cash or Subordinate Voting Shares or a combination of both, or shall reserve to the Administrator or the Participant the right to make that determination prior to or at the payment or settlement date.
|
(ii)
|
Performance Criteria. The Administrator shall, prior to or at the time of grant, condition the grant, vesting or payment of, or lapse of restrictions on, an Award of Performance
|
(iii)
|
Additional Terms and Conditions. The Administrator may, by way of the Award Agreement or otherwise, determine such other terms, conditions, restrictions, and/or limitations, if any, of any Award of Performance Shares or Performance Units, provided they are not inconsistent with the Plan.
|
(j)
|
Other Stock-Based Awards. The Administrator may from time to time grant to Eligible Individuals Awards in the form of Other Stock-Based Awards. Other Stock-Based Awards in the form of Dividend Equivalents may be (A) awarded on a free-standing basis or in connection with another Award other than a stock option or stock appreciation right, (B) paid currently or credited to an account for the Participant, including the reinvestment of such credited amounts in Subordinate Voting Shares equivalents, to be paid on a deferred basis, and (C) settled in cash or Subordinate Voting Shares as determined by the Administrator; provided, however, that Dividend Equivalents payable on Other Stock-Based Awards that are granted as a Performance Award shall, rather than be paid on a current basis, be accrued and made subject to forfeiture at least until achievement of the applicable Performance Goal related to such Other Stock-Based Awards. Any such settlements, and any such crediting of Dividend Equivalents, may be subject to such conditions, restrictions and contingencies as the Administrator shall establish.
|
(k)
|
Awards to Participants Outside the United States. The Administrator may grant Awards to Eligible Individuals who are foreign nationals, who are located outside the United States or who are not compensated from a payroll maintained in the United States, or who are otherwise subject to (or could cause Acreage or a Subsidiary to be subject to) tax, legal or regulatory provisions of countries or jurisdictions outside the United States, on such terms and conditions different from those specified in the Plan as may, in the judgment of the Administrator, be necessary or desirable in order that any such Award shall conform to laws, regulations, and customs of the country or jurisdiction in which the Participant is then resident or primarily employed or to foster and promote achievement of the purposes of the Plan.
|
(l)
|
Limitation on Dividend Reinvestment and Dividend Equivalents. Reinvestment of dividends in additional Restricted Stock at the time of any dividend payment, and the payment of Subordinate Voting Shares with respect to dividends to Participants holding Awards of stock Units, shall only be permissible if sufficient shares are available under the Share Pool for such reinvestment or payment (taking into account then outstanding Awards). In the event that sufficient shares are not available under the Share Pool for such reinvestment or payment, such reinvestment or payment shall be made in the form of a grant of stock Units equal in number to the Subordinate Voting Shares that would have been obtained by such payment or reinvestment, the terms of which stock Units shall provide for settlement in cash and for Dividend Equivalent reinvestment in further stock Units on the terms contemplated by this Section 7(m).
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8.
|
Withholding of Taxes.
|
9.
|
Transferability of Awards.
|
(a)
|
Requirement for Administrator Permission. Except as otherwise determined by the Administrator, and in any event in the case of an Incentive Stock Option or a tandem stock appreciation right granted with respect to an Incentive Stock Option, no Award granted under the Plan shall be transferable by a Participant otherwise than by will or the laws of descent and distribution. The Administrator shall not permit any transfer of an Award for value except to the Company or in connection with a Change in Control. An Award may be exercised during the lifetime of the Participant, only by the Participant or, during the period the Participant is under a legal disability, by the Participant’s guardian or legal representative, unless otherwise determined by the Administrator. Awards granted under the Plan shall not be subject in any manner to alienation, anticipation, sale, transfer, assignment, pledge, or encumbrance, except as otherwise determined by the Administrator; provided, however, that the restrictions in this sentence shall not apply to the Subordinate Voting Shares received in connection with an Award after the date that the restrictions on transferability of such shares set forth in the applicable Award Agreement have lapsed. Nothing in this paragraph shall be interpreted or construed as overriding the terms of any Acreage stock ownership or retention policy, now or hereafter existing, that may apply to the Participant or Subordinate Voting Shares received under an Award.
|
(b)
|
Administrator Discretion to Permit Transfers Other Than For Value. Except as otherwise restricted by applicable law, the Administrator may, but need not, permit an Award, other than an Incentive Stock Option or a tandem stock appreciation right granted with respect to an Incentive Stock Option, to be transferred to a Participant’s Family Member (as defined below) as a gift or pursuant to a domestic relations order in settlement of marital property rights. The Administrator shall not permit any transfer of an Award for value except to the Company or in connection with a Change in Control. For purposes of this Section 9, “Family Member” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Participant’s household (other than a tenant or employee), a trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or the Participant) control the management of assets, and any other entity in which these persons (or the Participant) own more than fifty percent (50%) of the voting interests. The following transactions are not prohibited transfers for value: (i) a transfer under a domestic relations order in settlement of marital property rights; and (ii) a transfer to an entity in which more than fifty percent of the voting interests are owned by Family Members (or the Participant) in exchange for an interest in that entity.
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10.
|
Adjustments for Corporate Transactions and Other Events.
|
(a)
|
Mandatory Adjustments. In the event of a merger, consolidation, stock rights offering, statutory share exchange or similar event affecting Acreage (each, a “Corporate Event”) or a stock dividend, stock split, reverse stock split, separation, spinoff, reorganization, extraordinary dividend of cash or other property, share combination or subdivision, or recapitalization or similar event affecting the capital structure of Acreage (each, a “Share Change”) that occurs at any time after adoption of this Plan by the Board (including any such Corporate Event or Share Change that occurs after such
|
(b)
|
Discretionary Adjustments. In the case of a Corporate Event, the Administrator may, with the approval of the Exchange or the shareholders of the Company (if required), make such other adjustments to outstanding Awards as it determines to be appropriate and desirable, which adjustments may include, without limitation, (i) the cancellation of outstanding Awards in exchange for payments of cash, securities or other property or a combination thereof having an aggregate value equal to the value of such Awards, as determined by the Administrator in its sole discretion (it being understood that in the case of a Corporate Event with respect to which shareholders of Acreage receive consideration other than publicly traded equity securities of the ultimate surviving entity, any such determination by the Administrator that the value of a stock option or stock appreciation right shall for this purpose be deemed to equal the excess, if any, of the value of the consideration being paid for each Subordinate Voting Share pursuant to such Corporate Event over the exercise price or base price of such stock option or stock appreciation right shall conclusively be deemed valid and that any stock option or stock appreciation right may be cancelled for no consideration upon a Corporate Event if its exercise price or base price equals or exceeds the value of the consideration being paid for each Subordinate Voting Share pursuant to such Corporate Event), (ii) the substitution of securities or other property (including, without limitation, cash or other securities of Acreage and securities of entities other than Acreage) for the Subordinate Voting Shares subject to outstanding Awards, and (iii) the substitution of equivalent awards, as determined in the sole discretion of the Administrator, of the surviving or successor entity or a parent thereof (“Substitute Awards”).
|
(c)
|
Adjustments to Performance Criteria. The Administrator may, in its discretion, adjust the Performance Criteria applicable to any Awards to reflect any unusual or infrequently occurring event or transaction, impact of charges for restructurings, discontinued operations and the cumulative effects of accounting or tax changes, each as defined by generally accepted accounting principles or as identified in Acreage’s consolidated financial statements, notes to the consolidated financial statements, management’s discussion and analysis or other Acreage filings with the Securities and Exchange Commission. If the Administrator determines that a change in the business, operations, corporate structure or capital structure of Acreage or the applicable subsidiary, business segment or other operational unit of Acreage or any such entity or segment, or the manner in which any of the foregoing conducts its business, or other events or circumstances, render the Performance Criteria to be unsuitable, the Administrator may modify such Performance Criteria or the related minimum acceptable level of achievement, in whole or in part, as the Administrator deems appropriate and equitable.
|
(d)
|
Statutory Requirements Affecting Adjustments. Notwithstanding the foregoing: (A) any adjustments made pursuant to Section 10 to Awards that are considered “deferred compensation” within the meaning of Section 409A of the Code shall be made in compliance with the requirements of Section 409A of the Code; (B) any adjustments made pursuant to Section 10 to Awards that are not considered “deferred compensation” subject to Section 409A of the Code shall be made in such
|
(e)
|
Dissolution or Liquidation. Unless the Administrator determines otherwise, all Awards outstanding under the Plan shall terminate upon the dissolution or liquidation of Acreage.
|
11.
|
Change in Control Provisions.
|
(a)
|
Termination of Awards. Notwithstanding the provisions of Section 11(b), in the event that any transaction resulting in a Change in Control occurs, outstanding Awards will terminate upon the effective time of such Change in Control unless provision is made in connection with the transaction for the continuation or assumption of such Awards by, or for the issuance therefor of Substitute Awards of, the surviving or successor entity or a parent thereof. Solely with respect to Awards that will terminate as a result of the immediately preceding sentence and except as otherwise provided in the applicable Award Agreement:
|
(i)
|
the outstanding Awards of stock options and stock appreciation rights that will terminate upon the effective time of the Change in Control shall, immediately before the effective time of the Change in Control, become fully exercisable and the holders of such Awards will be permitted, immediately before the Change in Control, to exercise the Awards;
|
(ii)
|
the outstanding shares of Restricted Stock the vesting or restrictions on which are then solely time-based and not subject to achievement of Performance Criteria shall, immediately before the effective time of the Change in Control, become fully vested, free of all transfer and lapse restrictions and free of all risks of forfeiture;
|
(iii)
|
the outstanding shares of Restricted Stock the vesting or restrictions on which are then subject to and pending achievement of Performance Criteria shall, immediately before the effective time of the Change in Control and unless the Award Agreement provides for vesting or lapsing of restrictions in a greater amount upon the occurrence of a Change in Control, become vested, free of transfer and lapse restrictions and risks of forfeiture in such amounts as if the applicable Performance Criteria for the unexpired Performance Period had been achieved at the target level set forth in the applicable Award Agreement;
|
(iv)
|
the outstanding Restricted Share Units, Performance Shares and Performance Units the vesting, earning or settlement of which is then solely time-based and not subject to or pending achievement of Performance Criteria shall, immediately before the effective time of the Change in Control, become fully earned and vested and shall be settled in cash or Subordinate Voting Shares (consistent with the terms of the Award Agreement after taking into account the effect of the Change in Control transaction on the shares) as promptly as is practicable, subject to any applicable limitations imposed thereon by Section 409A of the Code; and
|
(v)
|
the outstanding Restricted Share Units, Performance Shares and Performance Units the vesting, earning or settlement of which is then subject to and pending achievement of Performance Criteria shall, immediately before the effective time of the Change in Control and unless the Award Agreement provides for vesting, earning or settlement in a greater amount upon the occurrence of a Change in Control, become vested and earned in such amounts as if the applicable Performance Criteria for the unexpired Performance Period had been achieved at the target level set forth in the applicable Award Agreement and shall be settled in cash or Subordinate Voting Shares (consistent with the terms of the Award
|
(b)
|
Continuation, Assumption or Substitution of Awards. The administrator may specify, on or after the date of grant, in an award agreement or amendment thereto, the consequences of a Participant’s Termination of Service that occurs coincident with or following the occurrence of a Change in Control, if a Change in Control occurs under which provision is made in connection with the transaction for the continuation or assumption of outstanding Awards by, or for the issuance therefor of Substitute Awards of, the surviving or successor entity or a parent thereof.
|
(c)
|
Other Permitted Actions. In the event that any transaction resulting in a Change in Control occurs, the Administrator may take any of the actions set forth in Section 10 with respect to any or all Awards granted under the Plan.
|
(d)
|
Section 409A Savings Clause. Notwithstanding the foregoing, if any Award is considered to be a “nonqualified deferred compensation plan” within the meaning of Section 409A of the Code, this Section 11 shall apply to such Award only to the extent that its application would not result in the imposition of any tax or interest or the inclusion of any amount in income under Section 409A of the Code.
|
12.
|
Substitution of Awards in Mergers and Acquisitions.
|
13.
|
Compliance with Securities Laws; Listing and Registration.
|
(a)
|
The obligation of Acreage to sell or deliver Subordinate Voting Shares with respect to any Award granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal, state or foreign (non-United States) securities laws, or foreign (non-United States) securities laws and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Administrator. If at any time the Administrator determines that the delivery of Subordinate Voting Shares under the Plan is or may be unlawful under the laws of any applicable jurisdiction, or federal, state or foreign (non-United States) securities laws, the right to exercise an Award or receive Subordinate Voting Shares pursuant to an Award shall be suspended until the Administrator determines that such delivery is lawful. If at any time the Administrator determines that the delivery of Subordinate Voting Shares under the Plan would or may violate the rules of any exchange on which Acreage’s securities are then listed for trading, the right to exercise an Award or receive Subordinate Voting Shares pursuant to an Award shall be suspended until the Administrator determines that such delivery would not violate such rules. If the Administrator determines that the exercise or nonforfeitability of, or delivery of benefits pursuant to, any Award would violate any applicable provision of securities laws or the listing requirements of any stock exchange upon which any of Acreage’s equity securities are listed, then the
|
(b)
|
Each Award is subject to the requirement that, if at any time the Administrator determines, in its absolute discretion, that the listing, registration or qualification of Subordinate Voting Shares issuable pursuant to the Plan is required by any securities exchange or under any state, federal or foreign (non-United States) law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Award or the issuance of Subordinate Voting Shares, no such Award shall be granted or payment made or Subordinate Voting Shares issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Administrator.
|
(c)
|
In the event that the disposition of Subordinate Voting Shares acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act of 1933, as amended (the “Securities Act”), and is not otherwise exempt from such registration, such Subordinate Voting Shares shall be restricted against transfer to the extent required by the Securities Act or regulations thereunder, and the Administrator may require a person receiving Subordinate Voting Shares pursuant to the Plan, as a condition precedent to receipt of such Subordinate Voting Shares, to represent to Acreage in writing that the Subordinate Voting Shares acquired by such person is acquired for investment only and not with a view to distribution and that such person will not dispose of the Subordinate Voting Shares so acquired in violation of federal, state or foreign securities laws and furnish such information as may, in the opinion of counsel for the Company, be appropriate to permit the Company to issue the Subordinate Voting Shares in compliance with applicable federal, state or foreign securities laws. If applicable, all certificates representing such Subordinate Voting Shares shall bear applicable legends as required by federal, state or foreign securities laws or stock exchange regulation.
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14.
|
Section 409A Compliance.
|
15.
|
Plan Duration; Amendment and Discontinuance.
|
(a)
|
Plan Duration. The Plan shall remain in effect, subject to the right of the Board or the Compensation Committee to amend or terminate the Plan at any time, until the (a) earliest date as of which all Awards granted under the Plan have been satisfied in full or terminated and no Subordinate Voting Shares approved for issuance under the Plan remain available to be granted under new Awards or (b) the tenth anniversary of the Effective Date. No Awards shall be granted under the Plan after such termination date. Subject to other applicable provisions of the Plan, all Awards made under the Plan on or before the tenth anniversary of the Effective Date, or such earlier termination of the Plan, shall remain in effect until such Awards have been satisfied or terminated in accordance with the Plan and the terms of such Awards.
|
(b)
|
Amendment and Discontinuance of the Plan. The Board or the Compensation Committee may, without shareholder approval, amend, alter or discontinue the Plan, but no amendment, alteration or discontinuation shall be made which would materially impair the rights of a Participant with respect to a previously granted Award without such Participant’s consent, except such an amendment made to comply with applicable law or rule of any securities exchange or market on which the Subordinate Voting Shares are listed or admitted for trading or to prevent adverse tax or accounting consequences to Acreage or the Participant. Notwithstanding the foregoing, no such amendment shall be made without the approval of Acreage’s shareholders to the extent such amendment would (A) materially increase the benefits accruing to Participants under the Plan, (B) materially increase the number of Subordinate Voting Shares which may be issued under the Plan or to a Participant, (C) materially expand the eligibility for participation in the Plan, (D) eliminate or modify the prohibition set forth in Section 7(f) on repricing of stock options and stock appreciation rights, (E) lengthen the maximum term or lower the minimum exercise price or base price permitted for stock options and stock appreciation rights, or (F) modify the prohibition on the issuance of reload or replenishment options. Except as otherwise determined by the Board or Compensation Committee, termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.
|
(c)
|
Amendment of Awards. Subject to Section 7(f), the Administrator may unilaterally amend the terms of any Award theretofore granted, but no such amendment shall materially impair the rights of any Participant with respect to an Award without the Participant’s consent, except such an amendment made to cause the Plan or Award to comply with applicable law, applicable rule of any securities exchange on which the Subordinate Voting Shares are listed or admitted for trading, or to prevent adverse tax or accounting consequences for the Participant or the Company or any of its Affiliates. For purposes of the foregoing sentence, an amendment to an Award that results in a change in the tax consequences of the Award to the Participant shall not be considered to be a material impairment of the rights of the Participant and shall not require the Participant’s consent.
|
16.
|
General Provisions.
|
(a)
|
Non-Guarantee of Employment or Service. Nothing in the Plan or in any Award Agreement thereunder shall confer any right on an individual to continue in the service of Acreage or any Affiliate or shall interfere in any way with any right of Acreage or any Affiliate may have to terminate such service at any time with or without cause or notice and whether or not such termination results in (i) the failure of any Award to vest or become payable; (ii) the forfeiture of any unvested or vested portion of any Award; and/or (iii) any other adverse effect on the individual’s
|
(b)
|
No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between Acreage and a Participant or any other person. To the extent that any Participant or other person acquires a right to receive payments from Acreage pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of Acreage.
|
(c)
|
Status of Awards. Awards shall be special incentive payments to the Participant and shall not be taken into account in computing the amount of salary or compensation of the Participant for purposes of determining any pension, retirement, death, severance or other benefit under (a) any pension, retirement, profit-sharing, bonus, insurance, severance or other employee benefit plan of Acreage or any Affiliate now or hereafter in effect under which the availability or amount of benefits is related to the level of compensation or (b) any agreement between (i) Acreage or any Affiliate and (ii) the Participant, except as such plan or agreement shall otherwise expressly provide.
|
(d)
|
Subsidiary Employees. In the case of a grant of an Award to an Eligible Individual who provides services to any Subsidiary, Acreage may, if the Administrator so directs, issue or transfer the Subordinate Voting Shares, if any, covered by the Award to the Subsidiary, for such lawful consideration as the Administrator may specify, upon the condition or understanding that the Subsidiary will transfer the Subordinate Voting Shares to the Eligible Individual in accordance with the terms of the Award specified by the Administrator pursuant to the provisions of the Plan. All Subordinate Voting Shares underlying Awards that are forfeited or canceled after such issue or transfer of shares to the Subsidiary shall revert to Acreage.
|
(e)
|
Governing Law and Interpretation. The validity, construction and effect of the Plan, of Award Agreements entered into pursuant to the Plan, and of any rules, regulations, determinations or decisions made by the Administrator relating to the Plan or such Award Agreements, and the rights of any and all persons having or claiming to have any interest therein or thereunder, shall be determined exclusively in accordance with the laws of British Columbia and the laws of Canada applicable therein without regard to its conflict of laws principles. The captions of the Plan are not part of the provisions hereof and shall have no force or effect. Except where the context otherwise requires: (i) the singular includes the plural and vice versa; (ii) a reference to one gender includes other genders; (iii) a reference to a person includes a natural person, partnership, corporation, association, governmental or local authority or agency or other entity; and (iv) a reference to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them.
|
(f)
|
Use of English Language. The Plan, each Award Agreement, and all other documents, notices and legal proceedings entered into, given or instituted pursuant to an Award shall be written in English, unless otherwise determined by the Administrator. If a Participant receives an Award Agreement, a copy of the Plan or any other documents related to an Award translated into a language other than English, and if the meaning of the translated version is different from the English version, the English version shall control.
|
(g)
|
Recovery of Amounts Paid. Except as otherwise provided by the Administrator, Awards granted under the Plan shall be subject to any and all policies, guidelines, codes of conduct, or other agreement or arrangement adopted by the Board or Compensation Committee with respect to the recoupment, recovery or clawback of compensation (collectively, the “Recoupment Policy”) and/or to any provisions set forth in the applicable Award Agreement under which Acreage may recover from current and former Participants any amounts paid or Subordinate Voting Shares issued under
|
1.
|
[●] (the “Grant Date”), [●] (the “Participant”) was granted [●] Options (“Awards”), in accordance with the terms of this Award Agreement and subject to the provisions of the Plan.
|
2.
|
The Awards will vest as follows:
|
Number & Type of Awards
|
Vesting On
|
Exercise Price (USD)
|
Expiry Date
|
[●] - Options
|
One-third on the first anniversary of [●]; the remaining two-thirds vests ratably over the subsequent eight quarters, as set forth on Schedule “B”
|
$[●]
|
[●]
|
3.
|
By signing this agreement, the Participant:
|
(a)
|
acknowledges that he or she has read and understands the Plan, agrees with the terms and conditions thereof, which shall be deemed to be incorporated into and form part of this Award Agreement (subject to any specific variations contained in this Award Agreement);
|
(b)
|
acknowledges that he or she is responsible for paying any applicable taxes and withholding taxes arising from the exercise of any Award, as further described in Article 8 of the Plan;
|
(c)
|
agrees that an Award does not carry any voting rights until such time as the Award is exercised, settled or exchanged, as applicable, for voting securities of the Corporation;
|
(d)
|
acknowledges that the value of the Awards granted herein is in US$ denomination, and such value is not guaranteed;
|
(e)
|
recognizes that the value of an Award upon vesting, settlement and/or exercise, as applicable, is subject to stock market fluctuations;
|
(f)
|
recognizes that the Plan can be administered by a designee of the Compensation and Corporate Governance Committee (the “Committee”) of the board of directors of the Corporation (the “Board”) by virtue of Section 4(c) of the Plan and any communication from or to the designee shall be deemed to be from or to the Corporation;
|
(g)
|
acknowledges that he or she has had an opportunity to obtain the advice of counsel prior to executing this Award Agreement and has taken the opportunity to obtain such independent legal advice or has elected not to do so, and fully understands all provisions hereof and the Plan; and
|
(h)
|
agrees to accept as binding, conclusive and final all decisions or interpretations of the Board or the Committee, if any, upon any questions arising under and matters concerning the Plan or this Award Agreement.
|
ACREAGE HOLDINGS, INC.
|
|
By:
|
|
Name:
|
|
Title:
|
|
|
|
Name of Participant
|
|
|
|
Signature of Participant
|
Vesting Date
|
Amount Vested
|
[●]
|
[●]
|
[●]
|
[●]
|
[●]
|
[●]
|
[●]
|
[●]
|
[●]
|
[●]
|
[●]
|
[●]
|
[●]
|
[●]
|
[●]
|
[●]
|
[●]
|
[●]
|
Total Options
|
[●]
|
1.
|
[●] (the “Grant Date”), [●] (the “Participant”) was granted [●]Restricted Share Units (“Awards”), in accordance with the terms of this Award Agreement and subject to the provisions of the Plan.
|
2.
|
The Awards will vest as follows:
|
Number & Type of Awards
|
Vesting On
|
Fair Value on Grant Date
|
Expiry Date
|
[●] Restricted Stock Units
|
50% on the first anniversary of [●]; the remaining 50% vests ratably over the following four quarters (i.e., 12.5% of total grant per remaining quarter), as set forth on Schedule “B”
|
$[●]
|
None
|
3.
|
By signing this agreement, the Participant:
|
(a)
|
acknowledges that he or she has read and understands the Plan, agrees with the terms and conditions thereof, which shall be deemed to be incorporated into and form part of this Award Agreement (subject to any specific variations contained in this Award Agreement);
|
(b)
|
acknowledges that he or she is responsible for paying any applicable taxes and withholding taxes arising from the exercise of any Award, as further described in Article 8 of the Plan;
|
(c)
|
agrees that an Award does not carry any voting rights until such time as the Award is exercised, settled or exchanged, as applicable, for voting securities of the Corporation;
|
(d)
|
acknowledges that the value of the Awards granted herein is in US$ denomination, and such value is not guaranteed;
|
(e)
|
recognizes that the value of an Award upon vesting, settlement and/or exercise, as applicable, is subject to stock market fluctuations;
|
(f)
|
recognizes that the Plan can be administered by a designee of the Compensation and Corporate Governance Committee (the “Committee”) of the board of directors of the Corporation (the “Board”) by virtue of Section 4(c) of the Plan and any communication from or to the designee shall be deemed to be from or to the Corporation;
|
(g)
|
acknowledges that he or she has had an opportunity to obtain the advice of counsel prior to executing this Award Agreement and has taken the opportunity to obtain such independent legal advice or has elected not to do so, and fully understands all provisions hereof and the Plan; and
|
(h)
|
agrees to accept as binding, conclusive and final all decisions or interpretations of the Board or the Committee, if any, upon any questions arising under and matters concerning the Plan or this Award Agreement.
|
ACREAGE HOLDINGS, INC.
|
|
By:
|
|
Name:
|
|
Title:
|
|
|
|
Name of Participant
|
|
Signature of Participant
|
(i)
|
promptly pay the indemnified amount claimed or, if the dispute concerns the reasonableness of the claim, pay the amount the Corporation, acting reasonably, believes to be reasonable in the circumstances, as if the Indemnified Party is entitled to indemnification hereunder, and
|
(ii)
|
bring the matter before an arbitrator in accordance with Section 12 or, if required, a court of competent jurisdiction, at its own expense and use all reasonable efforts to obtain a Final Judgment or Award determining the question of entitlement to indemnification or the reasonableness of the claim, as the case may be, as soon as reasonably possible in the circumstances.
|
ACREAGE HOLDINGS, INC.
|
|
by:
|
|
|
Name: Kevin Murphy
Title: Chief Executive Officer
Authorized Signing Officer
|
|
|
|
|
Witness Signature
|
|
|
Indemnified Party Signature
|
|
|
|
|
Witness Signature
|
|
|
Indemnified Party Signature
|
MANAGER:
|
|
ACREAGE HOLDINGS AMERICA, INC.
|
|
By: /s/ Kevin Murphy
|
Name: Kevin Murphy
|
Title: Chief Executive Officer
|
|
MAJORITY MEMBER:
|
|
ACREAGE HOLDINGS AMERICA, INC.
|
|
By: /s/ Kevin Murphy
|
Name: Kevin Murphy
|
Title: Chief Executive Officer
|
MANAGER:
|
|
|
|
ACREAGE HOLDINGS AMERICA, INC.
|
|
|
|
By:
|
/s/ Kevin Murphy
|
|
Name: Kevin Murphy
|
|
Title: Chief Executive Officer
|
|
|
MAJORITY MEMBER:
|
|
|
|
ACREAGE HOLDINGS AMERICA, INC.
|
|
|
|
By:
|
/s/ Kevin Murphy
|
|
Name: Kevin Murphy
|
|
Title: Chief Executive Officer
|
TABLE OF CONTENTS
|
|||
|
|
|
Page
|
ARTICLE I. DEFINITIONS
|
1
|
||
|
|
||
ARTICLE II. ORGANIZATIONAL MATTERS
|
10
|
||
|
|
|
|
|
Section 2.01
|
Formation of Company
|
10
|
|
Section 2.02
|
Fourth Amended and Restated Limited Liability Company Agreement
|
10
|
|
Section 2.03
|
Name
|
10
|
|
Section 2.04
|
Purpose
|
10
|
|
Section 2.05
|
Principal Office; Registered Agent
|
10
|
|
Section 2.06
|
Term
|
10
|
|
Section 2.07
|
No State-Law Partnership
|
10
|
|
|
|
|
ARTICLE III. MEMBERS; UNITS; CAPITALIZATION
|
11
|
||
|
|
|
|
|
Section 3.01
|
Members
|
11
|
|
Section 3.02
|
Units
|
11
|
|
Section 3.03
|
Recapitalization; Capital Contributions.
|
12
|
|
Section 3.04
|
Issuance of Additional Units in Conformance with Support Agreement
|
12
|
|
Section 3.05
|
Repurchase or Redemption of Pubco Shares or USCo2 Class B Shares
|
12
|
|
Section 3.06
|
Certificates Representing Units; Lost, Stolen or Destroyed Certificates; Registration and Transfer of Units
|
13
|
|
Section 3.07
|
Negative Capital Accounts
|
13
|
|
Section 3.08
|
No Withdrawal
|
13
|
|
Section 3.09
|
Loans From Members
|
14
|
|
Section 3.10
|
Acquisitions
|
14
|
|
Section 3.11
|
Pubco Equity Incentive Plans
|
14
|
|
|
|
|
ARTICLE IV. DISTRIBUTIONS
|
14
|
||
|
|
|
|
|
Section 4.01
|
Distributions
|
14
|
|
Section 4.02
|
Restricted Distributions
|
16
|
|
|
|
|
ARTICLE V. CAPITAL ACCOUNTS; ALLOCATIONS; TAX MATTERS
|
16
|
||
|
|
|
|
|
Section 5.01
|
Capital Accounts
|
16
|
|
Section 5.02
|
Allocations
|
17
|
|
Section 5.03
|
Regulatory Allocations
|
17
|
|
Section 5.04
|
Final Allocations
|
18
|
|
Section 5.05
|
Tax Allocations
|
18
|
|
Section 5.06
|
Indemnification and Reimbursement for Payments on Behalf of a Member
|
19
|
|
|
|
|
ARTICLE VI. MANAGEMENT
|
19
|
||
|
|
|
|
|
Section 6.01
|
Authority of the Manager
|
19
|
|
Section 6.02
|
Actions of the Manager
|
20
|
|
Section 6.03
|
Resignation; No Removal
|
20
|
|
Section 6.04
|
Vacancies
|
20
|
|
Section 6.05
|
Transactions between the Company and the Manager
|
20
|
|
Section 6.06
|
Reimbursement for Expenses
|
20
|
|
Section 6.07
|
Delegation of Authority
|
21
|
|
Section 6.08
|
Limitation of Liability of Manager
|
21
|
|
Section 6.09
|
Investment Company Act
|
22
|
|
Section 6.10
|
Outside Activities of the Manager
|
22
|
|
|
|
|
ARTICLE VII. RIGHTS AND OBLIGATIONS OF MEMBERS
|
22
|
||
|
|
|
|
|
Section 7.01
|
Limitation of Liability and Duties of Members
|
22
|
|
Section 7.02
|
Lack of Authority
|
23
|
|
Section 7.03
|
No Right of Partition
|
23
|
|
Section 7.04
|
Indemnification
|
23
|
|
Section 7.05
|
Members Right to Act
|
24
|
|
|
|
|
ARTICLE VIII. BOOKS, RECORDS, ACCOUNTING AND REPORTS, AFFIRMATIVE COVENANTS
|
24
|
||
|
|
|
|
|
Section 8.01
|
Records and Accounting
|
24
|
|
Section 8.02
|
Fiscal Year
|
25
|
|
Section 8.03
|
Reports
|
25
|
|
|
|
|
ARTICLE IX. TAX MATTERS
|
25
|
||
|
|
|
|
|
Section 9.01
|
Preparation of Tax Returns
|
25
|
|
Section 9.02
|
Tax Elections
|
25
|
|
Section 9.03
|
Tax Controversies
|
25
|
|
Section 9.04
|
Withholding
|
26
|
|
|
|
|
ARTICLE X. RESTRICTIONS ON TRANSFER OF UNITS
|
26
|
||
|
|
|
|
|
Section 10.01
|
Transfers by Members
|
26
|
|
Section 10.02
|
Permitted Transfers
|
26
|
|
Section 10.03
|
Restricted Units Legend
|
27
|
|
Section 10.04
|
Transfer
|
27
|
|
Section 10.05
|
Assignee’s Rights
|
27
|
|
Section 10.06
|
Assignor’s Rights and Obligations
|
28
|
|
Section 10.07
|
Overriding Provisions
|
28
|
|
|
|
|
ARTICLE XI. REDEMPTION AND EXCHANGE RIGHTS; COMPANY OR USCO OPTION
|
29
|
||
|
|
|
|
|
Section 11.01
|
Redemption Right of a Member
|
29
|
|
Section 11.02
|
Election of USCo and Redemption of Redeemed Units
|
31
|
|
Section 11.03
|
Exchange Right of USCo
|
31
|
|
Section 11.04
|
Effect of Exercise of Redemption or Exchange Right
|
31
|
|
Section 11.05
|
Tax Treatment
|
31
|
|
Section 11.06
|
Company or USCo Option
|
32
|
|
|
|
|
ARTICLE XII. ADMISSION OF MEMBERS
|
32
|
||
|
|
|
|
|
Section 12.01
|
Substituted Members
|
32
|
|
Section 12.02
|
Additional Members
|
32
|
|
|
|
|
ARTICLE XIII. WITHDRAWAL AND RESIGNATION; MEMBERS’ REPRESENTATIONS;
TERMINATION OF RIGHTS
|
32
|
||
|
|
|
|
|
Section 13.01
|
Withdrawal and Resignation of Members
|
32
|
|
Section 13.02
|
Required Withdrawals.
|
32
|
|
|
|
|
ARTICLE XIV. DISSOLUTION AND LIQUIDATION
|
34
|
|
|
|
|
|
Section 14.01
|
Dissolution
|
34
|
|
Section 14.02
|
Liquidation and Termination
|
34
|
|
Section 14.03
|
Deferment; Distribution in Kind
|
35
|
|
Section 14.04
|
Cancellation of Certificate
|
35
|
|
Section 14.05
|
Reasonable Time for Winding Up
|
35
|
|
Section 14.06
|
Return of Capital
|
35
|
|
|
|
|
ARTICLE XV. VALUATION
|
36
|
||
|
|
|
|
|
Section 15.01
|
Determination
|
36
|
|
Section 15.02
|
Dispute Resolution
|
36
|
|
|
|
|
ARTICLE XVI. GENERAL PROVISIONS
|
36
|
||
|
|
|
|
|
Section 16.01
|
Power of Attorney
|
36
|
|
Section 16.02
|
Confidentiality
|
37
|
|
Section 16.03
|
Amendments
|
37
|
|
Section 16.04
|
Title to Company Assets
|
37
|
|
Section 16.05
|
Addresses and Notices
|
37
|
|
Section 16.06
|
Binding Effect; Intended Beneficiaries
|
38
|
|
Section 16.07
|
Creditors
|
38
|
|
Section 16.08
|
Waiver
|
38
|
|
Section 16.09
|
Counterparts
|
38
|
|
Section 16.10
|
Applicable Law
|
38
|
|
Section 16.11
|
Severability
|
38
|
|
Section 16.12
|
Further Action
|
39
|
|
Section 16.13
|
Delivery by Electronic Transmission
|
39
|
|
Section 16.14
|
Right of Offset
|
39
|
|
Section 16.15
|
Entire Agreement
|
39
|
|
Section 16.16
|
Remedies
|
39
|
|
Section 16.17
|
Descriptive Headings; Interpretation
|
39
|
|
Section 16.18
|
Enactment
|
40
|
(a)
|
reduced for any items described in Treasury Regulation Section 1.704- 1(b)(2)(ii)(d)(4), (5), and (6); and
|
(b)
|
increased for any amount such Member is obligated to contribute or is treated as being obligated to contribute to the Company pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (relating to partner liabilities to a partnership) or 1.704-2(g)(1) and 1.704-2(i) (relating to minimum gain).
|
1.
|
Joinder to the LLC Agreement. Upon the execution of this Joinder by the undersigned and delivery hereof to the Manager, the undersigned hereby is and hereafter will be a Member under the LLC Agreement and a party thereto, with all the rights, privileges and responsibilities of a Member thereunder. The undersigned hereby agrees that it shall comply with and be fully bound by the terms of the LLC Agreement as if it had been a signatory thereto as of the date thereof.
|
2.
|
Incorporation by Reference. All terms and conditions of the LLC Agreement are hereby incorporated by reference in this Joinder as if set forth herein in full.
|
3.
|
Address. All notices under the LLC Agreement to the undersigned shall be directed to:
|
[NAME OF NEW MEMBER]
|
|
|
|
By:
|
|
Name:
|
|
Title:
|
|
By:
|
|
Name:
|
|
Title:
|
|
Name of Subsidiary
|
Jurisdiction/State of Incorporation
|
1627 West Main, LLC
|
Rhode Island
|
22nd and Burn Inc. (d/b/a Cannablis & Co.)
|
Oregon
|
Acreage California Holding Company, LLC
|
California
|
Acreage CCF New Jersey, LLC
|
New Jersey
|
Acreage Chicago 1, LLC
|
Illinois
|
Acreage Compass, LLC
|
Georgia
|
Acreage Compassionate Care Holdings OK, LLC
|
Oklahoma
|
Acreage Compassionate Care OK, LLC
|
Oklahoma
|
Acreage Connecticut, LLC
|
Connecticut
|
Acreage Desert Hot Springs, LLC
|
Delaware
|
Acreage Florida 1, LLC
|
Florida
|
Acreage Florida, Inc. (d/b/a The Botanist)
|
Florida
|
Acreage Georgia LLC
|
Georgia
|
Acreage Grand Forks, LLC
|
North Dakota
|
Acreage Hoboken, LLC
|
New Jersey
|
Acreage Holdings America, Inc.
|
Nevada
|
Acreage Holdings of NJ, L.L.C.
|
New Jersey
|
Acreage Holdings WC, Inc.
|
Nevada
|
Acreage Illinois 1, LLC
|
Illinois
|
Acreage Illinois 2, LLC
|
Illinois
|
Acreage Illinois 3, LLC
|
Illinois
|
Acreage Illinois Holding Company, LLC
|
Delaware
|
Acreage Iowa, LLC
|
Iowa
|
Acreage IP California, LLC
|
California
|
Acreage IP Holdings, LLC
|
Nevada
|
Acreage IP Maryland, LLC
|
Maryland
|
Acreage IP Massachusetts, LLC
|
Massachusetts
|
Acreage IP Nevada, LLC
|
Nevada
|
Acreage IP New Jersey, LLC
|
New Jersey
|
Acreage IP New York, LLC
|
New York
|
Acreage IP North Dakota, LLC
|
North Dakota
|
Acreage IP Ohio, LLC
|
Ohio
|
Acreage IP Oregon, LLC
|
Oregon
|
Acreage IP Pennsylvania, LLC
|
Pennsylvania
|
Acreage Maryland, LLC
|
Maryland
|
Acreage Massachusetts, LLC
|
Delaware
|
Acreage Michigan 1, LLC
|
Michigan
|
Acreage Michigan 2, LLC
|
Michigan
|
Acreage Michigan 3, LLC
|
Michigan
|
Acreage Michigan 4, LLC
|
Michigan
|
Acreage Michigan 5, LLC
|
Michigan
|
Acreage Michigan 6, LLC
|
Michigan
|
Acreage Michigan 7, LLC
|
Michigan
|
Acreage Michigan Holding Company, LLC
|
Delaware
|
Acreage Michigan Operating, LLC
|
Michigan
|
Acreage Michigan, LLC
|
Michigan
|
Acreage Missouri, LLC
|
Missouri
|
Acreage New York, LLC
|
New York
|
Acreage North Dakota, LLC (d/b/a The Botanist)
|
Delaware
|
Acreage OK Holdings, LLC
|
Oklahoma
|
Acreage Oklahoma, LLC
|
Oklahoma
|
Acreage OZ RE, LLC
|
Delaware
|
Acreage PA Management, LLC
|
Pennsylvania
|
Acreage Pasadena, LLC
|
California
|
Acreage Properties, LLC
|
Delaware
|
Acreage RE State Holdings, LLC
|
Delaware
|
Acreage Real Estate Holdco, LLC
|
Delaware
|
Acreage Real Estate, LLC
|
Delaware
|
Acreage Relief Holdings OK, LLC
|
Oklahoma
|
Acreage Relief OK, LLC
|
Oklahoma
|
Acreage Transportation, LLC
|
Pennsylvania
|
Acreage Utah, LLC
|
Utah
|
Acreage Virginia, LLC
|
Virginia
|
Acreage Williston, LLC
|
North Dakota
|
Acreage-CCF, Inc.
|
New Jersey
|
Balaton Foods, LLC
|
Michigan
|
Braeburn, LLC
|
California
|
Community Administrative Services, LLC
|
Connecticut
|
D&B Wellness, LLC (d/b/a Compassionate Care Centers of CT)
|
Connecticut
|
East 11th Incorporated (d/b/a Cannablis & Co.)
|
Oregon
|
Form Factory Holdings, LLC
|
Delaware
|
Gesundheit Foods, LLC
|
Oregon
|
Granny Smith Co., LLC
|
Washington
|
Gravenstein Foods, LLC
|
California
|
Gruner Apfel LLC
|
Oregon
|
Gruner Apfel-CA, LLC
|
Oregon
|
High Street Capital Partners, LLC (d/b/a Acreage Holdings)
|
Delaware
|
HSC Solutions, LLC
|
Delaware
|
HSCP Holding Corporation
|
Delaware
|
HSCP Missouri, LLC
|
Missouri
|
HSCP Oregon, LLC (d/b/a Cannablis & Co.)
|
Oregon
|
HSCP Service Company Holdings, Inc.
|
Delaware
|
HSCP Service Company, LLC
|
Delaware
|
HSRC Norcal, LLC
|
California
|
Impire State Holdings LLC
|
New York
|
In Grown Farms LLC 2
|
Illinois
|
Kanna, Inc.
|
California
|
MA RMD SCVS, LLC
|
Massachusetts
|
Made by Science LLC
|
California
|
Maine HSCP, Inc
|
Maine
|
Maryland Medicinal Research & Caring, LLC (d/b/a The Botanist)
|
Maryland
|
NCC LLC (d/b/a Nature's Care Company)
|
Illinois
|
NCC Real Estate, LLC
|
Illinois
|
NY Medicinal Research & Caring, LLC
|
New York
|
NYCANNA, LLC (d/b/a The Botanist)
|
Delaware
|
Prime Alternative Treatment Center Consulting, LLC
|
New Hampshire
|
Prime Consulting Group, LLC
|
Massachusetts
|
Prime Wellness of Connecticut, LLC
|
Connecticut
|
Prime Wellness of Pennsylvania, LLC
|
Pennsylvania
|
Sancan, LLC
|
Missouri
|
South Shore Bio Pharma, LLC
|
Delaware
|
Thames Valley Apothecary, LLC (d/b/a Thames Valley Relief)
|
Connecticut
|
The Botanist, Inc.
|
Massachusetts
|
The Firestation 23 Inc. (d/b/a Cannablis & Co.)
|
Oregon
|
The Wellness & Pain Management Connection, LLC
|
Delaware
|
|
|
|
|
|
|
|
|
/s/ Kevin P. Murphy
|
Kevin P. Murphy
|
Chief Executive Officer
|
|
|
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|
/s/ Glen S. Leibowitz
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Glen S. Leibowitz
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Chief Financial Officer
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